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Exhibit 99.2
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement ("this Agreement") is made as of March
2, 2001 between ArQule, Inc., a Delaware corporation (the "Borrower") and Fleet
National Bank (the "Bank"). The Bank is the successor by merger to the entity
formerly known as "Fleet National Bank" ("Old FNB"). For good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank act and agree as follows:
1. Reference is made to: (i) that certain letter agreement dated March
18, 1999 (the "Letter Agreement") between the Borrower and Old FNB, the Bank
having succeeded to the rights and obligations of Old FNB thereunder; (ii) that
certain $15,000,000 face principal amount promissory note dated March 18, 1999
(the "Facility One Term Note") made by the Borrower and payable to the order of
Old FNB, the Bank having succeeded to the interests of Old FNB thereunder; (iii)
that certain Security Agreement (Equipment) dated March 18, 1999 (the "Security
Agreement") given by the Borrower to Old FNB, the Bank having succeeded to the
interests of Old FNB thereunder; (iv) that certain $16,000,000 original
principal amount promissory note of even date herewith (the "Facility Two Term
Note") made by the Borrower and payable to the order of the Bank; (v) that
certain Mortgage and Security Agreement and Assignment of Leases and Rents of
even date herewith (the "Mortgage") given by the Borrower, as mortgagor, to the
Bank, as mortgagee; and (vi) that certain Environmental Compliance and Indemnity
Agreement of even date herewith (the "Environmental Agreement") given by the
Borrower to the Bank. The Letter Agreement, the Facility One Term Note, the
Security Agreement, the Facility Two Term Note, the Mortgage and the
Environmental Agreement are hereinafter collectively referred to as the
"Financing Documents".
2. The Letter Agreement is hereby amended, effective as of the date
hereof:
a. By deleting from clause (i) of Section 1.1 of the Letter Agreement
the words "Term Note" and by substituting in their stead the following:
"Facility One Term Note"
b. By deleting the period at the end of Section 1.1 of the Letter
Agreement and by substituting in its stead the following:
", (iii) that certain $16,000,000 face principal amount promissory
note (the `Facility Two Term Note') dated March 2, 2001 issued by
the Borrower pursuant to ss.1.4A below and payable to the order of
the Bank, (iv) that certain Mortgage and Security Agreement and
Assignment of Leases and Rents dated as of March 2, 2001 (the
`Mortgage') from the Borrower, as mortgagor, to the Bank, as
mortgagee, and (v) that certain Environmental Compliance and
Indemnity Agreement dated March 2, 2001 (the `Environmental
Agreement') from the Borrower to the Bank."
c. By the Borrower acknowledging that no COF Loan (as defined in the
Letter Agreement) has been made, nor will any such COF Loan be made hereafter.
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d. By deleting the caption to Section 1.2 of the Letter Agreement and
by substituting in its stead the following:
"FACILITY ONE TERM LOANS; FACILITY ONE TERM NOTE."
e. By deleting from the first sentence of Section 1.2 of the Letter
Agreement the words "Term Loans" and by substituting in their stead the
following:
"Facility One Term Loans"
f. By deleting the penultimate sentence of Section 1.3 of the Letter
Agreement and by substituting in its stead the following:
"Any partial prepayment of principal of the Facility One Term Loans
will be applied to installments of principal of the Facility One
Term Loans thereafter coming due, being applied in inverse order of
normal maturity."
g. By deleting from the third sentence of Section 1.4 of the Letter
Agreement the words "LIBOR Borrowing Notice" and by substituting in their stead
the following:
"Facility One LIBOR Notice"
h. By providing that, in each of Sections 1.2, 1.3 and 1.4 of the
Letter Agreement, all references to a "Term Loan" or to the "Term Loans" will be
deemed to refer to a Facility One Term Loan or to the Facility One Term Loans,
respectively. Further, in each of said Sections 1.2, 1.3 and 1.4 of the Letter
Agreement, all references to "Floating Rate Loans" will be deemed to refer to
Facility One Floating Rate Term Loans, all references to the "Term Note" will be
deemed to refer to the Facility One Term Note, all references to "LIBOR Loans"
will be deemed to refer to Facility One LIBOR Term Loans, all references to a
"Fixed Rate Loan" will be deemed to refer to a Facility One LIBOR Term Loan, and
all references to a "LIBOR Borrowing Notice" will be deemed to refer to a
Facility One LIBOR Notice.
i. By inserting into Article I of the Letter Agreement, immediately
after Section 1.4 thereof, the following:
"1.4A. FACILITY TWO TERM LOAN; FACILITY TWO TERM NOTE. In addition
to the foregoing, subject to the terms of this letter agreement, the
Bank is, on or about March 2, 2001, making a $16,000,000.00 original
principal amount loan (the `Facility Two Term Loan') to the
Borrower. The Facility Two Term Loan is evidenced by the Facility
Two Term Note, to be executed and delivered by the Borrower prior to
the making of the Facility Two Term Loan. The Borrower hereby
irrevocably authorizes the Bank to make or cause to be made, on a
schedule attached to the Facility Two Term Note or on the books of
the Bank, at or following the time of receiving any payment of
principal of the Facility Two Term Loan, an appropriate notation
reflecting such transaction and the then unpaid principal balance of
the Facility Two Term Loan. The amount so noted shall constitute
presumptive
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evidence as to the amount owed by the Borrower with respect to
principal of the Facility Two Term Loan. Failure of the Bank to make
any such notation shall not, however, affect any obligation of the
Borrower or any right of the Bank hereunder or under the Facility
Two Term Note.
1.4B. PRINCIPAL REPAYMENT OF FACILITY TWO TERM LOAN. The Borrower
shall repay principal of the Facility Two Term Loan in 15 equal
consecutive quarterly installments, commencing on March 30, 2001 and
continuing on the last Business Day of each calendar quarter
thereafter through and including September 30, 2004 (each such
quarterly installment to be in the amount of $1,000,000.00), PLUS a
16th and final installment payment due on December 31, 2004 in an
amount equal to the then outstanding principal balance of the
Facility Two Term Loan and all interest then accrued but unpaid
thereon. The Borrower may prepay, at any time or from time to time,
without premium or penalty, the whole or any portion of the Facility
Two Term Loan to the extent that same is a Facility Two Floating
Rate Term Loan; provided that each such principal prepayment shall
be accompanied by payment of all interest on the amount so prepaid
accrued under the Facility Two Term Note but unpaid to the date of
payment. Subject to ss.1.7, the Borrower may prepay the whole or any
portion of any Facility Two LIBOR Term 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 the Facility Two LIBOR Term Loan (or such portion
thereof) so prepaid accrued to the date of such prepayment, (iii)
any voluntary prepayment with respect to all or any portion of any
Facility Two LIBOR Term Loan shall be in a principal amount which is
$500,000 or an integral multiple of $100,000 in excess of $500,000
(provided that, in any event, no Facility Two LIBOR Term Loan will
remain outstanding in a principal amount of less than $500,000), and
(iv) if the Borrower for any reason makes any prepayment of a
Facility Two LIBOR Term 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. Any
partial prepayment of principal of the Facility Two Term Loan will
be applied to installments of principal of the Facility Two Term
Loan thereafter coming due in inverse order of normal maturity.
Amounts repaid or prepaid with respect to the Facility Two Term Loan
are not available for reborrowing.
1.4C. INTEREST RATE FOR FACILITY TWO TERM LOAN. Except as otherwise
provided below, interest on the Facility Two Term Loan will be
payable at the Floating Rate, with a change in such rate of interest
to become effective on each day when a change in the Prime Rate
becomes effective, each such change to become effective without
notice or demand of any kind. Subject to the conditions set forth
herein, the Borrower may elect that all or any portion of the
Facility Two Term Loan will be made as a
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Facility Two LIBOR Term Loan, that all or any portion of a Facility
Two Floating Rate Term Loan will be converted to a Facility Two
LIBOR Term Loan and/or that any Facility Two LIBOR Term Loan will be
continued at the expiration of the Interest Period applicable
thereto as a new Facility Two LIBOR Term Loan. Such election shall
be made by the Borrower giving to the Bank a written or telephonic
notice received by the Bank within the time period and containing
the information described in the next following sentence (a
`Facility Two LIBOR Notice'). The Facility Two LIBOR 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, must
specify the duration (one month, three months, six months or twelve
months) of the Interest Period requested and must specify the amount
of the Facility Two LIBOR Term Loan requested (which shall be
$500,000 or an integral multiple of $100,000 in excess of $500,000),
must identify the Facility Two Term Loan or particular portion
thereof so to be made, converted or continued, as the case may be,
and must specify the proposed commencement date of the relevant
Interest Period. Notwithstanding anything provided elsewhere in this
letter agreement, the Borrower may not elect to have any installment
of the Facility Two Term Loan included in a Facility Two LIBOR Term
Loan if the Interest Period applicable thereto would continue after
the due date of such installment. Any Facility Two LIBOR 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 Facility Two LIBOR
Term 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 Facility
Two LIBOR Term Loan. At the expiration of each Interest Period
applicable to a Facility Two LIBOR Term Loan, the principal amount
of such Facility Two LIBOR Term Loan may be continued as a new
Facility Two LIBOR Term Loan to the extent and on the terms and
conditions contained in this letter agreement by delivery to the
Bank of a new Facility Two LIBOR Notice conforming to the
requirements set forth above in this ss.1.4C (and any Facility Two
LIBOR Term Loan not repaid and not so continued as a new Facility
Two LIBOR Term Loan will be deemed to have been converted into a
Facility Two Floating Rate Term Loan). Notwithstanding any other
provision of this letter agreement, the Bank need not make any
Facility Two LIBOR Term Loan or allow any conversion of a Facility
Two Floating Rate Term Loan to a Facility Two LIBOR Term Loan at any
time when there exists any Default or Event of Default. Further,
notwithstanding any other provision of this letter agreement, in no
event will more than five Interest Periods (whether relating to
Facility One
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LIBOR Term Loans and/or Facility Two LIBOR Term Loans) be in effect
at any one time.
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 Facility Two LIBOR Term Loan and any election to
convert all or any portion of the Facility Two Term Loan to a
Facility Two LIBOR Term 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."
j. By deleting in its entirety Section 1.5 of the Letter Agreement and
by substituting in its stead the following:
"1.5. INTEREST PAYMENTS. The Borrower will pay interest on the
principal amount of the Term Loans outstanding from time to time,
from the date hereof until payment of the Term Loans in full.
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 on each Term Loan shall also be paid on the date of
payment of such Term Loan 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, after the occurrence and
during the continuance of any Event of Default, each Term Loan will,
at the option of the Bank, bear interest at a fluctuating rate per
annum which at all times shall be equal to the sum of (i) four (4%)
percent per annum PLUS (ii) the per annum rate otherwise payable
with respect thereto (but in no event in excess of the maximum rate
from time to time permitted by then applicable law). All interest
and fees payable under this letter agreement and/or under any Term
Note will be calculated on the basis of a 360-day year for the
actual number of days elapsed."
k. By deleting in its entirety Section 1.7 of the Letter Agreement and
by substituting in its stead the following:
"1.7. PREPAYMENT OF LIBOR LOANS. The following provisions of this
ss.1.7 shall be effective only with respect to LIBOR Loans: The
Borrower shall pay to the Bank, upon request of the Bank, such
amount or amounts as shall be sufficient (in the reasonable opinion
of the Bank) to
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compensate it for any loss, cost or expense incurred as a result of:
(i) any payment of a LIBOR Loan on a date other than the last day of
the Interest Period for such LIBOR Loan; (ii) any failure by the
Borrower to borrow a LIBOR Loan on the date specified in any
Facility One LIBOR Notice or Facility Two LIBOR Notice; and/or (iii)
any failure by the Borrower to pay a LIBOR Loan on the date for
payment specified in any notice given as to any prepayment. Without
limiting the foregoing, if, due to acceleration of any 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 any LIBOR Loan on any date prior to the last day of the relevant
Interest Period, the Borrower shall, upon demand and receipt of a
Bank Certificate from the Bank with respect thereto, pay forthwith
to the Bank a yield maintenance fee in an amount computed as
follows: The current rate for United States Treasury securities
(bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the last day of the
Interest Period applicable to the affected LIBOR Loan shall be
subtracted from the `cost of funds' component (I.E.,
reserve-adjusted LIBOR) of the fixed rate in effect at the date of
such prepayment or conversion. If the result is zero or a negative
number, there shall be no yield maintenance fee. If the result is a
positive number, then the resulting percentage shall be multiplied
by the amount of the principal balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days
remaining in the relevant Interest Period. Said amount shall be
reduced to present value calculated by using the number of days
remaining in the relevant Interest Period and by using the
above-referenced United States Treasury securities rate as the
discount rate. The resulting amount shall be the yield maintenance
fee due to the Bank upon prepayment or conversion of the applicable
LIBOR Loan. Any acceleration of a LIBOR Loan due to an Event of
Default will give rise to a yield maintenance fee calculated with
the respect to such LIBOR Loan on the date of such acceleration in
the same manner as though the Borrower had exercised a right of
prepayment at that date, such yield maintenance fee being due and
payable at that date."
l. By deleting from Section 1.8 of the Letter Agreement the words "the
Term Note", in each place where same appear, and by substituting in their stead,
in each such place, the following:
"any Term Note"
m. By deleting from Section 1.10 of the Letter Agreement the words "the
Term Note", in each place where same appear, and by substituting in their stead,
in each such place, the following:
"any Term Note"
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n. By deleting the period at the end of the second sentence of the
first paragraph of Section 1.10 of the Letter Agreement and by substituting in
its stead the following:
"or, as to the Facility Two Term Loan, the costs of acquisition of
premises at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇."
o. By deleting from the third sentence of the third paragraph of
Section 1.10 of the Letter Agreement the words "One Federal Street" and by
substituting in their stead the following:
"100 Federal Street"
p. By deleting the period appearing at the end of the last sentence of
Section 1.10 of the Letter Agreement and by substituting in its stead the
following:
"; provided, however, that after the occurrence and during the
continuance of an Event of Default, payments will be applied to
obligations of the Borrower to the Bank with respect to the Term
Loans as the Bank determines in its sole discretion."
q. By deleting from the third sentence of Section 1.12 of the Letter
Agreement the words "Liquidity Coverage Ratio" and by substituting in their
stead the following:
"Liquidity Ratio"
r. By deleting from Section 3.7 of the Letter Agreement the amount of
"$40,000,000" and by substituting in its stead the following:
"$60,000,000"
s. By deleting the last sentence of Section 3.9 of the Letter Agreement
and by substituting in its stead the following:
"As used herein, (A) `interest' on Indebtedness includes, without
limitation, the interest component of any capitalized leases and all
fees paid in respect of any letters of credit now or hereafter
issued for the account of the Borrower and/or any of its
Subsidiaries, and (B) `current maturities of long-term debt'
include, without limitation, current principal components of
capitalized leases. Further, notwithstanding the foregoing
provisions of this ss.3.9, the Borrower need not maintain the Debt
Service Coverage Ratio otherwise required as at any Determination
Date if the Borrower's Unencumbered Cash Balance as at such
Determination Date is equal to or greater than the product of (x)
1.75 TIMES (y) the aggregate amount of Funded Debt of the Borrower
and/or any of its Subsidiaries outstanding at that Determination
Date. As used herein, `Funded Debt' means, without duplication, all
Indebtedness for borrowed money, all liabilities (whether or not
contingent) in respect of any letters of credit, all Indebtedness
representing the deferred purchase price of any property, all
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Indebtedness secured by a Lien, the principal components of any
capitalized leases and any guaranty relating to any of the
foregoing."
t. By deleting from clause (i) of Section 4.1 of the Letter Agreement
the words "the Term Note" and by substituting in their stead the following:
"the Term Notes"
u. By inserting into Article IV of the Letter Agreement, immediately
after Section 4.6, the following:
"4.6A. MATERIAL SUBSIDIARIES. As determined at any date, a `Material
Subsidiary' is a Subsidiary of the Borrower with net assets at such
date which constitute 5% or more of the then consolidated net assets
of the Borrower and all of its Subsidiaries. The Borrower represents
that, at March 2, 2001, the Borrower has no Material Subsidiaries.
Without limitation of the provisions of ss.4.6 above, the Borrower
agrees that, within 10 days of the acquisition or creation of any
Material Subsidiary or within 10 days after the date when any
existing Subsidiary becomes a Material Subsidiary, the Borrower will
cause to be delivered to the Bank each of the following:
(A) Instruments in form and substance satisfactory to the Bank
pursuant to which such Material Subsidiary shall guaranty the
payment and performance of the obligations of the Borrower hereunder
and under the other Loan Documents and shall grant to the Bank a
security interest in all of its fixed assets in order to secure such
guaranty, together with all relevant Uniform Commercial Code
financing statements and any other documents necessary to perfect in
favor of the Bank a first priority security interest in all fixed
assets of such Material Subsidiary;
(B) An opinion of counsel to the relevant Material Subsidiary
dated as of the date of delivery of the instruments provided for in
the foregoing clause (A) and addressed to the Bank, in form and
substance reasonably acceptable to the Bank, to the effect that:
(1) such Material Subsidiary is duly organized,
validly existing and in good standing in the jurisdiction of
its organization, has the requisite power and authority to own
its properties and conduct its business as then owned and then
proposed to be conducted; and
(2) the execution, delivery and performance of the
above-described guaranty and the security agreement granting
the above-described security interest have been duly
authorized by all requisite corporate action (including any
required shareholder approval), such instruments have been
duly executed and delivered
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and same constitute legal, valid and binding obligations of
such Material Subsidiary, enforceable against such Material
Subsidiary in accordance with their terms; and
(C) Current copies of the charter documents, including, a
partnership agreement and certificate of limited partnership, if
applicable, and by-laws of such Material Subsidiary, together with
the minutes of duly called and conducted meetings (or duly effected
consent actions) of the Board of Directors, partners or appropriate
committees (and, if required by such charter documents, by-laws or
by applicable laws, of the shareholders or partners) of such
Material Subsidiary authorizing the actions and the execution and
delivery of the documents described above in this Section.
The Borrower acknowledges that compliance with this ss.4.6A is a
requirement in addition to, and distinct from, compliance with
ss.4.6 above, and that compliance with this ss.4.6A will not be
deemed to waive or excuse any violation of clause (vii) of ss.4.6."
v. By inserting into Article IV of the Letter Agreement, at the end of
such Article, the following:
"4.14. LOAN-TO-VALUE. The Borrower will not suffer or permit to
exist at any time any circumstance in which the outstanding
principal amount of the Facility Two Term Loan exceeds 80% of the
fair market value of the real estate on which the Mortgage
constitutes a first lien. `Fair market value' will be determined for
the purpose of this Section by an appraisal satisfactory in detail
and methodology to the Bank and prepared by an appraiser
satisfactory to the Bank. The Borrower will, at its sole cost and
expense, at the request of the Bank from time to time provide
updated appraisals in order to determine compliance with this
Section. Further, and without limitation of the foregoing, from time
to time, at the Bank's option, the Bank may obtain any appraisal of
any property, whether real or personal, of the Borrower and/or any
Guarantor that secures the Term Loans which the Bank in its sole,
unfettered discretion deems necessary, and the Borrower and any
Guarantor shall be jointly and severally liable to pay to the Bank
immediately upon demand all costs of such appraisals, but not more
than one every two (2) years; provided, however, that if the Bank,
in its sole and unfettered discretion, determines that there has
been a material adverse change in the value of the real estate
encumbered by the Mortgage, the Borrower, any Guarantor or market
conditions, the Borrower and any Guarantor shall be jointly and
severally liable to pay to the Bank immediately upon demand all
costs of such appraisals, but not more than one annually. The
Borrower and any Guarantor shall permit the Bank and its agents,
employees, representatives and appraisers such access to their
respective properties, books and records relating thereto as may be
necessary or convenient to perform such appraisals."
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w. By deleting from clause (a) of Section 5.1 of the Letter Agreement
the words "the Term Note" and by substituting in their stead the following:
"any Term Note"
x. By inserting into clause (b) of Section 5.1 of the Letter Agreement,
immediately after the words "by the Borrower", the following:
"or by any Guarantor"
y. By inserting into clause (f) of Section 5.1 of the Letter Agreement,
immediately after the words "or undertaking", the following:
"(including, without limitation, the occurrence of any `Event of
Default' as defined in any guaranty which may be given by any
Guarantor or in any security agreement which may be given by any
Guarantor)"
z. By the Borrower acknowledging that the references in Section 5.1 of
the Letter Agreement to any "Subsidiary" of the Borrower include, without
limitation, any Guarantor.
aa. By inserting into clause (n) of Section 5.1 of the Letter
Agreement, immediately after the words "Security Agreement", the following:
", the Mortgage and/or any security agreement which may be given by
a Guarantor"
bb. By deleting from clause (a) of Section 5.2 of the Letter Agreement
the words "the Term Note" and by substituting in their stead the following:
"each Term Note"
cc. By deleting from clause (c) of Section 5.2 of the Letter Agreement
the words "under the Term Note" and by substituting in their stead the
following:
"under each Term Note, under the Mortgage, under any guaranty which
may be given by a Guarantor, under any security agreement which may
be given by a Guarantor"
dd. By deleting in its entirety Section 6.1 of the Letter Agreement and
by substituting in its stead the following:
"6.1. COSTS AND EXPENSES. The Borrower agrees to pay, on demand, all
costs and expenses (including, without limitation, reasonable legal
fees) of the Bank in connection with the preparation, execution and
delivery of this letter agreement, the Security Agreement, the
Mortgage, the Term Notes and all other instruments and documents to
be delivered in connection with any Term Loan and any amendments or
modifications of any of the foregoing, as well as the costs and
expenses incurred by the Bank in
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connection with the administration, default, collection, waiver or
amendment of any terms of the Loan Documents, or in connection with
the Bank's exercise, preservation or enforcement of any of its
rights, remedies or options thereunder, including, without
limitation, fees of outside legal counsel or the allocated costs of
in-house legal counsel, accounting, consulting, brokerage or other
similar professional fees or expenses, and any fees or expenses
associated with travel or other costs relating to any appraisals or
examinations conducted in connection with any Term Loan or any
collateral therefor, 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 Mortgage, the Term Notes 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 highest rate applicable to any
Term Loans (including any default rate then applicable)."
ee. By providing that the "Term Loans" described in Section 6.2 of the
Letter Agreement will be deemed to be the Facility One Term Loans.
ff. By changing the notice address of the Borrower, pursuant to Section
6.4 of the Letter Agreement, to the following:
"ArQule, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer"
gg. By changing the notice address of the Bank, pursuant to Section 6.4
of the Letter Agreement, to the following:
"Fleet National Bank
Technology & Communications Group
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Mail Code: MA DE 10009G
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director"
hh. By deleting from each of Section 6.5 and Section 6.6 of the Letter
Agreement, in each place where same appear, the words "the Term Note" and by
substituting in their stead, in each such place, the following:
"any of the Term Notes"
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ii. By deleting from Section 6.8 of the Letter Agreement the words "the
Term Note" and by substituting in their stead the following:
"the Term Notes"
jj. By deleting the period at the end of Section 6.8 of the Letter
Agreement and by substituting in its stead the following:
"(without giving effect to conflict of laws principles)."
kk. By deleting in their entireties Sections 6.9-6.11 of the Letter
Agreement and by substituting in their stead the following:
"6.9. REPLACEMENT NOTE. Upon receipt of an affidavit of an officer
of the Bank as to the loss, theft, destruction or mutilation of any
Term Note or of any other Loan Document which is not of public
record and, in the case of any such mutilation, upon surrender and
cancellation of such Term Note or other Loan Document, the Borrower
will issue, in lieu thereof, a replacement Term Note or other Loan
Document in the same principal amount (as to any 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 Notes 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 any Term Note exceed the maximum permissible under
applicable law. As used herein, the term `applicable law' shall mean
the law in effect as of the date hereof; provided, however, that in
the event there is a change in the law which results in a higher
permissible rate of interest, then this letter agreement and the
Term Notes shall be governed by such new law as of its effective
date. 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 Notes, 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 any of the Term Notes 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 Notes
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
each Term Note.
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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, ANY TERM NOTE
OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE
BANK RELATING TO THE ADMINISTRATION OF THE TERM LOANS OR ENFORCEMENT
OF THE LOAN DOCUMENTS, AND AGREE THAT NEITHER PARTY WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW,
THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR
THE BANK TO ENTER INTO THIS LETTER AGREEMENT AND TO MAKE TERM LOANS
AS CONTEMPLATED HEREIN."
ll. By inserting into Article VI of the Letter Agreement, at the end of
such Article, the following:
"6.12. INTEGRATION; AMENDMENTS. This letter agreement, the Term
Notes and the other Loan Documents delivered herewith are intended
by the parties as the final, complete and exclusive statement of the
transactions evidenced by the Loan Documents. All prior or
contemporaneous promises, agreements and understandings, whether
oral or written, are deemed to be superseded by this letter
agreement and the other Loan Documents delivered herewith. This
letter agreement may not be amended or modified except by a written
instrument setting forth such amendment or modification executed by
the Borrower and the Bank."
mm. By deleting the period at the end of the definition of "Applicable
Rate Increment" appearing in Section 7.1 of the Letter Agreement and by
substituting in its stead the following:
"; provided, however, that during any period when the Borrower fails
to maintain in one or more investment accounts with the Bank or any
affiliate of the Bank cash and other investments at least equal to
the Investment
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Minimum, the Applicable Rate Increment will be increased by 15 basis
points (I.E., to 1.90% per annum during Level One Compliance and
2.40% per annum during Level Two Compliance). As determined at any
time, the `Investment Minimum' is the greater of (a) the product of
(x) 1.5 TIMES (y) the aggregate principal amount of all outstanding
Term Loans or (b) $20,000,000."
nn. By deleting from the definition of "Bank Certificate" appearing in
Section 7.1 of the Letter Agreement the words "ss.1.4, ss.1.7 or ss.1.8" and by
substituting in their stead the following:
"ss.1.4,ss.1.4C,ss.1.7 or ss.1.8"
oo. By deleting the definition of "Collateral" appearing in Section 7.1
of the Letter Agreement and by substituting in its stead the following:
`"Collateral' - All property now or hereafter owned by the Borrower
and/or by any Guarantor or in which the Borrower and/or any
Guarantor now or hereafter has any interest and which is now or
hereafter described as `Collateral' in the Security Agreement and/or
in any security agreement which may be given by any Guarantor or
which is included within the `Mortgaged Premises' as defined in the
Mortgage."
pp. By inserting into Section 7.1 of the Letter Agreement, immediately
after the definition of "Event of Default", the following:
"`Facility One Floating Rate Term Loan' - All or any portion of any
Facility One Term Loan which bears interest at a rate calculated
with reference to the Prime Rate.
`Facility One LIBOR Notice' - As defined in ss.1.4.
`Facility One LIBOR Term Loan' - All or any portion of a Facility
One Term Loan which bears interest at a LIBOR Interest Rate.
`Facility One Term Loan' - Any loan made pursuant to ss.1.2.
`Facility One Term Note' - As defined in ss.1.1.
`Facility Two Floating Rate Term Loan' - All or any portion of the
Facility Two Term Loan which bears interest at a rate calculated
with reference to the Prime Rate.
`Facility Two LIBOR Notice' - As defined in ss.1.4C.
`Facility Two LIBOR Term Loan' - All or any portion of the Facility
Two Term Loan which bears interest at a LIBOR Interest Rate.
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`Facility Two Term Loan' - The loan made pursuant to ss.1.4A.
`Facility Two Term Note' - As defined in ss.1.1."
qq. By deleting from Section 7.1 of the Letter Agreement the definition
of "Floating Rate Loan" and by substituting in its stead the following:
`"Floating Rate Loan' - A Facility One Floating Rate Term Loan or a
Facility Two Floating Rate Term Loan, as applicable.
`Guarantor' - Any Subsidiary of the Borrower which gives a guaranty
as provided in ss.4.6A."
rr. By deleting from Section 7.1 of the Letter Agreement the definition
of "Interest Period" and by substituting in its stead the following:
"`Interest Period' - As to each Facility One LIBOR Term Loan, the
period commencing with the date of the making of such Facility One
LIBOR Term Loan or conversion into such Facility One LIBOR Term Loan
or the date on which any prior Facility One LIBOR Term Loan is
continued as the relevant Facility One LIBOR Term Loan and ending
three months, six months or twelve months thereafter (as the
Borrower may select in accordance with ss.1.4) and, as to each
Facility Two LIBOR Term Loan, the period commencing with the making
of such Facility Two LIBOR Term Loan or conversion into such
Facility Two LIBOR Term Loan or the date on which any prior Facility
Two LIBOR Term Loan is continued as the relevant Facility Two LIBOR
Term Loan and ending one month, three months, six months or twelve
months thereafter (as the Borrower may select in accordance with
ss.1.4C); 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."
ss. By deleting the definition of "LIBOR" appearing in Section 7.1 of
the Letter Agreement and by substituting in its stead the following:
"`LIBOR' - With respect to each Interest Period for a LIBOR Loan,
that rate per annum (rounded upward, if necessary, to the nearest
one hundred-thousandth of a percentage point) which represents the
offered rate for deposits in U.S. Dollars, for a period of time
comparable to such Interest
-15-
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Period, which appears on the Telerate page 3750 as of 11:00 a.m.
(London time) on that day that is two (2) London Banking Days
preceding the first day of such Interest Period; provided, however,
that if the rate described above does not appear on the Telerate
System on any applicable interest determination date, LIBOR for such
Interest Period shall be the rate (rounded upwards as described
above, if necessary) determined on the basis of the offered rates
for deposits in U.S. Dollars for a period of time comparable to such
Interest Period which are offered by four major banks in the London
interbank market at approximately 11:00 a.m., London time, on that
day that is two (2) London Banking Days preceding the first day of
such Interest Period, as selected by the Bank. The principal London
office of each of four major London banks will be requested to
provide a quotation of its U.S. Dollar deposit offered rate. If at
least two such quotations are provided, the rate for that date will
be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that date will be
determined on the basis of the rates quoted for loans in U.S.
Dollars to leading European banks for a period of time comparable to
such Interest Period offered by major banks in New York City at
approximately 11:00 a.m., New York City time, on that day that is
two London Banking Days preceding the first day of such Interest
Period. In the event that the Bank is unable to obtain any such
quotation as provided above, it will be deemed that LIBOR for the
proposed Interest Period cannot be determined. The Bank shall give
prompt notice to the Borrower of LIBOR as determined for each LIBOR
Loan and such notice shall be deemed conclusively correct, absent
manifest error. `London Banking Day' shall mean any date on which
commercial banks are open for business in London."
tt. By deleting the definition of "LIBOR Loan" appearing in Section 7.1
of the Letter Agreement and by substituting in its stead the following:
"`LIBOR Loan' - A Facility One LIBOR Term Loan or a Facility Two
LIBOR Term Loan, as applicable."
uu. By deleting from the definition of "Loan Documents" appearing in
Section 7.1 of the Letter Agreement the words "the Term Note" and by
substituting in their stead the following:
"the Term Notes"
vv. By inserting into the definition of "Loan Documents" appearing in
Section 7.1 of the Letter Agreement immediately after the words "Security
Agreement", the following:
", the Mortgage, the Environmental Agreement, any guaranty which may
be given by any Guarantor (once same has been executed and
delivered), any security agreement which may be given by any
Guarantor (once same has been executed and delivered)"
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17
ww. By deleting the definition of "Net Quick Assets" appearing in
Section 7.1 of the Letter Agreement and by substituting in its stead the
following:
"`Net Quick Assets' - Such current assets of the Borrower as consist
(without duplication) of cash, Cash-Equivalents, commercial paper
rated not less than A-1/P-1 and Receivables (net of appropriate
reserves), but excluding any of the foregoing which are subject to
any pledge, lien, encumbrance or other restriction."
xx. By providing that the "Term Loans" referred to in the definitions
of "Qualifying Equipment" and "Qualifying Leasehold Improvements" appearing in
Section 7.1 of the Letter Agreement will be deemed to be the Facility One Term
Loans.
yy. By inserting into Section 7.1 of the Letter Agreement, immediately
after the definition of "Tangible Net Worth," the following:
"`Term Loans' - Collectively, the Facility One Term Loans and the
Facility Two Term Loans.
`Term Notes' - Collectively, the Facility One Term Note and the
Facility Two Term Note."
zz. By deleting from the definition of "Unencumbered Cash Balance"
appearing in Section 7.1 of the Letter Agreement the words "cash,
Cash-Equivalents and Readily-Marketable Securities" and by substituting in their
stead the following:
"cash and Cash-Equivalents"
3. The Security Agreement is hereby amended:
a. By providing that the "Obligations" secured by the Security
Agreement include, without limitation, the Facility Two Term Note and the
Facility Two Term Loan made thereunder.
b. By deleting from the first sentence of Subsection 3(d) of the
Security Agreement the words "200 ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇" and by
substituting in their stead the following:
"19 ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇"
c. By deleting the period at the end of the last sentence of Subsection
3(d) of the Security Agreement and by substituting in its stead the following:
"; provided that the Debtor is the record owner of the Premises at
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇."
d. By modifying Exhibit B to the Security Agreement as set forth in the
attached Supplemental Disclosure Schedule.
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4. Simultaneously with the execution and delivery of this Agreement,
the Borrower is executing and delivering to the Bank the Mortgage and the
Environmental Agreement. In addition, the Borrower is executing and delivering
to the Bank an Allonge to Note (the "Allonge"), amending the Facility One Term
Note.
5. Wherever in any Financing Document, or in any certificate or opinion
to be delivered in connection therewith, reference is made to a "letter
agreement" or to the "Letter Agreement", from and after the date hereof same
will be deemed to refer to the Letter Agreement, as hereby amended. Wherever in
the Letter Agreement or in any other Financing Document, or in any certificate
or opinion to be delivered in connection therewith, reference is made to the
"Security Agreement", from and after the date hereof same will be deemed to
refer to the Security Agreement, as hereby amended. Wherever in the Letter
Agreement or in any other Financing Document, or in any certificate or opinion
to be delivered in connection therewith, reference is made to the "Facility One
Term Note", from and after the date hereof same will be deemed to refer to the
Facility One Term Note, as amended by the Allonge.
6. Simultaneously with the execution and delivery of this Agreement,
the Borrower is executing and delivering to the Bank the Facility Two Term Note.
The Facility Two Term Note is a $16,000,000 promissory note of the Borrower,
substantially in the form attached hereto as Exhibit 1.
7. In order to induce the Bank to enter into this Agreement, the
Borrower agrees to pay to the Bank, at the date hereof, in respect of the
Facility Two Term Loans, a facility fee of $80,000. Said fee is in addition to,
and shall not be reduced by or applied against, any interest, fees, charges or
other amounts paid or payable with respect to the Letter Agreement and/or with
respect to any note issued thereunder.
8. The Bank acknowledges and agrees that the Borrower may, without
being deemed in violation of Sections 4.1, 4.5 or 4.9 of the Letter Agreement,
from time to time make loans to its wholly-owned Subsidiary, Camitro Corporation
("Camitro") and/or cash investments in Camitro, so long as at the date of any
such loan or investment, and after giving effect thereto, there shall be no
Default or Event of Default under the Letter Agreement (except as such a loan or
investment may in and of itself be deemed to violate Sections 4.1, 4.5 and/or
4.9 of the Letter Agreement). For the purpose of determining whether or not a
Default or Event of Default would exist after giving effect to a loan or
investment as described in the immediately preceding sentence, compliance with
each of Section 3.8 and clause (vii) of Section 4.6 of the Letter Agreement will
be determined as at the date of each such loan or investment, whether or not a
fiscal quarter-end, and compliance with Section 3.9 of the Letter Agreement will
be determined at the date of each such loan or investment if said date is a
fiscal quarter-end, and otherwise as at the date of the immediately preceding
fiscal quarter-end, giving effect to the relevant loan or investment on a PRO
FORMA basis as though it (and all other such loans or investments made since the
date of said immediately preceding fiscal quarter-end) had been made on the date
of such immediately preceding fiscal quarter-end.
9. In order to induce the Bank to enter into this Agreement, the
Borrower also agrees to pay, promptly upon receipt of an invoice therefor, all
costs and expenses (including, without
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limitation, reasonable attorneys' fees) incurred by the Bank with respect to
this Agreement, the Mortgage and/or the Facility Two Term Loans.
10. In order to induce the Bank to enter into this Agreement, the
Borrower further represents and warrants as follows:
a. The execution, delivery and performance of this Agreement, the
Facility Two Term Note, the Allonge, the Mortgage and the Environmental
Agreement have been duly authorized by the Borrower by all necessary corporate
and other action, will not require the consent of any third party and will not
conflict with, violate the provisions of, or cause a default or constitute an
event which, with the passage of time or the giving of notice or both, could
cause a default on the part of the Borrower under its charter documents or
by-laws or under any contract, agreement, law, rule, order, ordinance,
franchise, instrument or other document, or result in the imposition of any lien
or encumbrance (except in favor of the Bank) on any property or assets of the
Borrower.
b. The Borrower has duly executed and delivered each of this Agreement,
the Facility Two Term Note, the Allonge, the Mortgage and the Environmental
Agreement.
c. Each of this Agreement, the Facility Two Term Note, the Allonge, the
Mortgage and the Environmental Agreement is the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its respective terms.
d. The statements, representations and warranties of the Borrower made
in the Letter Agreement (as amended hereby) and/or in the Security Agreement (as
amended hereby) continue to be correct as of the date hereof; except as amended,
updated and/or supplemented by the attached Supplemental Disclosure Schedule.
e. The covenants and agreements of the Borrower contained in the Letter
Agreement (as amended hereby) and/or in the Security Agreement (as amended
hereby) have been complied with on and as of the date hereof.
f. No event which constitutes or which, with notice or lapse of time,
or both, could constitute, an Event of Default (as defined in the Letter
Agreement) has occurred and is continuing.
g. No material adverse change has occurred in the financial condition
of the Borrower from that disclosed in the financial statements of the Borrower
heretofore most recently furnished to the Bank.
11. Except as expressly affected hereby, the Letter Agreement and each
of the other Financing Documents remains in full force and effect as heretofore.
All of the Borrower's obligations, indebtedness and liabilities to the Bank as
evidenced by or otherwise arising under the Financing Documents, except as
otherwise expressly modified in this Agreement, are, by the Borrower's execution
of this Agreement, ratified and confirmed in all respects by the Borrower. In
addition, by the Borrower's execution of this Agreement, the Borrower represents
and warrants that no counterclaim, right of set-off or defense of any kind
exists or is outstanding with respect to such
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obligations, indebtedness and liabilities. The Borrower acknowledges that the
security interests created by the Security Agreement (as amended hereby) run in
favor of the Bank and constitute valid liens on the Collateral (as defined in
the Security Agreement) and the Borrower agrees that the Borrower shall take no
action to impair or invalidate said security interests. The Borrower
acknowledges that the obligations secured by such security interests include,
without limitation, the Facility One Term Note (as affected by the Allonge), the
Facility Two Term Note and the Letter Agreement (as affected by this Agreement).
12. Nothing contained herein will be deemed to constitute a waiver or a release
of any provision of any of the Financing Documents. Nothing contained herein
will in any event be deemed to constitute an agreement to give a waiver or
release or to agree to any amendment or modification of any provision of any of
the Financing Documents on any other or future occasion.
-20-
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Executed, as an instrument under seal, as of the day and year first
above written.
ARQULE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and CEO
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------ ------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President and CFO
Title: Director
Corporate Seal Attest
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
▇▇ ▇▇▇▇▇▇▇
Its Attorney
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SUPPLEMENTAL DISCLOSURE SCHEDULE
[To be provided by Borrower, if needed]