June 24, 1997
Ms. Nancy C. Broadbent
Vice President and Chief Financial Officer
CollaGenex Pharmaceuticals, Inc.
301 South State Street
Newtown, PA 18901
Dear Nancy:
It is a pleasure to inform you that CoreStates Bank, N.A. (the "Bank") has
approved a $5,000,000 line of credit to support the normal working capital needs
of CollaGenex Pharmaceuticals, Inc., a Delaware corporation (the "Company") and
its subsidiary.
All borrowings will be subject to the Bank's continuing satisfaction with the
Company's financial condition and will be evidenced by the enclosed $5,000,000
Master Promissory Note when it and the enclosed borrowing resolution have been
duly executed by the Company.
Interest on all borrowings will be payable at the maturity of each borrowing but
in no event less frequently than monthly on the first business day. Interest
will be paid by means of a charge to the Company's demand account with the Bank.
Interest will be calculated on the basis of a year of 360 days for each day
actually outstanding.
All or any part of the line will be available to the Company using the following
pricing alternatives:
Floating prime rate:
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Interest will be calculated at a rate equal to the prime rate of interest
charged from time to time by the Bank. Said interest rate will change each time
the Bank's prime rate changes, effective on and as of the date of the change.
There will be no minimum size for borrowings bearing interest at the Bank's
prime rate, and the Company may repay such borrowings in full or in part at any
time without notice or penalty.
Ms. Nancy C. Broadbent
June 24, 1997
Page 2
Adjusted LIBOR-based rates:
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Interest will be calculated at a fixed rate of interest for the duration of each
such borrowing. The Company's interest rate(s) will be 2.15% in excess of the
interest rate(s) (adjusted for reserve requirements, if any) at which the Bank
is offered dollar deposits in the interbank Eurodollar market at or about 10:00
a.m. (Eastern Time) two business days prior to a borrowing which is to be priced
using this alternative.
Minimum borrowings will be $100,000. Once agreed to, these may not be prepaid
nor added to prior to their stated maturities.
Collateral
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The line of credit will be unsecured as long as the sum of the Company's cash
and investment balances (the "Liquid Assets") maintained with the Bank or with
CoreStates Investment Advisers equals or exceeds $10,000,000. If the Liquid
Assets fall below $10,000,000, all advances will be fully secured by the Liquid
Assets.
Other Conditions
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Negative Pledge
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Except for assets having aggregate book value not greater than $100,000, the
Company will not create or permit to exist any liens on any assets of the
Company or its Subsidiary without the prior written consent of the Bank.
Negative-Negative Pledge
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The Company will not give a Negative Pledge to any party other than the Bank.
Primary Depository and Investment Advisor
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The Bank will remain the Company's primary operating and account bank, and
CoreStates Investment Advisers will remain the Company's primary provider of
investment management and custody services.
Ms. Nancy C. Broadbent
June 24, 1997
Page 3
Reporting
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In consideration of the line, the Company will provide the Bank with:
- - its SEC Form 10-K and consolidated annual report, to be audited by KPMG
Peat Marwick LLP or another independent Certified Public Accountant
satisfactory to the Bank, to be delivered to the Bank within 90 days of the
close of the Company's fiscal year;
- - its SEC Form 10-Q and quarterly consolidated financial statements, to be
prepared in accordance with GAAP, to be delivered to the Bank within 90
days of the close of each fiscal quarter;
- - such other financial and operating information as the Bank may from time to
time reasonably request.
You understand that this line of credit may be terminated by the Company or the
Bank at any time.
Nancy, we are delighted to support the Company in the manner set forth above and
hope that the Company will find the terms of this credit facility acceptable. If
so, please have the appropriate party so signify in the space provided below and
return this letter to my attention.
At the Bank's option, this letter will be null and void unless accepted in
writing by June 30, 1997.
Very truly yours,
CORESTATES BANK, N.A.
Bruce F. Morgan
Vice President
BFM:bm
Enclosures (2)
[signatures continued on following page]
Ms. Nancy C. Broadbent
June 24, 1997
Page 4
Agreed to and accepted:
COLLAGENEX PHARMACEUTICALS, INC.
[SEAL]
/s/ Nancy C. Broadbent, VP&CFO 6/26/97
By: ------------------------------ -------
(Name and Title) (Date)
MASTER
COMMERCIAL PROMISSORY NOTE
$ 5,000,000.00 June 24, 1997
------------ -------------
FOR VALUE RECEIVED, each of the undersigned, jointly and severally if more than
one (hereinafter collectively referred to as "Borrower"), promises to pay to the
order of CORESTATES BANK, N.A.*, a national banking association (the "Bank"), at
any of its
banking offices in Pennsylvania, the principal amount of Five million and
00/100--------------Dollars, in lawful money of the United States, plus
interest, to be paid as follows:
plus interest on the unpaid principal balance at a rate mutually agreed upon at
the time a loan is made and shall be payable monthly, if the loan is payable on
demand, or the date or dates agreed to, if the loan is payable on a time or
other basis. If the rate of interest agreed to is based upon our "prime rate,"
such term shall mean and refer to the rate of interest for commercial loans
established and publicly announced by us from time to time as our prime rate,
and such rate of interest shall change each time our prime rate changes,
effective on the date of change. Interest will be computed on the basis of a
year of 360 days for each day of the year actually elapsed. The Undersigned
hereby authorizes the Bank to charge any account in the name of the Undersigned
for any and all amounts due hereunder. All payments to the Bank of principal and
interest and other amounts, if any, shall be made in U.S. dollars in immediately
available funds.
ADDITIONAL TERMS OF THIS NOTE - Each of the following provisions shall apply to
this Note, to any extension or modification hereof and to the indebtedness
evidenced hereby, except as otherwise expressly stated above or in a separate
writing signed by Bank and Borrower.
INTEREST - Interest shall be calculated on the basis of a 360-day year and shall
be charged for the actual number of days elapsed. Accrued interest shall be
payable monthly. Accrued interest shall also be payable when the entire
principal balance of this Note becomes due and payable (whether by demand,
stated maturity or acceleration) or, if earlier, when such principal balance is
actually paid to Bank. If the rate at which interest accrues is based on the
"Prime Rate" that term is defined as the rate of interest for loans established
by Bank, from time to time as its prime rate. Said per annum rate of interest
shall change each time Bank's prime rate shall change, effective on and as of
the date of the change. Interest shall accrue on each disbursement hereunder
from the date such disbursement is made by Bank, provided, however, that to the
extent this Note represents a replacement, substitution, renewal or refinancing
of existing indebtedness, interest shall accrue from the date hereof. Interest
shall accrue on the unpaid balance hereof at the rate provided for in this Note
until the entire unpaid balance has been paid in full, notwithstanding the entry
of any judgment against Borrower.
PREPAYMENT - If this Note bears interest at a floating or variable rate and no
floor or minimum rate is specified, Borrower may prepay all or any portion of
the principal balance of this Note at any time, without premium or penalty. If
not permitted under the preceding sentence, any prepayment of principal
(including any principal repayment as a result of acceleration by Bank of this
Note) shall require immediate payment to Bank of a prepayment fee equal to the
amount, if any, by which the aggregate present value of scheduled principal and
interest payments eliminated by the prepayment exceeds the principal amount
being prepaid. Said present value shall be calculated by application of a
discount rate determined by Bank in its reasonable judgment to be the
yield-to-maturity at the time of prepayment on U.S. Treasury securities having a
maturity which most closely approximates the final maturity date of the
principal balance then outstanding. Whether or not a prepayment fee is required
hereunder, prepayments shall be applied to scheduled installments of principal
in the inverse order of their maturity, shall be accompanied by payment of
accrued interest on the principal amount being prepaid and, unless this Note has
been accelerated by Bank, shall not be permitted in an amount less than the
scheduled principal installment immediately prior to final maturity of the
outstanding principal balance.
- --------------------------------------------------------------------------------
*CoreStates Bank, N.A. also conducts business as Philadelphia National Bank, as
CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank
EVENTS OF DEFAULT - Each of the following shall be an Event of Default
hereunder: (a) the nonpayment when due of any amount payable under this Note or
under any obligation or indebtedness to Bank of Borrower or any person liable,
either absolutely or contingently, for payment of any indebtedness evidenced
hereby, including endorsers, guarantors and sureties (each such person is
referred to as an "Obligor"); (b) if Borrower or any Obligor has failed to
observe or perform any other existing or future agreement with Bank of any
nature whatsoever; (c) if any representation, warranty, certificate, financial
statement or other information made or given by Borrower or any Obligor to Bank
is materially incorrect or misleading; (d) if Borrower or any Obligor shall
become insolvent or make an assignment for the benefit of creditors or if any
petition shall be filed by or against Borrower or any Obligor under any
bankruptcy or insolvency law; (e) the entry of any judgment against Borrower or
any Obligor which remains unsatisfied for 15 days or the issuance of any
attachment, tax lien, levy or garnishment against any property of material value
in which Borrower or any Obligor has an interest; (f) if any attachment, levy,
garnishment or similar legal process is served upon Bank as a result of any
claim against Borrower or any Obligor or against any property of Borrower or any
Obligor; (g) the dissolution, merger, consolidation or change in control (as
control is defined in Rule 12b-2 under the Securities Exchange Act of 1934), of
any Borrower which is a corporation or partnership, or the sale or transfer of
any substantial portion of any of Borrower's assets, or if any agreement for
such dissolution, merger, or consolidation, change in control, sale or transfer
is entered into by Borrower, without the written consent of Bank; (h) the death
of any Borrower or Obligor who is a natural person; (i) if Bank determines
reasonably and in good faith that an event has occurred or a condition exists
which has had, or is likely to have a material adverse effect on the financial
condition or creditworthiness of Borrower or any Obligor, or on the ability of
Borrower or any Obligor to perform its obligation evidenced by this Note; (j) if
Borrower shall fail to remit promptly when due to the appropriate government
agency or authorized depository, any amount collected or withheld from any
employee of Borrower for payroll taxes, Social Security payments or similar
payroll deductions; (k) if any Obligor shall attempt to terminate or disclaim
such Obligor's liability for the indebtedness evidenced by this Note; (l) if
Bank shall reasonably and in good faith determine and notify Borrower that any
collateral for this Note or for the indebtedness evidenced hereby is
insufficient as to quality or quantity; (m) if Borrower shall fail to pay when
due any material indebtedness for borrowed money other than to Bank; or (n) if
Borrower shall be notified of the failure of Borrower or any Obligor to provide
financial and other information promptly when reasonably requested by Bank. If
this Note is payable on demand, Bank's right to demand payment hereof shall not
be restricted or impaired by the absence, non-occurrence or waiver of an Event
of Default, and it is understood that if this Note is payable on demand, Bank
may demand payment at any time.
BANK'S REMEDIES - Upon the occurrence of one or more Events of Default
(including, if this Note is payable on demand, any Event of Default resulting
from Borrower's failure to make any payment hereunder when demanded) unless Bank
elects otherwise, the entire unpaid balance of this Note and all accrued
interest shall be immediately due and payable without notice to borrower or any
Obligor, and Bank may, immediately or at any time thereafter exercise any or all
of its rights and remedies hereunder or under any agreement or otherwise under
applicable law against Borrower, any Obligor and any collateral, Bank may
exercise its rights and remedies in any order and may, at its option, delay in
or refrain from exercising some or all of its rights and remedies without
prejudice thereto. Upon the occurrence of any such Event of Default or at any
time thereafter; Bank may, at its option, and upon five days' written notice to
Borrower, begin accruing interest on this Note, at a rate not to exceed five
percent (5%) per annum in excess of the greater of (a) the rate of interest
provided for above, or (b) the Prime Rate in effect from time to time on the
unpaid principal balance hereof; provided, however, that no interest shall
accrue hereunder in excess of the maximum rate permitted by law. All such
additional interest shall be payable on demand.
NOTICE TO BORROWER - Any notice required to be given by Bank under the
provisions of this Note shall be effective as to each Borrower and each Obligor
when addressed to Borrower and deposited in the mail, postage prepaid, for
delivery by first class mail at Borrower's mailing address as it appears on
Bank's records.
DISBURSEMENTS AND PAYMENTS - The proceeds of this Note, or any portion thereof,
may be credited by Bank to the deposit account of Borrower, or disbursed in any
other manner requested by Borrower and approved by Bank. If Borrower so
requests, Bank may, at its option, disburse the proceeds of this Note in more
than one disbursement on the same or different dates, but except as otherwise
agreed by Bank in writing, no action taken by Bank in response to any such
request shall be deemed to create or shall imply the existence of any commitment
or obligation to pay or credit the undisbursed portion of this Note. All
payments due under this Note are to be made in immediately available funds. If
Bank accepts payment in any other form, such payment shall not be deemed to have
been made until the funds comprising such payment have actually been received by
or made available to Bank. If Borrower is not an individual, Borrower authorizes
Bank (but Bank shall have no obligation) to charge any deposit account in
Borrower's name for any and all payments of principal, interest, or any other
amounts due under this Note.
PAYMENT OF COSTS - In addition to the principal and interest payable hereunder,
Borrower agrees to pay Bank, on demand, all costs and expenses (including
reasonable attorneys' fees and disbursements) which may be incurred by Bank in
the collection of this Note or the enforcement of Bank's rights and remedies
hereunder.
REPRESENTATIONS BY BORROWER - If Borrower is a corporation or a general or
limited partnership, Borrower represents and warrants that it is validly
existing and in good standing in the jurisdiction under whose laws it was
organized. If Borrower is a corporation, Borrower represents and warrants that
the execution, delivery and performance of this Note are within Borrower's
corporate powers, have been duly authorized by all necessary action by
Borrower's Board of Directors, and are not in contravention of the terms of
Borrrower's charter, by-laws, or any resolution of its Board of Directors. If
Borrower is a general or limited partnership, Borrower represents and warrants
that the execution, delivery and performance of this Note have been duly
authorized and are not in conflict with any provision of Borrower's partnership
agreement or certificate of limited partnership. Borrower further represents and
warrants that this Note has been validly executed and is enforceable in
accordance with its terms, that the execution, delivery and performance by
Borrower of this Note are not in contravention of law and do not conflict with
any indenture, agreement or undertaking to which Borrower is a party or is
otherwise bound, and that no consent or approval of any governmental authority
or any third party is required in connection with the execution, delivery and
performance of this Note.
WAIVERS, ETC. - Borrower and each Obligor waive presentment, dishonor, notice of
dishonor, protest and notice of protest. Neither the failure nor any delay on
the part of Bank to exercise any right, remedy, power or privilege hereunder
shall operate as a waiver or modification thereof. No consent, waiver or
modification of the terms of this Note shall be effective unless set forth in a
writing signed by Bank. All rights and remedies of Bank are cumulative and
concurrent and no single or partial exercise of any power or privilege shall
preclude any other or further exercise of any right, power or privilege.
MISCELLANEOUS - This Note is the unconditional obligation of Borrower, and
Borrower agrees that Bank shall not be required to exercise any of its rights or
remedies against any collateral in which it holds a lien or security interest or
against which it has a right of setoff or against any particular Obligor. All
representations, warranties and agreements herein are made jointly and severally
by each Borrower. If any provision of this Note shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof. To the extent that this Note represents a replacement,
substitution, renewal or refinancing of a pre-existing note or other evidence of
indebtedness, the indebtedness represented by such pre-existing note or other
instrument shall not be deemed to have been extinguished hereby. In the event
that any due date specified or otherwise provided for in this Note shall fall on
a day on which Bank is not open for business, such due date shall be postponed
until the next banking day, and interest and any fees or similar charges shall
continue to accrue during such period of postponement. This Note has been
delivered in and shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania without regard to the law of conflicts. This
Note shall be binding upon each Borrower and each Obligor and upon their
personal representatives, heirs, successors and assigns, and shall benefit Bank
and its successors and assigns.
CONSENT TO JURISDICTION AND VENUE - IN ANY LEGAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY, EACH UNDERSIGNED PARTY HEREBY IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN ANY
COUNTY OF THE COMMONWEALTH OF PENNSYLVANIA WHERE BANK MAINTAINS AN OFFICE AND
AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR
MAINTAINING OF THE VENUE OF ANY SUCH PROCEEDING IN SUCH COUNTY. EACH UNDERSIGNED
PARTY AGREES THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED
UPON IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO EACH
UNDERSIGNED PARTY.
WAIVER OF JURY TRIAL - EACH UNDERSIGNED PARTY HEREBY WAIVES, AND BANK BY ITS
ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP EVIDENCED HEREBY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK
TO ENTER INTO, ACCEPT OR RELY UPON THIS NOTE.
IN WITNESS WHEREOF, Borrower, intending this to be a sealed instrument and
intending to be legally bound hereby, has executed and delivered this Note as of
the day and year first above written.
- --------------------------------------------------------------------------------
Name of Corporation
or Partnership COLLAGENEX PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
By: By:
- ----------------------------------- ------------------------------------
(Signature of Authorized Signer) (Signature of Authorized Signer)
- ----------------------------------- ------------------------------------
(Print or Type Name and (Print or Type Name and
Title of Signer Above) Title of Signer Above)
INDIVIDUALS SIGN BELOW
SEAL
- ----------------------------------- ------------------------------------
(Signature of Witness) (Signature of Individual Borrower)
- ----------------------------------- ------------------------------------
(Print or Type Name of Above Witness) (Print or Type Name of Borrower
Signing Above)
SEAL
- ----------------------------------- ------------------------------------
(Signature of Witness) (Signature of Individual Borrower)
- ----------------------------------- ------------------------------------
(Print or Type Name of Above Witness) (Print or Type Name of Borrower
Signing Above)