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EXHIBIT 10.37
LOAN AGREEMENT
Xxx X. Xxxxxx (the "Lender"), hereby commits to Caraco Pharmaceutical
Laboratories, Ltd., a Michigan corporation (the "Borrower") to lend the amount
of three hundred thousand dollars ($300,000), in accordance with the terms and
conditions of this Loan Commitment Letter (the "Commitment"). This Commitment
is subject to the satisfaction of all of the conditions set forth herein.
(1) Commitment Amount - The Lender will loan the amount of three hundred
thousand dollars ($300,000) to the Borrower on or before October 18, 1996.
(2) Closing Date - Subject to the satisfaction of the terms and conditions of
this Commitment, the Loan will be funded on October 18, 1996, or such
other date as is satisfactory to the Lender (the "Closing Date").
(3) Promissory Note - On the Closing Date, the Borrower will execute a
promissory note (the "Note"), in the principal amount of $300,000. The
form and substance of such Note must be satisfactory to the Lender.
Interest will accrue under such Note at the per annum rate of ten percent
(10%) so long as there shall be no event of default. The entire principal
balance, together with all interest and other charges due and payable
under the Note, will be due and-payable upon the first to occur of the one
year anniversary of the Closing Date or demand by the Lender.
(4) Prepayment - Borrower shall be permitted to prepay the Note at any time,
without penalty, provided all prepayments will be applied first to the
payment of any fees or charges due under the Note, if any, second to the
payment of all outstanding interest, and third to the payment of all
outstanding principal in the inverse order of maturity.
(5) Loan Agreement - On the Closing Date, in order to secure the full, prompt
and faithful performance by the Borrower of its obligations under the
Note, the Borrower will execute and deliver a loan agreement (the "Loan
Agreement"), in form and substance satisfactory to the Lender, pursuant to
which the Borrower will grant to the Lender a first, prior and senior, and
continuing security interest in and to all "Collateral". The term
"Collateral" refers collectively to all of the Borrower's tangible and
intangible personal property, whether now owned or hereafter acquired, or
in which Borrower now has or may hereafter acquire an interest including
without limitation all of the following items of property:
(a) all of Borrower's accounts, accounts receivable, notes receivable,
and other rights of Borrower in and to
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payments due for goods sold or services rendered, whether owned,
existing, or arising as of or subsequent to the Closing Date;
(b) all of Borrower's inventory (whether raw materials, work in
process, or finished goods), supplies, parts, and goods, whether
owned, existing, or arising as of or subsequent to the Closing Date;
(c) all of Borrower's furniture, fixtures, machinery, equipment,
tools, leasehold improvements, vehicles, together with all other
tangible personal property, whether owned, existing, or arising as
of or subsequent to the Closing Date;
(d) all contract rights, chattel paper, leases and other general
intangibles, including without limitation all rights to any refund
of any taxes assessed against or paid by Borrower, insurance premium
refunds, unearned premiums, insurance proceeds, chose in action,
goodwill, going concern value, trademarks, copyrights, service
marks, tradenames, and patents, technology and know how, whether
owned, existing or arising as of or subsequent to the Closing Date,
including without limitation all new drug applications to, and
approvals of such applications from, the Federal Drug
Administration;
(e) all securities held by or issued to Borrower, including without
limitation all shares of stock, warrants, options, and debentures,
whether owned, existing, or arising as of or subsequent to the
Closing Date;
(f) all instruments, documents of title, policies and certificates of
insurance, bank deposits, deposit accounts, checking accounts and
cash, whether owned, existing, or arising as of or subsequent to
the Closing Date;
(g) any and all proceeds (of sale, insurance, or otherwise),
replacements, substitutions, additions, improvements, products, and
accessions to, for or of the foregoing; and
(h) all books, records and documents relating to all of the
foregoing.
The Lender's rights in the Collateral will be perfected by the filing of
Uniform Commercial Code Financing Statements (Form UCC-1) in the State of
Michigan and Xxxxx County, Michigan, and the Borrower shall also execute
and deliver such other instruments and do such other things as is
necessary from time to time to grant to Lender a first, prior and senior
security interest in and to the Collateral.
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(6) Inter-Creditor Agreement - The Lender agrees to enter into an
"Inter-Creditor Agreement", in form and substance satisfactory to the
Lender, which will provide, among other things, for the relative rights
and remedies of the Lender with respect to the Loan and Collateral.
(7) Indemnification - In further consideration of the Lender's commitment to
make the Loan pursuant to this Commitment, Borrower agrees to indemnify,
defend and hold harmless the Lender from and against all damages,
liabilities, losses, costs, and expenses, including without limitation
attorneys' fees, arising out of or relating to any claims brought by
reason of the extension of the Loan or the transactions contemplated
hereby, except to the extent of a Lender's willful misconduct.
(8) Warrant Agreement - The Lender shall receive a warrant agreement to
purchase 300,000 shares of Caraco Common Stock at the purchase price of
$1.31 per share. The Lender may divide said 300,000 shares in any matter
in which the Lender deems.
(9) Affirmative and Negative Covenants - So long as Borrower shall be
indebted to the Lender under the Notes, Lender agrees as follows:
(a) No dividends or distribution, whether in cash, stock or other
property, shall be declared or paid to any shareholder;
(b) The Borrower shall not enter into, or agree or make any
agreement to enter into, any transaction outside of the ordinary
course of business;
(c) All budgets and expenditures shall be approved by the Lender,
within their discretion; and
(d) The continuing employment status and wage rates of all
employees, and all employment policies and contracts, shall be
approved in advance by the Lender, within their discretion.
(10) Events of Default - The occurrence of any one or more of the following
events, among such other occurrences as may be provided for in the Notes,
will be an event of default under the Note:
(a) The failure of Borrower to make any payment, as and when due,
of principal, interest or any other charge due and payable under the
Note and/or under any other evidences of indebtedness of the
Borrower to any person;
(b) The death or termination of employment with the Borrower,
without regard to the reason or lack of reason therefor, of Xxxxxxx
X. Xxxx;
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(c) Either Borrower shall voluntarily apply for the appointment
of a custodian, trustee or receiver to take custody or dispose of
any substantial portion of assets; or a court of competent
jurisdiction shall appoint a custodian, trustee or receiver to take
custody or dispose of any substantial portion of the assets of the
Borrower pursuant to any involuntary proceeding, and either (i)
Borrower shall indicate approval of, consent to, or acquiescence to
such appointment, or (ii) such custodian, trustee, or receive shall
not be discharged within thirty (30) days; or Borrower shall
voluntarily seek protection from creditors under any applicable
state or federal bankruptcy, liquidation or dissolution, insolvency,
or debt reorganization laws; or any of Borrower's creditors shall
institute any proceeding against Borrower under any applicable state
or federal bankruptcy, liquidation or dissolution, insolvency, or
debt reorganizations laws, and the same shall not be dismissed or
discharged within thirty (30) days;
(d) The temporary or permanent liquidation, dissolution, or other
discontinuance of the Borrower's corporate existence; the merger or
consolidation of Borrower; the sale or transfer of all or
substantially all of Borrower's assets; and/or the sale or transfer
of not less than 50% of the outstanding shares of capital stock of
the Borrower;
(e) There shall be more than seven persons on the Borrower's
Board of Directors, and the Lender shall not be a member of the
Borrower's Board of Directors; and/or
(f) The occurrence of any breach or violation by Borrower under
any of the Loan Documents.
(11) General Provisions - This Commitment shall be governed by, construed,
interpreted, and enforced in accordance with the internal laws of the
State of Michigan. This Commitment may not be modified orally or by
contrary course of conduct, and no modifications shall be effective unless
in writing and signed by the Lender. This Commitment inures solely to the
benefit of the Borrower and may not be assigned or transferred by
Borrower. This Commitment may be negotiated and transferred by the
Lender. BORROWER CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF MICHIGAN FOR ANY DISPUTES ARISING UNDER THIS COMMITMENT.
BORROWER EXPRESSLY WAIVES ALL OBJECTIONS IT NOW HAS OR MAY HAVE TO VENUE,
WHETHER BASED ON INCONVENIENCE OR ANY OTHER REASON. TO THE EXTENT THAT
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM THE JURISDICTION
OF ANY COURT OR FROM ANY LEGAL PROCESS, HOWSOEVER OCCURRING, WITH RESPECT
TO BORROWER OR ITS PROPERTIES, BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY. BORROWER HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY
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JURY IN ANY ACTION OR SUIT BROUGHT UNDER OR PURSUANT TO THIS COMMITMENT.
LENDER:
/s/Xxx X. Xxxxxx
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Xxx X. Xxxxxx
BORROWER:
CARACO PHARMACEUTICAL LABORATORIES, LTD.
/s/Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
President
Date: October 18, 1996
