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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this
"AGREEMENT") is entered into on November 6, 1998 between NATIONSCREDIT
COMMERCIAL CORPORATION, THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION
("LENDER"), having an address at 1177 Avenue of the Americas, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 and DURAMED PHARMACEUTICALS, INC. ("BORROWER"), whose chief
executive office is located at 0000 Xxxx Xxxxxx Xxxx, Xxxxxxxxxx 00000
("BORROWER'S ADDRESS"). The Schedules to this Agreement are an integral part of
this Agreement and are incorporated herein by reference. Terms used, but not
defined elsewhere, in this Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 AMOUNT. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) REVOLVING LOANS AND CREDIT ACCOMMODATIONS. From time to time
during the Term at Borrower's request, make revolving loans to Borrower
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and other
credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower, in each
case to the extent that there is sufficient Availability at the time of such
request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation; PROVIDED, that after giving effect to such Revolving Loan or
Credit Accommodation, (x) the outstanding balance of all monetary Obligations
(INCLUDING the principal balance of any Term Loan and, solely for the purpose of
determining compliance with this provision, the Credit Accommodation Balance)
will not exceed the Maximum Facility Amount set forth in Section 1(a) of
Schedule A and (y) none of the other Loan Limits set forth in Section 1 of
Schedule A will be exceeded. For this purpose, "AVAILABILITY" means:
(i) the aggregate amount of Eligible Accounts (less maximum
existing or asserted taxes, discounts, credits and allowances)
multiplied by the Accounts Advance Rate set forth in Section 1(b)(i) of
Schedule A but not to exceed the Accounts Sublimit, if any, set forth in
Section 1(c) of Schedule A;
PLUS
(ii) the lower of cost or market value of Eligible Inventory
multiplied by the Inventory Advance Rate(s) set forth in Section
1(b)(ii) of Schedule A, but not to exceed the Inventory Sublimit(s) set
forth in Section 1(d) of Schedule A;
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MINUS
(iii) all Reserves which Lender has established pursuant to
Section 1.2 (including those to be established in connection with the
requested Revolving Loan or Credit Accommodation);
MINUS
(iv) the outstanding balance of all of the monetary Obligations
(EXCLUDING the Credit Accommodation Balance and the principal balance of
the Term Loan); and
PLUS
(v) the Overadvance Amount, if any, set forth in Section 1(g) of
Schedule A.
(b) TERM LOAN. Make (i) on the date of this Agreement an advance to
Borrower computed with respect to the value of Borrower's Eligible Equipment
owned by Borrower on the date of this Agreement (the "EQUIPMENT ADVANCE") in the
principal amount, if any, set forth in Section 2(a)(i) of Schedule A, (ii) on
the later of the date of this Agreement and the date on which Borrower has
satisfied the Real Property Advance Conditions Precedent an advance to Borrower
computed with respect to the value of Borrower's Eligible Real Property (the
"REAL PROPERTY ADVANCE") in the principal amount, if any, set forth in Section
2(a)(ii) of Schedule A and (iii) upon at least fifteen days prior written
request by Borrower, one or more advances to Borrower computed with respect to
the value of Borrower's Capital Expenditure Equipment to be acquired with the
proceeds of such advance (each, a "CAPITAL EXPENDITURE ADVANCE") in a principal
amount, if any, set forth in Section 2(a)(iii) of Schedule A; PROVIDED, that
each Capital Expenditure Advance requested by Borrower shall be in a principal
amount of not less than $100,000. The Equipment Advance, the Real Property
Advance and all Capital Expenditure Advances are collectively referred to as the
"TERM LOAN." Each Capital Expenditure Advance will be evidenced by a term note
in the form attached hereto as Exhibit A.
1.2 RESERVES. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion ("RESERVES") to
reflect (i) events, conditions, contingencies or risks which affect or may
affect (A) the Collateral or its value, or the security interests and other
rights of Lender in the Collateral or (B) the assets, business or prospects of
Borrower or any Obligor, (ii) Lender's good faith concern that any Collateral
report or financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or misleading in
any material respect, (iii) any fact or circumstance which Lender determines in
good faith constitutes, or could constitute, a Default or Event of Default or
(iv) any other events or circumstances which Lender determines in good faith
make the establishment or revision of a Reserve prudent. Without limiting the
foregoing, Lender shall (x) in the case of each Credit Accommodation issued for
the purchase of Inventory (a) which meets the criteria for Eligible Inventory
set forth in clauses (i), (ii),
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(iii), (v) and (vi) of the definition of Eligible Inventory, (b) which is or
will be in transit to one of the locations set forth in Section 9(d) of Schedule
A, (c) which is fully insured in a manner satisfactory to Lender and (d) with
respect to which Lender is in possession of all bills of lading and all other
documentation which Lender has requested, all in form and substance satisfactory
to Lender in its sole discretion, establish a Reserve equal to the cost of such
Inventory (plus all duties, freight, taxes, insurance, costs and other charges
and expenses relating to such Credit Accommodation or such Eligible Inventory)
multiplied by a percentage equal to 100% minus the Inventory Advance Rate
applicable to Eligible Inventory and (y) in the case of any other Credit
Accommodation issued for any purpose, establish a Reserve equal to the full
amount of such Credit Accommodation plus all costs and other charges and
expenses relating to such Credit Accommodation. In addition, (x) Lender shall
establish a permanent Reserve in the amount, if any, set forth in Section 1(f)
of Schedule A, and (y) if the outstanding principal balance of any Term Loan
advance with respect to Eligible Equipment exceeds the percentage set forth in
Section 2(a)(i) or 2(a)(iii) of Schedule A of the appraised value of such
Eligible Equipment, Lender may establish an additional Reserve in the amount of
such excess (and, for this purpose, if payments of principal on the Term Loan
advances against Eligible Equipment and Real Property are not calculated
separately, payments of principal of the Term Loan made by Borrower shall be
deemed to apply to the Term Loan advance with respect to Eligible Equipment and
Real Property, respectively, in proportion to the original principal amounts of
such advances). Lender may, in its discretion, establish and revise Reserves by
deducting them in determining Availability or by reclassifying Eligible Accounts
or Eligible Inventory as ineligible. In no event shall the establishment of a
Reserve in respect of a particular actual or contingent liability obligate
Lender to make advances hereunder to pay such liability or otherwise obligate
Lender with respect thereto.
1.3 OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS. Lender may,
in its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; PROVIDED, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
1.4 REPAYMENT. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately upon telephonic or other
demand by Lender pay to Lender such amounts (or provide cash collateral to
Lender with respect to the Credit Accommodation Balance in the
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manner set forth in Section 7.3), as shall cause Borrower to be in full
compliance with all of the Loan Limits. Notwithstanding the foregoing, Lender
may, in its sole discretion, make or permit Revolving Loans, the Term Loan, any
Credit Accommodations or any other monetary Obligations to be in excess of any
of the Loan Limits; PROVIDED, that Borrower shall, upon Lender's demand, pay to
Lender such amounts as shall cause Borrower to be in full compliance with all of
the Loan Limits. All unpaid monetary Obligations shall be payable in full on the
Maturity Date (as defined in Section 7.1) or, if earlier, the date of any early
termination pursuant to Section 7.2.
1.5 MINIMUM BORROWING. Subject to the terms and conditions of this
Agreement, Borrower agrees to (i) borrow sufficient amounts to cause the
outstanding principal balance of the Loans to equal or exceed, at all times
prior to the Maturity Date, the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain Availability sufficient to enable Borrower to do
so; PROVIDED, that any breach by Borrower of the foregoing provision of this
Section 1.5 shall not constitute an Event of Default if Borrower timely pays all
minimum borrowing fees due and payable pursuant to Section 2.2(e). However,
Lender shall not be obligated to loan Borrower the Minimum Loan Amount other
than in accordance with all of the terms and conditions of this Agreement.
2. INTEREST AND FEES.
2.1 INTEREST. All Loans and other monetary Obligations shall bear
interest at the Interest Rate(s) set forth in Section 3 of Schedule A, except
where expressly set forth to the contrary in this Agreement or another Loan
Document; PROVIDED, that after the occurrence and during the continuance of an
Event of Default, all Loans and other monetary Obligations shall, at Lender's
option, bear interest at a rate per annum equal to two percent (2%) in excess of
the rate otherwise applicable thereto (the "DEFAULT RATE") until paid in full
(notwithstanding the entry of any judgment against Borrower or the exercise of
any other right or remedy by Lender), and all such interest shall be payable on
demand. Changes in the Interest Rate shall be effective as of the date of any
change in the Prime Rate. Notwithstanding anything to the contrary contained in
this Agreement, the aggregate of all amounts deemed to be interest hereunder and
charged or collected by Lender is not intended to exceed the highest rate
permissible under any applicable law, but if it should, such interest shall
automatically be reduced to the extent necessary to comply with applicable law
and Lender will refund to Borrower any such excess interest received by Lender.
2.2 FEES. Borrower shall pay Lender the following fees, which are in
addition to all interest and other sums payable by Borrower to Lender under this
Agreement, and are not refundable:
(a) CLOSING FEE. A closing fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully earned as of, and payable
on, the date hereof.
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(b) FACILITY FEES. A facility fee for the Initial Term in the amount
set forth in Section 6(b)(i) of Schedule A (which shall be fully earned as of
the date of this Agreement and shall be payable in equal installments due,
respectively, on each anniversary of the date of this Agreement during the
Initial Term, other than the Maturity Date), and a facility fee for each Renewal
Term in the amount set forth in Section 6(b)(ii) of Schedule A (which shall be
fully earned and payable on the first day of such Renewal Term); PROVIDED, that
if the Loans are repaid more than eighteen months after the date of the
Agreement through financing provided by NationsBank, N.A. or any Affiliate of
NationsBank, N.A., then all installments of such facility fees which are not
then due and payable shall not be charged to Borrower.
(c) SERVICING FEE. A monthly servicing fee in the amount, if any,
set forth in Section 6(c) of Schedule A, in consideration of Lender's
administration and other services for each month (or part thereof), which shall
be fully earned as of, and payable in advance on, the date of this Agreement and
on the first day of each month thereafter so long as any of the Obligations are
outstanding.
(d) UNUSED LINE FEE. An unused line fee at a rate equal to the
percentage per annum set forth in Section 6(d) of Schedule A of the amount by
which the Maximum Facility Amount exceeds the greater of (i) $10,000,000 and
(ii) the average daily outstanding principal balance of the Loans and the Credit
Accommodation Balance during the immediately preceding month (or part thereof),
which fee shall be payable, in arrears, on the first day of each month so long
as any of the Obligations are outstanding and on the Maturity Date.
(e) MINIMUM BORROWING FEE. A minimum borrowing fee equal to the
excess, if any, of (i) interest which would have been payable in respect of each
period set forth in Section 6(e)(i) of Schedule A if, at all times during such
period, the principal balance of the Loans was equal to the Minimum Loan Amount
over (ii) the actual interest payable in respect of such period, which fee shall
be fully earned as of the last day of such period and payable on the date set
forth in Section 6(e)(ii) of Schedule A and on the Maturity Date, commencing
with the immediately following period.
(f) SUCCESS FEE. A success fee in the amount, if any, set forth in
Section 6(f) of Schedule A, which shall be fully earned as of the date of this
Agreement and payable as set forth in Section 6(f) of Schedule A.
(g) [INTENTIONALLY OMITTED.]
(h) CREDIT ACCOMMODATION FEES. The fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A, payable, in arrears, on
the first day of each month so long as any of the Obligations are outstanding
and on the Maturity Date, plus all costs and fees charged by the issuer, payable
as and when such costs and fees are charged.
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2.3 COMPUTATION OF INTEREST AND FEES. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily principal balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.
2.4 LOAN ACCOUNT; MONTHLY ACCOUNTINGS. Lender shall maintain a loan
account for Borrower reflecting all advances, charges, expenses and payments
made pursuant to this Agreement (the "LOAN ACCOUNT"), and shall provide Borrower
with a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty days after such account is rendered,
describing the nature of any alleged errors or omissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the
Obligations, Borrower hereby grants to Lender a continuing security interest in
all of Borrower's property and interests in property, whether tangible or
intangible, now owned or in existence or hereafter acquired or arising, wherever
located, including Borrower's interest in all of the following, whether or not
eligible for lending purposes: (i) all Accounts, Chattel Paper, Instruments,
Documents, Goods (including Inventory, Equipment, farm products and consumer
goods), Investment Property, General Intangibles, Deposit Accounts and money,
(ii) the motor vehicle(s) listed on Exhibit B hereto, (iii) all proceeds and
products of all of the foregoing (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties for loss or any
destruction of any of the foregoing) and (iv) all books and records relating to
any of the foregoing.
4. ADMINISTRATION.
4.1 LOCK BOXES AND BLOCKED ACCOUNTS. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("ACCOUNT PROCEEDS"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of
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Lender (a "LOCK BOX") or (ii) depositing all Account Proceeds received by
Borrower into one or more bank accounts maintained for Lender's benefit (each, a
"BLOCKED ACCOUNT"), under an arrangement acceptable to Lender with a depository
bank acceptable to Lender, pursuant to which all funds deposited into each
Blocked Account are to be transferred to Lender in such manner, and with such
frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
require from time to time in connection with the foregoing. However, Lender has
no present intention of requiring Borrower to alter the Lock Box arrangement in
place on the date of this Agreement absent (A) the occurrence of a Default or
Event of Default, (B) Lender's determination that the existing arrangement is
not working in a satisfactory manner, or (C) Lender's determination that some
other change in circumstances has made the establishment of a Lock Box
desirable.
4.2 REMITTANCE OF PROCEEDS. Except as provided in Section 4.1, all
proceeds arising from the sale or other disposition of any Collateral shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 APPLICATION OF PAYMENTS. Prior to the occurrence of a Default or an
Event of Default, Lender shall apply all cash and non-cash proceeds of
Collateral or other payments received with respect to the Obligations (i) first,
to any of the Obligations then due and owing, consisting of interest, fees and
costs, (ii) second, to any of the Obligations then due and owing, consisting of
principal, and (iii) third, to Obligations under the Revolving Loans consisting
of principal; and after payment of the Revolving Loans in full, Lender shall
remit all cash proceeds of the Collateral received by it to Borrower unless and
until such time as any of the Obligations become due and owing or any
Obligations consisting of outstanding principal under the Revolving Loans exist,
at which time such proceeds shall be applied to the Obligations in the order set
forth in this Section 4.3 above. After the occurrence and during the continuance
of a Default or an Event of Default, Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due. For purposes of
determining Availability, such amounts will be credited to the Loan Account and
the Collateral balances to which they relate upon Lender's receipt of advice
from Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's account at Lender's Bank (or upon Lender's deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case subject to final payment and collection. However, for purposes of
computing interest on the
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Obligations, such items shall be deemed applied by Lender two Business Days
after Lender's receipt of advice of deposit thereof at Lender's Bank.
4.4 NOTIFICATION; VERIFICATION. Lender or its designee may, from time
to time, whether or not a Default or Event of Default has occurred: (i) verify
directly with the Account Debtors the validity, amount and other matters
relating to the Accounts and Chattel Paper, by means of mail, telephone or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose; and (ii) notify Account Debtors that Lender has a security interest
in the Accounts and that payment thereof is to be made directly to Lender,
PROVIDED that prior to the occurrence of a Default or Event of Default, Lender
shall use good faith efforts, over a period not to exceed three business days,
to obtain Borrower's approval of the form of such notice, BUT PROVIDED FURTHER,
that if it has not obtained such approval within such period, Lender shall be
entitled to provide such notice without Borrower's approval. Lender or its
designee may, from time to time, after the occurrence of a Default or Event of
Default, demand, collect or enforce payment of any Accounts and Chattel Paper
(but without any duty to do so).
4.5 POWER OF ATTORNEY. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of Borrower any documents that Lender may, in its sole discretion, deem
advisable in order to perfect and maintain Lender's security interests in the
Collateral, to exercise a right of Borrower or Lender, or to fully consummate
all the transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate) and to file
as a financing statement any copy of this Agreement or any financing statement
signed by Borrower; (ii) after the occurrence and during the continuance of a
Default or Event of Default, execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or lease (as lessor or lessee) any real or personal property which is
part of the Collateral or in which Lender has an interest; (iii) after the
occurrence and during the continuance of a Default or Event of Default, execute
on behalf of Borrower any invoices relating to any Accounts, any draft against
any Account Debtor, any proof of claim in bankruptcy, any notice of Lien or
claim, and any assignment or satisfaction of mechanic's, materialman's or other
Lien; (iv) after the occurrence and during the continuance of a Default or Event
of Default, execute on behalf of Borrower any notice to any Account Debtor; (v)
receive and otherwise take control in any manner of any cash or non-cash items
of payment or proceeds of Collateral; (vi) endorse Borrower's name on all checks
and other forms of remittances received by Lender; (vii) pay, contest or settle
any Lien (other than Permitted Liens which have not been enforced (or
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attempted to be enforced) against the Collateral), charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (viii)
after the occurrence of a Default or Event of Default, grant extensions of time
to pay, compromise claims relating to, and settle Accounts, Chattel Paper and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (ix) pay any sums required on account of
Borrower's taxes or to secure the release of any Liens therefor; (x) pay any
amounts necessary to obtain, or maintain in effect, any of the insurance
described in Section 5.12; (xi) settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (xii) instruct any third party having custody or control of any
Collateral or books or records belonging to, or relating to, Borrower to give
Lender the same rights of access and other rights with respect thereto as Lender
has under this Agreement; and (xiii) after the occurrence of a Default or Event
of Default, change the address for delivery of Borrower's mail and receive and
open all mail addressed to Borrower. Any and all sums paid, and any and all
costs, expenses, liabilities, obligations and reasonable attorneys' fees
incurred, by Lender with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
Borrower agrees that Lender's rights under the foregoing power of attorney or
any of Lender's other rights under this Agreement or the other Loan Documents
shall not be construed to indicate that Lender is in control of the business,
management or properties of Borrower.
4.6 DISPUTES. Borrower shall promptly notify Lender, in its reports
submitted to Lender with respect to the Collateral, of all disputes or claims
relating to Accounts and Chattel Paper. Borrower will not, without Lender's
prior written consent, compromise or settle any Account or Chattel Paper for
less than the full amount thereof, grant any extension of time of payment of any
Account or Chattel Paper, release (in whole or in part) any Account Debtor or
other person liable for the payment of any Account or Chattel Paper or grant any
credits, discounts, allowances, deductions, return authorizations or the like
with respect to any Account or Chattel Paper; except that prior to the
occurrence of an Event of Default, Borrower may take any of such actions in the
ordinary course of its business, PROVIDED that Borrower reports the same to
Lender in its next report submitted to Lender with respect to the Collateral.
4.7 INVOICES. At Lender's request, Borrower will cause all invoices and
statements which it sends to Account Debtors or other third parties to be
marked, in a manner satisfactory to Lender, to reflect Lender's security
interest therein.
4.8 INVENTORY.
(a) RETURNS. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason for
such return and promptly issue a
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credit memorandum to the Account Debtor in the appropriate amount (and promptly
send a copy of such credit memorandum to Lender upon Lender's request). After
the occurrence of an Event of Default, Borrower will not accept any return
without Lender's prior written consent. Upon Lender's demand, regardless of
whether an Event of Default has occurred, Borrower will (i) hold the returned
Inventory in trust for Lender; (ii) segregate all returned Inventory from all of
Borrower's other property; (iii) conspicuously label the returned Inventory as
Lender's property; and (iv) immediately notify Lender of the return of such
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory and, at Lender's request, deliver such returned Inventory
to Lender at an address specified by Lender.
(b) OTHER COVENANTS. Borrower will not, without Lender's prior
written consent, (i) store any Inventory with any warehouseman or other third
party other than as set forth in Section 9(d) of Schedule A or (ii) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis. All of the Inventory has been produced only in accordance with the Fair
Labor Standards Act of 1938 and all rules, regulations and orders promulgated
thereunder.
4.9 ACCESS TO COLLATERAL, BOOKS AND RECORDS. Lender or its agents shall
have the right to inspect the Collateral, and the right to examine and copy
Borrower's books and records, at reasonable times, and on one Business Day's
notice, prior to the occurrence of a Default or an Event of Default (PROVIDED,
however, that prior to the occurrence of a Default or Event of Default, Lender
shall use its best efforts to (but shall not be obligated to, or incur any
liability to Borrower for its failure to) provide Borrower with three Business
Day's notice), and at any time and with or without notice after the occurrence
of a Default or an Event of Default, Lender or its agents shall have the right
to inspect the Collateral, and the right to examine and copy Borrower's books
and records. Lender shall take reasonable steps to keep confidential all
information obtained in any such inspection or examination, but Lender shall
have the right to disclose any such information to its auditors, regulatory
agencies, attorneys and participants, and pursuant to any subpoena or other
legal process. Borrower agrees to give Lender access to any or all of Borrower's
premises to enable Lender to conduct such inspections and examinations. Such
inspections and examinations shall be at Borrower's expense and the charge
therefor shall be $750 per person per day (or such higher amount as shall
represent Lender's then current standard charge), plus reasonable out-of-pocket
expenses. After the occurrence of an Event of Default, Lender may, at Borrower's
expense, use Borrower's personnel, computer and other equipment, programs,
printed output and computer readable media, supplies and premises for the
collection, sale or other disposition of Collateral to the extent Lender, in its
sole discretion, deems appropriate. Borrower hereby irrevocably authorizes all
accountants and third parties to disclose and deliver to Lender, at Borrower's
expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding Borrower. Borrower
will not enter into any agreement with any accounting firm, service bureau or
third party to store Borrower's
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books or records at any location other than Borrower's Address without first
obtaining Lender's written consent (which consent may be conditioned upon such
accounting firm, service bureau or other third party agreeing to give Lender the
same rights with respect to access to books and records and related rights as
Lender has under this Agreement).
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation by, Lender, and (ii) the accuracy of
each such representation, warranty and covenant will be a condition to each Loan
and Credit Accommodation):
5.1 EXISTENCE AND AUTHORITY. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation. Borrower is qualified and licensed to do business in
all jurisdictions in which any failure to do so would have a material adverse
effect on Borrower. The execution, delivery and performance by Borrower of this
Agreement and all of the other Loan Documents have been duly and validly
authorized, do not violate Borrower's articles or certificate of incorporation,
by-laws or other organizational documents, or any law or any agreement or
instrument or any court order which is binding upon Borrower or its property, do
not constitute grounds for acceleration of any indebtedness or obligation under
any agreement or instrument which is binding upon Borrower or its property, and
do not require the consent of any Person. This Agreement and such other Loan
Documents have been duly executed and delivered by, and are enforceable against,
Borrower, and all other Obligors who have signed them, in accordance with their
respective terms. Sections 9(g) and 9(h) of Schedule A set forth all Persons
holding more than five percent (5%) of the common stock of Borrower and the
names and ownership of Borrower's Subsidiaries as of the date of this Agreement.
Borrower has no shares of preferred stock outstanding other than 120,000 shares
of its Cumulative Convertible Preferred Stock, Series F, with a stated value of
$100 per share.
5.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least thirty days' prior written notice before changing its name
or doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to another
corporation or other legal entity; (ii) all Accounts invoiced under any such
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender
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and the other terms of this Agreement and (iii) all schedules of Accounts,
including any sales made or services rendered using any trade name shall show
Borrower's name as assignor.
5.3 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower has good and
marketable title to the Collateral. The Collateral now is and will remain free
and clear of any and all liens, charges, security interests, encumbrances
(including, without limitation, equipment leases under which Borrower is the
lessor) and adverse claims, except for Permitted Liens. Lender now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Lender and the Collateral against all claims of others. None
of the Collateral which is Equipment and which is not a fixture as of the date
of this Agreement (other than (i) Equipment hereafter acquired by Borrower with
financing provided by a Person other than Lender and which Borrower intends to
become a fixture and (ii) items of Equipment, with an original cost not to
exceed $100,000 in the aggregate, hereafter acquired by Borrower with Revolving
Loans and which Borrower intends to become fixtures) will be hereafter affixed
to any real property in such a manner, or with such intent, as to become a
fixture. Except for leases or subleases as to which Borrower has delivered to
Lender a landlord's waiver in form and substance satisfactory to Lender,
Borrower is not, as of the date of this Agreement, a lessee or sublessee under
any real property lease or sublease pursuant to which the lessor or sublessor
may obtain any rights in any of the Collateral, and no such lease or sublease
now prohibits, restrains, impairs or conditions, or will prohibit, restrain,
impair or condition, Borrower's right to remove any Collateral from the
premises. Borrower shall not permit any Collateral to be located upon premises
in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), unless Borrower has
caused each such third party to execute and deliver to Lender, in form and
substance acceptable to Lender, such waivers and subordinations as Lender shall
specify, so as to ensure that Lender's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party; PROVIDED, that
notwithstanding the foregoing Borrower may temporarily allow items of Equipment
to be located on such premises for repair in the ordinary course of Borrower's
business as long as, (A) no Default or Event of Default exists, and (B) if at
any time such items of Equipment have a value in excess of $25,000 in the
aggregate, Borrower has provided Lender with written notice of all such items of
Equipment and the locations thereof; and PROVIDED FURTHER, that notwithstanding
the foregoing Borrower may allow items of Inventory to be located on such
premises as long as, (A) no Default or Event of Default exists or would be
caused by the locating of Inventory on such premises, (B) such items of
Inventory at no time have a value in excess of $25,000 in the aggregate, and (C)
Borrower has provided Lender with written notice of all such items of Inventory
(all of which Inventory shall be ineligible for borrowing purposes) and the
locations thereof. Borrower will keep in full force and effect, and will comply
with all the terms of, any lease of real property where any of the Collateral
now or in the future may be located.
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5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by Borrower,
all Accounts which Borrower has reported to Lender as being Eligible Accounts
comply in all respects with the criteria for eligibility established by Lender
and in effect at such time. All Accounts and Chattel Paper are genuine and in
all respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower in the ordinary course of its business and in accordance
with the terms and conditions of all purchase orders, contracts or other
documents relating thereto, each Account Debtor thereunder had the capacity to
contract at the time any contract or other document giving rise to such Accounts
and Chattel Paper were executed, and the transactions giving rise to such
Accounts and Chattel Paper comply with all applicable laws and governmental
rules and regulations.
5.5 INVESTMENT PROPERTY. Borrower will take any and all actions
reasonably requested by Lender, or as may be required, from time to time, to (i)
cause Lender to obtain exclusive control of any Investment Property in a manner
acceptable to Lender and (ii) obtain from any issuers of Investment Property and
such other Persons as Lender shall specify, for the benefit of Lender, written
confirmation of Lender's exclusive control over such Investment Property and
take such other actions as Lender may request to perfect Lender's security
interest in such Investment Property. For purposes of this Section 5.5, Lender
shall have exclusive control of Investment Property if (A) such Investment
Property consists of certificated securities and Borrower delivers such
certificated securities to Lender (with appropriate endorsements if such
certificated securities are in registered form); (B) such Investment Property
consists of uncertificated securities and either (x) Borrower delivers such
uncertificated securities to Lender or (y) the issuer thereof agrees, pursuant
to documentation in form and substance satisfactory to Lender, that it will
comply with instructions originated by Lender without further consent by
Borrower, and (C) such Investment Property consists of security entitlements and
either (x) Lender becomes the entitlement holder thereof or (y) the appropriate
securities intermediary agrees, pursuant to documentation in form and substance
satisfactory to Lender, that it will comply with entitlement orders originated
by Lender without further consent by Borrower.
5.6 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Borrower's Address is
Borrower's chief executive office and the location of its books and records. In
addition, except as provided in the immediately following sentence, Borrower has
places of business and Collateral located only at the locations set forth on
Sections 9(d) and 9(e) of Schedule A. Borrower will give Lender at least thirty
days' prior written notice before opening any additional place of business,
changing its chief executive office or the location of its books and records, or
moving any of the Collateral to a location other than Borrower's Address or one
of the locations set forth in Sections 9(d) and 9(e) of Schedule A, and will
execute and deliver all financing statements and other agreements, instruments
and documents which Lender shall require as a result thereof.
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5.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements delivered to Lender by or on behalf of Borrower have been prepared in
conformity with GAAP and completely and fairly reflect the financial condition
of Borrower, at the times and for the periods therein stated, PROVIDED, that
financial statements delivered to Lender under Section 5.13(c) may be subject to
year-end adjustments and need not contain notes. Between the last date covered
by any such financial statement provided to Lender and the date hereof (or, with
respect to the remaking of this representation in connection with the making of
any Loan or the providing of any Credit Accommodation, the date such Loan is
made or such Credit Accommodation is provided), there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
solvent and able to pay its debts as they come due, and has sufficient capital
to carry on its business as now conducted and as proposed to be conducted. All
schedules, reports and other information and documentation delivered by Borrower
to Lender with respect to the Collateral are, or will be, when delivered, true,
correct and complete as of the date delivered or the date specified therein.
5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed all tax returns and reports required by applicable law, has timely
paid all applicable taxes, assessments, deposits and contributions owing by
Borrower and will timely pay all such items in the future as they became due and
payable. Borrower may, however, defer payment of any contested taxes; PROVIDED,
that Borrower (i) in good faith contests Borrower's obligation to pay such taxes
by appropriate proceedings promptly and diligently instituted and conducted;
(ii) notifies Lender in writing of the commencement of, and any material
development in, the proceedings; (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a Lien upon any of the
Collateral; and (iv) maintains adequate reserves therefor in conformity with
GAAP. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay, all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, permitted partial or complete termination of,
or permitted the occurrence of any other event with respect to, any such plan
which could result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or any other governmental agency.
5.9 COMPLIANCE WITH LAWS. Borrower has complied in all material
respects with all provisions of all applicable laws and regulations, including
those relating to Borrower's ownership of real or personal property, the conduct
and licensing of Borrower's business, the payment and withholding of taxes,
ERISA and other employee matters, safety and environmental matters.
5.10 LITIGATION. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower. There is no claim, suit, litigation,
proceeding or investigation pending or (to the
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best of Borrower's knowledge) threatened by or against Borrower in any court or
before any governmental agency (or any basis therefor known to Borrower) which
may result, either separately or in the aggregate, in any material adverse
change in the financial condition or business of Borrower, or in any material
impairment in the ability of Borrower to carry on its business in substantially
the same manner as it is now being conducted. To the best of Borrower's
knowledge, there is no claim, suit, litigation, proceeding or investigation, to
which Borrower is not (or will not be) a party, pending or threatened in any
court or before any governmental agency which could reasonably be expected to
cause, any material adverse change in the financial condition or business of
Borrower or any material impairment in the ability of Borrower to carry on its
business in substantially the same manner as it is now being conducted. Borrower
will promptly inform Lender in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Borrower
other than (i) worker's compensation claims to the extent fully covered by
insurance (subject to applicable deductibles), (ii) claims brought by
individuals who took fenfluramine and phentermine hydrochloride in combination
to the extent fully covered by insurance, and (iii) other claims not exceeding
$50,000 in the aggregate.
5.11 USE OF PROCEEDS. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 INSURANCE. Borrower will at all times carry property, liability
and other insurance, with insurers acceptable to Lender, in such form and
amounts, and with such deductibles and other provisions, as Lender shall
require, and Borrower will provide evidence of such insurance to Lender, so that
Lender is satisfied that such insurance is, at all times, in full force and
effect. Each property insurance policy shall name Lender as loss payee and shall
contain a lender's loss payable endorsement in form acceptable to Lender, each
liability insurance policy shall name Lender as an additional insured, and each
business interruption insurance policy shall be collaterally assigned to Lender,
all in form and substance satisfactory to Lender. All policies of insurance
shall provide that they may not be cancelled or changed without at least thirty
days' prior written notice to Lender, shall contain breach of warranty coverage,
and shall otherwise be in form and substance satisfactory to Lender. Lender has
reviewed the insurance of Borrower as in place on the date of this Agreement,
and such insurance currently is acceptable to Lender, and Lender has no present
intent to change Borrower's insurance requirements under this Section 5.12
absent the occurrence of (i) a Default or Event of Default, (ii) a change in the
Collateral or Borrower's business, or (iii) some other change in circumstances
resulting in Lender's determination that such insurance requirements should be
changed. Upon receipt of the proceeds of any such insurance prior to the
occurrence of a Default or an Event of Default, Lender shall apply such proceeds
in reduction of the Obligations, (A) first, to any of the Obligations then due
and owing, consisting of interest, fees and costs, (B) second, to any of the
Obligations then due and owing, consisting of principal, (C) third, (1) to the
extent that such insurance proceeds relate to a casualty involving an item of
Eligible Equipment, to the Obligations consisting of
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the principal amount of the Equipment Advance not yet due and owing, in an
amount up to the currently outstanding amount advanced against such item of
Eligible Equipment (as determined by Lender in good faith), (2) to the extent
that such insurance proceeds relate to a casualty involving Eligible Real
Property, to the Obligations consisting of the principal amount of the Real
Property Advance not yet due and owing, (3) to the extent that such insurance
proceeds relate to a casualty involving an item of Capital Expenditure
Equipment, to the Obligations consisting of the principal amount of the Capital
Expenditure Advance not yet due and owing, in an amount up to the currently
outstanding amount advanced against such item of Capital Expenditure Equipment
(as determined by Lender in good faith), and (4) otherwise, to Obligations under
the Revolving Loans consisting of principal; and after payment of the Revolving
Loans in full, Lender shall remit all such insurance proceeds received by it to
Borrower unless and until such time as any of the Obligations become due and
owing or any Obligations consisting of principal under the Revolving Loans
exist, at which time such insurance proceeds shall be applied to the Obligations
in the order set forth in this Section 5.12 above. Upon receipt of the proceeds
of any such insurance after the occurrence and during the continuance of a
Default or an Event of Default, Lender shall apply such proceeds in reduction of
the Obligations as Lender shall determine in its sole discretion, whether or not
the Obligations are due. Borrower will promptly deliver to Lender copies of all
reports made to insurance companies.
5.13 FINANCIAL AND COLLATERAL REPORTS. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender, and PROVIDED that financial statements
delivered to Lender under Section 5.13(c) may be subject to year-end adjustments
and need not contain notes):
(a) COLLATERAL REPORTS. On or before the fifteenth day of each
month, an aging of Borrower's Accounts, Chattel Paper and notes receivable, and
weekly Inventory reports, all in such form, and together with such additional
certificates, schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; PROVIDED, that
Borrower's failure to execute and deliver the same shall not affect or limit
Lender's security interests and other rights in any of the Accounts, nor shall
Lender's failure to advance or lend against a specific Account affect or limit
Lender's security interest and other rights therein. Together with each such
schedule, Borrower, at Lender's request, shall furnish Lender with copies (or,
at Lender's request, duplicate originals) of all contracts, orders, invoices,
and other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts, and Borrower warrants
the genuineness of all of the foregoing. In addition, Borrower shall deliver to
Lender the originals of all Instruments,
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Chattel Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts, immediately upon receipt thereof and in the
same form as received, with all necessary endorsements. Lender may destroy or
otherwise dispose of all documents, schedules and other papers delivered to
Lender pursuant to this Agreement (other than originals of contracts, orders,
invoices, other similar documents, shipping instructions, delivery receipts,
bills of lading, other evidence of the delivery of Goods, and Instruments,
Chattel Paper, security agreements, guaranties and other documents and property
evidencing or securing any Accounts) six months after Lender receives them,
unless Borrower requests their return in writing in advance and arranges for
their return to Borrower at Borrower's expense.
(b) ANNUAL STATEMENTS. Not later than ninety days after the close of
each fiscal year of Borrower, unqualified (except for a qualification for a
change in accounting principles with which the accountant concurs) (i) audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a consolidated basis, certified by a firm of independent certified
public accountants of recognized standing selected by Borrower but reasonably
acceptable to Lender, together with a copy of any management letter issued in
connection therewith and an executed letter from Borrower to such accountants
indicating that Lender is relying on such financial statements and (ii)
unaudited consolidating schedules of Borrower and its Subsidiaries as of the end
of such year, certified by the principal financial officer of Borrower as
prepared in accordance with GAAP;
(c) INTERIM STATEMENTS. Not later than fifteen business days after
the end of each month hereafter (but twenty-five business days after the end of
each January hereafter), including the last month of Borrower's fiscal year,
unaudited interim financial statements (including, without limitation, cash flow
statements) of Borrower and its Subsidiaries as of the end of such month and of
the portion of Borrower's fiscal year then elapsed, on a consolidated basis,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the consolidated financial position
and results of operations of Borrower and its Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments and except
that such statements need not contain notes;
(d) PROJECTIONS, ETC. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time. Absent the existence
of a Default or Event of Default, Lender presently intends only to request that
Borrower provide it, not later than 30 days after the close of each fiscal year,
with the documents described in this Section 5.13(d) for the following fiscal
year (broken down on a quarterly basis);
(e) SHAREHOLDER REPORTS, ETC. Promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and
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Exchange Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(f) ERISA REPORTS. Upon request by Lender, copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto; and
(g) OTHER INFORMATION. Such other data and information (financial
and otherwise) as Lender, from time to time, may reasonably request, bearing
upon or related to the Collateral or Borrower's and each of its Subsidiary's
financial condition or results of operations.
5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Lender with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Lender, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.15 MAINTENANCE OF COLLATERAL, ETC. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 NOTIFICATION OF CHANGES. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 FURTHER ASSURANCES. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 NEGATIVE COVENANTS. Except as set forth in Section 13 of Schedule
A or as otherwise permitted by this Agreement and the other Loan Documents,
Borrower will not, without Lender's prior written consent, (i) merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of
business; (iii) enter into any transaction outside the ordinary course of
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business; (iv) sell or transfer any Collateral or other assets, except that
Borrower may sell finished goods Inventory in the ordinary course of its
business; (v) make any loans to, or investments in, any Affiliate or other
Person in the form of money or other assets; (vi) incur any debt outside the
ordinary course of business; (vii) guaranty or otherwise become liable with
respect to the obligations of another party or entity; (viii) pay or declare any
dividends or other distributions on Borrower's stock, if Borrower is a
corporation (except for dividends payable solely in capital stock of Borrower)
or with respect to any equity interests, if Borrower is not a corporation; (ix)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's capital stock or other equity interests; (x) make any change in
Borrower's capital structure; (xi) dissolve or elect to dissolve; (xii) pay any
principal or interest on any indebtedness owing to an Affiliate, (xiii) enter
into any transaction with an Affiliate other than on arms-length terms; or (xiv)
agree to do any of the foregoing.
5.19 FINANCIAL COVENANTS.
(a) CAPITAL EXPENDITURES. Borrower will not expend or commit to
expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year without Lender's
prior written consent.
(b) NET WORTH. Borrower will at all times maintain a net worth of at
least the amount set forth in Section 8(b) of Schedule A.
(c) TANGIBLE NET WORTH. Borrower will at all times maintain a
minimum tangible net worth of at least the amount set forth in Section 8(c) of
Schedule A.
(d) WORKING CAPITAL. Borrower will at all times maintain working
capital of at least the amount set forth in Section 8(d) of Schedule A.
(e) NET LOSSES. Borrower will not permit its cumulative net loss to
exceed the amount set forth in Section 8(e) of Schedule A.
(f) NET INCOME. Borrower will not permit its cumulative net income
to be less than the amount set forth in Section 8(f) of Schedule A.
(g) LEVERAGE. Borrower will not permit the ratio of its total
liabilities to its net worth to exceed, at any time, the ratio set forth in
Section 8(g) of Schedule A.
(h) OTHER FINANCIAL COVENANTS. Borrower will comply with any
additional financial covenants set forth in Section 8(j) of Schedule A.
5.20 YEAR 2000 COMPLIANCE. Borrower has (i) initiated a review and
assessment of all areas within its and each of its Affiliates' business and
operations (including those affected by suppliers and vendors) that could be
materially and adversely affected by the "YEAR 2000
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PROBLEM" (that is, the risk that computer applications used by Borrower or any
of its Affiliates (or its suppliers and vendors) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Borrower reasonably
believes that all computer applications (including those of its suppliers and
vendors) that are material to its or any of its Affiliates' business and
operations will on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be "YEAR
2000 COMPLIANT"), except to the extent that a failure to do so could not
reasonably be expected to have a material adverse effect on Borrower's business
or operations or on the condition or value of the Collateral (a "MATERIAL
ADVERSE EFFECT"). Borrower will promptly notify Lender in the event Borrower
discovers or determines that any computer application (including those of its
suppliers and vendors) that is material to its or any of its Affiliates'
business and operations will not be Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect.
6. RELEASE AND INDEMNITY.
6.1 RELEASE. Borrower hereby releases Lender and its Affiliates and
their respective directors, officers, employees, attorneys and agents and any
other Person affiliated with or representing Lender (the "RELEASED PARTIES")
from any and all liability arising from acts or omissions under or pursuant to
this Agreement, whether based on errors of judgment or mistake of law or fact,
except for those arising from gross negligence or willful misconduct. However,
in no circumstance will any of the Released Parties be liable for lost profits
or other special or consequential damages. Such release is made on the date
hereof and remade upon each request for a Loan or Credit Accommodation by
Borrower. Without limiting the foregoing, and except as provided above:
(a) Lender shall not be liable for (i) any shortage or discrepancy
in, damage to, or loss or destruction of, any goods, the sale or other
disposition of which gave rise to an Account; (ii) any error, act, omission, or
delay of any kind occurring in the settlement, failure to settle, collection or
failure to collect any Account; (iii) settling any Account in good faith for
less than the full amount thereof; or (iv) any of Borrower's obligations under
any contract or agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good faith, or any action taken by
an issuer of any Credit Accommodation, under or in connection with any Credit
Accommodation, shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any
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instructions as to acceptance or rejection of any documents or goods, to execute
for Borrower's account any and all applications for steamship or airway
guaranties, indemnities or delivery orders, to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents, and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation pertaining
thereto.
6.2 INDEMNITY. Borrower hereby agrees to indemnify the Released Parties
and hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including reasonable attorneys' fees), of every nature, character and
description, which the Released Parties may sustain or incur based upon or
arising out of any of the transactions contemplated by this Agreement or the
other Loan Documents or any of the Obligations, including any transactions or
occurrences relating to the issuance of any Credit Accommodation, the Collateral
relating thereto, any drafts thereunder and any errors or omissions relating
thereto (including any loss or claim due to any action or inaction taken by the
issuer of any Credit Accommodation) (and for this purpose any charges to Lender
by any issuer of Credit Accommodations shall be conclusive as to their
appropriateness and may be charged to the Loan Account), or any other matter,
cause or thing whatsoever occurred, done, omitted or suffered to be done by
Lender relating to Borrower or the Obligations (except any such amounts
sustained or incurred as the result of the gross negligence or willful
misconduct of the Released Parties). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement.
7. TERM.
7.1 MATURITY DATE. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement shall initially continue in effect
until the Initial Maturity Date set forth in Section 7 of Schedule A (the
"INITIAL TERM"); PROVIDED, that such date shall automatically be extended (the
Initial Maturity Date, as it may be so extended, being referred to as the
"MATURITY DATE") for successive additional terms of one year each (each a
"RENEWAL TERM"), unless one party gives written notice to the other, not less
than sixty days prior to the Maturity Date, that such party elects not to extend
the Maturity Date. This Agreement and the other Loan Documents and Lender's
security interests in and Liens upon the Collateral, and all representations,
warranties and covenants of Borrower contained herein and therein, shall remain
in full force and effect after the Maturity Date until all of the monetary
Obligations are indefeasibly paid in full.
7.2 EARLY TERMINATION. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty business days after
written notice of termination is given to Lender or (ii) by Lender at any time
after the occurrence of an Event of Default,
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without notice, effective immediately; PROVIDED, that if any Affiliate of
Borrower is also a party to a financing arrangement with Lender, no such early
termination shall be effective unless such Affiliate simultaneously terminates
its financing arrangement with Lender. If so terminated under this Section 7.2,
Borrower shall pay to Lender (i) an early termination fee (the "EARLY
TERMINATION FEE") in the amount set forth in Section 6(h) of Schedule A plus
(ii) any earned but unpaid Facility Fee. Such fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations. In addition, if
Borrower so terminates and repays the Obligations without having provided Lender
with at least thirty days' prior written notice thereof, an additional amount
equal to thirty days of interest at the applicable Interest Rate(s), based on
the average outstanding amount of the Obligations for the six month period
immediately preceding the date of termination.
7.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if, on the Maturity
Date or on any earlier effective date of termination, there are any outstanding
Credit Accommodations, then on such date Borrower shall provide to Lender cash
collateral in an amount equal to 110% of the Credit Accommodation Balance to
secure all of the Obligations (including estimated attorneys' fees and other
expenses) relating to said Credit Accommodations or such greater percentage or
amount as Lender reasonably deems appropriate, pursuant to a cash pledge
agreement in form and substance satisfactory to Lender.
7.4 EFFECT OF TERMINATION. No termination shall affect or impair any
right or remedy of Lender or relieve Borrower of any of the Obligations until
all of the monetary Obligations have been indefeasibly paid in full. Upon
indefeasible payment and performance in full of all of the monetary Obligations
(and the provision of cash collateral with respect to any Credit Accommodation
Balance as required by Section 7.3) and termination of this Agreement, Lender
shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate Lender's security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower shall
give Lender immediate written notice thereof: (i) if any warranty,
representation, statement, report or certificate made or delivered to Lender by
Borrower or any of Borrower's officers, employees or agents is untrue or
misleading; (ii) if Borrower fails to pay when due any principal or interest on
any Loan or any other monetary Obligation; (iii) if Borrower breaches any
covenant or obligation contained in this Agreement or any other Loan Document or
fails to perform any other non-monetary Obligation; (iv) if any levy,
assessment, attachment, seizure, lien or encumbrance
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(other than a Permitted Lien) is made or permitted to exist on all or any part
of the Collateral and remains undischarged, unvacated, unbonded or unstayed for
a period of ten (10) days; (v) if one or more judgments aggregating in excess of
$100,000, or any injunction or attachment, is obtained against Borrower or any
Obligor which remains unstayed for more than ten days or is enforced; (vi) (A)
the occurrence of any default (not cured within any applicable cure period)
under any financing agreement(s), security agreement(s) or other agreement(s),
instrument(s) or document(s) involving obligations of Borrower aggregating in
excess of $100,000 and executed and delivered by Borrower with, or in favor of,
any Person other than Lender or (B) the occurrence of any default (not cured
within any applicable cure period) under any financing agreement(s), security
agreement(s) or other agreement(s), instrument(s) or document(s) executed and
delivered by Borrower or any Affiliate of Borrower with, or in favor of, Lender
or any Affiliate of Lender; (vii) the dissolution, death, termination of
existence in good standing, insolvency or business failure or suspension or
cessation of business as usual of Borrower or any Obligor (or of any general
partner of Borrower or any Obligor if it is a partnership) or the appointment of
a receiver, trustee or custodian for all or any part of the property of, or an
assignment for the benefit of creditors by Borrower or any Obligor, or the
commencement of any proceeding by Borrower or any Obligor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, or if Borrower makes or sends a notice of a bulk transfer or
calls a meeting of its creditors; (viii) the commencement of any proceeding
against Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; (ix) the actual or
attempted revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations, or any security document securing the
Obligations, by any Obligor; (x) if Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement, or if any Person
who has subordinated such indebtedness or obligations attempts to limit or
terminate its subordination agreement; (xi) if there is any actual or threatened
indictment of Borrower or any Obligor under any criminal statute or commencement
or threatened commencement of criminal or civil proceedings against Borrower or
any Obligor, pursuant to which the potential penalties or remedies sought or
available include forfeiture of any property of Borrower or such Obligor; (xii)
if there is any change in the chief executive officer, chief operating officer
or chief financial officer of Borrower (except such a change resulting from such
an officer's death if such office is filled within sixty days of such death by a
Person whose professional qualifications are equal to or greater than were the
professional qualifications of such officer); or (xiii) if an Event of Default
occurs under any Loan and Security Agreement between Lender and an Affiliate of
Borrower; PROVIDED, that any breach of the foregoing clauses (i)-(xiii) of this
Section 8.1 above (other than (A) a breach of clause (ii) of this Section 8.1
above, (B) a breach resulting from Borrower's fraud, dishonesty or other willful
misconduct, or (C) a breach which is incapable of being timely cured (as
determined by Lender in good faith)) shall not constitute an Event of Default
unless such
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breach is not cured within (1) three days after the occurrence of such breach
(if Borrower knew, or could reasonably have been expected to know, of such
breach) or (2) three days after Borrower's receipt of telephonic or other notice
from Lender of such breach (if Borrower neither knew, nor could reasonably have
been expected to know, of such breach).
8.2 REMEDIES. Upon the occurrence and during the continuance of any
Default, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain (or cause a custodian
to remain) on the premises in exclusive control thereof, without charge for so
long as Lender deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement; PROVIDED,
that if Lender seeks to take possession of any of the Collateral by court
process, Borrower hereby irrevocably waives (A) any bond and any surety or
security relating thereto required by law as an incident to such possession, (B)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof and (C) any requirement that Lender retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(iv) require Borrower to assemble any or all of the Collateral and make it
available to Lender at one or more places designated by Lender which are
reasonably convenient to Lender and Borrower, and to remove the Collateral to
such locations as Lender may deem advisable; (v) complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Lender shall have the right to
use Borrower's premises, vehicles and other Equipment and all other property
without charge; (vi) sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Lender obtains possession of it or after further
manufacturing, processing or repair, at one or more public or private sales, in
lots or in bulk, for cash, exchange or other property, or on credit (a "SALE"),
and to adjourn any such Sale from time to time without notice other than oral
announcement at the time scheduled for Sale (and, in connection therewith, (A)
Lender shall have the right to conduct such Sale on Borrower's premises without
charge, for such times as Lender deems reasonable, on Lender's premises, or
elsewhere, and the Collateral need not be located at the place of Sale; (B)
Lender may directly or through any of its Affiliates purchase or lease any of
the Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition and (C) any Sale of Collateral shall
not relieve Borrower of any liability Borrower may have if any
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Collateral is defective as to title, physical condition or otherwise at the time
of sale); (vii) demand payment of and collect any Accounts, Chattel Paper,
Instruments and General Intangibles included in the Collateral and, in
connection therewith, Borrower irrevocably authorizes Lender to endorse or sign
Borrower's name on all collections, receipts, Instruments and other documents,
to take possession of and open mail addressed to Borrower and remove therefrom
payments made with respect to any item of Collateral or proceeds thereof and, in
Lender's sole discretion, to grant extensions of time to pay, compromise claims
and settle Accounts, General Intangibles and the like for less than face value;
and (viii) demand and receive possession of any of Borrower's federal and state
income tax returns and the books and records utilized in the preparation thereof
or relating thereto. In addition to the foregoing remedies, upon the occurrence
of any Event of Default resulting from a breach of any of the financial
covenants set forth in Section 5.19, Lender may, at its option, upon not less
than ten days' prior notice to Borrower, reduce any or all of the Advance Rates
set forth in Section 1(b) of Schedule A to the extent Lender, in its sole
discretion, deems appropriate. In addition to the rights and remedies set forth
above, Lender shall have all the other rights and remedies accorded a secured
party after default under the UCC and under all other applicable laws, and under
any other Loan Document, and all of such rights and remedies are cumulative and
non-exclusive. Exercise or partial exercise by Lender of one or more of its
rights or remedies shall not be deemed an election or bar Lender from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Lender to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and effect
until all of the Obligations have been fully paid and performed. If notice of
any sale or other disposition of Collateral is required by law, notice at least
seven days prior to the sale designating the time and place of sale in the case
of a public sale or the time after which any private sale or other disposition
is to be made shall be deemed to be reasonable notice, and Borrower waives any
other notice. If any Collateral is sold or leased by Lender on credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment is collected by Lender.
8.3 APPLICATION OF PROCEEDS. Subject to any application required by
law, all proceeds realized as the result of any Sale shall be applied by Lender
to the Obligations in such order as Lender shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; but Borrower shall remain liable to Lender for any deficiency.
If Lender, in its sole discretion, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any Sale, Lender shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Lender of
the cash therefor.
9. GENERAL PROVISIONS.
9.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class
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mail or certified mail return receipt requested, addressed to Lender or Borrower
at the address shown in the heading to this Agreement, or by facsimile to the
facsimile number shown in Section 9(i) of Schedule A, or at any other address
(or to any other facsimile number) designated in writing by one party to the
other party in the manner prescribed in this Section 9.1. All notices shall be
deemed to have been given when received or when delivery is refused by the
recipient.
9.2 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any party or circumstance, is held to be void or
unenforceable by any court of competent jurisdiction, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.3 INTEGRATION. This Agreement and the other Loan Documents represent
the final, entire and complete agreement between Borrower and Lender and
supersede all prior and contemporaneous negotiations, oral representations and
agreements, all of which are merged and integrated into this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 WAIVERS. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Documents shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Lender
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 AMENDMENT. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
9.6 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement and the other Loan
Documents.
9.7 ATTORNEYS' FEES AND COSTS. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees (including in-house attorneys and
paralegals employed by Lender) and all filing, recording, search, title
insurance, appraisal, audit, and other costs
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incurred by Lender, pursuant to, in connection with, or relating to this
Agreement, including all reasonable attorneys' fees and costs Lender incurs to
prepare and negotiate this Agreement and the other Loan Documents; to obtain
legal advice in connection with this Agreement and the other Loan Documents or
Borrower or any Obligor; to administer this Agreement and the other Loan
Documents (including the cost of periodic financing statement, tax lien and
other searches conducted by Lender); to enforce, or seek to enforce, any of its
rights; prosecute actions against, or defend actions by, Account Debtors; to
commence, intervene in, or defend any action or proceeding; to enforce and
protect, or to seek to enforce and protect, any of its rights and interests in
any bankruptcy case of Borrower, including, without limitation, by initiating
and prosecuting any motion for relief from the automatic stay and by initiating,
prosecuting or defending any other contested matter or adversary proceeding in
bankruptcy; to file or prosecute any probate claim, bankruptcy claim,
third-party claim, or other claim; to examine, audit, copy, and inspect any of
the Collateral or any of Borrower's books and records; to protect, obtain
possession of, lease, dispose of, or otherwise enforce Lender's security
interests in, the Collateral; and to otherwise represent Lender in any
litigation relating to Borrower. Without limiting the foregoing, Borrower shall
reimburse Lender for all payments made by Lender pursuant to, in connection
with, or relating to, any support agreement entered into by any officer or
employee of Borrower in favor of Lender in connection with any liquidation of
the Collateral following an Event of Default. If either Lender or Borrower files
any lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys' fees and costs to which Lender may be entitled
pursuant to this Section shall immediately become part of the Obligations, shall
be due on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations.
9.8 BENEFIT OF AGREEMENT; ASSIGNABILITY. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of Borrower and
Lender; PROVIDED, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of Lender, and any
prohibited assignment shall be void. No consent by Lender to any assignment
shall release Borrower from its liability for any of the Obligations. Lender
shall have the right to assign all or any of its rights and obligations under
the Loan Documents. Lender shall also have the right to sell participating
interests therein, to one or more other Persons, PROVIDED, that Lender shall
remain the lead lender following any sale of any participating interests, and
FURTHER PROVIDED, that Lender shall not sell participating interests aggregating
more than forty-nine percent (49%) of the Obligations as long as the Maximum
Facility Amount is not amended so as to exceed $33,000,000. Borrower agrees to
execute all agreements, instruments and documents requested by Lender in
connection with each such assignment and participation.
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9.9 HEADINGS; CONSTRUCTION. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against Lender or Borrower under any rule of construction or
otherwise.
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER
AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE
EXTENT PERMITTED BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
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9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL
BY JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE; (ii) THE RIGHT TO INTERPOSE ANY CLAIMS,
DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN DOCUMENTS OR ANY MATTER RELATING
THERETO, EXCEPT FOR COMPULSORY COUNTERCLAIMS; (iii) NOTICE PRIOR TO LENDER'S
TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES AND (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND
EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of
the date set forth in the heading.
BORROWER: LENDER:
DURAMED PHARMACEUTICALS, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ XXXXXXX X. XXXX By /s/ XXXXX XXXXXXX
----------------------------------- ----------------------------------
Its Senior Vice President - Finance Its Authorized Signatory
-29-
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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SCHEDULE A
DESCRIPTION OF CERTAIN TERMS
This Schedule is an integral part of the Loan and Security Agreement
between DURAMED PHARMACEUTICALS, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
1. Loan Limits for Revolving Loans:
(a) Maximum Facility Amount: $33,000,000
(b) Advance Rates:
(i) Accounts 85%; PROVIDED, that if the
Advance Rate: Dilution Percentage exceeds 5%,
Lender may, at its option, (A)
reduce such advance rate by the
number of full or partial
percentage points of such excess
or (B) establish a Reserve on
account of such excess
(ii) Inventory
Advance Rate(s):
(A) Finished goods: 60%
(B) Raw materials: 60%
(C) Bulk Inventory: 40%
(D) Work in process: Not Applicable
(c) Accounts Sublimit: Not Applicable
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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(d) Inventory
Sublimit(s):
(i) Overall sublimit The lesser of $12,000,000 and (A)
on advances during each of the first three fiscal
against Eligible quarters of each of Borrower's fiscal
Inventory years, 200% of the amount of
Availability with respect to Eligible
Accounts under Section 1.1(a)(i) of
the Agreement at any time of
determination during such period or
(B) during the fourth fiscal quarter
of each of Borrower's fiscal years,
210% of the amount of Availability
with respect to Eligible Accounts
under Section 1.1(a)(i) of the
Agreement at any time of determination
during such period
(ii) Sublimit on
advances
against finished
goods Not Applicable
(iii) Sublimit on
advances
against raw
materials Not Applicable
(iv) Sublimit on
advances
against work in
process Not Applicable
(v) Sublimit on
advances against Bulk
Inventory $2,500,000
(e) Credit Accommodation
Limit: $5,000,000
(f) Permanent Reserve Amount: Not Applicable
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(g) Overadvance Amount:
2. Loan Limits for Term Loan:
(a) Principal Amount:
(i) Equipment Advance The lesser of $6,000,000 and 85% of
the appraised auction sale value of
Borrower's Eligible Equipment
(ii) Real Property The lesser of $3,000,000 and 70% of
Advance: the appraised quick sale value of
Borrower's Eligible Real Property
(iii) Capital Expenditure A principal amount equal to 85% of the
Advances: appraised (by an appraiser acceptable
to Lender) auction sale value of
Borrower's Capital Expenditure
Equipment, up to a maximum principal
amount of $5,000,000 in the aggregate
for all Capital Expenditure Advances
(b) Repayment Schedule:
(i) Equipment Advance: The Equipment Advance shall be repaid
in equal consecutive monthly
installments amortized over 84 months
payable on the first day of each
calendar month commencing December 1,
1998, with the entire unpaid balance
due and payable on the Maturity Date;
PROVIDED, that if at any time Lender
determines that the unpaid principal
balance of the Equipment Advance
exceeds 85% of the value of Eligible
Equipment owned by Borrower on the
date of the Agreement as set forth on
the most recent of the Updated
Equipment Appraisals (as defined in
Section 12 of this Schedule A), then,
Borrower shall repay such excess in 6
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equal consecutive monthly installments
payable on the first day of each
calendar month commencing with the
month immediately following the date
of such determination by Lender (which
payments shall be in addition to the
regular amortization payments set
forth above), AND PROVIDED FURTHER,
that if Borrower's cumulative pre-tax
loss (net of any Included Subordinated
Debt and any Additional Equity) from
October 1, 1998 through the end of the
Term exceeds $4,000,000 (the
occurrence of such a pre-tax loss in
excess of $4,000,000 being referred to
herein as an "EXCESSIVE LOSS"), the
Loan Limit with respect to the
Equipment Advance shall immediately
upon telephonic or other notice from
Lender to Borrower be reduced to the
lesser of $4,000,000 and 85% of the
appraised auction sale value of
Borrower's Eligible Equipment and
Borrower shall immediately repay to
Lender such amounts as shall cause
Borrower to be in full compliance with
such reduced Loan Limit (which payment
shall be in addition to the regular
amortization payments set forth
above); PROVIDED, that if Borrower
fails to pay immediately when due any
such amounts to Lender, such failure
shall constitute an Event of Default
under Section 8.1(ii) of the
Agreement, BUT PROVIDED FURTHER, that
if following the occurrence of an
Excessive Loss, Borrower has Cash Flow
greater than $0 for each of six
consecutive months, and if no Default
or Event of Default then exists,
Lender will consider entering into a
written amendment of the Agreement
increasing the Loan Limit with respect
to the Equipment Advance back to the
lesser of $6,000,000 and 85% of the
appraised
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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auction sale value of Borrower's
Eligible Equipment, but Lender shall
have no obligation to agree to any
such increase
(ii) Real Property The Real Property Advance shall be
Advance: repaid in equal consecutive monthly
installments amortized over 120 months
payable on the first day of each
calendar month commencing on the first
month which begins at least thirty
days after the funding of the Real
Property Advance, with the entire
unpaid balance due and payable on the
Maturity Date; PROVIDED, that if at
any time Lender determines that the
unpaid principal balance of the Real
Property Advance exceeds 70% of the
quick sale value of the Real Property
as set forth on the most recent of the
Updated Real Property Appraisals (as
defined in Section 12 of this Schedule
A), then, Borrower shall repay such
excess in 6 equal consecutive monthly
installments payable on the first day
of each calendar month commencing with
the month immediately following the
date of such determination by Lender
(which payments shall be in addition
to the regular amortization payments
set forth above)
(iii) Capital Each Capital Expenditure Advance shall
Expenditure be repaid in equal consecutive monthly
Advances: installments amortized over 84 months
payable on the first day of each
calendar month commencing with the
month following the date on which such
Capital Expenditure Advance was made,
with the entire unpaid balance due and
payable on the Maturity Date;
PROVIDED, that if at any time Lender
determines that the aggregate unpaid
principal balance of the Capital
Expenditure Advances exceeds 85% of
the
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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value of the applicable Capital
Expenditure Equipment as set forth on
the most recent of the Updated
Equipment Appraisals (as defined in
Section 12 of this Schedule A), then,
Borrower shall repay such excess in 6
equal consecutive monthly installments
payable on the first day of each
calendar month commencing with the
month immediately following the date
of such determination by Lender (which
payments shall be in addition to the
regular amortization payments set
forth above)
3. Interest Rates:
(a) Revolving Loans: 0.50% per annum in excess of the Prime
Rate
(b) Term Loan: 0.75% per annum in excess of the Prime
Rate
4. Minimum Loan Amount: $10,000,000
5. Maximum Days:
(a) Maximum days after 90 (or 120 with respect to Accounts
original INVOICE DATE owing by McKesson Drug Company with
for Eligible Accounts: respect to which the purchase order
terms are net 90 days)
(b) Maximum days after 60
original INVOICE DUE
DATE for Eligible
Accounts:
A-6
36
NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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6. Fees:
(a) Closing Fee: $165,000, $82,500 of which was paid
pursuant to the Commitment Letter
between Lender and Borrower dated
August 31, 1998; PROVIDED, that if at
any time the Maximum Facility Amount
is increased (which increase will only
be pursuant to a written amendment of
the Agreement entered into by Lender
in its sole discretion) to an amount
in excess of $33,000,000, then
Borrower shall pay Lender an
additional closing fee equal to 0.50%
of the amount of such increase, which
additional closing fee shall be deemed
to be fully earned as of, and payable
on, the effective date of such
amendment
(b) Facility Fee:
(i) Initial Term: 0.75% of the Maximum Facility Amount
(ii) Renewal Term(s): 0.25% of the Maximum Facility Amount
(c) Servicing Fee: Not Applicable
(d) Unused Line Fee: 0.25% per annum
(e) Minimum Borrowing
Fee:
(i) Applicable period: Each month
(ii) Date payable: The first day of each month
(f) Success Fee: Not Applicable
(g) Warrants: Not Applicable
A-7
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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(h) Early Termination 3% of the Maximum Facility Amount if
Fee: terminated during the first year of
the Initial Term, 2% of the Maximum
Facility Amount if terminated during
the second year of the Initial Term,
and 1% of the Maximum Facility Amount
if terminated during the third year of
the Initial Term, and 0% of the
Maximum Facility Amount if terminated
after the third year of the Initial
Term; PROVIDED, that there will be no
Early Termination Fee charged if the
Loans are repaid more than eighteen
months after the date of the Agreement
through financing provided by
NationsBank, N.A. or any Affiliate of
NationsBank, N.A.
(i) Fees for letters of credit .50% per annum of the face amount of
and other Credit each open Credit Accommodation
Accommodations (or
guaranties thereof by
Lender):
7. Initial Maturity Date: November ___, 2002
8. Financial Covenants:
(a) Capital Expenditure $6,500,000
Limitation:
(b) Minimum Net Worth Not Applicable
Requirement:
(c) Minimum Tangible Not Applicable
Net Worth:
(d) Minimum Working Not Applicable
Capital:
A-8
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
(e) Maximum Cumulative Not Applicable
Net Loss:
(f) Minimum Cumulative Not Applicable
Net Income:
(g) Maximum Leverage Not Applicable
Ratio:
(h) Limitation on Not Applicable
Purchase Money
Security Interests:
(i) Limitation on Not Applicable
Equipment Leases:
(j) Additional Financial Not Applicable
Covenants:
9. Borrower Information:
(a) Prior Names of Borrower: None
(b) Prior Trade Names None
of Borrower:
(c) Existing Trade Hallmark Pharmaceuticals
Names of Borrower: Strong, Xxxx & Xxxxx
(d) Inventory Locations: 0000 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
0000 Xxxxxxxxxx Xxx
Xxxxxxxxxx, Xxxx 00000
000 Xxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Xxxxxxxxxx Health Care
000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxx
A-9
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
International Processing Corp.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx
(e) Other Locations: 0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
(f) Litigation: Schein Pharmaceuticals (see Exhibit C)
Also involved in miscellaneous product
liability lawsuits and other legal
matters in the ordinary course of
business, none of which is expected to
result in judgments in excess of the
Company's product liability insurance.
(g) Ownership of Borrower: See Exhibit D
(h) Subsidiaries (and Duramed Europe Ltd.;
ownership thereof): Marketmaster Inc.;
Duramed Research & Development;
all 100% owned by Duramed
(i) Facsimile Numbers:
Borrower: (000) 000-0000
Lender: (000) 000-0000
10. Description of See Exhibit E
Real Property:
11. Lender's Bank: The First National Bank of Chicago/NBD
12. Other Covenants: (a) At the end of every eighteen-month
period, commencing with the end of the
eighteen-month period immediately
following the date of the Agreement,
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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Lender will cause to be prepared and
delivered to Lender at Borrower's
expense updated auction sale value
appraisals of Borrower's Equipment
(the "UPDATED EQUIPMENT APPRAISAL")
and updated fair market and quick sale
value appraisals of Borrower's real
property performed in accordance with
FIRREA (the "UPDATED REAL PROPERTY
APPRAISAL"), all of which appraisals
shall be performed by independent
appraisers acceptable to Lender. Each
Updated Equipment Appraisal and
Updated Real Property Appraisal shall
be prepared and delivered to Lender
within thirty days of the end of the
applicable eighteen-month period. Each
Updated Equipment Appraisal shall
include, without limitation, all
Equipment acquired by Borrower after
the date of this Agreement
(b) Unless and until all of Borrower's
obligations under that letter
agreement between Borrower and
Ortho-XxXxxx Pharmaceutical
Corporation dated September 24, 1997,
have been discharged and terminated
and Borrower has provided Lender with
written notice of such discharge and
termination, Borrower will provide
Lender with written notice of any
attempt by Borrower to obtain formal
permission from the Federal Drug
Administration to market the CE
Product commercially based on an ANDA
for the CE Product, which notice of
such attempt shall be given within
five (5) business days of the filing
of such ANDA
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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(c) Borrower shall not accept or agree
to accept any loss payment from
American Credit Indemnity Company
under Policy No. G-345, 784-1 without
Lender's written consent
13. Exceptions to Negative (a) Notwithstanding the provisions of
Covenants: Section 5.18 of the Agreement,
Borrower may invest or loan to Europe
an amount not to exceed $100,000 in
the aggregate during any fiscal
quarter of Borrower, as long as no
Default or Event of Default has
occurred and is continuing or would be
caused by the making of any such
investment or loan
(b) Notwithstanding the provisions of
Section 5.18 of the Agreement,
Borrower may pay regularly scheduled
dividends on the 5% Cumulative
Preferred Stock, Series F, with a
stated value of $100.00 per share (the
"PREFERRED STOCK") held by Shepherd
Investments International, Ltd. and
Xxxxx International (collectively, the
"PREFERRED SHAREHOLDERS") as long as
no Default or Event of Default has
occurred and is continuing or would be
caused by the making of any such
payment, and Borrower may make
mandatory redemptions (as and when
regularly scheduled) of the Preferred
Stock held by the Preferred
Shareholders as long as (i) no Default
or Event of Default has occurred and
is continuing or would be caused by
the making of any such redemption,
(ii) Borrower's Net Availability,
after giving effect to each
A-12
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
such redemption, will not then be less
than $3,000,000, (iii) Borrower's Cash
Flow, after giving effect to each such
redemption, will then be greater than
$0, and (iv) Borrower has attained at
least seventy-five percent (75%) of
its projected cumulative pre-tax
profit for the period from the date of
the Agreement through the date of each
such redemption (or, if Borrower has
projected a loss for any such period,
Borrower's cumulative pre-tax loss for
the period from the date of the
Agreement through the date of each
such redemption, does not exceed its
projected cumulative pre-tax loss for
such period by more than twenty-five
percent (25%)
(c) Notwithstanding the provisions of
Section 5.18 of the Agreement,
Borrower may make regularly scheduled
payments of interest on account of
Included Subordinated Debt so long as
no Default or Event of Default has
occurred and is continuing or would be
caused by the making of any such
payment, and Borrower may make
regularly scheduled payments of
principal on account of Included
Subordinated Debt so long as (i) no
Default or Event of Default has
occurred and is continuing or would be
caused by the making of any such
payment, (ii) Borrower's Net
Availability, after giving effect to
each such payment, will not then be
less than $3,000,000 and (iii)
Borrower's Cash Flow, after giving
effect to each such payment, will then
be greater than $0
A-13
43
NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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(d) Notwithstanding the provisions of
Section 5.18 of the Agreement,
Borrower may acquire Capital
Expenditure Equipment with Capital
Expenditure Advances or with purchase
money financing provided by Persons
other than Lender
(e) Notwithstanding the provisions of
Section 5.18 of the Agreement,
Borrower may sell or otherwise dispose
of obsolete or worn-out Equipment, so
long as the fair market value of all
such Equipment sold or otherwise
disposed of by Borrower during any
twelve-month period is less than
$50,000 in the aggregate
(f) Notwithstanding the provisions of
Section 5.18 of the Agreement,
Borrower may make advances to its
employees for business travel
expenses, relocation expenses and
other business related expenses, to
the extent such advances are made in
the ordinary course of Borrower's
business as presently and as
heretofore conducted
(g) Notwithstanding the provisions of
Section 5.18 of the Agreement,
Borrower shall be permitted to have
its currently outstanding loans in the
approximate amount of $360,000 to its
employees, and Borrower may make
additional loans to its employees, the
outstanding amount of which additional
loans shall not exceed at
A-14
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
any time $200,000 for all employees in
the aggregate
(h) Notwithstanding the provisions of
Section 5.18 of the Agreement,
Borrower may issue Additional Equity
or warrants for the purchase of
Additional Equity, provided, that
Borrower shall not issue Additional
Equity or warrants for the purchase of
Additional Equity to any Person who,
as a result of such issuance, would
(or could through the exercise of such
warrants) hold more than 39.9% of all
of the issued and outstanding shares
of Borrower's common stock at any time
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
DURAMED PHARMACEUTICALS, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ XXXXXXX X. XXXX By /s/ XXXXX XXXXXXX
---------------------------------- ------------------------------------
Its Senior Vice President--Finance Its Authorized Signatory
A-15
45
NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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SCHEDULE B
DEFINITIONS
This Schedule is an integral part of the Loan and Security Agreement
between DURAMED PHARMACEUTICALS, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
As used in the Agreement, the following terms have the following
meanings:
"ACCOUNT" means any right to payment for Goods sold or leased or for
services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"ACCOUNT DEBTOR" means the obligor on an Account or Chattel Paper.
"ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.
"ADDITIONAL EQUITY" means (i) common or other stock of Borrower issued
subsequent to the date of this Agreement with respect to which there are no
rights to receive dividends, rights of redemption or other rights to payments of
any kind (other than rights to receive additional shares of Borrower's common
stock in exchange for such stock) and (ii) other stock of Borrower issued
subsequent to the date of this Agreement with respect to which (A) cash
dividends may only be paid as long as no Default or Event of Default exists or
would be caused by the making of such payments and (B) redemptions (other than
by the issuance of additional shares of Borrower's common stock in exchange for
such stock) and other cash payments may be made only as long as (1) no Default
or Event of Default exists or would be caused by the making of such redemptions
or cash payments, (2) Borrower's Net Availability, after giving effect to each
such redemption or cash payment, will not then be less than $3,000,000 and (3)
Borrower's Cash Flow, after giving affect to each such redemption or cash
payment, will then be greater than $0, and (C) a written subordination agreement
(containing payment subordination, lien subordination and "standstill"
provisions) in favor of Lender, and in form and substance acceptable to Lender,
has been delivered to Lender by the applicable stockholder.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, member, manager, director, officer, or employee of such Person, any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person or any other Person affiliated, directly
or indirectly, by virtue of family membership, ownership, management or
otherwise, PROVIDED, that a shareholder of Borrower shall not be deemed to be an
Affiliate unless such shareholder owns at least five percent (5%) of the stock
of Borrower.
"AGREEMENT" and "THIS AGREEMENT" mean the Loan and Security Agreement
of which this Schedule B is a part and the Schedules thereto.
B-1
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"ANDA" means an abbreviated new drug application as described in 21
C.F.R. section 314.94.
"AVAILABILITY" has the meaning set forth in Section 1.1(a).
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.
section 101 et seq.).
"BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.
"BORROWER" has the meaning set forth in the heading to the Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the heading to the
Agreement.
"BULK INVENTORY" means Inventory which (i) is finished goods in all
respects except for the fact that it has not been packaged by Borrower for
distribution, and (ii) is and has heretofore been commonly referred to by
Borrower as "bulk" or "bulk inventory."
"BUSINESS DAY" means a day other than a Saturday or Sunday or any other
day on which Lender or banks in New York are authorized to close.
"CAPITAL EXPENDITURE ADVANCE" has the meaning set forth in Section
1.1(b).
"CAPITAL EXPENDITURE EQUIPMENT" means Eligible Equipment acquired by
Borrower after the date of this Agreement with Capital Expenditure Advances.
"CAPITAL EXPENDITURES" means amount capitalized (including, without
limitation, with respect to capitalized leases) for the period, as determined in
accordance with GAAP.
"CASH FLOW" means at any time of calculation, on a cumulative basis
from the date of the Agreement through the date of calculation, Borrower's net
income (or net loss) before taxes for such period, plus depreciation and
amortization deducted in determining net income for such period, less Capital
Expenditures for such period not financed, less all current principal maturities
(including, without limitation, the principal portion of scheduled payments of
capital lease obligations) paid or scheduled to be paid during such period, all
as determined by Lender, on a consistent basis, based upon the most recent
financial statements received by Lender from Borrower.
"CE PRODUCT" means the solid oral dosage forms and concentrations or
strengths of the conjugated estrogen product heretofore or hereafter developed
by Borrower, and which will be manufactured by Borrower as a generic equivalent
to the brand name Premarin(R) product, and that Borrower may make available for
commercial sale at any time, but excluding any product that is a combination of
conjugated estrogens with another active ingredient or any product that is
approved by the Federal Drug Administration and marketed on the basis of an NDA.
B-2
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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"CHATTEL PAPER" has the meaning set forth in the UCC.
"COLLATERAL" means all property and interests in property in or upon
which a security interest or other Lien is granted pursuant to this Agreement or
the other Loan Documents.
"CREDIT ACCOMMODATION" has the meaning set forth in Section 1.1(a).
"CREDIT ACCOMMODATION BALANCE" means the sum of (i) the aggregate
undrawn face amount of all outstanding Credit Accommodations and (ii) all
interest, fees and costs due or, in Lender's good faith estimation, likely to
become due in connection therewith.
"DEFAULT" means any event which with notice or passage of time, or
both, would constitute an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.1.
"DEPOSIT ACCOUNT" has the meaning set forth in the UCC.
"DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a ninety (90) day rolling average.
"DOCUMENT" has the meaning set forth in the UCC.
"EARLY TERMINATION FEE" has the meaning set forth in Section 7.2.
"ELIGIBLE ACCOUNT" means, at any time of determination, an Account
which satisfies the general criteria set forth below and which is otherwise
acceptable to Lender (PROVIDED, that Lender may, in its sole discretion, change
the general criteria for acceptability of Eligible Accounts upon at least
fifteen days' prior notice to Borrower). An Account shall be deemed to meet the
current general criteria if (i) neither the Account Debtor nor any of its
Affiliates is an Affiliate, creditor or supplier of Borrower; (ii) it does not
remain unpaid more than the earlier to occur of (A) the number of days after the
original INVOICE DATE set forth in Section 5(a) of Schedule A or (B) the number
of days after the original INVOICE DUE DATE set forth in Section 5(b) of
Schedule A; (iii) the Account Debtor or its Affiliates are not past due on other
Accounts owing to Borrower comprising more than 50% of all of the Accounts owing
to Borrower by such Account Debtor or its Affiliates; (iv) all Accounts owing by
the Account Debtor or its Affiliates do not represent more than 20% (or 25% with
respect to Accounts owing by Cardinal Health, Inc.) of all otherwise Eligible
Accounts (PROVIDED, that Accounts which are deemed to be ineligible solely by
reason of this clause (iv) shall be considered Eligible Accounts to the extent
of the amount thereof which does not exceed 20% (or 25% with respect to Accounts
owing by Cardinal Health, Inc.) of all otherwise Eligible Accounts); (v) no
covenant, representation or warranty contained in this Agreement with respect to
such Account (including any of the representations set forth in
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NATIONSCREDIT COMMERCIAL FUNDING LOAN AND SECURITY AGREEMENT
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Section 5.4) has been breached; (vi) the Account is not subject to any contra
relationship, counterclaim, dispute or set-off (PROVIDED, that Accounts which
are deemed to be ineligible solely by reason of this clause (vi) shall be
considered Eligible Accounts to the extent of the amount thereof which is not
affected by such contra relationships, counterclaims, disputes or set-offs);
(vii) the Account Debtor's chief executive office or principal place of business
is located in the United States or Provinces of Canada which have adopted the
Personal Property Security Act or a similar act, unless (A) the sale is fully
backed by a letter of credit, guaranty or acceptance acceptable to Lender in its
sole discretion, and if backed by a letter of credit, such letter of credit has
been issued or confirmed by a bank satisfactory to Lender, is sufficient to
cover such Account, and if required by Lender, the original of such letter of
credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender or
(B) such Account is subject to credit insurance payable to Lender issued by an
insurer and on terms and in an amount acceptable to Lender; (viii) it is
absolutely owing to Borrower and does not arise from a sale on a xxxx-and-hold,
guarantied sale, sale-or-return, sale-on-approval, consignment, retainage or any
other repurchase or return basis or consist of progress xxxxxxxx; (ix) Lender
shall have verified the Account in a manner satisfactory to Lender; (x) the
Account Debtor is not the United States of America or any state or political
subdivision (or any department, agency or instrumentality thereof), unless
Borrower has complied with the Assignment of Claims Act of 1940 (31 U.S.C.
section 203 et seq.) or other applicable similar state or local law in a manner
satisfactory to Lender; (xi) it is at all times subject to Lender's duly
perfected, first priority security interest and to no other Lien that is not a
Permitted Lien, and the goods giving rise to such Account (A) were not, at the
time of sale, subject to any Lien except Permitted Liens and (B) have been
delivered to and accepted by the Account Debtor, or the services giving rise to
such Account have been performed by Borrower and accepted by the Account Debtor;
(xii) the Account is not evidenced by Chattel Paper or an Instrument of any kind
and has not been reduced to judgment; (xiii) the Account Debtor's total
indebtedness to Borrower does not exceed the amount of any credit limit
established by Borrower or Lender and the Account Debtor is otherwise deemed to
be creditworthy by Lender (PROVIDED, that Accounts which are deemed to be
ineligible solely by reason of this clause (xiii) shall be considered Eligible
Accounts to the extent the amount of such Accounts does not exceed the lower of
such credit limits); (xiv) there are no facts or circumstances existing, or
which could reasonably be anticipated to occur, which might result in any
adverse change in the Account Debtor's financial condition or impair or delay
the collectibility of all or any portion of such Account; (xv) Lender has been
furnished with all documents and other information pertaining to such Account
which Lender has requested, or which Borrower is obligated to deliver to Lender,
pursuant to this Agreement; (xvi) Borrower has not made an agreement with the
Account Debtor to extend the time of payment thereof beyond the time periods set
forth in clause (ii) above; (xvii) Borrower has not posted a surety or other
bond in respect of the contract under which such Account arose; (xviii) the
Account Debtor is not Xxxxxx-Xxxxxxx Company, unless Xxxxxx-Xxxxxxx Company has
delivered to Lender a no-offset agreement in form and substance satisfactory to
Lender in its sole discretion;
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and (xix) the Account is not owing with respect to the sale of Premarin(R) or
any conjugated estrogen products which are a generic version of Premarin(R).
"ELIGIBLE EQUIPMENT" means, at any time of determination, Equipment
owned by Borrower which Lender, in its sole discretion, deems to be eligible for
borrowing purposes.
"ELIGIBLE INVENTORY" means, at any time of determination, Inventory
(other than packaging materials and supplies) which satisfies the general
criteria set forth below and which is otherwise acceptable to Lender (PROVIDED,
that Lender may, in its sole discretion, change the general criteria for
acceptability of Eligible Inventory upon at least fifteen days' prior written
notice to Borrower). Inventory shall be deemed to meet the current general
criteria if (i) it consists of raw materials or finished goods, or Bulk
Inventory that is readily marketable in its current form; (ii) it is in good,
new and saleable condition; (iii) it is not slow-moving, obsolete or
unmerchantable; (iv) it is not in the possession of a processor, consignee or
bailee, or located on premises leased or subleased to Borrower, or on premises
subject to a mortgage in favor of a Person other than Lender, unless such
processor, consignee, bailee or mortgagee or the lessor or sublessor of such
premises, as the case may be, has executed and delivered all documentation which
Lender shall require to evidence the subordination or other limitation or
extinguishment of such Person's rights with respect to such Inventory and
Lender's right to gain access thereto; (v) it meets all standards imposed by any
governmental agency or authority; (vi) it conforms in all respects to any
covenants, warranties and representations set forth in the Agreement; (vii) it
is at all times subject to Lender's duly perfected, first priority security
interest and no other Lien except a Permitted Lien; (viii) it is situated at an
Inventory Location listed in Section 9(d) of Schedule A or other location of
which Lender has been notified as required by Section 5.6; (ix) it is not
Inventory to be distributed for, or pursuant to any agreement with, Xxxxxx
Xxxxxxx, Ltd. ("Xxxxxx") , unless Xxxxxx has delivered to Lender an agreement,
in form and substance satisfactory to Lender in its sole discretion, pursuant to
which Xxxxxx agrees that following the occurrence of an Event of Default, Lender
or its agents will be entitled to dispose of all such Inventory pursuant to the
terms of the Agreement and applicable law, without interference from Xxxxxx; and
(x) it is not Inventory consisting of Premarin(R) or any conjugated estrogen
products which are a generic version of Premarin(R), unless Schein
Pharmaceutical, Inc. ("SCHEIN") either has delivered to Lender an agreement, in
form and substance satisfactory to Lender in its sole discretion, pursuant to
which Schein subordinates any security interest it may claim in such Inventory
in favor of Lender's security interest therein and agrees not to enforce any
such security interest against such Inventory while any of the Obligations
remain outstanding or Schein has legally terminated any security interest it may
claim in such Inventory pursuant to documentation acceptable to Lender.
"ELIGIBLE REAL PROPERTY" means, at any time of determination, Real
Property owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
"EQUIPMENT" means all Goods which are used or bought for use primarily
in business (including farming or a profession) or by a Person who is a
non-profit organization or
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governmental subdivision or agency and which are not Inventory, farm products or
consumer goods, including all machinery, molds, machine tools, motors,
furniture, equipment, furnishings, fixtures, trade fixtures, motor vehicles,
tools, parts, dies and jigs, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to, or spare parts for,
any of the foregoing.
"EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).
"ERISA" means the Employee Retirement Income Security Act of 1974 and
all rules, regulations and orders promulgated thereunder.
"EUROPE" means "Duramed Europe Ltd.", a Subsidiary of Borrower.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in effect from
time to time, consistently applied.
"GENERAL INTANGIBLES" has the meaning set forth in the UCC, and
includes all books and records pertaining to the Collateral and other business
and financial records in the possession of Borrower or any other Person,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than "intent to use" applications
until a verified statement of use is filed with respect to such applications)
and the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, causes of action and other rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, internet
addresses, proprietary information, purchase orders, and all insurance policies
and claims (including life insurance, key man insurance, credit insurance,
liability insurance, property insurance and other insurance), tax refunds and
claims, letters of credit, banker's acceptances and guaranties, computer
programs, discs, tapes and tape files in the possession of Borrower or any other
Person, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature.
"GOODS" means all things which are movable at the time the security
interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"INCLUDED SUBORDINATED DEBT" means indebtedness of Borrower which (i)
is incurred subsequent to the date of this Agreement, (ii) is subordinated in
payment to payment of
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the Obligations, (iii) is either unsecured or secured by Lien junior and
subordinate to Lender's Liens upon the Collateral, (iv) may not be enforced
unless and until the Obligations have been paid in full, and (v) is otherwise
subject to a written subordination agreement in favor of Lender in form and
substance acceptable to Lender.
"INITIAL TERM" has the meaning set forth in Section 7.1.
"INSTRUMENT" has the meaning set forth in the UCC.
"INVENTORY" means all Goods held for sale or lease or furnished or to
be furnished under contracts of service, including all raw materials, work in
process, finished goods, goods in transit and materials and supplies which are
or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.
"INVESTMENT PROPERTY" shall mean all of Borrower's securities, whether
certificated or uncertificated, securities entitlements, securities accounts,
commodity contracts and commodity accounts.
"LENDER" has the meaning set forth in the heading to the Agreement.
"LIEN" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purpose of this Agreement, Borrower shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"LOAN ACCOUNT" has the meaning set forth in Section 2.4.
"LOAN DOCUMENTS" means the Agreement and all notes, guaranties,
security agreements, certificates, landlord's agreements, Lock Box and Blocked
Account agreements and all other agreements, documents and instruments now or
hereafter executed or delivered by Borrower or any Obligor in connection with,
or to evidence the transactions contemplated by, this Agreement.
"LOAN LIMITS" means, collectively, the Availability limits and all
other limits on the amount of Loans and Credit Accommodations set forth in this
Agreement.
"LOANS" means, collectively, the Revolving Loans and any Term Loan.
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"LOCK BOX" has the meaning set forth in Section 4.1.
"MATURITY DATE" has the meaning set forth in Section 7.1.
"MAXIMUM FACILITY AMOUNT" means the amount set forth in Section 1(a) of
Schedule A.
"NDA" means a new drug application under 21 U.S.C. section 355(b)(1) or
an equivalent submission to the Federal Drug Administration.
"NET AVAILABILITY" means the amount of Availability at any time, less
the amount of Borrower's accounts payable which are then more than sixty days
past due, and less the amount of any taxes then due and payable by Borrower.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender, whether evidenced by this Agreement or any
other Loan Document, whether arising from an extension of credit, opening of a
Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, Closing Fees, Facility Fees, Servicing Fees, Unused Line Fees,
Minimum Borrowing Fees, Success Fees, Credit Accommodation Fees and any other
sums chargeable to Borrower under this Agreement or under any other Loan
Document.
"OBLIGOR" means any guarantor, endorser, acceptor, surety or other
person liable on, or with respect to, the Obligations or who is the owner of any
property which is security for the Obligations, other than Borrower.
"PERMITTED LIENS" means: (i) purchase money security interests in
specific items of Equipment not included in Eligible Equipment of which Borrower
has notified Lender in writing at or prior to the creation thereof; (ii) leases
(under which Borrower is the lessee) of specific items of Equipment not included
in Eligible Equipment of which Borrower has notified Lender in writing at or
prior to the creation thereof; (iii) Liens for taxes not yet due and payable;
(iv) additional Liens which are fully subordinate to the security interests of
Lender and are consented to in writing by Lender; (v) security interests being
terminated concurrently with the execution of this Agreement; (vi) Liens of
materialmen, mechanics, warehousemen or carriers arising in the ordinary course
of business and securing obligations which are not delinquent;
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(vii) Liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by Liens of the type described in clause (i) or (ii)
above; PROVIDED, that any extension, renewal or replacement Lien is limited to
the property encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods; (ix) security
deposits posted in connection with real property leases or subleases; (x) a
first-priority Lien in favor of Xxxxxx-Xxxxxxx Company upon Borrower's real
property commonly known as 0000 Xxxxxxx Xxxxx, Xxxxxxxxxx, Xxxx 00000; and (xi)
a Lien (the existence of which Borrower disputes and which is currently the
subject of litigation) in favor of Schein in Borrower's right, title and
interest in and to conjugated estrogen tablets which are a generic version of
Premarin(R) (the "PRODUCT"), including, without limitation, all proprietary
information relating to the Product, all information and technology relating
thereto, all manufacturing technology, know-how, formulas, marketing
information, clinical data, studies and analyses relating thereto, all sums
contributed to Borrower by Schein under their June 26, 1992 agreement and in the
possession or control of Borrower, and any Federal Food and Drug Administration
approval of the Abbreviated New Drug Application under the June 26, 1992
agreement between Borrower and Schein. Lender will have the right to require, as
a condition to its consent under clause (iv) above, that the holder of the
additional Lien sign an intercreditor agreement in form and substance
satisfactory to Lender, in its sole discretion, acknowledging that the Lien is
subordinate to the security interests of Lender, and agreeing not to take any
action to enforce its subordinate Lien so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate Lien shall also constitute an Event of Default under
this Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"PRIME RATE" means, at any given time, the prime rate as quoted in The
Wall Street Journal as the base rate on corporate loans posted as of such time
by at least 75% of the nation's 30 largest banks (which rate is not necessarily
the lowest rate offered by such banks).
"REAL PROPERTY" means the real property described in Section 10 of
Schedule A.
"REAL PROPERTY ADVANCE" has the meaning set forth in Section 1.1(b).
"REAL PROPERTY ADVANCE CONDITIONS PRECEDENT" means (i) Borrower shall
have acquired title to the Real Property free and clear of any Liens, (ii)
Borrower shall have granted Lender a first-priority Lien upon the Real Property
pursuant to a mortgage delivered to Lender in form and substance satisfactory to
Lender in its sole discretion, (iii) Borrower shall have caused to be delivered
to Lender a survey of the Real Property in form and substance satisfactory to
Lender in its sole discretion, (iv) Borrower shall have caused to be delivered
to Lender a title insurance
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policy on the Real Property in form and substance satisfactory to Lender in its
sole discretion, (v) Borrower shall have caused to be delivered to Lender a fair
market and quick sale value appraisal of the Real Property prepared in
accordance with FIRREA standards and otherwise in form and substance
satisfactory to Lender in its sole discretion, (vi) Borrower shall have caused
to be delivered to Lender a Phase I environmental study of the Real Property in
form and substance satisfactory to Lender in its sole discretion (the "PHASE I
REPORT") demonstrating that the Real Property complies with all current federal,
state and local environmental laws and regulations and that no remediation of
the Real Property is required by any such laws or regulations, (vii) if
indicated by the results of the Phase I Report, Borrower shall have caused to be
delivered to Lender a Phase II environmental study demonstrating that the Real
Property complies with all current federal, state and local environmental laws
and that no remediation of the Real Property is required by any such laws or
regulations, and (viii) Borrower shall have delivered or caused to be delivered
to Lender all such other documents as Lender shall deem necessary in its sole
discretion in connection with the Real Property Advance.
"RELEASED PARTIES" has the meaning set forth in Section 6.1.
"RENEWAL TERM" has the meaning set forth in Section 7.1.
"RESERVES" has the meaning set forth in Section 1.2.
"REVOLVING LOANS" has the meaning set forth in Section 1.1(a).
"SALE" has the meaning set forth in Section 8.2.
"SUBSIDIARY" means any corporation or other entity of which a Person
owns, directly or indirectly, through one or more intermediaries, more than 50%
of the capital stock or other equity interest at the time of determination.
"TERM" means the period commencing on the date of this Agreement and
ending on the Maturity Date.
"TERM LOAN" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as adopted
and in effect at such time in the State of New York.
All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the UCC, to the extent such terms are defined
therein. The term "INCLUDING," whenever used in this Agreement, shall mean
"including but not limited to." The singular form of any term shall include the
plural form, and vice versa, when the context so requires.
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References to Sections, subsections and Schedules are to Sections and
subsections of, and Schedules to, this Agreement. All references to agreements
and statutes shall include all amendments thereto and successor statutes in the
case of statutes.
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
DURAMED PHARMACEUTICALS, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ XXXXXXX X. XXXX By /s/ XXXXX XXXXXXX
---------------------------------- ------------------------------------
Its Senior Vice President--Finance Its Authorized Signatory
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EXHIBIT A
FORM OF TERM NOTE FOR
CAPITAL EXPENDITURE ADVANCES
$ New York, New York
---------------
------- --, ----
FOR VALUE RECEIVED, the undersigned, Duramed Pharmaceuticals,
Inc., a __________ corporation ("BORROWER"), hereby unconditionally promises to
pay to the order of NationsCredit Commercial Corporation, through its
NationsCredit Commercial Funding Division ("LENDER"), at its office at 1177
Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
place as the holder of this Term Note ("TERM NOTE") may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of ________________________ and
__/100 Dollars ($____________). Reference is hereby made to the Loan and
Security Agreement between Borrower and Lender of even date herewith (the "LOAN
AGREEMENT") for a statement of the terms and conditions under which the loan
evidenced hereby was made and is to be repaid. This Term Note evidences a
Capital Expenditure Advance described in the Loan Agreement. Capitalized terms
used herein which are not otherwise specifically defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.
The outstanding principal balance of this Term Note shall be
payable in full on the Maturity Date. Prior thereto, the Term Note shall be
repayable as set forth in the Loan Agreement.
Borrower further promises to pay interest on the outstanding
principal amount hereof from the date hereof until payment in full hereof at the
per annum rate equal to the Prime Rate in effect from time to time plus
three-quarters of one percent (0.75%). Following the occurrence and during the
continuance of an Event of Default the entire outstanding principal balance of
this Term Note shall, at Lender's option, bear interest until paid in full at a
per annum rate equal to the interest rate applicable to the Term Loan from time
to time in effect plus two percent (2.00%). Until maturity, interest on the
outstanding principal amount hereof shall be payable in arrears on the first day
of each month, commencing [INSERT DATE WHICH IS THE FIRST DAY OF THE CALENDAR
MONTH FOLLOWING THE MONTH IN WHICH SUCH CAPITAL EXPENDITURE ADVANCE WAS MADE]
and on the Maturity Date. After maturity, whether by acceleration or otherwise,
accrued interest
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shall be payable on demand. Interest as aforesaid shall be charged for the
actual number of days elapsed over a year consisting of three hundred sixty
(360) days on the actual daily outstanding balance hereof. Changes in the
interest rate provided for herein which are due to changes in the Prime Rate
shall be effective on the date of the change in the Prime Rate.
Notwithstanding anything to the contrary contained herein, the
aggregate of all interest hereunder and charged or collected by Lender is not
intended to exceed the highest rate permissible under any applicable law, but if
it should, such interest shall automatically be reduced to the extent necessary
to comply with applicable law and Lender will refund to Borrower any such excess
interest received by Lender.
Subject to Section 7.2 of the Loan Agreement, Borrower may,
prepay the outstanding principal balance hereof in whole or in part. Any partial
prepayment of the Term Loan shall be applied to the unpaid installments of the
Term Loan in the inverse order of their maturities.
Upon and after the occurrence of an Event of Default, this
Term Note may, at the option of Lender, and without demand, notice or legal
process of any kind, be declared, and immediately shall become, due and payable.
Payments received by Lender from Borrower on this Term Note
shall be applied to the Obligations as provided in the Loan Agreement.
Presentment, demand, protest and notice of presentment,
demand, nonpayment and protest are hereby waived by Borrower.
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THIS TERM NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. If any provision of this Term Note or the application thereof
shall be held to be void or unenforceable by any court of competent
jurisdiction, such defect shall not affect the remainder of this Term Note,
which shall continue in full force and effect. Whenever in this Term Note
reference is made to Lender or Borrower, such reference shall be deemed to
include, as applicable, a reference to their respective successors and assigns.
The provisions of this Term Note shall be binding upon Borrower and its
successors and assigns, and shall inure to the benefit of Lender and its
successors and assigns.
DURAMED PHARMACEUTICALS, INC.
By:
---------------------------------
Its:
--------------------------------
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EXHIBIT B
VEHICLE TITLES
----------------------------------------------------------------------------------------------------------------------
COUNTY/
NAME OF CURRENT STATE WHERE BODY CURRENT
OWNER TITLED MAKE YEAR MODEL STYLE VIN TITLE NUMBER
----------------------------------------------------------------------------------------------------------------------
Duramed Xxxxxxxx INTL 1994 470 TK 0XXXXXXX0XX000000 3100411273
Pharmaceuticals County, Ohio
----------------------------------------------------------------------------------------------------------------------
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EXHIBIT C
SCHEIN LITIGATION
Duramed Pharmaceuticals, Inc. (the "COMPANY") is a party to an
Agreement dated June 26, 1992 and amended on April 7, 1994 (the "SCHEIN
AGREEMENT") with Schein Pharmaceutical, Inc. ("SCHEIN") relating to the
development of a generic version of the conjugated estrogens product
Premarin(R). On August 7, 1997, the Company filed a complaint for a declaratory
judgment against Schein in the Court of Common Pleas, Xxxxxxxx County, Ohio,
Case No. A9705498 ("OHIO ACTION"). The Company seeks a declaration that the
Schein Agreement applies only to a product approved on the basis of an ANDA and
which would be fully substitutable for Premarin(R) and that the Schein Agreement
does not apply to the Company's efforts to develop or market any conjugated
estrogens product which would be approved and marketed on the basis of an NDA.
In apparent response to the Company's action, on September 29,
1997, Schein filed a complaint against the Company and other unnamed defendants
in the Superior Court of New Jersey, Chancery Division, Xxxxxx County, Docket
No. MRS-C-187-97 ("NEW JERSEY ACTION"). Schein alleges that the Company breached
its obligations to Schein under an alleged joint venture arising between the
parties and that the unnamed defendants tortuously interfered with Schein's
prospective business advantage and are liable to Schein. Schein seeks various
forms of relief against the Company, including injunctions barring the Company
from the development of a conjugated estrogens product with any person or
company other than Schein and requiring specific performance from the Company
according to the terms of the Schein Agreement and alleged joint venture and
accounting and money damages and a constructive trust.
On October 9, 1997, Schein filed a motion to dismiss the Ohio
action based upon the pending New Jersey action. The court denied this motion on
November 13, 1997. On October 17, 1997, the Company filed a motion to dismiss
or, in the alternative, to stay the New Jersey action because of the
previously-filed Ohio action. On November 14, 1997, the New Jersey court granted
the Company's motion in part and stayed the New Jersey action.
On January 30, 1998, Schein amended its answer in the Ohio
action and asserted a counterclaim against the Company and other unnamed
defendants similar to the New Jersey complaint. As a result, on March 4, 1998,
the Company renewed its motion to dismiss the New Jersey action because Schein
had brought the same basic claims as a
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counterclaim in the Ohio action. On April 17, 1998, the Court dismissed without
prejudice the New Jersey action.
On September 11, 1998, both the Company and Schein filed cross
motions for summary judgment. These motions have been fully briefed and are
pending before the Court. The case currently is scheduled to go to trial on
November 30, 1998.
The Company intends vigorously to prosecute its claim for
declaratory relief in the Ohio action and vigorously to defend against Schein's
counterclaim in the Ohio action; however, the outcome of these claims cannot be
predicted with certainty.
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EXHIBIT D
PRINCIPAL STOCKHOLDERS AND
HOLDINGS OF MANAGEMENT
The following table sets forth, as of July 9, 1998, certain
information with regard to the beneficial ownership of Common Stock of Duramed
Pharmaceuticals, Inc. (the "COMPANY") by (i) each of the Company's stockholders
known to hold more than 5% of the outstanding shares of Common Stock, (ii) each
continuing director, nominee for director and named executive officer,
individually, and (iii) all continuing directors, nominees and executive
officers of the Company as a group.
Beneficial Ownership
--------------------
Name Number of Shares (1) Percent
---- -------------------- -------
E. Xxxxxx Xxxxxxxx 1,945,209 10.2%
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxx 156,833 *
Xxxxxx X. Xxxxxxxx 73,000 *
Xxxxx X. Xxxxxx -- --
X. Xxxxxxxxxxxx 218,716 1.2%
Xxxxxxx X. Xxxx 123,981 *
All directors, nominees and executive 2,517,739 13.0%
officers as a group
(6 persons)
---------------
* Less than one percent.
63
NATIONSCREDIT COMMERCIAL FUNDING
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EXHIBIT E
DESCRIPTION OF REAL PROPERTY
BEGINNING at a point in the Southeasterly line of Cottontail
Lane as established Twenty (20') feet in width, where the same is intersected by
the Northeasterly line of lands now or formerly of Xxxxxx Xxxxxxx and wife;
thence running (1) North Twenty-one degrees Twenty-two minutes East (N.
21(Degree) 22' E.) along the Southeasterly line of Cottontail Lane, Three
Hundred Two and Seven-tenths (302.7') feet; thence (2) South sixty-nine degrees
Four minutes East (S. 69(Degree) 04' E.), Twenty (20') feet; thence (3) North
Twenty-one degrees Twenty-two minutes East (N. 21(Degree) 22' E.) continuing
along the Southeasterly line of Cottontail Lane as established Forty (40') feet
in width, Three Hundred Twenty and One one-hundredth (320.01') feet to the
Westerly line of Campus Drive, as established Sixty (60') feet in width; thence
(4) Southerly along said Westerly line of Campus Drive, on a curve to the left,
said curve having a radius of Five Hundred Thirty (530') feet and an arc length
of Seventy-one and Eighty-eight one-hundredths (71.88') feet to a point of
tangent (the chord of said arc having a bearing of South Ten degrees
Twenty-seven minutes Forty-three seconds East (S. 10(Degree) 27' 43" E.) and a
length of Seventy-one and Eighty-two one-hundredths (71.82') feet); thence (5)
South Fourteen degrees Twenty minutes Fifty seconds East (S. 14(Degree) 20' 50"
E.) along Campus Drive, Six Hundred Forty and Sixty-three one-hundredths
(640.63') feet; thence (6) South Twenty-one degrees Twenty-two minutes West (S.
21(Degree) 22' W.) along lands now or formerly of Xxxxxx Xxxxxxx, Thirty-eight
and Forty-one one-hundredths (38.41') feet; thence (7) North Sixty-nine degrees
Four minutes West (N. 69(Degree) 04' W.) along said last mentioned lands, Four
Hundred Thirty-one and Eighty-five one-hundredths (431.85') feet to the place of
Beginning.
Containing Three and Two Hundred Twenty-seven one-thousandths
(3.227) Acres of land.
Being known as Lot 9 in Block 517 as shown on the Tax Map of
Franklin Township, New Jersey.
