Exhibit 10(a)
ABIOMED, INC.
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October 14, 1999
Fleet National Bank
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Gentlemen:
This letter agreement will set forth certain understandings between
ABIOMED, Inc., a Delaware corporation (the "Borrower") and Fleet National Bank
(the "Bank") with respect to Demand Loans and Term Loans (each as hereinafter
defined) which may be made by the Bank to the Borrower and with respect to
letters of credit which may hereafter be issued by the Bank for the account of
the Borrower. In consideration of the mutual promises contained herein and in
the other documents referred to below, and for other good and valuable
consideration, receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. REFERENCE TO DOCUMENTS. Reference is made to (i) that certain
$3,000,000 face principal amount demand promissory note (the "Demand Note") of
even date herewith made by the Borrower and payable to the order of the Bank,
(ii) that certain $250,000 face principal amount term promissory note (the
"Tranche A Term Note") of even date herewith made by the Borrower and payable to
the order of the Bank, (iii) that certain $400,000 face principal amount term
promissory note (the "Tranche B Term Note") of even date herewith made by the
Borrower and payable to the order of the Bank, (iv) that certain $550,000 face
principal amount term note (the "Tranche C Term Note") made by the Borrower and
payable to the order of the Bank, and (v) that certain Security Agreement
(Equipment) of even date herewith from the Borrower to the Bank (the "Security
Agreement"). This letter agreement and the Demand Note supersede and replace in
its entirety that certain Demand Line of Credit Promissory Note dated October
21, 1998 made by the Borrower and payable to the order of the Bank (the "Prior
Note"). From and after the date hereof the Bank shall not be deemed to have any
obligations or commitments under or in respect of the loan facility evidenced by
the Prior Note. All loans outstanding under the Prior Note at the date of
execution and delivery of this letter agreement shall be deemed refunded and
replaced by Demand Loans hereunder.
1.2. DEMAND LOANS; DEMAND NOTE. Subject to the terms and conditions
hereinafter set forth, the Bank may, in the Bank's discretion, make loans
("Demand Loans") to the Borrower, in such amounts as the Borrower may request,
on any Business Day prior to the first to occur of (i) the Expiration Date, or
(ii) the date of any demand for payment under the Demand Note, or
(iii) the earlier termination of the within-described financing arrangements
for Demand Loans pursuant to Section 5.2 or Section 6.6; provided, however,
that the aggregate principal amount of the Demand Loans outstanding shall at
no time exceed the Maximum Demand Loan Amount (hereinafter defined) as then
in effect. Within such limit, and subject to the terms and conditions hereof,
the Borrower may obtain Demand Loans, repay Demand Loans and obtain Demand
Loans again on one or more occasions. The Demand Loans shall be evidenced by
the Demand Note. The Borrower hereby irrevocably authorizes the Bank to make
or cause to be made, on a schedule attached to the Demand Note or on the
books of the Bank, at or following the time of making each Demand Loan and of
receiving any payment of principal of a Demand Loan, an appropriate notation
reflecting such transaction and the then aggregate unpaid principal balance
of the Demand Loans. The amount so noted shall constitute presumptive
evidence as to the amount owed by the Borrower with respect to principal of
the Demand 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 Demand Note.
1.3. REPAYMENT; RENEWAL OF DEMAND LOAN FACILITY. The Borrower shall
repay in full all Demand Loans and all interest thereon upon the first to
occur of: (i) the Expiration Date, or (ii) the date of any demand for payment
(which demand may be made by the Bank at any time in the Bank's discretion,
whether or not any Default or Event of Default has occurred), or (iii) an
acceleration under Section 5.2(a) following an Event of Default. The
Borrower may repay at any time, without penalty or premium, the whole or any
portion of any Demand Loan. The Bank may, at its sole discretion, renew the
financing arrangements described in Section 1.2 by extending the Expiration
Date in a writing signed by the Bank and accepted by the Borrower. Neither
the inclusion in this letter agreement or elsewhere of covenants relating to
periods of time after the Expiration Date, nor any other provision hereof,
nor any action (except a written extension pursuant to the immediately
preceding sentence), non-action or course of dealing on the part of the Bank
will be deemed an extension of, or agreement on the part of the Bank to
extend, the Expiration Date.
1.4. TERM LOANS; TERM NOTES. In addition to the foregoing, subject
to the terms and conditions of this letter agreement, the Bank will make one
or more term loans (the "Term Loans") to the Borrower. The Term Loans are
available as follows: (1) At the Borrower's request, and subject to the terms
and conditions of this letter agreement, the Bank will make one or more Term
Loans ("Tranche A Term Loans") to the Borrower in an aggregate original
principal amount not to exceed $250,000. Such Tranche A Term Loans may be
made on any Business Day prior to the first to occur of (i) the close of
business on November 30, 1999 or (ii) the earlier termination of the Term
Loan facilities pursuant to Section 5.2 or Section 6.6. (2) In addition, at
the Borrower's request, and subject to the terms and conditions of this
letter agreement, the Bank will make one or more Term Loans ("Tranche B Term
Loans") to the Borrower in an aggregate original principal amount not to
exceed $400,000. Such Tranche B Term Loans may be made on any Business Day
prior to the first to occur of (i) the close of business on January 31, 2000
or (ii) the earlier termination of the Term Loan facilities pursuant to
Section 5.2 or Section 6.6. (3) In addition, at the Borrower's request, and
subject to the terms and conditions of this letter agreement, the Bank will
make one or more Term Loans ("Tranche C Term Loans") to the Borrower in an
aggregate original principal amount not to exceed $550,000. Such Tranche C
Term Loans may be made on any Business Day prior to the first to occur of (i)
the close of business on March 31, 2000 or (ii)
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the earlier termination of the Term Loan facilities pursuant to ss.5.2 or
ss.6.6. Thus, the maximum aggregate original principal amounts of the Term Loans
available to the Borrower will be $1,200,000. At the time of each such request,
the Borrower will indicate whether the Borrower requests a Tranche A Term Loan,
a Tranche B Term Loan or a Tranche C Term Loan and the amount of the Term Loan
of such Tranche being requested. A Term Loan of any Tranche (or contemporaneous
Term Loans of two or more Tranches) shall be made, no more than once per month
(unless the Bank shall consent to more frequent Term Loans), in order to finance
costs of Qualifying Equipment acquired by the Borrower within the 60 days
preceding the request for such a Term Loan and/or to finance the costs of
Qualifying Leasehold Improvements incurred by the Borrower during the 60 days
preceding such request. Each such Term Loan shall be in such amount as may be
requested by the Borrower; provided that (i) no Term Loan of any Tranche will be
made after the expiry date for such Tranche set forth above in this ss.1.4; (ii)
the aggregate original principal amounts of the Term Loans of each Tranche shall
not exceed the amount set forth above in this ss.1.4 as the maximum amount for
such Tranche nor will the aggregate original principal amounts of all Term Loans
exceed $1,200,000; (iii) 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"); except that the Borrower may in
its sole discretion elect to deposit with the Bank and pledge to the Bank cash
equal to 10% of the original principal amount of any Term Loan; and if it so
elects and pursuant to such election deposits with the Bank and pledges to the
Bank (by instruments satisfactory in form and substance to the Bank) cash equal
to 10% of the original principal amount of any Term Loan, then the amount of
such Term Loan (including the amount so pledged) will be 100% of said invoiced
actual costs; and (iv) the aggregate principal amount of all Term Loans made
with respect to Qualifying Leasehold Improvements will not exceed the lesser of
(A) $400,000 or (B) 30% of the total principal amounts of all Term Loans made at
or prior to the date of the making of any such Term Loan for Leasehold
Improvements.
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 the costs of the relevant Qualifying
Leasehold Improvements, as the case may be; (ii) such evidence as the Bank may
reasonably require showing that each item of Qualifying Equipment has been
delivered to and installed at the Borrower's Danvers, MA premises, has been
accepted by the Borrower, 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 each item of Qualifying
Leasehold Improvements has been constructed at or installed at the Borrower's
Danvers, MA premises, 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), except that
the Bank acknowledges that certain Qualifying Leasehold Improvements may be so
built into the real estate at the Borrower's Danvers, MA premises that the
Borrower's landlord will, upon termination of the Borrower's lease, have rights
in such Qualifying Leasehold Improvements; (iv) Uniform Commercial Code
financing statements and appropriate supplements to the Security Agreement
reflecting the relevant Qualifying Equipment and/or Qualifying Leasehold
Improvements with respect to which such Term Loan is being made; and (v)
evidence satisfactory to the Bank that
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the Qualifying Equipment and the Qualifying Leasehold Improvements are fully
insured against casualty loss, with insurance naming the Bank as secured party
and first loss payee.
The Tranche A Term Loans will be evidenced by the Tranche A Term Note.
The Tranche B Term Loans will be evidenced by the Tranche B Term Note. The
Tranche C Term Loans will be evidenced by the Tranche C Term Note. The Borrower
hereby irrevocably authorizes the Bank to make or cause to be made, on a
schedule attached to the appropriate 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 of any Term Loan, an appropriate notation reflecting such transaction
and the then aggregate unpaid principal balance of the Term Loans of that
Tranche to which such Term Note relates. The amount so noted on each Term Note
shall constitute presumptive evidence as to the amount owed by the Borrower with
respect to principal of the Term Loans of that Tranche to which such Term Note
relates. 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 any Term Note.
1.5. PRINCIPAL REPAYMENT OF TERM LOANS. The Borrower shall repay
principal of the Tranche A Term Loans in 45 equal consecutive monthly
installments (each in an amount equal to 1/46th of the aggregate principal
amount of the Tranche A Term Loans outstanding at the close of business on
November 30, 1999), such monthly installments to commence on December 1, 1999
and to continue on the first day of each month thereafter through and including
August 1, 2003, PLUS a 46th and final installment due and payable on September
1, 2003 in an amount equal to the entire then outstanding principal balance of
the Tranche A Term Loans and all interest then accrued but unpaid thereon to the
date of payment. The Borrower may prepay, at any time or from time to time,
without premium or penalty, the whole or any portion of the Tranche A Term Loans
to the extent that same are Floating Rate Term Loans; provided that each such
principal prepayment shall be accompanied by payment of all interest on the
amount so prepaid accrued under the Tranche A Term Note but unpaid to the date
of payment. The Borrower may prepay the whole or any portion of any Tranche A
Term Loan which is a LIBOR Term Loan; provided that (i) the Borrower gives the
Bank not less than two (2) Business Days' prior written notice of its intent so
to prepay, (ii) the Borrower pays all interest on each such Tranche A Term Loan
which is a LIBOR Term Loan (or portion thereof) so prepaid accrued to the date
of such prepayment, (iii) any voluntary prepayment with respect to a Tranche A
Term Loan which is a LIBOR Term Loan must be in an integral multiple of $100,000
(provided that, in any event, no Tranche A Loan which is a LIBOR Term Loan will
remain outstanding in a principal amount of less than $100,000), and (iv) if the
Borrower for any reason makes any prepayment of a Tranche A Term Loan which is a
LIBOR Term Loan prior to the last day of the Interest Period applicable thereto,
the Borrower shall forthwith pay all amounts owing to the Bank pursuant to the
provisions of ss.1.9 with respect to such LIBOR Term Loan. Any partial
prepayment of principal of the Tranche A Term Loans will be applied to
installments of principal of the Tranche A Term Loans thereafter coming due in
inverse order of normal maturity. Amounts repaid or prepaid with respect to the
Tranche A Term Loans are not available for reborrowing.
The Borrower shall repay principal of the Tranche B Term Loans in 43
equal consecutive monthly installments (each in an amount equal to 1/44th of the
aggregate principal amount of the
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Tranche B Term Loans outstanding on at the close of business on January 31,
2000), such monthly installments to commence on February 1, 2000 and to continue
on the first day of each month thereafter through and including August 1, 2003,
PLUS a 44th and final installment due and payable on September 1, 2003 in an
amount equal to the entire then outstanding principal balance of the Tranche B
Term Loans and all interest then accrued but unpaid thereon to the date of
payment. The Borrower may prepay, at any time or from time to time, without
premium or penalty, the whole or any portion of the Tranche B Term Loans to the
extent that same are Floating Rate Term Loans; provided that each such principal
prepayment shall be accompanied by payment of all interest on the amount so
prepaid accrued under the Tranche B Term Note but unpaid to the date of payment.
The Borrower may prepay the whole or any portion of any Tranche B Term Loan
which is a LIBOR Term Loan; provided that (i) the Borrower gives the Bank not
less than two (2) Business Days' prior written notice of its intent so to
prepay, (ii) the Borrower pays all interest on each such Tranche B Term Loan
which is a LIBOR Term Loan (or portion thereof) so prepaid accrued to the date
of such prepayment, (iii) any voluntary prepayment with respect to a Tranche B
Term Loan which is a LIBOR Term Loan must be in an integral multiple of $100,000
(provided that, in any event, no Tranche B Loan which is a LIBOR Term Loan will
remain outstanding in a principal amount of less than $100,000), and (iv) if the
Borrower for any reason makes any prepayment of a Tranche B Term Loan which is a
LIBOR Term Loan prior to the last day of the Interest Period applicable thereto,
the Borrower shall forthwith pay all amounts owing to the Bank pursuant to the
provisions of ss.1.9 with respect to such LIBOR Term Loan. Any partial
prepayment of principal of the Tranche B Term Loans will be applied to
installments of principal of the Tranche B Term Loans thereafter coming due in
inverse order of normal maturity. Amounts repaid or prepaid with respect to the
Tranche B Term Loans are not available for reborrowing.
The Borrower shall repay principal of the Tranche C Term Loans in 41
equal consecutive monthly installments (each in an amount equal to 1/42nd of the
aggregate principal amount of the Tranche C Term Loans outstanding at the close
of business on March 31, 2000), such monthly installments to commence on April
1, 2000 and to continue on the first day of each month thereafter through and
including August 1, 2003, PLUS a 42nd and final installment due and payable on
September 1, 2003 in an amount equal to the entire then outstanding principal
balance of the Tranche C Term Loans and all interest then accrued but unpaid
thereon to the date of payment. The Borrower may prepay, at any time or from
time to time, without premium or penalty, the whole or any portion of the
Tranche C Term Loans to the extent that same are Floating Rate Term Loans;
provided that each such principal prepayment shall be accompanied by payment of
all interest on the amount so prepaid accrued under the Tranche C Term Note but
unpaid to the date of payment. The Borrower may prepay the whole or any portion
of any Tranche C Term Loan which is a LIBOR Term Loan; provided that (i) the
Borrower gives the Bank not less than two (2) Business Days' prior written
notice of its intent so to prepay, (ii) the Borrower pays all interest on each
such Tranche C Term Loan which is a LIBOR Term Loan (or portion thereof) so
prepaid accrued to the date of such prepayment, (iii) any voluntary prepayment
with respect to a Tranche C Term Loan which is a LIBOR Term Loan must be in an
integral multiple of $100,000 (provided that, in any event, no Tranche C Loan
which is a LIBOR Term Loan will remain outstanding in a principal amount of less
than $100,000), and (iv) if the Borrower for any reason makes any prepayment of
a Tranche C Term Loan which is a LIBOR Term Loan prior to the last day of the
Interest Period applicable thereto, the Borrower shall
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forthwith pay all amounts owing to the Bank pursuant to the provisions of ss.1.9
with respect to such LIBOR Term Loan. Any partial prepayment of principal of the
Tranche C Term Loans will be applied to installments of principal of the Tranche
C Term Loans thereafter coming due in inverse order of normal maturity. Amounts
repaid or prepaid with respect to the Tranche C Term Loans are not available for
reborrowing.
1.6. INTEREST RATE FOR TERM LOANS. Except as otherwise provided below
in this ss.1.6, interest on the Term Loans will be payable at a fluctuating rate
per annum (the "Floating Rate") which shall at all times be equal to the Prime
Rate as in effect from time to time (but in no event in excess of the maximum
rate permitted by then applicable law), with a change in such rate of interest
to become effective on each day when a change in the Prime Rate becomes
effective. Subject to the conditions set forth herein, the Borrower may elect
that all or any portion of any Term Loan to be made under ss.1.4 will be made as
a LIBOR Term Loan, that all or any portion of any Floating Rate Term Loan will
be converted to a LIBOR Term Loan and/or that any LIBOR Term Loan will be
continued at the expiration of the Interest Period applicable thereto as a new
LIBOR Term Loan. Such election shall be made by the Borrower giving to the Bank
a written or telephonic notice received by the Bank within the time period and
containing the information described in the next following sentence (a "LIBOR
Term Loan Notice"). The LIBOR Term 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 Term Loan requested (which
shall be an integral multiple of $100,000), must identify the particular Term
Loan or Loans or portion thereof so to be made, converted or continued, as the
case may be, and must specify the proposed commencement date of the relevant
Interest Period. 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 Term Loan if the Interest Period applicable thereto would
continue after the due date of such installment. Any LIBOR Term 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 Term Loan, including, without limitation, any loss or expense
incurred by reason of the liquidation or redeployment of deposits or other funds
acquired by the Bank to fund or maintain such LIBOR Term Loan. At the expiration
of each Interest Period applicable to a LIBOR Term Loan, the principal amount of
such LIBOR Term Loan may be continued as a new LIBOR Term Loan to the extent and
on the terms and conditions contained in this letter agreement by delivery to
the Bank of a new LIBOR Term Loan Notice conforming to the requirements set
forth above in this ss.1.6 (and any LIBOR Term Loan not repaid and not so
continued as a new LIBOR Term Loan will be deemed to have been converted into a
Floating Rate Term Loan). Notwithstanding any other provision of this letter
agreement, the Bank need not make any LIBOR Term Loan or allow any conversion of
a Floating Rate Term Loan to a LIBOR Term 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
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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 Term Loan and any election to convert all or
any portion of the Term Loans to a LIBOR Term Loan may be made on behalf of the
Borrower only by a duly authorized officer; provided, however, that the Bank may
conclusively rely upon any written or facsimile communication received from any
individual whom the Bank believes in good faith to be such a duly authorized
officer.
1.7. INTEREST PAYMENTS ON ALL LOANS. The Borrower will pay interest on
the principal amount of the Loans outstanding from time to time, from the date
hereof until payment of the Loans and the Notes in full and the termination of
this letter agreement. Interest on Demand Loans and on Floating Rate Term Loans
will be payable monthly in arrears on the first day of each month. Interest on
each LIBOR Term Loan will be payable in arrears on the Interest Payment Date
applicable to such LIBOR Term Loan. In any event, interest under each Term Note
shall also be paid on the date of payment of such Term Note in full. Interest on
Demand Loans and on Floating Rate Term Loans shall be payable at the Floating
Rate. The rate of interest payable on any LIBOR Term Loan will be the LIBOR
Interest Rate applicable thereto. In any event, after the occurrence and during
the continuance of an Event of Default the Loans shall bear interest at a rate
per annum which at all times shall be equal to the sum of (i) four (4%) percent
per annum PLUS (ii) the Prime Rate in effect from time to time. All interest and
fees payable under this letter agreement and/or under any Note will be
calculated on the basis of a 360-day year for the actual number of days elapsed.
1.8. RATE DETERMINATION PROTECTION. In the event that:
(i) the Bank shall determine that, by reason of circumstances
affecting the London interbank market or otherwise, adequate and
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 Term Loan
has been made impracticable or unlawful by (1) the occurrence
of any contingency that materially and adversely affects the
London interbank market or (2) compliance by the Bank with any
applicable law or governmental regulation, guideline or order
or interpretation or change thereof by any governmental
authority charged with the interpretation or administration
thereof or with any request or directive of any such
governmental authority (whether or not having the force of
law); or
(B) LIBOR (taking into account any adjustment in
respect of any Reserve Rate which may become effective) will
not, in the reasonable determination of the Bank, adequately
and fairly reflect the cost to the Bank of funding the LIBOR
Term Loans for such Interest Period
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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 Term 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.
1.9. PREPAYMENT OF LIBOR TERM LOANS. The following provisions of this
ss.1.9 shall be effective only with respect to LIBOR Term Loans: If, due to
acceleration of any Term Note or due to voluntary prepayment or mandatory
repayment or prepayment or due to any other reason, the Bank receives payment of
any principal of any LIBOR Term Loan on any date prior to the last day of the
relevant Interest Period or if for any reason any LIBOR Term Loan is converted
to a Floating Rate Term 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 Term Loan shall be subtracted from the "cost of funds"
component (I.E., reserve-adjusted LIBOR) of the LIBOR Interest Rate in effect
with respect to such LIBOR Term 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 Term Loan. Any acceleration of a LIBOR Term Loan due to an
Event of Default will give rise to a yield maintenance fee calculated with the
respect to such LIBOR Term 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.
1.10. INCREASED COSTS; CAPITAL ADEQUACY.
(i) If the adoption, effectiveness or phase-in, after the date
hereof, of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive (whether or not
having the force of law) of any such authority, central bank or
comparable agency:
(A) shall subject the Bank to any Imposition or other
charge with respect to any LIBOR Term Loan or the Bank's
agreement to make LIBOR Term Loans, or shall change the basis
of taxation of payments to the Bank of the principal of or
interest on any LIBOR Term Loan or any other amounts due under
this letter agreement in respect of the LIBOR Term Loans or
the Bank's
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agreement to make LIBOR Term Loans (except for changes in
the rate of tax on the over-all net income of the Bank); or
(B) shall impose, modify or deem applicable any
reserve, special deposit, deposit insurance or similar
requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding, with respect to any LIBOR Term
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 Term Loans or the Bank's agreement to make
LIBOR Term Loans
and the result of any of the foregoing is to increase the cost to the
Bank of making or maintaining any LIBOR Term Loan or to reduce the
amount of any sum received or receivable by the Bank under this letter
agreement or under any Term Note with respect to any LIBOR Term Loan by
an amount deemed by the Bank to be material, then (A) the Bank shall
promptly after its determination of such occurrence deliver a Bank
Certificate with respect thereto to the Borrower; and (B) promptly upon
demand by the Bank and receipt of such Bank Certificate from the Bank
with respect thereto, the Borrower shall pay to the Bank such
additional amount or amounts as the Bank certifies to be necessary to
compensate the Bank for such increased cost or reduction in amount
received or receivable.
(ii) If the Bank shall have determined that the adoption,
effectiveness or phase-in after the date hereof of any applicable law,
rule or regulation regarding capital requirements for banks or bank
holding companies, or any change therein after the date hereof, or any
change after the date hereof in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive of such entity
regarding capital adequacy (whether or not having the force of law) has
or would have the effect of reducing the return on the Bank's capital
with respect to any Loan (whether or not then subject to any LIBOR
Interest Rate) or any letter of credit and/or with respect to the
Bank's agreements hereunder to make Loans and/or issue letters of
credit to a level below that which the Bank could have achieved (taking
into consideration the Bank's policies with respect to capital adequacy
immediately before such adoption, effectiveness, phase-in, change or
compliance and assuming that the Bank's capital was then fully
utilized) by any amount deemed by the Bank to be material: (A) the Bank
shall promptly after its determination of such occurrence deliver a
Bank Certificate with respect thereto to the Borrower; and (B) the
Borrower shall pay to the Bank as an additional fee from time to time
on demand such amount as the Bank certifies to be the amount that will
compensate it for such reduction.
(iii) A Bank Certificate of the Bank claiming compensation
under this ss.1.10 shall be conclusive in the absence of manifest
error. Such certificate shall set forth the nature and date of the
occurrence giving rise to such compensation, the additional amount
9
or amounts to be paid to the Bank hereunder and the method by which
such amounts are determined. In determining any such amount, the Bank
may use any reasonable averaging and attribution methods.
(iv) No failure on the part of the Bank to demand compensation
on any one occasion shall constitute a waiver of its right to demand
such compensation on any other occasion and no failure on the part of
the Bank to deliver any Bank Certificate in a timely manner shall in
any way reduce any obligation of the Borrower to the Bank under this
ss.1.10; provided, however, that if a Bank Certificate is delivered
more than 180 days after the event or circumstance giving rise thereto,
the Bank shall not be entitled to compensation under this ss.1.10 with
respect to any period more than 180 days prior to the date of delivery
of such Bank Certificate.
1.11. ILLEGALITY OR IMPOSSIBILITY. Notwithstanding any other provision
of this letter agreement, if the introduction of or any change in or in the
interpretation or administration of any law or regulation applicable to the Bank
or the Bank's activities in the London interbank market shall make it unlawful,
or any central bank or other governmental authority having jurisdiction over the
Bank or the Bank's activities in the London interbank market shall assert that
it is unlawful, or otherwise make it impossible, for the Bank to perform its
obligations hereunder to make LIBOR Term Loans or to continue to fund or
maintain LIBOR Term Loans, then on notice thereof and demand therefor by the
Bank to the Borrower, (i) the obligation of the Bank to fund LIBOR Term Loans
shall terminate and (ii) all affected LIBOR Term Loans shall be deemed to have
been converted into Floating Rate Term Loans (with the Borrower to be
responsible for any amount payable under ss.1.9 as a consequence of such
conversion) at the last day on which such LIBOR Term Loans may legally remain
outstanding. Except as provided above in this ss.1.11, the Borrower will have no
right to convert any LIBOR Term Loan to a Floating Rate Term Loan prior to the
end of the Interest Period applicable to such LIBOR Term Loan.
1.12. ADVANCES AND PAYMENTS. The proceeds of all Loans shall be
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of each Demand Loan shall be used by the Borrower
solely for working capital purposes. At the date of execution and delivery of
this letter agreement, all loans outstanding under the Prior Note are deemed to
be refunded by Demand Loans under this letter agreement. 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 when
same are due, from time to time, under this letter agreement and/or any Note
and/or with respect to any letter of credit; and will thereafter promptly 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 any
Note or with respect to any letter of credit.
10
Whenever any payment to be made to the Bank hereunder or under any Note
or with respect to any letter of credit 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 any Note and/or with respect to any
letter of credit 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 any Note
and/or with respect to any letter of credit shall be made to the Bank, in lawful
money of the United States in immediately available funds, at its office at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or at 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, any Note and/or any of the
other Loan Documents and/or with respect to any letter of credit, next to
interest then accrued on account of any Loans or letter of credit reimbursement
obligations and only thereafter to principal of the Loans and letter of credit
reimbursement obligations, being applied against the Loans and/or such
obligations in such order as the Borrower may designate (and, failing such
designation, being applied first against the letter of credit reimbursement
obligations, next against any outstanding Demand Loans and thereafter against
installments of the Term Loans in inverse order of normal maturity). All
interest and fees payable hereunder and/or under any Note shall be calculated on
the basis of a 360-day year for the actual number of days elapsed.
1.13. LETTERS OF CREDIT. At the Borrower's request, the Bank may, from
time to time, in its sole discretion issue one or more letters of credit for the
account of the Borrower; provided that at the time of issuance of such letter of
credit and after giving effect thereto, the Aggregate Demand Facility
Liabilities will not exceed $3,000,000. Any such letter of credit will be issued
for such fee and upon such terms and conditions as may be agreed to by the Bank
and the Borrower at the time of issuance. The Borrower hereby authorizes the
Bank, without further request from the Borrower, to cause the Borrower's
liability to the Bank for reimbursement of funds drawn under any such letter of
credit to be repaid from the proceeds of a Demand Loan to be made hereunder. The
Borrower hereby irrevocably requests that such Demand Loan be made.
1.14. CONDITIONS TO ADVANCE. Prior to the making of the initial Loan
hereunder or the issuance of any letter of credit hereunder, the Borrower shall
deliver to the Bank duly executed copies of this letter agreement, the Security
Agreement, the Demand Note, the Tranche A Term Note, the Tranche B Term Note,
the Tranche C 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 Loan or letter of credit issuance
(including the initial Loan or letter of credit issuance) is subject to the
further conditions precedent that on the date on which such Loan is made or such
letter of credit is issued (and after giving effect thereto):
11
(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 Loan or issuance of such
letter of credit, as the case may be.
(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 Loan or issuance of such letter
of credit, as the case may be.
(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 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 Loan or for the issuance of a
letter of credit, and each acceptance by the Borrower of the proceeds of any
Loan or delivery of a letter of credit, will be deemed a representation and
warranty by the Borrower that at the date of such Loan or letter of credit
issuance, as the case may be, and after giving effect thereto all of the
conditions set forth in the foregoing clauses (a)-(d) of this ss.1.14 will be
satisfied.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to
enter into this letter agreement and to make Loans hereunder and/or issue
letters of credit 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
contemplated 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 facility, sales office or warehouse 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, as at
the date of this letter agreement, 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) of the attached Disclosure Schedule. 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. The Borrower owns 100% of the
outstanding capital stock of each Subsidiary.
12
(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 any filings (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
(iii) result in, or require, the creation or imposition of any
lien, security interest or other encumbrance (other than in favor of
the Bank), upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
(d) This letter agreement and each of the other Loan Documents has been
duly executed and delivered by the Borrower and each is a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
(e) Except as described on item 2.1(e) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary of the Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could hinder or prevent the consummation of the transactions contemplated hereby
or call into question the validity of this letter agreement or any of the other
Loan Documents or any other instrument provided for or contemplated by 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 could result in any material
adverse change in the business, prospects, condition, affairs or operations of
the Borrower or any such Subsidiary.
(f) The Borrower is not in violation of any term of its charter or
by-laws as now in effect. Neither the Borrower nor any Subsidiary of the
Borrower is in material violation of any term of any mortgage, indenture or
judgment, decree or order, or any other 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 by 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,
13
assessment or governmental charge have been asserted or assessed, and the
Borrower knows of no material tax liability or basis therefor.
(h) The Borrower is in compliance with (and each Subsidiary of the
Borrower is in compliance with) all requirements of law, federal, 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 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 or any such Subsidiary. Without limiting the foregoing, the
Borrower has all the franchises, licenses, leases, permits, certificates and
authorizations needed for the conduct of its business and the use of its
properties and all premises occupied by it, as now conducted, owned and used and
as proposed to be conducted, owned and used.
(i) The audited financial statements of the Borrower as at March 31,
1999 and the management-generated financial statements of the Borrower as at
June 30, 1999, each heretofore delivered to the Bank, are complete and accurate
and fairly present the financial condition of the Borrower as at the date
thereof and for the period covered thereby, except that the aforesaid
management-generated statements do not have footnotes and thus do not present
the information which would normally be contained in footnotes to financial
statements and are subject to normal year-end audit adjustments. Neither the
Borrower nor any of the Borrower's Subsidiaries has any liability, contingent or
otherwise, not disclosed in the aforesaid financial statements or in the notes
thereto that could materially affect the financial condition of the Borrower.
Since March 31, 1999, there has been no material adverse development in the
business or condition of the Borrower, and the Borrower has not entered into any
transaction other than in the ordinary course.
(j) The principal place of business and chief executive offices of the
Borrower are located at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. All of the
books and records of the Borrower are located at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and/or at
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Except as described on item 2.1(j) of
the attached Disclosure Schedule, no Collateral is located at any other address.
Said item 2.1(j) of the attached Disclosure Schedule sets forth the names and
addresses of all record owners of any premises where any material amount of
Collateral is located.
(k) Except as described on item 2.1(k) of attached Disclosure Schedule,
the Borrower owns or has a valid right to use all of the patents, licenses,
copyrights, trademarks, trade names and franchises 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,
licenses, copyrights, trademarks, trade names or franchises of others in any
manner that could materially adversely affect the business or assets or
condition, financial or otherwise, of the Borrower.
(l) To the best knowledge of the Borrower, 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
14
conducted or proposed to be conducted by the Borrower or which grants to anyone
other than the Borrower any rights in any inventions or other ideas susceptible
to legal protection developed or conceived by any such officer or key employee.
(m) The Borrower is not a party to any contract or agreement which now
has or, as far as can be reasonably foreseen by the Borrower at the date hereof,
may have a material adverse effect on the financial condition, business,
prospects or properties of the Borrower.
(n) As used herein, the term "Year 2000 Issue" refers to the concern
that computers, software and other equipment utilizing microprocessors may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date on or after December 31, 1999. The Borrower
has evaluated this potential issue with respect to its products, its financial
and management information systems and its suppliers. With respect to the
Borrower's products, the software controlling the BVS drive console includes
internal counters, but the BVS operation is not related in any way to a specific
calendar date. Accordingly, the Borrower believes that the BVS will not need any
repair or modification with regard to the Year 2000 issue. With respect to the
Borrower's financial and management information systems, the Borrower
successfully installed and tested a Year 2000 upgrade to its primary system and
is currently working on execution of a plan to ensure that all personal
computers ("PCs") and applications are fully assessed and updated to be Year
2000 compliant before the end of 1999. To date, expenditures for new Pcs,
software applications, and operating systems under the Borrower's Year 2000 plan
have amounted to less than $100,000. Remaining expenditures to complete the plan
are expected to be immaterial. With respect to its suppliers, the Borrower is
completing an assessment of vendors begun in fiscal 1999 and is increasing
safety stocks of materials and inventory where a prolonged loss of material and
inventory deliveries would have an adverse impact on the Borrower's business,
financial condition and results of operations. The Borrower has also made
inquiries to assess its key service providers such as its financial
institutions, its payroll service provider, and its retirement plan
administrator as to their Year 2000 readiness and has received assurances that
the vendors' critical systems have been updated, tested, and found to be
compliant.
Although the Borrower's management does not expect Year 2000 Issues to
have a material impact on its business or future results of operations, there
may be interruptions of operations or other limitations of system functionality
or the Borrower may incur significant costs to avoid such interruptions or
limitations. To the extent that the Borrower does not eliminate all Year 2000
Issues, the most likely worst case Year 2000 scenario is systemic failures
beyond the control of the Borrower, such as prolonged telecommunications or
electrical failure, or a general disruption in supplies and services provided to
the Borrower which could have a material adverse effect on the Borrower's
business, results of operations and financial condition.
The Borrower will, at the request of the Bank, provide such reports and
such other information as the Bank may reasonably request in order to evidence
such Year 2000 compliance.
15
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Demand Loan or
any Term Loan or any of the other Obligations shall be outstanding or any letter
of credit issued hereunder shall be outstanding:
3.1. LEGAL EXISTENCE; QUALIFICATION; COMPLIANCE. The Borrower will
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will remain qualified to do business and in good standing in
Massachusetts. The Borrower will qualify to do business and will remain
qualified and in good standing (and 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,
sales office, warehouse or other facility and in each other jurisdiction in
which the failure so to qualify could (singly or in the aggregate with all other
such failures) have a material adverse effect on the financial condition,
business or prospects of the Borrower or any such Subsidiary. The Borrower will
comply with (and will cause each Subsidiary of the Borrower to comply with) its
charter documents and by-laws. The Borrower will comply with (and will cause
each Subsidiary of the Borrower to comply with) all applicable laws, rules and
regulations (including, without limitation, ERISA and those relating to
environmental protection) other than (i) laws, rules or regulations the validity
or applicability of which the Borrower or such Subsidiary shall be contesting in
good faith by proceedings which serve as a matter of law to stay the enforcement
thereof and (ii) those laws, rules and regulations the failure to comply with
any of which could not (singly or in the aggregate) have a material adverse
effect on the financial condition, business or prospects of the Borrower or any
such Subsidiary.
3.2. MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will maintain and
preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its properties in good working order and condition, making all
necessary repairs thereto and replacements thereof. The Borrower will maintain
all such insurance as may be required under the Security Agreement and will also
maintain, with financially sound and reputable insurers, insurance with respect
to its property and business against such liabilities, casualties and
contingencies and of such types and in such amounts as shall be reasonably
satisfactory to the Bank from time to time and in any event all such insurance
as may from time to time be customary for companies conducting a business
similar to that of the Borrower in similar locales.
3.3. PAYMENT OF TAXES AND CHARGES. The Borrower will pay and discharge
(and will cause each Subsidiary of the Borrower to pay and discharge) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or property, including, without limitation, taxes, assessments, charges
or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the Borrower or any such Subsidiary, except any of the foregoing
which is being contested in good faith and by appropriate proceedings which
serve as a matter of law to stay the enforcement
16
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, all material trade debt, purchase
money obligations, equipment lease obligations and all of its other material
Indebtedness. The Borrower will perform and fulfill all material covenants and
agreements under any leases of real estate, agreements relating to purchase
money debt, equipment leases and other material contracts. The Borrower will
maintain in full force and effect, and comply with the terms and conditions of,
all permits, permissions and licenses necessary or desirable for its business.
3.4. ACCOUNTS. The Borrower will maintain its principal depository and
operating accounts with the Bank.
3.5. CONDUCT OF BUSINESS. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly (itself or
through any Subsidiary), enter into any other lines of business, businesses or
ventures.
3.6. REPORTING REQUIREMENTS. The Borrower will furnish to the Bank:
(i) Within 120 days after the end of each fiscal year of the
Borrower, a copy of the annual audit report for such fiscal year for
the Borrower, including therein consolidated and consolidating balance
sheets of the Borrower and Subsidiaries as 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".
(ii) Within 45 days after the end of each fiscal quarter of
the Borrower, consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries and related consolidated and
consolidating statements of income and cash flow, unaudited but
complete and accurate and prepared in accordance with generally
accepted accounting principles fairly presenting the financial
condition of the Borrower as at the dates thereof and for the periods
covered thereby (except that such quarterly statements need not contain
footnotes) and certified as accurate (subject to normal year-end audit
adjustments, which shall not be material) by the chief financial
officer of the Borrower, such balance sheets to be as at the end of
each such fiscal quarter and such statements of income and cash flow to
be for such fiscal quarter and for the fiscal year to date. Such income
statements shall be accompanied by a comparison to budget and a
comparison to the results for the corresponding period of the
immediately prior fiscal year.
(iii) At the time of delivery of each annual or quarterly
statement of the Borrower, a certificate executed by the chief
financial officer of the Borrower stating that he or she has reviewed
this letter agreement and the other Loan Documents and has no knowledge
of any default by the Borrower in the performance or observance of any
of the provisions of this letter agreement or of any of the other Loan
Documents or, if he or she
17
has such knowledge, specifying each such default and the nature
thereof. Each such certificate given as at the end of any fiscal
quarter shall also set forth the calculations necessary to evidence
compliance with ss.ss.3.7-3.9.
(iv) Promptly after receipt, a copy of all audits or reports
submitted to the Borrower by independent public accountants in
connection with any annual, special or interim audits of the books of
the Borrower and any "management letter" prepared by such accountants.
(v) Within 120 days after the beginning of each fiscal year, a
copy of the Borrower's income statement and balance sheet projections
for such fiscal year, in detail reasonably satisfactory to the Bank.
(vi) If any securities of the Borrower are publicly traded or
if registration of such securities is being sought, the Borrower will
furnish to the Bank, promptly upon same becoming available, one copy of
each financial statement, report, notice or proxy statement sent by the
Borrower to stockholders or the holders of debt securities generally,
of each press release or other communication disseminated to the public
generally, and of each regular or periodic report and any registration
statement, prospectus or listing application filed by the Borrower with
the National Association of Securities Dealers, any securities exchange
or the Securities and Exchange Commission or any successor agency.
(vii) As soon as possible and in any event within five days of
the occurrence of any Event of Default or any event which, with the
giving of notice or passage of time or both, would constitute an Event
of Default, the statement of the Borrower setting forth details of such
Event of Default or event and the action which the Borrower proposes to
take with respect thereto.
(viii) Promptly after receiving notice of 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, brought against the Borrower or
any Subsidiary of the Borrower; provided, however, that this clause
(viii) will not be deemed to require the Borrower to give notice of FDA
proceedings occurring in the ordinary course of the Borrower's business
(including, without limitation, product recalls in the ordinary course)
which could not reasonably be expected to have a material adverse
effect on the Borrower's financial condition, business or prospects.
(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.
18
3.7. CAPITAL BASE. The Borrower will maintain, as at the end of each
fiscal quarter of the Borrower (commencing with its results as at June 30,
1999), a consolidated Capital Base which shall not be less than $13,500,000.
3.8. LIQUIDITY. The Borrower will maintain, as at the end of each
fiscal quarter of the Borrower (commencing with its results as at June 30,
1999), a ratio of Net Quick Assets to Total Liabilities, which ratio shall be
not less than 2.0 to 1.
3.9. DEBT SERVICE COVERAGE. As used herein, "Determination Date" means
the last day of each fiscal quarter of the Borrower. The Borrower will maintain
on a consolidated basis, as at each Determination Date (commencing with its
results as at June 30, 1999), a Debt Service Coverage Ratio of not less than 1.5
to 1. As used herein, the "Debt Service Coverage Ratio", as determined as at any
Determination Date, means the ratio of (x) Earnings Available of the Borrower
and Subsidiaries for the 12-month period ending on such Determination Date to
(y) the total of (1) all interest on any Indebtedness (whether senior or
subordinated, long-term or current), which interest was paid or payable or
accrued by the Borrower or any Subsidiary of the Borrower during such 12-month
period ending on such Determination Date, PLUS (2) the aggregate current
maturities of long-term debt of the Borrower and Subsidiaries outstanding at
such Determination Date. Notwithstanding the foregoing, the Borrower need not
comply with the foregoing provisions of this ss.3.9 as at any Determination Date
if the Borrower's Unencumbered Cash Balance as at such Determination Date
exceeds $9,000,000.
3.10. BOOKS AND RECORDS. The Borrower will maintain (and cause each of
its Subsidiaries to maintain) complete and accurate books, records and accounts
which will at all times accurately and fairly reflect in all material respects
all of its transactions in accordance with generally accepted accounting
principles consistently applied. The Borrower will, at any reasonable time and
from time to time upon reasonable notice and during normal business hours (and
at any time and without any necessity for notice following the occurrence of an
Event of Default), permit the Bank, and any agents or representatives thereof,
to examine and make copies of and take abstracts from the records and books of
account of, and visit the properties of the Borrower and any of its
Subsidiaries, and to discuss its affairs, finances and accounts with its
managers, officers or directors and independent accountants, all of whom are
hereby authorized and directed to cooperate with the Bank in carrying out the
intent of this ss.3.10. Each financial statement of the Borrower hereafter
delivered pursuant to this letter agreement will be complete and accurate and
will fairly present in all material respects the financial condition of the
Borrower as at the date thereof and for the periods covered thereby.
3.11. LANDLORD'S WAIVER. Prior to the date of the first Loan hereunder
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.
19
IV. NEGATIVE COVENANTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Demand Loan or
any Term Loan or any of the other Obligations shall be outstanding or any letter
of credit issued hereunder shall be outstanding:
4.1. INDEBTEDNESS. The Borrower will not create, incur, assume or
suffer to exist any Indebtedness (nor allow any of its Subsidiaries to create,
incur, assume or suffer to exist any Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without
limitation, the Indebtedness represented by the Notes and any
Indebtedness in respect of letters of credit issued by the Bank;
(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)
hereafter incurred 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 (A) future Indebtedness permitted under this
clause (iv) plus (B) presently-existing equipment financing permitted
under clause (v) of this ss.4.1 will not exceed $2,200,000 in the
aggregate outstanding at any one time;
(v) other Indebtedness existing at the date hereof, but only
to the extent set forth on item 4.1 of the attached Disclosure
Schedule;
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to ss.4.3; and
(vii) Subordinated Debt hereafter incurred by the Borrower;
provided that (A) the Bank shall have approved in writing the principal
amount, interest rate and other payment terms for such Subordinated
Debt, such approval not to be unreasonably withheld or delayed, and (B)
the Bank shall have approved in writing the subordination terms for
such Subordinated Debt, which approval may be given or withheld by the
Bank in its sole discretion.
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
20
to any of its property or assets (including, without limitation, any trustee
process affecting any account of the Borrower with the Bank), now owned or
hereafter acquired, except:
(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, except any of the foregoing which is being
contested in good faith and by an 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;
(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
have been made and are maintained;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv)Liens in favor of the Bank;
(v) Liens in favor of equipment vendors and/or lessors
securing purchase money Indebtedness to the extent permitted by clause
(iv) of ss.4.1; provided that no such Lien will extend to any property
of the Borrower or any Subsidiary other than the specific items of
equipment financed; or
(vi) other Liens existing at the date hereof, but only to the
extent and with the relative priorities set forth on item 4.2 of the
attached Disclosure Schedule.
Without limitation of the other representations, warranties, covenants and
agreements of the Borrower set forth elsewhere in this letter agreement, the
Borrower (i) represents and warrants that neither the Borrower nor any of its
Subsidiaries is now a party to any Restrictive Agreement and (ii) agrees that
the Borrower will not enter into (nor permit any of its Subsidiaries to enter
into) any Restrictive Agreement, except that (A) the Borrower may enter into a
Restrictive Agreement with the lessor of any equipment or with any Person
providing purchase money financing permitted by clause (iv) of ss.4.1 above;
provided that such Restrictive Agreement relates only to the particular item or
items of equipment so leased or financed, and (B) software licenses under which
the Borrower is the licensee may restrict assignment to any other Person. As
used herein, a "Restrictive Agreement" is any agreement, covenant, undertaking
or understanding which could have the effect of preventing the Borrower or any
Subsidiary from granting a Lien on any of its assets to the Bank.
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
21
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, (ii) currently
existing guaranties described on item 4.3 of the attached Disclosure Schedule
and (iii) guaranties hereafter entered into by the Borrower relating to
Indebtedness not in excess of $100,000 in the aggregate.
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 any loans or
advances (and will not permit any of its Subsidiaries to make any loans or
advances) to any Person, including, without limitation, the Borrower's
directors, officers and employees, except advances to directors, officers or
employees with respect to expenses incurred by them in the ordinary course of
their duties and advances against salary, all of which will not exceed, in the
aggregate, $300,000 outstanding at any one time.
4.6. INVESTMENTS. The Borrower will not, without the Bank's prior
written consent, invest in, hold or purchase any stock or securities of any
Person (nor will the Borrower permit any of its Subsidiaries to invest in,
purchase or hold any such stock or securities) except (i) readily marketable
direct obligations of, or obligations guarantied by, the United States of
America or any agency thereof, (ii) other investment grade debt securities,
(iii) mutual funds, the assets of which are primarily invested in items of the
kind described in the foregoing clauses (i) and (ii) of this ss.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 United States commercial bank having more than
$100,000,000 in capital, (vi) investments in any Subsidiaries now existing or
hereafter created by the Borrower pursuant to ss.4.7 below; provided that in any
event the Tangible Net Worth of the Borrower alone (exclusive of its investment
in Subsidiaries and any debt owed by any Subsidiary to the Borrower) will not be
less than 90% of the consolidated Tangible Net Worth of the Borrower and
Subsidiaries, and (vii) other existing investments described on item 4.6 of the
attached Disclosure Schedule and all such future investments as are permitted by
the Borrower's Investment Policy, a copy of which is included in item 4.6 of the
attached Disclosure Schedule.
4.7. SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the
prior written consent of the Bank, form or acquire any Subsidiary or make any
other acquisition of the stock of any Person or of all or substantially all of
the assets of any other Person, other than Permitted Acquisitions. The Borrower
will not become a partner in any partnership.
4.8. MERGER. The Borrower will not, without the prior written consent
of the Bank, merge or consolidate with any Person (other than (A) a merger of
any wholly-owned Subsidiary of the Borrower into the Borrower or (B) a merger
made to carry out a Permitted Acquisition, provided that the Borrower is the
surviving entity) or sell, lease, transfer or otherwise dispose of
22
any material portion of its assets (whether in one or more transactions), other
than sale of inventory in the ordinary course.
4.9. AFFILIATE TRANSACTIONS. The Borrower will not, without the prior
written consent of the Bank, enter into any transaction, including, without
limitation, the purchase, sale or exchange of any property or the rendering of
any service, with any affiliate of the Borrower, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's business and
upon fair and reasonable terms no less favorable to the Borrower than would be
obtained in a comparable arms'-length transaction with any Person not an
affiliate; provided that nothing in this ss.4.9 shall be deemed to prohibit the
payment of salary or other similar payments to any officer or director of the
Borrower at a level consistent with the salary and other payments being paid at
the date of this letter agreement and heretofore disclosed in writing to the
Bank, nor to prevent the hiring of additional officers at a salary level
consistent with industry practice, nor to prevent reasonable periodic increases
in salary. For the purposes of this letter agreement, "affiliate" means any
Person which, directly or indirectly, controls or is controlled by or is under
common control with the Borrower; any officer or director or former officer or
director of the Borrower; any Person owning of record or beneficially, directly
or indirectly, 5% or more of any class of capital stock of the Borrower or 5% or
more of any class of capital stock or other equity interest having voting power
(under ordinary circumstances) of any of the other Persons described above; and
any member of the immediate family of any of the foregoing. "Control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of any Person, whether through ownership
of voting equity, by contract or otherwise.
4.10. CHANGE OF ADDRESS, ETC. The Borrower will not change its name or
legal structure, nor will the Borrower move its chief executive offices or
principal place of business from the address described in the first sentence of
ss.2.1(j) above (except that the Borrower is in the process of moving from ▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ to ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇), nor will
the Borrower remove any books or records from such address (except as
aforesaid), nor will the Borrower keep any Collateral at any location other than
at one of the locations described in ss.2.1(j) and/or on item 2.1(j) of the
attached Disclosure Schedule without, in each instance, giving the Bank at least
30 days' prior written notice 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 security interests granted or
intended to be granted pursuant to the Security Agreement. The Borrower will not
change its fiscal year or 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 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 in compliance with applicable law, 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 (except in compliance with applicable law) 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
23
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) 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 (ii) 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, hazardous materials and oil in the ordinary course of their
respective businesses, 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 Loan shall be used directly
or indirectly to purchase or carry any margin security.
4.13. SUBORDINATED DEBT. The Borrower will not directly or indirectly
make any optional or voluntary prepayment or purchase of Subordinated Debt; nor
will the Borrower modify, alter or add any material provisions with respect to
any Subordinated Debt without the prior written consent of the Bank. The
Borrower will not make any payment of any principal of or interest on any
Subordinated Debt in violation of any applicable subordination agreement and,
without limitation of the foregoing, no such payment will be made at any time
when there exists, or if there would result therefrom, any Event of Default
hereunder.
V. DEFAULT AND REMEDIES
5.1. EVENTS OF DEFAULT. Without derogating in any way from the demand
nature of the Demand Loans, 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 Demand Note and/or any Term Note on or before the date when due;
or the Borrower shall fail to pay when due any amount owed to the Bank with
respect to any letter of credit now or hereafter issued by the Bank; 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
Loan or letter of credit shall at any time prove to have been incorrect in any
material respect when made; or
24
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of ss.ss.3.1, 3.3, 3.6, 3.7, 3.8 or 3.9 or
Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after notice thereof shall have been given to
the Borrower; or
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other credit agreement
or other agreement relating to borrowed money or the extension of credit now
existing or hereafter entered into with or for the benefit of the Bank (or any
affiliate of the Bank); or
(f) Any default shall exist and remain unwaived or uncured with respect
to any Subordinated Debt of the Borrower or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Subordinated Debt, or any such Subordinated Debt shall not have been paid when
due, whether by acceleration or otherwise, or shall have been declared to be due
and payable prior to its stated maturity, or any event or circumstance shall
occur which permits, or with the lapse of time or the giving of notice or both
would permit, the acceleration of the maturity of any Subordinated Debt by the
holder or holders thereof; or
(g) Any default shall exist and remain unwaived or uncured with respect
to any Indebtedness for borrowed money of the Borrower or any Subsidiary of the
Borrower 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 for borrowed money, or any such Indebtedness for borrowed
money in excess of $100,000 in aggregate principal amount shall not have been
paid when due, whether by acceleration or otherwise, or shall have been declared
to be due and payable prior to its stated maturity, or any event or circumstance
shall occur which permits, or with the lapse of time or the giving of notice or
both would permit, the acceleration of the maturity of any such Indebtedness by
the holder or holders thereof; or
(h) The Borrower shall be dissolved, or the Borrower or any Subsidiary
of the Borrower shall become insolvent or bankrupt or shall cease paying its
debts as they mature or shall make an assignment for the benefit of creditors,
or a trustee, receiver or liquidator shall be appointed for the Borrower or any
Subsidiary of the Borrower or for a substantial part of the property of the
Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any such Subsidiary under the laws of any jurisdiction (except for an
involuntary proceeding filed against the Borrower or any Subsidiary of the
Borrower which is dismissed within 60 days following the institution thereof);
or
(i) Any final uninsured judgment in excess of $250,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction and such judgment remains undischarged, unstayed or unpaid for 30
days after such entry; or
25
(j) The Borrower or any Subsidiary of the Borrower shall fail to meet
its minimum funding requirements under ERISA with respect to any employee
benefit plan (or other class of benefit which the PBGC has elected to insure) or
any such plan shall be the subject of termination proceedings (whether voluntary
or involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which
would have a material adverse effect upon the financial condition of the
Borrower or any such Subsidiary; or
(k) The Security Agreement or any other Loan Document shall for any
reason (other than due to payment in full of all amounts secured or evidenced
thereby or due to discharge in writing by the Bank) not remain in full force and
effect; or
(l) The security interests and liens of the Bank in and on any of the
Collateral shall for any reason (other than due to payment in full of all
amounts secured thereby or due to written release by the Bank) not be fully
perfected liens and security interests; or
(m) If, at any time, more than 50% of any class of voting stock of the
Borrower shall be held, of record and/or beneficially, by any Person or by any
"group" (as defined in the Securities Exchange Act of 1934, as amended, and the
regulations thereunder), other than by one or more of the Persons listed on item
5.1(m) of the attached Disclosure Schedule; or
(n) There shall occur any other material adverse change in the
condition (financial or otherwise), operations, properties, assets, liabilities
or earnings of the Borrower and its Subsidiaries, taken as a whole.
5.2. RIGHTS AND REMEDIES ON DEFAULT. Without derogating in any way from
the demand nature of the Demand Loans, during the existence 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 amounts of each of the Loans
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 Demand Loan financing arrangements and the Term Loan
facilities provided for by this letter agreement.
(c) Exercise all rights and remedies hereunder, under the Demand Note,
under each Term Note, under the Security Agreement 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.
The Borrower expressly acknowledges and agrees that the Demand Loans
are demand obligations and that the Bank may demand payment of same (in which
case same shall be
26
immediately due and payable) at any time in the Bank's discretion, whether or
not any Default or Event of Default then exists and whether or not at the end of
any applicable Interest Period.
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.
5.4. LETTERS OF CREDIT. Without limitation of any other right or remedy
of the Bank, (i) if an Event of Default shall have occurred and the Bank shall
have accelerated the Demand Loans, or (ii) if the Bank shall demand payment
under the Demand Note, or (iii) if this letter agreement and/or the Demand Loan
financing arrangements described herein shall have expired or shall have been
earlier terminated by either the Bank or the Borrower for any reason, the
Borrower will forthwith deposit with the Bank in cash a sum equal to the total
of all then undrawn amounts of all outstanding letters of credit issued by the
Bank for the account of the Borrower.
VI. MISCELLANEOUS
6.1. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs
and expenses (including, without limitation, reasonable legal fees) of the Bank
in connection with the preparation, execution and delivery of this letter
agreement, the Security Agreement, the Demand Note, the Term Notes and all other
instruments and documents to be delivered in connection with any Loan or letter
of credit issued hereunder and any amendments or modifications of any of the
foregoing, as well as the costs and expenses (including, without limitation, the
reasonable fees and expenses of legal counsel) incurred by the Bank in
connection with preserving, enforcing or exercising, upon default, any rights or
remedies under this letter agreement, the Security Agreement, the Demand Note,
the Term Notes and all other instruments and documents delivered or to be
delivered hereunder or in connection herewith, all whether or not legal action
is instituted. In addition, the Borrower shall be obligated to pay any and all
stamp and other taxes payable or determined to be payable in connection with the
execution and
27
delivery of this letter agreement, the Security Agreement, the Demand Note, 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 sum of (i) four (4%) percent PLUS (ii) the Prime Rate (but in
no event in excess of the maximum rate permitted by then applicable law).
6.2. FACILITY FEES; BALANCES. With respect to the within facilities for
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 $6,000. In addition, in respect of the within facility for Demand Loans the
Borrower will maintain, from and after the date hereof, in a demand deposit
account at the Bank, average collected balances which shall be equal, at least,
to the sum of (i) $100,000 PLUS (ii) 5% of the average aggregate outstanding
balance of the Demand Loans. Balances shall be averaged monthly on the last day
of each month and on the Expiration Date or date of earlier termination of the
within facility for Demand Loans, and if any deficiency in the amount thereof
specified in the preceding sentence shall occur, such occurrence shall not
constitute an Event of Default, provided that the Borrower shall forthwith make
payment to the Bank of such sum as the Bank would have earned on the amount of
the deficiency, if it had made a loan of such amount outstanding throughout the
month in question and repayable with interest at the rate of interest payable
from time to time on the Demand Loans. Fees and balances described in this
Section are in addition to any fees and balances 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 in any such other agreement.
6.4. GOVERNING LAW. This letter agreement and the Notes shall be
governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
6.5. 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:
28
If to the Borrower:
ABIOMED, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Vice President Finance and Business
Operations
If to the Bank:
Fleet National Bank
High Technology Division
Mail Stop: MA OF D07A
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Case, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be effective two (2) Business Days after deposit in the
United States mails, if 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.
6.6. 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 Loans, the Notes and/or any letters
of credit issued hereunder. 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 any Note) to
any of the 12 Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the
enforcement thereof shall release the Bank from its obligations under
any of the Loan Documents.
(ii) The Bank shall have the unrestricted right at any time
and from time to time, and without the consent of or notice to the
Borrower, to grant to one or more banks or other financial institutions
(each, a "Participant") participating interests in the Bank's
obligation to lend hereunder and/or any or all of the 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
29
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 all Loans and all interest thereon and all fees and charges payable
in connection therewith and all letters of credit issued hereunder have been
terminated.
6.7. 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 any Note.
The Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in such a court and any claim that any such
suit, action or proceeding has been brought in an inconvenient forum. The
Borrower agrees that final judgment in any such suit, action or proceeding
brought in such a court shall be enforced in any court of proper jurisdiction by
a suit upon such judgment, provided that service of process in such action, suit
or proceeding shall have been effected upon the Borrower in one of the manners
specified in the following paragraph of this ss.6.7 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 ss.6.7 either (i) by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to it at its address set forth
in ss.6.5 or (ii) by serving a copy thereof upon it at its address set forth in
ss.6.5.
6.8. 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.
6.9. REPLACEMENT NOTE. Upon receipt of an affidavit of an officer of
the Bank as to the loss, theft, destruction or mutilation of any Note or of any
other Loan Document which is not of public record and, in the case of any such
mutilation, upon surrender and cancellation of such Note or other Loan Document,
the Borrower will issue, in lieu thereof, a replacement Note or other Loan
Document in the same principal amount (as to any 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 Notes or otherwise, shall the
amount paid or agreed to be paid to the Bank for the
30
use or the forbearance of the Indebtedness represented by any Note exceed the
maximum permissible under applicable law. In this regard, it is expressly agreed
that it is the intent of the Borrower and the Bank, in the execution, delivery
and acceptance of the Notes, to contract in strict compliance with the laws of
The Commonwealth of Massachusetts. If, under any circumstances whatsoever,
performance or fulfillment of any provision of any of the Notes or any of the
other Loan Documents at the time such provision is to be performed or fulfilled
shall involve exceeding the limit of validity prescribed by applicable law, then
the obligation so to be performed or fulfilled shall be reduced automatically to
the limits of such validity, and if under any circumstances whatsoever the Bank
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced by the Notes and not to the payment
of interest. The provisions of this ss.6.10 shall control every other provision
of this letter agreement and of each 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, ANY NOTE OR ANY OTHER LOAN DOCUMENTS OR OUT OF ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO
ENTER INTO THIS LETTER AGREEMENT AND TO MAKE LOANS AS CONTEMPLATED HEREIN.
VII. DEFINED TERMS
7.1. DEFINITIONS. In addition to terms defined elsewhere in this letter
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Acquisition" - Any purchase or other acquisition made by the Borrower
or any Subsidiary of the Borrower of all or substantially all of the business or
assets of any other corporation or other entity or any line of business of
another corporation or entity, all whether through the acquisition of stock or
assets or otherwise.
"Aggregate Demand Facility Liabilities" - At any time, the sum of (i)
the principal amount of all Demand Loans then outstanding, PLUS (ii) all then
undrawn amounts of letters of credit issued by the Bank for the account of the
Borrower, PLUS (iii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"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 ss.1.6, ss.1.9 or ss.1.10 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
31
upon each demand. A claim by the Bank for all or any part of any additional
amount required to be paid by the Borrower may be made before and/or after the
end of the Interest Period to which such claim relates or during which such
claim has arisen and before and/or after any payment hereunder to which such
claim relates. Each Bank Certificate shall set forth in reasonable detail the
basis for and the calculation of the claim to which it relates.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor
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
Term Loan, then the term "Business Day" shall not include any day on which
dealings are not carried on in the London interbank market or on which banks are
not open for business in London.
"Capital Base" - At any time, the sum of (i) the consolidated Tangible
Net Worth of the Borrower and Subsidiaries then existing PLUS (ii) the principal
amount of Subordinated Debt of the Borrower then outstanding (nothing contained
herein being deemed to authorize the incurrence of any additional Subordinated
Debt).
"Collateral" - All property now or hereafter owned by the Borrower or
in which the Borrower now or hereafter has any interest which is described as
"Collateral" in the Security Agreement.
"Default" - Any event or circumstance which, with the passage of time
or the giving of notice or both, could become an Event of Default.
"Demand Loans" - As defined in ss.1.2.
"Demand Note" - As defined in ss.1.1.
"Earnings Available" - The consolidated Net Income (or consolidated Net
Loss, as the case may be, 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 by the Borrower and/or
any of its Subsidiaries 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
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 consolidated Net Income (or consolidated Net Loss, as
the case may be) for the period involved, but MINUS all cash taxes paid during
such period by the Borrower and/or any of its Subsidiaries.
"ERISA" - The Employee Retirement Income Security Act of 1974, as
amended.
32
"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 ss.5.1.
"Expiration Date" - October 13, 2000.
"FDA" - The United States Food and Drug Administration or any successor
agency.
"Floating Rate" - As defined in ss.1.6.
"Floating Rate Term 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 Term 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" - The total of all obligations of a Person, whether
current or long-term, senior or subordinated, which in accordance with generally
accepted accounting principles would be included as liabilities upon such
Person's balance sheet at the date as of which Indebtedness is to be determined,
and shall also include guaranties, endorsements (other than for collection in
the ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Interest Payment Date" - As to each LIBOR Term Loan, the Interest
Payment Date will be the last day of Interest Period applicable to such LIBOR
Term Loan.
"Interest Period" - As to each LIBOR Term Loan, the period commencing
with the date of the making of such LIBOR Term Loan and ending three months
thereafter; 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.
33
"LIBOR" - With respect to each Interest Period for a LIBOR Term Loan,
that rate per annum (rounded upward, if necessary, to the nearest 1/32nd of one
percent) which represents the offered rate for deposits in U.S. Dollars, for a
period of time comparable to such Interest Period, which appears on the Telerate
page 3750 as of 11:00 a.m. (London time) on that day that is two (2) London
Banking Days preceding the first day of such Interest Period; provided, however,
that if the rate described above does not appear on the Telerate System on any
applicable interest determination date, LIBOR for such Interest Period shall be
the rate (rounded upwards as described above, if necessary) for deposits in
dollars for a period substantially equal to such Interest Period shown on the
Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that
service for the purpose of displaying such rates), as of 11:00 a.m. (London
Time), on that day that is two (2) London Banking Days prior to the beginning of
such Interest Period. "London Banking Day" shall mean any date on which
commercial banks are open for business in London. If both the Telerate and
Reuters systems are unavailable, then LIBOR for any Interest Period will be
determined on the basis of the offered rates for deposits in U.S. Dollars for a
period of time comparable to such Interest Period which are offered by four
major banks in the London interbank market at approximately 11:00 a.m., London
time, on that day that is two (2) London Banking Days preceding the first day of
such Interest Period, as selected by the Bank. The principal London office of
each of four major London banks will be requested to provide a quotation of its
U.S. Dollar deposit offered rate. If at least two such quotations are provided,
the rate for that date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for that date will be
determined on the basis of the rates quoted for loans in U.S. Dollars to leading
European banks for a period of time comparable to such Interest Period offered
by major banks in New York City at approximately 11:00 a.m., New York City time,
on that day that is two London Banking Days preceding the first day of such
Interest Period. In the event that the Bank is unable to obtain any such
quotation as provided above, it will be deemed that LIBOR for the proposed
Interest Period cannot be determined. The Bank shall give prompt notice to the
Borrower of LIBOR as determined for each LIBOR Term Loan and such notice shall
be deemed conclusively correct, absent manifest error.
"LIBOR Interest Rate" - For any Interest Period, an interest rate per
annum, expressed as a percentage, determined by the Bank pursuant to the
following formula:
* LIR = LIBOR + 2.5
-----------
[1.00 - RR]
Where LIR = LIBOR Interest Rate
LIBOR = See definition of LIBOR
RR = Reserve Rate
*LIR to be rounded upwards to the next higher 1/32 of 1%.
The LIBOR Interest Rate will be adjusted during any Interest Period to reflect
any change in the Reserve Rate during such Interest Period.
"LIBOR Term Loan" - All or any portion of a Term Loan which bears
interest at a LIBOR Interest Rate.
34
"Loan" - Any Demand Loan or any Term Loan.
"Loan Documents" - Each of this letter agreement, the Demand Note, the
Tranche A Term Note, the Tranche B Term Note, the Tranche C Term Note, the
Security Agreement and each other instrument, document or agreement evidencing,
securing, guaranteeing or relating in any way to any of the Loans or to any of
the letters of credit issued hereunder, all whether now existing or hereafter
arising or entered into.
"Maximum Demand Loan Amount" - At any date as of which same is to be
determined, the amount by which (x) $3,000,000 exceeds (y) the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower PLUS (ii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Net Income" (or "Net Loss") - The book net income (or book net loss,
as the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, cash-equivalents, readily-marketable securities and Receivables (less an
allowance for bad debt consistent with the Borrower's prior experience).
"Notes" - Collectively, the Demand Note, the Tranche A Term Note, the
Tranche B Term Note and the Tranche C Term Note.
"Obligations" - All Indebtedness, covenants, agreements, liabilities
and obligations, now existing or hereafter arising, made by the Borrower with or
for the benefit of the Bank or owed by the Borrower to the Bank in any capacity.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Acquisition" - Any Acquisition hereafter made by the
Borrower which meets all of the following criteria: (1) the Person so acquired
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) the consideration paid or
payable for such Acquisition by the Borrower must consist solely of capital
stock of the Borrower; (4) the aggregate number of shares of capital stock of
the Borrower issued or transferred as such consideration (computed on a fully
diluted and converted basis) for any one or more Acquisitions during the term of
this letter agreement will not exceed 20% of the total number of shares of
capital stock of the Borrower outstanding at the date of this letter agreement
(computed on a fully diluted and converted basis); (5) at the time of each such
Acquisition and after giving effect thereto there shall be no Default or Event
of Default, with compliance with each of ss.3.7
35
and ss.3.8 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
ss.3.9 being measured for this purpose as at the then most recent fiscal
quarter-end, giving effect to such acquisition as if it had occurred at the
beginning of the 12-month period ending at said fiscal quarter-end; and (6)
prior to such Acquisition the Borrower provides the Bank with projections
reasonably satisfactory to the Bank showing that the Borrower (giving effect to
such Acquisition) will remain in compliance with each of ss.3.7, ss.3.8 and
ss.3.9 during the fiscal year in which sucH Acquisition takes place and during
the immediately following fiscal year.
"Person" - An individual, corporation, limited liability company,
partnership, limited partnership, 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.
"Prior Note" - As defined in ss.1.1.
"Qualifying Equipment" - Tangible equipment purchased by the Borrower
for use in the Borrower's business which meets all of the following criteria:
(i) such equipment consists of one of the items shown on the Equipment and
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, and (ii)
the Bank has a fully perfected first security interest in such equipment.
"Qualifying Leasehold Improvements" - Fixtures and leasehold
improvements purchased by the Borrower which meet all of the following criteria:
(i) such fixtures and leasehold improvements consist of one or more of the items
shown on the Equipment and Improvements List heretofore delivered by the
Borrower to the Bank or have otherwise been approved by the Bank for use in
supporting a Term Loan, and (ii) the Bank has a fully perfected first security
interest in each such item (subject to the interest of the owner of the
Borrower's premises, as described in ss.1.4 above).
"Receivables" - All of the Borrower's accounts and accounts receivable
for goods sold or 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 Term Loans. The LIBOR Interest Rate shall be adjusted automatically on
and as of the effective date of any change in the Reserve Rate.
"Security Agreement" - As defined in ss.1.1.
36
"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 and (ii) any
assets representing amounts due from any officer, employee or other affiliate 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).
"Term Loans" - Collectively, the Tranche A Term Loans, the Tranche B
Term Loans and the Tranche C Term Loans.
"Term Notes" - Collectively, the Tranche A Term Note, the Tranche B
Term Note and the Tranche C Term Note.
"Total Liabilities" - All Indebtedness of the Borrower and/or any
Subsidiary of the Borrower (secured or unsecured, senior or subordinated) which
would properly be included in liabilities shown on a balance sheet of the
Borrower prepared in accordance with generally accepted accounting principles.
"Tranche" - Each of Tranche A, Tranche B and Tranche C, as applicable.
"Tranche A" - The facility for Tranche A Term Loans established by
ss.1.4.
"Tranche A Term Loans" - As defined in ss.1.4.
"Tranche A Term Note" - As defined in ss.1.1.
"Tranche B" - The facility for Tranche B Term Loans established by
ss.1.4.
"Tranche B Term Loans" - As defined in ss.1.4.
"Tranche B Term Note" - As defined in ss.1.1.
"Tranche C" - The facility for Tranche C Term Loans established by
ss.1.4.
"Tranche C Term Loans" - As defined in ss.1.4.
37
"Tranche C Term Note" - As defined in ss.1.1.
"Unencumbered Cash Balance" - At any time, the total of all cash,
cash-equivalents and readily-marketable securities of the Borrower which are not
subject to any pledge, lien, encumbrance or other restriction.
Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any defined term
used in the singular preceded by "any" shall be taken to indicate any number of
the members of the relevant class.
38
This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
ABIOMED, INC.
By
-------------------------------
Name:
Title:
Accepted and agreed:
FLEET NATIONAL BANK
By
--------------------------------
Name:
Title:
39
DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified; Subsidiaries
Item 2.1(b) Stock ownership
Item 2.1(e) Litigation
Item 2.1(j) Collateral locations of Borrower; Record owners of premises
where Collateral is located
Item 2.1(k) Claims regarding intellectual property
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 4.6 Existing Investments; Investment Policy
Item 5.1(m) Permitted 50% Stockholders