Exhibit 10.1

 

SECOND MODIFICATION TO CREDIT AGREEMENT AND PROMISSORY NOTE

 

This SECOND MODIFICATION TO CREDIT AGREEMENT AND PROMISSORY NOTE (this
“Agreement”) is made as of the 30th day of June, 2004, by and between BIOSPHERE
MEDICAL, INC., a Delaware corporation (the “Borrower”), and BROWN BROTHERS
HARRIMAN & CO., a New York general partnership with an office at 40 Water
Street, Boston, Massachusetts 02109 (the “Lender”), in the following
circumstances:

 

A. Lender has established a revolving line of credit with Borrower in the
maximum amount of $5,000,000, (the “Loan”), which Loan is evidenced by the
Promissory Note dated May 17, 2002 made by Borrower in favor of Lender (the
“Note”).

 

B. The Loan is governed, in part, by the Credit Agreement dated May 17, 2002 by
and between Borrower and Lender, as amended by the First Amendment to Credit
Agreement and Ratification of Loan Documents dated March 10, 2003, by and
between Borrower and Lender (as amended, the “Credit Agreement”) and is secured
by, among other things, the Security Agreement dated May 17, 2002 by and between
Borrower and Lender (the “Security Agreement”).

 

C. Borrower has requested that Lender extend the maturity date of the Loan, and
Lender has agreed to Borrower’s request, but only upon the terms and conditions
set forth herein and in the documents executed in connection herewith.

 

NOW, THEREFORE, in consideration of the parties’ agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1. The Credit Agreement is hereby amended, from and after the date hereof, as
follows:

 

1.1 Section 1.1 is hereby deleted in its entirety and the following Section 1.1
is substituted therefor and inserted in place thereof:

 

“1.1 Credit Facility – Credit Availability. Subject to the terms and conditions
hereof, Borrower may until the earlier to occur of June 29, 2005 (“Maturity”) or
an Event of Default, as hereinafter defined, borrow, repay and reborrow funds
from the Lender, as set forth below; provided however that the aggregate
principal amount of all advances outstanding at any one time under the Credit
Facility, shall not in the aggregate exceed (a) the Borrowing Base, as defined
below, or (b) $3,000,000, whichever is less (the “Credit Availability”); and
provided further, however, that notwithstanding anything contained herein to the
contrary, in no event shall Borrower have the right to borrow or shall Lender
have the obligation to make any advance under the Credit Facility at any time
that a condition which, with the giving of notice or the passage of time, or
both, would constitute an Event of Default hereunder, shall exist.”

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1.2 Subsection (d) of Section 5.1 is hereby deleted in its entirety and the
following subsection (d) of Section 5.1 is substituted therefor and inserted in
place thereof:

 

“(d) Projections. As soon as practicable and in any event within thirty (30)
days prior to Borrower’s fiscal year end, two (2) years of projections,
including balance sheets, income statements and assumptions.”

 

1.3 Section 1.4(e)(iii) is hereby deleted in its entirety and the following
Section 1.4(e)(iii) is substituted therefor and inserted in place thereof:

 

“(iii) “Base Rate Spread” shall mean (i) 100 basis points at all times that the
Borrower shall have an aggregate amount of cash or cash equivalents in the
Pledged Account (as hereinafter defined), determined by Lender in its sole
discretion, greater than $7,500,000 but less than $10,000,000, (ii) 50 basis
points at all times that Borrower shall have an aggregate mount of cash or cash
equivalents in the Pledged Account, determined by Lender in its sole discretion,
equal to or greater than $10,000,000, but less than $12,500,000 and (iii) 0
basis points at all times that Borrower shall have an aggregate amount of cash
or cash equivalents in the Pledged Account, determined by Lender in its sole
discretion, equal to or greater than $12,500,000.”

 

1.4 Section 1.4(e)(v) is hereby deleted in its entirety and the following
Section 1.4(e)(v) is substituted therefor and inserted in place thereof:

 

“(v) “LIBOR Rate Spread” shall mean: (i) 350 basis points at all times that
Borrower shall have an aggregate amount of cash or cash equivalents in the
Pledged Account, determined by Lender in its sole discretion, greater than
$7,500,000 but less than $10,000,000, (ii) 325 basis points at all times that
Borrower shall have an aggregate amount of cash or cash equivalents in the
Pledged Account, determined by Lender in its sole discretion, equal to or
greater than $10,000,000, but less than $12,500,000, and (iii) 200 basis points
at all times that Borrower shall have an aggregate amount of cash or cash
equivalents in the Pledged Account, determined by Lender in its sole discretion,
equal to or greater than $12,500,000.”

 

2. The Note is hereby amended, from and after the date hereof, as follows:

 

2.1 The reference to “$5,000,000” in the upper left hand corner of the Note is
hereby deleted and the symbol and numbers “$3,000,000” is substituted therefor
and inserted in place thereof.

 

2.2 The reference to “$5,000,000” in the third line of the first paragraph of
the Note is hereby deleted and the symbol and numbers “$3,000,000” is
substituted therefor and inserted in place thereof.

 

2.3 The reference to “May 17, 2004” in the third line of the first paragraph of
the Note is hereby deleted and the date “June 29, 2005” is substituted therefor
and inserted in place thereof.

 

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3. All security for the Loan and the Note now existing or hereafter granted to
Lender, including without limitation all security evidenced, granted or governed
by the Security Agreement and any other of the documents evidencing, governing
or relating to the Loan (collectively, the “Loan Documents”), shall be security
for the Loan and the Note, and for all obligations of Borrower under this
Agreement, under the Note and under the Credit Agreement, as amended by this
Agreement. All references to the principal amount of the Loan as being
$5,000,000 contained in such Security Agreement and in such Loan Documents,
whether now existing or hereafter created, are hereby deemed to be references to
the principal amount of $3,000,000, wherever or however such references are made
or contained.

 

4. All references to the Credit Agreement and/or Note, wherever, whenever or
however made or contained, are hereby deemed to be references to the Credit
Agreement or Note, as applicable, as previously amended and as modified by this
Agreement. By signing this Agreement in the space indicated below, Borrower
hereby affirms and restates all of the representations, warranties, covenants,
and agreements made and set forth in the Credit Agreement and in all other Loan
Documents. ALL OF THE PROVISIONS OF THE CREDIT AGREEMENT AND THE NOTE, AS
PREVIOUSLY AMENDED AND AS AMENDED HEREBY, REMAIN IN FULL FORCE AND EFFECT.

 

5. From and after the date hereof, the Security Agreement is hereby amended to
provide that the obligations secured by such Security Agreement includes,
without limitation, all of Borrower’s obligations under the Note and Credit
Agreement, as hereby amended. Borrower hereby reaffirms the grant of the lien of
the Security Agreement. The Security Agreement is further amended to revise
Section 18 to replace the copy to Janet S. Fogarty with a copy to James W.
Litsey, Esq., Partridge Snow & Hahn LLP, 180 South Main Street, Providence,
Rhode Island 02903, Facsimile No.: (401) 861-8210.

 

6. Concurrently with the execution and delivery of this Agreement, and as a
condition precedent to Lender’s obligations hereunder, Borrower agrees to
deliver to Lender the additional documents set forth on Exhibit A attached
hereto and incorporated herein by reference.

 

7. Concurrently with the execution and delivery of this Agreement, or within ten
(10) days following Lender’s written request, Borrower shall pay to Lender all
expenses incurred in connection with this Agreement, including without
limitation all legal fees and expenses.

 

8. By executing this Agreement on behalf of Borrower in the space designated
below, the individual so signing represents and warrants to Lender that he or
she has full power and authority to execute this Agreement and to bind Borrower,
and that all corporate actions necessary to authorize and approve execution of
this Agreement, and by such individual, have been taken prior to the execution
hereof.

 

9. The failure of any party to insist upon strict performance of a covenant
hereunder or of any obligations hereunder, irrespective of the length of time
for which such failure continues, shall not be a waiver of such party’s right to
demand strict compliance in the

 

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future. No consent or waiver, express or implied, to or of any breach shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder. No term or provision
of this Agreement may be waived unless such waiver is in writing and signed by
any party against whom such waiver is sought to be enforced.

 

10. This Agreement shall be binding upon and shall inure to the benefit of
Borrower and Lender, and their respective heirs, administrators, executors,
successors, and assigns. This Agreement has been made in the Commonwealth of
Massachusetts and shall be governed, construed, applied, and enforced in
accordance with the laws of such state without resort to its conflict of laws
rules. Whenever possible, each provision of this Agreement shall be interpreted
in such a manner as to be effective and valid under applicable law; should any
provision of this Agreement be declared invalid for any reason in any
jurisdiction, such declaration shall have no effect upon the remaining portions
of this Agreement. In addition, the entirety of this Agreement shall continue in
full force and effect in all jurisdictions and said remaining portions of this
Agreement shall continue in full force and effect in the subject jurisdiction as
if this Agreement had been executed with the invalid portions thereof deleted.

 

11. All notices and communications provided for herein shall be in writing and
shall be deemed effective when sent in accordance with Section 18 of the
Security Agreement, as amended hereby.

 

12. IN THE EVENT THAT LENDER BRINGS ANY ACTION OR PROCEEDING IN CONNECTION
HEREWITH IN ANY COURT OF RECORD OF THE COMMONWEALTH OF MASSACHUSETTS, OR THE
UNITED STATES DISTRICT COURT LOCATED IN SUCH COMMONWEALTH, BORROWER HEREBY
IRREVOCABLY CONSENTS TO AND CONFERS PERSONAL JURISDICTION OF SUCH COURT OVER
BORROWER BY SUCH COURT. IN ANY SUCH ACTION OR PROCEEDING, BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT
SERVICE THEREOF MAY BE MADE UPON BORROWER BY MAILING A COPY OF SUCH SUMMONS,
COMPLAINT OR OTHER PROCESS BY UNITED STATES CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, TO BORROWER AT THE ADDRESS SET FORTH IN THE CREDIT
AGREEMENT. BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT. BORROWER AND LENDER EACH HEREBY AGREE NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND EACH MUTUALLY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE OR EXECUTED IN
CONNECTION HEREWITH OR ANY CAUSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. LENDER IS HEREBY AUTHORIZED
TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER BY BORROWER.

 

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EXCEPT AS PROHIBITED BY LAW, BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER (A) CERTIFIES THAT NO REPRESENTATIVE
OR ATTORNEY OF LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (B)
ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first set forth above.

 

Witnessed by:   BORROWER:     BIOSPHERE MEDICAL, INC.

 

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  By:  

/s/    Paul Looney

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        Paul Looney         Chief Executive Officer     LENDER:     BROWN
BROTHERS HARRIMAN & CO.

 

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  By:  

/s/    J. Edward Hall

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        J. Edward Hall         Managing Director

 

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Exhibit A

 

Additional Documents

 

1. Opinion of Counsel to Borrower

 

2. Certificate of Good Standing/Legal Existence of Borrower

 

  – Massachusetts

 

  – Delaware

 

3. Articles of Incorporation of Borrower certified by the Delaware Secretary of
State

 

4. Certificate of Secretary of Borrower certifying corporate resolutions,
incumbency of officers, and bylaws

 

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