DIACRIN, INC.
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November 25, ▇▇▇▇
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Gentlemen:
This letter agreement will set forth certain understandings between
Diacrin, Inc., a Delaware corporation (the "Borrower"), and Fleet National Bank
(the "Bank") with respect to the Term Loan (hereinafter defined) being made by
the Bank to the Borrower. In consideration of the mutual promises contained
herein and in the other documents referred to below, and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. References to Documents. Reference is made to that certain $650,000
original principal amount promissory note (the "Term Note") of even date
herewith made by the Borrower and payable to the order of the Bank.
1.2. The Borrowing; Term Note. At the date hereof, the Bank is making a $650,000
loan (the "Term Loan") to the Borrower. Prior to the making of the Term
Loan, and as a precondition thereto, the Borrower will provide the Bank
with~a copy of the invoice presented by PharmServices, Inc. for the
buildout costs of the facilities described in Section 1.4 below. The Term
Loan will be evidenced by the Term Note. Interest on the Term Loan shall be
payable at the times and at the rate provided for in the Term Note. Overdue
principal of the Term Loan 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 per annum rate otherwise payable under the Term Note (but in no
event in excess of the maximum rate from time to time permitted by then
applicable law), compounded monthly and payable on demand. 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 receiving any payment of principal, an appropriate
notation reflecting such transaction and the then aggregate unpaid
principal balance of the Term Loan. The amount so noted shall constitute
presumptive evidence (absent manifest error) as to the amount owed by the
Borrower with respect to principal of the Term Loan. Failure of the Bank to
make any such notation shall not, however, affect any obligation of the
Borrower or any right of the Bank hereunder or under the Term Note.
1.3. Principal Repayment of Term Loan. The Borrower shall repay principal of the
Term Loan in 60 equal consecutive monthly installments, commencing on
December 1, 1997 and continuing on the first Business Day of each month
thereafter. In any event, the then outstanding principal balance of the
Term Loan and all interest then accrued but unpaid thereon shall be due and
payable in full on November 1, 2002. The Borrower may prepay, at any time
or from time to time, without premium or penalty, the whole or any portion
of the Term Loan; provided that each such principal prepayment shall be
accompanied by payment of all interest under the Term Note accrued but
unpaid to the date of payment. Any partial prepayment of principal of the
Term Loan will be applied to installments of principal of the Term Loan
thereafter coming due in inverse order of normal maturity. Amounts repaid
or prepaid with respect to the Term Loan are not available for reborrowing.
1.4. Advances and Payments. The proceeds of the Term Loan shall be credited by
the Bank to Account No. maintained by the Borrower with the Bank. The
proceeds of the Term Loan will be used by the Borrower to finance the
buildout of the facility located at ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
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 money of the
United States in immediately available funds, at its office at ▇▇ ▇▇▇▇▇
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to time direct. All payments received by the Bank after 2:00 p.m. on any
day shall be deemed received as of the next succeeding Business Day. All
monies received by the Bank shall be applied first to fees, charges, costs
and expenses payable to the Bank under this letter agreement, the Term Note
and/or any of the other Loan Documents, next to interest then accrued on
account of Term Loan and only thereafter to principal of the Term Loan. All
interest and fees payable hereunder and/or under the Term Note shall be
calculated on the basis of a 360-day year for the actual number of days
elapsed.
1.5. Conditions to Advance. Prior to the making of the 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, the Term Loan is subject to the further
conditions precedent that on the date on which the Term Loan is made (and
after giving effect thereto):
(a) All statements, representations and warranties of the Borrower made in
this letter agreement shall be correct in all material respects as of the
date of the Term Loan.
(b) All covenants and agreements of the Borrower contained herein and/or in
any of the other Loan Documents shall have been complied with in all
material respects on and as of the date of the 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.
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties. In order to induce the Bank to enter into
this letter agreement and to make the Term Loan 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 would (singly or in the aggregate with all other such failures)
have a material adverse effect on the financial condition, business or
prospects of the Borrower, all such jurisdictions being listed on item
2.1(a)~of the attached Disclosure Schedule. At the date hereof, the
Borrower has no Subsidiaries. The Borrower is not a member of any
partnership or joint venture other than Diacrin/Genzyme LLC.
(b) At the date of this letter agreement, no person is known by the
Borrower to own (based on records as of the date hereof unless otherwise
indicated in item 2.1(b)), of record or beneficially, 5% or more of the
outstanding shares of any class of capital stock of the Borrower, except as
set forth on item 2.1(b) of the attached Disclosure Schedule.
(c) The execution, delivery and performance by the Borrower of this letter
agreement and each of the other Loan Documents have been duly authorized by
all necessary corporate and other action and do not and will not:
(i) violate any provision of, or require as a prerequisite to
effectiveness any filing, 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 (other than in favor of the
Bank), upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
(d) This letter agreement and each of the other Loan Documents delivered
herewith has been duly executed and delivered by the Borrower and each is a
legal, valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its respective terms.
(e) There are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or
any Subsidiary before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which could
hinder or prevent the consummation of the transactions contemplated hereby
or call into question the validity of this letter agreement or any of the
other Loan Documents or any action taken or to be taken in connection with
the transactions contemplated hereby or thereby or which in any single case
or in the aggregate may result in any material adverse change in the
business, prospects, condition, affairs or operations of the Borrower or
any Subsidiary.
(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 of the Borrower
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.
(g) The Borrower has filed (and has caused each of its Subsidiaries to
file) all federal, foreign, state and local tax returns, reports and
estimates required to be filed by the Borrower and/or by any such
Subsidiary. All such filed returns, reports and estimates are proper and
accurate and the Borrower or the relevant Subsidiary has paid all taxes,
assessments, impositions, fees and other governmental charges required to
be paid in respect of the periods covered by such returns, reports or
estimates. No deficiencies for any tax, assessment or governmental charge
have been asserted or assessed, and the Borrower knows of no material tax
liability or basis therefor.
(h) The Borrower is in compliance (and each Subsidiary of the Borrower is
in compliance) with all requirements of law, federal, foreign, state and
local, and all requirements of all governmental bodies or agencies having
jurisdiction over it, the conduct of its business, the use of~its
properties and assets, and all premises occupied by it, failure to comply
with any of which would (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 or any such Subsidiary.
Without limiting the foregoing, the Borrower has all of 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.
(i) The audited financial statements of the Borrower and Subsidiaries as at
December 31, 1996 and the management-generated unaudited statements of the
Borrower and Subsidiaries as at September 30, 1997, each heretofore
delivered to the Bank, are complete and accurate and fairly present the
financial condition of the Borrower and Subsidiaries as at the respective
dates thereof and for the periods covered thereby, except that the
management-generated statements do not have footnotes and thus do not
present all of the information which would normally be contained in
footnotes to financial statements and are subject to normal year-end
adjustments, which shall not be material. Neither the Borrower nor any of
the Borrower's Subsidiaries has any liability, contingent or otherwise, not
disclosed, except for certain contingent liabilities in connection with the
Diacrin/Genzyme LLC, which are described in the Borrower's Form 10-K, in
the aforesaid financial statements or in any notes thereto, that could
materially affect the financial condition of the Borrower. Since December
31, 1996, 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 Building 96, 13th Street, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
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(k) The Borrower owns or has a valid right to use all of the material
patents, licenses, copyrights, trademarks, trade names and franchises now
being used or necessary to conduct its business as presently conducted. To
the best of Borrower's knowledge and belief, the conduct of the Borrower's
business as now operated does not conflict with valid patents, licenses,
copyrights, trademarks, trade names or franchises of others in any manner
that could materially adversely affect the business or assets or condition,
financial or otherwise, of the Borrower.
(l) To the Borrower's knowledge, none of the executive officers or key
employees of the Borrower is subject to any agreement in favor of anyone
other than the Borrower which materially limits or restricts that person's
right to engage in the type of business activity conducted or proposed to
be conducted by the Borrower or which grants to anyone other than the
Borrower (or Diacrin/Genzyme LLC) 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 reasonably be foreseen by the Borrower at the date
hereof, would reasonably be expected to have a material adverse effect on
the financial condition, business, prospects or properties of the Borrower,
provided that any termination of the Diacrin/Genzyme joint venture
agreement may have such material adverse effect.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any other covenants and agreements contained herein or in
any other Loan Documents, the Borrower agrees that so long as the financing
arrangements contemplated hereby are in effect or all or any portion of the Term
Loan 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 and in good standing in
Massachusetts. In addition, 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 appropriate proceedings and as to which adequate reserves
are maintained and (ii)~those laws, rules and regulations the failure to
comply with any of which would not reasonably be expected (singly or in the
aggregate) to have a material adverse effect on the financial condition,
business or prospects of the Borrower and its Subsidiaries taken as a
whole.
3.2. Maintenance of Property; Insurance. The Borrower will maintain and preserve
(and will cause each Subsidiary of the Borrower to maintain and preserve)
all of its fixed assets used in its business in good working order and
condition, making all necessary repairs thereto and replacements thereof.
The Borrower will maintain, with financially sound and reputable insurers,
insurance with respect to its property and business against such
liabilities, casualties and contingencies and of such types and in such
amounts as shall be reasonably satisfactory to the Bank from time to time
and in any event all such insurance as may from time to time be customary
for companies conducting a business similar to that of the Borrower in
similar locales.
3.3. Payment of Taxes and Charges. The Borrower will pay and discharge (and will
cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments,
charges or levies relating to real and personal property, franchises,
income, unemployment, old age benefits, withholding, or sales or use, prior
to the date on which penalties would attach thereto, and all lawful claims
(whether for any of the foregoing or otherwise) which, if unpaid, might
give rise to a lien upon any property of the Borrower or any such
Subsidiary, except any of the foregoing which is being contested in good
faith and by appropriate proceedings 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 its primary operating accounts with
the Bank.
3.5. Conduct of Business. The Borrower will conduct, in the ordinary course, the
business in which it is presently engaged or which is substantially related
thereto. The Borrower will not, without the prior written consent of the
Bank, directly or indirectly (itself or through any Subsidiary) enter into
any other unrelated lines of business, businesses or ventures.
3.6. Reporting Requirements. The Borrower will furnish to the Bank (or cause to
be furnished to the Bank):
(i) Within 92 days after the end of each fiscal year of the Borrower, a
copy of the annual audit report for such fiscal year for the Borrower,
including therein consolidated and consolidating balance sheets of the
Borrower and Subsidiaries, as applicable, as at the end of such fiscal year
and related consolidated and consolidating, as applicable, 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". Said annual financial statements
shall be accompanied by a copy of the Borrower's budget for the then
current fiscal year approved by the Borrower's Board of Directors, which
information shall be held as confidential by the Bank in accordance with
Section 3.13 hereto.
(ii) Within 47 days after the end of each fiscal quarter of the Borrower,
consolidated and consolidating, as applicable, balance sheets of the
Borrower and its Subsidiaries and related consolidated and consolidating,
as applicable, statements of income and cash flow, unaudited but complete
and accurate and 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 footnotes) and certified as accurate 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 to be for such fiscal quarter and
such statements of income and cash flow to be for the year to date, in each
case together with a comparison to the results for the corresponding fiscal
period of the immediately prior fiscal year.
(iii) At the time of delivery of each annual or quarterly 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 3.7-3.10.
(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".
(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 other than an action
in which monetary damages alone are sought and such monetary damages exceed
$100,000.
(vii) Promptly upon filing any registration statement or listing
application, a copy of same; provided that this provision shall not apply
to filings on Form S-8 (and the related listing application).
(viii) 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) Promptly after the Borrower has knowledge thereof, written notice of
any development or circumstance which would have a material adverse effect
on the Borrower or its business, properties, assets, Subsidiaries or
condition, financial or otherwise; provided, however, that the Borrower is
not required to give notice of matters relating to general economic
conditions and other matters affecting the Borrower's industry generally
(x) Promptly upon request, such other information respecting the financial
condition or operations of the Borrower or any Subsidiary as the Bank may
from time to time reasonably request.
Each financial statement of the Borrower hereafter delivered pursuant to
Section 3.6(i) or (ii) of 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.
3.7. Capital Base. The Borrower will maintain, as at the end of each fiscal
quarter of the Borrower, a consolidated Capital Base of not less than
$5,000,000.
3.8. Liquidity. The Borrower will maintain as at the end of each fiscal quarter
of Borrower (commencing with December 31, 1997), a ratio of (x) the Net
Quick Assets of the Borrower and its Subsidiaries on a consolidated basis
to (y) the total of (i)~Total Liabilities of the Borrower and its
Subsidiaries on a consolidated basis less (ii) the non-current principal
(that principal which is not due within the next 12 months) under the Line
of Credit described in Section~4.1 (vii) hereof to the extent it is
included in Total Indebtedness, which ratio shall be not less than 1.5 to
1.0.
3.9. Debt Service Ratio. As used herein, "Determination Date" means the last day
of each fiscal quarter of the Borrower. The Borrower will maintain on a
consolidated basis, as at each Determination Date (commencing with December
31, 1997), a Debt Service Coverage Ratio of not less than 2.0 to 1. As used
herein, the "Debt Service Coverage Ratio", as determined as at any
Determination Date, means the ratio of (x) Earnings Available of the
Borrower and Subsidiaries for the 12-month period ending on such
Determination Date to (y) the total of (1) all interest on any Indebtedness
(whether senior or subordinated, long-term or current), which interest was
paid or payable or accrued by the Borrower or any Subsidiary of the
Borrower during such 12-month period ending on such Determination Date,
plus (2) all payments on account of principal of any Indebtedness of the
Borrower and for any of its Subsidiaries paid or required to be paid during
such 12-month period, which payments represent current maturities of
long-term debt on the date when paid or required to be paid.
Notwithstanding the foregoing, the Borrower need not comply with the
foregoing provisions of this Sections 3.9 as at any Determination Date if
the Borrower's Unencumbered Cash Balance (which shall include the minimum
investment with the Bank described in Section 3.10 hereof) as at such
Determination Date exceeds $2,500,000.
3.10.Minimum Investment. The Borrower will maintain a minimum investment of
$1,000,000 with the Bank at all times. Such investment may be represented,
in whole or in part, by commercial paper issued by the Bank or the Bank's
parent or by investment grade securities offered by or through the Bank or
any of its affiliates, including Fleet Treasury Services.
3.11.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. Following the occurrence of a Default, the Borrower
will, at any reasonable time without necessity for notice, 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 3.11.
3.12.Subordination. Prior to the making of the Term Loan, the Borrower will
obtain, and will thereafter maintain in effect at all times, subordination
agreements in form and substance satisfactory to the Bank providing for
full subordination of all of the obligations (if any) of the Borrower
listed on item 4.1 of the attached Disclosure Schedule, other than
capitalized leases.
3.13.Confidentiality. Except as otherwise provided below, the Bank will not at
any time use (for any purpose other than in connection with monitoring the
within-described credit facility and/or enforcing its rights hereunder) any
confidential or proprietary information of any kind to which the Bank is
given access or which is provided to the Bank by the Borrower pursuant to
this Agreement (such information being hereinafter referred to as the
"Confidential Information"). The Bank agrees that it will use reasonable
efforts to ensure that Confidential Information will not be disclosed to
any other Person without the Borrower's consent; provided, however, that
nothing contained herein will be deemed to preclude any such disclosure:
(1) to employees, officers, directors and/or agents of the Bank in
connection with the approval of the within described credit facility; (2)
to internal or independent auditors; (3) to any examiners or other
officials, employees or agents of any federal or state governmental
regulatory agency, board, commission, public corporation or similar entity;
(4) if ordered by any court or governmental agency having or claiming
jurisdiction; (5) to any actual or proposed assignee of or participant in
the Term Loan; and/or (6) in connection with any suit, action or other
proceeding to collect the Term Loan or any other Obligations or enforce any
other right under this letter agreement and/or the Term Note.
Notwithstanding the foregoing, it is agreed that "Confidential Information"
expressly excludes: (1) any information filed with a public agency or
otherwise within the public domain, and (2) any information supplied to the
Bank by a third party under circumstances in which the recipient of such
information does not know of (and should not reasonably have known of) any
confidential relationship between such third party and the Borrower which
would restrict dissemination of such information.
Without limitation of any other covenants and agreements contained herein or
elsewhere, the Borrower agrees that so long as the financing arrangements
contemplated hereby are in effect or all or any portion of any Term Loan or any
of the other Obligations shall be outstanding:
4.1. Indebtedness. 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 and/or lessors for equipment purchased or leased by the Borrower
subsequent to the date of this letter agreement 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 $1,000,000 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) amounts borrowed under the Genzyme Line of Credit discussed in
Section 4.2 of the Collaboration Agreement among Borrower, Genzyme Corp.
and Diacrin/Genzyme LLC dated October 1, 1996; provided, however, that any
such borrowing shall not occur until the Borrower has executed a
subordination agreement reasonably satisfactory in form and substance to
the Bank.
4.2 Liens. The Borrower will not create, incur, assume or suffer to exist (nor
allow any of its Subsidiaries to create, incur, assume or suffer to exist)
any mortgage, deed of trust, pledge, lien, security interest, or other
charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any nature (collectively, "Liens"), upon or with
respect to any of its property or assets, now owned or hereafter acquired,
except that the foregoing restrictions shall not apply to:
(i) Liens for taxes, assessments or governmental charges or levies on
property of the Borrower or any of its Subsidiaries if the same shall not
at the time be delinquent or thereafter can be paid without interest or
penalty or are being contested in good faith and by appropriate proceedings
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 and/or lessors 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.
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 the Borrower may pay up to $50,000 in the aggregate during
the term of this letter agreement to redeem common stock warrants issued by
Borrower.
4.5. Loans and Advances. The Borrower will not make (and will not permit any
Subsidiary to make) any loans or advances to any Person, including, without
limitation, the Borrower's directors, officers and employees, except
advances to such directors, officers or employees with respect to expenses
incurred by them in the ordinary course of their duties and advances
against salary, all of which loans and advances will not exceed, in the
aggregate, $300,000 outstanding at any one time.
4.6. Investments. The Borrower will not, without the Bank's prior written
consent, invest in, hold or purchase any stock or securities of any Person
(nor will the Borrower permit any of its Subsidiaries to invest in,
purchase or hold any such stock or securities) except: (i)~readily
marketable direct obligations of, or obligations guarantied by, the United
States of America or any agency thereof; (ii)~other investment grade debt
securities; (iii)~mutual funds, the assets of which are primarily invested
in items of the kind described in the foregoing clauses (i)~and (ii)~of
this 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,
including Eurodollar deposits made through the Bank or the Bank's parent;
(v) deposits in any other bank organized in the United States having
capital in excess of $100,000,000; (vi)~investments in any Subsidiaries now
existing or hereafter created by the Borrower pursuant to Section 4.7
below; and (vii) investments contemplated by and with respect to
Diacrin/Genzyme LLC; 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 90% of
the consolidated Tangible Net Worth of the Borrower and Subsidiaries.
4.7. Subsidiaries; Acquisitions. The Borrower will not, without the prior
written consent of the Bank, form or acquire any Subsidiary or make any
other acquisition of the stock of any other Person or of all or
substantially all of the assets of any other Person. The Borrower will not
become a partner in any partnership.
4.8. Merger. The Borrower will not, without the prior written consent of the
Bank, merge or consolidate with any Person, or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or
more transactions), other than sale of inventory in the ordinary course.
4.9. Affiliate Transactions. The Borrower will not, without 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 of 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 at a level consistent with the
salary and other payments being paid at the date of this letter agreement
and heretofore disclosed in writing to the Bank or in financial reports
previously furnished to the Bank, nor to prevent the hiring of additional
officers at a salary level consistent with industry practice, nor to
prevent reasonable periodic increases in salary. 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 or former officer or director of the
Borrower; any Person owning of record or beneficially, directly or
indirectly, 5% or more of any class of capital stock of the Borrower or 5%
or more of any class of capital stock or other equity interest having
voting power (under ordinary circumstances) of any of the other Persons
described above; and any member of the immediate family of any of the
foregoing. "Control" means possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of any
Person, whether through ownership of voting equity, by contract or
otherwise.
4.10.Change of Address, etc. The Borrower will not change its corporate name or
legal structure, nor will the Borrower change its chief executive offices
or principal place of business from the address described in Section 2.1(j)
above, without prior written notice to the Bank. The Borrower will not
change its fiscal year or methods of financial reporting with respect to
the financial covenants set forth in Sections 3.7-3.9 hereof 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,. 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 (y)~hazardous materials that
are solvents or cleaning agents used in the ordinary course of the
respective business operations of the Borrower and its Subsidiaries and (2)
other materials used in the ordinary course of the respective business
operations of the Borrower or any Subsidiary, 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
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.
▇.▇▇.▇▇ Margin Stock. No proceeds of the 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
the 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, the first sentence of Section 3.3 or under
any of Sections 3.6, 3.7, 3.8, 3.9 or 3.10 or any provision of Article IV;
or
(d) The Borrower shall be in default for 30 days after having knowledge of
such default in the performance or observance of any agreement or
obligation under Section 3.1 or in the last 4 sentences of Section 3.3 and
such default shall continue unremedied for 30 days after Borrower's
knowledge thereof.
(e) The Borrower shall be 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
(f) 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
(g) 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 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
(h) Any default shall exist and remain unwaived or uncured with respect to
any other Indebtedness of the Borrower or any Subsidiary of the Borrower
for borrowed money or representing the deferred purchase price of the
property in excess of $250,000 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
$250,000 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 of holders thereof; or
(i) 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
(j) Any attachment, execution or similar process 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
(k) Any final uninsured judgment in excess of $250,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of
competent jurisdiction; or
(l) 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
(m) Any Loan Document shall for any reason (other than due to payment in
full of all amounts secured or evidenced thereby or due to discharge in
writing by the Bank) not remain in full force and effect; or
(n) If, at any time, more than 50% of any class of voting stock of the
Borrower shall be held, of record and/or beneficially, by any Person or by
any "group" (as defined in the Securities Exchange Act of 1934, as amended,
and the regulations thereunder) other than any Person listed on item 5.1(n)
of the attached Disclosure Schedule or a group consisting of such Persons;
or
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) 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.
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 and during the continuance 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 other than those held in tax
accounts or other similar trust fund or payroll accounts, 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.
VI. MISCELLANEOUS
6.1. Costs and Expenses. The Borrower agrees to pay, on demand and delivery of a
Bank Certificate therefor, all costs and expenses (including, without
limitation, reasonable legal fees) reasonably incurred by 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 the Term Loan and any amendments or
modifications of any of the foregoing, as well as the costs and expenses
(including, without limitation, the reasonable fees and expenses of legal
counsel) reasonably 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 ten (10) days following any
demand therefor until the date when paid at a rate per annum equal to 4%
per annum plus the per annum rate otherwise payable under the Term Note
(but in no event in excess of the maximum rate permitted by then applicable
law).
6.2. Capital Adequacy. If the Bank shall have determined that the adoption 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 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 the Term Loan 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, phase-in, change or
compliance and assuming that the Bank's capital was then fully utilized)
but for such adoption, phase-in, change or compliance by any amount deemed
by the Bank to be material: (i)~the Bank shall promptly after its
determination of such occurrence give notice thereof to the Borrower; and
(ii)~the Borrower shall pay forthwith to the Bank as an additional fee such
amount as the Bank certifies to be the amount that will compensate the Bank
for such reduction with respect to the Term Loan.
A certificate of the Bank claiming compensation under this Section 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 it hereunder and the method by
which such amounts were determined. In determining such amounts, the Bank
may use any reasonable averaging and attribution methods. 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 certificate
in a timely manner shall reduce any obligation of the Borrower to the Bank
under this Section.
6.3. Facility Fee. The Borrower will pay to the Bank at the date of execution
and delivery of this letter agreement a non-refundable facility fee in the
amount of $3,250. 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.
6.4. Other Agreements. The provisions of this letter agreement are not in
derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with
or for the benefit of the Bank. No inconsistency in default provisions
between this letter agreement and any of the other Loan Documents or any
such other agreement will be deemed to create any additional grace period
or otherwise derogate from the express terms of each such default
provision. No covenant, agreement or obligation of the Borrower contained
herein, nor any right or remedy of the Bank contained herein, shall in any
respect be limited by or be deemed in limitation of any inconsistent or
additional provisions contained in any of the other Loan Documents or any
such other agreement.
6.5. 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.
6.6. 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:
Diacrin, Inc.
Building 96, 13th Street
Charlestown Navy Yard
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Bank:
Fleet National Bank
High Technology Group
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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.
6.7. Binding Effect; Assignment; Termination. This letter agreement shall be
binding upon the Borrower and the Bank and their respective 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 Loan or the Term Note. Without limitation of the
foregoing generality,
(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 Loan held by the Bank hereunder. In the event of any
such grant by a 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 full the Term Loan and all interest thereon and
all fees and charges payable in connection therewith.
6.8. Consent to Jurisdiction. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or the
Term Note. The Borrower irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of
venue of any such suit, action or proceeding brought in such a court and
any claim that any such suit, action or proceeding has been brought in an
inconvenient forum. The Borrower agrees that final judgment in any such
suit, action or proceeding brought in such a court shall be enforced in any
court of proper jurisdiction by a suit upon such judgment, provided that
service of process in such action, suit or proceeding shall have been
effected upon the Borrower in one of the manners specified in the following
paragraph of this Section 6.8 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 6.8 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 6.6 (as such address may be changed from time to time
pursuant to said Section 6.6) or (ii)~by serving a copy thereof upon it at
its address set forth in Section 6.6 (as such address may be changed from
time to time pursuant to said Section 6.6).
6.9. 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.
6.10.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 such 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.
6.11.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 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 of interest. The provisions of this Section 6.11 shall control
every other provision of this letter agreement and of the Term Note.
6.12.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 LETTER 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 THE TERM LOAN 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:
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a public
holiday under the laws of the United States of America or The Commonwealth
of Massachusetts applicable to a national bank.
"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.
"Default" - Any event or circumstance which, with the passage of time or
the giving of notice or both, could become an Event of Default under this
letter agreement.
"Earnings Available" - The consolidated Net Income (or consolidated Net
Loss) of the Borrower and Subsidiaries for any period, plus, without
duplication of any item, (i) all interest on any Indebtedness (whether
senior debt or subordinated debt) paid or accrued by the Borrower and/or
any of its Subsidiaries for such period and actually deducted on the
consolidated books of the Borrower for the purposes of computation of
consolidated Net Income (or consolidated Net Loss) for the period involved,
and (ii) the amount of the provision for depreciation and/or amortization
actually deducted on the consolidated books of the Borrower for the
purposes of computation of consolidated Net Income (or consolidated Net
Loss) for the period involved, but minus all cash taxes paid during such
period by the Borrower and/or any of its Subsidiaries.
"ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
"Expiration Date" - November 1, 2002.
"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.
"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 Loan, all whether now existing or
hereafter arising or entered into.
"Net Income" (or "Net Loss") - The book net income (or book net loss, as
the case may be) of a Person for any period, after all taxes actually paid
or accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, Cash-Equivalents, readily-marketable securities and Receivables (less
an allowance for bad debt consistent with the Borrower's prior experience).
"Obligations" - All Indebtedness, covenants, agreements, liabilities and
obligations, now existing or hereafter arising, made by the Borrower with
or for the benefit of the Bank or owed by the Borrower to the Bank in any
capacity.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto.
"Person" - An individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Receivables" - As to any Person, all of such Person's present and future
accounts receivable for goods sold or for services rendered.
"SEC" - The Securities and Exchange Commission or any successor thereto.
"Subordinated Debt" - Any Indebtedness of the Borrower which is expressly
subordinated, pursuant to a subordination agreement in form and substance
satisfactory to the Bank, to all Indebtedness now or hereafter owed by the
Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower and/or
any of its Subsidiaries, directly or indirectly, owns, or has the right to
control or direct the voting of, fifty (50%) percent or more of the
outstanding capital stock or other ownership interest having general voting
power (under ordinary circumstances); provided, however, in no event shall
Diacrin/Genzyme LLC constitute a "Subsidiary" for purposes of this
Agreement.
"Tangible Net Worth" - An amount equal to the total assets of any Person
(excluding (i)~the total intangible assets of such Person, (ii) any
minority interests in Subsidiaries and (iii)~any assets representing
amounts due from any officer or employee of such Person or from any
Subsidiary of such Person) minus the total liabilities of such Person.
Total intangible assets shall be deemed to include, but shall not be
limited to, the excess of cost over book value of acquired businesses
accounted for by the purchase method, formulae, trademarks, trade names,
patents, patent rights and deferred expenses (including, but not limited
to, unamortized debt discount and expense, organizational expense,
capitalized software costs and experimental and development expenses).
"Total Liabilities" - All Indebtedness of the Borrower and/or any
Subsidiary of the Borrower (secured or unsecured, senior or subordinated)
which would properly be included in liabilities shown on a balance sheet of
the Borrower prepared in accordance with generally accepted accounting
principles.
"Unencumbered Cash Balance" - At any time, the total of all cash and
Cash-Equivalents of the Borrower which are not subject to any pledge, lien,
encumbrance or other restriction, other than any set-off right in favor of
the Bank.
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,
DIACRIN, INC.
By
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and
Chief Executive Officer
Accepted and agreed:
FLEET NATIONAL BANK
By
Its
By
Its
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries
Item 2.1(b) 50% Stock Ownership
Item 2.1(e) Litigation
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 5.1(n) Permitted 50% stockholders
