Exhibit 10(cc)
ORGANOGENESIS INC.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
November 12, 1999
Fleet National Bank
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
This letter agreement will set forth certain understandings between
Organogenesis Inc., a Delaware corporation (the "Borrower"), and Fleet National
Bank (the "Bank") with respect to Term Loans (hereinafter defined) to be made by
the Bank to the Borrower. In consideration of the mutual promises contained
herein and in the other documents referred to below, and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. References to Documents. Reference is made to (i) that certain
$5,000,000 face principal amount promissory note (the "Term Note") of even date
herewith made by the Borrower and payable to the order of the Bank, and (ii)
that certain Security Agreement (Equipment) of even date herewith from the
Borrower to the Bank (the "Security Agreement").
1.2. The Borrowing; Term Note. Subject to the terms and conditions
hereinafter set forth, the Bank will make one or more loans (the "Term Loans")
to the Borrower, as the Borrower may request, on any Business Day prior to the
first to occur of (i) the close of business on September 29, 2000 or (ii) the
earlier termination of the within-described term loan facility pursuant to
ss.5.2 or ss.6.5. A Term Loan shall be made, not more than once per calendar
quarter (except that more than one Term Loan may be made in any calendar quarter
provided that each additional Term Loan in any one calendar quarter is in an
amount of at least $100,000), in order to finance the costs of Qualifying
Equipment acquired by the Borrower within the 90 days (or 210 days in the case
of the initial Term Loan) preceding the request for such Term Loan and/or the
costs of Qualifying Leasehold Improvements installed or constructed within the
90 days (or 210 days in the case of the initial Term Loan) 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 September 29,
2000; (ii) the aggregate original principal amounts of all Term Loans will not
exceed $5,000,000; (iii) the aggregate original principal amounts of all Term
Loans made in respect of Qualifying Leasehold Improvements and/or software will
not exceed $3,000,000; and (iv) no Term Loan will be in an amount more than 90%
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 (except as
otherwise provided in the next following sentence), installation charges (except
as otherwise provided in the next following sentence), training fees
and other "soft costs"). Notwithstanding the provisions of clause (iv) of the
immediately preceding sentence (but subject always to the limitations contained
in clause (iii) of the immediately preceding sentence), (i) construction costs
incurred by the Borrower in connection with the installation of leasehold
improvements at the Borrower's Canton, MA premises may be included in Qualifying
Leasehold Improvements and (ii) the Borrower may include within Qualifying
Equipment up to $500,000 in costs of software acquired by the Borrower. 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 Qualifying Leasehold Improvements (as the case may
be); (ii) such evidence as the Bank may reasonably require showing that all
Qualifying Equipment has been delivered to and installed at the Borrower's
premises at ▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ and/or ▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇, has become
fully operational, has been paid for by the Borrower (or is being paid for by
the Borrower from the proceeds of the relevant Term Loan) and is owned by the
Borrower free of all liens and interests of any other Person (other than the
security interest of the Bank pursuant to the Security Agreement); (iii) such
evidence as the Bank may reasonably require showing that the Qualifying
Leasehold Improvements have been installed at the Borrower's premises at ▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇ and/or ▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇, have been paid for (or are
being paid for by the Borrower from the proceeds of the relevant Term Loan) by
the Borrower and are owned by the Borrower free of all liens and interests of
any other Person (other than the security interests of the Bank pursuant to the
Security Agreement), it being acknowledged that such Qualifying Leasehold
Improvements are to be affixed to the Borrower's premises and may become so
built into such premises that they become part of the realty, with the result
that the owner of such premises would have rights thereto upon the termination
of the Borrower's lease and the Bank would no longer have a security interest
therein; (iv) if reasonably required in order to effect and maintain the
security interest contemplated by the Security Agreement, an appropriate
supplement to the Security Agreement and Uniform Commercial Code financing
statements reflecting the relevant Qualifying Equipment and/or Qualifying
Leasehold Improvements with respect to which such Term Loan is being made (all
in form and substance reasonably satisfactory to the Bank); and (v) evidence
satisfactory to the Bank that the items of Qualifying Equipment and/or
Qualifying Leasehold Improvements (as the case may be) are fully insured against
casualty loss, with insurance naming the Bank as secured party and first loss
payee.
The Term Loans will be evidenced by the Term Note. The Borrower hereby
irrevocably authorizes the Bank to make or cause to be made, on a schedule
attached to the Term Note or on the books of the Bank, at or following the time
of making each Term Loan and of receiving any payment of principal, an
appropriate notation reflecting such transaction and the then aggregate unpaid
principal balance of the Term Loans. The amount so noted shall constitute
presumptive evidence as to the amount owed by the Borrower with respect to
principal of the Term Loans. Failure of the Bank to make any such notation shall
not, however, affect any obligation of the Borrower or any right of the Bank
hereunder or under the Term Note.
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1.3. Principal Repayment of Term Loans. The Borrower shall repay principal
of the Term Loans in 12 equal consecutive quarterly installments, commencing on
December 29, 2000 and continuing on the last Business Day of each calendar
quarter thereafter. Each such quarterly installment of principal of the Term
Loans shall be in an amount equal to 1/12th of the aggregate principal amount of
the Term Loans outstanding at the close of business on September 29, 2000. In
any event, the then outstanding principal balance of all Term Loans and all
interest then accrued but unpaid thereon shall be due and payable in full on
September 30, 2003. 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 on the amount so prepaid 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
prepayment, (iii) any voluntary prepayment with respect to a LIBOR Loan must be
in a principal amount of $100,000 or an integral multiple of $100,000 and, after
giving effect to such voluntary prepayment, the remaining outstanding balance of
such LIBOR Loan shall be not less than $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 ss.1.7 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.
1.4. Interest Rate. Except as otherwise provided below in this ss.1.4,
interest on the Term Loans will be payable at a fluctuating rate per annum (the
"Floating Rate") which shall at all times be equal to the Prime Rate as in
effect from time to time (but in no event in excess of the maximum rate
permitted by then applicable law), with a change in such rate of interest to
become effective on each day when a change in the Prime Rate becomes effective.
Subject to the conditions set forth herein, the Borrower may elect that all or
any portion of any Term Loan to be made under ss.1.2 will be made as a LIBOR
Loan with an Interest Period of one month, two months, 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 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
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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 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 ss.1.4 (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 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.
1.5. Interest Payments. The Borrower will pay interest on the unpaid
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. Notwithstanding the foregoing, at any time after
maturity of the Term Loans or after the occurrence and during the continuance of
any Event of Default, each 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 interest rate otherwise then applicable to such Term Loan. All
interest and fees payable under this letter agreement and/or under the Term Note
will be calculated on the basis of a 360-day year for the actual number of days
elapsed.
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1.6. Rate Determination Protection. In the event that:
(a) the Bank shall determine that, by reason of circumstances
affecting the London interbank market or otherwise, adequate and
reasonable methods do not exist for ascertaining the LIBOR Interest
Rate which would otherwise be applicable during any Interest Period,
or
(b) the Bank shall determine that:
(i) 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
(ii) reserve-adjusted LIBOR will not, in the reasonable
determination of the Bank, adequately and fairly reflect the cost
to the Bank of funding the LIBOR Loans for such Interest Period
then the Bank shall forthwith give notice of such determination (which
shall be conclusive and binding on the Borrower) to the Borrower. In
such event the obligations of the Bank to make LIBOR Loans shall be
suspended until the Bank determines that the circumstances giving rise
to such suspension no longer exist, whereupon the Bank shall notify
the Borrower.
1.7. Prepayment of LIBOR Loans. The following provisions of this ss.1.7
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 LIBOR Interest Rate in effect with respect to the
relevant LIBOR Loan 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 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
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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.
1.8. Increased Costs; Capital Adequacy.
(i) If the adoption, effectiveness or phase-in, after the date hereof,
of any applicable law, rule or regulation, or any change therein, or
any change in the 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 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
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.
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(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 ss.1.8 shall be conclusive in the absence of manifest error.
Such certificate shall set forth the nature of the occurrence
giving rise to such compensation, the additional amount or
amounts to be paid to the Bank hereunder and the method by which
such amounts are determined. In determining any such amount, the
Bank may use any reasonable averaging and attribution methods.
(iv) No failure on the part of the Bank to demand compensation on
any one occasion shall constitute a waiver of its right to demand
such compensation on any other occasion and no failure on the
part of the Bank to deliver any Bank Certificate in a timely
manner shall in any way reduce any obligation of the Borrower to
the Bank under this ss.1.8.
1.9. Illegality or Impossibility. Notwithstanding any other provision of
this letter agreement, if the introduction of or any change in or in the
interpretation or administration of any law or regulation applicable to the Bank
or the Bank's activities in the London interbank market shall make it unlawful,
or any central bank or other governmental authority having jurisdiction over the
Bank or the Bank's activities in the London interbank market shall assert that
it is unlawful, or otherwise make it impossible, for the Bank to perform its
obligations hereunder to make LIBOR Loans or to continue to fund or maintain
LIBOR Loans, then on notice thereof and demand therefor by the Bank to the
Borrower, (i) the obligation of the Bank to fund LIBOR Loans shall terminate and
(ii) all affected LIBOR Loans shall be deemed to have been converted into
Floating Rate Loans (with the Borrower to be responsible for any amount payable
under ss.1.7 as a consequence of such conversion) at the last day on which such
LIBOR Loans may legally remain outstanding. Except as expressly provided in the
immediately preceding sentence, no LIBOR Loan may be converted into a Floating
Rate Loan prior to the end of the Interest Period applicable to such LIBOR Loan.
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1.10. Advances and Payments. The proceeds of all Term Loans shall be
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of each Term Loan will be used by the Borrower
solely to pay or reimburse acquisition costs of Qualifying Equipment and/or
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 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ or to such other address as the Bank may from time to time direct. All
payments received by the Bank after 2:00 p.m. on any day shall be deemed
received as of the next succeeding Business Day. All monies received by the Bank
shall be applied first to fees, charges, costs and expenses payable to the Bank
under this letter agreement, the Term Note and/or any of the other Loan
Documents, next to interest then accrued on account of any Term Loans and only
thereafter to principal of the Term Loans.
1.11. Conditions to Advance. Prior to the making of the initial Term Loan,
the Borrower shall deliver to the Bank duly executed copies of this letter
agreement, the Security Agreement, the Term Note and the documents and other
items listed on the Closing Agenda delivered herewith by the Bank to the
Borrower, all of which, as well as all legal matters incident to the
transactions contemplated hereby, shall be satisfactory in form and substance to
the Bank and its counsel.
Without limiting the foregoing, any Term Loan (including the initial Term
Loan) is subject to the further conditions precedent that on the date on which
such Term Loan is made (and after giving effect thereto):
(a) All statements, representations and warranties of the Borrower
made in this letter agreement and/or in the Security Agreement shall
continue to be correct in all material respects as of the date of such Term
Loan.
(b) All covenants and agreements of the Borrower contained herein
and/or in any of the other Loan Documents shall have been complied with in
all material respects on and as of the date of such Term Loan.
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(c) No event which constitutes, or which with notice or lapse of time
or both could constitute, an Event of Default shall have occurred and be
continuing.
(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 ss.1.11 will be satisfied.
Section 1.12. Rate Adjustment. This letter agreement contemplates that the
Applicable Rate Increment will be adjusted upon each change in Compliance Level
(hereinafter defined). As used herein, (i) the term "Rate Adjustment Date" will
mean the 45th day after the close of each fiscal quarter of the Borrower, the
first such Rate Adjustment Date being November 15, 1999, and (ii) as to each
Rate Adjustment Date, the relevant "Adjustment Measurement Date" will be the
fiscal quarter-end immediately preceding such Rate Adjustment Date. The
Compliance Level will be determined on each Rate Adjustment Date, based on the
Borrower's Debt Service Coverage Ratio determined as at the Adjustment
Measurement Date relevant thereto and (except as otherwise provided below) will
remain in effect until (but not including) the next following Rate Adjustment
Date. For the purposes of this letter agreement, the Borrower will be deemed to
be in Level One Compliance as at any Rate Adjustment Date if and only if the
Borrower's Debt Service Coverage Ratio as at the relevant Adjustment Measurement
Date is greater than or equal to 1.5 to 1. The Borrower will be deemed to be in
Level Two Compliance as at any Rate Adjustment Date if the Borrower is not in
Level One Compliance as at such Rate Adjustment Date. The Compliance Level to
take effect on each Rate Adjustment Date (including, without limitation, that
Rate Adjustment Date which falls in the first quarter of each fiscal year of the
Borrower) will be determined based on the unaudited consolidated financial
statements of the Borrower as at the relevant Adjustment Measurement Date
furnished pursuant to clause (ii) of ss.3.6; provided that if the audited annual
consolidated financial statements of the Borrower (when received by the Bank
pursuant to clause (i) of ss.3.6) indicate that as at any Adjustment Measurement
Date which is a fiscal year-end the Borrower's Debt Service Coverage Ratio, as
evidenced by said audited financial statements (the "Audited Q4 Debt Service
Coverage Ratio"), was different from that Debt Service Coverage Ratio (the
"Unaudited Q4 Debt Service Coverage Ratio") which had been shown on the
management-generated financial statements theretofore delivered to the Bank
pursuant to clause (ii) of ss.3.6 with respect to such Adjustment Measurement
Date and the difference is such that the Audited Q4 Debt Service Coverage Ratio
would result in a Compliance Level different from that calculated with reference
to the Unaudited Q4 Debt Service Coverage Ratio, then, promptly after the
relevant audited financial statements have been received by the Bank, (i) the
Compliance Level will be adjusted to reflect the Audited Q4 Debt Service
Coverage Ratio and (ii) as applicable, either the Borrower will pay to the Bank
(in the case of a decrease in the Debt Service Coverage Ratio) an amount which
reflects the additional interest which the Bank would have received for the
period beginning on the relevant Rate Adjustment Date and continuing through the
date of such adjustment if the lower Debt Service Coverage Ratio had been in
effect, or (in the case of an
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increase in the Debt Service Coverage Ratio) the Bank will pay to the Borrower
or will credit to the next following interest payment or payments an amount
equal to the excess interest which the Bank actually received for the period
beginning on the relevant Rate Adjustment Date and continuing through the date
of such adjustment, "excess interest" being deemed to mean for the purposes of
this paragraph, the result, if positive, of (x) the interest on the Term Note
actually received by the Bank for such period minus (y) the interest on the Term
Note which would have been received by the Bank for such period had the
Compliance Level corresponding to the Audited Q4 Debt Service Coverage Ratio
been in effect throughout such period. Further, and notwithstanding anything
provided above in this ss.1.12, if the Borrower's financial statements for any
fiscal quarter are for any reason not timely delivered to the Bank, the Borrower
will be deemed to be in Level Two Compliance unless and until such financial
statements are so delivered to the Bank, at which time the Compliance Level will
be determined based on such financial statements and the Applicable Rate
Increment will be adjusted (if the Compliance Level so determined is not Level
Two Compliance), such adjustment to be retroactive to the preceding Rate
Adjustment Date. No rate adjustment provided for herein will be deemed to excuse
or waive any default resulting from the failure by the Borrower to comply with
any other provision of this letter agreement (including, without limitation,
ss.3.9 of this letter agreement and, in the event of any such default, the Bank
will have all of its rights and remedies described in Article V below consequent
thereon. In any event, the Borrower will be deemed to be in Level Two Compliance
from the date of this letter agreement to November 15, 1999, at which date the
Compliance Level will be determined on the basis of the Debt Service Coverage
Ratio as at the then relevant Adjustment Measurement Date (i.e., September 30,
1999).
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties. In order to induce the Bank to enter
into this letter agreement and to make Term Loans hereunder, the Borrower
warrants and represents to the Bank as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. The Borrower has full
corporate power to own its property and conduct its business as now
conducted and as proposed to be conducted, to grant the security interests
contemplated by the Security Agreement and to enter into and perform this
letter agreement and the other Loan Documents. The Borrower is duly
qualified to do business and in good standing in Massachusetts and in each
other jurisdiction in which the Borrower maintains any plant, office,
warehouse or other facility and in each other jurisdiction where the
failure so to qualify could (singly or in the aggregate with all other such
failures) have a material adverse effect on the financial condition,
business or prospects of the Borrower, all such jurisdictions being listed
on item 2.1(a) of the attached Disclosure Schedule. At the date hereof, the
Borrower has no Subsidiaries, except as shown 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 by the
Borrower to own, of record and/or beneficially, more than 5% of the
outstanding shares of any class of the Borrower's capital stock, except as
set forth on item 2.1(b) of the attached Disclosure Schedule.
10
(c) The execution, delivery and performance by the Borrower of this
letter agreement and each of the other Loan Documents have been duly
authorized by all necessary corporate and other action and do not and will
not:
(i) violate any provision of, or require as a prerequisite to
effectiveness any filing (other than filings under the Uniform
Commercial Code), registration, consent or approval under, any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the
Borrower;
(ii) violate any provision of the charter or by-laws of the
Borrower, or result in a breach of or constitute a default or require
any waiver or consent 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 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 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 may result in any
material adverse change in the business, prospects, condition, affairs or
operations of the Borrower.
(f) The Borrower is not in violation of any term of its charter or
by-laws as now in effect. 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.
11
(g) 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. 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 with (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 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, 1998 and the quarterly financial statements of the Borrower as
at June 30, 1999 (collectively, the "Financial Statements"), 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, 1998, except as
indicated in the Financial Statements, 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 ▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The books and
records of the Borrower are located at said address. Except as described on
item 2.1(j) of the attached Disclosure Schedule, no assets of the Borrower
are presently located at any other address. Said item 2.1(j) of the
attached Disclosure Schedule also sets forth the names and addresses of all
record owners of any premises where Collateral may be located.
(k) To the Borrower's knowledge, 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
Borrower's knowledge, 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) 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
12
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 reasonably foreseen by the Borrower at the date
hereof, may have a material adverse effect on the financial condition,
business, prospects or properties of the Borrower.
(n) The Borrower has reviewed the hardware and software which it uses
in its business for "Year 2000" compliance and reasonably believes that
such hardware and software will continue to function in the manner intended
without any interruption of service or other difficulty resulting from the
"Year 2000 problem" that would have a material adverse effect on the
financial condition, business, prospects or properties of the Borrower. 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 all or any portion of any Term
Loan is outstanding or any commitment on the part of the Bank to make any Term
Loan is in effect:
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. 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 such qualification is required and 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 with (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
all such insurance as may be required under the Security
13
Agreement and will also maintain, with financially sound and reputable insurers,
insurance with respect to its property and business against such liabilities,
casualties and contingencies and of such types and in such amounts as shall be
reasonably satisfactory to the Bank from time to time and in any event all such
insurance as may from time to time be customary for companies conducting a
business similar to that of the Borrower in similar locales.
3.3. Payment of Taxes and Charges. The Borrower will pay and discharge (and
will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the 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
lease obligations, material trade debt, purchase money obligations and equipment
lease obligations and all of its other material Indebtedness. The Borrower will
perform and fulfill all material covenants and agreements under any leases of
real estate, agreements relating to purchase money debt, 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 principal 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. 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 of the fields in which the Borrower conducts its business at
the date of this letter agreement or any substantially related businesses.
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 an Annual
Report on Form 10-K) all of the following: the annual audit report for such
fiscal year for the Borrower, including therein consolidated and
consolidating balance sheets of the Borrower and Subsidiaries as at the end
of such fiscal year and related consolidated and consolidating 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 (including balance sheet and income statement projections) for
the Borrower for such
14
fiscal year, prepared by the Borrower's management and approved by the
Borrower's Chief Financial Officer, 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 a Quarterly Report on Form 10-Q) all of the following: consolidated
and consolidating balance sheets of the Borrower and Subsidiaries and
related consolidated and consolidating 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 or Event of Default or, if he or she has such knowledge, specifying
each such Default or Event of 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 ss.ss.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.
(v) As soon as possible and in any event within ten (10) 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 which,
if determined adversely to the Borrower or such Subsidiary, could
reasonably be expected to have a material adverse effect on the financial
condition, business or prospects of the Borrower or such Subsidiary.
15
(vii) Promptly upon filing any registration statement, a copy of same.
(viii) As long as the Borrower has a class of securities which is
publicly traded, one copy of each periodic or current report of the
Borrower filed with the SEC or any successor agency, of each press release
or other communication disseminated to the public generally, and of 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, such public
dissemination or such communication with shareholders or securityholders,
as the case may be.
(ix) Promptly after the Borrower has knowledge thereof, written notice
of any development or circumstance which may reasonably be expected to have
a material adverse effect on the Borrower or its business, properties,
assets, Subsidiaries or condition, financial or otherwise.
(x) Promptly upon request, such other information respecting the
financial condition, operations, receivables, inventory, machinery or
equipment of the Borrower or any Subsidiary as the Bank may from time to
time reasonably request.
3.7. Capital Base. The Borrower will maintain, as at the end of each fiscal
quarter of the Borrower (commencing with its results as at September 30, 1999),
a consolidated Capital Base of not less than $10,000,000.
3.8. Liquidity. The Borrower will maintain, as at the end of each fiscal
quarter of Borrower (commencing with its results as at September 30, 1999), a
ratio of Net Quick Unrestricted Assets to Senior Debt, which ratio shall be not
less than 1.5 to 1.
3.9. Debt Service Coverage. As used herein, "Determination Date" means the
last day of each fiscal quarter of the Borrower. The Borrower will maintain on a
consolidated basis, as at each Determination Date (commencing with its results
as at September 30, 1999), 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 period of the four fiscal quarters 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 four-quarter 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, plus (3) the total Capital Expenditures
incurred by the Borrower and/or any of its Subsidiaries and not financed by the
Borrower as permitted under this letter agreement during the four-quarter period
ending on such Determination Date. Notwithstanding the foregoing, the Borrower
need not comply with the foregoing provisions of this ss.3.9 as at any
Determination Date if the Borrower's Unencumbered Cash Balance as at such
Determination Date is at least equal to the then Cash Balance Requirement. As
used herein, "Cash Balance Requirement", as determined at any date, means the
lesser of (x) 200% of the aggregate principal amount of the Term Loans
outstanding at that date or (y) $10,000,000; provided, however, that the Cash
Balance Requirement shall never be less than $5,000,000.
16
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 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 ss.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; provided that interim
financial statements may be subject to normal recurring year-end adjustments.
IV. NEGATIVE COVENANTS
Without limitation of any other covenants and agreements contained herein
or elsewhere, the Borrower agrees that so long as all or any portion of any Term
Loan is outstanding or any commitment on the part of the Bank to make any Term
Loan is in effect:
4.1. Indebtedness. Without the prior written consent of the Bank, the
Borrower will not create, incur, assume or suffer to exist any Indebtedness (nor
allow any of its Subsidiaries to create, incur, assume or suffer to exist any
Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without limitation, the
Indebtedness represented by the Term Note;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies which are not yet due and
payable 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;
(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) hereafter incurred
to equipment vendors, equipment lessors and other Persons providing
purchase money financing to the Borrower for equipment purchased or leased
by the Borrower for use in the Borrower's business; provided that the total
of Indebtedness permitted under this clause (iv) plus presently-existing
equipment financing permitted under clause (v) of this ss.4.1 will not
exceed $2,000,000 in the aggregate outstanding at any one time;
17
(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 toss.4.3;
(vii) Indebtedness which may now or hereafter be incurred by the
Borrower to purchase approximately 98 acres of real estate in Smithfield,
Rhode Island for $1,450,000;
(viii) Indebtedness under the 1999 Subordinated Notes; and
(ix) any additional Subordinated Debt incurred after the date hereof;
provided that the subordination provisions governing same are approved by
the Bank in writing (which approval may be given or withheld by the Bank in
its discretion) prior to the date when such additional Subordinated Debt is
incurred.
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 (including, without
limitation, any trustee process affecting any account of the Borrower with the
Bank), except that the foregoing restrictions shall not apply to:
(i) Liens for taxes, assessments or governmental charges or levies on
property of the Borrower or any of its Subsidiaries if the same shall not
at the time be delinquent or thereafter can be paid without interest or
penalty or are being contested in good faith and by appropriate proceedings
which serve as a matter of law to stay any enforcement thereof and as to
which adequate reserves are maintained;
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business for sums not yet due or which are being contested in good faith
and by appropriate proceedings which serve as a matter of law to stay the
enforcement thereof and as to which adequate reserves are maintained;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors, equipment lessors and other
Persons securing purchase money Indebtedness to the extent permitted by
clauses (iv) or (v) of ss.4.1; provided that no such Lien will extend to
any property of the Borrower other than the specific items of equipment
financed;
18
(vi) rights of the licensee under any commercially reasonable license
of technology or other intellectual property given by the Borrower to any
of the Borrower's customers in the ordinary course of its business;
(vii) any mortgage or other Lien securing the Indebtedness described
in clause (vii) of ss.4.1; provided that no such mortgage or other Lien
will encumber any property of the Borrower other than the Smithfield, Rhode
Island property described in said clause (vii) of ss.4.1; or
(viii) 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 ss.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 (other than
a commercially reasonable license of technology or other intellectual property
entered into by the Borrower in the ordinary course of its business) which could
have the effect of preventing the Borrower or any Subsidiary from granting a
Lien on any of its assets (including, without limitation, any of its
intellectual property) to the Bank.
4.3. Guaranties. The Borrower will not, without the prior written consent
of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable) in connection with any
indebtedness of any other Person, except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business, and (ii) guaranties
existing at the date hereof and described on item 4.3 of the attached Disclosure
Schedule.
4.4. Dividends. The Borrower will not, without the prior written consent of
the Bank, make any distributions to its shareholders, pay any dividends (other
than dividends payable solely in capital stock of the Borrower) or redeem,
purchase or otherwise acquire, directly or indirectly any of its capital stock,
except as expressly permitted by the next following sentence. Notwithstanding
the foregoing, the Borrower may, without being deemed to be in violation of this
ss.4.4, redeem shares of its existing Preferred Stock as and to the extent
required by the Borrower's Certificate of Incorporation; provided that at the
time of each such redemption and after giving effect thereto (1) there is not
(nor will there result therefrom) any Default or Event of Default and (2) in any
event the Borrower's Unencumbered Cash Balance would not be less than the then
applicable Cash Balance Requirement.
19
4.5. Loans and Advances. The Borrower will not make (and will not permit
any Subsidiary to make) any loans or advances to any Person, including, without
limitation, the Borrower's directors, officers and employees, except advances to
such directors, officers or employees with respect to expenses incurred by them
in the ordinary course of their duties and advances against salary, all of which
loans and advances will not exceed, in the aggregate, $250,000 outstanding at
any one time.
4.6. Investments. The Borrower will not, without the Bank's prior written
consent, invest in, hold or purchase any stock or securities of any Person (nor
will the Borrower permit any of its Subsidiaries to invest in, purchase or hold
any such stock or securities) except: (i) readily marketable direct obligations
of, or obligations guarantied by, the United States of America or any agency
thereof; (ii) other investment grade debt securities; (iii) mutual funds, the
assets of which are primarily invested in items of the kinds described in the
foregoing clauses (i) and (ii) of this ss.4.6; (iv) commercial paper rated not
less than A-1/P-1; (v) deposits with or certificates of deposit issued by the
Bank and any other obligations of the Bank or the Bank's parent; (vi) deposits
with or certificates of deposit issued by any other bank organized in the United
States having capital in excess of $100,000,000; (vii) any money market
accounts; (viii) existing investments described in Part A of item 4.6 of the
attached Disclosure Schedule and investments which may hereafter be acquired by
the Borrower in compliance with Part B of said item 4.6; (ix) investments in any
Subsidiaries now existing or hereafter created by the Borrower pursuant to
ss.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 80% of the consolidated
Tangible Net Worth of the Borrower and Subsidiaries; and (x) Permitted
Acquisitions (provided that any such Permitted Acquisition which involves the
creation or acquisition of a Subsidiary must also satisfy the test set forth in
the proviso contained in clause (ix) above).
4.7. Subsidiaries; Acquisitions. The Borrower will not, without the prior
written consent of the Bank, make any acquisition of all or substantially all of
the stock of any other Person or of all or substantially all of the assets of
any other Person, other than pursuant to a Permitted Acquisition which also
complies with the proviso contained in clause (ix) of ss.4.6. The Borrower will
not become a partner in any partnership pursuant to any arrangement which
permits a third party to incur Indebtedness on behalf of the Borrower without
the Borrower's consent or to commit any assets of the Borrower without the
Borrower's consent. The Borrower will promptly inform the Bank if it forms any
Subsidiaries.
4.8. Merger. The Borrower will not, without the prior written consent of
the Bank, merge or consolidate with any Person (other than a merger pursuant to
a Permitted Acquisition in which the Borrower is the surviving corporation), or
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 in the ordinary course of Borrower's business to another Person on
commercially reasonable terms; or (iii) transfer of any of the Borrower's
intellectual property for reasonable consideration to a research and development
entity in which the Borrower participates as an equity owner.
20
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 as permitted under
ss.4.5 or 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 ss.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, nor to prevent the hiring of additional
officers at a salary level consistent with industry practice, nor to prevent
reasonable periodic increases in salary or benefits. For the purposes of this
letter agreement, "affiliate" means any Person which, directly or indirectly,
controls or is controlled by or is under common control with the Borrower; any
officer or director of the Borrower; any Person owning of record or
beneficially, directly or indirectly, 5% or more of any class of capital stock
of the Borrower or 5% or more of any class of capital stock or other equity
interest having voting power (under ordinary circumstances) of any of the other
Persons described above; and any member of the immediate family of any of the
foregoing. "Control" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of any Person,
whether through ownership of voting equity, by contract or otherwise.
4.10. Change of Address, etc. The Borrower will not change its corporate
name or legal structure, nor will the Borrower change its chief executive
offices or principal place of business from the premises described in ss.2.1(j),
nor will the Borrower keep any Collateral at any location other than at those
premises described in ss.2.1(j) without, in each instance, giving the Bank at
least 30 days' prior written notice and executing and delivering all such
financing statements, certificates and other documentation as the Bank may
reasonably request in order to maintain the perfection and priority of the
security interests granted or intended to be granted pursuant to the Security
Agreement. The Borrower 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.
21
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 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. The
Borrower will not make any payment on account of any Subordinated Debt in
violation of the subordination agreement or subordination provisions governing
same.
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:
22
(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 ss.ss.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
(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 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 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 $100,000 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
$100,000 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
(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
23
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 execution or similar process shall be issued or levied against
any property of the Borrower or any Subsidiary and such execution or
similar process shall not be paid, stayed, released, vacated or fully
bonded within 10 days after its issue or levy; or
(j) 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
(k) The Security Agreement or any other Loan Document shall for any
reason (other than due to payment in full of all amounts secured or
evidenced thereby or due to discharge in writing by the Bank) not remain in
full force and effect; or
(l) The security interest and liens of the Bank in and on any of the
Collateral covered or intended to be covered by the Security Agreement
shall for any reason (other than written release by the Bank or the Bank's
failure to file adequate and timely Uniform Commercial Code financing
statements or continuations or amendments thereof or the Bank's failure to
give value) not be fully perfected liens and security interests; or
(m) 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(m) of
the attached Disclosure Schedule; or
(n) There shall occur any other material adverse change in the
condition (financial or otherwise), operations, properties, assets,
liabilities or earnings of the Borrower.
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.
24
(c) Exercise all rights and remedies hereunder, under the Security
Agreement, under the Term Note and under each and any other agreement with
the Bank; and exercise all other rights and remedies which the Bank may
have under applicable law.
5.3. Set-off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As further 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 Security Agreement, the Term Note and all other
instruments and documents to be delivered in connection with any Term Loan and
any amendments or modifications of any of the foregoing, as well as the
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 Security Agreement, the Term Note and all other
instruments and documents delivered or to be delivered hereunder or in
connection herewith, all whether or not legal action is instituted. In addition,
the Borrower shall be obligated to pay any and all stamp and other taxes payable
or determined to be payable in connection with the execution and delivery of
this letter agreement, the Security Agreement, the Term Note and all other
instruments and documents to be delivered in connection with any Obligation. Any
fees, expenses or other charges which the Bank is entitled to receive from the
Borrower under this Section shall bear interest from the date of any demand
therefor until the date when paid at a rate per annum equal to the sum of (i)
one (1%) percent per annum plus (ii) the Floating Rate (but in no event in
excess of the maximum rate permitted by then applicable law).
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
25
amount of $25,000. 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. 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.
6.4. Addresses for Notices, etc. All notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be mailed or
delivered to the applicable party at the address indicated below:
If to the Borrower:
Organogenesis Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Bank:
Fleet National Bank
High Technology Division
Mail Code: MA BOS 01-08-06
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ or (▇▇▇) ▇▇▇-▇▇▇▇
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. If any
such notice, request, demand or other communication is hand-delivered, same
shall be effective upon receipted delivery.
26
6.5. Binding Effect; Assignment; Termination. This letter agreement shall
be binding upon the Borrower, its successors and assigns and shall inure to the
benefit of the Borrower and the Bank and their respective permitted successors
and assigns. The Borrower may not assign this letter agreement or any rights
hereunder without the express written consent of the Bank. The Bank may, in
accordance with applicable law, from time to time assign or grant participations
in this letter agreement, the Term Loans and/or the Term Note. 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 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 full the Term Loans and all interest thereon and all fees and charges
payable in connection therewith.
6.6. Consent to Jurisdiction. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or the Term
Note. The Borrower irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of venue of any
such suit, action or proceeding brought in such a court and any claim that any
such suit, action or proceeding has been brought in an inconvenient forum. The
Borrower agrees that final judgment in any such suit, action or proceeding
brought in such a court shall be enforced in any court of proper jurisdiction by
a suit upon such judgment, provided that service of process in such action, suit
or proceeding shall have been effected upon the Borrower in one of the manners
specified in the following paragraph of this ss.6.6 or as otherwise permitted by
law.
27
The Borrower hereby consents to process being served in any suit, action or
proceeding of the nature referred to in the preceding paragraph of this ss.6.6
either (i) by mailing a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to it at its address set forth in ss.6.4 (as
such address may be changed from time to time pursuant to said ss.6.4) or (ii)
by serving a copy thereof upon it at its address set forth in ss.6.4 (as such
address may be changed from time to time pursuant to said ss.6.4).
6.7. Severability. In the event that any provision of this letter agreement
or the application thereof to any Person, property or circumstances shall be
held to any extent to be invalid or unenforceable, the remainder of this letter
agreement, and the application of such provision to Persons, properties or
circumstances other than those as to which it has been held invalid and
unenforceable, shall not be affected thereby, and each provision of this letter
agreement shall be valid and enforced to the fullest extent permitted by law.
6.8. Governing Law. This letter agreement and the Term Note shall be
governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
6.9. 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.
6.10. 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 ss.6.10 shall control every other
provision of this letter agreement and of the Term Note.
6.11. 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,
28
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:
"Applicable Rate Increment" - At any time while the Borrower is in Level
One Compliance - 1.75% per annum; and at any time while the Borrower is in Level
Two Compliance - 2.25% per annum.
"Bank Certificate" - A certificate signed by an officer of the Bank setting
forth in reasonable detail any additional amount required to be paid by the
Borrower to the Bank pursuant to ss.1.4, ss.1.7 or ss.1.8 of this letter
agreement and the basis therefor and the computation thereof, 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 period to which such claim relates or during
which such claim has arisen and before and/or after any payment hereunder to
which such claim relates. Each Bank Certificate shall set forth in reasonable
detail the basis for and the calculation of the claim to which it relates.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a public
holiday under the laws of the United States of America or The Commonwealth of
Massachusetts applicable to a national 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).
"Capital Expenditures" - All acquisitions of machinery, equipment, land,
leaseholds, buildings, leasehold improvements and all other expenditures for
purposes which are considered to be fixed assets under generally accepted
accounting principles consistently applied. When a fixed asset is acquired by a
lease which is required to be capitalized pursuant to generally accepted
accounting principles, the amount required to be capitalized pursuant thereto
shall be considered to be a Capital Expenditure in the year such asset is first
leased.
29
"Cash Balance Requirement" - As defined in ss.3.9.
"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) other investment grade debt securities, mortgage-backed
obligations, eurodollar time deposits, bankers acceptances, commercial paper and
repurchase agreements fully collateralized by treasury or federal agency
obligations, but, as to each of the foregoing items in this clause (ii), only to
the extent that same comply with all of the Borrower's cash management
guidelines set forth in paragraph B.2 of item 4.6 of the attached Disclosure
Schedule, (iii) deposits with or certificates of deposit issued by the Bank or
the Bank's parent or deposits with or certificates of deposit issued by any
other bank chartered by the United States or by any state and having capital in
excess of $100,000,000, (iv) any money market accounts, or (v) interests in
mutual funds, substantially all of the assets of which shall be obligations of
the types described in the foregoing clauses of this sentence.
"Collateral" - All property now or hereafter owned by the Borrower or in
which the Borrower now or hereafter has any interest which is now or hereafter
described as "Collateral" in the Security Agreement.
"Compliance Level" - Level One Compliance and Level Two Compliance, as the
case may be.
"Debt Service Coverage Ratio" - As defined in s.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
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 s.5.1.
30
"Floating Rate" - As defined in ss.1.4.
"Floating Rate Loan" - All or any portion of any Term Loan which bears
interest at a rate calculated with reference to the Prime Rate.
"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 last day of
Interest Period applicable to such LIBOR Loan; provided, however, that if such
Interest Period is more than three months, then there shall be two Interest
Payment Dates for such Interest Period -- the first such Interest Payment Date
being three months from the commencement of such Interest Period, and the second
such Interest Payment Date being 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 amount of any Term Loan if such Interest Period
would end after the regularly-scheduled due date of such principal amount.
"Level One Compliance" and "Level Two Compliance" are each defined in
ss.1.12.
"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
31
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 presumptively 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:
32
* LIR = LIBOR + ARI
------------
[1.00 - RR]
Where LIR = LIBOR Interest Rate
LIBOR = See definition of LIBOR
RR = Reserve Rate
ARI = The then Applicable Rate Increment
*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 effective change in the Applicable Rate Increment during such Interest
Period and/or 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
particular LIBOR Interest Rate.
"Loan Documents" - Each of this letter agreement, the Term Note, the
Security Agreement and each other instrument, document or agreement evidencing,
securing, guaranteeing or relating in any way to any of the Term Loans, all
whether now existing or hereafter arising or entered into.
"London" - The City of London in England.
"Net Income" (or "Net Loss") - The book net income (or book net loss, as
the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Net Quick Unrestricted Assets" - Such current assets of the Borrower as
consist (without duplication) of cash, Cash-Equivalents and Receivables (net of
appropriate reserves), but excluding any of the foregoing which are subject to
any pledge, lien, encumbrance or other similar restriction.
"1999 Subordinated Notes" - The Borrower's 7% Convertible Subordinated
Notes due March 29, 2004 in an aggregate amount not to exceed $20,000,000 issued
pursuant to a Securities Purchase Agreement dated as of March 30, 1999.
"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.
33
"Permitted Acquisition" - The acquisition by the Borrower of all or
substantially all of the stock or other equity ownership interests or assets of
another Person; provided that all of the following criteria are met: (1) such
Person conducts a business (or the assets so acquired are used to conduct a
business) which is the same as or is substantially related to the business
conducted by the Borrower at the time of such acquisition; (2) the Board of
Directors of the Person so acquired (as such Board was constituted prior to the
commencement of the acquisition) has approved the acquisition; (3) the total
cash consideration paid or payable by the Borrower for all such acquisitions
will not (unless the prior written consent of the Bank is obtained) exceed
$2,000,000 in the aggregate during the term of this letter agreement; (4) at the
time of each such acquisition and after giving effect thereto there shall be no
Default or Event of Default, with compliance with each of ss.3.7 and ss.3.8 and
the Unencumbered Cash Balance test of ss.3.9 being measured for this purpose as
at the then most recent fiscal quarter-end, giving effect to such acquisition on
a pro forma basis as if it had occurred immediately prior to such fiscal
quarter-end, and with compliance with the Debt Service Coverage Ratio test
contained in ss.3.9 being measured for this purpose as at the then most recent
fiscal quarter-end, giving effect to such acquisition as if it had occurred at
the beginning of the 12-month period ended at said fiscal quarter-end; and (5)
prior to such acquisition the Borrower shall have delivered to the Bank
projections, in form and substance reasonably satisfactory to the Bank, showing
that the Borrower will be in compliance with each of ss.3.7, ss.3.8 and ss.3.9
for the balance of the fiscal year in which such acquisition takes place and for
the next following fiscal year.
"Person" - An individual, corporation, partnership, limited 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" - Laboratory equipment and other capital equipment
purchased by the Borrower within the 90 days (or 210 days in the case of the
initial Term Loan) preceding the date of the relevant Term Loan for use in the
Borrower's business and meeting all of the following criteria: (i) each item of
such equipment has been delivered to and installed at the Borrower's premises at
▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ or ▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ and has become fully
operational, (ii) the Borrower has paid in full for each item of such equipment
(or is paying for same from the proceeds of the Term Loan supported by such
equipment) and the Borrower holds title to each such item of equipment, free of
all interests and claims of any other Person (other than the security interest
of the Bank), and (iii) the Bank has (assuming that it has given value and has
filed appropriate Uniform Commercial Code financing statements) a fully
perfected first security interest in such equipment. The Borrower may include
certain costs of software in its Qualifying Equipment to the extent expressly
provided for in ss.1.2.
"Qualifying Leasehold Improvements" - Leasehold improvements affixed to,
installed in and/or made to the Borrower's premises at ▇▇▇ ▇▇▇ ▇▇▇▇ or ▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇ within the 90 days (or 210 days in the case of the initial Term
Loan) prior to the date of the advance of the relevant Term Loan, all of which
leasehold improvements must meet all of the following criteria: (i) the Borrower
has paid in full for such leasehold improvements (or is paying for same
34
from the proceeds of the Term Loan supported by such leasehold improvements) and
holds title to such leasehold improvements, free of all interests and claims of
any other Person (other than the security interest of the Bank), and (ii) the
Bank has (assuming that it has given value and has filed appropriate Uniform
Commercial Code financing statements) a fully perfected first priority security
interest in such leasehold improvements, except as set forth in the next
sentence. The Bank acknowledges that such leasehold improvements are to be
affixed to the Borrower's premises and may become so built into such premises
that they become part of the realty, with the result that the owner of the
premises would have rights thereto upon the termination of the Borrower's lease
and the Bank would no longer have a security interest therein.
"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.
"Senior Debt" - The Total Liabilities of the Borrower and Subsidiaries on a
consolidated basis, exclusive of any such Total Liabilities which constitute
Subordinated Debt.
"Subordinated Debt" - Any Indebtedness of the Borrower which is
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. The Bank has informed the Borrower that the Borrower's
1999 Subordinated Notes in an aggregate principal amount not to exceed
$20,000,000 will be deemed to constitute "Subordinated Debt" for the purpose of
this letter agreement, but that the subordination provisions contained in the
1999 Subordinated Notes will not necessarily be acceptable as a template for
subordination provisions to be used in the context of any subsequent issue of
Subordinated Debt.
"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 (to the extent required
35
by generally accepted accounting principles to be treated as intangible assets)
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 similar 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.
36
This letter agreement is executed, as an instrument under seal, as of the
day and year first above written.
Very truly yours,
Organogenesis Inc.
By _____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
Accepted and agreed:
FLEET NATIONAL BANK
By ________________________________
Name:▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
37
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries
Item 2.1 (b) 5% Stockholders
Item 2.1(e) Litigation
Item 2.1 (j) Collateral locations; record owner of each location
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 4.6 Permitted Investments
Item 5.1(m) Permitted 50% Stockholders