EXHIBIT 99.1
CITIZENS BANK OF COMMERCIAL LOAN
MASSACHUSETTS AGREEMENT
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THIS COMMERCIAL LOAN AGREEMENT dated May 13, 2002 between Citizens Bank of
Massachusetts (the "Bank"), a Massachusetts banking corporation having an office
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and DUSA
Pharmaceuticals, Inc., (the "Borrower"), a New Jersey corporation having an
address at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 1. THE LOAN FACILITY
1.1. THE LOAN. Pursuant to the terms of this Agreement and upon the
satisfaction of the conditions precedent referred to herein, the Bank hereby
establishes a facility pursuant to which the Bank may, in its sole discretion,
lend to the Borrower, and the Borrower may, in its sole discretion, borrow from
the Bank, the maximum principal amount of Two Million Seven Hundred Thousand
Dollars ($2,700,000.00), to be evidenced by a certain Secured Term Loan
Commercial Promissory Note (the "Note") dated the date hereof and executed by
the Borrower. No funds will be advanced by the Bank after June 30, 2002 (the
"Termination Date").
1.2. ADVANCES. If any advance is made, the Bank may, at its option, record
on the books and records of the Bank or endorse on a schedule attached to the
Note, an appropriate notation evidencing any advance, each repayment on account
of the principal thereof and the amount of interest paid; and the Borrower
authorizes the Bank to maintain such records or make such notations and agrees
that the amount shown on the books and records or on said schedule, as
applicable, as outstanding from time to time shall constitute the amount owing
to the Bank pursuant to this Agreement, absent manifest error. In the event the
amount shown on the schedule conflicts with the amount noted as due pursuant to
the books and records of the Bank, the books and records of the Bank shall
control the disposition of the conflict.
1.3. PAYMENTS OF PRINCIPAL AND INTEREST. The outstanding principal balance
of amounts advanced by the Bank will accrue interest at the rates specified in
the Note. Interest and principal payments shall be made in accordance with the
terms set forth in the Note.
1.4. PREPAYMENTS. The Borrower may prepay the Note, in whole or in part,
subject to such terms, fees and provisions as are provided for in the Note.
1.5 ADDITIONAL PAYMENTS. If the Bank shall deem applicable to this
Agreement or the Note (including, in each case, any borrowed and any unused
portion thereof), any requirement of any law of the United States of America,
any regulation, order, interpretation, ruling, official directive or guideline
(whether or not having the force of law) of the Board of Governors of the
Federal Reserve System, the Comptroller of the Currency, the Federal Deposit
Insurance Corporation or any other board or governmental or administrative
agency of the United States of America which shall impose, increase, modify or
make applicable to this Agreement or the Note or cause this Agreement or the
Note to be included in any reserve, special deposit, calculation used in the
computation of regulatory capital standards, assessment or other requirement
which imposes on
the Bank any cost that is attributable to the maintenance thereof, then, and in
each such event, the Borrower shall promptly pay the Bank, upon its demand, such
amount as will compensate the Bank for any such cost, which determination may be
based upon the Bank's reasonable allocation of the aggregate of such costs
resulting from such events. In the event any such cost is a continuing cost, a
fee payable to the Bank may be imposed upon the Borrower periodically for so
long as any such cost is deemed applicable by the Bank, in an amount determined
by the Bank to be necessary to compensate the Bank for any such cost, which
determination may be based upon the Bank's reasonable allocation the aggregate
of such costs resulting from such events. The determination by the Bank of the
existence and amount of any such costs shall, in the absence of manifest error,
be conclusive.
SECTION 2. REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Bank (which
representations and warranties will survive the delivery of the Note and this
Agreement and the making of any advances and shall be deemed to be continuing
until the Note is fully paid and this Agreement is terminated) that:
2.1. EXISTENCE AND POWER. (a) The Borrower is and will continue to be duly
organized, validly existing and in good standing under the laws of its state of
organization; (b) the Borrower is qualified to do business and in good standing
as a foreign corporation in the Commonwealth of Massachusetts, the States of
Rhode Island and Ohio and the Province of Ontario, (c) the Borrower is qualified
and in good standing to do business in all other jurisdictions in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary and where the failure to so qualify
could have a material adverse effect on its business or financial condition; (d)
the Borrower has the power to execute and deliver this Agreement, the Note and
all other documents executed in connection therewith (hereinafter the "Related
Agreements") and to borrow hereunder; and (e) the Borrower has all requisite
permits, authorizations and licenses, without unusual restrictions or
limitations, to own, operate and lease its properties and to conduct the
business in which it is presently engaged, all of which are in full force and
effect.
2.2. AUTHORITY. The making and performance by the Borrower of this
Agreement, the Note and the Related Agreements have been authorized by all
necessary action. The execution and delivery of this Agreement, the Note and the
Related Agreements, the consummation of the transactions herein and therein
contemplated, the fulfillment of or compliance with the terms and provisions
hereof and thereof, (a) are within its powers, (b) will not violate any
provision of its Certificate of Incorporation, any amendment thereto, or its
By-laws or (c) to its knowledge will not result in the material breach of, or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of the Borrower pursuant to any
indenture or bank loan or credit agreement or other agreement or instrument to
which the Borrower is a party. No approval, authorization, consent or other
order of or registration or filing with any person, entity or governmental body
is required in connection with the making and performance of this Agreement, the
Note or the Related Agreements.
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2.3. FINANCIAL CONDITION. The financial statements heretofore delivered to
the Bank were prepared in conformity with generally accepted accounting
principles consistently applied (GAAP), are correct and complete, and fairly
present the financial condition and the results of operations of the Borrower
for the periods and as of the dates thereof. There are no material direct or
contingent liabilities not disclosed in such statements. Since the date of the
latest financial statement delivered to the Bank, there has been no material
adverse change in the assets, liabilities, financial condition, or business of
the Borrower.
2.4. INFORMATION COMPLETE. Subject to any limitations stated therein or in
connection therewith, all information furnished or to be furnished by the
Borrower pursuant to the terms hereof is, or will be at the time the same is
furnished, accurate and complete in all material respects necessary in order to
make the information furnished, in the light of the circumstances under which
such information is furnished, not misleading.
2.5. STATUTORY COMPLIANCE. To its knowledge, without investigation, the
Borrower is in compliance with all federal, state, county and municipal laws,
ordinances, rules or regulations applicable to it, its property or the conduct
of its business, including, without limitation, those pertaining to or
concerning the employment of labor, employee benefits, public health, safety and
the environment.
2.6. EVENTS OF DEFAULT. No Event of Default (defined below) has occurred
and no event has occurred or is continuing which with the lapse of time and/or
the giving of a notice would constitute such an Event of Default.
2.7. USE OF PROCEEDS. The Borrower shall use the proceeds of each advance
to purchase equipment and to finance project construction costs related to its
new manufacturing facilities in Wilmington, Massachusetts. No part of such
proceeds will be used, in whole or in part, for the purpose of (a) acquiring all
or substantially all of the assets or stock of any person, entity or corporation
or (b) purchasing or carrying any "margin stock" as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System.
2.8. VALIDITY. This Agreement, the Note and all Related Agreements, upon
the execution and delivery thereof, will be legal, valid, binding and
enforceable obligations of the Borrower or the person executing the same, as the
case may be, in accordance with the terms of each.
SECTION 3. CONDITIONS PRECEDENT
The Bank's obligation to advance any funds to the Borrower shall be subject
to the following conditions precedent:
3.1. APPROVAL OF BANK COUNSEL. All legal matters incident to the
transactions hereby contemplated shall be satisfactory to counsel for the Bank.
3.2. PROOF OF ACTION. The Bank shall have received such documents
evidencing the Borrower's power to execute and deliver this Agreement, the Note
and the Related Agreements as
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the Bank or its counsel shall reasonably request.
3.3. THE NOTE, RELATED AGREEMENTS AND DOCUMENTS. The Borrower shall have
delivered to the Bank the Note, this Agreement, the Pledge and Security
Agreement, all other Related Agreements, and such other documents as the Bank
may request.
3.4. OPINION OF COUNSEL. The Bank shall have received from counsel for the
Borrower a written opinion, satisfactory in form and substance to the Bank and
its counsel.
3.5. NO EVENT OF DEFAULT. No Event of Default has occurred and no event has
occurred or is continuing which with the lapse of time and/or the giving of a
notice would constitute an Event of Default.
3.6. NO MATERIAL ADVERSE CHANGE. There has been no material adverse change
in the assets, liabilities, financial condition, business or prospects of the
Borrower since the date of any financial statements delivered to the Bank before
or after the date of this Agreement.
3.7. REPRESENTATIONS AND WARRANTIES. That the representations and
warranties contained in herein are true and correct, and that the Borrower shall
have so certified to the Bank.
3.8. PAYMENT OF COMMITMENT FEE. The Bank shall have received a commitment
fee from the Borrower in the amount of $6,750.00.
SECTION 4. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until payment in full of the Note
and the complete performance of all obligations hereunder and under any Related
Agreement, it shall comply with the following agreements.
4.1. FINANCIAL STATEMENTS.
(a) Within forty five (45) days after the close of each fiscal quarter,
the Borrower shall deliver to the Bank a balance sheet as of the close of each
period and statements of income, retained earnings and cash flows for that
portion of the year-to-date then ended prepared in conformity with GAAP by
Borrower's management in a form reasonably acceptable to the Bank.
(b) Within one hundred twenty (120) days after the close of each fiscal
year, the Borrower shall deliver to the Bank (i) financial statements for the
Borrower, including a balance sheet as of the close of such year and statements
of income and retained earnings and cash flows for the year then ended, and
accompanied by a report thereon, prepared in conformity with GAAP reviewed by a
firm of independent certified public accountants acceptable to the Bank; and
(ii) projected financial statements for the next fiscal year, prepared in
conformity with GAAP by Borrower's management and in a form reasonably
acceptable to the Bank.
(c) The Borrower shall promptly deliver to the Bank such other
information about the financial condition, business and operations of the
Borrower as the Bank may from time
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to time reasonably request.
4.2. COMPLIANCE WITH LAWS; PAYMENT OF TAXES AND OTHER LIENS. The Borrower
shall comply with all federal, state, county and municipal laws, rules,
ordinances and regulations applicable to it, its business or property, including
without limitation, those pertaining to or concerning the employment of labor,
employee benefits, public health, safety and the environment. The Borrower shall
pay all taxes when due, assessments, governmental charges or levies, or claims
for labor, supplies, rent and other obligations made against it or its property
which, if unpaid, might become a lien or charge against it or its property,
except liabilities being contested in good faith and against which, if requested
by the Bank, it shall maintain reserves in amount and in form (book, cash, bond
or otherwise) reasonably satisfactory to the Bank.
4.3. PERFORMANCE. The Borrower shall comply with all terms and conditions
of this Agreement, the Related Agreements and the Note and pay all debts before
the same shall become delinquent.
4.4. DEPOSITS. The Borrower shall maintain the Bank as its principal bank
of deposit and account.
4.5. DEEMED COLLATERAL VALUE REQUIREMENTS. The Borrower shall comply with
the requirements pertaining to Deemed Collateral Value set forth in the Pledge
and Security Agreement of even date herewith (the "Pledge Agreement").
SECTION 5. EVENTS OF DEFAULT; REMEDIES
If any one or more of the following "Events of Default" shall occur:
5.1. Failure to make payment when due of the principal of the Note, or in
the payment of interest on the Note or in the payment of any other liability
owing by any Borrower to the Bank, now existing or hereinafter incurred, whether
direct or contingent; or
5.2. Any Related Agreement ceases to be in full force and effect; or
5.3. Failure by the Borrower to materially observe or perform any covenant
contained herein, or failure by the Borrower to perform any act, duty,
obligation or other agreement contained in this Agreement, the Note or any
Related Agreement for seven (7) days following the Bank giving notice thereof;
or
5.4. Any representation or warranty made by the Borrower herein or in any
Related Agreement, or any statement, certificate or other data furnished by the
Borrower in connection herewith or with any Related Agreement, proves to be
incorrect in any material respect; or
5.5. A judgment or judgments for the payment of money shall be rendered
against the Borrower, and any such judgment shall remain unsatisfied and in
effect for any period of thirty (30) consecutive days without a stay of
execution; or
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5.6. Any levy, seizure, attachment, garnishment, execution or similar
process shall be issued or levied on any of the Borrower's property; or
5.7. The Borrower shall (a) apply for or consent to the appointment of a
receiver, conservator, trustee or liquidator of all or a substantial part of any
of its assets; (b) admit in writing its inability, to pay its debts as they
mature; (c) file or permit the filing of any petition, case, arrangement,
reorganization, or the like under any insolvency or bankruptcy law, or the
adjudication of it as a bankrupt, or the making of an assignment for the benefit
of creditors or the consenting to any form of arrangement for the satisfaction,
settlement or delay of debt or the appointment of a receiver for all or any part
of its properties; or (d) take any action for the purpose of effecting any of
the foregoing; or
5.8. An order, judgment or decree shall be entered, or a case shall be
commenced, against the Borrower, without the application, approval or consent of
the Borrower by or in any court of competent jurisdiction, approving a petition
or permitting the commencement of a case seeking reorganization or liquidation
of the Borrower or appointing a receiver, trustee, conservator or liquidator of
the Borrower or of all or a substantial part of its assets and Borrower, by any
act, indicates its approval thereof, consent thereto, or acquiescence therein,
or such order, judgment, decree or case shall continue unstayed and in effect
for any period of sixty (60) consecutive days; or
5.9. The Borrower shall dissolve or liquidate, or be dissolved or
liquidated, or cease to legally exist; or
5.10. Except for liabilities being contested in good faith, failure by the
Borrower to pay any other indebtedness or obligation, whether contingent or
otherwise, or if any such other indebtedness or obligation shall be accelerated,
or if there exists any event of default under any instrument, document or
agreement governing, evidencing or securing such other indebtedness or
obligation which failure or default would cause a material adverse change in the
Borrower's business or financial condition; or
5.11. Any material adverse change in the assets, liabilities, financial
condition or business of the Borrower has occurred since the date of any
financial statements delivered to the Bank before or after the date of this
Agreement; or
5.12. Any noncompliance with the Deemed Collateral Value requirements
specified above in Section 4.5;
then, and in such event (other than an event described in Sections 5.7 or 5.8
above), the Bank may declare the then outstanding principal balance and all
interest accrued on the Note and all applicable late charges and surcharges and
all other liabilities and obligations of the Borrower to the Bank to be
forthwith due and payable, whereupon the same shall become forthwith due and
payable, and the Borrower's right to borrow any funds hereunder or under the
Note shall be deemed to be automatically terminated, all of the foregoing
without presentment or demand for payment, notice of non-payment, protest or any
other notice or demand of any kind, all of which are expressly waived by the
Borrower. Notwithstanding the foregoing, upon the occurrence of an event
described in Section 5.7 or Section 5.8 above, (i) the Borrower's right to
borrow any funds hereunder or under
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the Note shall automatically terminate and (ii) the outstanding principal
balance and all interest accrued on the Note and all applicable late charges and
surcharges and all other liabilities and obligations of the Borrower to the Bank
shall become automatically due and payable without presentment or demand for
payment, notice of non-payment, protest or any other notice or demand of any
kind, all of which are expressly waived by the Borrower.
SECTION 6. MISCELLANEOUS
6.1. WAIVERS.
(a) Borrower hereby waives presentment, demand, notice, protest, notice
of acceptance of this Agreement, notices of advances made, credit extended,
collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description. With respect to this
Agreement, the Related Agreements, the Note and any collateral now or hereafter
securing the Note, Borrower assents to any extension or postponement of the time
of payment or any other indulgence, to any substitution, exchange or release of
any collateral now or hereafter securing the Note, or to the acceptance of
partial payments thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the Bank may deem
advisable in accordance with good banking practices. The Bank shall have no duty
as to the collection or protection of any collateral now or hereafter securing
the Note or any income thereon, nor as to the preservation of rights against
prior parties, nor as to the preservation of any rights pertaining thereto
beyond the safe custody thereof. The Bank may exercise its rights with respect
to any collateral without resorting or regard to other collateral now or
hereafter securing the Note or sources of reimbursement for liability. The Bank
shall not be deemed to have waived any of its rights upon or under any document
or agreement relating to the liabilities of the Borrower, or any collateral now
or hereafter securing any such liabilities unless such waiver be in writing and
signed by the Bank. No delay or omission on the part of the Bank in exercising
any right shall operate as a waiver of such right or any other right. A waiver
on any one occasion shall not be construed as a bar to or waiver of any right on
any future occasion. The Bank may revoke any permission or waiver previously
granted to Borrower, such revocation shall be effective whether given orally or
in writing. All rights and remedies of the Bank with respect to this Agreement,
the Related Agreements, the Note or any collateral now or hereafter securing the
Note, whether evidenced hereby or by any other instrument or document, shall be
cumulative and may be exercised singularly or concurrently.
(b) THE BANK AND THE BORROWER IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY
JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST THE BANK OR THE
BORROWER IN RESPECT OF THIS AGREEMENT, THE NOTE OR ANY RELATED AGREEMENT.
(C) BORROWER (I) ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION AND (II) TO THE EXTENT PERMITTED
BY ANY STATE OR FEDERAL LAW, WAIVES THE RIGHT IT MAY HAVE TO PRIOR NOTICE OF AND
A HEARING ON THE RIGHT OF ANY HOLDER OF THE NOTE TO ANY REMEDY OR COMBINATION OF
REMEDIES THAT ENABLES SAID HOLDER, BY WAY OF ATTACHMENT, FOREIGN
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ATTACHMENT, GARNISHMENT OR REPLEVIN, TO DEPRIVE BORROWER OF ANY OF ITS PROPERTY,
AT ANY TIME, PRIOR TO FINAL JUDGMENT IN ANY LITIGATION INSTITUTED IN CONNECTION
WITH THIS AGREEMENT.
6.2. NOTICES. All notices, requests or demands to or upon a party to this
Agreement shall be given or made by the other party hereto in writing, in
person, overnight courier or by depositing in the mail postage prepaid, return
receipt requested addressed to the addressee at the address set forth above or
to such other addresses as such addressee may have designated in writing to the
other party hereto.
6.3. EXPENSES; ADDITIONAL DOCUMENTS. The Borrower will pay all taxes levied
or assessed upon the principal sum of the advances made against the Bank and all
reasonable expenses arising out of the preparation, administration, amendment,
waiver, modification, protection, collection and/or other enforcement of this
Agreement, the Related Agreements, the Note, or of any collateral or security
interest now or hereafter granted to secure the Note, security interest or lien
granted under any Related Agreement and the Note (including, without limitation,
reasonable counsels' fees and allocated costs of internal counsel). The Borrower
will, from time to time, at its expense, execute and deliver to the Bank all
such other and further instruments and documents and take or cause to be taken
all such other and future action as the Bank shall reasonably request in order
to effect and confirm or vest more securely all rights contemplated by this
Agreement or any Related Agreement.
6.4. INDEMNIFICATION. The Borrower agrees to defend, indemnify and hold
harmless the Bank and any participants, successors or assigns of the Bank and
the officers, directors, employees and agents of each of them from and against
any and all losses, claims, liabilities, asserted liabilities, costs and
expenses, including, without limitation, costs of litigation and attorneys'
reasonable fees (both the allocated costs of internal counsel and outside
counsel), incurred in connection with any and all claims or proceedings for
bodily injury, property damage, abatement or remediation, environmental damage
or impairment or any other injury or damage (including all foreseeable and
unforeseeable consequential damage) or any diminution in value of any real
property resulting from or relating, directly or indirectly, to (a) any release,
spilling, leaking, migrating, discharging, escaping, leaching, dumping or
disposing (a "Release") into the environment of any toxic substances or
hazardous wastes (actual or threatened), a threatened Release, the existence or
removal of any toxic substances or hazardous wastes on, into, from, through or
under any real property owned or operated by the Borrower (whether or not such
Release was caused by Borrower, a tenant, subtenant, prior owner or tenant or
any other Person and whether or not the alleged liability is attributable to the
handling, storage, generation, transportation or disposal of toxic substances or
hazardous wastes or the mere presence of such toxic substances or hazardous
wastes) or (b) the breach or alleged breach by Borrower of any federal, state or
local law or regulation concerning public health, safety or the environment with
respect to any real property owned or operated by the Borrower and/or any
business conducted thereon.
6.5. LIEN AND SET OFF. The Borrower hereby gives the Bank a lien and right
of set off for all of Borrower's liabilities and obligations upon and against
all the deposits, credits, collateral and property of the Borrower, now or
hereafter in the possession, custody, safekeeping or control of the Bank or any
entity under the control of the Bank or in transit to any of them. At any time,
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without demand or notice, the Bank may set off the same or any part thereof and
apply the same to any liability or obligation of the Borrower.
6.6. GOVERNING LAW. This Agreement, the Related Agreements and the rights
and obligations of the parties hereunder and thereunder shall be construed and
interpreted in accordance with the laws of the state referred to in the Bank's
address set forth in the preamble to this Agreement (the "Governing State"). The
Borrower agrees that the execution of this Agreement and Related Agreements and
the performance of the Borrower's obligations hereunder and thereunder shall be
deemed to have a situs in the Governing State and the Borrower shall be subject
to the personal jurisdiction of the courts of the Governing State with respect
to any action the Bank or its successors or assigns may commence hereunder or
thereunder. Accordingly, the Borrower hereby specifically and irrevocably
consent to the jurisdiction of the courts of the Governing State with respect to
all matters concerning this Agreement, the Related Agreements, the Note or the
enforcement of any of the foregoing.
6.7. SURVIVAL OF REPRESENTATIONS. All representations, warranties,
covenants and agreements herein contained or made in writing in connection with
this Agreement shall survive the execution and delivery of the Note, shall
continue in full force and effect until all amounts payable on account of the
Note, the Related Agreements and this Agreement shall have been paid in full and
this Agreement has been terminated.
6.8. SEVERABILITY. If any provision of this Agreement shall to any extent
be held invalid or unenforceable, then only such provision shall be deemed
ineffective and the remainder of this Agreement shall not be affected.
6.9. INTEGRATION; MODIFICATIONS. This Agreement is intended by the parties
as the final, complete and exclusive statement of the transactions evidenced by
this Agreement. No modification or amendment hereof shall be effective unless
the same shall be in writing and signed by the parties hereto.
6.10. ASSIGNMENTS. The Borrower may not assign any of its obligations
hereunder or under any Related Agreement to any person without the prior written
consent of the Bank; provided, however, that the Borrower may assign or transfer
this Agreement without such prior written consent in the event such assignment
or transfer results from the merger, consolidation, sale of substantially all of
the assets or a majority of the voting securities of the Borrower. The Bank may,
without notice to or consent of the Borrower, or any other person, sell, assign,
grant a participation in or otherwise dispose of all or any portion of the Note,
this Agreement and the Related Agreements. In connection therewith, the Bank may
disclose to a prospective purchaser, assignee, participant or transferee, any
information possessed by the Bank relating to the Loan, the Borrower, and the
collateral securing the Loan subject to Bank's securing appropriate provisions
of confidentiality with respect to such information regarding the Borrower or
its financial condition.
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6.11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the Borrower, the Bank and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed as a sealed instrument as of the day and year first above
written.
WITNESS: BORROWER:
DUSA Pharmaceuticals, Inc.
By:
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Print Name:
----------------------------
Title:
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BANK:
Citizens Bank of Massachusetts
By:
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Print Name:
----------------------------
Title:
--------------------------------
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CITIZENS BANK OF SECURED TERM LOAN
MASSACHUSETTS COMMERCIAL PROMISSORY NOTE
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$2,700,000.00 May ___, 2002
For value received, DUSA Pharmaceuticals, Inc., a New Jersey corporation
with an address at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Borrower") hereby promises to pay to the order of Citizens Bank of
Massachusetts, a Massachusetts banking corporation (the "Bank"), at the office
of the Bank located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ or at such other address as the holder hereof may designate, on June 30,
2009 or earlier as specified herein (the "Maturity Date"), the principal sum of
TWO MILLION SEVEN HUNDRED THOUSAND DOLLARS ($2,700,000.00), or the aggregate
unpaid principal amount of all advances made by the Bank to the Borrower
pursuant to the terms of the Loan Agreement of even date herewith, whichever is
less.
For the purposes of this Note, the following terms shall have the following
meanings:
(a) The term "Business Day" shall mean any day other than a Saturday,
Sunday, or other day on which commercial banks in the Commonwealth of
Massachusetts are authorized or required to close under the laws of the
Commonwealth of Massachusetts and, if the matter concerns the LIBOR Rate
(defined below), the day on which dealings in dollar deposits are also carried
on in the London interbank market and banks are open for business in London.
(b) The term "Fixed Rate" shall mean a fixed rate of interest equal to the
Bank's cost of funds, for a term not to exceed five years, as of June 30, 2002
(or upon the date of conversion from the LIBOR Rate to the Fixed Rate as
provided for herein), as determined by the Bank in its sole and absolute
discretion, plus 1.5% per annum.
(c) The term "LIBOR Rate" shall mean a fixed rate of interest equal to
LIBOR (as defined below), plus 1.75 % per annum.
(d) The term "LIBOR" shall mean the rate per annum (rounded upward, if
necessary, to the nearest 1/8 of one percent) as determined on the basis of the
offered rates for deposits in U.S. dollars for the applicable LIBOR Period,
which appears on the Telerate page 3750 as of 11:00 a.m. London time on June 28,
2002 or the day that is two (2) Business Days preceding any subsequent interest
determination date; provided, however, if the rate described above does not
appear on the Telerate System, LIBOR shall be the rate (rounded upwards as
described above, if necessary to the nearest 1/8 of one percent), for deposits
in dollars for a period substantially equal to the LIBOR Period on the Reuters
Page "LIBO" (or such other page as may replace the LIBO Page on that service for
the purpose of displaying such rates), as of 11:00 a.m.
(London time), on June 28, 2002 or the day that is two (2) Business Days prior
to any subsequent interest determination date. If both the Telerate and Reuters
systems are unavailable, then LIBOR will be determined on the basis of the
offered rates for deposits in U.S. dollars for a period of time comparable to
the LIBOR Period which are offered by four major banks in the London interbank
market, as selected by the Bank in its sole and absolute discretion, at
approximately 11:00 a.m. London time on June 28, 2002 or the day that is two
Business Days prior to any subsequent interest determination date. The principal
London office of each of the four major London banks will be requested to
provide a quotation of its U.S. dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to the
LIBOR Period offered by major banks in New York City, as selected by the Bank in
its sole and absolute discretion, at approximately 11:00 a.m. New York City time
on June 28, 2002 or the day that is two Business Days preceding any subsequent
interest determination date. In the event that the Bank is unable to obtain any
such quotation as provided above, it will be deemed that LIBOR cannot be
determined and the Fixed Rate shall apply. In the event that the Board of
Governors of the Federal Reserve System shall impose a Reserve Percentage with
respect to LIBOR deposits of the Bank, then for any period during which such
Reserve Percentage shall apply, LIBOR shall be equal to the amount determined
above divided by an amount equal to 1 minus the Reserve Percentage.
(e) The term "LIBOR Period" shall mean 30, 60, 90, 180 or 360 days, as
selected by the Borrower in accordance with the provisions hereof, commencing on
July 1, 2002, together with any extensions as provided for herein. Upon
expiration of the LIBOR Period, if any balance is outstanding hereunder, and if
the Borrower does not elect to convert to the Fixed Rate by written notice to
the Bank prior to the expiration of the LIBOR Period, then the LIBOR Period will
automatically be renewed for a successive period equal to the immediately
preceding "LIBOR Period", and, provided, further, that no LIBOR Period shall
extend beyond the Maturity Date. Each determination by the Bank of any LIBOR
Period shall be conclusive. In the event that a LIBOR Period is automatically
renewed as provided for herein, the LIBOR Rate shall change on the day which
corresponds to beginning of the new LIBOR Period. The calculation of all amounts
payable to the Bank for LIBOR loans shall be made as though the Bank actually
funded the loan through the purchase of a deposit in the London interbank market
bearing interest at the LIBOR Rate in an amount equal to the loan and having a
maturity comparable to the LIBOR Period and through the transfer of such deposit
from an offshore office of the Bank to a domestic office of the Bank in the
United States of America; provided, however, that the Bank may fund its LIBOR
loans in any manner it sees fit and the foregoing assumption shall be utilized
solely for the calculation of amounts payable hereunder.
(f) The term "Prime Rate" shall mean a variable per annum rate of interest
equal to the rate designated from time to time by the Bank as its prime
commercial lending rate. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate being charged to any borrower.
Changes in the rate of interest resulting from changes in the Prime Rate shall
take effect immediately without notice or demand of any kind.
Through June 30, 2002, interest shall accrue on the outstanding principal
of all advances hereunder at the Prime Rate. Payments of interest only at the
Prime Rate shall be due and payable in arrears on May 1, 2002, June 1, 2002 and
July 1, 2002.
-2-
After June 30, 2002, interest shall accrue on the outstanding principal of
all advances hereunder at a rate equal to either the LIBOR Rate or the Fixed
Rate. No later than June 30, 2002, the Borrower shall notify the Bank in writing
as to whether the Borrower has elected to have interest accrue at the Fixed Rate
or at the LIBOR Rate. Any such notice selecting the LIBOR Rate shall also
specify the duration of the LIBOR Period. To qualify for the LIBOR Rate at any
time hereunder, the outstanding principal must be at least One Hundred Thousand
($100,000.00) Dollars. If the Borrower does not elect either the Fixed Rate or
the LIBOR Rate for a specific LIBOR Period by written notice to the Bank on or
before June 30, 2002, then the Fixed Rate shall apply.
In the event that the Borrower selects the LIBOR Rate, monthly payments of
principal in the amount of $22,500.00 plus interest calculated at the LIBOR Rate
shall be due and payable on the first day of each month, commencing August 1,
2002 and continuing thereafter for so long as the LIBOR Rate continues to be
applicable, with all remaining unpaid principal and interest being due and
payable on June 30, 2009.
In the event that the Borrower selects the Fixed Rate, monthly principal
payments based on a ten (10) year amortization schedule plus interest (i) at the
Fixed Rate commencing August 1, 2002 and continuing for a period not to exceed
five years, and (ii) at the Prime Rate thereafter, shall be due and payable on
the first day of each month, with all remaining unpaid principal and interest
being due and payable on June 30, 2009.
If the Borrower elects the LIBOR Rate, the Borrower subsequently shall have
a one-time right to convert to the Fixed Rate at the end of the LIBOR Period by
giving written notice of its desire to convert to the Fixed Rate at least three
(3) Business Days before the conversion. Following such conversion, monthly
principal payments based on a ten (10) year amortization schedule plus interest
(i) at the Fixed Rate commencing on the first day of the first month after the
conversion, for a period not to exceed five years, and (ii) at the Prime Rate
thereafter, shall be due and payable on the first day of each month, with all
remaining unpaid principal and interest being due and payable on June 30, 2009.
Interest shall be computed on the basis of a three hundred sixty (360)-day
year and actual days elapsed.
The Borrower shall pay to the Bank an administrative late fee of the
greater of thirty-five ($35.00) dollars or five (5%) percent of any periodic
payment under the Note not received by the Bank within ten (10) days after the
periodic payment is due. Neither the inclusion of this provision nor the
Borrower's payment of such an administrative late fee shall excuse the Borrower
from timely making those payments otherwise required to be made under the Note,
or waive or limit any rights which the Bank has under the Note. The obligation
of the Borrower to pay such administrative late fees is in addition to all other
payment obligations of the Borrower under the Note.
After an Event of Default has occurred, or after maturity or after judgment
has been rendered on this Note, the Borrower shall have no right to select
pricing options, and the entire
-3-
unpaid balance of the Note shall accrue interest at a rate (the "Default Rate")
which is equal to the lesser of (i) four (4) percentage points per annum greater
than the Prime Rate, or (ii) the maximum interest rate permitted by law. The
Default Rate is separate and in addition to the administrative late fee set
forth above for any principal and/or interest installment under the Note not
received by the Bank within ten (10) days after the installment is due.
The Borrower may prepay the outstanding principal amount of the Note, in
whole or in part from time to time; provided, however, that (i) the Borrower
shall provide at least five (5) Business Days prior written notice of such
prepayment to the Bank, (ii) any such prepayment while the LIBOR Rate is in
effect shall occur only on the last day of the applicable LIBOR Period, (iii)
the prepayment shall be accompanied by a prepayment fee calculated as set forth
below, and (iv) each partial prepayment shall be in an integral multiple of
$10,000. Notwithstanding the foregoing, no prepayment fee shall be payable if a
prepayment is made while the LIBOR Rate is in effect. In addition, no prepayment
fee shall be payable while the Fixed Rate is in effect if the prepayment is made
both (i) more than one year after the date hereof and (ii) within thirty (30)
days after a sale of all or substantially all of the assets of the Borrower or a
majority of the voting control of its securities. If by reason of an Event of
Default, the Bank elects to declare the Note immediately due and payable, then a
prepayment fee shall become due and payable in the same manner as though the
Borrower had exercised such right of prepayment.
The amount of any prepayment fee shall be equal to the greater of (x) one
percent (1%) of the amount of such principal prepayment; or (y) the quotient of:
(i) the product of (A) the excess, if any, of the Fixed Rate over the yield
to maturity on a United States treasury instrument sharing a maturity date
approximately coinciding with the remainder of the period ending on the
expiration of the term of the Fixed Rate (as determined by the Bank), times
(B) the amount of such principal prepayment, times (C) the number of days
remaining, as of the date of the prepayment, until the expiration of the
term of the Fixed Rate;
divided by
(ii) three hundred sixty (360).
A certificate prepared by the Bank as to the amount of any required
prepayment fee setting forth the basis and method of determining such amount
shall be conclusive, absent manifest error.
If the Bank determines that the effect of an applicable law or government
regulation, guideline or order or the interpretation thereof by any governmental
authority charged with the administration thereof (such as, for example, a
change in official reserve requirements which the Bank is required to maintain
in respect of loans or deposits or other funds procured for funding such loans)
is to increase the cost to the Bank of making or continuing a LIBOR loan
hereunder or to reduce the amount of any payment of principal or interest
receivable by the Bank thereon, then the Borrower shall pay to the Bank on
demand such additional amounts as the Bank may
-4-
determine in its sole and absolute discretion, to be required to compensate the
Bank for such additional costs or reduction. Any additional payment under this
section will be computed from the effective date at which such additional costs
have to be borne by the Bank. A certificate as to any additional amounts payable
pursuant to this section setting forth the basis and method of determining such
amounts shall be conclusive, absent manifest error, as to the determination by
the Bank set forth therein if made reasonably and in good faith. The Borrower
shall pay any and all amounts so certified to it by the Bank within ten (10)
days of receipt of such certificate.
In the event, and on each occasion, that the Bank shall have determined (i)
that dollar deposits in the amount of the requested principal amount of such
LIBOR loan are not generally available in the London interbank market, (ii) that
the rate at which such dollar deposits are being offered will not adequately and
fairly reflect the cost to the Bank of making or maintaining such LIBOR loan
during such LIBOR Period, or (iii) that reasonable means do not exist for
ascertaining the LIBOR Rate, the Bank shall, as soon as practicable thereafter,
give written notice or telex notice of such determination to the Borrower. In
the event of any such determination, until the circumstances giving rise to such
notice no longer exist, interest shall accrue at the Fixed Rate hereunder. Each
determination by the Bank hereunder shall be conclusive absent manifest error.
Notwithstanding anything to the contrary contained herein, if any change in
any law or regulation or with the administration or interpretation thereof shall
make it unlawful for the Bank to make or maintain any LIBOR loan, then, by
written notice to the Borrower, the Bank may: (i) declare that the LIBOR Rate
will not thereafter be available; and (ii) require that all outstanding loans
bearing interest at the LIBOR Rate be converted to the Fixed Rate, in which
event all such LIBOR loans shall be automatically converted into Fixed Rate
loans as of the effective date of such notice as provided for herein.
All payments, including any prepayments as set forth above, shall, at the
option of the Bank, be applied first to the payment of all costs and expenses
incurred by the Bank arising out of the loan transaction evidenced by this Note,
which have not been paid or reimbursed to the Bank, then to accrued interest on
the unpaid principal of all advances due under this Note, and the balance on
account of the principal of all advances due under this Note. All payments shall
be in lawful money of the United States of America in immediately available
funds. If this Note or any payment hereunder becomes due on a day which is not a
Business Day, the due date of this Note or payment shall be extended to the next
succeeding Business Day, and such extension of time shall be included in
computing interest and fees in connection with such payment.
Upon the happening of any Event of Default, as defined in the Commercial
Loan Agreement dated of even date, between the Borrower and the Bank, as may be
amended from time to time (the "Agreement"), the Bank may (i) declare the then
principal of all advances and all interest accrued thereon and all applicable
late charges and surcharges and all other liabilities and obligations of the
Borrower to the Bank to be immediately due and payable, whereupon the same shall
become immediately due and payable and/or (ii) terminate any obligation of the
Bank to make advances hereunder and under the Agreement, all of the foregoing
without presentment or demand for payment, notice of non-payment, protest or any
other demand or notice of any
-5-
kind, all of which are expressly waived by the Borrower. Failure to exercise
such options shall not constitute a waiver of the right to exercise the same in
the event of any subsequent default. Notwithstanding the foregoing, upon the
occurrence of any Event of Default described in the Agreement, (A) any
obligation of the Bank to advance hereunder shall automatically terminate, and
(B) the outstanding principal balance of all advances and all interest accrued
thereon and all applicable late charges and surcharges and all other liabilities
and obligations of the Borrower to the Bank shall become automatically due and
payable without presentment or demand for payment, notice of non-payment,
protest or any other demand or notice of any kind, all of which are expressly
waived by the Borrower.
This Note has been executed and delivered in accordance with the Agreement
incorporated herein by reference, which sets forth further rights of the Bank
and duties of the Borrower and any guarantor, endorser or surety of any
obligation of the Borrower to the Bank with respect hereto. All advances made by
the Bank to the Borrower and payments of principal and interest received by the
Bank shall be evidenced by notation on the books and records of the Bank which
shall be conclusive as to the amounts owing to the Bank pursuant to the Note,
absent manifest error; provided, however, that the failure of the Bank to make
any such notation with respect to any advance or principal or interest payment
shall not limit or otherwise affect the obligations of the Borrower hereunder.
The Borrower agrees to pay all taxes levied or assessed upon the
outstanding principal against any holder of this Note and to pay all costs,
including reasonable attorneys' fees (including the costs and expenses allocated
to the Bank's internal Legal Department), costs relating to the valuation of
assets and all other costs and expenses incurred in the collection, protection,
preservation, defense, or enforcement of this Note or in any litigation arising
out of the transactions of which this Note is a part.
The Borrower hereby grants to the Bank a lien, security interest, and right
of set off as security for all of the Borrower's liabilities and obligations to
the Bank, whether now existing or hereafter arising, upon and against all the
deposits, or credits, of the Borrower now or hereafter in the possession,
custody, or control of the Bank or any entity under the control of the Bank or
in transit to any of them. In the Event of Default by Borrower, without demand
or notice, the Bank may set off the same or any part thereof and apply the same
to any liability or obligation of the Borrower. TO THE EXTENT PERMITTED BY LAW,
ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE LIABILITIES PRIOR TO EXERCISING ITS RIGHT
OF SET OFF WITH RESPECT TO SUCH DEPOSITS OR CREDITS OF THE BORROWER, ARE HEREBY
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVED.
THE BANK AND THE BORROWER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY
INTENTIONALLY AND IRREVOCABLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS NOTE, ANY DOCUMENT,
INSTRUMENT OR AGREEMENT EVIDENCING, GOVERNING OR SECURING THIS NOTE,
-6-
INCLUDING THE AFORESAID AGREEMENT (THE "LOAN DOCUMENTS") OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF
ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT
THIS NOTE AND ENTER INTO THE LOAN TRANSACTION EVIDENCED BY THIS NOTE.
THE BORROWER (1) ACKNOWLEDGES THAT THE ADVANCES EVIDENCED BY THIS NOTE ARE
PART OF A COMMERCIAL TRANSACTION AND (2) TO THE EXTENT PERMITTED BY ANY STATE OR
FEDERAL LAW, THE BORROWER WAIVES ANY RIGHT IT MAY HAVE TO PRIOR NOTICE OF AND A
HEARING ON THE RIGHT OF ANY HOLDER OF THIS NOTE TO ANY REMEDY OR COMBINATION OF
REMEDIES THAT ENABLES SAID HOLDER, BY WAY OF ATTACHMENT, FOREIGN ATTACHMENT,
GARNISHMENT OR REPLEVIN, TO DEPRIVE BORROWER OF ANY OF ITS PROPERTY, AT ANY
TIME, PRIOR TO FINAL JUDGMENT IN ANY LITIGATION INSTITUTED IN CONNECTION WITH
THIS NOTE.
All agreements between the Borrower and the Bank are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Bank for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof; provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then this Note shall be governed by such new law as of its effective date. In
this regard, it is expressly agreed that it is the intent of the Borrower and
the Bank in the execution, delivery and acceptance of this Note to contract in
strict compliance with the laws of the Commonwealth of Massachusetts from time
to time in effect. If, under or from any circumstances whatsoever, fulfillment
of any provision hereof at the time of performance of such provision shall be
due, shall involve transcending the limit of such validity prescribed by
applicable law, then the obligation to be fulfilled shall automatically be
reduced to the limits of such validity, and if under or from circumstances
whatsoever the Bank should ever receive as interest an amount which would exceed
the highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of the principal balance evidenced hereby and not to
the payment of interest. This provision shall control every other provision of
all agreements between the Borrower and the Bank.
The Bank may at any time pledge all or any portion of its rights under the
Loan Documents including any portion of this Note to any of the twelve (12)
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or enforcement thereof shall release the Bank
from its obligations under any of the Loan Documents.
The Bank shall have the unrestricted right at any time and from time to
time, and without the consent of or notice to the Borrower, to grant to one or
more banks or other financial institutions (each, a "Participant") participating
interests in the Bank's obligation to lend
-7-
hereunder and/or any or all of the loans held by the Bank hereunder. In the
event of any such grant by the Bank of a participating interest to a Participant
whether or not upon notice to the Borrower, the Bank shall remain responsible
for the performance of its obligations hereunder and the Borrower shall continue
to deal solely and directly with the Bank in connection with the Bank's rights
and obligations hereunder. The Bank may furnish any information concerning the
Borrower in its possession from time to time to prospective Participants,
provided that the Bank shall require any such prospective Participant to agree
in writing to maintain the confidentiality of such information.
The Borrower and each endorser hereof waives diligence, demand, presentment
for payment, notice of nonpayment, protest and notice of protest, and notice of
any renewals or extensions of this Note, and each agrees that the time for
payment of this Note may extended at the Bank's sole discretion, without
impairing the liability of the Borrower and each endorser hereon, and each
further consents to the release of all or any part of the security for the
payment hereof at the discretion of the Bank. Any delay on the part of the Bank
in exercising any right hereunder shall not operate as a waiver of any such
right, and any waiver granted for one occasion shall not operate as a waiver in
the event of any subsequent default.
If any provision of this Note shall, to any extent, be held invalid or
unenforceable, then only such provision shall be deemed ineffective and the
remainder of this Note shall not be affected.
This Note shall bind the successors, assigns and representatives of the
Borrower and each endorser hereof, and shall inure to the benefit of the Bank,
its successors and assigns.
This Note is executed as a sealed instrument and shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
WITNESS:
DUSA Pharmaceuticals, Inc.
------------------------------ By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
-8-
CITIZENS BANK OF PLEDGE AND SECURITY
MASSACHUSETTS AGREEMENT
--------------------------------------------------------------------------------
THIS PLEDGE AND SECURITY AGREEMENT (the "Agreement"), dated as of May 13,
2002, by and between DUSA Pharmaceuticals, Inc., a New Jersey corporation having
an address at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ (the "Pledgor") and
Citizens Bank of Massachusetts, a Massachusetts banking corporation having an
office at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ (the "Bank").
W I T N E S S E T H:
WHEREAS, the Bank has agreed to establish a $2,700,000.00 secured term loan
in favor of the Pledgor (the "Loan") as evidenced by that certain Commercial
Promissory Note dated the date hereof in the original principal amount of
$2,700,000.00 (the "Note"); and
WHEREAS, as a condition to making the Loan to the Pledgor, the Bank has
required that the Pledgor execute and deliver this Agreement and grant to the
Bank a security interest in the securities listed on Exhibit "A" attached hereto
and made a part hereof.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. SECURITY AGREEMENT. As security for the Secured Obligations described in
Section 2 below, the Pledgor hereby grants to the Bank a security interest in,
and pledges and assigns (on default) as collateral to the Bank, all of the
Pledgor's rights, now owned or hereafter acquired, in and to all investment
securities (whether certificated or uncertificated) and all security
entitlements now or hereafter carried by the Bank in any securities account for
the Pledgor (the "Securities"), including, without limitation, the Securities
listed on Exhibit A, and any additions, changes or substitutions to said
Securities and the products and proceeds of such Securities.
2. SECURED OBLIGATIONS. The Securities and the security interest hereby
granted shall secure the following obligations and liabilities now existing or
hereafter arising (herein called the "Secured Obligations"):
(a) The payment and performance of all covenants and agreements in the
Note and in the Commercial Loan Agreement of even date herewith (the "Loan
Agreement"), at the times, in the manner and with interest and charges, all as
more fully provided therein; and
(b) The payment and performance of all other indebtedness or
obligations of the Pledgor to the Bank, whether direct or indirect, absolute or
contingent, due or to become due or now existing or hereafter arising.
3. CERTIFICATES. If at any time any of the Securities shall be represented
by one or more certificates or by any documents which are instruments (as
defined in the Uniform Commercial Code), then the Pledgor shall promptly deliver
the same to the Bank or the Bank's agent, accompanied by duly executed transfer
powers endorsed in blank respecting such certificates or documents.
4. SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS. The Pledgor
represents and warrants to, and covenants with, the Bank that:
(a) The Securities are not subject to any restriction which would
prohibit or restrict the granting of the security interest in and assignment of
the Securities pursuant hereto or the disposition of the Securities upon default
hereunder.
(b) The execution, delivery and performance of this Agreement will not
result in any violation of or be in conflict with or constitute a default under
any term of any agreement or instrument or any judgment, decree, order, statute,
rule or governmental regulation applicable to the Pledgor or result in the
creation of any mortgage, lien, charge or encumbrance upon any of the properties
or assets of the Pledgor (except pursuant to this Agreement).
(c) The Pledgor is the sole owner of the Securities and the Securities
are not subject to any pledge, lien, security interest, charge or encumbrance
except pursuant to this Agreement. The Pledgor will defend the Securities
against all claims and demands of all persons at any time claiming any interest
therein. No financing statements covering any of the Securities are on file in
any public office other than the financing statements filed pursuant to this
Agreement.
(d) The Pledgor will not sell, pledge, encumber, grant a security
interest in or otherwise dispose of the Securities nor will the Pledgor create,
incur or permit to exist any sale, pledge, encumbrance or any security interest
whatsoever with respect to the Securities or the proceeds thereof, without
substituting United States government obligation securities sufficient to meet
the Deemed Collateral Value requirement stated below.
(e) The Pledgor will, at its own expense, do, make, execute and deliver
all such additional and further acts, things, deeds, assurances and instruments
as the Bank may reasonably require more completely to vest in and assure to the
Bank its rights hereunder or in the Securities, including, without limitation,
(i) executing, delivering and, where appropriate, filing financing statements
and continuation statements under the Uniform Commercial Code, (ii) obtaining
governmental and other third party consents and approvals, and (iii) taking all
actions required by Sections 8-313, 8-321 and any other section of the Uniform
Commercial Code (1990) or Sections 8-106, 9-115 or any other section of the
Uniform Commercial Code, as applicable in any relevant jurisdiction, with
respect to certificated and uncertificated securities.
(f) The Pledgor will, at its own expense, take all actions necessary to
ensure that the Deemed Collateral Value (defined below) of the Securities that
are subject to this Agreement is at all times equal to, or in excess of, the
aggregate total amount of principal, interest and other charges outstanding
under the Note. For purposes of this requirement, Deemed Collateral Value
2
shall be ninety percent (90%) of the actual fair market value of the Securities
which consist of Government Obligations. The Pledgor agrees to make such
additions/substitutions to the Securities listed on Exhibit A from time to time
as requested by the Bank in order to comply with this coverage threshold.
5. EVENTS OF DEFAULT.
(a) The occurrence of any of the following events or conditions shall
constitute a default hereunder (herein called "Events of Default"):
(i) The failure to pay or perform any of the Secured Obligations, as
and when the same shall become due and payable (whether at maturity or at a date
fixed for any prepayment or installment or by declaration or acceleration or
otherwise) and such failure shall continue beyond the expiration of the
applicable period of grace, if any; or
(ii) Any Event of Default (as defined in the Note, the Loan
Agreement or in any other agreement between the Pledgor and the Bank) shall
occur; or
(iii) Failure to pay or perform any term or provision of this
Agreement.
(b) If an Event of Default shall occur hereunder, such default not
having previously been remedied or waived, then thereupon and at any time or
times thereafter the Bank shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code and any other applicable law. More
specifically, but in no way in limitation of its other rights and remedies, the
Bank may, upon ten (10) days' written notice (which notice shall be deemed to
satisfy any requirement of reasonable notification) to the Pledgor, and without
liability for any diminution in price which may have occurred, sell or otherwise
dispose of all or any part of the Securities (or any rights comprising the
Securities) or other collateral hereunder. Such sale or other disposition may be
by public or private proceedings and may be made by way of one or more
contracts, as a unit or in portions, at such time and place, by such method, and
in such manner and on such terms, as the Bank may reasonably determine. At any
bona fide public sale the Bank shall be free to purchase all or any part of the
Securities (or any rights comprising the Securities) or other collateral.
Without limiting the generality of the foregoing, and in view of the fact that
federal and state securities laws may impose certain restrictions on the method
by which a sale of the Securities may be effected after an Event of Default, the
Pledgor agrees that upon the occurrence or existence of an Event of Default, the
Bank may, from time to time, attempt to sell all or any part of the Securities
by means of a private placement, restricting the bidders and prospective
purchasers to those who will represent or agree as to their investment intent or
method of resale or both in a manner reasonably required by the Bank to assure
compliance with applicable securities laws, and that such a sale shall be deemed
to be a commercially reasonable method of disposition of the Securities.
6. ATTORNEY-IN-FACT. Upon the occurrence of an Event of Default, the Bank
is hereby appointed the attorney-in-fact, with full power of substitution, of
the Pledgor for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instruments (including, without limitation,
issuing instructions to any securities intermediary, financing or
3
continuation statements, conveyances, assignments, and transfers) which the Bank
may deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is coupled with an interest and is irrevocable.
The Pledgor shall indemnify and hold harmless the Bank from and against any
liability or damage which it may incur in the exercise and performance, in good
faith, of the Bank's powers and duties specifically set forth herein.
7. WAIVERS, ETC. The Pledgor, on its own behalf and on behalf of its
successors and assigns, hereby waives presentment, demand, notice, protest and,
except as is otherwise provided herein, all other demands and notices in
connection with this Agreement, with the enforcement of the Bank's rights
hereunder or with any Secured Obligation or any of the Securities; waives all
rights to require a marshalling of assets by the Bank; and consents to and
waives notice of (a) the granting of renewals, extensions of time for payment or
other indulgences to the Pledgor or any other party, (b) substitution, release
or surrender of any of the Securities, (c) the addition or release of any of the
Securities or other Collateral, (d) the acceptance of partial payments on any
Secured Obligation, any Securities and/or the settlement or compromise thereof.
The rights of the Bank hereunder shall not be affected by (i) any
extension, renewal, acceleration, indulgence, settlement, compromise or any
other change in the time of payment or the terms of any Secured Obligation or
any part thereof; (ii) the taking and holding of additional security, other than
the Securities and other collateral herein described, for the payment of the
Secured Obligations or any part thereof, or the exchange, enforcement, waiver or
release of any of the Securities or other collateral herein described or any
part thereof or any other security for the Secured Obligations in accordance
with this Agreement. The Bank may take any additional collateral security and
may release, supersede, exchange or modify any other security it may from time
to time hold in accordance with this Agreement. The Pledgor hereby further
waives any right it may have under the Constitution of the Commonwealth of
Massachusetts, or under the Constitution of the United States of America, to
notice (other than any requirement of notice provided herein) or to a judicial
hearing prior to the exercise of any right or remedy provided by this Agreement
to the Bank and waives its rights, if any, to set aside or invalidate any sale
duly consummated in accordance with the foregoing provisions hereof on the
grounds (if such be the case) that the sale was consummated without a prior
judicial hearing. The Pledgor's waivers under this paragraph have been made
voluntarily, intelligently and knowingly and after the Pledgor has been apprised
and counseled by its attorneys as to the nature thereof and its possible
alternative rights. No delay or omission on the part of the Bank in exercising
any right hereunder shall operate as a waiver of such right or of any other
right hereunder. Any waiver of any such right on any one occasion shall not be
construed as a bar to or waiver of any such right on any future occasion. No
course of dealing between the Pledgor and the Bank nor any failure to exercise,
nor any delay in exercising, on the part of the Bank, any right, power or
privilege hereunder or under any of the Secured Obligations, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
8. OFFSETS. Upon the occurrence of an Event of Default and at any time
thereafter, the Bank shall have the right to set off and apply against the
Secured Obligations, without notice to the Pledgor any and all deposits (general
or special, time or demand, provisional or final), accounts, or
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other sums at any time credited by or owing from the Bank to the Pledgor,
including without limitation, any and all other property at any time in the
Bank's possession, regardless of the adequacy of any collateral for the Secured
Obligations. The rights and remedies of the Bank hereunder are in addition to
any other rights and remedies which the Bank may have.
9. NOTICES. Except as otherwise provided herein, all notices hereunder
shall be in writing and shall be deemed to have been sufficiently given or
served for all purposes hereof if personally delivered or mailed by first class
mail, postage prepaid, or mailed by overnight courier to the address specified
on the first page hereof, or at such other address as the party to whom such
notice is directed may have designated in writing to the other parties hereof. A
notice shall be deemed to have been given upon the earlier to occur of (i) three
(3) days after the date on which it is deposited in the U.S. mails or (ii)
receipt by the party to whom such notice is directed.
10. MISCELLANEOUS.
(a) The Bank shall be under no duty or liability with respect to the
Securities or other collateral hereunder other than to use reasonable care in
the custody of any certificate representing any of the Securities or of other
collateral while in its possession.
(b) The Pledgor has, simultaneously herewith, executed and delivered to
the Bank financing statements pursuant to the Uniform Commercial Code covering
the security interest hereunder. The Pledgor shall, upon request of the Bank,
make, execute, deliver and perform such further instruments, acts, and
assurances as the Bank may request to maintain the priority of the lien
hereunder, to confirm or more fully perfect the rights hereunder, or in any way
to assure to the Bank all of its rights hereunder. The Pledgor shall pay the
costs of all filings in public offices or records. In addition, the Pledgor
shall, upon request of the Bank, make, execute and deliver such further
instruments and take such acts as the Bank may deem necessary or appropriate to
enable the Bank to realize upon the Securities and other collateral, to exercise
fully the rights hereunder, and to ratify and confirm any sale hereunder.
(c) The Bank's rights and remedies herein provided or provided under
any other agreement or instrument, or whether otherwise available, are
cumulative, and are in addition to and not exclusive of, any rights and remedies
provided by law including, without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code.
(d) All reasonable costs and expenses, including without limitation
legal costs and reasonable attorneys' fees, incurred by the Bank in enforcing
this Agreement shall be chargeable to and secured by the Securities and other
collateral hereunder.
(e) All rights of the Bank hereunder shall inure to the benefit of its
successors and assigns, and this Agreement shall bind the Pledgor's respective
successors and assigns. The term "Bank" shall be deemed to include any other
holder or holders of the Secured Obligations.
(f) If any provision hereof shall be invalid or unenforceable in any
respect or in any jurisdiction, the remaining provisions hereof shall remain in
full force and effect and shall be enforceable to the maximum extent permitted
by law.
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(g) The Pledgor may withdraw from its account the Securities, without
the consent of the Bank, so long as other United States government obligation
securities of equal value are substituted therefor as Securities subject to the
lien of the Pledge Agreement.
11. GOVERNING LAW; JURISDICTION. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.
THE BANK:
CITIZENS BANK OF MASSACHUSETTS
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
THE PLEDGOR:
DUSA PHARMACEUTICALS, INC.
By:
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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EXHIBIT A
TO
PLEDGE AND SECURITY AGREEMENT
Securities Held By And Pledged To Citizens Bank of Massachusetts
TYPE AMOUNT
COUPON RATE DUE DATE CURRENT VALUE
----------- --------- -------------
Fed Home Ln Bk $1,000,000 $1,020,630
5.375 02/15/07
Fed Home Ln Bk $1,000,000 $1,071,250
6.525 01/03/07
Fed Home Ln Bk $1,000,000 $1,002,810
4.910 12/11/06
7