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Leasehold Improvement Loan

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Exhibit 10.24

June 2, 2000

Mr. Kevin Rakin Executive Vice President Genaissance Pharmaceuticals, Inc. Five Science Park New Haven, CT 06511

Re: Leasehold Improvement Loan

Dear Mr. Rakin:

Connecticut Innovations, Incorporated, ("CII") has approved a construction first leasehold mortgage loan to you in the amount of $1,500,000 (the "Loan") to be secured by a first mortgage on the above-referenced leasehold property at Building 5 North and Building 5 South, Science Park, New Haven, Connecticut (the "Property"), on which will be constructed certain leasehold improvements, including laboratory space (the "Project"). The Loan will be further secured by a first perfected security interest in all of your tangible and intangible personal property, building materials, appliances, equipment and furnishings located or to be located on the property, as more particularly described herein.

A. TERMS OF THE LOAN. The Loan will be made by CII to the Borrower upon the following terms and conditions:

1. BORROWER. The Borrower shall be Genaissance Pharmaceuticals, Inc. (the "Borrower").

2. USE OF PROCEEDS. The proceeds of the Loan shall be used to finance leasehold improvements for laboratory and related space (the "Improvements").

3. NOTE; INTEREST RATE. The Loan will be evidenced by Borrower's promissory note (the "Note") in the amount of the Loan and will bear interest at the rate of six and one half percent (6.5%) per annum and will provide for repayment in monthly installments of principal and interest over a period of ten (10) years. The first installment of principal and interest shall become due and payable on July 1, 2001 (the "Amortization Date"). Until the Amortization Date, interest only on the initial advance and all subsequent advances shall be collected monthly in arrears, on the first (1st) day of each month after the closing.

4. MATURITY. The outstanding balance of the Loan, and all accrued interest thereon, shall be due and payable ten (10) years from the date of the closing.

5. PREPAYMENT. Prepayment of the Loan or any portion thereof will be permitted on any regular payment date without penalty or premium, provided however that the borrower gives CII a written notice 20 business days prior to the prepayment of the principal balance.

6. CONVERSION. During the first twelve months after the loan closes, the outstanding principal balance of the Loan may be converted, from time to time, in whole or in part, at the sole option of CII, into the shares of common stock of the Borrower at a price per share equal to 150% of the average closing price for the stock for the twenty trading days preceding the notice of conversion. Commencing in the thirteenth month and thereafter, the outstanding principal balance may be converted at either (i) the average closing price for the stock for the twenty trading days preceding the notice of conversion if the common stock is registered and publicly traded or (ii) if the common stock is not registered and publicly traded within twelve (12) months from the date of the date of the loan closing, then the lesser of $12.00 per share or the most recent price awarded a private financing round or warrant issued by the Borrower with respect to the common stock.

B. CLOSING DOCUMENTS. At the time of closing of the Loan and the Purchase, and prior to any advance of the Loan, CII shall be furnished with the following:

1. LOAN DOCUMENTS. In addition to the Note, at the time of closing the Borrower shall execute and deliver the following documents as security for the Loan:

(a) A loan agreement ("Loan Agreement") describing the terms of the Loan, conditions for advances and other customary terms;

(b) A first mortgage (the "Mortgage") covering the Borrower's leasehold interest in the Property, and including all building improvements, fixtures, equipment and other articles of personal property now or subsequently constructed, owned or acquired by the Borrower, to be duly recorded on the applicable land records;

(c) A security agreement and UCC-1 financing statement granting CII a first perfected security interest in all of the property and real estate improvements of Borrower, including building materials, contracts, leases, fixtures, equipment, and other property now or hereafter owned or acquired by Borrower; and

(d) The additional documents described herein, including the documents described in paragraph B.5.

The Loan Agreement, Note, Mortgage and security agreement shall all provide for a default upon the failure to perform any covenant, condition or agreement contained therein for a period of ten (15) days. The Note shall provide for a late charge of three percent (3.00%) of any installment provided for in the Note or mortgage which is not paid within ten (10) days of the date it is due. The Note will also provide for a lien and right of set-off against, all sums of the Borrower presently or at any time hereafter in the possession or control of, or in transit to, CII.


2. TITLE INSURANCE POLICY. A signed title insurance binder (to be supplemented, not more than five (5) business days after the initial closing by a signed policy of title insurance), of a title company approved by CII dated the date of the closing, insuring the interest of CII in the total amount of the Loan as holder of a valid first mortgage lien on the Borrower's leasehold interest in the Property free and clear of all liens, encumbrances, and title exceptions other than those approved by CII and its counsel. Proof shall be presented at closing of the payment of the premium for such title insurance. Such title insurance policy shall: (i) include insurance against any and all unrecorded mechanics' liens and materialmens' liens; (ii) contain such endorsement including a variable rate endorsement, as may be required by CII or its counsel; and (iii) show no liens, encumbrances, exceptions including survey exceptions or encroachments, whether prior or subsequent to our mortgage, other than those specifically approved by CII. Said title insurance coverage shall be subject to review and approval by CII and its counsel prior to the closing.

3. LEASES. The Borrower's third amendment to the lease of the Property, which shall be subject to the approval of CII and its counsel as to form and substance together with such modifications as CII may require.

4. HAZARD AND LIABILITY INSURANCE. Evidence of insurance coverage providing for:

(a) Fire and extended coverage insurance including vandalism and malicious mischief, in the form of a builder's risk, 100% non-reporting policy in an am
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