FOURTH LOAN MODIFICATION AGREEMENT
This Fourth Loan Modification Agreement (this "Loan Modification
Agreement') is entered into as of June 7, 2004, by and between SILICON VALLEY
BANK, a California-chartered bank, with its principal place of business at 0000
Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production office
located at One Newton Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, doing business under the name "Silicon Valley East"
("Bank") and COLLAGENEX PHARMACEUTICALS, INC., a Delaware corporation with its
chief executive office located at 00 Xxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxx
00000 ("Borrower").
1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as
of March 19, 2001, evidenced by, among other documents, a certain
Loan and Security Agreement dated as of March 19, 2001, between
Borrower and Bank, as amended (the "Loan Agreement"). Capitalized
terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.
Hereinafter, all indebtedness and obligations owing by Borrower to Bank
shall be referred to as the "Obligations".
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured
by the Collateral as described in the Loan Agreement and the
Intellectual Property Collateral, as described in the Intellectual
Property Security Agreement dated as of March 19, 2001, between the
Borrower and the Bank (together with any other collateral security
granted to Bank, the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing, securing or otherwise executed in connection with the Obligations
shall be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
Modifications to Loan Agreement. From and after the execution of this Loan
Modification Agreement, the Loan Agreement shall be amended as follows:
(i) By adding the following new Sections 1.6 and 1.7 after
Section 1.5 therein:
"1.6 FOREIGN EXCHANGE CONTRACT SUBLIMIT. In addition to
Section 1.5 and Section 1.7, Borrower may use up to the
amount set forth on the Schedule in connection with
foreign exchange forward contracts with Silicon under
which Borrower commits to purchase from or sell to
Silicon a set amount of foreign currency more than one
business day after the contract date. Silicon may
terminate the foreign exchange contracts if an Event of
Default occurs.
1.7 CASH MANAGEMENT SERVICES SUBLIMIT. In addition to
Section 1.5 and Section 1.6 above, Borrower may also use
up to the amount set forth on the Schedule for Cash
Management Services. Such aggregate amounts utilized
under the Cash Management Services Sublimit shall at all
times reduce the amount otherwise available for Loans,
letters of credit, foreign exchange contracts or other
credit accommodations hereunder. Any amounts Silicon
pays on behalf of Borrower or any amounts that are not
paid by Borrower for any Cash Management Services will
be treated as Loans hereunder and will accrue interest
at the interest rate applicable to Loans."
(ii) By deleting Section 4.4 of the Loan Agreement, entitled
"Collection of Receivable" in its entirety and inserting
the following in lieu thereof:
"4.4 COLLECTION OF RECEIVABLES. Borrower shall direct
the Account Debtors to remit all Receivables to
Borrower's lockbox account maintained at Silicon and
Silicon shall transfer such funds to Borrower's
operating account."
(iii) By deleting the following text appearing in Section
1(A)(i) of the Schedule to the Loan Agreement:
"$4,000,000 at any one time outstanding (the "Maximum
Credit Limit"; minus"
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and inserting the following in lieu thereof:
"$5,000,000 at any one time outstanding (the "Maximum
Credit Limit"; minus"
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(iv) By deleting the following text appearing in Section 1 of
the Schedule to the Loan Agreement:
"Letter of Credit/Foreign Exchange Contract Sublimit
(Section 1.5): $1,500,000"
and inserting the following in lieu thereof:
"Letter of Credit/Foreign Exchange Contract/Cash
Management Services Sublimit (Sections 1.5, 1.6 and
1.7): $2,000,000"
(v) By deleting the "Interest Rate" subsection appearing in
Section 2 of the Schedule to the Loan Agreement in its
entirety and inserting the following in lieu thereof:
"Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in effect from time to
time Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time
by Silicon as its "prime rate;" it is a base rate upon
which other rates charged by Silicon are based, and it
is not necessarily the best rate available at Silicon.
The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate."
(vi) By deleting the following text appearing in the "Unused
Line Fee" subsection of Section 3 of the Schedule to the
Loan Agreement:
"0.50% per annum."
and inserting the following in lieu thereof:
"0.375% per annum."
(vii) By adding the following subsection at the end of Section
3 of the Schedule to the Loan Agreement:
"Letter of Credit Fee: 1.00 %, per annum."
(viii) By deleting the "Maturity Date" set forth in Section 4
of the Schedule to the Loan Agreement in its entirety
and inserting the following in lieu thereof:
"May 31, 2006."
(ix) By deleting the Minimum Tangible Net Worth covenant in
Section 5a. of the Schedule to the Loan Agreement in its
entirety and inserting the following in lieu thereof:
"a. Minimum Tangible Net Worth:
Borrower shall at all times maintain a Tangible Net
Worth, tested quarterly, of not less than the sum of (i)
plus (ii) below:
(i) $28,000,000 (which minimum amount shall be
increased by 50% of Borrower's net income (if positive)
for fiscal year 2004), from the date of this Agreement
until the Maturity Date; plus
(ii) 50% of all consideration received after the date
hereof from proceeds from the issuance of any equity
securities of the Borrower and/or subordinated debt
incurred by the Borrower.
In no event shall the amount of this Minimum Tangible
Net Worth covenant be decreased."
(x) By adding the following Section 5b after Section 5a of
the Schedule to Loan Agreement:
"b. Minimum Adjusted Quick Ratio:
Borrower shall maintain a minimum Adjusted Quick Ratio
of 2.00 to 1.00, to be tested as of the end of each
quarter."
(xi) By adding the following definitions alphabetically after
Section 5b. of the Schedule to the Loan Agreement:
""Adjusted Quick Ratio" is a ratio of Quick Assets to
Current Liabilities.
"Current Liabilities" is the aggregate amount of all
obligations and liabilities of Borrower to Silicon,
plus, without duplication, Borrower's total Liabilities
which mature within one (1) year.
"Quick Assets" is, on any date, the Borrower's
consolidated, unrestricted cash, cash equivalents and
net billed accounts receivable determined according to
GAAP."
(xii) By deleting the text of Section 6 to the Schedule to the
Loan Agreement and inserting the following text in lieu
thereof:
"6 Reporting.
Borrower shall deliver to Silicon: (i) as soon as
available, but no later than thirty (30) days after the
last day of each month, a company prepared balance sheet
and income statement covering Borrower's operations
during the period in a form acceptable to Silicon; (ii)
as soon as available, but no later than five (5) days
after its filing with the Securities and Exchange
Commission, audited financial statements of the Borrower
prepared under GAAP, consistently applied, together with
an unqualified opinion on the financial statements from
an
independent certified public accounting firm reasonably
acceptable to Silicon; (iii) as soon as available,
but no later than five (5) days after its filing with
the Securities and Exchange Commission, quarterly
financial statements of the Borrower prepared under
GAAP, consistently applied (iv) within thirty (30) days
after the last day of each month or upon each Loan
request, Borrower shall deliver to Silicon a Borrowing
Base Certificate in the form of Exhibit A, along with an
aged listing of accounts receivable (by invoice date)
and a schedule of deferred revenue, (v) together with
its monthly (or quarterly, as appropriate) and annual
financial statements, Borrower shall deliver to Silicon
a Compliance Certificate in the form of Exhibit B and
(vi) budgets, sales projections, operating plans or
other financial information reasonably requested by
Silicon."
(xiii) By deleting the text "$700 per person" appearing in
Section 5.4 of the Loan Agreement and inserting the
following text in lieu thereof:
"$750 per person"
(xiv) The Loan Agreement shall be amended by adding Exhibit A
thereto, in the form of Exhibit A hereto.
(xv) The Loan Agreement shall be amended by adding Exhibit B
thereto, in the form of Exhibit B hereto.
4. RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT. Borrower
hereby ratifies, confirms and reaffirms, all and singular, the terms
and conditions of a certain Intellectual Property Security Agreement
dated as of March 19, 2001 between Borrower and Bank, and
acknowledges, confirms and agrees that, except as previously
disclosed in writing to Bank, said Intellectual Property Security
Agreement contains an accurate and complete listing of all
Intellectual Property Collateral (as defined in said Intellectual
Property Security Agreement) and shall remain in full force and
effect.
5. ADDITIONAL COVENANTS. Borrower shall not, without providing the Bank
with thirty (30) days prior written notice: (i) relocate its
principal executive office or add any new offices or business
locations or keep any Collateral in any additional locations, or
(ii) change its jurisdiction of organization, or (iii) change its
organizational structure or type, (iv) change its legal name, or (v)
change any organizational number (if any) assigned by its
jurisdiction of organization. In addition, the Borrower hereby
certifies that no Collateral is in the possession of any third party
bailee other than Cord Logistics (such as at a warehouse). In the
event that Borrower, after the date hereof, intends to store or
otherwise deliver the Collateral to such a bailee, then Borrower
shall first receive, the prior written consent of Bank and such
bailee must acknowledge in writing that the bailee is holding such
Collateral for the benefit of Bank.
6. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file
financing statements without notice to Borrower, with all
appropriate jurisdictions, as Bank deems appropriate, in order to
further perfect or protect Bank's interest in the Collateral.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms,
and reaffirms all terms and conditions of the Existing Loan
Documents and all security or other collateral granted to the Bank,
and confirms that the indebtedness secured thereby includes, without
limitation, the Obligations.
9. NO DEFENSES OF BORROWER. The Borrower hereby acknowledges and agrees
that the Borrower has no offsets, defenses, claims, or counterclaims
against the Bank or the Bank's officers, directors, employees,
attorneys, representatives, predecessors, affiliates, subsidiaries,
parents, successors, and assigns with respect to the Obligations,
and/or the Existing Loan Documents, and that if the Borrower now
has, or ever did have, any offsets, defenses, claims, or
counterclaims against the Bank or the Bank's officers, directors,
employees, attorneys, representatives, predecessors, affiliates,
subsidiaries, parents, successors, and assigns, whether known or
unknown, at law or in equity, from the beginning of the world
through this date and through the time of execution of this Loan
Modification Agreement, with respect to the Obligations and/or the
Existing Loan Documents, all of them are hereby expressly WAIVED,
and the Borrower hereby RELEASES the Bank and the Bank's officers,
directors, employees, attorneys, representatives, predecessors,
successors, and assigns from any liability therefor.
10. FEES. Upon or prior to the execution of this Loan Modification
Agreement, Borrower shall pay to Bank a fee in the amount of
$18,750.00, which fee shall be retained by Bank and not applied in
reduction of the Obligations. In addition, the Borrower shall
reimburse Bank for all legal fees and expenses incurred in
connection with this amendment to the Existing Loan Documents.
11. CONTINUING VALIDITY. Borrower understands and agrees that in
modifying the existing Obligations, Bank is relying upon Borrower's
representations, warranties, and agreements, as set forth in the
Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Bank's
agreement to modify the existing Obligations pursuant to this Loan
Modification Agreement in no way shall obligate Bank to make any
future modifications to the Obligations. Nothing in this Loan
Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as
liable parties all makers of Existing Loan Documents, unless the
party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.
12. JURISDICTION/VENUE. Borrower accepts for itself and in connection
with its properties, unconditionally, the non-exclusive jurisdiction
of any state or federal court of competent jurisdiction in the
Commonwealth of Massachusetts in any action, suit, or proceeding of
any kind against it which arises out of or by reason of this Loan
Modification Agreement; provided, however, that if for any reason
Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Xxxxx County,
California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK
DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL
OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR
ITS PROPERTY.
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This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
COLLAGENEX PHARMACEUTICALS, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: /s/ Xxxxx Xxxxx Name: /s/ R. Xxxxx Xxxxx
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Name: Xxxxx Xxxxx Name: R. Xxxxx Xxxxx
Title: Director of Finance, Controller Title: Vice President
The undersigned ratifies, confirms and reaffirms, all and singular, the
terms and conditions of a certain Unconditional Guaranty dated March 19, 2001
(the "Guaranty") and a certain Security Agreement dated March 19, 2001 (the
"Security Agreement") and acknowledges, confirms and agrees that the Guaranty
and the Security Agreement shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, or any
other documents, instruments and/or agreements executed and/or delivered in
connection herewith
MMP, INC.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
Title: Secretary and Treasurer
