Exhibit 10.5
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of March 27, 2002, by and between SILICON VALLEY
BANK, a California-chartered bank, with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name "Silicon Valley East"
("Bank") and COLLAGENEX PHARMACEUTICALS, INC., a Delaware corporation with its
chief executive office located at 41 University Drive, Newtown, Pennsylvania
18940 ("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 by a certain First
Loan Modification Agreement dated as of March 22, 2002 (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.
Modification to Loan Agreement. From and after the execution of this Loan
Modification Agreement, the Loan Agreement shall be amended by deleting the
following text appearing as Section 5.5(x) of the Loan Agreement:
"(x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower and except for dividends
payable to holders of the Borrower's Series D Cumulative Convertible
Preferred Stock (the "Series D Stock"), except for, prior to the
occurrence of an Event of Default, preferred stock cash dividends in an
amount not to exceed $400,000 in calendar year 2002, $1,600,000 in
calendar year 2003, and $400,000 in the first quarter of calendar year
2004."
and replacing it with the following text:
"(x) pay any dividends on Borrower's stock (except for dividends payable
solely in stock of Borrower and except for dividends payable to holders of
the Borrower's Series D Cumulative Convertible Preferred Stock (the
"Series D Stock"), except for, prior to the occurrence of an Event of
Default, preferred stock cash dividends in an amount not to exceed
$430,000 in calendar year 2002, $1,600,000 in calendar year 2003, and
$400,000 in the first quarter of calendar year 2004."
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. WAIVER. Bank hereby waives Borrower's failure to comply with the Tangible Net
Worth covenant requirement set forth in the Schedule to the Loan Agreement
tested as of February 28, 2002 (the "Existing Default"). This waiver applies
only to the specific Existing Default, is a one-time waiver, and shall not be
deemed to constitute a continuing waiver of this or any other provision of the
Loan Agreement or a waiver of this Tangible Net Worth covenant for any other
period.
6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
7. 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.
8. 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.
9. FEES. Borrower shall reimburse Bank for all legal fees and expenses incurred
in connection with this amendment to the Existing Loan Documents.
10. 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.
11. 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 Clara 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.
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/ Nancy C. Broadbent By: /s/ John V. Atanasoff
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Name: Nancy C. Broadbent Name: John V. Atanasoff
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Title: Chief Financial Officer Title: Regional Market Manager
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ACKNOWLEDGED AND AGREED:
MMP, INC.
By: /s/ Frank Ruffo
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Name: Frank Ruffo
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Title: Secretary & Treasurer
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