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EXHIBIT 10.40
LOAN AGREEMENT
AMONG
GENOME THERAPEUTICS CORP.,
COLLABORATIVE SECURITIES CORP.
AND
THE SUMITOMO BANK, LIMITED
JULY 31, 1997
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TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS 1
Section 1.1. Definitional Provisions 1
ARTICLE II. LOAN 1
Section 2.1. Term Note 1
Section 2.2. Use of Proceeds 4
Section 2.3. Payments 4
Section 2.4. Prepayments 5
Section 2.5. Indemnification; Increased Costs 5
Section 2.6. Investment Account and Custodian Account 7
Section 2.7. Change In Legality 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES 8
Section 3.1. Organization 8
Section 3.2. Power, Authority, Consents 8
Section 3.3. No Violation of Law or Agreements 9
Section 3.4. Due Execution, Validity, Enforceability 9
Section 3.5. Judgments, Actions, Proceedings 9
Section 3.6. No Defaults, Compliance With Laws 9
Section 3.7. No Materially Adverse Contracts, Etc. 10
Section 3.8. Financial Statements. 10
Section 3.9. Title to Properties; Leases 11
Section 3.10. Priority of Liens 11
Section 3.11. Patents, Copyrights, Licenses, Etc 11
Section 3.12. Tax Returns 11
Section 3.13. Regulation U; Margin Stock 11
Section 3.14. Full Disclosure 12
Section 3.15. ERISA 12
Section 3.16. Environmental Compliance 12
Section 3.17. Other Regulations 14
Section 3.18. Compliance with Securities Laws 14
Section 3.19. Solvency 14
Section 3.20. Subsidiaries or Affiliates 14
Section 3.21. Pending Litigation 14
Section 3.22. Compliance with Investment Policy 14
Section 3.23. Nuclear Regulatory Compliance 14
ARTICLE IV. CONDITIONS PRECEDENT 14
Section 4.1. Conditions Precedent to the Effectiveness
of this Agreement 14
ARTICLE V. AFFIRMATIVE COVENANTS 16
Section 5.1 Books and Records 16
Section 5.2. Inspections and Audits 16
Section 5.3. Perform Obligations 16
Section 5.4. Fees and Expenses 17
Section 5.5. Maintenance of Existence; Conduct of Business 17
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PAGE
Section 5.6. Insurance 17
Section 5.7. Certain Taxes 18
Section 5.8. Use of Proceeds 18
Section 5.9. Further Assurances With Respect To Accounts 19
Section 5.10. Financial Covenants 19
Section 5.11 Deposits Into Custodian Account 19
ARTICLE VI. DELIVERY OF FINANCIAL REPORTS,DOCUMENTS AND OTHER INFORMATION 20
Section 6.1. Annual Financial Statements 20
Section 6.2. Quarterly Financial Statements 20
Section 6.3. 10Q and 10K Filings 20
Section 6.4. ash and Covenant Reports 21
Section 6.5. Other Information 21
Section 6.6. No Default Certificate 21
Section 6.7. Notices 21
ARTICLE VII. NEGATIVE COVENANTS 22
Section 7.1. Liens 22
Section 7.2. Changes in Business; Merger or Consolidation;
Disposition of Assets 23
Section 7.3. Change of Office Address 24
Section 7.4. Violation of Agreement 24
ARTICLE VIII. EVENTS OF DEFAULT 24
Section 8.1. Events of Default 24
ARTICLE IX. MISCELLANEOUS PROVISIONS 26
Section 9.1. Indemnity; Additional Fees 26
Section 9.2. Survival of Agreements and Representations 27
Section 9.3. Modifications, Consents and Waivers 27
Section 9.4. Entire Agreement 27
Section 9.5. Remedies Cumulative 27
Section 9.6. Further Assurances 27
Section 9.7. Notices 27
Section 9.8. Construction; Governing Law 29
Section 9.9. Waiver of Jury Trial 29
Section 9.10. Jurisdiction 29
Section 9.11. Relationship of the Borrowers and the Bank 30
Section 9.12. Severability 30
Section 9.13. Ending Effect; Assignment 30
Section 9.14. Counterparts 31
Section 9.15. Joint and Several Obligations 31
APPENDIX A TO LOAN AGREEMENT -- DEFINITIONS A-1
Exhibit 2.1 Form of Note
Exhibit 2.1(a) Form of Borrower's Request
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PAGE
Exhibit 2.6 Form of Irrevocable Instructions and Power of Attorney
Schedule 3.5 Judgments, Actions, Proceedings
Schedule 3.9 Title to Properties; Leases
Schedule 3.11 Pending Litigation on Intellectual Property Rights
Schedule 3.15 ERISA
Schedule 3.16 Environmental Compliance
Schedule 3.20 Subsidiary or Affiliate
Schedule 3.21 Pending Litigation Claims
Schedule 5.6 Insurance In Effect
Schedule 8.1(j) Borrowers' Cash Investment Policies
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LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of July 31, 1997 by
and among GENOME THERAPEUTICS CORP., a Massachusetts corporation ("Genome"),
COLLABORATIVE SECURITIES CORP., a Massachusetts corporation ("Collaborative",
and jointly and severally together with Genome, the "Borrowers"), and THE
SUMITOMO BANK, LIMITED, a Japanese banking corporation (the "Bank").
The Borrowers and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONAL PROVISIONS.
(a) Capitalized terms used in this Agreement and defined in APPENDIX A
hereto, which APPENDIX A is attached to this Agreement and by this reference
made a part hereof, shall have the respective meanings specified in such
APPENDIX A.
(a) All terms defined in APPENDIX A shall have such defined meanings when
used in any certificate or any other document made or delivered pursuant to this
Agreement unless otherwise defined in such other document or certificate.
(a) All accounting terms not specifically defined in this Agreement or in
APPENDIX A hereto shall be construed in accordance with generally accepted
accounting principles as in effect in the United States of America on the date
of this Agreement.
ARTICLE II
LOAN
SECTION 2.1 TERM NOTE.
(a) Subject to the terms and conditions of this Agreement, the Bank shall
loan to the Borrowers from time to time between the Closing Date through the
Advance Termination Date upon three (3) Business Days prior written notice to
the Bank in the form of EXHIBIT 2.1(a) hereto, an aggregate principal amount of
up to Six Million Dollars ($6,000,000) (the "Loan"). The Bank will make an
initial Disbursement to the Borrowers on the Closing Date in the amount of Two
Million Five Hundred Thousand Dollars ($2,500,000). The Borrowers may request
additional Disbursements hereunder following the Closing Date in principal
amounts of not less than $500,000, provided that the aggregate of the principal
amount of all Disbursements (including the one being requested) shall not exceed
$6,000,000. The obligation of the Borrowers to repay the Loan and to pay
interest and all other costs and charges payable hereunder is joint and several
and will be evidenced by a promissory note in the form of EXHIBIT 2.1 (the
"Note") dated the Closing Date and payable to the order of the Bank in the
original principal amount of Six Million Dollars ($6,000,000).
(a) The Loan shall bear interest, and the Borrowers shall pay interest on
the outstanding principal balance of the Loan from the date of each Disbursement
to the Borrowers until the Maturity Date, at the following rates per annum:
(i) with respect to any portion of such Loan which is a Eurodollar Rate
Loan Portion, interest at a rate per annum on such Eurodollar Rate Loan
Portion equal (at all times during each applicable Interest Period) to the
Reserve Adjusted Eurodollar Rate for such applicable Interest Period plus
the Applicable Margin; and
(i) with respect to each portion of such Loan which is not a Eurodollar
Rate Loan Portion, interest at a rate per annum on each such Loan Portion
equal to the Prime Rate.
Except for the initial Disbursement to be made hereunder on the Closing
Date, not later than 12:00 noon (Chicago time) on the third Business Day prior
to the funding of the Loan, the Borrowers shall provide written notice
("Eurodollar Notice") to the Bank of the dollar amount of any Disbursement which
will be a Eurodollar Rate Loan Portion for the initial Interest Period. In the
event that the Borrowers fail to provide the Eurodollar Notice in accordance
with the preceding sentence or if an Event of Default has occurred and is
continuing , then the outstanding principal balance of the Loan shall bear
interest at the Prime Rate until such time as Borrowers have given an Election
Notice in accordance with Section 2.1(c) below. Computations of interest will be
on the basis of a 360 day year, for actual days elapsed with respect to interest
accruing.
(a) The Borrowers, upon written notice (the "Election Notice") given to the
Bank by not later than 12:00 noon (Chicago time) on the third Business Day prior
to the expiration of the Interest Period for any Eurodollar Rate Loan Portion in
the case of any continuation of a Eurodollar Rate Loan Portion as such, and not
later than 12:00 Noon (Chicago time) on the conversion date in the case of any
conversion into a Prime Rate Loan Portion, may elect: (1) to continue such
portion or any part thereof as a Eurodollar
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Rate Loan Portion for the next succeeding Interest Period; or (2) to convert
such portion or any part thereof to a Prime Rate Loan Portion; or (3) a
combination thereof, effective the last day of such Interest Period.
At the end of each applicable Interest Period, in the absence
of a timely effective Election Notice to continue the applicable Loan Portion as
a Eurodollar Rate Loan Portion, such Loan Portion shall bear interest at the
Prime Rate. Notwithstanding anything herein to the contrary, if at the end of an
applicable Interest Period for a Eurodollar Rate Loan Portion, an Event of
Default has occurred and is continuing, then the Borrower shall have no right to
give an Election Notice, and the Bank may ignore any attempt by the Borrower to
give an Election Notice.
(a) An Election Notice with respect to any Eurodollar Rate Loan Portion
shall contain the following information:
(i) the dollar amount (if any) which is to be continued as a Eurodollar
Rate Loan Portion; and
(i) with respect to the dollar amount to be continued as a Eurodollar
Rate Loan Portion, the new Interest Period.
Notwithstanding anything herein to the contrary, the outstanding Loan
balance may not at any time be comprised of more than five (5) Eurodollar Rate
Loan Portions at the same time without the Bank's consent, which shall be in the
Bank's sole and absolute discretion. Once received by the Bank, any Election
Notice will be irrevocable for the applicable Eurodollar Rate Loan Portion for
the applicable Interest Period.
The Borrowers hereby authorize the Bank to record on schedule(s)
annexed to the Note (a) the date and amount of each Loan Portion; (b) the term
of the Interest Period for each Eurodollar Rate Loan Portion; (c) the interest
rate or rates for each Prime Rate Loan Portion and the effective date(s) of all
changes in such rates; and (d) the date and amount of each principal and
interest payment on each Loan Portion made by the Borrowers, and the Borrowers
agree that all such notations shall constitute PRIMA FACIE evidence of the
matters noted absent manifest error, provided that the failure of the Bank to
record such information shall not reduce or affect the obligations of the
Borrowers hereunder or under the Note.
(a) In the event that on the date for determining the Reserve Adjusted
Eurodollar Rate to be paid by the Borrowers in respect of any Interest Period,
the Bank determines in good faith (which determination will be conclusive and
binding on the Borrower) that
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by reason of circumstances affecting the London Interbank Eurodollar market,
either Eurodollar rates are not offered in the London Interbank Eurodollar
market or adequate and fair means do not exist for ascertaining the Reserve
Adjusted Eurodollar Rate for such Interest Period, the Bank shall promptly give
to the Borrowers telephonic notice (confirmed as soon as practicable in writing)
of such determination. During the existence of such circumstances, any existing
Eurodollar Rate Loan Portion in respect of which such circumstances exist will
convert to a Prime Rate Loan Portion at the end of the applicable Interest
Period.
SECTION 2.2 USE OF PROCEEDS. The proceeds of the Loan shall be used by the
Borrowers for the purpose of funding or replenishing working capital reserves,
funding capital expenditures for enhancement of research and development
facilities and acquisition of laboratory equipment and for general corporate
purposes.
SECTION 2.3 PAYMENTS.
(a) The Borrowers will pay interest hereunder as set forth in Section 2.1.
The Borrowers will repay the principal amount of the Loan in forty-eight (48)
equal consecutive monthly installments of principal (each installment being in
an amount sufficient to amortize the outstanding principal balance of the Loan
over a period of forty-eight (48) months), payable on the first Business Day of
each calendar month commencing with the first payment due on July 1, 1998 and
continuing until the Maturity Date, on which date the Borrowers shall make a
final payment in an amount equal to all the then unpaid principal of the Loan
and all unpaid interest thereon. Notwithstanding the foregoing, repayment of the
Loan and all accrued and unpaid interest thereon may be accelerated upon the
occurrence and continuance of an Event of Default.
(a) The Borrowers shall make all payments hereunder in U.S. Dollars and in
immediately available funds at the Bank's office at 233 S. Wacker Drive, Suite
5400, Chicago, Illinois 60606 (or at such other office as the Bank may notify
the Borrowers in writing) via wire transfer to Sumitomo Bank, Limited, Chicago
Branch, ABA 071001850, through the Federal Reserve Bank of Chicago, Reference:
Genome Therapeutics Corp. Payments not made prior to 12:00 noon (Chicago time)
on the date of payment will be deemed paid on the next Business Day. Payments
which fall due on a day which is not a Business Day will be payable on the next
Business Day, with interest to accrue to such date of payment. All payments
hereunder and under the Note shall be made without set-off or counterclaim and
in such amounts as may be necessary in order that all such payments shall not be
less than the amounts otherwise specified to be paid under this Agreement or the
Note, as the case may be.
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(a) Any installment of interest only or of principal and interest paid more
than five (5) days late or any other amount payable hereunder which is not paid
when due, will bear (and the Borrowers shall pay) interest (to the extent
permitted by law) from such due date until such unpaid amount has been paid in
full (whether before or after judgment) at a rate per annum equal to three and
one-half percent (3.5%) in excess of the rate then applicable to each Loan
Portion until the end of any Interest Period then applicable to such Loan
Portion and thereafter at a rate per annum equal to three and one-half percent
(3.5%) in excess of the Prime Rate ("Default Rate").
(a) In partial consideration for the Bank making the Loan to the Borrowers,
the Borrowers shall pay to Bank: (i) a loan disbursement fee ("Loan Fee") in an
amount equal to one and one-eighth percent (1.125%) of each Disbursement amount
being made, such Loan Fee to be due and payable at the time of funding such
Disbursement, and (ii) during the period that the Bank has any lending
commitment hereunder, a commitment fee ("Commitment Fee") in an amount equal to
one quarter of one percent (0.25%) per annum of any portion of the Loan not
disbursed to the Borrowers, with such Commitment Fee to be due and payable, in
arrears, on the last Business Day of each calendar quarter and calculated on the
actual daily amount of the undisbursed portion of the Loan, provided that when
any Disbursement occurs, the Commitment Fee which has accrued on the portion of
the unutilized Loan being disbursed shall be credited against the Loan Fee
payable with respect to such Disbursement, and only the net amount of such Loan
Fee shall be payable at the time of such Disbursement. From and after the
Closing Date, Borrowers hereby authorize Bank to deduct and pay any and all Loan
Fees (including such fee for the initial Disbursement made on the Closing Date),
all Commitment Fees and any and all other reasonable fees and expenses of the
Bank from the available proceeds of the Loan.
SECTION 2.4 PREPAYMENTS. Subject to this Section 2.4, the Borrowers may, upon
five (5) Business Days' prior notice to the Bank, prepay the outstanding amount
of the Loan in whole or in part. In the event that the Borrowers prepay or are
required to prepay any Eurodollar Rate Loan Portion by acceleration or otherwise
or fails to draw down or convert to a Eurodollar Rate Loan Portion after giving
notice thereof, the Borrowers agree to reimburse the Bank for its expenses,
funding losses and loss of anticipated profits due to such prepayment or failure
to draw. The Borrowers and the Bank hereby agree that such expenses, funding
losses and loss of anticipated profits shall consist of the sum of:
(a) Principal amount of each such Eurodollar Rate Loan Portion times
(([number of days between the date of prepayment
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and the last day in the applicable Interest Period] divided by 360), times the
applicable Interest Differential); plus
(a) All actual out-of-pocket expenses (other than those taken into account
in the calculation of the Interest Differential) incurred by the Bank (excluding
allocations of any expense internal to the Bank) and reasonably attributable to
such payment or prepayment.
Notwithstanding the foregoing, no prepayment fee shall be payable (and no credit
or rebate shall be required) if the product of the foregoing formula is not a
positive number. The Loan is not in a nature of a revolving loan; therefore,
amounts prepaid or repaid under the Note may not be reborrowed.
SECTION 2.5 INDEMNIFICATION; INCREASED COSTS. If after the date of this
Agreement the Bank reasonably determines that any Regulatory Change, or
compliance by the Bank with any request or directive (whether or not having the
force of law) of any governmental authority, central bank or comparable agency
charged with the interpretation or administration of any applicable law, rule or
regulation which is effective or issued after the date hereof:
(a) Subjects the Bank to any tax, duty or other charge with respect to the
Loan or the Note, or changes the basis of taxation of payments to the Bank of
the principal of or interest on the Loan or any other amounts due under this
Agreement in respect of the Loan except for changes in the rate of tax on the
overall net income of the Bank or its lending office imposed by the Commonwealth
of Massachusetts or the jurisdictions in which the Bank's principal executive
office or applicable lending office is located) (such non-excluded amounts,
"Taxes"); or
(a) Imposes, modifies or deems applicable any reserve (including, without
limitation, any reserve imposed by the Board of Governors of the Federal Reserve
System), special deposit, liquidity, capital maintenance, capital adequacy,
capital ratio (including, but without limitation thereto, any request by or
requirement of any regulatory body or official which affects the manner in which
the Bank allocates capital resources to its obligations hereunder), for the
account of, or credit extended by, the Bank or imposes on the Bank any other
condition affecting the Loan, or the Note;
and the result of any of the foregoing is to (A) impose a cost on or increase
the cost to the Bank of making or maintaining the Loan, or (B) cause an increase
in any capital requirement arising out of the making or maintenance of the Loan
or any obligation to the Borrower hereunder or (C) reduce the amount of any sum
received or
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receivable by the Bank under this Agreement or under the Note, by an amount
deemed by the Bank to be material, then, within ten (10) days after demand by
the Bank, the Borrowers shall pay for the account of the Bank such additional
amount or amounts as will compensate the Bank for such increased cost or
reduction as such cost or reduction is incurred by the Bank. If the Bank makes
any claim for compensation under this Section 2.5, the Borrowers may immediately
elect by written notice (or telephonic notice confirmed as soon as practicable
in writing) to the Bank to prepay the Loan (but subject to payment of any other
amounts due under Section 2.4 and this Section 2.5, including any increased cost
or reduction incurred through the date of such prepayment or conversion). The
Bank shall promptly notify the Borrowers of any event of which it has knowledge,
occurring after the date hereof, which will entitle the Bank to compensation
pursuant to this Section 2.5. The Bank shall provide to the Borrowers a
certificate claiming compensation under this Section 2.5, setting forth the
additional amount or amounts to be paid to it hereunder and showing in
reasonable detail the Bank's calculation thereof which shall be presumed to be
correct absent manifest error. In determining such amount, the Bank may use any
reasonable averaging and attribution methods. The Bank shall exercise reasonable
efforts to promptly provide the Borrowers with notice of the imposition, or
overtly threatened exercise of, any Regulatory Change set forth in this Section
2.5 of which the Bank has actual knowledge, provided, however, that the failure
by the Bank to so provide such notice will not relieve the Borrowers of any of
their obligations hereunder.
The Bank agrees that it will use reasonable efforts to reduce or
eliminate any claim for compensation pursuant to this Section 2.5, including
designating a different lending office for the Loans, if such designation will
avoid the need for or reduce the amount of any such compensation, PROVIDED that
the Bank will not be obligated to take any actions that would, in the sole
opinion of the Bank, be disadvantageous to the Bank in any material respect (it
being understood that the incurrence of any unreimbursed cost or expense by the
Bank that would not have been incurred but for such action is material).
SECTION 2.6 INVESTMENT ACCOUNT AND CUSTODIAN ACCOUNT.
(a) Prior to the occurrence of a Trigger Event, the Borrowers shall hold at
all times Cash and Cash Equivalents, which are not subject to any Lien or claim
of any Person other than the Bank, in an amount not less than an amount equal to
the then outstanding principal balance due under the Loan plus three (3) months
interest thereon at the then applicable rate provided for herein, in a custodial
account (the "Investment Account") with an institution approved by the Bank
(such institution being referred to herein as the "Custodian"). The initial
Custodian will be Oppenheimer & Co.,
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Inc. The amounts held in the Investment Account shall be subject to the
investment control of the Borrowers. The Custodian in respect of the Investment
Account cannot be changed or a new Investment Account opened without the Bank's
prior written approval, which approval shall not be unreasonably withheld. The
Borrowers shall deliver to the Custodian the Irrevocable Instructions and Power
of Attorney in the form of EXHIBIT 2.6 (the "Irrevocable Instructions and Power
of Attorney").
(a) On or before the Closing Date, the Borrowers, for the benefit and on
behalf of the Bank, shall establish and maintain or cause to be established and
maintained in the name of the Borrowers an account (the "Custodian Account")
with Sumitomo Bank of New York Trust Company (the "Bailee") under the Custodian
Agreement and the Collateral Bailment Agreement. Pursuant to the Restricted
Account and Security Agreement by and between the Bank and the Borrowers, the
Borrowers have granted to the Bank a security interest in all of its right,
title and interest in the Custodian Account, all deposits or investments held
therein and all proceeds thereof to secure payment and performance of the
Borrowers' obligations hereunder. On or before the Closing Date, the Borrowers
shall cause to be deposited in the Custodian Account the sum of One Thousand
Dollars ($1,000). So long as the Borrowers are indebted to the Bank hereunder
and until payment in full of the Note and the Borrowers' full and complete
performance of its obligations hereunder, the Custodian Account shall at all
times have a Restricted Account Balance of not less than One Thousand Dollars
($1,000). The terms and conditions of the Restricted Account and Security
Agreement, the Collateral Bailment Agreement, and the Custodian Agreement are
incorporated herein by reference.
SECTION 2.7 CHANGE IN LEGALITY.
(a) In the event that at any time the Bank shall have reasonably determined
(which determination shall be presumed to be correct until the contrary shall
have been established) that by reason of a change in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
interpretation thereof affecting the Bank or the Eurodollar market and
applicable to any Eurodollar Rate Loan Portion, the making or continuation of a
loan at the applicable Reserve Adjusted Eurodollar Rate plus the Applicable
Margin has become unlawful, the Bank shall forthwith give written notice (or
telephonic notice, confirmed as soon as practicable in writing) to the Borrowers
and the obligation of the Bank to make or maintain such Eurodollar Rate Portion
at the applicable Reserve Adjusted Eurodollar Rate plus the Applicable Margin
shall terminate and the Borrowers shall forthwith upon receipt of notice of such
determination prepay such Eurodollar Rate Loan Portion without premium or
penalty (subject to Sections 2.4 and 2.5), together with all interest accrued on
the amount
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prepaid to the date of prepayment. A certificate, setting forth (x) each event
which the Bank shall have determined makes the continuation of such Eurodollar
Rate Loan Portion unlawful and (y) any additional amounts payable by the
Borrowers under Sections 2.4 and 2.5 (and the basis therefor and the Bank's
computation thereof) upon prepayment of such Eurodollar Rate Loan Portion, shall
be furnished to the Borrowers by the Bank and shall be presumed correct absent
manifest error.
(a) In the event that the Borrowers are obligated to prepay a Eurodollar
Rate Loan Portion pursuant to clause (a) of this Section 2.7, the Borrowers
shall have the right, upon written notice (or telephonic notice confirmed as
soon as practicable in writing) to the Bank, in lieu of such prepayment, to
elect to convert such Eurodollar Rate Portion to a Prime Rate Loan Portion,
effective on the date on which such prepayment would otherwise be required to
have been made, provided that on the effective date of conversion the Borrowers
also shall pay all interest accrued on the amount converted to the date of
conversion and such additional amounts, if any, payable by the Borrowers under
Section 2.4 and 2.5, as specified in the certificate furnished the Borrowers
pursuant to said clause (a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of the Borrowers hereby represents and warrants to the Bank that:
SECTION 3.1 ORGANIZATION. It is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts; it has
the power to own its assets, to transact the business in which it is presently
engaged and in which it proposes to be engaged and is duly qualified and in good
standing in each jurisdiction in which the failure to qualify to do business
would materially adversely affect its financial condition and business
operations.
SECTION 3.2 POWER, AUTHORITY, CONSENTS.
(a) It has the power to execute, deliver and to perform its obligations
under the Loan Documents.
(a) It has the power to borrow hereunder and has taken all necessary action
to authorize the borrowing hereunder on the terms and conditions of this
Agreement.
(a) It has taken all necessary corporate action to authorize the execution,
delivery and performance of the Loan Documents.
(a) No consent or approval of any Person, no waiver of any Lien or right of
distraint or other similar right and no consent, license, approval,
authorization or declaration of any governmental authority, bureau or agency is
or will be required in connection with the execution and delivery of the Loan
Documents by it or the performance by it of its obligations thereunder or the
validity, enforcement or priority of the Loan Documents, or any Lien created and
granted thereunder, except such consents as have been obtained and copies of
which have been delivered to the Bank.
SECTION 3.3 NO VIOLATION OF LAW OR AGREEMENTS. The execution and delivery of
the Loan Documents and the performance by it of its obligations thereunder, will
not violate any provision of law and will not conflict with or result in a
breach of any order, writ, injunction, ordinance, resolution, decree, or other
similar document or instrument of any court or governmental authority, bureau or
agency, domestic or foreign, its charter or bylaws or create (with or without
the giving of notice or lapse of time, or both) a default under or breach of any
agreement, bond, note or indenture to which it is a party, or by which it is
bound or any of its properties or assets is affected, or result in the
imposition of any Lien of any nature whatsoever upon any of the properties or
assets owned by or used in connection with its business.
SECTION 3.4 DUE EXECUTION, VALIDITY, ENFORCEABILITY. This Agreement and each of
the other Loan Documents has been, or upon the execution and delivery thereof,
will be, duly executed and delivered by it, and each constitutes, or, upon the
execution and delivery thereof, will constitute, its valid and legally binding
obligation enforceable in accordance with its terms, except to the extent that
the enforcement thereof may be limited by applicable bankruptcy, moratorium,
insolvency, reorganization, or other similar laws or equitable principles
relating to the enforcement of creditors' rights generally.
SECTION 3.5 JUDGMENTS, ACTIONS, PROCEEDINGS. Except as set forth in Schedule
3.5, there are no outstanding judgments, actions (including, without limitation,
derivative actions), suits or proceedings pending before any court or
governmental authority, bureau or agency, having a claim or amount in
controversy that exceeds $100,000 in any one instance or $500,000 in the
aggregate at any one time with respect to or, to the best of its knowledge,
threatened against or affecting either of the Borrowers.
SECTION 3.6 NO DEFAULTS, COMPLIANCE WITH LAWS. It is not in material default
under any agreement, ordinance, resolution, decree, bond, note, indenture, order
or judgment to which it is a
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party or by which it is bound (including, without limitation, any collaborative
agreements), or its charter documents or bylaws, or any other agreement or other
instrument by which any of the properties or assets owned by it or used in the
conduct of its business is affected or evidencing, guaranteeing or relating to
any outstanding indebtedness, liability or obligation for borrowed money or
lease obligations, which default could have a material adverse effect on its
business, operations, financial condition or properties, or on its ability to
perform its obligations under the Loan Documents. It has complied and is in
compliance in all material respects with all applicable federal, state, local
and other laws, ordinances and regulations, including, without limitation, the
statutes, rules and regulations of the Food and Drug Administration and the
Nuclear Regulatory Commission, the non-compliance with which could have a
material adverse effect on its business, operations, financial condition or
properties, or on its ability of to perform its obligations under the Loan
Documents, and it has not received notice and has no knowledge of any violations
or alleged violations by either of the Borrowers of any of the foregoing.
SECTION 3.7 NO MATERIALLY ADVERSE CONTRACTS, ETC. It is not subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has, or is expected in the judgment of its officers to
have a materially adverse effect on its business, assets or financial condition.
It is understood that the preceding sentence shall not apply to government rules
and regulations which affect the Borrowers in the same general manner as they do
other companies similar to Borrowers such as general tax laws and rules
regulating the sale of pharmaceuticals in countries throughout the world. It is
not a party to any contract or agreement that has or is expected, in the
judgment of its officers, to have any materially adverse effect on its business.
SECTION 3.8 FINANCIAL STATEMENTS.
(a) It has furnished to the Bank its most recent audited Financial
Statements and all subsequent unaudited Financial Statements which are available
to the public. Each of the Financial Statements is correct and complete in all
material respects and presents fairly its financial condition, at its date or
for the respective period, and has been prepared in accordance with generally
accepted accounting principles.
(a) It has no material obligation, liability or commitment, direct or
contingent, which is not reflected in the Financial Statements or in any notes
thereto in accordance with generally accepted accounting principles.
(a) There has been no material adverse change in its financial position
or operations since the date of the Financial Statement for the fiscal quarter
ending March 1, 1997.
(a) Its fiscal year is the twelve (12) month period ending on August 31
in each year.
SECTION 3.9 TITLE TO PROPERTIES; LEASES. Except as disclosed in the footnotes to
the Financial Statements or on Schedule 3.9, it owns all of the assets reflected
in the most recent balance sheet or acquired since that date (except property
and assets leased, sold or otherwise disposed of in the ordinary course of
business since that date), subject to no rights of others, including any
mortgages, ordinary or capital leases, conditional sales agreements, title
retention agreements, liens or other encumbrances.
SECTION 3.10 PRIORITY OF LIENS. The Liens which have been or will be created and
granted by the Loan Documents upon the execution and delivery thereof
constitute, or will constitute upon such execution and delivery, valid first
priority Liens on the properties and assets covered by the Loan Documents,
subject to no other liens.
SECTION 3.11 PATENTS, COPYRIGHTS, LICENSES, ETC. It owns or has a valid right to
use all patents, copyrights, trademarks, trade names, licenses, franchises, and
rights in respect of the foregoing ("Intellectual Property Rights"), adequate
for the conduct of its business substantially as now conducted without conflict
with any rights of others, and there are no suits or claims for infringement
with respect to the Intellectual Property Rights except as set forth in Schedule
3.11. Schedule 3.11 lists all pending suits or claims for infringement with
respect to Intellectual Property Rights.
SECTION 3.12 TAX RETURNS.
(a) It has filed all federal and state income tax returns and all other tax
returns, reports, and declarations required to be filed by it and has not failed
to pay any taxes, or interest and penalties relating thereto, on or before the
due dates thereof except for returns, taxes, interest or penalties with respect
to which it has duly filed extensions or is contesting the validity thereof by
appropriate legal proceedings diligently conducted in good faith. No audits of
its federal income tax returns are pending.
(a) Except to the extent that reserves therefor are reflected in the
Financial Statements, (i) it has no material federal, state or local tax
liabilities due or to become due for any tax year ended on or prior to the date
of the most recent balance sheet included in the Financial Statements, whether
incurred in respect of or measured by the income of such entity, which are not
properly reflected in such balance sheet, and (ii) it has no material claims
pending or, to its knowledge proposed or threatened against it for past federal,
state or local taxes.
SECTION 3.13 REGULATION U; MARGIN STOCK. No part of the proceeds from the Loan
will be used directly or indirectly for the purpose of purchasing or carrying,
or for payment in full or in part of indebtedness which was incurred for the
purposes of purchasing or carrying, any margin stock as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II, Part 221. It does not own margin stock.
SECTION 3.14 FULL DISCLOSURE. Neither the Financial Statements nor any
certificate, opinion, or any other statement made or furnished in writing to
Bank by or on behalf of the Borrower in connection with this Agreement or the
transactions contemplated herein, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements
contained therein or herein, in light of the circumstances under which they were
made, not misleading.
SECTION 3.15 ERISA.
(a) With the exceptions of its 401(K) plans, certain other employee benefit
plans, all as set forth in Schedule 3.15, none of its or any of its Affiliates
has pension or other employee benefit plans which are subject to the provisions
of Title IV of ERISA (any such plans which have been or may hereafter be adopted
or assumed by it are hereinafter referred to individually as a "Plan" and,
collectively, as the "Plans"). In connection with the Plans, it does not have,
or know of any likely event which will give rise to, any direct or contingent
material liabilities of it to the Pension Benefit Guaranty Corporation ("PBGC"),
the Department of Labor or the Internal Revenue Service ("IRS").
(a) Neither it nor any of its Affiliates is a participating employer in any
Plan under which more than one employer makes contributions as described in
Sections 4063 and 4064 of ERISA.
(a) Neither it nor any of its Affiliates is a participating employer in a
multiemployer plan as defined in Section 4001(a) of ERISA, which participation
could give rise to material withdrawal liability on the part of the Borrower, as
the case may be under Subtitle E of Title IV of ERISA.
For purposes of this Agreement, all references to "ERISA" shall be
deemed to refer to the Employee Retirement Income Security
14
Act of 1974 (including any sections of the Code) as heretofore amended and as it
may hereafter be amended or modified, and all regulations promulgated
thereunder, and all references to the Borrower in this Section 3.15, or in any
other Section of this Agreement relating to ERISA, shall be deemed to refer to
the Borrower and all other entities which are part of a Controlled Group with
respect to the Borrower.
SECTION 3.16 ENVIRONMENTAL COMPLIANCE. Except as set forth in Schedule 3.16, it
has taken all necessary steps to comply with Environmental Laws (as hereinafter
defined) and has determined that:
(a) It is not in violation, or alleged violation, of any judgment, decree,
order, law, license, rule or regulation pertaining to environmental matters,
including without limitation, those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, each as amended as of the date
hereof, or any other federal, state or local statute, regulation, ordinance,
order or decree relating to health, safety or the environment (hereinafter
"Environmental Laws"), which violation would have a material adverse effect on
its business, assets or financial condition;
(a) It has not received notice from any third party including, without
limitation, any federal, state or local governmental authority, (i) that it has
been identified by the United States Environmental Protection Agency ("EPA") as
a potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that
any hazardous waste, as defined by 42 U.S.C. ss. 9601(5), any hazardous
substances as defined by 42 U.S.C. ss. 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. ss.9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any Environmental Laws
("Hazardous Substances") which it has generated, transported or disposed of has
been found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that it conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law; or (iii)
that it is or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each case, contingent or
otherwise) arising out of any third party's incurrence of costs, expenses,
losses or damages of any kind whatsoever in connection with the release of
Hazardous Substances;
(a) (i) the properties on which it conducts its business have not been used
for the handling, processing, storage or Disposal of Hazardous Substances except
in accordance with applicable Environmental Laws; (ii) in the course of any
activities conducted by it, no Hazardous Substances have been generated or are
being used on property leased by it on which it conducts its business except in
accordance with applicable Environmental Laws; (iii) there has been no Release
or threatened Release of Hazardous Substances by it on, upon, into or from the
properties on which it operates its business, which Release would have a
material adverse effect on its business; (iv) to the best of its knowledge,
there have been no Releases on, upon, from or into any real property in the
vicinity of any of the properties on which either of Genome or Collaborative
conducts its business, through soil or groundwater contamination, which may have
come to be located on, and which would have a material adverse effect on its
business; and (v) in addition, any Hazardous Substances that have been generated
by it on the properties on which it conducts its business have been transported
off-site only by carriers having an identification number issued by the EPA,
treated or Disposed of only by treatment or disposal facilities maintaining
valid permits as required under applicable Environmental Laws, which
transporters and facilities have been and are, to the best of its knowledge,
operating in compliance with such permits and applicable Environmental Laws; and
(a) none of the properties on which it conducts its business is or is
expected to be in violation of any applicable environmental clean-up
responsibility law or regulation or environmental restrictive transfer law or
regulation, in regard to which failure to comply would have a material adverse
effect on its business, assets or financial condition.
SECTION 3.17 OTHER REGULATIONS. It is not subject to regulation under the
Investment Company Act of 1940, the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, any state public utilities
code or any federal or state statute or regulations limiting its ability to
incur Indebtedness.
SECTION 3.18 COMPLIANCE WITH SECURITIES LAWS. All offers and sales of its
securities have been made in material compliance with all applicable federal and
state securities laws, including without limitation the Securities Act of 1933
and the Securities Exchange Act of 1934, both as amended.
SECTION 3.19 SOLVENCY. It is solvent and is not the subject of a bankruptcy or
insolvency proceeding.
SECTION 3.20 SUBSIDIARIES OR AFFILIATES. Except for Collaborative being a
wholly-owned subsidiary of Genome and as otherwise set forth on Schedule 3.20,
it does not have any Subsidiary or Affiliate.
SECTION 3.21 PENDING LITIGATION. Except as set forth in Schedule 3.21, there are
no lawsuits or claims pending against it which could have a material adverse
affect on its financial condition or the financial condition of the Borrowers
taken as a whole.
SECTION 3.22 COMPLIANCE WITH INVESTMENT POLICY. It is in compliance with its
"Investment Policy" for investment of Cash and Cash Equivalents (as mandated and
adopted by Genome's and Collaborative's Board of Directors). True and correct
copies of such Investment Policy is attached as Schedule 8.1(j).
SECTION 3.23 NUCLEAR REGULATORY COMPLIANCE. It is in compliance with all rules,
regulations, orders, decrees, findings or other determinations pertaining to
matters regulated, reviewed or overseen by the Nuclear Regulatory Commission.
Upon request by the Bank, it shall furnish reasonable evidence of such
compliance.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT. The
effectiveness of this Agreement and the obligations of the Bank hereunder shall
be subject to the following conditions precedent:
(a) Each of the Borrowers will have executed and delivered to the Bank the
Note, the Collateral Bailment Agreement, the Restricted Account and Security
Agreement, the Irrevocable Instructions and Power of Attorney, the Custodian
Agreement, the Financing Statement and an original counterpart of this
Agreement.
(a) The Bailee will have executed and delivered the Collateral Bailment
Agreement, the Custodian Agreement and the Restricted Account and Security
Agreement;
(a) The initial Custodian will have executed and delivered its consent to
the Irrevocable Instructions and Power of Attorney to the Bank;
(a) The Borrowers shall have deposited, in the aggregate, One Thousand
Dollars ($1,000) into the Custodian Account;
(a) Each of the Borrowers will have otherwise fully complied with all of
the terms and conditions of the Loan Documents;
15
(a) Each of the Borrowers will have delivered to the Bank the following, in
form and substance acceptable to the Bank:
(i) a copy of its Articles of Organization certified by the Secretary of
the Commonwealth of the Commonwealth of Massachusetts;
(i) a copy of its by-laws certified by its Clerk;
(i) a copy of resolutions of its Board of Directors authorizing its
execution, delivery and performance of this Agreement, the Note, the Loan
Documents and all instruments and documents provided for herein or
therein, certified by its Clerk;
(i) a good standing certificate for each of the Borrowers, dated as of a
date not more than ten (10) days prior to the Closing Date from the
Secretary of the Commonwealth of the Commonwealth of Massachusetts; and
(i) an incumbency certificate with respect to its officers, certified by
its Clerk.
(a) Counsel of each of the Borrowers will have delivered to the Bank its
favorable legal opinion as to the due organization, existence, qualification to
do business, and good standing of each of Genome and Collaborative, the due
authorization, execution and enforceability of this Agreement and the other Loan
Documents, the absence of pending and threatened litigation, the
non-contravention of other documents, instruments, laws, and regulations, and
such other matters as the Bank may require, in form and substance reasonably
satisfactory to the Bank;
(a) The Bank shall have received the Loan Fee with respect to the initial
Disbursement and all other fees and expenses (including, without limitation,
Bank's legal fees and expenses incurred in the negotiation and preparation of
the Loan Documents and any other fees and expenses of the Bank for UCC searches
or filing fees) required to be paid to Bank on or before the Closing Date;
(a) All representations and warranties of the Borrowers contained herein
are true and correct as of the Closing Date and each of Genome and Collaborative
will have executed and delivered to Bank such certificates with respect thereto
as Bank may require;
(a) There shall have occurred no materially adverse change in the financial
condition, business or prospects of either Genome or
16
Collaborative between the date of the most recent Financial Statements of
them provided to the Bank and the Closing Date;
(a) Each of Genome and Collaborative shall have provided the Bank or has
caused to be provided to the Bank by the Custodian a current list of investments
held in the Custodian Account and which is in form satisfactory to the Bank.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as the Borrowers are indebted to the Bank hereunder, and until
payment in full of the Note and full and complete performance of all of its
other obligations arising hereunder (except for the Borrowers' obligations under
Section 5.7 or Section 9.1 to indemnify the Bank under certain circumstances
following the payment of the Note), each of the Borrowers shall in all material
respects:
SECTION 5.1 BOOKS AND RECORDS. Keep proper books of record and account in a
manner reasonably satisfactory to the Bank in which full true and correct
entries shall be made of all dealings or transactions in relation to its
business and activities.
SECTION 5.2 INSPECTIONS AND AUDITS. Permit the Bank to make or cause to be made
reasonable inspections and audits of any of its books, records and papers and to
make extracts therefrom and copies thereof at all such reasonable times and as
often as the Bank may reasonably require, provided, however, that certain areas
of the Borrowers' facilities may be restricted for reasons of health and safety
and the Bank will not be permitted access to such restricted areas.
SECTION 5.3 PERFORM OBLIGATIONS. Pay and discharge all of its obligations and
liabilities including, without limitation, all taxes, assessments and
governmental charges upon its income and properties, when due, unless and to the
extent only that such obligations, liabilities, taxes, assessments and
governmental charges are contested in good faith and by appropriate proceedings
and that, to the extent required by generally accepted accounting principles
then in effect, proper and adequate book reserves relating thereto are
established by the Borrowers, and provided that the Bank is reasonably satisfied
that the Accounts are not in danger of being the subject of a Lien (except to
the extent permitted by Section 7.1) or sold, forfeited or lost as a result
thereof and the Borrowers have provided such security or other assurances as
Bank reasonably requests.
17
SECTION 5.4 FEES AND EXPENSES. Pay upon written request by Bank: (i) up to
$15,000 towards the costs and expenses (including, without limitation, legal
fees, filing fees and UCC search fees, but excluding any Commitment Fee, Loan
Fee or other fee payable to the Bank for this Loan) of the Bank in connection
with the preparation, execution and delivery of this Agreement and the other
Loan Documents; (ii) all costs and expenses of the Bank in enforcing the
Borrowers' (or either of them) performance of and compliance with all agreements
and conditions contained in the Loan Documents on its part to be performed or
complied with or in connection with the negotiation, preparation and execution
and delivery of any amendment, modification or supplement of or to, or any
consent or waiver under, any such document (or any such instrument which is
proposed but not executed and delivered) or relating to any claim or action
threatened, made or brought against the Bank arising out of or relating to any
extent to the Loan Documents, or the transactions contemplated hereby or
thereby; (iii) all costs and expenses (including, without limitation, reasonable
fees and disbursements of counsel) suffered or incurred by the Bank in
connection with the enforcement or the payment of the Note or any other sum due
to it under any of the other Loan Documents or any of its other rights hereunder
or thereunder; and (iv) any and all costs and expenses (which, prior to the
occurrence of an Event of Default, shall not exceed $1,500 per calendar year)
incurred by Bank in conducting lien searches, UCC searches or other due
diligence investigations which the Bank determines are necessary to monitor the
Borrowers' performance hereunder and which are incurred after the Closing Date.
SECTION 5.5 MAINTENANCE OF EXISTENCE; CONDUCT OF BUSINESS. Preserve and maintain
its corporate existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business except for
transfers (including, without limitation, transfers in the form of paid-up
licenses) for reasonably equivalent value in the normal course of its business.
The Borrowers shall comply in all material respects with all applicable laws,
rules, regulations, orders, writs, decrees and judgments and its charter and
bylaws, and with the material terms of all mortgages, indentures, leases,
contracts and other agreements and instruments binding upon them. The Borrowers
will continue to engage in business of the same general type as now conducted by
them.
SECTION 5.6 INSURANCE. Maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such liabilities,
casualties and contingencies and of such types and in such amounts as shall be
customary for businesses engaged in similar activities in similar geographic
areas. Without limiting the foregoing, the Borrowers will (i) keep
18
all of its physical property insured against fire and extended coverage risks in
amounts and with deductibles equal to those generally maintained by businesses
engaged in similar activities in similar geographic areas, (ii) maintain all
such workers' compensation or similar insurance as may be required by law, and
(iii) maintain, in amounts and with deductibles equal to those generally
maintained by businesses engaged in similar activities in similar geographic
areas, general public liability insurance against claims for bodily injury,
death or property damage occurring on, in or about the Borrowers' properties,
and business interruption insurance. SCHEDULE 5.6 lists insurance of each of
Genome and Collaborative currently in effect. The Borrowers shall furnish to the
Bank, from time to time upon the Bank's request, certificates or other evidence
satisfactory to the Bank of compliance with the foregoing. At such time as it
would be customary for a business engaged in similar activities as Genome or
Collaborative to obtain product liability or other insurance not currently
maintained by Genome or Collaborative or specified herein, Genome and/or
Collaborative, as the case may be, shall obtain and maintain such insurance in
accordance with the provisions of this Section.
SECTION 5.7 CERTAIN TAXES.
(a) If, under any law in effect on the date hereof, or under any law
subsequently enacted, it is determined that any U.S. federal, state or local tax
is payable in respect of the issuance of the Note, or in connection with the
filing or recording of any assignments, mortgages, financing statements, or
other documents (whether measured by the amount of indebtedness secured or
otherwise) as contemplated by this Agreement, then the Borrowers shall pay any
such tax and all interest and penalties thereon, if any, and shall indemnify the
Bank against and save it harmless from any loss or damage resulting from or
arising out of the nonpayment or delay in payment of any such tax.
(a) If any such tax or taxes shall be assessed or levied against the Bank
or any other holder of the Note, the Bank, or such other holder, as the case may
be, may notify the Borrowers and make immediate payment thereof, together with
interest or penalties in connection therewith, and will thereupon be entitled to
and shall receive immediate reimbursement therefor from the Borrowers.
(a) Notwithstanding any other provision contained in this Agreement, the
covenants and agreements of the Borrowers in this Section 5.7 will survive for
four years following the payment of the Note and the termination of this
Agreement.
SECTION 5.8 USE OF PROCEEDS. Use the proceeds of all Disbursements made by the
Bank hereunder only for the purpose
19
specified in Section 2.2 -- "Use of Proceeds." Neither Genome nor Collaborative
will use any of the proceeds of such Loans, directly or indirectly, for the
purpose of purchasing or carrying any margin stock or for the purpose of
purchasing or carrying or trading in any securities under such circumstances as
to involve Genome, Collaborative or the Bank in a violation of Regulation G, T,
U or X issued by the Federal Reserve Board.
SECTION 5.9 FURTHER ASSURANCES WITH RESPECT TO ACCOUNTS. Promptly supply the
Bank with such information concerning the Investment Account as the Bank may
reasonably request from time to time hereafter, including, without limitation,
Account statements which shall be delivered not less frequently than quarterly
(or more frequently if required pursuant to Section 6.4), which Account
statements will summarize the value of deposits and investments in the Accounts.
SECTION 5.10 FINANCIAL COVENANTS. The Borrowers on a consolidated basis shall at
all times maintain:
(i) A maximum ratio of Total Debt to Net Worth, as calculated on a
quarterly basis, of 0.50:1;
(i) A minimum Current Ratio, as calculated on a quarterly basis, of
1.50:1;
(i) A minimum Adjusted Net Cash Level equal to the then outstanding
principal balance due under the Note plus Twenty Million Dollars
($20,000,000);
(i) A minimum Net Cash Level equal to the then outstanding principal
balance due under the Note plus three (3) months interest thereon at the
applicable rate provided for herein;
(i) A minimum Net Worth of Twenty Million Dollars ($20,000,000); and
(i) Cash and Cash Equivalents, which are not subject to any Lien or claim
of any Person other than the Bank, on hand in the Investment Account equal
to at least the sum of the then outstanding principal balance of the Loan
plus three (3) months interest thereon at the then applicable rate
provided for herein.
The failure of the Borrowers to maintain any of the covenants set forth in this
Section 5.10(i)-(v) and/or the occurrence of an Event of Default under
Section 8.1 of this Agreement shall be a "Trigger Event."
20
SECTION 5.11 DEPOSITS INTO CUSTODIAN ACCOUNT. Upon the occurrence of a Trigger
Event, the Borrowers will make, or, through the Custodian pursuant to the
Irrevocable Instructions and Power of Attorney cause to be made, payments or
deposits to the Custodian Account such that after giving effect to such payments
or deposits the Restricted Account Balance equals or exceeds the Required
Restricted Account Balance. At the time of each such payment, the Borrowers will
submit to the Bank a statement setting forth the market values of marketable
securities and the Restricted Account Balance as of the date of deposit (after
giving effect to any deposits made on or before such day).
ARTICLE VI
DELIVERY OF FINANCIAL REPORTS,
DOCUMENTS AND OTHER INFORMATION
So long as the Borrowers are indebted to the Bank hereunder and until
payment in full of the Note and full and complete performance of all of their
other obligations arising hereunder, the Borrowers shall deliver to the Bank:
SECTION 6.1 ANNUAL FINANCIAL STATEMENTS. Annually, as soon as available, but in
any event within ninety (90) days after the last day of the fiscal year, (i) the
balance sheet of the Borrowers as of such last day of the fiscal year and
statements of operations, stockholders' equity and cash flows, for such fiscal
year, on a consolidated basis, prepared in accordance with generally accepted
accounting principles consistently applied, in reasonable detail, audited and
opined on by Arthur Anderson LLP or by another firm of independent public
accountants reasonably satisfactory to the Bank (which audit opinion shall
contain no qualification unsatisfactory to the Bank), to present fairly the
financial position and the results of operations of the Borrowers as of the end
of such fiscal year and to have been prepared in accordance with generally
accepted accounting principles and (ii) calculations, certified by the chief
financial officer of each of the Borrowers, demonstrating compliance with the
financial covenants set forth in Section 5.10.
SECTION 6.2 QUARTERLY FINANCIAL STATEMENTS. As soon as available, but in any
event within forty-five (45) days after the end of each fiscal quarter ended on
the last day of each November, February and May, (i) balance sheets for the
Borrowers as of the last day of each such quarter and statements of operations,
and cash flows, for such quarter, all in reasonable detail and on a consolidated
basis and (ii) calculations demonstrating compliance with the financial
covenants set forth in Section 5.10. Each such statement shall be certified on
behalf of the Borrowers by each of
21
the Borrowers' controller or chief financial officer as fairly presenting the
financial position and the results of operations of the Borrowers as of the end
of such fiscal quarter and as having been prepared in accordance with generally
accepted accounting principles consistently applied (subject to normal
adjustments).
SECTION 6.3 10Q AND 10K FILINGS. At the time its Form 10-Q is released to the
public (which in all events shall be within forty-five (45) days after the end
of the fiscal quarters ended November, February and May or, if later, the date
of the filing of the Form 10-Q with the Securities and Exchange Commission), a
copy of each Form 10-Q; and, each year at the time its Form 10K is released to
the public (which in all events shall be within one hundred twenty (120) days
after the end of the Borrowers' fiscal year), a copy of its Annual Report to
Stockholders along with its Form 10K.
SECTION 6.4 CASH AND COVENANT REPORTS. The following reports, statements or
certificates: (i) at the same time as it delivers the Financial Statements
required under the provisions of Sections 6.1 -- "Annual Financial Statements"
and 6.2 -- "Quarterly Financial Statements", a report as to the calculations
with respect to, and compliance with, the financial covenants set forth in
Section 5.10(i) through 5.10(iv); (ii) within twenty (20) days of the end of
each calendar quarter, a compliance statement, certified by the Chief Financial
Officer of the Borrowers, listing (A) the Borrowers' Adjusted Net Cash Level at
the end of such calendar quarter and the domicile of such cash and investments
and of the Committed R&D Funds for the next 24 months and (B) the cash balances
and Cash Equivalent Balances of the Investment Account as of the end of such
calendar quarter, provided that during any period when the Borrower's Adjusted
Net Cash Level is less than an amount equal to Twenty-Five Million Dollars
($25,000,000) minus the difference between Six Million Dollars ($6,000,000) and
the then outstanding principal balance due under the Loan (i.e. the amount of
principal repayment made under the Loan), the Borrowers shall submit to the
Bank, (i) within twenty (20) days of the end of each calendar month, a
compliance statement indicating the Borrower's actual Adjusted Net Cash Level
and the amount of Committed R&D Funds for the next 24 months and (ii) within ten
(10) days of the end of each calendar month, a cash summary listing all of the
Borrower's cash balances and Cash Equivalent Balances as of month end wherever
domiciled, accompanied by confirming statements of the custodians of such cash
balances and Cash Equivalent Balances; and (iii) within sixty (60) days after
the end of any fiscal year of Borrowers, an annual operating budget for the next
twelve months, shown on at least a quarterly basis and projecting the Adjusted
Net Cash Level for such period in form consistent with the calculation described
in Section 5.10(iii).
22
SECTION 6.5 OTHER INFORMATION. Promptly after a written request therefor, such
other financial data or information evidencing compliance with the requirements
of this Agreement and the other Loan Documents as the Bank may reasonably
request from time to time.
SECTION 6.6 NO DEFAULT CERTIFICATE. At the same time as it delivers the
Financial Statements required under the provisions of Sections 6.1 -- "Annual
Financial Statements" and 6.2 -- "Quarterly Financial Statements," a certificate
of each of the Borrowers signed on their behalf by an Authorized Signatory or
their controller, to the effect that, to the best of their knowledge, no Trigger
Event hereunder has occurred and is continuing or, if such cannot be so
certified, specifying in reasonable detail the exceptions, if any, to such
statement.
SECTION 6.7 NOTICES.
(a) DEFAULTS. As soon as possible and in any event within seven (7) days
after either of the Borrowers has knowledge of the occurrence or existence of a
Trigger Event or any event which with the giving of notice or passage of time or
both, would constitute either an Event of Default or Trigger Event, the
statement of the Borrowers setting forth details of such Trigger Event or event
and the action which the Borrowers propose to take with respect thereto.
(a) LITIGATION AND JUDGMENTS. Promptly after obtaining knowledge thereof,
written notification of any litigation or legal proceedings instituted against
either of the Borrowers, regardless of the subject matter thereof, having claims
or amounts in controversy of more than $1,000,000 in any one instance or
$2,000,000 in the aggregate at any one time.
(a) ENVIRONMENTAL EVENTS. Promptly after obtaining knowledge or receipt
thereof, written notice of any of the following which has the potential to
materially adversely affect the assets, liabilities, financial condition or
operations of either of the Borrowers: (i) any violation of any Environmental
Laws regarding the Borrowers' operations; (ii) any potential or known Release,
or threat of Release, of any Hazardous Substances at, from or into the
Borrowers' place of business which the Borrowers report in writing or is
reportable in writing (or for which any written report supplemental to any oral
report is made) to any federal, state, or local environmental agency; (iii) any
notice of violation of any Environmental Laws or of any release or threatened
release of Hazardous Substances, including a notice or claim of liability or
potential responsibility from any third party (including without limitation any
federal, state or local governmental officials) and including notice of any
formal inquiry, proceeding, demand,
23
investigation or other action with regard to the Borrowers' business operation;
or (iv) any expense or loss that has been identified by such governmental
authority in connection with the assessment, containment, removal or remediation
of any Hazardous Substances with respect to which the Borrowers may be liable.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Borrowers are indebted to the Bank hereunder, and until
payment in full of the Note and full and complete performance of all of their
other obligations arising hereunder (except for the Borrowers' obligations under
Sections 5.7 or Section 9.1 to indemnify the Bank under certain circumstances
following the payment of the Note), neither of the Borrowers shall do, or permit
to be done, any of the following:
SECTION 7.1 LIENS. Without the Bank's consent, create or assume or permit to
exist, any Lien upon or with respect to any of its assets, or assign or
otherwise convey any right to receive income except:
(a) Liens in favor of the Bank;
(a) Liens for taxes, assessments or governmental charges or levies on the
Borrowers' property if the same shall not at the time be delinquent or
thereafter can be paid without interest or penalty or are being contested in
good faith and by appropriate proceedings which serve as a matter of law to stay
the enforcement thereof and as to which adequate reserves have been made;
(a) Liens imposed by law, such as carrier's, warehousemen's and mechanic's
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;
(a) Liens arising out of pledgor deposits under workers' compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(a) Permitted Purchase Money Liens (including, without limitation, Liens
arising in connection with equipment leases);
(a) Rights of other parties under technology licenses from the Borrowers
granted in connection with the development,
24
manufacture or marketing of pharmaceutical or other products, or otherwise in
the ordinary course of business;
(a) Rights of the United States government in certain technology, the
development of which is or was funded in whole or in part by the United States
government; and
(a) Security deposits under the Borrowers' leased premises.
SECTION 7.2 CHANGES IN BUSINESS; MERGER OR CONSOLIDATION; DISPOSITION OF ASSETS.
Without the Bank's consent:
(a) Consolidate with, merge into or convey or transfer its properties
substantially as an entirety to, any Person, except that the Borrowers may
participate in any merger in which either of the Borrowers is the surviving
entity so long as after giving effect to such merger the Borrowers remain in
compliance with all covenants and conditions of this Agreement.
(a) Make any material change in the nature of its business, or in the nature
of its operations, or liquidate or dissolve itself (or suffer any liquidation or
dissolution).
(a) Effect any disposition of all or any material portion of its assets
(whether in one or more transactions) except that (i) the Borrowers may dispose
of obsolete or worn out equipment, (ii) the Borrowers may replace equipment with
upgraded equipment and may thereafter dispose of the equipment so upgraded and
replaced, (iii) the Borrowers may engage in research and development
transactions (each, an "R&D Transaction") involving the licensing of their
rights in certain technology to other persons and the licensing back of such
rights to them, provided that after giving effect to each such R&D Transaction,
the Borrowers remain in compliance with all covenants and conditions of this
Agreement; and (iv) dispose of other assets in the ordinary course of their
business provided that they receive equivalent value on such disposition of
assets.
SECTION 7.3 CHANGE OF OFFICE ADDRESS. Except upon five (5) days' prior written
notice to the Bank, change the address of their principal office or place of
business or the place where they maintain their records with respect to the
Accounts.
SECTION 7.4 VIOLATION OF AGREEMENT. Take any action the effect of which would
constitute a breach or violation of any provision of this Agreement.
ARTICLE VIII
EVENTS OF DEFAULT
25
SECTION 8.1 EVENTS OF DEFAULT. If any one or more of the following events
("Event of Default") shall occur and be continuing, the entire unpaid balance of
the principal of and interest on the Note and all other obligations and
Indebtedness of the Borrowers to the Bank arising hereunder and under the other
Loan Documents will, in the case of any Event of Default of the types referred
to in subparagraph (e) hereinbelow, immediately become due and payable without
notice and in the case of any other Event of Default, will immediately become
due and payable upon written notice to that effect given to the Borrowers by the
Bank, without presentment or demand for payment, notice of non-payment, protest
or further notice or demand of any kind, all of which are expressly waived by
the Borrowers. Upon an Event of Default, the Bank shall have the rights and
remedies provided for herein and in the other Loan Documents and under
applicable law and in equity, and the rights and remedies provided for herein
shall be cumulative and in addition to the rights and remedies provided for
therein. Each of the following shall constitute an Event of Default:
(a) Failure by the Borrowers to make any payment when due of any amount
payable under the Loan Documents, which failure is not cured within five (5)
days of the occurrence thereof.
(a) Failure by the Borrowers to make any mandatory payments under any
borrowing agreement (other than the Loan Documents) to which either is a party
within any applicable grace period provided in such agreement or any other
default by either of the Borrowers under any such borrowing agreement and the
failure of them to cure such default within any applicable grace period, but in
any event not later than thirty (30) days after such default, provided that no
Event of Default will be deemed to have occurred under this paragraph (b) with
respect to any indebtedness under any borrowing agreement if payment of such
indebtedness, after notice thereof having been given to the Bank, is being
contested by the Borrowers in good faith and by appropriate proceedings and such
contest operates to prevent the other party to such agreement from exercising
its remedies against the Borrowers or any of their properties and the amount in
dispute is in the aggregate less than $100,000.
(a) Failure by the Borrowers to perform or observe any material term,
condition or covenant of this Agreement or of any of the Loan Documents (other
than the financial covenants set forth in Section 5.10 which shall constitute a
Trigger Event instead) which failure (other than a failure which by its nature
is not capable of cure and other than a failure to perform or observe any term,
condition or covenant referred to or set forth in Subparagraphs
26
(a), (b) and (c) hereinabove) is not cured within thirty (30) days of the
occurrence thereof.
(a) Any representation or warranty made in writing to the Bank in any of
the Loan Documents or in connection with the making of the Loan or a
certificate, statement or report made or delivered in compliance with this
Agreement, will have been false or misleading in any material respect when made
or delivered.
(a) Either of the Borrowers makes an assignment for the benefit of
creditors, files a petition for bankruptcy, petitions or applies to any tribunal
for the appointment of a receiver, custodian, or any trustee for it or a
substantial part of its assets, or commences any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or there will have been filed any such petition or application, or any
such proceeding has been commenced against it, which remains undismissed for a
period of sixty (60) days or more; or any order for relief is entered in any
such proceeding; or either of the Borrowers by any act or omission indicates its
consent to, approval of or acquiescence in any such petition, application or
proceeding or the appointment of a custodian, receiver or any trustee for it or
any substantial part of any of its properties; or either of Genome or
Collaborative suffers any custodianship, receivership or trusteeship to continue
undischarged for a period of sixty (60) days or more.
(a) Any single judgment of $1,000,000 or more or a combination of unsecured
judgments aggregating $2,000,000 or more against Genome and/or Collaborative
remains unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a
period of thirty (30) days or more.
(a) Any Loan Document ceases to be in full force and effect in all material
respects for any reason (other than due to the payment in full of all amounts
secured or evidenced thereby or due to discharge in writing by the Bank).
(a) After the occurrence of a Trigger Event under Section 5.10, the failure
of the Borrowers and/or the Custodian to make the requisite transfer to the
Custodian Account as provided in Section 5.11 such that, not later than
5:00 P.M. in New York, New York on the first Business Day following the
occurrence of the Trigger Event, the Restricted Account Balance equals or
exceeds the Required Restricted Account Balance.
(a) After the occurrence of a Trigger Event under Section 5.10, the failure
of either of the Borrowers to execute and deliver, or cause to be executed and
delivered, any additional
27
documents requested by the Bank in connection with the transfer by the Borrowers
and/or Custodian to the Custodian Account as provided in Section 5.11 (including
without limitation any additional documents requested by the Bank in order to
further implement or perfect the pledge of assets held in the Custodian Account
and any additional opinion of the Borrowers' counsel on such matters the Bank
may require, in a form and substance satisfactory to Bank).
(a) Failure by either of the Borrowers to comply with or make a material
change to its "Investment Policy" described in Section 3.22 hereof without the
Bank's prior written approval, which approval shall not be unreasonably
withheld. A copy of each Borrowers' Investment Policy is attached hereto as
SCHEDULE 8.1.(J).
(a) After the occurrence of a Trigger Event and the initial transfer to the
Custodian Account as provided in Section 5.11, the failure of the Borrowers
and/or the Custodian to make, within one Business Day following the request of
the Bank, such additional transfers to the Custodian Account as may be
necessary, from time to time, to increase the Restricted Account Balance so that
it equals the Required Restricted Account Balance.
(a) The failure by the Borrowers, at any time, to maintain a Adjusted Net
Cash Level equal to an amount equal to the sum of: (i) Fifteen Million Dollars
($15,000,000) plus (ii) the then outstanding principal balance due under the
Note.
(a) The failure by the Borrowers, at any time, to maintain a Net Cash Level
equal to an amount equal to the outstanding principal balance due under the Note
plus three (3) months interest thereon at the then applicable rate provided for
herein.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1 INDEMNITY; ADDITIONAL FEES. The Borrowers shall indemnify Bank
against, and hold it harmless from, any loss, liabilities, damages, claims, and
reasonable costs and expenses (including attorneys' fees and disbursements)
suffered or incurred by the Bank arising out of, resulting from or in any manner
connected with, the Loan Documents, or any transaction related hereto or
thereto, except any such loss arising solely from the Bank's own gross
negligence or willful misconduct. The provisions of this Section 9.1 will
survive for a period of three (3) years following the repayment of the Note and
the termination of this Agreement.
28
SECTION 9.2 SURVIVAL OF AGREEMENTS AND REPRESENTATIONS. All agreements,
representations and warranties made herein will survive the delivery of the Loan
Documents and shall be in full force and effect during the term of this
Agreement.
SECTION 9.3 MODIFICATIONS, CONSENTS AND WAIVERS. No modification, amendment or
waiver of or with respect to any provision of the Loan Documents, nor consent to
any departure by a party from any of the terms or conditions thereof shall in
any event be effective unless it is in writing and signed by the party against
whom such modification, amendment, waiver or consent is sought to be enforced.
Any such waiver or consent will be effective only in the specific instance and
for the purpose for which given. No consent to or demand on the Borrowers in any
case will, of itself, entitle it to any other or further notice or demand in
similar or other circumstances.
SECTION 9.4 ENTIRE AGREEMENT. This Agreement and the other Loan Documents embody
the entire agreement and understanding between the Bank and the Borrowers and
supersede all prior agreements and understandings relating to the subject matter
hereof.
SECTION 9.5 REMEDIES CUMULATIVE. Each and every right granted to the Bank
hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, is cumulative and may be exercised
from time to time. No failure on the part of the Bank or the holder of the Note
to exercise, and no delay in exercising, any right shall operate as a waiver
thereof, nor will any single or partial exercise of any right preclude any other
or future exercise thereof or the exercise of any other right.
SECTION 9.6 FURTHER ASSURANCES. At any time and from time to time, upon the
request of the Bank, the Borrowers shall execute, deliver and acknowledge or
cause to be executed, delivered and acknowledged such further documents and
instruments and do such other acts and things as the Bank may reasonably request
to fully effect the purposes of the Loan Documents and any other agreements,
instruments and documents delivered pursuant hereto or in connection with the
Loan.
SECTION 9.7 NOTICES. All notices, requests, reports and other communications
pursuant to this Agreement must be in writing, either by letter (delivered by
hand or commercial delivery service or sent by certified mail, return receipt
requested, except for routine reports which may be by ordinary first class mail)
or facsimile or telecopier, addressed as follows:
29
If to Genome or Collaborative:
Genome Therapeutics Corp. or
Collaborative Securities Corp.
100 Beaver Street
Waltham, MA 02154
Attn: Mr. Fenel M. Eloi, Treasurer and CFO
Telephone: (617)
Facsimile: (617)
If to Borrower's counsel:
Ropes & Gray
One International Place
Boston, MA 02110
Attn: David A. McKay, Esq.
Telephone: (617) 951-7000
Facsimile: (617) 951-7050
If to Bank:
The Sumitomo Bank, Limited
One Post Office Square, Suite 3820 Boston, MA 02109
Attn: Daniel G. Eastman, Vice President
Telephone: (617) 451-3200
Facsimile: (617) 423-4884
and
The Sumitomo Bank, Limited
233 S. Wacker Drive, Suite 5400
Chicago, IL 60606
Attn: Stan Marciniak, Vice President
Telephone: (312) 993-6210
Facsimile: (312) 876-1993
If to Bank's Counsel:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Paul P. Daley, Esq.
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
Any notice, request or communication hereunder will be deemed to have been given
(i) on the day on which it is delivered by hand to such party at its address
specified above, (ii) if sent by mail, on the third (3rd) Business Day following
the day it was deposited in the mail, postage prepaid, or (iii) if sent by
telecopy, when
30
transmitted addressed as aforesaid on a Business Day during normal business
hours and receipt is confirmed, on such Business Day. Any party may change the
person or address to whom or which notices are to be given hereunder, by notice
duly given hereunder, provided, however, that any such notice will be deemed to
have been given hereunder only when actually received by the party to which it
is addressed.
SECTION 9.8 CONSTRUCTION; GOVERNING LAW.
(a) The headings used in this Agreement and the table of contents are for
convenience only and will not be deemed to constitute a part hereof. All uses
herein of the masculine gender or of singular or plural terms will be deemed to
include uses of the feminine or neuter gender or plural or singular terms, as
the context may require. All references herein (including the definitions set
out in APPENDIX A hereto) to any agreements shall be to such agreement as
amended or modified to the date of reference. All references to a particular
entity shall include a reference to such entity's successors and permitted
assigns. The words "herein," "hereof" and "hereunder" refer to this Agreement as
a whole and not to any particular section or subsection of this Agreement.
"Including" means "including, without limitation".
(a) THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REFERENCE
TO ITS CONFLICT OF LAWS RULES.
SECTION 9.9 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, ANY LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF
THE BORROWERS OR THE BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK
PROVIDING THE LOAN DESCRIBED HEREIN.
SECTION 9.10 JURISDICTION.
(a) Each of the Borrowers and the Bank hereby irrevocably and
unconditionally submits, for itself and its property, to service of process
(directly or on an agent) in Massachusetts to the nonexclusive jurisdiction of
any Massachusetts state court or Federal court of the United States of America
in each case sitting in Boston, and any appellate court handling an appeal from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Agreement, or for recognition or enforcement of any
judgment, and each of the Borrowers and the Bank hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard and determined in such Massachusetts state or, to the
extent permitted
31
by law, in such Federal court. Each of the Borrowers and the Bank agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that a party
may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Agreement against any other party or its respective properties
in the court of any jurisdiction.
(a) Each of the Borrowers and the Bank hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any such Massachusetts state or Federal court. Each of the Borrowers and the
Bank hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
SECTION 9.11 RELATIONSHIP OF THE BORROWERS AND THE BANK. The Borrowers and the
Bank agree that nothing contained in this Agreement or any other document
executed in connection with the Loan is intended or shall be construed to
establish the Borrowers and the Bank as joint venturers or partners; and the
Borrowers hereby indemnify and agree to hold the Bank, its officers, directors,
agents and employees harmless from any and all damages resulting from such a
construction of the relationship of the parties hereto, except any such damage
arising solely from the Bank's own gross negligence or willful misconduct.
SECTION 9.12 SEVERABILITY. The provisions of this Agreement are severable, and
if any clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
will affect only such clause or provision, or part thereof, in such jurisdiction
and will not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision in this Agreement in any
jurisdiction. Each of the covenants, agreements and conditions contained in this
Agreement is independent and compliance by the Borrowers with any of them will
not excuse noncompliance by the Borrowers with any other.
SECTION 9.13 BINDING EFFECT; ASSIGNMENT.
(a) This Agreement will be binding upon and inure to the benefit of the
Borrowers and their successors and assigns as permitted herein and to the
benefit of Bank and its successors and assigns.
32
(a) The rights and obligations of the Borrowers under this Agreement may
not be assigned or delegated without the prior written consent of the Bank, and
any purported assignment or delegation without such consent shall be void.
(a) Bank, without the consent of the Borrowers, may at any time assign or
grant participations to any other Person in all or part of its rights and
obligations under the Loan Documents; PROVIDED, HOWEVER, that no such assignment
or participation may be made or shall be effective unless the Bank shall have
delivered prior notice thereof to the Borrowers of the proposed effective date
and amount of such assignment or participation and the identity of the proposed
assignee or participant. The Bank shall be the agent of all such assignees and
participants for the purpose of the receipt and delivery of funds and notices
under the Loan Documents unless the Borrowers otherwise consent (which consent
will not unreasonably be withheld).
SECTION 9.14 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which will be deemed an original, but all of which will constitute one and
the same document.
SECTION 9.15 JOINT AND SEVERAL OBLIGATIONS. The obligations of the Borrowers
hereunder shall be joint and several.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COLLABORATIVE SECURITIES CORP. GENOME THERAPEUTICS CORP.
By: ____________________________ By: ____________________________
Title: _________________________ Title: _________________________
THE SUMITOMO BANK, LIMITED
By: ____________________________
Title: _________________________
By: ____________________________
Title: _________________________
33
APPENDIX A TO LOAN AGREEMENT -- DEFINITIONS
The following words shall have the meanings specified below in the
Section of the Agreement referred to below.
"ACCOUNTS" -- the Investment Account and the Custodian Account.
"ACTUAL CASH BURN" -- the amount of the actual reduction in the
Borrowers' Cash and Cash Equivalents (including short-term and long-term
investments) as calculated as of the last day of each calendar quarter for the
period commencing with the first day of such quarter and ending on the last day
of such calendar quarter and as determined by the Bank, in its sole discretion,
based upon the financial reports delivered to Bank by Borrowers pursuant to
Article VI (including without limitation the reports provided pursuant to
Section 6.4).
"ADJUSTED NET CASH LEVEL" -- the aggregate amount of the market value
of Cash and Cash Equivalents plus, to the extent not otherwise included, the
aggregate amount of Committed R&D Funds, less otherwise restricted cash and
amounts which may be restricted in the future pursuant to existing or future
agreements between the Borrowers (or either of them) and third parties.
"ADVANCE TERMINATION DATE" -- June 30, 1998.
"AFFILIATE" -- as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean possession
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise). The term "Affiliate" shall not
include any Person who controls another Person solely by virtue of such Person's
position as a corporate officer or director of such other Person.
"AGREEMENT" -- is defined in the Preamble.
"APPLICABLE MARGIN" -- for any Eurodollar Rate Loan portion shall be
one and one-half percent (1.5%).
"AUTHORIZED SIGNATORY" -- with respect to a corporation, any officer of
such corporation.
"BAILEE" -- is defined in Subsection 2.6(b).
34
"BANK" -- is defined in the Preamble.
"BORROWER" -- is either Genome or Collaborative.
"BORROWERS" -- is defined in the Preamble.
"BUSINESS DAY" -- a day when commercial banks in both Boston,
Massachusetts and Chicago, Illinois and, in the case of setting the Reserve
Adjusted Eurodollar Rate, London, England, are open for business with respect to
transactions of the kind contemplated in this Agreement.
"CERCLA" -- is defined in Subsection 3.16(a).
"CASH AND CASH EQUIVALENTS" -- liquid investments, consisting of cash
and cash equivalents and other investments in investment grade securities, that
are classified on the Borrower's consolidated balance sheet as current,
noncurrent, long-term or restricted.
"CASH EQUIVALENT BALANCES" -- the aggregate amount of the lower of cost
or market value of Cash Equivalents, as reported in the Financial Statements.
"CLOSING DATE" -- July __, 1997.
"CODE" -- the Internal Revenue Code of 1986, as amended.
"COLLABORATIVE" -- Collaborative Securities Corp., a Massachusetts
corporation.
"COLLATERAL BAILMENT AGREEMENT" -- the Collateral Bailment Agreement of
even date herewith by and between the Bank and Sumitomo Bank of New York Trust
Company.
"COMMITTED R&D FUNDS" -- the aggregate amount of funds due to or
receivable by the Borrowers from a Person pursuant to a collaboration or similar
agreement with respect to research and development in the biotechnology field,
provided (i) such funds are due and payable pursuant to a written agreement, a
copy of which has been provided the Bank, within the twenty-four (24) months
following the date of determination, (ii) no amounts due to the Borrowers under
such agreement have remained unpaid for more than 45 days beyond their due date,
(iii) such Person has annual sales of at least $500,000,000 and a net worth of
at least $50,000,000 and is not the subject of any proceeding of the type
described in Section 8.1(e) hereof (with such Person being substituted for the
Borrowers), and (iv) the payment of such funds are not subject to any
contingency, such as the attainment of any milestones, other than solely the
passage of time.
35
"CONTROLLED GROUP" -- all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414(b), 414(c) or 414(m) of the Code and Section 4001(a)(2) of ERISA.
"CURRENT RATIO" -- the ratio of total current assets to total current
liabilities.
"CUSTODIAN ACCOUNT" -- is defined in Subsection 2.6(b).
"CUSTODIAN" -- is defined in Subsection 2.6(a).
"CUSTODIAN AGREEMENT" -- Custodian Agreement of even date herewith by
and between the Borrower and Sumitomo Bank of New York Trust Company.
"DEFAULT RATE" -- is defined in Subsection 2.3(c).
"DISBURSEMENT" -- a disbursement of available proceeds of the Loan.
"DISPOSAL," "DISPOSE(d)" -- as specified in RCRA and in the regulations
promulgated thereunder.
"ELECTION NOTICE" -- is defined in Subsection 2.1(c).
"EPA" -- is defined in Subsection 3.16(b).
"ENVIRONMENTAL LAWS" -- is defined in Subsection 3.16(b).
"ERISA" -- is defined in Section 3.15.
"EUROCURRENCY RESERVE PERCENTAGE" -- with respect to each Interest
Period, a percentage (expressed as a decimal) equal to the percentage (if any)
in effect two Business Days prior to the first day of such Interest Period, as
prescribed by the F.R.S. Board, for determining reserve requirements applicable
to "Eurocurrency liabilities" pursuant to Regulation D or any other then
applicable regulation of the F.R.S. Board which prescribes reserve requirements
applicable to "Eurocurrency liabilities," as presently defined in said
Regulation D. For purposes of this definition, Eurodollar Rate Loan Portions
hereunder shall be deemed to be "Eurocurrency liabilities" as defined in said
Regulation D.
"EURODOLLAR RATE LOAN PORTION -- any portion of the Loan, which the
Borrowers have notified the Bank (in accordance with the provisions of Section
2.1) is to bear interest at the Reserve
36
Adjusted Eurodollar Rate plus the Applicable Margin for the applicable Interest
Period.
"EURODOLLAR RATE" -- for any Eurodollar Rate Loan Portion, with respect
to the applicable Interest Period relating to such Eurodollar Rate Loan Portion,
the rate per annum (rounded up to the next whole multiple of 1/16 of 1%) equal
to the rate at which United States dollar deposits are offered to the Bank in
the London interbank Eurodollar market as of approximately 11:00 a.m., London,
England time, on the second Business Day prior to the first day of such Interest
Period for delivery in immediately available funds on the first day of such
Interest Period for the number of days in such Interest Period and in an amount
equal to the amount of the Eurodollar Rate Loan Portion.
"EVENT OF DEFAULT" -- is defined in Section 8.1.
"FINANCIAL STATEMENTS"
(a) the audited consolidated balance sheet and consolidated
statements of operations, shareholders' equity and cash flows of
Borrowers for the fiscal year then ended, together with the unqualified
opinion of the independent public accountants preparing such
statements; and
(b) the quarterly unaudited consolidated balance sheet and
unaudited consolidated statements of operations, and cash flows for
Borrowers for the fiscal quarters ended November, February and May,
certified as to accuracy by the Chief Financial Officer or controller
of each Borrower, provided, however, that such quarterly unaudited
financial statements may not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements.
"FINANCING STATEMENT" -- a financing statement or statements on form
UCC-1, signed by the Borrowers and describing the property in which the Bank has
a security interest under the Restricted Account and Security Agreement, all in
form and substance suitable for filing as a financing statement under Article 9
of the Uniform Commercial Code as enacted in Massachusetts and/or New York.
"GENOME" -- Genome Therapeutics Corp., a Massachusetts corporation.
"HAZARDOUS SUBSTANCES" -- is defined in Subsection 3.16(b).
"INDEBTEDNESS" -- with respect to any Person, all:
37
(a) all indebtedness, liabilities or other obligations of such
Person for borrowed money or for the deferred purchase price of
property or services (excluding trade accounts payable and accrued
obligations incurred in the ordinary course of business) and any other
liabilities, which in accordance with generally accepted accounting
principles would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person at the date as
of which such Indebtedness is to be determined, excluding all operating
lease obligations, as determined in accordance with generally accepted
accounting principles consistently applied and any other contingent
liabilities of such Person;
(b) all indebtedness, liabilities or obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of property,
assets or businesses;
(c) all reimbursement and other obligations of such Person in
respect of letters of credit and bankers acceptance and all net
obligations in respect of interest rate swaps, caps, floors and
collars, currency swaps, and other similar financial products;
(d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person;
(e) all obligations under leases which shall have been or should
be, in accordance with GAAP, recorded as capital leases; and
(f) all indebtedness of another Person of the types referred to
in clauses (a) through (e) guaranteed directly or indirectly in any
manner by the Person for whom Indebtedness is being determined, or in
effect guaranteed directly or indirectly by such Person through an
agreement to purchase or acquire such indebtedness, to advance or
supply funds for the payment or purchase of such indebtedness or
otherwise assure a creditor against loss, or secured by any Lien upon
or in property owned by the Person for whom Indebtedness is being
determined, whether or not such Person has assumed or become liable for
the payment of such indebtedness of such other Person.
"INTELLECTUAL PROPERTY RIGHTS" -- is defined in Section 3.11.
"INTEREST DIFFERENTIAL" -- with respect to any prepayment of a
Eurodollar Rate Loan Portion on a day other than an Interest Payment Date
falling at the end of the applicable Interest Period,
38
the sum of: (a) the per annum interest rate payable with respect to such
Eurodollar Rate Loan Portion as of the date of the prepayment MINUS (b) what the
Reserve Adjusted Eurodollar Rate plus the Applicable Margin would have been on,
or as near as practicable to, the date of the prepayment for a Eurodollar Rate
Loan Portion for a period commencing on such date and ending on the last day of
the applicable Interest Period. The determination of the Interest Differential
by the Bank shall be conclusive in the absence of manifest error.
"INTEREST PAYMENT DATE" -- with respect to any Loan Portion, the
earlier to occur of (a) the last Business Day of each calendar month occurring
within an Interest Period; or (b) the last day of each applicable Interest
Period; or (c) the date that the Loan Portion is due by either the occurrence of
Maturity Date or an Event of Default having occurred and the maturity of the
Loan having been accelerated pursuant to the terms of the Loan Documents.
"INTEREST PERIOD" -- as to any Eurodollar Rate Loan Portion, the period
commencing on the date of the initial funding of such Eurodollar Rate Loan
Portion or the last day of the immediately preceding Interest Period for any
Eurodollar Rate Loan Portion that is to be continued as a Eurodollar Rate Loan
Portion and ending, with respect to such Eurodollar Rate Loan Portion, on the
numerically corresponding day (or if there is no numerically corresponding day,
on the last day), in the calendar month that is one, two, three, six or, if
available, twelve months thereafter, in each case as the Borrower may elect in
the Election Notice; provided however, that (a) no Interest Period with respect
to any Eurodollar Rate Loan Portion shall end later than the Maturity Date, (b)
if an Interest Period would end on a day that it is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding day would fall in the next calendar month, in which case,
such Interest Period shall end on the immediately preceding Business Day, and
(c) interest shall accrue from and including the first day of an Interest Period
to but excluding the last Business Day of such Interest Period.
"INTEREST RESERVE" -- on any date of determination means an amount
equal to the interest that would accrue in three months on an amount equal to
the principal balance of the Loan outstanding on such date of determination.
"INVESTMENT ACCOUNT" -- is defined in Subsection 2.6(a).
"IRREVOCABLE INSTRUCTIONS AND POWER OF ATTORNEY" -- is defined in
Subsection 2.6(b).
39
"IRS" -- is defined in Subsection 3.15(a).
"LIEN" -- any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement and any
lease in the nature of a security interest or lien).
"LOAN" -- is defined in Section 2.1.
"LOAN DOCUMENTS" -- this Agreement, the Note, the Restricted Account
and Security Agreement, the Collateral Bailment Agreement, the Irrevocable
Instructions and Power of Attorney, the Custodian Agreement, and all other
documents executed and delivered in connection herewith or therewith, including
all amendments, modifications and supplements of or all such documents.
"LOAN FEE" -- is defined in Subsection 2.3(d).
"LOAN PORTION" -- as the circumstances or context warrants, the portion
of the Loan which is a Eurodollar Rate Loan Portion, or Prime Rate Loan Portion.
"MATURITY DATE" -- May 31, 2002.
"NET CASH LEVEL" -- the aggregate amount of the market value of Cash
and Cash Equivalents, less otherwise restricted cash and amounts which may be
restricted in the future pursuant to existing or future agreements between the
Borrowers (or either of them) and third parties.
"NET WORTH" -- an amount equal to the Total Assets minus Total Debt.
"NOTE" -- is defined in Section 2.1.
"PBGC" -- is defined in Subsection 3.15(a).
"PERMITTED PURCHASE MONEY LIENS" -- purchase money security interests
in personal property acquired after the date hereof to secure purchase money
Indebtedness, to the extent that the amount of money borrowed does not exceed
the value of the personal property purchased, and the security interest granted
does not extend beyond the personal property purchased.
"PERSON" -- an individual, a corporation, a partnership, a joint
venture, a trust or unincorporated organization, a joint stock company or other
similar organization, a government or any political subdivision thereof, a
court, or any other legal entity, whether acting in an individual, fiduciary or
other capacity.
40
"PLAN(S)" -- is defined in Subsection 3.15(a) hereof.
"PRIME RATE" -- the higher of (i) the interest rate which the Bank
announces from time to time as its floating prime rate in the United States and
(ii) the federal funds rate announced from time to time plus one-half percent
(0.5%).
"PRIME RATE LOAN PORTION" -- any portion of the Loan which bears
interest at the Prime Rate as provided in Section 2.1 or 2.7.
"RCRA" -- is defined in Subsection 3.16(a).
"R&D TRANSACTION" -- is defined in Subsection 7.2(c).
"REGULATORY CHANGE" -- any change after the date of this Agreement in
United States federal, state or local laws or regulations or the adoption or
making after such date of any interpretations, directives or requests applying
to a class of banks including the Bank of or under any United States federal,
state, or local laws or regulations (whether or not having the force of law) by
any court or governmental or monetary authority charged with the interpretation
or administration thereof.
"RELEASE" -- as specified in CERCLA.
"REPORTING PERIOD" -- a fiscal quarter of the Borrowers.
"REQUIRED RESTRICTED ACCOUNT BALANCE" -- on and after a Trigger Event
has occurred, the sum of the Borrower's then outstanding principal balance of
the Loan PLUS the Interest Reserve.
"RESERVE ADJUSTED EURODOLLAR RATE" -- with respect to any Eurodollar
Rate Loan Portion for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Reserve Adjusted = EURODOLLAR RATE
---------------- -------------------------------------
Eurodollar Rate 1 - Eurocurrency Reserve Percentage
"RESTRICTED ACCOUNT AND SECURITY AGREEMENT" -- the Restricted Account
and Security Agreement of even date herewith by and between the Bank and the
Borrowers.
"RESTRICTED ACCOUNT BALANCE" -- the sum of all Cash and Cash
Equivalents and any other investments on deposit in the Custodian Account, the
amount of such Cash Equivalents or investments to be calculated at the lower of
cost or market value.
41
"SARA" -- is defined in Subsection 3.16(a).
"SUBSIDIARY" -- any person of which a Borrower owns directly or
indirectly: (i) sufficient capital stock to enable it to elect at least a
majority of the board of directors or similar managing body of such person, or
(ii) capital stock with rights under the charter documents of such Person to
elect a director or similar managing official with the power to veto material
business decisions and organizational changes.
"TAXES" -- is defined in Subsection 2.5(a).
"TOTAL ASSETS" -- total assets as determined in accordance with
generally accepted accounting principles, consistently applied; provided,
however, that Total Assets shall be reduced by the amount (if any) of intangible
assets (other than intangible assets consisting of patent and trademark costs as
shown on the Company's Financial Statements and determined in accordance with,
and consistent with, both generally accepted accounting principals consistently
applied and the Company's accounting practices prior to the date hereof.
"TOTAL DEBT" -- the aggregate amount of the Borrowers' Indebtedness.
"TRIGGER EVENT" -- is defined in Section 5.10.
"UCC" -- the Uniform Commercial Code in effect from time to time in the
relevant jurisdiction.
42
NOTE
$6,000,000.00 Boston, Massachusetts
July 31, 1997
FOR VALUE RECEIVED, GENOME THERAPEUTICS CORP., a Massachusetts
corporation and its wholly owned subsidiary, Collaborative Securities Corp., a
Massachusetts corporation (together "Borrower"), hereby jointly and severally
promise to pay to the order of The Sumitomo Bank, Limited, a Japanese banking
corporation ("Bank"), without counterclaim, offset or deduction, the principal
sum of SIX MILLION DOLLARS ($6,000,000) or, if less, the aggregate unpaid
principal amount of all Disbursements (as defined in the Loan Agreement), in
accordance with the terms of the Loan Agreement (referred to below) and to pay
interest on the outstanding principal balance at the interest rates and at such
times as provided in the Loan Agreement and elected by Borrower and calculated
in accordance with the terms of Loan Agreement. This Note is the Note referred
to in the Loan Agreement, of even date herewith, between Borrower and Bank, and
is subject to all of the terms and conditions of the Loan Agreement (which are
incorporated herein by reference), including the rights of prepayment and the
rights of acceleration of maturity. Terms used herein have the meanings assigned
to those terms in the Loan Agreement, unless otherwise defined herein.
Interest on the unpaid principal balance hereunder shall be paid
commencing on the Closing Date and shall be paid monthly in arrears on the first
Business Day of each full calendar month hereafter until the Maturity Date
(defined below) at which time all unpaid interest shall be due and payable. The
unpaid principal balance hereunder shall be paid in forty-eight (48) equal
consecutive monthly installments of principal (each installment being in an
amount sufficient to amortize the outstanding principal balance of the Loan over
a period of forty-eight (48) months), payable on the first Business Day of each
calendar month commencing with the first payment due on July 1, 1998 and
continuing until May 31, 2002 (the "Maturity Date"), on which date Borrower
shall make a final payment in an amount equal to all of the then unpaid
principal of the Loan and all unpaid interest thereon, provided, however, that
repayment of any or all of the outstanding principal balance hereunder and all
accrued and unpaid interest thereon may be accelerated by Bank as hereinafter
provided upon the occurrence of any failure to make any payment required under
this Note and/or any Event of Default under the Loan Agreement. Any installment
of interest only or of
43
principal and interest paid more than five (5) days late or any other amount
payable hereunder which is not paid when due will bear (and Borrower shall pay)
interest (to the extent permitted by law) from such due date until such unpaid
amount has been paid in full (whether before or after judgment) at a rate per
annum equal to the Default Rate.
Borrower hereby authorizes Bank to record on schedule(s) annexed to
this Note (a) the date and amount of each portion of the Loan which constitutes
a Eurodollar Rate Loan Portion or Prime Rate Loan Portion; (b) the term of the
Interest Period for the Eurodollar Rate Loan Portion; (c) the interest rate or
rates for each Eurodollar Rate Loan Portion or Prime Rate Loan Portion and the
effective date(s) of all changes in such rates; (d) the date and amount of each
interest only payment on each Eurodollar Rate Loan Portion or Prime Rate Loan
Portion; and (e) the date and amount of each principal and interest payment on
each Eurodollar Rate Loan Portion or Prime Rate Loan Portion and of each
prepayment of principal made by Borrower, and Borrower agrees that all such
notations shall constitute PRIMA FACIE evidence of the matters noted. Bank's
failure to record such information shall not reduce or affect the obligations of
Borrower hereunder or under the Loan Agreement.
Upon the occurrence of any failure to make a payment required under
this Note and/or any Event of Default under the Loan Agreement, Bank, at its
option and without further notice, demand, or presentment for payment to
Borrower, may declare immediately due and payable the unpaid principal balance
and interest accrued thereon together with all other sums owed by Borrower under
this Note and the Loan Documents (including, but not limited to attorneys' fees
as provided below), anything in this Note and the Loan Documents to the contrary
notwithstanding. Notwithstanding the foregoing, under certain circumstances as
provided in the Loan Agreement or under applicable law, the unpaid principal
balance and interest accrued thereon together with all other sums owed by
Borrower under this Note and the Loan Documents (including, but not limited to,
attorneys fees as provided below) shall automatically become due and payable.
Payment of such sums may be enforced and recovered in whole or in part at any
time by one or more of the remedies provided to Bank in this Note or the Loan
Documents. All amounts so accelerated under this Note or the Loan Documents, or
all such amounts that become due and payable on the Maturity Date but remain
unpaid, shall in each case (without need for further notice) bear interest from
the date of such acceleration or the Maturity Date, as applicable, until the
date such amounts are paid in full at a rate per annum equal to the Default
Rate.
44
Borrower shall make all payments hereunder in lawful money of the
United States and in immediately available funds to Bank's account by means of a
wire transfer addressed as follows: The Sumitomo Bank, Limited, Chicago Bank,
ABA 071001850, through the Federal Reserve Bank of Chicago, Reference: Genome
Therapeutics Corp. The computation of interest hereunder shall be on the basis
of a 360 day year, for actual days elapsed.
All agreements between Borrower and Bank, whether now existing or
hereafter arising, are hereby limited so that in no event shall the interest
charged hereunder or under the Loan Agreement or any other charges hereunder or
under the Loan Agreement which may at any time be deemed to be interest or
agreed to be paid to Bank exceed the maximum amount permissible under applicable
law. Bank shall be entitled to amortize, prorate and spread throughout the full
term of this Note all interest paid or payable so that the interest paid does
not exceed the maximum amount permitted by law. In the event that the total
liability for payments of interest and payments in the nature of interest,
including without limitation, all charges, fees or other sums which may at any
time be deemed to be interest, shall for any reason whatsoever, result in an
effective rate of interest that for any interest payment period exceeds the
amount which Bank may lawfully collect, then the interest rate shall
automatically be reduced to the maximum rate permitted by law and all sums in
excess of those lawfully collectible as interest for the period in question
shall, without further notice to any party hereto, be applied as a premium-free
reduction of the principal balance, provided, however, that Bank may, at any
time, and from time to time, elect, by notice in writing to Borrower, to waive,
reduce or limit the collection of any sums (or refund to Borrower any sums
collected) in excess of those lawfully collectible as interest rather than
accept such sums as prepayment of the principal balance.
Borrower shall pay all reasonable fees, costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the preparation and negotiation
of this Note and the Loan Documents and in the enforcement or attempt to enforce
any of Borrower's obligations hereunder not performed when due, whether or not
any legal action is actually filed, litigated or prosecuted to judgment of
award. This Note shall be governed by, construed and interpreted in accordance
with the laws of the Commonwealth of Massachusetts.
Time is of the essence in the performance of the obligations evidenced
by this Note. In the event that Borrower defaults under this Note, or an Event
of Default occurs under the Loan Agreement, Bank shall have all of the rights
and remedies provided for in any of the Loan Documents or at law or in equity.
45
The remedies of Bank shall be cumulative and may be exercised from time to time.
No failure on the part of Bank or the holder of the Note to exercise, and no
delay in exercising, any right shall operate as a waiver thereof, nor will any
single or partial exercise of any right preclude any other or future exercise
thereof or the exercise of any other right. Borrower hereby waives diligence,
presentment for payment, demand, notice of demand, notice of non-payment or
dishonor, protest and notice of protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Note, except such notices as are required under the terms of
any of the Loan Documents.
If this Note is destroyed, lost or stolen, Borrower shall deliver a new
note to Bank on the same terms and conditions as this Note, with all appropriate
schedules annexed thereto, in substitution of the prior Note. Bank shall furnish
to Borrower reasonable evidence that the Note was destroyed, lost or stolen, and
any security or indemnity that may be reasonably required by Borrower in
connection with the replacement of the Note.
46
Executed as an instrument under seal as of the day and date referred to
above.
GENOME THERAPEUTICS CORP.
_____________________________ By: ____________________________
Attest
Name: __________________________
Title:__________________________
COLLABORATIVE SECURITIES CORP.
_____________________________ By: ____________________________
Attest
Name: __________________________
Title:__________________________