EXHIBIT 10.31
TRANSKARYOTIC THERAPIES, INC.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
December 23, 1998
Fleet National Bank
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Gentlemen:
This letter agreement will set forth certain understandings between
Transkaryotic Therapies, 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 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 23, 1999 or (ii) the earlier
termination of the within-described term loan facility pursuant to Section
5.2 or Section 6.4. 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 the costs
of Qualifying Equipment and Qualifying Leasehold Improvements acquired by the
Borrower within the 120 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 23, 1999; (ii) the
aggregate original principal amounts of all Term Loans will not exceed
$14,000,000; and (iii) no Term Loan will be in an amount more than 100% of
the invoiced actual costs of the tangible property constituting the items of
Qualifying Equipment and/or Qualifying Leasehold Improvements with respect to
which such Term Loan is made (excluding taxes, shipping, software,
installation charges, training fees and other "soft costs", except as
expressly provided in the next following sentence). Notwithstanding the
provisions of the immediately preceding sentence, the Borrower may include
within its Qualifying Equipment the invoiced costs of software relating to
its equipment and may include within Qualifying Leasehold Improvements the
invoiced costs of engineering, architectural and similar soft costs relating
to the New Cambridge Premises; provided that the total amount so included
within Qualifying Equipment
and/or Qualifying Leasehold Improvements pursuant to this sentence will in no
event exceed 40% of the total invoiced costs of the Qualifying Equipment and
Qualifying Leasehold Improvements with respect to which Term Loans are made.
Prior to the making of each Term Loan, and as a precondition thereto, the
Borrower will provide the Bank with: (i) invoices supporting the costs of the
relevant Qualifying Equipment and/or relevant Qualifying Leasehold Improvements;
(ii) such evidence as the Bank may reasonably require showing that (A) all
Qualifying Equipment has been delivered to the Borrower's New Cambridge
Premises, has been paid for by the Borrower and is owned by the Borrower free of
all liens and interests of any other Person, and (B) all Qualifying Leasehold
Improvements have been built into or installed at the Borrower's New Cambridge
Premises, have been paid for by the Borrower and are owned by the Borrower free
of all liens and interests of any other Person (except that items so built into
the relevant premises as to become an integral part of the real estate may be
subject to the rights of the owner of such real estate); and (iii) evidence
satisfactory to the Bank that the Qualifying Equipment and Qualifying Leasehold
Improvements are fully insured against casualty loss. The Term Loans will be
evidenced by that certain $14,000,000 face principal amount promissory note of
even date herewith (the "Term Note") made by the Borrower and payable to the
order of the Bank. 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.
1.2 PRINCIPAL REPAYMENT OF TERM LOANS. The Borrower shall repay
principal of the Term Loans in 19 equal consecutive quarterly installments (each
in an amount equal to 1/28th of the aggregate principal amount of the Term Loans
outstanding on December 23, 1999), such quarterly installments to commence on
December 31, 1999 and to continue on the last day of each calendar quarter
thereafter through and including June 30, 2004, PLUS a 20th and final "balloon"
installment due and payable on September 30, 2004 in an amount equal to the
outstanding principal balance of all Term Loans and all interest then accrued
but unpaid thereon. 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 to the
extent that same are Floating Rate 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. The Borrower may prepay the whole or
any portion of any LIBOR Loan; provided that (i) the Borrower gives the Bank not
less than two (2) Business Days' prior written notice of its intent so to
prepay, (ii) the Borrower pays all interest on each LIBOR Loan (or portion
thereof) so prepaid accrued to the date of such
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prepayment, (iii) any voluntary prepayment with respect to a LIBOR Loan must
be in a principal amount of $500,000 or an integral multiple of $ 100,000 in
excess of $500,000 and (iv) if the Borrower for any reason makes any
prepayment of a LIBOR Loan prior to the last day of the Interest Period
applicable thereto, the Borrower shall forthwith pay all amounts owing to the
Bank pursuant to the provisions of Section 1.6 with respect to such LIBOR
Loan. 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.
1.3 INTEREST RATE. Except as otherwise provided below in this
Section 1.3, 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 Section
1.1 will be made as a LIBOR Loan with an Interest Period of one month, two
month, three months or six months (as the Borrower may select), that all or
any portion of any Floating Rate Loan will be converted to a LIBOR Loan with
an Interest Period of one month, two months, three months or six months (as
the Borrower may select) and/or that any LIBOR Loan will be continued at the
expiration of the Interest Period applicable thereto as a new LIBOR Loan with
an Interest Period of one month, two months, three months or six months (as
the Borrower may select). 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 information described in the next following
sentence (a "LIBOR Borrowing Notice"). The LIBOR 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 of $ 100,000
in excess of $500,000), must identify the particular Term Loan or Loans or
portion thereof so to be made, converted or continued, as the case may be,
and must specify the proposed commencement date of the relevant Interest
Period and the duration (one month, two months, three months or six months)
of such 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 LIBOR
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
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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 LIBOR Borrowing Notice conforming to the requirements set forth above in
this Section 1.3 (and any LIBOR Loan not repaid and not so continued as a new
LIBOR Loan will be deemed 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.
The Borrower may request and the Bank may issue caps, collars, swaps
and other rate protection products, using the Bank's then customary
documentation for such transactions. Such caps, collars, swaps and other rate
protection products will be issued for such fees and upon such other terms and
conditions as may be agreed upon by the Bank and the Borrower at the time of
issuance thereof.
Any request for a LIBOR Loan and any election to convert all or any
portion of the Term Loans to a LIBOR 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.
1.4 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 will be
payable monthly in arrears on the first day of each month. Interest on each
LIBOR Loan will be payable in arrears on each 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
LIBOR Interest Rate applicable thereto. 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) four (4%) percent per annum PLUS (ii) the Prime Rate
in effect from time to time, compounded monthly and 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.
1.5 RATE DETERMINATION PROTECTION. In the event that:
(i) the Bank shall determine that, by reason of
circumstances affecting the London interbank market or
otherwise, adequate and
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reasonable methods do not exist for ascertaining the LIBOR
Interest Rate which would otherwise be applicable during any
Interest Period, or
(ii) the Bank shall 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.
1.6 PREPAYMENT OF LIBOR LOANS. The following provisions of this
Section 1.6 shall be effective only with respect to LIBOR Loans: If, due to
acceleration of the Term Note or due to voluntary prepayment or mandatory
repayment or 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 if for any reason any LIBOR Loan is converted to
a Floating Rate Loan prior to the expiration of the relevant Interest Period,
the Borrower shall, upon demand and receipt of a Bank Certificate from the
Bank with respect thereto, pay forthwith to the Bank a yield maintenance fee
in an amount computed as follows: The current rate for United States Treasury
securities (bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the last day of the Interest
Period applicable to the affected LIBOR Loan shall be subtracted from the
"cost of funds" component (I.E., reserve-adjusted LIBOR) of the fixed rate in
effect at the date of such prepayment or conversion. If the result is zero or
a negative number, there shall be no yield maintenance fee. If the result is
a positive number, then the resulting percentage shall be multiplied by the
amount of the principal balance being prepaid. The resulting amount shall be
divided by 360 and multiplied by the number of days
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remaining in the relevant Interest Period. Said amount shall be reduced to
present value calculated by using the number of days remaining in the relevant
Interest Period and by using the above-referenced United States Treasury
securities rate as the discount rate. The resulting amount shall be the yield
maintenance fee due to the Bank upon prepayment or conversion of the applicable
LIBOR Loan. Any acceleration of a LIBOR Loan due to an Event of Default will
give rise to a yield maintenance fee calculated with the respect to such LIBOR
Loan on the date of such acceleration in the same manner as though the Borrower
had exercised a right of prepayment at that date, such yield maintenance fee
being due and payable at that date.
1.7 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 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 LIBOR Loan, the
Term Note or the Bank's agreement to make LIBOR
Loans, or shall change the basis of taxation of
payments to the Bank of the principal of or
interest on any LIBOR Loan or any other amounts due
under this letter agreement in respect of the LIBOR
Loans or the Bank's agreement to make LIBOR 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
LIBOR Loans, the Term Note or the Bank's agreement
to make LIBOR Loans
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and the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining any LIBOR 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 LIBOR 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 LIBOR Interest
Rate) to a level below that which the Bank could have achieved
(taking into consideration the Bank's policies with 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 deliver a Bank Certificate with
respect thereto to the Borrower; and (B) the Borrower shall 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 Section 1.7 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
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shall in any way reduce any obligation of the Borrower to the
Bank under this Section 1.7.
1.8 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 converted into Floating Rate Loans (with the Borrower to be
responsible for any amount payable under Section 1.6 as a consequence of such
conversion) at the last day on which such LIBOR Loans may legally remain
outstanding.
1.9 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 pay or reimburse acquisition costs of Qualifying Equipment and
Qualifying Leasehold Improvements.
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 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
lawful currency of the United States in immediately available funds, at its
office at Xxx Xxxxxxx 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
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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.
1.10 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 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 such Term Loan is made (and after giving effect thereto):
(a) All statements, representations and warranties of the Borrower
made in this letter agreement (other than those statements, representations
and warranties which are expressly stated to apply only as of a specific date
and those statements, representations and warranties relating to facts which
this letter agreement contemplates may change from time to time without
violation of the terms of this letter 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
shall have been complied with in all material respects on and as of the date
of such Term Loan.
(c) No event which constitutes, or which with notice or lapse of time
or both would constitute, an Event of Default shall have occurred and be
continuing.
(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.
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 Section 1.10 will be satisfied.
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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 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, except as listed on said
item 2.1(a). The Borrower is not a member of any partnership or joint venture.
(b) At the date of this letter agreement, no Person is known 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 2.1(b) of the
attached Disclosure Schedule. The Borrower owns 100% of the outstanding capital
stock of each of its Subsidiaries.
(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, 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 under any 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 of any Person; or
(iii) result in, or require, the creation or imposition of any
lien, security interest or other encumbrance upon or with
respect to any of the properties now owned or hereafter
acquired by the Borrower.
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(d) This letter agreement and each of the other Loan Documents 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) Except as described on item 2.1(e) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending
or, to the knowledge of the Borrower, threatened by or against the Borrower
or any Subsidiary of 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 would be reasonably likely to
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. Neither the Borrower nor any Subsidiary is 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, failure to comply with
any of which could (singly or in the aggregate with all other failures) have
a material adverse effect upon the assets, business, financial condition or
prospects of the Borrower.
(g) Except as otherwise disclosed on item 2.1(g) of the attached
Disclosure Schedule, the Borrower has filed (and has caused each Subsidiary
of the Borrower to file) all federal, foreign, state and local tax returns,
reports and estimates required to be filed by the Borrower or any such
Subsidiary. All such filed returns, reports and estimates are proper and
accurate and the Borrower (or the Subsidiary concerned, as the case may be)
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, except any such taxes, assessments,
impositions, fees and other governmental charges which are 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 (all such taxes, assessments, impositions,
fees and other governmental charges under contest at the date of this letter
agreement being listed on item 2.1(g) of the attached Disclosure Schedule).
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) The Borrower is in compliance (and each Subsidiary of the Borrower
is in compliance with) with all requirements of law, federal, foreign, state and
local, and
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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 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 annual financial statements of the Borrower as at
December 31, 1997 (included in the Borrower's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997) and the quarterly financial
statements of the Borrower as at September 30, 1998 (included in the
Borrower's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998), each heretofore delivered to the Bank, are complete and
accurate and fairly present the financial condition of the Borrower as at the
dates thereof and for the periods covered thereby. 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, 1997, there has been
no material adverse development in the business, condition or prospects of
the Borrower, and the Borrower has not entered into any material transaction
other than in the ordinary course.
(j) The principal place of business and chief executive offices of the
Borrower are located at 000 Xxxxxx Xxxxxx, Xxxxxxxxx, XX 00000.
(k) To the best knowledge of the Borrower, the Borrower owns or has a
valid right to use all of the patents, licenses, copyrights, trademarks and
trade names now being used or necessary to conduct its business. To the best
knowledge of the Borrower, 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 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
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material adverse effect on the financial condition, business, prospects or
properties of the Borrower.
(n) Borrower has reviewed the software which it uses in its business
for "Year 2000" compliance and has determined that such software will continue
to function in the manner intended without interruption of service or other
difficulty resulting from the "Year 2000 problem". The Borrower will, at the
request of the Bank, provide such reports and other information as the Bank may
reasonably request in order to evidence such Year 2000 compliance.
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 properties in good working order and condition, making all
necessary repairs thereto and replacements thereof. The Borrower will maintain,
with financially sound and reputable insurers, insurance with respect to its
property and
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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 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 with the Bank an account for
the purpose of funding and repayment of Term Loans and payment of the interest
thereon.
3.5 CONDUCT OF BUSINESS. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly (itself or
through any Subsidiary) enter into any other lines of business, businesses or
ventures outside the fields of biotechnology, pharmaceuticals, medical devices,
medical products and medical services.
3.6 REPORTING REQUIREMENTS. The Borrower will furnish 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, and (whether or not
contained in such Annual Report on Form 10-K) all of the
following: the annual audit report for such fiscal year for the
Borrower, including therein the consolidated balance sheet of the
Borrower and Subsidiaries as at the
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end of such fiscal year and related consolidated statements of
income, stockholders' equity and cash flow for the fiscal year
then ended. The annual consolidated financial statements shall be
certified by independent public accountants selected by the
Borrower and reasonably acceptable to the Bank, such
certification 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, and (whether
or not contained in such Quarterly Report on Form 10-Q) all of
the following: the consolidated balance sheet of the Borrower and
Subsidiaries and related consolidated statements of income and
cash flow, unaudited but prepared in accordance with generally
accepted accounting principles consistently applied fairly
presenting the financial 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
fiscal 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 Sections 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 "management letter" submitted by
such accountants.
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(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 and which, if determined adversely, would
be reasonably likely to have a material adverse effect on the
assets, business, financial condition or prospects of the
Borrower or any such Subsidiary.
(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 provided to the Bank promptly upon
such filing with the SEC or such communication with shareholders
or securityholders, as the case may be.
(ix) Reasonably promptly after the Borrower has knowledge
thereof (and in no event later than the dissemination of any
press release or other public statement with respect thereto),
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 of the Borrower (commencing December 31, 1998), a consolidated
Capital Base of not less than $35,000,000.
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3.8 LIQUIDITY. The Borrower will maintain, as at the end of each fiscal
quarter of Borrower (commencing December 31, 1998), 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
December 31, 1998), 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) EBITDA 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 Section 3.9 as
at any Determination Date if the Borrower's Unencumbered Cash Balance as at
such Determination Date exceeds $35,000,000.
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
its 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 Section 3.10. Each financial statement of the Borrower hereafter
delivered pursuant to this letter agreement will be complete and accurate and
will fairly present the financial condition of the Borrower as at the date
thereof and for the periods covered thereby.
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:
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4.1 INDEBTEDNESS. 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 Section
4.1 will not exceed $2,000,000 in the aggregate outstanding at
any one time;
(v) other Indebtedness (not described in any of clauses
(i)-(iv) above) existing at the date hereof, but only to the
extent set forth on item 4.1 of the attached Disclosure Schedule;
(vi) any guaranties or other contingent liabilities
expressly permitted pursuant to Section 4.3; and
(vii) any loans by TKT Securities Corp. ("Securities Corp.")
to the Borrower.
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, attachment
or other charge or encumbrance (consensual or nonconsensual) (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:
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(i) Liens for taxes, assessments or governmental charges or
governmental 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 Section 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, but only to
the extent and with the relative priorities set forth on item 4.2
of the attached Disclosure Schedule.
Without limitation of the other representations, warranties, covenants and
agreements of the Borrower set forth elsewhere in this letter agreement, the
Borrower (i) represents and warrants that neither the Borrower nor any of its
Subsidiaries is now a party to any Restrictive Agreement and (ii) agrees that
the Borrower will not enter into (nor permit any of its Subsidiaries to enter
into) any Restrictive Agreement, except that the Borrower may enter into a
Restrictive Agreement with the lessor of any equipment or with any Person
providing purchase money financing permitted by clause (iv) of Section 4.1
above; provided that such Restrictive Agreement relates only to the
particular item or items of equipment so leased or financed. As used herein,
a "Restrictive Agreement" is any agreement, covenant, undertaking or
understanding which could have the effect of preventing the Borrower or any
Subsidiary from granting a Lien on any of its assets to the Bank.
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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; provided that the Borrower may, without such consent, repurchase from
employees leaving the employ of the Borrower those shares of the Borrower's
stock which had been issued to such employees under the Borrower's employee
stock ownership plan.
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 other loans to any such directors,
officers or employees, all of which loans and advances will not exceed, in the
aggregate, $1,000,000 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
and other readily- marketable 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 Section 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 with or certificates of deposit issued by any
other bank organized in the United States having capital in excess of
$100,000,000; (vi) existing investments described on item 4.6 of the attached
Disclosure Schedule; (vii) investments in any Subsidiaries now existing or
hereafter created by the Borrower pursuant to Section 4.7 below; provided that
in any event the Tangible Net Worth of the Borrower alone (exclusive of its
investment in Subsidiaries and any debt owed by any Subsidiary to the
Borrower) will not be less than 51% of the consolidated Tangible Net Worth of
the Borrower and Subsidiaries (excluding from such consolidated Tangible Net
Worth
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for the purpose of this calculation the cash and securities held by Securities
Corp.); (viii) the purchase and holding of securities pursuant to a Permitted
Acquisition, so long as the requirements of the PROVISO contained in clause
(vii) are satisfied; and (ix) any Permitted Minority Investment so long as the
requirements of the PROVISO contained in clause (vii) are satisfied.
4.7 SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the
prior written consent of the Bank, make any Acquisition other than one or
more Permitted Acquisitions. The Borrower will not become a partner in any
partnership; provided that nothing contained in this sentence will be deemed
to prevent the Borrower from forming with any other Person or Persons a joint
venture conducted in the form of a corporation or a limited liability
company. Further, nothing contained in this Section 4.7 will be deemed to
prohibit a Permitted Minority Investment. The Borrower will promptly inform
the Bank if it forms any Subsidiaries.
4.8 MERGER, ETC. The Borrower will not, without the prior written
consent of the Bank, merge or consolidate with any Person, except that any
Subsidiary of the Borrower may be merged into the Borrower and any Permitted
Acquisition may be accomplished pursuant to a merger so long as, in each such
case, (i) at the time of the merger and after giving effect thereto there is
no Default or Event of Default and (ii) the Borrower is in any event the
surviving corporation following such merger. The Borrower will not, without
the prior written consent of the Bank, sell, lease, transfer or otherwise
dispose of (whether in one or more transactions) any material portion of its
assets (including, without limitation, any material portion of its
intellectual property), other than (i) the sale of inventory in the ordinary
course; (ii) licensing of any of its intellectual property to another Person
on commercially reasonable terms; or (iii) transfer of any of its
intellectual property for reasonable consideration to a research and
development entity (including, without limitation, any joint venture
conducted as described in Section 4.7 above) in which the Borrower
participates as an equity owner.
4.9 AFFILIATE TRANSACTIONS. The Borrower will not, without the prior
written consent of the Bank, enter into any transaction, including, without
limitation, the purchase, sale or exchange of any property or the rendering
of any service, with any affiliate of the Borrower, except in the ordinary
course and 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 Section 4.9 shall be
deemed to restrict the payment of salary or other similar payments to any
officer or director of the Borrower. 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
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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 those premises
described in Section 2.1(j) without, in each instance, giving the Bank prompt
written notice thereof. The Borrower will 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 rights 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 in reasonable quantities, 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
-22-
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 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; 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 Sections 3.1, 3.3, 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
-23-
(f) Any default shall exist and remain unwaived or uncured with respect
to any Subordinated Debt of the Borrower or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Subordinated Debt, or any such Subordinated Debt shall not have been paid when
due, whether by acceleration or otherwise, or shall have been declared to be due
and payable prior to its stated maturity, or any event or circumstance shall
occur which permits, or with the lapse of time or the giving of notice or both
would permit, the acceleration of the maturity of any Subordinated Debt by the
holder or holders thereof; or
(g) Any default shall exist and remain unwaived or uncured with respect
to any Indebtedness of the Borrower or any Subsidiary of the Borrower in excess
of $1,000,000 in aggregate principal amount or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Indebtedness, or any such Indebtedness in excess of $1,000,000 in aggregate
principal amount shall not have been paid when due, whether by acceleration or
otherwise, or shall have been declared to be due and payable prior to its stated
maturity, or any event or circumstance shall occur which permits, or with the
lapse of time or the giving of notice or both would permit, the acceleration of
the maturity of any such Indebtedness by the holder or holders thereof, or
(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 or similar process relating to a claim of $250,000
or more (exclusive of execution on a judgment described in clause (j) below)
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 30 days after its issue or levy; or
(j) Any final uninsured judgment for $250,000 or more shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; provided that any such judgment shall not be deemed to constitute
an Event of Default under this clause (j) so long as enforcement of same is
effectively stayed on appeal with adequate reserves having been established and
maintained; and further provided that (A) no such judgment will be deemed to
constitute an Event of Default under this clause (j) if such judgment calls for
a lump-sum payment
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which is paid within 30 days after the date it is entered (or, if appealed
pursuant to the preceding PROVISO clause, upheld on appeal) and such payment
would not cause any default under any of Sections 3.7, 3.8 and/or 3.9, with
compliance being determined on a PRO FORMA basis as at the date of such
payment, whether or not a fiscal quarter-end; and (B) no such judgment which
calls for royalties or other payments over time will be deemed to constitute
an Event of Default under this clause (j) so long as such payments are made
promptly when due and would not cause a default under any of Sections 3.7,
3.8 and/or 3.9; 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) 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), other than as set forth on item 5.1(l) of the attached
Disclosure Schedule; provided that no Event of Default will be deemed to have
occurred under this clause (1) so long as the Borrower remains an independently
managed publicly traded company.
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 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.
-25-
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 also 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. ANY AND ALL
RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES ANY OF THE OBLIGATIONS PRIOR TO THE EXERCISE
BY THE BANK OF ITS RIGHT OF SET-OFF UNDER THIS SECTION ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
VI. MISCELLANEOUS
6.1 COSTS AND EXPENSES. The Borrower agrees to pay, on demand, all
reasonable 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 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 reasonable 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 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 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 the date of any demand
therefor until the date when paid at a rate per annum equal to the sum of (i)
four (4%) percent per annum PLUS (ii) 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).
-26-
6.2 FACILITY FEE. With respect to the Term Loans, the Borrower is
paying to the Bank, at the date of execution and delivery of this letter
agreement, a non-refundable facility fee in the amount of $35,000. The fee
described in this Section is in addition to any balances and fees required by
the Bank or any of its affiliates in connection with any other services now or
hereafter made available to the Borrower.
6.3 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:
Transkaryotic Therapies, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Vice President - Finance
and Chief Financial Officer
If to the Bank:
Fleet National Bank
High Technology Division
Mail Code: MA OF XX0X
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx X. 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.
6.4 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.
Without limitation of the foregoing generality,
-27-
(i) The Bank may at any time pledge all or any portion of
its rights under the Loan Documents (including any portion of the
Term Note) to any of the 12 Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No
such pledge or the enforcement thereof shall release the Bank
from its obligations under any of the Loan Documents.
(ii) The Bank shall have the unrestricted right at any time
and from time to time, and without the consent of or notice to
the Borrower, to grant to one or more banks or other financial
institutions (each, a "Participant") participating interests in
the Bank's obligation to lend hereunder and/or any or all of the
Term Loans held by the Bank hereunder. In the event of any such
grant by the Bank of a participating interest to a Participant,
whether or not upon notice to the Borrower, the Bank shall remain
responsible for the performance of its obligations hereunder and
the Borrower shall continue to deal solely and directly with the
Bank in connection with the Bank's rights and obligations
hereunder. The Bank may furnish any information concerning the
Borrower in its possession from time to time to prospective
assignees and Participants; provided that the Bank shall require
any such prospective assignee or Participant to agree in writing
to maintain the confidentiality of such information to the same
extent as the Bank would be required to maintain such
confidentiality.
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 fill the Term Loans and all interest thereon and all fees and charges
payable in connection therewith.
6.5 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
-28-
upon the Borrower in one of the manners specified in the following paragraph of
this Section 6.5 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 Section 6.5 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 Section 6.3 (as such address may be changed from time to
time pursuant to said Section 6.3) or (ii) by serving a copy thereof upon it
at its address set forth in Section 6.3 (as such address may be changed from
time to time pursuant to said Section 6.3).
6.6 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.
6.7 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.
6.8 REPLACEMENT NOTE. Upon receipt of an affidavit of an officer of the
Bank as to the loss, theft, destruction or mutilation of the Term Note or of any
other Loan Document which is not of public record and, in the case of any such
mutilation, upon surrender and cancellation of the Term Note or other Loan
Document, the Borrower will issue, in lieu thereof, a replacement Term Note or
other Loan Document in the same principal amount (as to the Term Note) and in
any event of like tenor.
6.9 USURY. All agreements between the Borrower and the Bank are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Term Note or otherwise, shall the
amount paid or agreed to be paid to the Bank for the use or the forbearance of
the Indebtedness represented by the Term Note exceed the maximum permissible
under applicable law. In this regard, it is expressly agreed that it is the
intent of the Borrower and the Bank, in the execution, delivery and acceptance
of the Term Note, to contract in strict compliance with the laws of The
Commonwealth of Massachusetts. If, under any circumstances whatsoever,
performance or fulfillment of any provision of the Term Note or any of the other
Loan Documents at the time such provision is to be performed or fulfilled shall
involve exceeding the limit of validity prescribed by applicable law, then the
obligation so to be performed or fulfilled shall be reduced automatically to the
limits of such validity, and if under any circumstances
-29-
whatsoever the Bank should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance evidenced by the
Term Note and not to the payment or interest. The provisions of this Section
6.9 shall control every other provision of this letter agreement and of the
Term Note.
6.10 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY MUTUALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT, THE TERM NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
ENTER INTO THIS LETTER AGREEMENT AND TO MAKE TERM LOANS AS CONTEMPLATED HEREIN.
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:
"Acquisition" - Any purchase or other acquisition made by the Borrower
or any Subsidiary of the Borrower of all or substantially all of the business or
assets of any other corporation or other entity or any line of business of
another corporation or entity, all whether through the acquisition of stock or
assets or otherwise.
"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 Section 1.3, Section 1.6 or Section 1.7 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
-30-
Massachusetts applicable to a national banking association or other day on which
banks in Boston, Massachusetts are authorized or directed to close; 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).
"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.
"Debt Service Coverage Ratio" - As defined in Section 3.9.
"Default" - Any event or circumstance which, with the passage of time
or the giving of notice or both, could become an Event of Default.
"EBITDA" - The consolidated Net Income (or, if relevant, the
consolidated Net Loss, expressed as a negative number) 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 its consolidated Net Income (or
consolidated Net Loss, as the case may be) 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 its consolidated Net Income (or consolidated Net Loss, as the
case may be) for the period involved.
"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
-31-
successor), as in effect from time to time, or in any successor regulation
relating to the liabilities described in said Regulation D.
"Event of Default" - As defined in Section 5.1.
"Floating Rate" - As defined in Section 1.3.
"Floating Rate Loan" - All or any portion of any Term Loan which bears
interest at a rate calculated with reference to the Prime Rate.
"Impositions" - All present and future taxes, levies, duties,
impositions, deductions, charges and withholdings applicable to the Bank with
respect to any LIBOR Loan, excluding, 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(s)" - As to each LIBOR Loan, the Interest
Payment Date will be the last day of Interest Period applicable to such LIBOR
Loan; provided that with respect to any Interest Period in excess of three
months there will be two Interest Payment Dates - one at the expiration of the
first three months of such Interest Period and the second on the last day of
such Interest Period.
"Interest Period" - As to each LIBOR Loan, the period commencing with
the date of the making of such LIBOR Loan and ending one month, two months,
three months or six months thereafter (as the Borrower may select); 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
-32-
amount of any Term Loan if such Interest Period would end after the
regularly-scheduled due date of such principal amount.
"LIBOR" - With respect to each Interest Period for a LIBOR Loan, that
rate per annum (rounded upward, if necessary, to the nearest 1/32nd of one
percent) which represents the offered rate for deposits in U.S. Dollars, for a
period of time comparable to such Interest Period, which appears on the Telerate
page 3750 as of 11:00 a.m. (London time) on that day that is two (2) London
Banking Days preceding the first day of such Interest Period; provided, however,
that if the rate described above does not appear on the Telerate System on any
applicable interest determination date, LIBOR for such Interest Period shall be
the rate (rounded upwards as described above, if necessary) for deposits in
dollars for a period substantially equal to such Interest Period shown on the
Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that
service for the purpose of displaying such rates), as of 11:00 a.m. (London
Time), on that day that is two (2) London Banking Days prior to the beginning of
such Interest Period. "London Banking Day" shall mean any date on which
commercial banks are open for business in London. If both the Telerate and
Reuters systems are unavailable, then LIBOR for any Interest Period will be
determined on the basis of the offered rates for deposits in U.S. Dollars for a
period of time comparable to such Interest Period which are offered by four
major banks in the London interbank market at approximately 11:00 a.m., London
time, on that day that is two (2) London Banking Days preceding the first day of
such Interest Period, as selected by the Bank. The principal London office of
each of four major London banks will be requested to provide a quotation of its
U.S. Dollar deposit offered rate. If at least two such quotations are provided,
the rate for that date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for that date will be
determined on the basis of the rates quoted for loans in U.S. Dollars to leading
European banks for a period of time comparable to such Interest Period offered
by major banks in New York City at approximately 11:00 a.m., New York City time,
on that day that is two London Banking Days preceding the first day of such
Interest Period. In the event that the Bank is unable to obtain any such
quotation as provided above, it will be deemed that LIBOR for the proposed
Interest Period cannot be determined. The Bank shall give prompt notice to the
Borrower of LIBOR as determined for each LIBOR Loan and such notice shall be
deemed conclusively correct, absent manifest error.
"LIBOR Interest Rate" - For any Interest Period, an interest rate per
annum, expressed as a percentage, determined by the Bank pursuant to the
following formula:
*LIR = LIBOR +1.5
--------------
[1.00 - R.R]
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Where LIR = LIBOR Interest Rate
LIBOR = See definition of LIBOR
RR = Reserve Rate
*LIR to be rounded upwards to the next higher 1/32 of 1%.
The LIBOR Interest Rate will be adjusted during any Interest Period to reflect
any change in the Reserve Rate during such Interest Period.
"LIBOR Loan" - All or any portion of a Term Loan which bears interest
at a LIBOR Interest Rate.
"Loan Documents" - Each of this letter agreement, the Term Note 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
(without duplication) of cash, Cash-Equivalents, commercial paper (rated not
less than A-1/P-1), money market mutual funds and Receivables (net of
appropriate reserves), but excluding any of the foregoing which are subject to
any pledge, lien, encumbrance or other restriction.
"New Cambridge Premises" - Premises to be leased by the Borrower at 000
Xxxxxxx Xxxxx Xxxxxxx, Xxxxxxxxx, XX.
"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.
"Permitted Acquisition" - Any Acquisition which meets all of the
following criteria: (1) at the time of such Acquisition and after giving effect
thereto, there is no
-34-
Default or Event of Default; (2) after giving effect to such Acquisition, the
Borrower is in PRO FORMA compliance with each of Sections 3.7 and 3.8, with
compliance with each of said Sections being determined on a PRO FORMA basis
as at the date of such Acquisition, even if not a fiscal quarter-end;
(3) such Acquisition relates to a Person primarily engaged in (or assets
primarily used in) a business expressly permitted pursuant to the second
sentence of Section 3.5 and (4) after giving effect to all cash payments due
or to become due in connection with such Acquisition, the Borrower will have
cash and Cash-Equivalents equal to not less than $50,000,000.
"Permitted Minority Investment" - Any investment by the Borrower
involving a total of less than 50% of the aggregate equity interest in any
corporation or limited liability company which investment meets all of the
following criteria: (1) at the time of such investment and after giving
effect thereto, there is no Default or Event of Default; (2) after giving
effect to such investment, the Borrower is in PRO FORMA compliance with each
of Sections 3.7 and 3.8, with compliance with each of said Sections being
determined on a PRO FORMA basis as at the date of such investment, even if
not a fiscal quarter-end; (3) such investment relates to a Person primarily
engaged in a business expressly permitted pursuant to the second sentence of
Section 3.5 and (4) after giving effect to all cash payments due or to become
due in connection with such investment, the Borrower will have cash and
Cash-Equivalents equal to not less than $50,000,000.
"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 variable rate of interest per annum designated by
the Bank, from time to time, as being its prime rate, it being understood that
such rate is merely a reference rate and does not necessarily represent the
lowest or best rate being charged to any customer.
"Qualifying Equipment" - Equipment purchased by the Borrower after
August 23, 1998 for use in the Borrower's business which meets all of the
following criteria: (i) such equipment consists of one or more of the items
shown on the equipment list heretofore delivered by the Borrower to the Bank
or has otherwise been approved by the Bank for use in supporting a Term Loan,
(ii) each item of such equipment has been delivered to and installed at the
New Cambridge Premises, and (iii) 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.
"Qualifying Leasehold Improvements" - Fixtures and leasehold
improvements purchased by the Borrower after August 23, 1998 which meet all
of the following criteria: (i) such fixtures and leasehold improvements
consist of one or more of the items shown on the leasehold improvements list
heretofore delivered by the
-35-
Borrower to the Bank or have otherwise been approved by the Bank for use in
supporting a Term Loan, (ii) each item of such fixtures and leasehold
improvements has been built into or installed at the New Cambridge Premises, and
(iii) the Borrower has paid in full for each item of such equipment and holds
title to same, free of all liens and interests of any other Person except that
items so built into the relevant premises as to become an integral part of the
real estate may be subject to the rights of the owner of such premises.
"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 LIBOR 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.
"Securities Corp." - As defined in Section 4.1.
"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).
-36-
"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 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 (without
duplication) of all cash, Cash-Equivalents, commercial paper (rated not less
than A-1/P-l) and money market mutual funds owned by the Borrower which are not
subject to any pledge, lien, encumbrance or other restriction.
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.
This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
TRANSKARYOTIC THERAPIES, INC.
By /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President, Chief
Financial Officer
Accepted and agreed:
FLEET NATIONAL BANK
By /s/ Xxxxxxxx Xxxxxxx
-----------------------------------
Its Vice President
-37-
PROMISSORY NOTE
$14,000,000.00 Boston, Massachusetts
December 23, 1998
FOR VALUE RECEIVED, the undersigned Transkaryotic Therapies, Inc., a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
FLEET NATIONAL BANK (the "Bank") the principal amount of Fourteen Million and
00/100 ($14,000,000.00) Dollars or such portion thereof as may be advanced by
the Bank pursuant to Section 1.1 of that certain letter agreement of even date
herewith between the Bank and the Borrower (the "Letter Agreement") and remains
outstanding from time to time hereunder ("Principal"), with interest, at the
rate hereinafter set forth, on the daily balance of all unpaid Principal, from
the date hereof until payment in fill of all Principal and interest hereunder.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month, commencing on the first such date
after the advance of any Principal and continuing on the first day of each
month thereafter and on the date of payment of this note in full, at a
fluctuating rate per annum (computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed) which shall at all
times (except as described in the next sentence) 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 the aforesaid rate of
interest to become effective on the same day on which any change in the Prime
Rate is effective; provided, however, that if a LIBOR Interest Rate (as
defined in the Letter Agreement) shall have become applicable to all or any
portion of the outstanding Principal for any Interest Period (as defined in
the Letter Agreement), then interest on such Principal or portion thereof
shall accrue at said applicable LIBOR Interest Rate (adjustable as provided
in the Letter Agreement) for such Interest Period and shall be payable on
each Interest Payment Date (as defined in the Letter Agreement) applicable to
such Interest Period. Overdue Principal and, to the extent permitted by law,
overdue interest shall bear interest at a fluctuating rate per annum which at
all times shall be equal to the sum of (i) four (4%) percent per annum PLUS
(ii) the Prime Rate in effect from time to time (but in no event in excess of
the maximum rate permitted by then applicable law), compounded monthly and
payable on demand. As used herein, "Prime Rate" means that rate of interest
per annum announced by the Bank from time to time as its prime rate, it being
understood that such rate is merely a reference rate and does not necessarily
represent the lowest or best rate being charged to any customer. If the
entire amount of any required Principal and/or interest is not paid within
ten (10) days after the same is due, the Borrower shall pay to the Bank a
late fee equal to five percent (5%) of the required payment.
Principal of this note shall be repaid by the Borrower to the Bank in
19 equal consecutive quarterly installments (each in an amount equal to 1/28th
of the total Principal outstanding at the close of business on December 23,
1999), such installments to commence December 31, 1999 and to continue
thereafter on the last day of each subsequent calendar quarter through and
including June 30, 2004, PLUS a 20th and final "balloon" installment due and
payable on September 30, 2004 in an amount equal to all then remaining Principal
and all interest accrued but unpaid thereon.
The Borrower may at any time and from time to time prepay all or any
portion of any Term Loan (as defined in the Letter Agreement), but, as to LIBOR
Loans (as defined in the Letter Agreement), only at the times and in the manner,
and (under certain circumstances) with the additional payments, provided for in
the Letter Agreement. Any prepayment of Principal, in whole or in part, will be
without premium or penalty (but, in the case of LIBOR Loans, may require payment
of additional amounts, as provided for in the Letter Agreement). Each Principal
prepayment shall be accompanied by payment of all interest on the prepaid amount
accrued but unpaid to the date of payment. Any partial prepayment of Principal
will be applied against Principal installments in inverse order of normal
maturity.
Payments of both Principal and interest shall be made, in lawful money
of the United States in immediately available funds, at the office of the Bank
located at Xxx Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or at such other
address as the Bank may from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or
cause to be made, on a schedule attached to this note or on the books of the
Bank, at or following the time of the making of any Term Loan and of receiving
any payment of Principal, an appropriate notation reflecting such transaction
(including date, amount and maturity) and the then aggregate unpaid balance of
Principal. Failure of the Bank to make any such notation shall not, however,
affect any obligation of the Borrower hereunder or under the Letter Agreement.
The unpaid Principal amount of this note, as recorded by the Bank from time to
time on such schedule or on such books, shall constitute presumptive evidence of
the aggregate unpaid principal amount of the Term Loans.
The Borrower hereby (a) waives notice (except any notices which are
expressly provided for in the Letter Agreement) of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b)waives presentment, demand, notice (except any notices
which are expressly provided for in the Letter Agreement), protest and all other
demands and notices
-2-
(except any notices which are expressly provided for in the Letter Agreement)
generally in connection with the delivery, acceptance, performance, default or
enforcement of or under this note, and (c) agrees to pay all reasonable costs
and expenses, including, without limitation, reasonable attorneys' fees,
incurred or paid by the Bank in enforcing this note and any collateral or
security therefor, all whether or not litigation is commenced.
This note is the Term Note referred to in the Letter Agreement. This
note is subject to prepayment as set forth in the Letter Agreement (which, in
the case of LIBOR Loans, may require the making of certain additional
payments, as provided for in the Letter Agreement). The maturity of this note
may be accelerated upon the occurrence of an Event of Default, as provided in
the Letter Agreement.
THE BORROWER HEREBY KNOWINGLY VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED ON THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PERSON. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO ACCEPT THIS NOTE AND TO MAKE TERM LOANS AS CONTEMPLATED IN THE LETTER
AGREEMENT.
Executed, as an instrument under seal, as of the day and year first
above written.
CORPORATE SEAL TRANSKARYOTIC THERAPIES, INC.
ATTEST:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------- -----------------------------------
Secretary Name: Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx Title: Vice President,
Chief Financial Officer
/s/ Xxxxxx Xxxxxxx
---------------------------------
Witness
-3-
