Contract
EXHIBIT 10.1
THIS
LOAN
AND SECURITY AGREEMENT IS SUBJECT TO AN INTERCREDITOR AND SUBORDINATION
AGREEMENT, DATED AS OF MAY ___, 2008, AMONG NPIL PHARMA INC., RXELITE, INC.
AND
CASTLERIGG MASTER INVESTMENTS LTD.
THIS
AGREEMENT, made this ___ day of May, 2008, is by and between NPIL PHARMA INC.,
a
Delaware corporation (the “Lender”)
and
RXELITE, INC., a Delaware corporation (the “Borrower”).
Borrower
has requested that the Lender make a term loan available to Borrower, and the
Lender is willing to make such loan available to Borrower on the terms and
conditions set forth in this Agreement.
As
used
herein:
“Accounts”,
“Chattel Paper”, Documents”, “Equipment”, “General Intangibles”, “Inventory”
and
“Instruments”
shall
have the same respective meanings as are given to those terms in the
UCC.
“Affiliates”
means
as
to any Person (A) any Person which, directly, or indirectly through one or
more
intermediaries, controls, is controlled by or is under common control with
such
Person, or (B) any Person who is a director or executive officer (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any Person described
in clause (A) above. For purposes of this definition, “control” of a Person
shall mean the power, direct or indirect, (i) to vote or direct the voting
of
more than twenty five percent (25%) of the outstanding shares of voting stock
of
such Person, or (ii) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise. In no event shall
the
Lender be deemed to be an Affiliate of the Borrower.
“Agreement”
means
this Loan and Security Agreement, as it may be amended, restated, renewed or
extended from time to time.
“Borrower
Distributions” means
(i)
any dividend or other distribution, whether in cash, in kind, or otherwise,
on
account of or with respect to, or (ii) the application of any funds, property
or
assets to the purchase, redemption or other retirement of, any of Borrower’s
equity interests or any warrants, options or other rights with respect to any
of
Borrower’s equity interests.
“Business
Day” means
any
day on which the state banks and national banking associations in New York,
New
York are open for the conduct of ordinary business.
“Capitalized
Lease” means
a
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.
“Capitalized
Lease Obligation” means
Indebtedness represented by obligations under a Capitalized Lease, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
“Closing”
means
the
valid execution and delivery of the Note, this Agreement, and the other Loan
Documents to the Lender.
“Collateral”
has
the
meaning set forth in Section
4.1.
“Constituent
Documents” means,
with respect to any Person, the governing legal documents of such Person, such
as Person’s charter, certificate of incorporation, articles of organization,
operating agreement, certificate of limited partnership, or Partnership
Agreement.
“Default
Rate”
means a
rate per annum equal to the Term Rate plus two percent (2%).
“Event
of Default” has
the
meaning set forth in Section
8.1.
“Financial
Statements” means
any
financial statements submitted to Lender in connection with the Loan.
“Financing
Statements” means
any
one or more filings made pursuant to the UCC to perfect the security interests
in the Collateral granted to Lender pursuant to Section
4 hereof.
“Fiscal
Year” means,
with respect to the Borrower, the calendar year period of January 1 through
December 31.
“GAAP”
means
generally accepted accounting principles as used in the United States applied
on
a consistent basis as in effect from time to time.
“Indebtedness”
means,
as
to any Person, all items of indebtedness whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, including
without limitation:
(a) All
indebtedness guaranteed, directly or indirectly, in any manner, or endorsed
(other than for collection or deposit in the ordinary course of business) or
discounted with recourse;
(b) All
indebtedness in effect guaranteed, directly or indirectly, through agreements,
contingent or otherwise: (1) to purchase such indebtedness; or (2) to purchase,
sell or lease (as lessee or lessor) property, products, materials or supplies
or
to purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such indebtedness or to assure the owner of the indebtedness
against loss; or (3) to supply funds to or in any other manner invest in the
debtor;
(c) All
indebtedness secured by (or for which the holder of such indebtedness has a
right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance upon property
owned or acquired subject thereto, whether or not the liabilities secured
thereby have been assumed; and
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(d) All
indebtedness incurred as the lessee of facilities, goods or services under
leases that, in accordance with generally accepted accounting principles
consistently applied, should be reflected on such Person’s balance
sheet.
“Interest
Rate”
means
the Term Rate.
“Laws”
means
all
ordinances, statutes, rules, regulations, order, injunctions, writs or decrees
of any government or political subdivision or agency thereof, or any court
of
similar entity established by any thereof.
“Loan”
means
the
term loan in the amount equal to the Loan Commitment made to Borrower by Lender
hereunder.
“Loan
Commitment”
means an
amount equal to $3,000,000.00; provided that,
so long
as no Unmatured Default or Event of Default has occurred and is continuing
and
subject to Lender’s sole discretion, the Loan Commitment may be increased, upon
the written request of Borrower, by $2,000,000.00; provided that the Loan
Commitment shall at no time exceed $5,000,000.00.
“Loan
Documents” means
this Agreement, the Subordination Agreement, the Note and any other document
executed or delivered by or on behalf of the Borrower evidencing or securing
the
Obligations.
“Loan
Termination Date” means
the
earlier of (a) six (6) months after the maturity date of the Senior Notes,
or
(b) immediately after redemption of 100% of the Senior Note pursuant to the
terms set forth in the Senior Note.
“Long
Term Debt” means
any
Indebtedness which, by its terms, matures more than one (1) year from the date
of any calculation thereof, and/or which is renewable or extendable at the
option of the obligor to a date more than one (1) year from the date of such
calculation.
“Material
Adverse Change” means
a
material adverse change in the business or conditions (financial or otherwise)
in the result of operations or prospects of the Borrower taken as a whole,
or in
the value of the Collateral.
“Material
Adverse Effect” means,
when referring to the taking of an action or the omission to take an action,
that such action, if taken, or omission, would have a material adverse effect
on
the business, condition (financial or otherwise) results of operations or
prospects of such Person, taken as a whole, or would materially impair the
value
of the Collateral.
“Minrad
Contract”
means
that certain Exclusive Manufacturing and Distribution Agreement, dated as of
June 9, 2004, by and between RxElite Holdings Inc. and Minrad International,
Inc., as amended to date.
“Note”
means
one
or more promissory notes substantially in the form of Exhibit
A
attached
hereto, duly executed and delivered to Lender by Borrower, as the same may
be
renewed, extended or modified from time to time.
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“Obligations”
means
all
of the obligations of the Borrower:
(a)
To
pay
the principal of and interest on the Note in accordance with the terms thereof
and to satisfy all the Borrower’s other liabilities to the Lender hereunder,
whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extension, modifications,
amendments, restatements and renewals thereof and substitutions
therefor;
(b) To
repay
the Lender all amounts advanced by the Lender hereunder on behalf of the
Borrower, including without limitation advances for overdrafts, principal or
interest payments to prior secured parties, mortgagees, or lienors, or for
taxes, levies, insurance, rent, repairs to or maintenance or storage of any
of
the Collateral; and
(c) To
reimburse the Lender, on demand, for all of the Lender’s reasonable
out-of-pocket expenses and costs, including the reasonable fees and expenses
of
its counsel, in connection with the enforcement of this Agreement and the
documents required hereunder, including, without limitation, any proceeding
brought or threatened to enforce payment of any of the obligations referred
to
in the foregoing paragraphs (a) and (b), or any suits or claims against Lender
whatsoever as a result of Lender’s execution of this Agreement and making of its
Loan, all as more specifically set forth in Sections
9.4 and 9.7
hereof;
and in addition, to reimburse the Lender for its expenses and reasonable
attorneys’ fees in connection with the preparation, administration, amendment,
modification or waiver of the Agreement and the other Loan
Documents.
“Permitted
Liens” means:
(a) Liens
in
favor of Lender;
(b) Liens
for
taxes, assessments, or similar charges, incurred in the ordinary course of
business that are not delinquent;
(c) Pledges
or deposits made in the ordinary course of business to secure payment of
workmen’s compensation, or to participate in any fund in connection with
workmen’s compensation, unemployment insurance, old-age pensions or other social
security programs;
(d) Liens
of
mechanics, materialmen, warehousemen, carriers, or other like liens, securing
obligations in the ordinary course of business that are not
delinquent;
(e) Good
faith pledges or deposits made in the ordinary course of business to secure
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory obligations, or surety,
appeal, indemnity, performance or other similar bonds required in the ordinary
course of business;
(f) Encumbrances
consisting of zoning restrictions, easements or other restrictions on the use
of
real property, none of which materially impairs the use of such property by
the
Borrower in the operations of its business, and none of which is violated in
any
material respect by existing or proposed structures or land use;
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(g) Existing
liens set forth or described on Schedule
5.6,
attached hereto and made a part hereof, and renewals thereof;
(h) Statutory
and common law landlord’s liens arising under any lease;
(i) The
interests of lessees of any property of Borrower;
(j) The
following, if the validity or amount thereof is being contested in good faith
by
appropriate and lawful proceedings, so long as levy and execution thereon have
been stayed and continue to be stayed; if Borrower has posted such security
as
may be required by Laws or as is reasonably satisfactory to Lender:
(i) Claims
or
liens for taxes, assessments or charges due and payable and subject to interest
or penalty;
(ii) Claims,
liens and encumbrances upon, and defects of title to, real or personal property,
including any attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits;
(iii) Claims
or
liens of mechanics, materialmen, warehousemen, carriers, or other like liens;
and
(iv) Adverse
judgments on appeal;
(k) Purchase
Money Liens securing Purchase Money Indebtedness incurred in compliance with
Section
7.4;
and
(l) Liens
granted to Castlerigg Master Investments Ltd. (as collateral agent for the
holders of the Senior Note) to secure the obligations of Borrower under the
Senior Note and the other documents relating thereto.
“Person”
means
any
individual, corporation, partnership, association, joint-stock company, estate,
trust, unincorporated organization, limited liability company, joint venture,
court or government or political subdivision or agency thereof.
“Purchase
Money Indebtedness” means
(a) Indebtedness
created to secure the payment of all or any part of the purchase price of any
property,
(b) any
Indebtedness incurred at the time of or within 30 days prior to or after the
acquisition of any property for the purpose of financing all or any part of
the
purchase price thereof, and
(c) any
renewals, extensions or refinancings thereof, but not any increases in the
principal amounts thereof outstanding at the time of any such renewal, extension
or refinancing.
“Purchase
Money Lien” means
any
lien securing Purchase Money Indebtedness, but only if such lien shall at all
times be confined solely to the property the purchase price of which was
financed through the incurrence of the Purchase Money Indebtedness secured
by
such lien.
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“Records”
means
correspondence, memoranda, tapes, books, discs, paper, magnetic storage and
other documents or information of any type, whether expressed in ordinary or
machine language.
“Senior
Note”
means
that certain senior secured promissory note, dated December 31, 2007, issued by
the Borrower to Castlerigg Master Investments Ltd. in the principal amount
of
$10,500,000, as amended, restated or otherwise modified, including, without
limitation, any replacement notes.
“Subordination
Agreement”
means
that certain Subordination Agreement of even date herewith, by and among the
Borrower, the Lender and Castlerigg Master Investments Ltd., as amended,
restated or otherwise modified.
“Subsidiary”
of
a
Person means any Person of which more than 50% of the outstanding voting
securities or other equity interests in such Person shall, at the time of
determination, be owned directly or indirectly through one or more Persons,
and
“Subsidiaries”
means
more than one of such Persons.
“Term
Rate”
means a
fixed rate of interest equal to 15% per annum.
“Vaporizers”
means
those certain anesthetic vaporizers purchased after the date hereof and owned
by
Borrower with the proceeds of the Loan hereunder.
“UCC”
means
the
Uniform Commercial Code as in effect on the date hereof in the State of
Delaware, as it may be amended from time to time; provided that if by reason
of
mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of a security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than Delaware,
“UCC”
means
the
Uniform Commercial Code as in effect in such other jurisdiction for purposes
of
the provisions hereof relating to such perfection or effect of perfection or
non-perfection.
“Unmatured
Default” means
an
event which but for the lapse of time or the giving of notice, or both, would
constitute an Event of Default
Concurrently
with the execution of this Agreement, Lender shall make the Loan available
to
Borrower under the following terms:
2.1 Loan.
Upon
the Closing Date, the Lender shall make available to Borrower a term loan with
a
principal amount of $3,000,000 to be paid at Closing. Amounts re-paid hereunder
shall not be permitted to be re-borrowed.
2.2 Use
of
Proceeds.
The
Loan shall be used only for the purchase of the Vaporizers.
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2.3 Term
Note.
The
obligations of Borrower under the Loan shall be evidenced by one or more Notes
in the form attached hereto as Exhibit
A.
(a) Interest
shall be charged and paid on the Loan from the date of the initial advance
until
the Loan is paid at the Term Rate.
(b) Interest
shall be computed on the basis of a 360-day year counting the actual number
of
days elapsed, and shall be due and payable, subject to the Subordination
Agreement, upon the earlier of (i) each December 31 occurring after the date
hereof, or (ii), upon demand by the Lender.
(c) Notwithstanding
the foregoing, upon the occurrence of an Event of Default and during the
continuation thereof, interest may be charged at the Default Rate if the Lender
so elects, regardless of whether the Lender has elected to exercise any other
remedies under Section
8
hereof,
including, without limitation, acceleration of the maturity of the outstanding
principal of the Note. All such interest shall be paid at the time of and as
a
condition precedent to the curing of any such default to the extent any right
to
cure is given.
(d) From
time
to time, the Lender shall send the Borrower statements of all amounts due
hereunder which statements, absent manifest error, shall be considered correct
and conclusively binding on the Borrower unless the Borrower notifies the Lender
to the contrary within one hundred eighty (180) days of its receipt of any
statement to which it objects. All sums payable to the Lender hereunder shall
be
paid in immediately available funds prior to 12:00 noon eastern standard time
on
the date when such sums are due and payable. Any amounts received by the Lender
after 12:00 noon eastern standard time on any Business Day shall be deemed
to
have been received on the next Business Day.
(e) Subject
to Section 2.6, the entire principal balance of the Loan, together with all
interest accrued thereon and all other amounts owing which constitute the
Obligations, shall be due and payable in full on the earlier of (1) the Loan
Termination Date, or (2) demand by the Lender.
(f) All
agreements herein made are expressly limited so that in no event whatsoever
shall the interest and loan charges agreed to be paid to the Lender for the
use
of the money advanced or to be advanced pursuant to this Agreement exceed the
maximum amounts collectible under applicable laws in effect from time to time.
If for any reason whatsoever the interest or loan charges paid or contracted
to
be paid in respect of the Loan shall exceed the maximum amounts collectible
under applicable laws in effect from time to time, then, ipso facto,
the
obligation to pay such interest and/or loan charges shall be reduced to the
maximum amounts collectible under applicable laws in effect from time to time,
and any amounts collected by the Lender that exceeds such maximum amounts shall
be applied to the reduction of the principal balance of the Loan and/or refunded
to Borrower so that at no time shall the interest or loan charges paid or
payable in respect of the Loan exceed the maximum amounts permitted from time
to
time by applicable law. This provision shall control every other provision
herein and in any and all other agreements and instruments now existing or
hereafter arising between Borrower and the Lender with respect to the
Loan.
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2.5 Prepayment.
Subject
to the Subordination Agreement, the Borrower may, upon two (2) Business Day’s
prior written notice to the Lender, prepay the Loan in whole or in
part.
2.6 Subordination. Notwithstanding
anything to the contrary herein, payment of the Obligations shall, to the extent
set forth in the Subordination Agreement, be subordinate and junior in right
of
payment to the prior payment in full of all obligations under the Senior Note,
the provisions of which Subordination Agreement are incorporated herein by
reference and made a part hereof.
The
obligation of the Lender to fund the Loan is subject to the following conditions
precedent:
3.1 Conditions
to Initial Advance.
The
Borrower shall have delivered to the Lender prior to the initial disbursement
of
the Loan the following:
(a) This
Agreement;
(b) The
Note;
(c) UCC-1
Financing Statement to be filed at the office of the Delaware Secretary of
State
and such other offices as Lender may require;
(d) Copies
of
the resolutions of the Board of Directors of the Borrower, certified by the
Borrower’s secretary as of the date of Closing, authorizing the execution,
delivery and performance of this Agreement and, as applicable, the Loan
Documents and each other document to be delivered pursuant hereto;
(e) A
copy,
certified as of the most recent date practicable, by the Delaware Secretary
of
State of Borrower’s certificate of incorporation together with a certificate
dated the date of the Closing of Borrower’s secretary to the effect that such
documents have not been amended since the date of the Secretary of State’s
certification;
(f) A
copy of
Borrower’s Bylaws certified by Borrower’s secretary as of the date of the
Closing;
(g) A
certificate dated as of the date of the Closing of the secretary of the Borrower
as to the incumbency and signatures of its officers executing the Loan
Documents;
(h) A
Certificate, as of the most recent date practicable, of the Delaware Secretary
of State as to the existence and good standing of Borrower;
(i) The
Subordination Agreement, in form and substance satisfactory to Lender, executed
by Borrower, Lender and Castlerigg Master Investments Ltd.
8
(j) A
certificate, dated the date of the Closing, signed by the president, vice
president, chief financial officer, or corporate controller of the Borrower
to
the effect that:
(i) The
representations and warranties set forth within Section
5 are
true
as of the date of the Closing;
(ii) No
Event
of Default or Unmatured Default has occurred as of such date; and
(iii) All
of
the Loan Documents are in full force and effect.
3.2 Legal
Matters.
At the
time of the Closing and thereafter, all legal matters incidental to the Loan
shall be satisfactory to Lender and its counsel.
4.1 Composition
of the Collateral.
The
property in which a security interest is granted pursuant to the provisions
of
Sections
4.2 and 4.3
shall
constitute the “Collateral”. The Collateral, together with all of the Borrower’s
other property of any kind, both real and personal, held by, assigned to,
mortgaged to or conveyed in favor of the Lender, shall stand as one general,
continuing collateral security for all Obligations and may be retained by the
Lender until all Obligations have been satisfied in full.
4.2 Rights
in Property Held by the Lender.
As
security for the prompt satisfaction of all Obligations, the Borrower hereby
grants the Lender a lien on and a security interest in, all amounts that may
be
owing from time to time by the Lender to the Borrower in any capacity,
including, but without limitation, any balance or share belonging to the
Borrower of any deposit or other account with the Lender, which lien and
security interest shall be independent of any right of set-off which the Lender
may have.
4.3 Rights
in Property of the Borrower.
As
further security for the prompt satisfaction of all Obligations, the Borrower
hereby grants the Lender a lien upon and security interest in all of the
following, wherever located, whether now owned or hereafter acquired, together
with all substitutions, replacements, improvements, accessions or appurtenances
thereto, and proceeds (including, without limitation, insurance proceeds)
thereof:
(a) Accounts;
(b)
Chattel
Paper;
(c)
Documents;
(d)
Equipment;
(e)
General
Intangibles;
(f)
Instruments;
(g)
Inventory;
and
(h) All
Records pertaining thereto or to any other Collateral; and
(i) any
other
personal property, whether tangible or intangible, now owned or hereafter
acquired by Borrower.
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4.4 Priority
of Liens.
The
foregoing liens shall be first priority liens except for (a) liens with respect
to the Senior Note, and (b) any Permitted Liens on assets which have priority
or
would have priority by the operation of Laws.
4.5 Financing
Statements.
(a) The
Borrower will pay or reimburse the Lender for all costs and taxes of filing
or
recording the same in such public offices as the Lender may designate, and
reimburse the Lender for performing subsequent verification searches following
Closing in each applicable jurisdiction.
(b) The
Borrower hereby authorizes the Lender to file any Financing Statement and to
perform all other acts that the Lender deems appropriate to perfect and continue
the Lender’s security interest in, and to protect and preserve, the
Collateral.
To
induce
the Lender to enter into this Agreement, the Borrower represents and warrants
to
Lender as follows:
5.1 Due
Organization and Qualification.
Except
as set forth on Schedule
5.1
hereto,
the Borrower is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware; the Borrower has no
Subsidiaries; the Borrower has the lawful power to own its properties and to
engage in the business it conducts, and is duly qualified and in good standing
in the jurisdictions wherein the nature of the business transacted by it or
property owned by it makes such qualification necessary;
5.2 No
Conflicting Agreement.
The
Borrower is not in default with respect to any existing Indebtedness, and the
making and performance of the Loan Documents will not (immediately, or with
the
passage of time or the giving of notice, or both):
(a) Violate
any provisions of the Constituent Documents of the Borrower, any provisions
of
any other documents related to the existing Indebtedness of Borrower (other
than
violations that have been waived in writing), or violate any Laws, or result
in
a default under any material contract, agreement, or instrument to which the
Borrower is a party or by which the Borrower or any of its property is bound;
or
(b) Result
in
the creation or imposition of any security interest in, or lien or encumbrance
upon, any of the assets of the Borrower except in favor of the
Lender;
5.3 Capacity.
The
Borrower has the power and authority to enter into and perform the Loan
Documents and to incur the Obligations herein and therein provided for, and
have
taken all action necessary to authorize the execution, delivery, and performance
of the Loan Documents;
5.4 Binding
Obligations.
The
Loan Documents are valid, binding, and enforceable in accordance with their
respective terms subject to the general principles of equity (regardless of
whether such question is considered in a proceeding in equity or at law) and
to
applicable bankruptcy, insolvency, moratorium, fraudulent or preferential
conveyance and other similar laws affecting generally the enforcement of
creditors’ rights;
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5.5 Litigation. Except
as
set forth on Schedule
5.5
hereto,
there is no pending or, to Borrower’s knowledge, threatened order, notice,
claim, litigation, proceeding or investigation against or affecting the Borrower
that could reasonably be expected to result in a Material Adverse
Effect;
5.6 Title.
Except
as set forth on Schedule
5.6
hereto,
the Borrower has good and marketable title to all of its assets, subject to
no
security interest, encumbrance or lien, or the claims of any other Person except
for Permitted Liens and other liens securing Indebtedness, in the aggregate,
of
less than $10,000;
5.7 Financial
Statements.
The
Financial Statements, including any schedules and notes pertaining thereto,
have
been prepared in accordance with GAAP consistently applied, and fully and fairly
present (subject, in the case of interim Financial Statements to normal,
year-end adjustments and the absence of notes) the financial condition of the
Borrower at the dates thereof and the results of operations for the periods
covered thereby, and there has been no Material Adverse Change from December
31,
2007 to the date hereof;
5.8 Licenses;
Compliance with Laws.
Except
to the extent that the failure to comply would not result in a Material Adverse
Effect, the Borrower, has complied with all applicable Laws with respect to:
(1)
any licenses, restrictions, specifications, or other requirement pertaining
to
services that the Borrower performs; (2) the conduct of its business; (3) the
use, maintenance, and operation of the real and personal properties owned or
leased by it; and (4) health, safety, worker’s compensation, and equal
employment opportunity;
5.9 Consents;
Governmental Approvals.
Each
consent, approval or authorization of, or filing, registration or qualification
with, any Person required to be obtained or effected by the Borrower in
connection with the execution and delivery of the Loan Documents or the
undertaking or performance of any obligation thereunder has been duly obtained
or effected; further, no authorization, consent, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery or performance by the Borrower
of
any Loan Documents to which it is or will be a party, except for approvals
which
have been obtained and are in full force and effect;
5.10 Survival.
All of
the representations and warranties set forth in Section
5 shall
be
true and correct when made and shall survive until all Obligations are satisfied
in full.
The
Borrower hereby covenants as follows:
6.1 Use
of
Proceeds.
The
Borrower will use the proceeds of the Loan only for the purposes permitted
in
Section
2.2,
and
will furnish the Lender such evidence as it may reasonably require with respect
to such use.
6.2 Financial
Statements and Reports.
The
Borrower will furnish the Lender:
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(a) As
soon
as available and in any event within 90 days after the end of each Fiscal Year
of Borrower: (i) statements of cash flows of the Borrower for such Fiscal Year;
(ii) income statements of the Borrower for such Fiscal Year; and (iii) balance
sheets of the Borrower as of the end of such Fiscal
Year -
all in
reasonable detail, setting forth the corresponding figures as at the end of
and
for the previous year, including supporting schedules, and audited by
independent public accountants of recognized standing, selected by Borrower
and
reasonably satisfactory to Lender, and prepared in accordance with
GAAP;
(b) As
soon
as available and in any event within 45 days after the close of each of the
first three fiscal quarters of each Fiscal Year of the Borrower: (i) statements
of cash flows of the Borrower for such year-to-date period; (ii) income
statements of the Borrower for such quarterly period; and (iii) balance sheets
of the Borrower as of the end of such quarterly period - all in reasonable
detail, subject to year-end audit adjustments and certified by the president
or
principal financial officer of the Borrower to have been prepared in accordance
with GAAP consistently applied, except for any inconsistencies explained in
such
certificate;
(c) As
soon
as available and in any event within 30 days after the close of each month
in
each Fiscal Year of Borrower: (i) statements of cash flows of the Borrower
for
such year-to-date period; (ii) income statements of the Borrower for such
monthly period; and (iii) balance sheets of the Borrower as of the end of such
monthly period - all in reasonable detail, subject to year-end audit adjustments
and certified by the president or principal financial officer of the Borrower
to
have been prepared in accordance with GAAP consistently applied, except for
any
inconsistencies explained in such certificate;
(d) Contemporaneously
with the delivery of the financial statements referred to in paragraphs (a),
(b)
and (c) above, a certificate of the president or chief financial officer of
the
Borrower stating that: (i) such officer has individually reviewed the provisions
of this Agreement; (ii) a review of the activities of the Borrower during such
reporting period has been made by such officer or under such officer’s
supervision, with a view to determining whether the Borrower has fulfilled
its
obligations under this Agreement; and (iii) to the best of such officers’
knowledge after a reasonable investigation, the Borrower has observed and
performed each undertaking contained in this Agreement and is not in default
in
the observance or performance of any of the provisions hereof or, if the
Borrower shall be so in default, specifying all such defaults and events of
which such officer may have knowledge;
(e) Immediately
upon receipt of the same by Borrower, copies of all management letters and
any
other reports which are submitted to the Borrower by its independent accountants
in connection with any annual or interim audit of the Records of the Borrower
by
such accountants;
(f) On
or
before April 30 of each year, a proforma budget (including both projected
maintenance Capital Expenditures and other Capital Expenditures) for such Fiscal
Year, in form reasonably satisfactory to the Lender; and
(g) From
time
to time such additional information regarding the financial condition or
business of the Borrower as the Lender may reasonably request.
12
6.3 Taxes;
Copies of Returns.
The
Borrower will pay, prior to delinquency, all taxes, assessments and charges
or
levies imposed upon it or on any of its property or which it is required to
withhold or pay over, except where contested in good faith by appropriate
proceedings with adequate security therefor having been set aside in a manner
satisfactory to Lender. The Borrower will pay or cause to be paid, all such
taxes, assessments, charges or levies forthwith whenever foreclosure on any
lien
that attaches (or security therefor) appears imminent. Within ten (10) days
of
Lender’s request therefor, the Borrower will furnish the Lender with copies of
federal income tax returns filed.
6.4 Records
and Inspection.
The
Borrower will, upon the request by the Lender, make available during regular
business hours any of its business Records for inspection by duly authorized
representatives of the Lender, and will furnish the Lender any information
regarding their business affairs and financial condition within a reasonable
time after written request therefor.
6.5 Maintenance
of Existence; Compliance with Laws; Licenses.
The
Borrower will take all necessary steps to renew, keep in full force and effect,
and preserve their corporate existence, good standing, and franchises, and
will
comply in all respects with all present and future Laws applicable to them
except to the extent that a failure to do so would not have or cause to occur
a
Material Adverse Effect.
6.6 Ordinary
Course; Pledge of Notes.
The
Borrower will keep accurate and complete Records of its Accounts, consistent
with sound business practices. The Borrower will collect its Accounts only
in
the ordinary course of business.
6.7 Notice
of Default.
The
Borrower will notify Lender immediately if it becomes aware of the occurrence
of
any Event of Default or of any fact, condition or event that only with the
giving of notice or passage of time or both, could reasonably be expected to
become an Event of Default, or of the failure of the Borrower to observe any
of
its undertakings hereunder.
6.8 Notice
of Name Change or State of Incorporation.
The
Borrower will notify Lender, with a copy to Castlerigg Master Investments Ltd.,
thirty (30) days in advance of any change in (i) the name of the Borrower,
or
(ii) any change in the state of incorporation of Borrower. Prior to establishing
any new place of business, if requested by Lender, Borrower will deliver to
Lender a landlord’s agreement in form and substance satisfactory to
Lender.
6.9 Exclusivity.
In
further consideration for the execution of this Agreement by Lender and as
an
inducement for the Lender to make the Loan available to Borrower, during the
period of time that the Loan is outstanding, Borrower agrees that Borrower
shall
notify the Lender of any Proposed Equity Offering (as defined below), at the
time such proposal is made but in no event less than fifteen (15) days prior
to
the closing of such Proposed Equity Offering. Subject to the right of first
refusal granted to Castlerigg Master Investments, Ltd. pursuant to Section
4(o)(iii) of that certain Securities Purchase Agreement, dated as of December
31, 2007 (the “Securities
Purchase Agreement”),
the
Lender shall have the right to purchase up to 100% of the shares not purchased
by Castlerigg Master Investments, Ltd. on the same terms and conditions as
offered in the Proposed Equity Offering. If the Lender does not respond within
15 business days of being notified of such a Proposed Equity Offering, or
declines to purchase all or a portion of such securities, then that portion
which is not purchased by Lender may be offered to other parties on terms no
less favorable to the Borrower for a period of 120 calendar days.
13
In
addition, subject to the provisions contained in Section 4(o)(ii) of the
Securities Purchase Agreement and the provisions contained in that certain
Registration Rights Agreement dated as of December 31, 2007 by and between
the
Borrower and Castlerigg Master Investments, Ltd., the Borrower will grant the
Lender any rights of first refusal or registration rights granted to subsequent
purchasers of the Borrower’s equity securities to the extent that such
subsequent rights are superior, in good faith judgment of the Lender, to those
granted in connection with this Agreement.
Proposed
Equity Offering shall mean an offering by the Borrower of (a) shares of common
stock or preferred stock (whether now authorized or hereafter authorized and
issued in any context), (b) shares of common stock issued or issuable upon
conversion of any preferred stock, or (c) shares of common stock issued or
issuable upon exercise or conversion, as applicable, of stock options, warrants
or other convertible securities of the Borrower, to any party. Notwithstanding
the foregoing, a Proposed Equity Offering shall not include securities issued:
(a) pursuant to any compensatory stock or option plan duly adopted for such
purpose by the members of the board of directors of the Borrower, (b) upon
the
exercise or exchange of or conversion of any securities exercisable or
exchangeable for or convertible into shares of common stock of the Borrower
issued and outstanding on the date of this Agreement, (c) pursuant to strategic
acquisitions or (d) to secure equipment financing.
6.10 Covenant
to Negotiate in Good Faith.
In
further consideration for the execution of this Agreement by Lender and as
an
inducement for the Lender to make the Loan available to Borrower, Borrower
agrees to negotiate with Lender, in good faith, additional terms with respect
to
Lender’s investment in the Borrower, subject to the rights of the holder of the
Senior Note.
Borrower
hereby covenants and agrees as follows:
7.1 Merger
or Reorganization.
Borrower will not enter into any merger, consolidation, reorganization or
recapitalization except as permitted under the Senior Note as in effect on
the
date hereof.
7.2 Sale
of Assets.
Except
as otherwise permitted under the Senior Note, Borrower will not sell, transfer,
lease or otherwise dispose of all or any material part of its assets; provided,
however, that Borrower may in the ordinary course of business (i) replace
damaged, obsolete or worn Equipment with Equipment of similar value and use,
or
(ii) dispose of assets representing no more than 5% of its consolidated total
assets.
7.3 Encumbrances.
The
Borrower will not: (1) mortgage, pledge, grant or permit to exist a security
interest in or lien upon any of its assets of any kind, now owned or hereafter
acquired, except for Permitted Liens, or (2) except for any restrictions set
forth in the Senior Notes, covenant or agree with any Person other than the
Lender not to mortgage, pledge, or grant a security-interest in or a lien upon
its assets; provided that Borrower may make such covenant or agreement with
respect to assets securing Purchase Money Indebtedness or Capitalized Lease
Obligations incurred in accordance with Section
7.4
of this
Agreement.
14
7.4 Debts
and Other Obligations.
The
Borrower will not incur, create, assume, or permit to exist any Indebtedness
except: (1) the Loan, (2) Indebtedness evidenced by the Senior Note, (3) trade
Indebtedness incurred in the ordinary course of business; (4) Indebtedness
secured by Permitted Liens; and (5) Capitalized Lease Obligations and/or
Purchase Money Indebtedness to the extent permitted under the Senior Notes.
Except for the Senior Notes, Borrower will not prepay, in whole or in part,
any
existing Indebtedness of the Borrower if at the time such payment is due or
is
otherwise made, or after giving effect to such payment, an event constituting
an
Unmatured Default or Event of Default has occurred and is
continuing.
7.5 Borrower
Distributions.
The
Borrower will not make any Borrower Distributions without the prior express
written consent of the Lender, other than (i) as otherwise required under the
Senior Note, and (ii) the redemption of up to 350,000 shares of common stock
held by former holders of the Series A Preferred Stock of RxElite Holdings
Inc.
that is due within fifty (50) days of December 31, 2008 at a redemption price
of
$4.00 per share, until payment in full of all Obligations of the Borrower
outstanding pursuant to the Loan Documents.
8.1 Events
of Default.
The
occurrence of any one or more of the following events shall constitute an “Event
of Default” hereunder:
(a) The
Borrower shall fail to pay within one (1) Business Day of the date when due
any
installment of principal or interest payable hereunder, or shall fail to pay
within two (2) Business Days of written notice any fee payable
hereunder.
(b) The
Borrower shall fail to observe or perform any obligation or covenant to be
observed or performed by it, jointly or severally, under any of the Loan
Documents; provided,
however,
if such
failure is not related to the breach of any negative covenant in Section
7
of this
Agreement, Borrower shall have fifteen (15) days after such Person’s knowledge
of such breach to cure or cause to be cured such failure.
(c) The
Borrower shall fail to pay any Indebtedness for borrowed money (whether direct
or indirect, including guarantees of borrowed money due from Subsidiaries)
due
any Person other than Lender and such failure shall continue beyond any
applicable grace period and shall equal or exceed, either individually or in
the
aggregate, $100,000.00 in amount.
(d) A
Material Adverse Effect shall result from any breach of or event of default
arising under any agreement binding the Borrower, as determined by Lender in
its
reasonable discretion.
15
(e) Any
financial statement, representation, warranty or certificate made or furnished
by Borrower in connection with this Agreement or the Loan, or as inducement
to
the Lender to enter into this Agreement, or in any separate statement or
document to be delivered hereunder to the Lender, shall be materially false,
incorrect, or incomplete when made, in light of the circumstances under which
it
was made.
(f) The
Borrower shall admit its inability to pay debts as they mature, or shall make
an
assignment for the benefit of its or any of its creditors.
(g) Proceedings
in bankruptcy, or for reorganization of Borrower or for the readjustment of
any
of its debts, under the United States Bankruptcy Code, as amended, or any part
thereof, or under any other Laws, whether state or federal, for the relief
of
debtors, now or hereafter existing, shall be commenced by the Borrower or shall
be commenced against the Borrower and not dismissed within thirty (30) days
of
such an involuntary filing.
(h) A
receiver or trustee shall be appointed for the Borrower or for any substantial
part of its assets, or any proceedings shall be instituted for the dissolution
or the full or partial liquidation of the Borrower.
(i) The
Borrower shall discontinue its business or materially change the nature of
its
business.
(j) A
judgment creditor of the Borrower shall obtain possession of any Collateral
or
other assets by any means, including, but without limitation, levy, distraint,
replevin or self-help.
(k) Any
proceeding shall be instituted against the Borrower, which is likely (taking
into account the probability of an adverse determination and the exhausting
of
all appeals) to have a Material Adverse Effect, as determined by Lender in
its
reasonable discretion.
(l) The
Borrower shall default beyond any applicable grace period in any other
Indebtedness (excluding the Obligations) owed to the Lender, or any of them,
or
under any other agreements for credit or borrowed money it may have with Lender,
jointly or severally, directly or indirectly, whether matured or
unmatured.
(m) RxElite
Holdings Inc. or any other party to the Minrad Contract defaults thereunder
or
the Minrad Contract is terminated.
8.2 Acceleration.
Upon
the occurrence of any of such Events of Default, the Lender may, at its option,
immediately terminate the obligation to make any further advances and/or declare
the principal and interest accrued on the Note and all other Obligations to
be
immediately due and payable, whereupon, subject to the terms of the
Subordination Agreement, the same shall become forthwith due and payable,
without presentment, demand, protest, or any notice of any kind except as set
forth above; provided,
that in
the case of the Events of Default specified in clause (f), (g) or (h) above
with
respect to Borrower, without any notice to Borrower or any act by the Lender,
the Note and all other Obligations shall, subject to the terms of the
Subordination Agreement, become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are waived by the
Borrower. In addition, and regardless of whether the Note has been accelerated,
the Lender may upon the occurrence of any Event of Default elect to charge
interest at the Default Rate set forth in the Note.
16
8.3 Remedies.
After
any acceleration, as provided for in Section
8.2,
the
Lender, subject to the terms of the Subordination Agreement, shall have, in
addition to the rights and remedies given it by the Loan Documents, all those
allowed by all applicable Laws, including, but without limitation, the UCC
as
enacted in any jurisdiction in which any Collateral may be located. Without
limiting the generality of the foregoing, the Lender may, subject to the terms
of the Subordination Agreement, immediately, without demand of performance
and
without other notice (except as specifically required by the Loan Documents)
or
demand whatsoever to the Borrower, all of which are hereby expressly waived,
and
without advertisement, sell at public or private sale, in any manner and at
any
location authorized by Laws, or otherwise realize upon, the whole, or, from
time
to time, any part of the Collateral, or any interest which the Borrower may
have
therein. After deducting from the proceeds of sale or other disposition of
the
Collateral all expenses (including all reasonable expenses for legal services),
the Lender shall apply such proceeds toward the satisfaction of the Obligations.
Any remainder of the proceeds after satisfaction in full of the Obligations
shall be distributed as required by applicable Laws. Notice of any sale or
other
disposition shall be given to the Borrower at least ten (10) days before the
time of any intended public sale or of the time after which any intended private
sale or other disposition of the Collateral is to be made, which the Borrower
hereby agrees shall be reasonable notice of such sale or other disposition.
The
Borrower agrees to assemble, or to cause to be assembled, at its own expense,
the Collateral at such place or places as the Lender shall designate. At any
such sale or other disposition, the Lender may, to the extent permissible under
applicable Laws, purchase the whole or any part of the Collateral, free from
any
right of redemption on the part of the Borrower, which right is hereby expressly
waived and released.
Without
limiting the generality of any of the rights and remedies conferred upon the
Lender under this Section
8.3,
the
Lender may, to the full extent permitted by applicable Laws and subject to
the
terms of the Subordination Agreement:
(a) Enter
upon the premises of the Borrower, exclude therefrom the Borrower, any
Subsidiary or any officer or employee thereof, and take immediate possession
of
the Collateral, either personally or by means of a receiver appointed by a
court
of competent jurisdiction, using all necessary and lawful self-help to do
so;
(b) At
the
Lender’s option, use, operate, manage and control the Collateral in any lawful
manner;
(c) Collect
and receive all receivables, rents, income, revenue, earnings, issues and
profits therefrom; and
(d) Maintain,
repair, renovate, alter or remove the Collateral as the Lender may determine
in
its discretion.
9.1 Construction.
The
provisions of this Agreement shall be in addition to those of any guaranty,
pledge or security agreement, note or other evidence of liability held by the
Lender, all of which shall be construed as complementary to each other;
provided, in the event of any inconsistency, the provisions of this Agreement
shall control. Nothing herein contained shall prevent the Lender from enforcing
any or all other notes, guaranties, pledge or security agreements in accordance
with their respective terms.
17
9.2 Further
Assurance.
From
time to time, the Borrower will execute and deliver to the Lender such
additional documents and will provide such additional information as the Lender
may reasonably require to carry out the terms of this Agreement and be informed
of the Borrower’s operations, business and condition
9.3 Enforcement
and Waiver by the Lender.
The
Lender shall have the right at all times to enforce the provisions of the Loan
Documents in strict accordance with the terms thereof, notwithstanding any
conduct or custom on the part of the Lender in refraining from so doing at
any
time or times. The failure of the Lender at any time or times to enforce their
rights under such provisions, strictly in accordance with the same, shall not
be
construed as having created a custom in any way or manner contrary to specific
provisions of the Loan Documents or as having in any way or manner modified
or
waived the same. All rights and remedies of the Lender is cumulative and
concurrent and the exercise of one right or remedy shall not be deemed a waiver
or release of any other right or remedy.
9.4 Expenses
of the Lender.
The
Borrower will, on demand, reimburse the Lender for all out-of-pocket expenses,
including the reasonable fees and expenses of legal counsel for the Lender,
incurred by the Lender in connection with the preparation, administration,
amendment, modification, or enforcement of the Loan Documents and the collection
or attempted collection of the Note.
9.5 Notices.
Any
notices or consents required or permitted by this Agreement shall be in writing
and shall be deemed delivered when delivered in person, or when sent by
certified mail, postage prepaid, return receipt requested, by overnight courier
service, or by facsimile to the address and/or telecopy number as follows,
unless such address or number is changed by written notice
hereunder.
(a) If to the Borrower: |
0000
Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxx 00000
Attn:
Xxxxxxxx Xxxxxxxx
Telecopy:
(000) 000-0000
with a copy (which shall not constitute notice) to: |
Xxxxxx
and Xxxxx, LLP
|
000
Xxxx
00xx
Xxxxxx,
Xxxxx 0000
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxx X. Xxxxxx, Esq.
Telecopy:
(000) 000-0000
18
(b) If to the Lender: |
NPIL
Pharma Inc.
|
000
Xxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxxx
Building
Edison,
New Jersey 08837
Attn:
X. Xxxxxxxxxxxxxxxx, President
Telecopy:
000-000-0000
Telephone:
000-000-0000
|
with a copy (which shall not constitute notice) to: |
Ashurst
LLP
|
Xxxxxxxxx
Xxxxx
0
Xxxxxx Xxxxxx
Xxxxxx
XX0X 0XX XX
Attention:
Xxxxxx Xxxx
Telecopy:
x00 (0)00 0000 0000
|
with a copy (which shall not constitute notice) to: |
Xxxxxx
Xxxxxxx Xxxxxx & Xxxxx LLP
|
000
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxx
Xxxxxxx
Xxxxx Xxxxxxx
Telecopy:
(000) 000-0000
|
9.6 Waiver
and Release.
To the
maximum extent permitted by applicable Laws, the Borrower:
(a)
Waives:
(1) protest of all commercial paper at any time held by the Lender on which
the
Borrower is in any way liable; and (2) notice and opportunity to be heard,
after
acceleration in the manner provided in Section
8.2,
before
exercise by the Lender of the remedies of self-help, set-off, or of other
summary procedures permitted by any applicable Laws or by any agreement with
the
Borrower, and, except where required hereby or by any applicable Laws, notice
of
any other action taken by the Lender; and
(b) Releases
the Lender, and its officers, directors, attorneys, employees, and agents from
all claims for loss or damage caused by any act or omission on the part of
any
of them except for gross negligence, recklessness or willful
misconduct.
9.7 Indemnification.
Borrower hereby indemnifies and holds the Lender, and its officers, directors,
employees and agents free and harmless from and against any and all actions,
causes of action, suits, losses, liabilities and damages, and expenses in
connection therewith, including, without limitation, reasonable counsel fees
and
disbursements, incurred by the Lender as a result of, or arising out of, or
relating to the execution, delivery, performance or enforcement of the Loan
Documents or any instrument contemplated therein, except for the Lender’s gross
negligence or willful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, Borrower hereby agrees to
make
the maximum contribution to the payment and satisfaction of such liabilities
and
costs permitted under applicable Laws.
19
9.8 Applicable
Laws.
The
Laws of the State of Delaware, other than its conflicts of laws rules, shall
govern the construction and interpretation of this Agreement and the validity
and enforceability of this Agreement, and of its provisions and the transactions
pursuant to this Agreement.
9.9 Binding
Effect, Assignment and Entire Agreement.
This
Agreement shall inure to the benefit of, and shall be binding upon, the
respective successors and permitted assigns of the parties hereto. The Borrower
has no right to assign any of its rights or obligations hereunder without the
prior written consent of the Lender. This Agreement and the documents executed
and delivered pursuant hereto constitute the entire agreement between the
parties, and supersede all prior agreements and understandings among the parties
hereto. This Agreement may be amended only by a writing signed on behalf of
each
party.
9.10 Severability.
If any
provision of this Agreement shall be held invalid under any applicable Laws,
such invalidity shall not affect any other provision of this Agreement that
can
be given effect without the invalid provision, and, to this end, the provisions
hereof are severable.
9.11 Counterparts.
This
Agreement may be executed by the parties independently in any number of
counterparts, all of which together shall constitute but one and the same
instrument which is valid and effective as if all parties had executed the
same
counterpart.
9.12 Venue.
It is
agreed that venue for any action arising in connection with this Agreement
or
the Obligations secured hereby shall lie exclusively with courts sitting in
the
State of Delaware, unless the Lender otherwise agrees in writing.
9.13 Right
of Setoff.
Borrower acknowledges that Lender shall retain its common law right of setoff
with respect to any of the Obligations.
(Remainder
of Page Intentionally Left Blank)
20
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first above written.
BORROWER:
|
|
BY:___________________________________
|
|
TITLE:_________________________________
|
LENDER:
|
|
NPIL
PHARMA INC.
|
|
BY:__________________________________
|
|
TITLE:________________________________
|