EXHIBIT 10.16
REVOLVING CREDIT AND LOAN AGREEMENT
DATED AS OF DECEMBER 21, 1999
KOS PHARMACEUTICALS, INC., a Florida corporation (the "Borrower"), and
XXXXXXX XXXXXXX, an individual residing in South Norwalk, Connecticut (the
"Lender"), agree as follows: ARTICLE I
DEFINITIONS
SECTION 1.01. ACQUISITION TRANSACTION shall mean (i) a merger or
consolidation, or any similar transaction, of Borrower into or with another
corporation or other entity (other than into or with a Related Company), (ii) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 20% or more of the voting
power of Borrower; (iii) the sale of all or substantially all of the assets of
the Borrower, or (iv) any substantially similar transaction.
SECTION 1.02. ADVANCES shall mean the advances made under the Note and
pursuant to this Agreement.
SECTION 1.03. AMENDED AND RESTATED PATENT SECURITY AGREEMENT shall mean
the Amended and Restated Patent, Trademark and License Security Agreement of
even date herewith granted by Borrower to Lender as collateral security for the
Note and the
September Note.
SECTION 1.04. AMENDED AND RESTATED SECURITY AGREEMENT shall mean the
Amended and Restated Security Agreement of even date herewith granted by
Borrower to Lender as collateral security for the Note and the September Note.
SECTION 1.05. AMENDED AND RESTATED STOCK PLEDGE AGREEMENT shall mean
the Amended and Restated Stock Pledge Agreement of even date herewith granted by
the Borrower to Lender as collateral security for the Note and the September
Note.
SECTION 1.06. AMENDED AND RESTATED SUBSIDIARY GUARANTY shall mean the
Amended and Restated Guaranty of even date herewith granted by ATI to Lender
guaranteeing repayment of the Note and the September Note.
SECTION 1.07. AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT shall
mean the Amended and Restated Subsidiary Security Agreement of even date
herewith granted by ATI to Lender as collateral security for the Amended and
Restated Subsidiary Guaranty.
SECTION 1.08. ATI shall mean Aeropharm Technology, Inc., a Delaware
corporation which is a wholly owned subsidiary of Borrower.
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SECTION 1.09. ATI STOCK PLEDGE AGREEMENT shall mean the Stock Pledge
Agreement of even date herewith granted by ATI to Lender as collateral security
for the Amended and Restated Subsidiary Guaranty.
SECTION 1.10. BUSINESS DAY shall mean any day other than a Saturday,
Sunday or other day on which the Borrower's business is closed.
SECTION 1.11. CLOSING DATE shall mean the date on which the closing for
this Loan is held.
SECTION 1.12. COMMON STOCK shall mean the capital common stock of the
Borrower, consisting of 50,000,000 authorized shares $.01 par value.
SECTION 1.13. COMPENSATION shall mean (i) any and all compensation,
including without limitation salaries, bonuses, commissions, fringe benefits,
deferred compensation, retirement benefit contributions and similar benefits,
paid to employees of the Borrower for services rendered, and (ii) any and all
compensation and payments, including without limitation payments reportable as
income to recipients on the various types of IRS Forms 1099, paid to recipients
for services rendered.
SECTION 1.14. CREDIT FACILITY shall mean the $50,000,000.00
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revolving credit facility made available by the Lender pursuant to the Note.
SECTION 1.15. DEBT shall mean the debt of any Person at any date,
without duplication in calculating the amount thereof, arising from:
(i) all obligations of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds (other
than performance bonds), debentures, notes or other similar
instruments;
(iii) all trade credit and other obligations of such Person to
pay the deferred purchase price of property or services;
(iv) all obligations of such Person as lessee under capital
leases;
(v) all debt of others secured by a lien on any asset of such
Person, whether or not such debt is assumed by such Person; and
(vi) all debt of others guaranteed by such Person.
SECTION 1.16. ENVIRONMENTAL COMPLAINT shall mean any complaint, order,
citation or notice of violation of Environmental Laws with regard to air
emissions, water discharges, surface
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contamination, noise emissions or any other environmental, health or safety
matter affecting the Borrower or any of its real properties.
SECTION 1.17. ENVIRONMENTAL LAWS means and includes the comprehensive
Environmental Response, Conservation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Toxic Substances Control Act, as
amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any
other "Superfund" or "Superlien" law, or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
Hazardous Materials, as now or at any time hereafter in effect.
SECTION 1.18. ENVIRONMENTAL AND SAFETY REQUIREMENTS shall mean any and
all Environmental Laws and any other federal, state and local laws relating to
public health and safety, worker health and safety, and pollution or protection
of the environment, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of toxic or otherwise hazardous
materials, substances, or wastes into ambient air,
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surface water, groundwater, subsurface soil or lands or otherwise relating to
generation, the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of toxic or otherwise hazardous materials,
substances or wastes.
SECTION 1.19. EVENT OF DEFAULT shall mean an Event of Default under
Section 6.01.
SECTION 1.20. EXCHANGE ACT shall mean the Securities Exchange Act of
1934, as amended from time to time.
SECTION 1.21. HAZARDOUS DISCHARGE shall mean the happening of any event
involving the generation, use, spill, discharge or storage, disposal or cleanup
of any Hazardous Materials not in compliance with Environmental Laws.
SECTION 1.22. HAZARDOUS MATERIAL shall mean any pollutant, contaminant,
toxic substance, hazardous waste, hazardous material, hazardous substance,
petroleum or petroleum product, asbestos, polychlorinated biphenyls, underground
storage tanks and the contents thereof including, without limitation, any such
materials defined in or regulated pursuant to the Resource Conservation and
Recovery Act, as amended, the Comprehensive Environmental Response, Conservation
and Liability Act, as amended, the Federal Clean Water Act as amended, the Toxic
Substances Control Act, as
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amended, the Hazardous Materials Transportation Act, as amended, or any other
Environmental Law, whether existing as of the date hereof, previously enforced,
or subsequently enacted.
SECTION 1.23. IEP shall mean IEP Pharmaceutical Devices, Inc., a
Florida corporation which is a wholly owned subsidiary of Borrower.
SECTION 1.24. IEP GUARANTY shall mean the Guaranty of even date
herewith granted by IEP to Lender guaranteeing repayment of the Note and the
September Note.
SECTION 1.25. IEP SECURITY AGREEMENT shall mean the IEP Security
Agreement of even date herewith granted by IEP to Lender as collateral security
for the IEP Guaranty.
SECTION 1.26. JULY CREDIT FACILITY shall mean the $30,000,000 revolving
credit facility made available by the Lender to the Borrower pursuant to that
certain Promissory Note by Borrower in favor of Lender dated as of July 1, 1998
and that certain Revolving Credit Facility and Loan Agreement between Borrower
and Lender dated as of July 1, 1998.
SECTION 1.27. LOAN shall mean the loan made pursuant to Section 2.01
and the Note.
SECTION 1.28. LOAN DOCUMENTS shall mean this Agreement, the
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Note, the Second Amended and Restated Registration Rights Agreement, the Amended
and Restated Security Agreement, the Amended and Restated Patent Security
Agreement, the Amended and Restated Stock Pledge Agreement, the Amended and
Restated Subsidiary Guaranty, the Amended and Restated Subsidiary Security
Agreement, the IEP Guaranty, the IEP Security Agreement, the UCC-1 financing
statements executed in connection with the security agreements, the Warrant
Agreement, and each and every other document executed or delivered in connection
with the closing of this transaction, each such document being referred to
individually as a "Loan Document".
SECTION 1.29. MATURITY DATE shall mean June 30, 2005.
SECTION 1.30. NOTE shall mean the promissory note referred to in
Section 2.01, substantially in the form of EXHIBIT I attached hereto and made a
part hereof.
SECTION 1.31. PERMISSIBLE EQUIPMENT FINANCING INDEBTEDNESS shall mean
Debt incurred for equipment financing in the ordinary course of business (i) in
an amount not in excess of $250,000.00 in the aggregate for any one transaction,
or (ii) for the lease or purchase of automobiles for use by employees. For the
purpose of defining a transaction, all equipment orders from the same vendor
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or affiliated vendors made within a 30 day period for a group of similar or
interrelated items shall constitute one transaction.
SECTION 1.32. PERMISSIBLE LETTER OF CREDIT INDEBTEDNESS shall mean Debt
incurred for the procurement of letters of credit (standby or documentary) in
the ordinary course of business in an amount not in excess of $2,000,000 in the
aggregate for all transactions at any one time. For the purpose of defining a
transaction, all letters of credit procured for the same underlying transaction
or a substantially related transaction shall constitute one transaction.
SECTION 1.33. PERSON means any individual, joint venture, corporation,
company, limited liability company, voluntary association, partnership, limited
partnership, limited liability partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of entity.
SECTION 1.34. RELATED COMPANY or RELATED COMPANIES shall mean (i) any
direct or indirect subsidiary of Borrower; (ii) Kos Investments, Inc., a
Delaware corporation, and all successors thereto; (iii) Kos Holdings, Inc., a
Delaware corporation, and all
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successors thereto.
SECTION 1.35. RELATED PERSON or RELATED PERSONS shall mean any
stockholder of Kos Investments, Inc., a Delaware corporation, existing as of the
date of this Agreement.
SECTION 1.36. REQUEST NOTICE shall mean a notice requesting an Advance
pursuant to Section 2.02 below, which notice shall be in the form and substance
attached hereto as EXHIBIT II hereto.
SECTION 1.37. SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
shall mean the Second Amended and Restated Registration Rights Agreement of even
date herewith entered into by Borrower in favor of Lender with respect to the
Common Stock to be issued upon exercise of warrants issued to Lender pursuant to
the Warrant Agreement or upon conversion of the September Note pursuant to
Article IV of the September Credit Agreement.
SECTION 1.38. SECURITIES ACT shall mean the Securities Act of 1933, as
amended from time to time.
SECTION 1.39. SEPTEMBER CREDIT AGREEMENT shall mean that certain
Revolving Credit and Loan Agreement between Borrower and Lender dated as of
September 1, 1999.
SECTION 1.40. SEPTEMBER CREDIT FACILITY shall mean the $50,000,000
revolving credit facility made available by the Lender
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pursuant to the September Note and the September Credit Agreement.
SECTION 1.41. SEPTEMBER NOTE shall mean that certain Promissory Note by
Borrower in favor of Lender dated as of September 1, 1999 in the principal
amount of $50,000,000.
SECTION 1.42. SUBSIDIARIES shall mean ATI and IEP.
SECTION 1.43. TAKE-OVER ATTEMPT shall mean any of the following
occurrences:
(a) Any person (other than a Related Company or a Related Person) shall
have acquired beneficial ownership or the right to acquire beneficial ownership
of securities representing 20% or more of the aggregate voting power of Borrower
or any Related Company (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the Exchange
Act, and the rules and regulations thereunder); or
(b) Any person shall have engaged in an Acquisition Transaction.
SECTION 1.44. TERMINATION DATE shall mean June 30, 2002.
SECTION 1.45. WARRANT shall mean that certain warrant to purchase 6
million shares of Common Stock at a price of $5.00 per share.
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ARTICLE II
THE LOAN
SECTION 2.01. THE LOAN. The Lender agrees, on the terms and conditions
hereinafter set forth, to make a Loan to the Borrower in an amount not to exceed
Fifty Million Dollars ($50,000,000.00) on the terms and conditions set forth
herein and in the Note.
SECTION 2.02. MAKING ADVANCES. Upon the terms and subject to the
conditions herein set forth, the Lender shall from time to time make Advances to
the Borrower under the Loan up to an aggregate principal amount at any one time
outstanding not to exceed an amount equal to the Credit Facility. Any sums
advanced pursuant to this Section and subsequently repaid may be re-borrowed
from time to time, subject to the requirements of Section 2.02.
(a) Borrower may use loan proceeds for any business purpose of
Borrower.
(b) Nothing herein shall obligate the Lender to make any Advance in
excess of the maximum amount of the Credit Facility, the making of any or all
Advances in excess of the maximum amount
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of the Credit Facility to be in the sole and absolute discretion of the Lender.
If at any time an excess shall exist for any reason other than as specifically
authorized by Lender, the Borrower shall repay to the Lender forthwith, without
notice or demand, such amount as shall be necessary to eliminate such excess.
(c) The Borrower shall give the Lender written or telegraphic notice of
its request for an Advance by submitting a Request Notice at least three (3)
Business Days prior to the requested date of the Advance. Each Request Notice
shall specify the date and the amount of the requested Advance. Each Advance
shall be in the minimum amount of $5,000.00 and in integral multiples of
$1,000.00. The Lender shall make each Advance in immediately available funds by
wire transfer to a deposit account designated by Borrower at its financial
institution, as soon as practicable, but in no event later than 3 business days
following the receipt by Lender of a Request Notice.
(d) The Lender shall not be obligated to make Advances aggregating in
excess of $12,000,000 during any fiscal quarter of Borrower.
SECTION 2.03. TERMINATION. Except as otherwise provided in
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this Agreement, the provisions of Section 2.02 relating to the making of
Advances under the Note shall remain in effect until the Termination Date, and
shall be terminated at such time unless otherwise renewed or extended by the
Lender. Notwithstanding any such termination, and subject to Lender's right to
exercise its rights and remedies under the Loan Documents upon the occurrence of
an Event of Default or otherwise, all of the provisions of this Loan Agreement
shall remain in effect while any part of the Loan remains outstanding, such
termination affecting only those provisions relating to the making of Advances.
All obligations of the Borrower in respect of the Note shall become due and
payable on the Maturity Date, without notice or demand.
SECTION 2.04. EXCESS ADVANCES. Any Advances made at any time during the
term of the Loan by the Lender to the Borrower in excess of the face amount of
the Note shall, while outstanding, be deemed part of the indebtedness of
Borrower owed to the Lender under the Note and shall be equally subject to all
of the terms and provisions of this Agreement and the Loan Documents. Any
reference in any Loan Documents to the indebtedness or amounts owed under this
Agreement and the Note is hereby deemed to include such excess Advances.
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SECTION 2.05. INCREASE IN LOAN AMOUNT. The amount of the Loan may be
increased from time to time by the execution and delivery of an amendment to
this Agreement setting forth the amount of such increase, duly executed by the
Lender and the Borrower, and the execution and delivery by the Borrower of a
note in substantially the form of EXHIBIT I attached hereto in the principal
amount of such increase. Upon execution and delivery of any such note, any
reference to the term "Loan Documents" herein or in any Loan Document shall be
deemed to include reference to such note.
SECTION 2.06. PAYMENTS AND COMPUTATIONS. The Borrower shall make each
payment under any Loan Document not later than 3:00 p.m. (New York City time) on
the day when due in lawful money of the United States of America to the Lender
at its address referred to in Section 8.02 in immediately available funds. All
computations of interest under the Note shall be made by the Lender on the basis
of a 360-day year, for the actual number of days (including the first day but
excluding the last day) elapsed.
SECTION 2.07. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder or under the Note shall be stated to
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be due on a day which is not a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest.
SECTION 2.08. TERMINATION OF FACILITY. The Lender's obligation to make
available to the Borrower the Credit Facility and to make Advances thereunder
shall terminate, at the Lender's option, upon the occurrence of any of the
following events:
(i) termination of the availability of the Credit Facility
pursuant to Section 2.03; or
(ii) an Event of Default.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO CLOSING. The obligation of the
Lender to close the Loan and make any Advances hereunder at closing shall be
subject to the condition precedent that the Lender shall have received on or
before the Closing Date the following, each dated the Closing Date, in form and
substance satisfactory to the Lender:
(a) The Note, duly executed by the Borrower;
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(b) The Second Amended and Restated Registration Rights Agreement, duly
executed by the Borrower;
(c) The Amended and Restated Security Agreement, duly executed by the
Borrower;
(d) The Amended and Restated Patent Security Agreement, duly executed
by the Borrower;
(e) The Amended and Restated Subsidiary Security Agreement, duly
executed by ATI;
(f) The Amended and Restated Subsidiary Guaranty, duly executed by ATI;
(g) The IEP Guaranty, duly executed by IEP;
(h) The IEP Security Agreement, duly executed by IEP;
(i) The ATI Stock Pledge Agreement, duly executed by ATI;
(j) UCC-1 financing statements with respect to the security interests
granted to Lender by IEP under the Loan Documents for such locations as the
Lender may deem necessary to perfect the Lender's security interests, duly
executed by IEP;
(k) The Warrant, duly executed by the Borrower.
(l) The Amended and Restated Stock Pledge Agreement, duly executed by
the Borrower;
(m) A conditional assignment of Borrower's lease(s) of real
17
property, together with a written consent to such assignment from Borrower's
landlord(s) and a written waiver by such landlord(s) of certain rights of
landlord under its lease(s) in furtherance of the exercise by Lender of its
rights under the Amended and Restated Security Agreement, all in form and
substance satisfactory to Lender;
(n) A binder of an endorsement to Borrower's fire, hazard and extended
coverage insurance policy (with a long form endorsement) with respect to the
assets given as collateral pursuant to the Amended and Restated Security
Agreement showing the Lender as loss payee in form satisfactory to the Lender
and to Borrower's comprehensive liability policy (with a long form endorsement)
and Borrower's product liability policy (with a long form endorsement) with
respect to Borrower's business showing the Lender as an additional insured under
such policy;
(o) A binder of an endorsement to business interruption coverage
insurance policy (with a long form endorsement) with respect to Borrower's
business showing the Lender as loss payee in form satisfactory to the Lender;
(p) A certified copy of the resolutions of the board of directors of
the Borrower approving this transaction in the form
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attached as EXHIBIT III;
(q) A certificate of the secretary or an assistant secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign each Loan Document to which it is a party and the
other documents to be delivered by it hereunder;
(r) Copies of consents of third parties necessary for the consummation
of this transaction;
(s) A favorable opinion of counsel for the Borrower, in substantially
the form of EXHIBIT IV and as to such other matters as the Lender may reasonably
request; and
(t) Such other documents and information as the Lender may reasonably
request.
SECTION 3.02. CONDITIONS PRECEDENT TO ADVANCES. The obligation of the
Lender to make any Advances under the Note is subject to the condition precedent
that the Lender shall have received at least three Business Days before the date
of such Advance, in form and substance satisfactory to the Lender:
(a) A Request Notice, the representations and warranties contained
within which shall be true and accurate as of the date of the Advance being
requested;
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(b) The representations and warranties contained in Section 5.0l below
shall be true and correct on and as of the date of such requested Advance as
though made on and as of such date;
(c) As of the date of such requested Advance, no event shall have
occurred and be continuing, or would result from the Advance requested thereby,
which would constitute an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse, or both;
(d) As of the date of such requested Advance, there shall not have
occurred any material adverse change in the business or financial operations or
condition of the Borrower or in its management;
(e) As of the date of such requested Advance, all loan proceeds
available under the September Credit Facility shall have been advanced to
Borrower and shall remain outstanding, except to the extent that any portion of
the outstanding balance under the September Credit Facility is converted
pursuant to the terms of the September Note and the September Credit Agreement.
(f) As of the date of such requested Advance, there shall not be any
pending, or to the best of its knowledge, threatened action or proceeding
affecting the Borrower before any court,
20
governmental agency or arbitrator which is likely to have a materially adverse
effect on the financial condition or operations of the Borrower;
(g) The Borrower shall waive any claim or defense based upon the
occurrence of any action or inaction of Lender on or prior to the date of such
requested Advance which Borrower believes at such time may (i) be actionable
against Lender, or (ii) give rise to a defense to payment under the Loan
Agreement or the Note for any reason, including without limitation, commission
of a tort or violation of any contractual duty or duty implied at law;
(h) As of the date of such requested Advance, the death of Lender shall
not have occurred;
(i) The Lender, together with Lender's spouse and children and any
entity of which Lender owns a majority interest, shall continue to own directly
and indirectly at least forty percent (40%) of the outstanding shares of Common
Stock of the Borrower; and
(j) Such approvals, opinions and documents as the Lender may reasonably
request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. Except as
otherwise disclosed in a schedule or schedules attached hereto and made a part
hereof, the Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing
and its status is active under the laws of the State of Florida, has the
requisite power and authority to own its properties and assets and to carry on
its business as now conducted, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which failure to so
qualify would have a material adverse effect on the transaction contemplated
hereby.
(b) The authorized capital stock of the Borrower consists exclusively
of (A) 50,000,000 shares of Common Stock, par value $.01 per share, of which
18,020,752 shares are issued and outstanding as of December 20, 1999, and (B)
10,000,000 shares of preferred stock, par value $.01 per share, of which no
shares are issued and outstanding. All issued and outstanding shares of the
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capital stock of the Borrower and of each of its subsidiaries have been fully
paid, were duly authorized and validly issued, are nonasesssable and have been
issued pursuant to an effective registration statement under the Securities Act
or an appropriate exemption from registration under the Securities Act and were
not issued in violation of the preemptive rights of any shareholder.
(c) The execution, delivery and performance by the Borrower of this
Agreement, the Note and each other Loan Document to which the Borrower is a
party have been duly authorized by all necessary corporate action and do not and
will not:
(i) require any consent or approval of the share-holders of
the Borrower not already obtained;
(ii) contravene the Borrower's governing documents;
(iii) violate any provision of any law, rule, regulation
(including, without limitation, Regulation X of the Board of Governors
of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability
to the Borrower;
(iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a
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party or by which it or its properties may be bound or affected; or
(v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other
charge or encumbrance of any nature (other than arising under a Loan
Document) upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower;
and the Borrower is not in default under any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of any Loan Document
to which it is or will be a party.
(e) This Agreement is, and each other Loan Document to which the
Borrower will be a party when delivered hereunder will be, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms,
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and there has not occurred any action or inaction of Lender which Borrower
believes may (i) be actionable against Lender, or (ii) give rise to a defense,
to payment hereunder or under the Note for any reason, including without
limitation, commission of a tort or violation of any contractual duty or duty
implied at law.
(f) The consolidated balance sheet of the Borrower as of December 31,
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for the fiscal year then ended, audited by Xxxxxx
Xxxxxxxx, LLP, and the consolidated balance sheet of the Borrower as of
September 30, 1999, and the related consolidated statements of operations,
shareholders' equity and cash flows for the quarter then ended, copies of which
have been furnished to the Lender, fairly present the financial condition of the
Borrower as at such date and its results of operations for the year then ended
in accordance with generally accepted accounting principles, consistently
applied, and since December 31, 1998 and September 30, 1999, there has been no
material adverse change in such condition or operations.
(g) There is no pending, or to the best of its knowledge, threatened
action or proceeding affecting the Borrower before any court, governmental
agency or arbitrator which may materially
25
adversely affect the financial condition or operations of the Borrower.
(h) The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of the Loan will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock.
(i) There are no recorded and/or perfected mortgages, deeds of trust,
liens, security interests or, to the best of its knowledge, other charges and
encumbrances (including liens or the retained titles of conditional vendors) of
any nature whatsoever on any properties of the Borrower other than those
permitted under Section 5.02(a) hereof.
(j) The Borrower has filed all tax returns (federal, state and local)
required to be filed and has paid all taxes shown thereon to be due, including
interest and penalties, or provided adequate reserves for payment thereof.
(k) ENVIRONMENTAL MATTERS.
(i) The Borrower has obtained all material permits,
26
licenses and other authorizations required under Environmental and
Safety Requirements, except for any licenses, permits or authorizations
the failure to obtain which would not reasonably be expected to have a
material adverse effect on the operations or financial condition of the
Company.
(ii) The Borrower is in material compliance with all material
terms and conditions of any required material permits, licenses, and
authorizations and with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Environmental and Safety
Requirements or any notice or demand letters issued, entered,
promulgated or approved thereunder, except where the failure to so
comply would not reasonably be expected to have a material adverse
effect on the operations or financial condition of Borrower.
(iii) The Borrower has not received any material written
notice, demand, complaint, or order from any governmental authority or
private party relating to material environmental impairments or
liabilities with respect to the
27
operation of its businesses or any of its real properties or advising
the Borrower that it is potentially responsible for material response
costs or remediation with respect to a release or threatened release of
Hazardous Materials, any of which, if adversely resolved, would
reasonably be expected to have a material adverse effect on the
operations or financial condition of the Borrower.
(iv) None of the real property owned or leased by the Borrower
is subject to a private or governmental lien arising under
Environmental Laws.
(l) No information, exhibit or report furnished by the Borrower to the
Lender in connection with the negotiation of this Agreement or any other Loan
Document or any representations and warranties herein contains or contained any
material misstatement of fact or omitted to state a material fact necessary to
make the statements contained therein not misleading. Borrower acknowledges that
the Lender is relying upon these representations and warranties in making the
loan contemplated herein.
ARTICLE V
COVENANTS OF THE BORROWER
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SECTION 5.01. AFFIRMATIVE COVENANTS. So long as the Note shall remain
unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property except
to the extent contested in good faith.
(b) MAINTENANCE OF INSURANCE. Maintain insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates.
(c) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve all of its
properties, necessary or useful in the proper conduct of its business, in good
working order and condition, ordinary wear and tear excepted.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate
29
records and books of account, in which complete entries will be made in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Borrower.
(e) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is necessary in view of its
business and operations or the ownership of its properties and in which the
failure to qualify would have a material adverse effect on Borrower's business
or prospects.
(f) ACCESS TO RECORDS. At any reasonable time and from time to time,
upon at least three days' oral or written notice (unless the Borrower is in
default, in which case no notice shall be necessary), permit the Lender or any
agents or representatives thereof during normal business hours to examine and at
Borrower's expense make copies of and abstracts from the records and books of
account of, and to visit the properties of, the Borrower and to discuss the
affairs, finances and accounts of the Borrower with any of its officers or
directors; provided, however, that prior to
30
the occurrence of an Event of Default no such actions by the Lender shall be
taken in a manner that would disrupt Borrower in the conduct of its business.
Until such time as Lender enforces its rights and exercises it remedies upon or
after an Event of Default, Lender shall keep confidential any information which
it obtains in the course of such examination and investigation and shall not
disclose such information to anyone other than agents, representatives and
advisors of Lender, except that this obligation to keep information confidential
shall not apply to information that (i) is already in Lender's possession,
provided that such information is not known by Lender to be subject to another
confidentiality agreement with or other obligation of secrecy to the Borrower or
another party, (ii) becomes generally available to the public other than as a
result of a disclosure by Lender or Lender's agents, representatives or advisors
or (iii) becomes available to Lender on a nonconfidential basis from a source
other than the Borrower or its advisors, provided that such source is not known
by Lender to be bound by a confidentiality agreement with or other obligation of
secrecy to the Borrower or another party.
(g) REPORTING REQUIREMENTS. Furnish to the Lender:
31
(i) as soon as available and in any event within forty-five
(45) days after the end of each quarter of each fiscal year of the
Borrower other than the fourth quarter, a consolidated balance sheet of
the Borrower as of the end of such quarter and the related consolidated
statements of operations and cash flows for the period commencing at
the end of the previous fiscal year and ending with the end of such
quarter, certified as to fairness of presentation, generally accepted
accounting principles and consistency by the chief accounting officer
of the Borrower, together with a certificate of such chief accounting
officer stating that as of the date of such certificate there is no
continuing Event of Default or event which, with notice or lapse of
time or both, would constitute an Event of Default, or, if an Event of
Default or such an event has occurred and is continuing, a statement as
to the nature thereof and the action which the Borrower has taken or
proposes to take with respect thereto;
(ii) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Borrower, a consolidated
balance sheet of the Borrower as of the end of such fiscal year and the
related consolidated
32
statements of operations, shareholders' equity and cash flows for such
fiscal year, certified without material qualification by the Company's
independent public accountants acceptable to the Lender, which shall be
one of the six largest national public accounting firms;
(iii) as soon as possible and in any event within five (5)
days after the Borrower has knowledge of the occurrence of each Event
of Default, continuing on the date of such statement, the statement of
the chief accounting officer of the Borrower setting forth details of
such Event of Default or event and the action which the Borrower has
taken or proposes to take with respect thereto;
(iv) as soon as available, and in any event within five (5)
days thereafter, notification of any proposed or pending change of
executive officers of the Borrower (as defined in the rules and
regulations of the Securities and Exchange Commission);
(v) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Borrower
33
of the type described in Section 4.01(g) hereof;
(vi) promptly after the furnishing thereof, copies of any
statement or report furnished to any financial institution or other
lender pursuant to the terms of any loan or credit or similar agreement
and not otherwise required to be furnished to the Lender pursuant to
any other clause of this subsection (g);
(vii) as soon as available, and in any event within five (5)
days thereafter, notification of (X) any bona fide proposal to Borrower
or its shareholders, by public announcement or written communication
that is or becomes the subject of public disclosure, to engage in an
Acquisition Transaction, or (B) the commencement (as such term is
defined in Rule 14d-2 under the Exchange Act) of, or the filing of a
registration statement under the Securities Act with respect to, a
tender offer or exchange offer to purchase any shares of Common Stock
such that, upon consummation of such offer, such person would own or
control securities representing 10% or more of the aggregate voting
power of Borrower or any Related Company; and
(viii) such other information respecting the condition
34
or operations, financial or otherwise, of the Borrower as the Lender
may from time to time reasonably request.
SECTION 5.02. NEGATIVE COVENANTS. So long as the Note shall remain
unpaid, the Borrower will not, without the written consent of the Lender:
(a) LIENS, ETC. Create or suffer to exist any lien, security interest
or other charge or encumbrance, or any other type of preferential arrangement,
upon or with respect to any of its properties, whether now owned or hereafter
acquired, or assign any right to receive income, in each case to secure any Debt
of any Person, except that the foregoing restrictions shall not apply to
mortgages, deeds of trust, pledges, liens, security interests or other charges
or encumbrances:
(i) existing as of the date hereof and listed in SCHEDULE A
attached hereto and made a part hereof;
(ii) for taxes, assessments or governmental charges or levies
on property of the Borrower if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings;
(iii) imposed by law, such as carriers, landlord's,
35
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business;
(iv) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation; or
(v) securing Permissible Equipment Financing Indebtedness or
Permissible Letter of Credit Indebtedness.
(b) DEBT. Create or suffer to exist any Debt, except:
(i) Debt existing as of the date hereof and listed in SCHEDULE
A attached hereto;
(ii) Debt under the Loan Documents;
(iii) Permissible Equipment Financing Indebtedness
(iv) Permissible Letter of Credit Indebtedness, including
without limitation the $3,000,000 Letter of Credit Agreement dated July
17, 1999 with First Union National Bank; provided that the indebtedness
thereunder shall at no time exceed the $2,000,000 limitation set forth
in Section 1.32 above; and
(v) Debt authorized under subsection 5.02(c).
(c) ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
36
PERSONS. Assume, guarantee, endorse or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor or otherwise to assure the creditor against loss)
in connection with any Debt or indebtedness, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.
(d) LOANS AND INVESTMENTS. Lend or advance money, credit or property to
any Person or invest (by capital contribution or otherwise) in any Person, or
purchase or repurchase of the stock or indebtedness or all or a substantial part
of the assets or properties of any Person, or agree to do any of the foregoing,
except for:
(i) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America and which mature within one year from the date of
acquisition thereof;
(ii) investments in commercial paper of any corporation with a
maturity not in excess of thirty days from the date of acquisition
thereof and rated P-1 or better by Xxxxx'x
37
Investors services Inc., or A-1 or better by Standard & Poor's
Corporation;
(iii) investments in certificates of deposit with a maturity
not in excess of ninety days from the date of acquisition thereof,
issued by any commercial bank organized and existing under the laws of
the United States of America or under any state of the United States of
America and having a combined capital and undivided surplus of not less
than $100,000,000, provided, however, that certificates of deposit at
any one bank shall at no time exceed ten percent (10%) of the undivided
capital and surplus of such bank;
(iv) accounts receivable owing to the Borrower, if created or
acquired in the ordinary course of business in connection with the sale
by the Borrower of inventory and payable or dischargeable in accordance
with customary trade terms; commission advances and other advances to
officers and employees for travel and other business-related expenses,
each in the ordinary course of business; and
(v) Loans and advances in each instance in an amount of not
more than $10,000 and in the aggregate with respect to such loans and
advances in an amount of not more than
38
$100,000.
(e) MERGERS, ETC. Merge or consolidate with any Person in a transaction
after which the holders of voting shares of Borrower (or of any class of voting
shares of Borrower) immediately prior to such transaction fail to own at least a
majority of the voting shares of the surviving entity (or of the shares of such
class of voting shares of the surviving entity) following such transaction.
(f) SALES, ETC. OF ASSETS. Sell, assign, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) substantially all of
its assets (whether now owned or hereafter acquired), or of substantially all of
the assets of any direct or indirect subsidiary of Borrower, to an unaffiliated
Person.
(g) CHANGE IN BOARD CONTROL. Enter into a transaction after which the
members of the board of directors of Borrower immediately prior to such
transaction fail to constitute at least a majority of the board of directors of
the surviving entity following such transaction.
(h) CHANGE IN NATURE OF BUSINESS. Make any material change in the
nature of the business of the Borrower, taken as a whole, as carried on at the
date hereof.
39
(i) PURCHASE OF SECURITIES. Purchase, acquire, redeem or retire, or
make any commitment to purchase, acquire, redeem or retire, any of its capital
stock, whether now or hereafter outstanding.
(j) ISSUANCE OF SECURITIES. Issue any stock or other securities in
addition to, in substitution for or in respect of its currently outstanding
capital stock, or raise capital or funds from the capital markets in
consideration for the present or future issuance of any form of securities of
the Borrower.
(k) PROHIBITED TRANSFERS. Transfer, in any manner, either directly or
indirectly, any cash, property, or other assets to any parent or any of its
affiliates or subsidiaries, other than sales made in the ordinary course of
business and for fair consideration on terms no less favorable than if such sale
had been an arms-length transaction between the Borrower and an unaffiliated
entity.
(l) CHARTER AMENDMENTS. Amend its articles or certificate of
incorporation without the prior written consent of Lender.
SECTION 5.03. FINANCIAL COVENANTS. So long as the Note shall remain
unpaid, the Borrower will not fail, without the prior
40
written consent of the Lender, to comply with the financial covenants set forth
in SCHEDULE B.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) The Borrower shall, unless the Lender otherwise consents in
writing, fail to pay any installment of principal of, or interest on, the Note
within ten (10) days after such payment is due; or
(b) Any representation or warranty made by the Borrower (or any of its
officers) under or in connection with any Loan Document or any other document
delivered in connection therewith shall prove to have been incorrect in any
material respect when made; or
(c) The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document, or in any other document
delivered in connection therewith, on its part to be performed or observed and,
in the case of a term, covenant or agreement other than one requiring payment of
funds to Lender,
41
any such failure shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to such Borrower by the Lender; provided,
however, that if by the end of such thirty day period the Borrower has
substantially cured the applicable failure, and such failure has not caused, and
is not expected to immediately cause, a material adverse effect on the Borrower
or its subsidiaries, the Borrower shall have an additional thirty (30) days to
remedy the failure; or
(d) The Borrower shall:
(i) fail to pay any Debt of such Borrower to the Lender
(excluding Debt evidenced by the Note), or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt, or
(ii) fail to pay any other Debt in excess of $250,000.00
(excluding Debt owed to the Lender) of such Borrower, or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall
42
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt, or
(iii) fail to perform or observe any term, covenant or
condition on its part to be performed or observed under any agreement
or instrument relating to any Debt, when required to be performed or
observed, and such failure shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the
effect of such failure to perform or observe is to accelerate (or, in
the case of Debt owed to Lender, is to entitle Lender to accelerate)
the maturity of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof; or
(e) The Borrower shall admit in writing its inability to pay its debts,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking appointment of
43
a receiver, trustee, or other similar official for it or for any substantial
part of its property, which proceeding is not dismissed within thirty (30) days
after being instituted; or the Borrower shall take any corporate action to
authorize any of the actions set forth above in this subsection (e); or
(f) A non-appealable final judgment or order for the payment of money
shall be rendered against the Borrower to the extent to which such judgment or
order exceeds $250,000.00 (or, in the case of insurance coverage for such
payment, exceeds such insurance payment by $250,000.00); or
(g) Any provision of any Loan Document after delivery thereof shall for
any reason cease to be valid and binding on the Borrower which is a party
thereto, or the Borrower shall so state in writing; or
(h) Any material adverse change in the financial condition or business
operations of the Borrower shall occur and be continuing; provided, however,
that in no event shall the lack of Borrower's working capital constitute such a
material adverse change; or
(i) The dissolution or liquidation of the Borrower; or
(j) The occurrence of an Acquisition Transaction; or
(k) A Take-Over Attempt.
44
SECTION 6.02. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default, the Lender may, at its option, either separately or cumulatively:
(a) declare the Note, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable, whereupon the
Note, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower;
(b) exercise any or all of its rights or remedies permitted by
applicable law of a secured party under the Amended and Restated Security
Agreement or the Amended and Restated Patent Security Agreement;
(c) if such Event of Default occurs prior to the Termination Date,
notify the Borrower in writing of the termination of the making of Advances
under Section 2.02, upon which notification the Borrower shall no longer be
entitled to Advances under the Note; and
(e) exercise any or all of its rights or remedies permitted by
applicable law in any capacity under the Loan Documents or applicable law.
45
ARTICLE VII
INDEMNIFICATION AND LIMITATION ON LIABILITY OF LENDER
SECTION 7.01. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, and recording of the Loan Documents, and the other documents
to be delivered under the Loan Documents, including, without limitation, the
reasonable fees and out-of-pocket expenses of legal counsel for the Lender and
fees and out-of-pocket expenses of Lender's advisors with respect thereto, and
all costs and expenses, if any, including, without limitation, the reasonable
fees and out-of-pocket expenses of legal counsel for the Lender, in connection
with the enforcement of the Loan Documents and the other documents to be
delivered under the Loan Documents, the filing or recording of financing
statements and other documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, insurance premiums or
encumbrances, or in defending or prosecuting any actions or proceedings arising
out of or related to this Agreement or any other Loan Document or any
obligations of
46
Borrower to the Lender and the amount of all claims in connection therewith. In
addition, the Borrower shall pay any and all documentary or similar taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of the Loan Documents and the other documents to
be delivered under the Loan Documents, in connection with the making of Advances
and in connection with the issuance of Common Stock pursuant to the exercise of
any Warrants and the registration of such stock under the securities laws, and
agrees to save the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
SECTION 7.02. GENERAL INDEMNIFICATION. Except as otherwise provided in
the Second Amended and Restated Registration Rights Agreement, Borrower hereby
agrees to defend the Lender and its officers, directors, agents, employees, and
counsel from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages, interests, judgments, costs and expenses incurred
by any of them, including without limitation reasonable attorneys fees and
disbursements, arising out of or in connection with the making, administration,
or enforcement of the Loan or the
47
execution of this Agreement or any other Loan Document, other than as such may
be caused by Lender's or such other Person's willful misconduct. All obligations
provided for in this Section 8.02 shall survive any termination of this
Agreement and any other Loan Document.
SECTION 7.03. ENVIRONMENTAL INDEMNIFICATION.
(a) Borrower hereby agrees to defend the Lender and its officers,
directors, agents, employees, and counsel from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages, interests, judgments,
costs (including without limitation cleanup costs) and expenses incurred by any
of them, including without limitation reasonable attorneys fees and
disbursements, arising out of or in connection with (i) the presence on or under
or the escape, seepage, leakage, spillage, discharge, emission, discharging or
release from, any real property owned or leased by the Borrower of any Hazardous
Materials caused by, or within the control of, the Borrower or claims asserted
or arising under any Environmental Laws, which may require the remediation of
such Hazardous Materials by the Borrower or the Lender or any successors or
assigns thereof, or (ii) any representation or warranty by the Borrower
contained in
48
Section 4.01(k) being false or untrue in any material respect.
(b) If the Borrower receives any written notice of (i) a Hazardous
Discharge affecting the Borrower or its real properties or (ii) an Environmental
Complaint from any Person, including, without limitation, the United States
Environmental Protection Agency or any agency, department or authority of the
State of Florida, then the Borrower will give, within ten (10) Business Days,
oral and written notice of same to the Lender.
(c) Without limitation of its rights under this Agreement, the Lender
shall have the right, but not the obligation after providing written notice to
Borrower and a reasonable opportunity for Borrower to respond, to enter onto any
of Borrower's real properties or in the event Borrower fails to act or respond,
to take such other reasonable actions as it deems reasonably necessary or
advisable to cleanup, remove, resolve or minimize the impact of, or otherwise
comply with Environmental Laws, or participate in such actions, in coordination
with Borrower for so long as no Event of Default exists, with respect to any
such Hazardous Discharge or Environmental Complaint upon its receipt of any
formal written notice from any Person, including, without
49
limitation, the United States Environmental Protection Agency, asserting the
existence of any Hazardous Discharge or Environmental Complaint on or pertaining
to any of the Borrower's real properties which, if true, could reasonably be
expected to result in an order, suit or other action against the Borrower
affecting any part of its real properties by any governmental agency or
otherwise and which could reasonably be expected to have a material adverse
effect on Borrower's operations or financial condition. All reasonable costs and
expenses incurred by the Lender in the exercise of any such rights herein shall
be payable by the Borrower upon demand, together with interest thereon at a rate
equal to the interest rate payable under the Note.
(d) The indemnity obligations of the Borrower under this Section 7.03
shall survive payment of the Note.
SECTION 7.04. LIMITATION ON LIABILITY OF LENDER. The Borrower hereby
waives any claim or defense arising out of or in any way related to the Loan
based upon the occurrence of any action or inaction of Lender on or prior to the
Closing Date which Borrower believes may (i) be actionable against Lender, or
(ii) give rise to a defense to payment hereunder or under the Note for any
reason, including without limitation, commission of a tort or
50
violation of any contractual duty or duty implied at law. Lender shall not be
responsible for any lost profits of Borrower arising from any breach of
contract, tort or any other wrong arising from the establishment, administration
or collection of the Loan.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of any Loan Document, this Agreement or the Note, nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed certified, return receipt requested, or telegraphed or delivered, if
to the Borrower, at its address at 0000 Xxxxxxxx Xxx Xxxxx, 00xx Xxxxx, Xxxxx,
XX 00000, Attention: President; if to the Lender, at its
51
address at Xxxxxxx Xxxxxxx, c/o Xxxxxx X. Xxxxxxx, P.C., 000 Xxxx Xxxxxx Xxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, with a copy to Xxxxxx X. Xxxxxxx, Esq. at
such address, or, as to each party, at such other address as shall be designated
by such party in a written notice to the other parties.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of the Lender
to exercise, and no delay in exercising, any right under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under any Loan Document preclude any other or further exercise thereof or
the exercise of any other right. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. ACCOUNTING TERMS. Except as otherwise stated herein, all
accounting terms not specifically defined herein or in any schedule or exhibit
hereto shall be construed in accordance with generally accepted accounting
principles, applied on a consistent basis with those of the period ended
December 31, 1998, modified to reflect those changes in generally accepted
accounting principles as may be mutually accepted by Lender and Borrower for the
purposes of this Agreement.
52
SECTION 8.05. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Lender is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all indebtedness
at any time owing by the Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement and the Note, irrespective of whether or not the
Lender shall have made any demand under this Agreement or the Note. The Lender
agrees promptly to notify the Borrower after any such set-off and application
made by the Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Lender
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Lender may have.
SECTION 8.06. BINDING EFFECT; GOVERNING LAW. This Agreement shall
become effective when it shall have been executed by the Borrower and the Lender
and shall be binding upon and inure to the benefit of the Borrower, the Lender
and their respective successors and assigns, except that the Borrower shall not
have
53
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of
Connecticut.
SECTION 8.07. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
SECTION 8.08. PARTIAL INVALIDITY. If any provision of this Agreement is
held to be invalid or unenforceable, such invalidity or unenforceability shall
not invalidate this Agreement as a whole but this Agreement shall be construed
as though it did not contain the particular provision or provisions held to be
invalid or unenforceable and the rights and obligations of the parties shall be
construed and enforced only to such extent as shall be permitted by law.
SECTION 8.09. CONFLICTS. In the event that any provision of this
Agreement conflicts with any of the Loan Documents delivered in connection with
the transaction contemplated herein, the terms of this Agreement shall control,
notwithstanding any
54
such conflicts.
SECTION 8.10. SURVIVAL. The representations and warranties contained
herein shall survive the execution of this Agreement by the parties herein.
SECTION 8.11. WAIVER OF RIGHTS. BORROWER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION. BORROWER
HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL VALUATION,
APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS, NOW IN
FORCE OR WHICH MAY HEREAFTER BECOME LAW.
SECTION 8.12. SUBMISSION TO JURISDICTION; WAIVER OF BOND. THE BORROWER
HEREBY CONSENTS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED WITHIN THE STATE OF CONNECTICUT OR FLORIDA AND WAIVES ANY OBJECTION
WHICH THE BORROWER MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS, TO
THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS
BE MADE BY MAIL OR MESSENGER DIRECTED TO BORROWER AT THE ADDRESS SET FORTH IN
SECTION 8.02 ABOVE AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO
55
THE BORROWER'S ADDRESS. THE BORROWER WAIVES ANY BOND OR SURETY OR SECURITY UPON
SUCH BOND WHICH, MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE LENDER. NOTHING
CONTAINED IN THIS SECTION AFFECTS THE RIGHT OF THE LENDER TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECTS THE RIGHT OF THE LENDER TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR BORROWER'S PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION.
SECTION 8.13. WAIVER OF JURY TRIAL. THE BORROWER WAIVES, TO THE EXTENT
PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY WHICH BORROWER MAY HAVE IN ANY
PROCEEDING BETWEEN LENDER AND BORROWER.
SECTION 8.14. WAIVER OF PLAINTIFF'S RIGHT. THE BORROWER HEREBY AGREES
NOT TO COMMENCE ANY LEGAL PROCEEDING AGAINST THE LENDER IN THE JURISDICTION OF
ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF FLORIDA UNLESS THE
LENDER EXPRESSLY CONSENTS THERETO IN WRITING.
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above given.
KOS PHARMACEUTICALS, INC.
By:____________________________
Name: Xxxxxx X. Xxxx
Title: President
_______________________________
XXXXXXX XXXXXXX
STATE OF )
) ss.:
COUNTY OF )
On the ______ day of ___________, _____, before me came Xxxxxx X. Xxxx,
to me known, who, being by me duly sworn, did depose and say that he resides at
No.________________ _______________________________________________; that he is
the President of Kos Pharmaceuticals, Inc., the corporation described in and
which executed, the foregoing instrument; that the foregoing instrument was
executed without corporate seal by order of the Board of Directors of said
corporation; that he signed his name thereto by like order.
_______________________________
Notary Public
My commission expires:
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of _________, ____, before me came Xxxxxxx Xxxxxxx, to
me known to be the individual described in, and who executed the foregoing
instrument, and acknowledged that he executed the same.
_______________________________
Notary Public
My commission expires:
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
A - LIST OF DEBTS AND LIENS
B - FINANCIAL COVENANTS
EXHIBITS
I - NOTE
II - REQUEST NOTICE
III - CORPORATE RESOLUTIONS OF BORROWER
IV - OPINION LETTER OF BORROWER'S COUNSEL
SCHEDULE B
FINANCIAL COVENANTS
1. So long as the Note shall remain unpaid, the Borrower will not,
without the prior written consent of the Lender:
(a) OPERATING EXPENSES. Incur operating expenses in any fiscal year
(exclusive of license fee payments) in excess of the following amounts
(determined on a cumulative basis):
-----------------------------------------------------------
AT END OF
-----------------------------------------------------------
-----------------------------------------------------------
1st Quarter $ 25,000,000
-----------------------------------------------------------
2nd Quarter $ 48,000,000
-----------------------------------------------------------
3rd Quarter $ 72,000,000
-----------------------------------------------------------
4th Quarter $ 95,000,000
-----------------------------------------------------------
(b) CURRENT LIABILITIES. Permit the total of accounts payable and
accrued expenses to exceed $12,000,000 for a continuous period of more than 30
days or to exceed $14,000,000 at any one time.
