Exhibit 10.8
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CURIS, INC.
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December 27, 2000
Fleet National Bank
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
This letter agreement will set forth certain understandings between Curis,
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
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1.1. References to Documents. Reference is made to (i) that certain
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$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 Inventory and Accounts Receivable Security Agreement and that
certain Supplementary Security Agreement - Security Interest in Goods and
Chattels, each of even date herewith, from the Borrower to the Bank
(collectively, the "Security Agreement").
1.2. Term Loans; Term Note. Subject to the terms and conditions
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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 December 31, 2001 or (ii) the
earlier termination of the within-described term loan facility pursuant to
(S)5.2 or (S)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 $250,000), in order to finance the costs of Qualifying
Equipment acquired by the Borrower within the 90 days preceding the request for
such Term Loan (except that the first Term Loan made hereunder may be used to
finance Qualifying Equipment acquired at any time after August 1, 2000) and/or
the costs of Qualifying Leasehold Improvements installed or constructed within
the 90 days preceding the request for such Term Loan (except that the first Term
Loan made hereunder may be used to finance Qualifying Leasehold Improvements
installed or constructed at any time after August 1, 2000), each such Term Loan
to be in such amount as may be requested by the Borrower; provided that (i) no
Term Loan will be made after December 31, 2001; (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 will
not exceed the lesser of (x) $2,500,000 or (y) 50% of the total amount of the
Term Loans advanced (and, at the earlier of January 1, 2002 or that date when
the facility for Term Loans has been drawn in full, the Borrower will make such
prepayment, if any, of the Term Loans relating to Qualifying Leasehold
Improvements as may be needed so that the foregoing 50% limit will not be
exceeded); 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, installation
charges, training fees and other "soft costs"). 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 ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ or ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇,
has become fully operational, has been paid for by the Borrower 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 ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ or ▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇, have been paid for 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) appropriate landlord's
waivers (if not previously furnished), (v) Uniform Commercial Code financing
statements (if needed) 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 (vi)
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.
1.3. Principal Repayment of Term Loans. Those Term Loans (or portions
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thereof) which are not made in respect of Qualifying Leasehold Improvements are
hereinafter referred to as the "Tranche A Term Loans". Those Term Loans (or
portions thereof) which are made in respect of Qualifying Leasehold Improvements
are hereinafter referred to as the "Tranche B Term
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Loans". The Borrower will repay principal of the Tranche A Term Loans in 12
equal consecutive quarterly installments, commencing on March 29, 2002 and
continuing on the last Business Day of each calendar quarter thereafter. Each
such quarterly installment of principal of the Tranche A Term Loans shall be in
an amount equal to 1/12th of the aggregate principal amount of the Tranche A
Term Loans outstanding at the close of business on December 31, 2001. The
Borrower will repay principal of the Tranche B Term Loans in 11 equal
consecutive quarterly installments (each such installment to be in an amount
equal to 1/24th of the aggregate principal amount of the Tranche B Term Loans
outstanding at the close of business on December 31, 2001), such installments to
commence March 29, 2002 and to continue on the last Business Day of each
calendar quarter thereafter through and including September 30, 2004, plus a
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12th and final "balloon" payment on December 31, 2004. In any event, the then
outstanding principal balance of all Term Loans (whether Tranche A Term Loans or
Tranche B Term Loans) and all interest then accrued but unpaid thereon shall be
due and payable in full on December 31, 2004. At any time after January 1, 2002,
the Bank may prepare a replacement Term Note giving effect to the amortization
schedule described above and setting out the principal amount to be paid on each
quarterly payment date. The Borrower agrees that it will execute and deliver
such replacement Term Note to the Bank, whereupon it will become the "Term Note"
for the purposes of this letter agreement. 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 three (3) 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 $1,000,000 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 (S)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 (including
the aforesaid "balloon" payment) 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 (S)1.4,
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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,
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 any Term Loan to be made under (S)1.2 will be made as a LIBOR
Loan, that all or any portion of any Floating Rate Loan will be converted to a
LIBOR Loan and/or that any LIBOR Loan will be continued at the expiration of
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the Interest Period applicable thereto as a new LIBOR Loan. Such election shall
be made by the Borrower giving to the Bank a written or telephonic notice
received by the Bank within the time period and containing the information
described in the next following sentence (a "LIBOR Loan Notice"). The LIBOR Loan
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 $1,000,000 or an integral multiple of
$100,000 in excess of $1,000,000), must identify the particular Term Loan or
Term 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, as the Borrower
shall select) of the relevant Interest Period. Notwithstanding anything provided
elsewhere in this letter agreement, the Borrower may not elect to have any
installment of a Term Loan included in a LIBOR Loan if the Interest Period
applicable thereto would continue after the due date of such installment. Any
LIBOR Loan 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 Loan Notice conforming to the requirements set forth
above in this (S)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 or continue any LIBOR Loan or allow any conversion of a Floating Rate Loan
to a LIBOR Loan at any time when there exists any Default or Event of Default.
The Borrower may request and the Bank may issue caps, collars, swaps and
other rate protection products, using the Bank's then customary documentation
for such transactions. Such caps, collars, swaps and other rate protection
products will be issued for such fees and upon such other terms and conditions
as may be agreed upon by the Bank and the Borrower at the time of issuance
thereof.
Any request for a LIBOR Loan and any election to convert all or any portion
of the Term Loans to a LIBOR Loan may be made on behalf of the Borrower only by
a duly authorized officer; provided, however, that the Bank may conclusively
rely upon any written or facsimile communication received from any individual
whom the Bank believes in good faith to be such a duly authorized officer.
1.5. Interest Payments. The Borrower will pay interest on the principal
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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 last Business Day of each month. Interest on each LIBOR Loan
will be payable in arrears on each applicable Interest Payment Date. In any
event,
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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, the Term Loans will, at the option of the Bank, 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 per annum rate otherwise payable with respect thereto
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under respect thereto underrespect thereto under the Term Note (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 the
Term Note will be calculated on the basis of a 360-day year for the actual
number of days elapsed.
1.6. Rate Determination Protection. In the event that:
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(i) 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
(ii) the Bank shall determine that:
(A) the making or continuation of any LIBOR Loan has been made
impracticable or unlawful by (1) the occurrence of any
contingency that materially and adversely affects the London
interbank market or (2) compliance by the Bank with any
applicable law or governmental regulation, guideline or order
or interpretation or change thereof by any governmental
authority charged with the interpretation or administration
thereof or with any request or directive of any such
governmental authority (whether or not having the force of
law); or
(B) 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 (S)1.7
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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 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 LIBOR Loan Notice;
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and/or (iii) any failure by the Borrower to pay a LIBOR Term Loan on the date
for payment specified in any notice given as to any prepayment. Without limiting
the foregoing, 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
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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 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.
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(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
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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.
(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) (each, a "Capital Adequacy Change") 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. Notwithstanding the
foregoing, if the Bank fails to give written notice to the Borrower
of a Capital Adequacy Change within 180 days after the date when same
first becomes applicable to any Term Loan, then the Bank will not be
entitled to compensation under this clause (iii) in respect of any
period which is more than 180 days prior to the date when such notice
is given.
(iii) A Bank Certificate of the Bank claiming compensation under
this (S)1.8 shall be deemed presumptively correct 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
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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
(S)1.8, except for the limitation provided for in clause (ii) above.
1.9. Illegality or Impossibility. Notwithstanding any other provision of
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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 (S)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.
1.10. Advances and Payments. The proceeds of all Term Loans shall be
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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
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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; 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 as
the Bank determines in its sole discretion.
1.11. Conditions to Advance. Prior to the making of the initial Term
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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.
(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 (S)1.11 will be satisfied.
Section 1.12. Rate Adjustment. This letter agreement contemplates that
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the Applicable LIBOR 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
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February 14, 2001, 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 equal to or greater than 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
(S)3.6; provided that if the audited annual consolidated financial statements of
the Borrower (when received by the Bank pursuant to clause (i) of (S)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 (S)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 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 (S)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 LIBOR Rate
Increment will be adjusted (if the Compliance Level so determined is not Level
Two Compliance), such adjustment to be retroactive to the due date of such
financial statements. No rate adjustment provided for herein will be deemed to
excuse or
-10-
waive any default resulting from the failure by the Borrower to comply with any
other provision of this letter agreement (including, without limitation, (S)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 February 14, 2001, 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.,
----
December 31, 2000).
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.
(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
affected or require any other consent of any Person; or
-11-
(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) To the best knowledge of the Borrower, except as described on item
2.1(e) of the attached Disclosure Schedule, there are no actions, suits or
proceedings 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. Except as described in item 2.1(f) of the attached Disclosure
Schedule, neither the Borrower nor any Subsidiary of the Borrower is in material
violation of any term of any mortgage, indenture or judgment, decree or order,
or any other material instrument, contract or agreement to which it is a party
or by which any of its property is bound.
(g) The Borrower has filed (and has caused each 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) To the best of the Borrower's knowledge, 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.
-12-
(i) The financial statements of the Borrower presented in the November 29,
2000 Registration Statement are complete and accurate in all material respects
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
material liability, contingent or otherwise, not disclosed in the November 29,
2000 Registration Statement that could materially affect the financial condition
of the Borrower. Since November 29, 2000, here 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 or at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ or at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇. Except as described on item
2.1(j) of the attached Disclosure Schedule, no assets of the Borrower are
presently located at any address, other than ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇,
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇, or ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇. 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 any material amount of
Collateral may be located.
(k) To the best knowledge of the Borrower, the Borrower owns or has a valid
right to use all of the patents, licenses, copyrights, trademarks, trade names,
know-how, trade secrets and other intellectual property (collectively,
"Intellectual Property") now being used or necessary to conduct its business.
To the best knowledge of the Borrower, the conduct of the Borrower's business as
now operated does not conflict with valid patents, copyrights, trademarks, trade
names, know-how, trade secrets or other intellectual property of others in any
manner that could materially adversely affect the business, prospects, assets or
condition, financial or otherwise, of the Borrower.
(l) None of the executive officers or key employees of the Borrower is
subject to any agreement in favor of anyone other than the Borrower which limits
or restricts that person's right to engage in the type of business activity
conducted or proposed to be conducted by the Borrower or which grants to anyone
other than the Borrower any rights in any inventions or other ideas susceptible
to legal protection developed or conceived by any such officer or key employee.
(m) The Borrower is not a party to any contract or agreement which now has
or, as far as can be 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.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
------------------------------------------------
Without limitation of any other covenants and agreements contained herein
or elsewhere, the Borrower agrees that so long as the financing arrangements
contemplated hereby are in effect or all or any portion of any Term Loan or any
of the other Obligations shall be outstanding:
-13-
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 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 in all
material respects 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 would not (singly or in the
aggregate) be reasonably likely to 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 material properties in good working order and condition,
making all necessary repairs thereto and replacements thereof. The Borrower
will maintain (and will cause each of its Subsidiaries to maintain) 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
-14-
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 depository and
--------
operating accounts with the Bank; provided that the Bank continues to offer
competitive rates in connection therewith. In addition, so long as the Bank
provides a competitive product for investment services, the Borrower will
maintain at all times at least 50% of its investment securities in an investment
account with the Bank.
3.5. Conduct of Business. The Borrower will conduct, in the ordinary
-------------------
course, the business in which it is presently engaged. 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, other than those reasonably related to the business conducted by the
Borrower at the date of this letter agreement.
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
(or, so long as the Borrower is subject to the requirements for the filing
of periodic reports under the Exchange Act, within any extended filing
period which may be permitted by the SEC), a copy of the annual audit
report for such fiscal year for the Borrower, including therein
consolidated and consolidating balance sheets of the Borrower and
Subsidiaries as 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 (or by such later date as may be established pursuant to the
first sentence of this clause (i) for the furnishing of the annual audit
report), projections (including balance sheet and income statement
projections on a quarterly basis) for the Borrower for such fiscal year,
prepared by the Borrower's management and approved by the Borrower's Board
of Directors, such projections to be in such detail as is reasonably
satisfactory to the Bank.
(ii) Within 45 days after the end of each fiscal quarter of the
Borrower (or, so long as the Borrower is subject to the requirements for
the filing of periodic reports under the Exchange Act, within any extended
filing period which may be permitted by the SEC for the filing of the
relevant quarterly report), 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
-15-
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. In addition, at any
time when the Borrower's Unencumbered Cash Balance is not in excess of
$25,000,000, the Borrower will also provide to the Bank on a monthly basis,
within 30 days after the end of each calendar month, management-prepared
monthly income statements, balance sheets and cash flow statements.
(iii) At the time of delivery of each annual, quarterly or monthly
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 (or at the
end of a calendar month, as the case may be) will also set forth the
calculations necessary to evidence compliance with (S)(S)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 days after the
Borrower first knows of (or reasonably should have known of) 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.
(vii) Promptly upon filing any registration statement or listing
application (or any supplement or amendment to any registration statement
or listing application) with the SEC or with any stock exchange or with the
National Association of Securities Dealers quotations system, a copy of
same.
(viii) As long as the Borrower has a class of securities which is
publicly-traded, a copy of each periodic or current report of the Borrower
filed with the SEC or any successor agency, 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.
-16-
(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 each Determination
------------
Date (commencing with December 31, 2000), a consolidated Capital Base of not
less than $10,000,000.
3.8. Liquidity. The Borrower will maintain, as each Determination Date
---------
(commencing with December 31, 2000), a Quick Ratio of not less than 1.5 to 1.
As used herein, "Quick Ratio" is the ratio of (x) Net Quick Unrestricted Assets
to (y) Total Senior Liabilities.
3.9. Debt Service Coverage. The Borrower will maintain on a consolidated
---------------------
basis, as at each Determination Date (commencing with December 31, 2000), 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 12 months
ending on such Determination Date to (y) the total of (1) all interest on any
Indebtedness (whether senior or subordinated, long-term or current), which
interest was paid or payable or accrued by the Borrower or any Subsidiary of the
Borrower during such 12-month period ended 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 12-
month period ended on such Determination Date. Notwithstanding the foregoing,
the Borrower need not comply with the foregoing provisions of this (S)3.9 as at
any Determination Date if the Borrower's Unencumbered Cash Balance as at such
Determination Date is at least equal to $10,000,000. 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 for any of its
Subsidiaries, and (B) "current maturities of long-term debt" include, without
limitation, current principal components of capitalized leases.
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
-17-
accountants, all of whom are hereby authorized and directed to cooperate with
the Bank in carrying out the intent of this (S)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.
3.11. Landlord's Waiver. Prior to making of the first Term Loan, the
-----------------
Borrower will obtain, and will thereafter maintain in effect at all times,
waivers from the owners of all premises in which any material amount of
Collateral is located, such waivers to be in form and substance satisfactory to
the Bank.
IV. NEGATIVE COVENANTS
------------------
Without limitation of any other covenants and agreements contained herein
or elsewhere, the Borrower agrees that so long as the financing arrangements
contemplated hereby are in effect or all or any portion of any Term Loan or any
of the other Obligations shall be outstanding:
4.1. Indebtedness. Without the prior written consent of the Bank, the
------------
Borrower will not create, incur, assume or suffer to exist any Indebtedness (nor
allow any of its Subsidiaries to create, incur, assume or suffer to exist any
Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without limitation, the
Indebtedness represented by the Term Note;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
(iii) unsecured current liabilities of the Borrower or any Subsidiary
(other than for money borrowed or for purchase money Indebtedness with
respect to fixed assets) incurred upon customary terms in the ordinary
course of business;
(iv) purchase money Indebtedness (including, without limitation,
Indebtedness in respect of capitalized equipment leases) incurred after the
date hereof to equipment vendors and/or lessors for equipment purchased or
leased by the Borrower for use in the Borrower's business, provided that
the total of future Indebtedness permitted under this clause (iv) plus
----
presently-existing equipment financing permitted under clause (v) of this
(S)4.1 will not exceed $500,000 in the aggregate outstanding at any one
time;
(v) other Indebtedness (not described in any of clauses (i)-(iv)
above) existing at the date hereof, but only to the extent set forth on
item 4.1 of the attached Disclosure Schedule; and
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to (S)4.3.
-18-
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 any purchase money Indebtedness permitted by clause (iv)
of (S)4.1; provided that no such Lien will extend to any property of the
Borrower other than the specific items of equipment financed;
(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; or
(vii) 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.
At the request of the Borrower, the Bank will release from the lien of the
Security Agreement the property financed by others and which is described in
clause (v) and/or clause (vii) of this (S)4.2.
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. As used herein, a "Restrictive Agreement" is
any agreement,
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covenant, undertaking or understanding which could have the effect of preventing
the Borrower or any Subsidiary from granting to the Bank in the future a Lien on
its Intellectual Property.
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.
4.5. Loans and Advances. The Borrower will not make or maintain (and will
------------------
not permit any Subsidiary to make or maintain) any loans or advances to any
Person, including, without limitation, the Borrower's directors, officers and
employees, except (i) existing officer loans listed on item 4.5 of the attached
Disclosure Schedule and (ii) new loans and advances to such directors, officers
or employees with respect to expenses incurred or expected to be incurred by
them, all of which new loans and advances will not exceed, in the aggregate,
$250,000 outstanding at any one time.
4.6. Investments. The Borrower will not, without the Bank's prior written
-----------
consent, invest in, hold or purchase any stock or securities of any Person (nor
will the Borrower permit any of its Subsidiaries to invest in, purchase or hold
any such stock or securities) except: (i) readily marketable direct obligations
of, or obligations guarantied by, the United States of America or any agency
thereof; (ii) other investment grade debt securities; (iii) mutual funds, the
assets of which are primarily invested in items of the kind described in the
foregoing clauses (i) and (ii) of this (S)4.6; (iv) deposits with or
certificates of deposit issued by the Bank and any other obligations of the Bank
or the Bank's parent; (v) deposits with or certificates of deposit issued by any
other bank organized in the United States having capital in excess of
$100,000,000; (vi) existing investments described on item 4.6 of the attached
Disclosure Schedule; (vii) investments in any Subsidiaries now existing or
hereafter created by the Borrower pursuant to (S)4.7 below; provided that in any
event the Tangible Net Worth of the Borrower alone (exclusive of its investment
in Subsidiaries other than the Pledged Securities Corporation and any debt owed
by any such Subsidiary to the Borrower but inclusive of the value of the
marketable securities from time to time held by the Pledged Securities
Corporation) will not be less than 90% of the consolidated Tangible Net Worth of
the Borrower and Subsidiaries; and (viii) 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 (vii) above) As used herein, a "Pledged Securities Corporation" is a
Massachusetts securities corporation which is wholly-
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owned by the Borrower and the capital stock of which is pledged to the Bank
pursuant to a pledge agreement and an inducement letter satisfactory to the
Bank.
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 clause (vii) of (S)4.6. The Borrower will not become a partner in
any partnership. The Borrower will promptly inform the Bank if it forms any
Subsidiaries.
4.8. Merger. The Borrower will not, without the prior written consent of
------
the Bank, merge or consolidate with any Person (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; and (ii) licensing of any of its Intellectual
Property in the ordinary course of Borrower's business to another Person on
commercially reasonable terms.
4.9. Affiliate Transactions. The Borrower will not, without the prior
----------------------
written consent of the Bank (such consent not to be unreasonably withheld or
delayed), enter into any transaction, including, without limitation, the
purchase, sale or exchange of any property or the rendering of any service, with
any affiliate of the Borrower, except in the ordinary course and pursuant to the
reasonable requirements of the Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than would be obtained in a comparable
arms'-length transaction with any Person not an affiliate; provided that nothing
in this (S)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
reasonably 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 reasonably
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 (S)2.1(j),
nor will the Borrower keep any Collateral at any location other than at those
premises described in (S)2.1(j) without, in each instance, giving the Bank
prompt written notice of same and providing all such financing statements,
certificates and other documentation as the Bank may request in order to
maintain the perfection and priority of the
-21-
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.
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 stock as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve System.
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 governing same. In any event,
the Borrower will not make any payment of any principal of or
-22-
interest on any Subordinated Debt at any time when there exists, or if there
would result therefrom, any Default or Event of Default hereunder.
V. DEFAULT AND REMEDIES
--------------------
5.1. Events of Default. The occurrence of any one of the following events
-----------------
shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or interest
on the Term Note on or before the date when due; or
(b) Any representation or warranty of the Borrower contained herein shall
at any time prove to have been incorrect in any material respect when made or
any representation or warranty made by the Borrower in connection with any Term
Loan shall at any time prove to have been incorrect in any material respect when
made; or
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under (S)(S)3.6, 3.7, 3.8 or 3.9 or any provision of
Article IV; or
(d) The Borrower shall default in the performance or observance of any
agreement or obligation under (S)3.1 and/or (S)3.3 and such default shall
continue uncured for 10 days; or
(e) 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
(f) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract,
agreement or undertaking now existing or hereafter entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or
(g) Any default shall exist and remain unwaived or uncured with respect to
any Subordinated Debt of the Borrower or with respect to any instrument
evidencing, guaranteeing or otherwise relating to any such Subordinated Debt, or
any such Subordinated Debt shall not have been paid when due, whether by
acceleration or otherwise, or shall have been declared to be due and payable
prior to its stated maturity, or any event or circumstance shall occur which
permits, or with the lapse of time or the giving of notice or both would permit,
the acceleration of the maturity of any Subordinated Debt by the holder or
holders thereof; or
(h) Any default shall exist and remain unwaived or uncured with respect to
any other Indebtedness of the Borrower or any Subsidiary of the Borrower for
borrowed money or representing the deferred purchase price of the property in
excess of $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
-23-
otherwise, or shall have been declared to be due and payable prior to its stated
maturity, or any event or circumstance shall occur which permits, or with the
lapse of time or the giving of notice or both would permit, the acceleration of
the maturity of any such Indebtedness by the holder of holders thereof; or
(i) The Borrower shall be dissolved, or the Borrower or any Subsidiary of
the Borrower shall become insolvent or bankrupt or shall cease paying its debts
as they mature or shall make an assignment for the benefit of creditors, or a
trustee, receiver or liquidator shall be appointed for the Borrower or any
Subsidiary of the Borrower or for a substantial part of the property of the
Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any such Subsidiary under the laws of any jurisdiction (except for an
involuntary proceeding filed against the Borrower or any Subsidiary of the
Borrower which is dismissed within 60 days following the institution thereof);
or
(j) Any 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 30 days
after its issue or levy; or
(k) Any final, uninsured judgment in excess of $100,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; or
(l) The Borrower or any Subsidiary of the Borrower shall fail to meet its
minimum funding requirements under ERISA with respect to any employee benefit
plan (or other class of benefit which the PBGC has elected to insure) or any
such plan shall be the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which,
in each case, in the reasonable opinion of the Bank may have a material adverse
effect upon the financial condition of the Borrower or any such Subsidiary; or
(m) 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
(n) The security interests 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 due to written release by the Bank) not be fully
perfected liens and security interests; or
(o) 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 Exchange Act and the regulations thereunder), other
than as set forth on item 5.1(o) of the attached Disclosure Schedule; or
(p) There shall occur any other material adverse change in the condition
(financial or otherwise), operations, properties, assets, liabilities or
earnings of the Borrower.
-24-
5.2. Rights and Remedies on Default. Upon the occurrence of any Event of
------------------------------
Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amount of the Term Note then
outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of the Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the arrangements for Term Loans provided for by this letter
agreement.
(c) Exercise all rights and remedies hereunder, under the Security
Agreement, under the Term Note and under each and any other agreement with the
Bank; and exercise all other rights and remedies which the Bank may have under
applicable law.
5.3. Set-off. In addition to any rights now or hereafter granted under
-------
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As 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 costs
and expenses
-25-
incurred by the Bank in 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.
(Notwithstanding the foregoing, the Bank agrees that the Borrower will not be
responsible for more than $10,000 in fees and disbursements of the Bank's
counsel for the period through the date of this letter agreement.) 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 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).
6.2. Facility Fee. With respect to the Term Loans, the Borrower is paying
------------
to the Bank, at the date of execution and delivery of this letter agreement, a
non-refundable facility fee in the amount of $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:
Curis, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer
with a copy to:
-▇▇-
▇. ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Bank:
Fleet National Bank
Technology & Communications Group
Mail Code: ▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director
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.
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 or from
time to time, and without the consent of or notice to the Borrower, to
assign all or any portion of its rights and obligations hereunder to one or
more banks or other financial institutions (each, an "Assignee"), and the
Borrower agrees that it shall execute, or cause to be executed, such
documents, including, without limitation, amendments to any documents,
instruments and agreements executed in connection herewith, as the Bank
shall deem necessary to effect the foregoing. In addition, at the request
of the Bank and any such Assignee, the Borrower at no cost to itself shall
issue one or more new promissory notes, as applicable,
-27-
to any such Assignee and, if the Bank has retained any of its rights and
obligations hereunder following such assignment, to the Bank, which new
promissory notes shall be issued in replacement of, but not in discharge
of, the liability evidenced by the promissory note held by the Bank prior
to such assignment and shall reflect the amount of the respective
commitments and loans held by such Assignee and the Bank after giving
effect to such assignment. Upon the execution and delivery of appropriate
assignment documentation, amendments and any other documentation required
by the Bank in connection with such assignment, and the payment by the
Assignee of the purchase price agreed to by the Bank and such Assignee,
such Assignee shall be a party to this letter agreement and shall have all
of the rights and obligations of the Bank hereunder (and under any and all
other guaranties, documents, instruments and agreements executed in
connection herewith) to the extent that such rights and obligations have
been assigned by the Bank pursuant to the assignment documentation between
the Bank and such Assignee, and the Bank shall be released from its
obligations hereunder and thereunder to a corresponding extent.
(iii) 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
-28-
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
(S)6.6 or as otherwise permitted by law.
The Borrower hereby consents to process being served in any suit, action or
proceeding of the nature referred to in the preceding paragraph of this (S)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 (S)6.4 (as
such address may be changed from time to time pursuant to said (S)6.4) or (ii)
by serving a copy thereof upon it at its address set forth in (S)6.4 (as such
address may be changed from time to time pursuant to said (S)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, without giving effect to conflict of laws
principles.
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. 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 Note 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 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
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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 (S)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, 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 AGREEMENT AND TO MAKE TERM LOANS AS CONTEMPLATED HEREIN.
6.12. Integration; Amendments. This Agreement, the Term Note 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
Agreement and the other Loan Documents delivered herewith. This 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.
6.13. Confidentiality. Except as otherwise provided below, the Bank will
---------------
not at any time use (for any purpose other than in connection with monitoring
the credit facilities which it provides to the Borrower and/or enforcing its
rights hereunder and/or under the Security Agreement) any confidential or
proprietary information of any kind to which the Bank is given access or which
is provided to the Bank by the Borrower pursuant to this letter agreement (such
information being hereinafter referred to, subject to the last sentence of this
(S)6.13, as the "Confidential Information"). The Bank agrees that it will use
reasonable efforts to ensure that Confidential Information will not be disclosed
to any other Person without the Borrower's consent; provided, however, that
nothing contained herein will be deemed to preclude any such disclosure: (1) to
employees, officers, directors and/or agents of the Bank in connection with the
approval of Term Loans, letters of credit, foreign exchange contracts or other
facilities or in connection with the administration of this letter agreement,
any such Term Loans, letters of credit, foreign exchange contracts or other
facilities; (2) to internal or independent auditors; (3) to
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any examiners or other officials, employees or agents of any federal or state
governmental regulatory agency, board, commission, public corporation or similar
entity; (4) if ordered by any court or governmental agency having or claiming
jurisdiction; (5) to any actual or proposed assignee of or participant in any
Term Loan, letter of credit, foreign exchange contract or other facility; and/or
(6) in connection with any suit, action or other proceeding to collect any Term
Loan or any other Obligation or enforce any other right under this Letter
Agreement, the Security Agreement and/or the Term Note. Notwithstanding the
foregoing, it is agreed that "Confidential Information" expressly excludes: (1)
any information filed with a public agency or otherwise within the public
domain, (2) any information supplied to the Bank by a third party under
circumstances in which the recipient of such information does not know of (and
should not reasonably have known of) any confidential relationship between such
third party and the Borrower which would restrict dissemination of such
information, and (3) any information supplied by or on behalf of the Borrower
which is not labeled "confidential" or as to which the Borrower has not
otherwise indicated that disclosure is prohibited.
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 LIBOR Rate Increment" - At any time while the Borrower is in
Level One Compliance - 2.0% per annum; and at any time while the Borrower is in
Level Two Compliance - 2.5% per annum.
"Bank Certificate" - A certificate signed by an officer of the Bank setting
forth any additional amount required to be paid by the Borrower to the Bank
pursuant to (S)1.4, (S)1.7 or (S)1.8 of this letter agreement, which certificate
shall be submitted by the Bank to the Borrower in connection with each demand
made at any time by the Bank upon the Borrower with respect to any such
additional amount, and each such certificate shall, save for manifest error,
constitute presumptive evidence of the additional amount required to be paid by
the Borrower to the Bank upon each demand. A claim by the Bank for all or any
part of any additional amount required to be paid by the Borrower may be made
before and/or after the end of the 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 another
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
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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.
"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 or 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.
"Determination Date" - The last day of each fiscal quarter of the Borrower;
provided that at any time when the Borrower's Unencumbered Cash Balance is not
in excess of $25,000,000, a Determination Date will be deemed to occur as at the
end of each calendar month.
"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.
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"Exchange Act" - The Securities Exchange Act of 1934, as amended, or any
successor statute.
"Floating Rate" - As defined in (S)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.
"Intellectual Property" - As defined in (S)2.1(k).
"Interest Payment Date(s)" - As to each LIBOR Loan, the last day of the
Interest Period applicable to such LIBOR Loan; provided that if such Interest
Period is longer than three months, then there shall be two Interest Payment
Dates for such LIBOR Loan, the first Interest Payment Date to occur three months
from the beginning of the Interest Period and the second Interest Payment Date
to occur at the end of such Interest Period.
"Interest Period" - As to each LIBOR Loan, the period commencing with the
date of the making of such LIBOR Loan (or the date on which a Floating Rate Loan
is converted into such LIBOR Loan or the date on which a prior LIBOR Loan is
continued as such LIBOR Loan) and ending one month, two months, three months or
six months thereafter (as the Borrower may select in accordance with (S)1.4);
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.
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"Level One Compliance" and "Level Two Compliance" are each defined in
(S)1.12.
"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 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.
"LIBOR Interest Rate" - For any Interest Period applicable to a LIBOR Loan,
an interest rate per annum, expressed as a percentage, determined by the Bank
pursuant to the following formula:
LIR = LIBOR + ALRI
-----------
[1.00 - RR]
Where LIR = LIBOR Interest Rate
LIBOR = See definition of LIBOR
RR = Reserve Rate
ALRI = Applicable LIBOR Rate Increment
The LIBOR Interest Rate will be adjusted during any Interest Period to reflect
any effective change in the Applicable LIBOR 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.
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"LIBOR Loan Notice" - As defined in (S)1.4.
"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, debt
instruments which are Readily-Marketable Securities, 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.
"November 29, 2000 Registration Statement" - The Registration
Statement on Form S-1 filed by the Borrower on November 29, 2000 with the SEC.
"Obligations" - All Indebtedness, covenants, agreements, liabilities
and obligations, now existing or hereafter arising, made by the Borrower with or
for the benefit of the Bank or owed by the Borrower to the Bank in any capacity.
"PBGC" - The Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Acquisition" - The acquisition by the Borrower of all or
substantially all of the stock 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 date of
this letter agreement; (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) 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 (S)3.7 and (S)3.8 and the Unencumbered Cash Balance test
of (S)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 (S)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; (4) 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
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will be in compliance with each of (S)3.7, (S)3.8 and (S)3.9 for the balance of
the fiscal year in which such acquisition takes place and for the next following
fiscal year; and (5) the Bank receives a fully perfected first priority security
interest in all assets acquired pursuant to any such acquisition (and, if any or
all of such assets are held by a Subsidiary of the Borrower, then such
Subsidiary must join in this letter agreement as a co-borrower hereunder and
grant such a security interest in its assets to the Bank, all pursuant to
documentation satisfactory to the Bank).
"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 preceding the date of the
Term Loan relating to same (or at any time since August 1, 2000 to the extent
expressly provided for in (S)1.2) for use in the Borrower's business and meeting
all of the following criteria: (i) such equipment consists of one or more of
the items shown on the Equipment and Leasehold Improvements List heretofore
delivered by the Borrower to the Bank or has otherwise been approved by the Bank
for use in supporting a Term Loan, (ii) each item of such equipment has been
delivered to and installed at the Borrower's premises in Cambridge, MA and has
become fully operational, (iii) the Borrower has paid in full for each item of
such equipment and holds title to same, free of all interests and claims of any
other Person (other than the security interest of the Bank), and (iv) the Bank
has a fully perfected first security interest in such equipment.
"Qualifying Leasehold Improvements" - Leasehold improvements affixed
to, installed in and/or made to the Borrower's premises in Cambridge, MA within
the 90-day period prior to the date of the advance of the relevant Term Loan (or
at any time since August 1, 2000 to the extent expressly provided for in
(S)1.2), all of which leasehold improvements must meet all of the following
criteria: (i) such leasehold improvements are shown on the Equipment and
Leasehold Improvements List heretofore delivered by the Borrower to the Bank or
otherwise have been approved by the Bank for use in supporting a Term Loan, (ii)
the Borrower has paid in full for such leasehold improvements and holds title to
same, free of all interests and claims of any other Person (other than the
security interest of the Bank), and (iii) the Bank has 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.
"Readily-Marketable Securities" - Debt and equity securities owned by
the Borrower which are publicly traded on the New York Stock Exchange, on the
American Stock Exchange or on the NASDAQ National Market System.
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"Receivables" - As to any Person, all of such Person's accounts and
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 agency.
"Subordinated Debt" - Any Indebtedness of the Borrower which is
expressly subordinated, pursuant to a subordination agreement in form and
substance satisfactory to the Bank, to all Indebtedness now or hereafter owed by
the Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower
and/or any of its Subsidiaries, directly or indirectly, owns, or has the right
to control or direct the voting of, fifty (50%) percent or more of the
outstanding capital stock or other ownership interest having general voting
power (under ordinary circumstances).
"Tangible Net Worth" - An amount equal to the total assets of any
Person (excluding (i) the total intangible assets of such Person, (ii) any
minority interests in Subsidiaries and (iii) any assets representing amounts due
from any officer or employee of such Person or from any Subsidiary of such
Person) minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense, capitalized software costs and experimental and
development expenses).
"Total Senior Liabilities" - All Indebtedness of the Borrower and/or
any Subsidiary of the Borrower (secured or unsecured) which would properly be
included in the liabilities shown on the face of a balance sheet of the Borrower
prepared in accordance with generally accepted accounting principles, but
excluding any such Indebtedness which constitutes Subordinated Debt.
"Unencumbered Cash Balance" - At any time, the total of all cash and
cash-equivalents of the Borrower which are not subject to any pledge, lien,
encumbrance or other restriction, except in favor of the Bank. Without
limitation of the foregoing, the "Unencumbered Cash Balance" will in no event
include any cash or cash-equivalents pledged to support any letter of credit.
Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any defined term
used in the singular preceded by "any" shall be taken to indicate any number of
the members of the relevant class.
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7.2. Security Agreement. (a) The Borrower acknowledges and
------------------
agrees that the "Obligations" described in and secured by the Security Agreement
include, without limitation, all of the obligations of the Borrower under the
Term Note and/or this letter agreement.
(b) In addition to, and without limitation of, the security interests
granted pursuant to any document included within the definition of "Security
Agreement", the Borrower hereby grants to the Bank, in order to secure the full
and prompt payment and performance of all of the Obligations, a security
interest in all of the Borrower's files, books and records (including, without
limitation, all electronically recorded data) all whether now owned or existing
or hereafter acquired, created or arising.
(c) The Borrower acknowledges and agrees that, during the continuance
of any Event of Default (as defined in (S)5.1 of this letter agreement), the
Bank may, at any time, without further notice to the Borrower, notify account
debtors that the Collateral has been assigned to the Bank and that payments by
such account debtors shall be made directly to the Bank. At any time during the
continuance of an Event of Default, the Bank may collect the Borrower's
Receivables, or any of same, directly from account debtors and may charge the
collection costs and expenses to the Borrower.
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This letter agreement is executed, as an instrument under
seal, as of the day and year first above written.
Very truly yours,
CURIS, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
Accepted and agreed:
FLEET NATIONAL BANK
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
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