EXHIBIT 10.13
THIRD AMENDMENT, WAIVER AND CONSENT
TO
LOAN AGREEMENT
THIS THIRD AMENDMENT, WAIVER AND CONSENT TO LOAN AGREEMENT, dated as of
February 6, 2004 (the "Third Amendment"), is made and entered into by and
between Xxxxxx Drug Co., Inc., a New York corporation ("Borrower"), and Xxxxxx
Pharmaceuticals, Inc., a Nevada corporation ("Lender"). Capitalized terms used
herein and not otherwise defined shall have the meaning provided in the Loan
Agreement (as defined below).
RECITALS
WHEREAS, Borrower and Lender are parties to that certain Loan
Agreement, dated as of March 29, 2000, as amended by a certain Amendment to Loan
Agreement dated as of March 31, 2000, and as further amended by a certain Second
Amendment to Loan Agreement dated as of December 20, 2002 (as so amended, the
"Loan Agreement"); and
WHEREAS, in accordance with the terms of the Loan Agreement, Borrower
has issued to Lender two Promissory Notes, the first dated December 20, 2002 in
the principal amount of $17,500,000 (the "Replacement Note"), and the second
dated December 20, 2002 in the principal amount of $3,901,331 (the "New Note",
and together with the Replacement Note, collectively, the "Old Notes"); and
WHEREAS, in order to allow the Borrower to complete each of the
transactions contemplated pursuant to that certain Term Sheet dated December 19,
2003 between the Borrower and the other signatories thereto (the "Term Sheet
Transactions"), Borrower has requested Lender, and Lender has agreed, to consent
to the Term Sheet Transactions and to waive certain restrictions contained in
the Loan Agreement, as provided herein; and
WHEREAS, pursuant to a certain Umbrella Agreement dated of even date
herewith (the "Umbrella Agreement") by and among Borrower, Lender, Care Capital
Investment II, L.P., Essex Woodlands Health Ventures V, LP, Xxxxx Partners III,
L.P. and the other signatories
thereto (collectively, but excluding the Borrower and Lender, the "Investor
Group"), in consideration of Borrower's payment to Lender of $4,000,000, Lender
has agreed to (i) cancel and discharge in full New Note in the principal amount
of $3,901,331, (ii) forgive $12,500,000 in principal amount of Replacement Note
and amend and restate Replacement Note as provided herein, and (iii) amend the
Loan Agreement as provided herein (collectively, the "Note and Loan Agreement
Amendments"); and
WHEREAS, pursuant to the terms of the Umbrella Agreement, Lender will
transfer and convey to the Investor Group all of its right, title and interest
in and to the Loan Agreement and Replacement Note after giving effect to the
Note and Loan Agreement Amendments; and
WHEREAS, it is a condition to the completion of the Term Sheet
Transactions and the Umbrella Agreement that the Note and Loan Agreement
Amendments be completed in accordance with the terms of this Third Amendment.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. Loan Agreement Waivers. Lender hereby consents to the Term
Sheet Transactions and, on the date this Third Amendment becomes effective,
waives the following, which waivers are limited solely to the Term Sheet
Transactions:
(a) The requirements to give notice of adverse changes and to
comply with material agreements contained in Sections 7.3 and
7.4 of the Loan Agreement;
(b) The lien restrictions contained in Section 8.3 of the Loan
Agreement;
(c) The indebtedness restrictions contained in Section 8.4 of the
Loan Agreement;
(d) The restrictions against the amendment to the Certificate of
Incorporation and/or By-Laws of the Borrower or the
Guarantors, contained in Section 8.6 of the Loan Agreement;
(e) The restrictions against the Guarantors' guaranteeing any
obligation of any person, firm or entity contained in Section
8.7 of the Loan Agreement;
(f) The restrictions against engaging in any business other than
such business conducted by the Borrower contained in Section
8.10 of the Loan Agreement; and
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(g) any and all Events of Default under the Loan Agreement and the
Loan Documents that have occurred and are continuing as of the
date hereof.
2. The fifth Recital to the Loan Agreement is hereby amended in
its entirety to read as follows:
"WHEREAS, pursuant to that certain Debenture and Warrant Purchase
Agreement, dated May 26, 1999 (the "1999 Debenture Agreement"), executed by
Borrower in favor of the purchasers named therein, Borrower issued its 5%
Convertible Senior Secured Debentures due March 15, 2003 (such debentures, the
"Oracle Debentures").
3. Article One of the Loan Agreement is hereby amended in its
entirety to read as follows:
"1. AMOUNT AND TERMS OF LOANS.
"1.1 Term Loans. Subject to the terms herein, Lender has
previously loaned to Borrower the aggregate principal amount of Twenty
One Million Four Hundred One Thousand Three Hundred Thirty One Dollars
($21,401,331) (the "Original Loan"). Effective the date of the Third
Amendment to the Loan Agreement, (i) Lender forever forgives,
discharges, cancels and renders null and void Borrower's obligation to
repay Sixteen Million Four Hundred One Thousand Three Hundred Thirty
One Dollars ($16,401,331) in principal amount, plus accrued and unpaid
interest on such principal amount, of the Original Loan, resulting in a
remaining principal balance of the Original Loan of Five Million
Dollars ($5,000,000) (the "Loan"), and (ii) Lender forever forgives and
discharges Borrower's obligation to pay interest under the Original
Loan, as evidenced by the Old Notes, to the extent accrued and unpaid
through and including the date of the Third Amendment to the Loan
Agreement. The Old Notes previously issued by Borrower to Lender
hereunder shall be amended or cancelled, as appropriate, in accordance
with Section 1.2 below. Notwithstanding any prepayment of the Loan by
Borrower, sums repaid may not be re-borrowed.
"1.2 Promissory Notes. Borrower's obligation to pay the
principal of, and interest on, the Loan shall be evidenced by a
promissory note dated as of December 20,
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2002 duly executed and delivered by Borrower in the form attached as
Exhibit A to the Third Amendment to the Loan Agreement and representing
the $5,000,000 principal balance of the Loan (the "Note"), which Note
shall be an amendment and restatement of the Replacement Note. Upon
execution and delivery of the Note, each of the Old Notes shall be null
and void and of no further legal force or effect. Xxxxxx agrees to
return to Borrower each of the original Old Notes on the date of
execution of the Third Amendment to the Loan Agreement."
4. Section 7.2(b) of the Loan Agreement is hereby amended in its
entirety to read as follows:
"(b) Within ninety (90) days after the end of each fiscal
year, consolidated statements of income and retained earnings
and cash flows of the Borrower and its Subsidiaries for the
period from the beginning of each fiscal year to the end of
such fiscal year, and consolidated balance sheets as at the
end of such fiscal year, setting forth in each case in
comparative form corresponding figures for the preceding
fiscal year, which statements will be prepared in accordance
with GAAP, consistently applied (except as approved by the
accounting firm examining such statements and disclosed by the
Borrower) and will be accompanied by the report of the
Borrower's independent certified public accountant firm;"
5. Section 7.8 of the Loan Agreement is hereby deleted in its
entirety.
6. Section 8.12 of the Loan Agreement is hereby deleted in its
entirety.
7. Section 8.13 of the Loan Agreement is hereby deleted in its
entirety.
8. Section 9.1(e) of the Loan Agreement is hereby amended in its
entirety to read as follows:
"(e) If any default shall occur under any indenture,
mortgage, agreement, instrument or commitment evidencing or
under which there is outstanding indebtedness of the Borrower
or a Subsidiary aggregating in excess of $1
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million, and which default results in such indebtedness
becoming due and payable prior to its due date and, if such
indenture or instrument so requires, the holder or holders
thereof shall have declared such indebtedness due and
payable;"
9. Section 9.1(i) of the Loan Agreement is hereby amended in its
entirety to read as follows:
"(i) if any default shall occur and be continuing under
the terms of the Existing Debentures and such indebtedness has
become due and payable; or"
10. A new Section 9.1(j) is hereby added to the Loan Agreement as
follows:
"(j) if the Conversion Event (and the conversion of the
Existing Debentures into Preferred Stock in connection
therewith), shall not have occurred by November 1, 2004."
11. Sections 9.2 and 9.3 of the Loan Agreement are hereby amended
in their entirety to read as follows:
"9.2 Remedies.
(a) Subject to Section 9.4, upon the occurrence of an
Event of Default, Lender may, at any time, unless all defaults shall
theretofore have been remedied, at its option, by written notice or
notices to Borrower (i) declare the Loan to be due and payable,
whereupon the same shall forthwith mature and become due and payable,
together with interest accrued thereon, without presentment, demand,
protest or notice, all of which are hereby waived; and (ii) declare any
other amounts payable to Lender under the Loan Documents or as
contemplated hereby due and payable.
(b) Subject to Section 9.4, upon the occurrence of any of
the Events of Default described in Section 9.1(h) above, then,
automatically and whether or not notice is given, (i) the Loan shall
become immediately due and payable, together with interest
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accrued thereon, without presentment, demand, protest or notice, all of
which are hereby waived; and (ii) any other amounts payable to Lender
under the Loan Documents or as contemplated hereby shall become
immediately due and payable.
(c) Notwithstanding anything contained in Section 9.2(a),
in the event that any time after the principal of the Loan shall so
become due and payable and prior to the date of maturity stated in the
Note, and all arrears of principal of and interest on the Loan (with
interest at the rate specified in the Note) shall be paid by or for the
account of Borrower, then Lender, by written notice or notices to
Borrower, may (but shall not be obligated to) waive such Event of
Default and its consequences and rescind or annul such declaration, but
no such waiver shall extend to or affect any subsequent Event of
Default or impair any right resulting therefrom.
9.3 Enforcement. Subject to Section 9.4, in case any one
or more Events of Default shall occur and be continuing, Lender may
proceed to protect and enforce its rights by an action at law, suit in
equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in the Note or for an
injunction against a violation of any of the terms hereof or thereof,
or in aid of the exercise of any power granted hereby or thereby or by
law. In case of a default in the payment of any principal of or
interest on the Loan, Borrower will pay to Lender such further amount
as shall be sufficient to cover the cost and the expenses of
collection, including, without limitation, reasonable attorneys' fees,
expenses and disbursements. No course of dealing and no delay on the
part of Lender in exercising any rights shall operate as a waiver
thereof or otherwise prejudice Lender's rights. No right conferred
hereby or by the Note upon Lender shall be exclusive of any other right
referred to herein or therein or now available at law in equity, by
statute or otherwise."
12. A new Section 9.4 is hereby added to the Loan Agreement as
follows:
"9.4 Waiver of Events of Default; Forbearance from
Exercise of Remedies.
(a) Borrower and Lender acknowledge and agree that as of
the date of the Third Amendment to the Loan Agreement, certain Events
of Default have occurred and are continuing, including without
limitation, the Borrower's default in the payment of interest due under
the Old Notes. Upon the date of the Third Amendment to the Loan
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Agreement, Lender will be deemed to have waived any and all Events of
Default under the Loan Agreement, the Old Notes, and the Loan Documents
that have occurred and are continuing as of the date hereof.
(b) Notwithstanding anything to the contrary contained in
the Loan Agreement, the Note or the Loan Documents, including, without
limitation, Sections 9.1, 9.2 and 9.3 of the Loan Agreement, commencing
with the occurrence and continuance of any Event of Default on or after
the date of the Third Amendment to Loan Agreement and for a period of
two (2) years thereafter, Lender shall forbear from the exercise and
enforcement (and shall be prohibited from any exercise or enforcement)
of any rights and remedies under the Loan Agreement, the Note, and the
Loan Documents, including, without limitation, the right to declare the
Loan due and payable, the acceleration of the maturity of the Loan, or
the exercise or enforcement of any rights or remedies provided under
the Xxxxxx Security Documents; provided, however, that Lender's
forbearance obligations contained in this Section 9.4(b) shall not (i)
impair, alter or otherwise diminish the exercise and enforcement of
Lender's rights and remedies provided in the Loan Agreement, the Note
and the Loan Documents solely upon the occurrence and continuance of an
Event of Default under Sections 9.1(a), 9.1(c) (but limited solely to
any default that affects the priority of the liens granted by Borrower
and the Guarantors to Lender pursuant to the Loan Documents), 9.1(e),
9.1.(h), 9.1(i) or 9.1(j) of the Loan Agreement, or (ii) in any
circumstance extend beyond June 30, 2007 (regardless of whether the
applicable Event of Default occurred less than two (2) years prior to
such date)."
13. The definition of "Existing Debentures" set forth in Section
12.1 of the Loan Agreement is hereby amended in its entirety to read as follows:
""Existing Debentures" shall mean, collectively, (i) the Xxxxx
Debentures, (ii) the Oracle Debentures, (iii) the convertible secured
debentures due March 31, 2006 issued pursuant to that certain Debenture
Purchase Agreement dated December 20, 2002 between the Borrower and the
purchasers listed on the signature page thereto, and (iv) the
convertible secured debentures due July 31, 2004 issued pursuant to
that certain Debenture and Share Purchase Agreement dated February 6,
2004 between the Borrower
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and the purchasers listed on the signature page thereto, as each of
such debentures may be supplemented, amended, or otherwise modified
from time to time."
14. The definition of "Existing Holders" set forth in Section 12.1
of the Loan Agreement is hereby amended in its entirety to read as follows:
""Existing Holders" shall mean the holders of the Existing
Debentures."
15. The definition of "Obligations" set forth in Section 12.1 of
the Loan Agreement is hereby amended in its entirety to read as follows:
"Obligations" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description of the Borrower and
the Guarantors from time to time owing to the Lender or any Indemnitee
under or in connection with the Loan Documents, whether direct or
indirect, primary or secondary, joint or several, absolute or
contingent, due or to become due, now existing or hereafter arising and
however acquired and shall include, without limitation, all principal
and interest on the Loan and, to the extent chargeable under any Loan
Document, all charges, expenses, fees and reasonable attorney's fees."
16. Section 12.1 of the Loan Agreement is further amended by
adding the following definition in alphabetical order in its entirety:
""Conversion Agreement" shall mean that certain Debenture
Conversion Agreement dated February 6, 2004 by and among the Borrower
and the holders of the Existing Debentures, as such agreement may be
supplemented, amended or otherwise modified from time to time in
accordance with its terms."
17. Section 12.1 of the Loan Agreement is further amended by
adding the following definition in alphabetical order in its entirety:
""Conversion Event" shall mean the conversion of the Existing
Debentures into Preferred Stock immediately upon the filing by the
Borrower of the documents necessary to create the Preferred Stock."
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18. Section 12.1 of the Loan Agreement is further amended by
adding the following definition in alphabetical order in its entirety:
""Old Notes" shall mean, collectively, (i) the secured
promissory note dated December 20, 2002 issued by Borrower to Lender in
the principal amount of $17,500,000, and (ii) the secured promissory
note dated December 20, 2002 issued by Borrower to Lender in the
principal amount of $3,901,331."
19. Section 12.1 of the Loan Agreement is further amended by
adding the following definition in alphabetical order in its entirety:
""Preferred Stock" shall mean, collectively, (i) the Series A
Convertible Preferred Stock, $.01 par value, of the Borrower (now or
hereafter issued), (ii) the Series B Convertible Preferred Stock, $.01
par value, of the Borrower (now or hereafter issued), (iii) the Series
C-1 Convertible Preferred Stock, $.01 par value, of the Borrower (now
or hereafter issued), (iv) the Series C-2 Convertible Preferred Stock,
$.01 par value, of the Borrower (now or hereafter issued), and (v) the
Series C-3 Convertible Preferred Stock, $.01 par value, of the Borrower
(now or hereafter issued)."
20. Section 12.3 of the Loan Agreement is hereby amended in its
entirety to read as follows:
"12.3 Governing Law. This Agreement and the rights of the
Parties hereunder shall be governed in all respects by the laws of the
State of New York wherein the terms of this Loan Agreement were
negotiated."
21. Section 12.11 of the Loan Agreement is hereby amended in its
entirety to read as follows:
"12.11 Litigation. The Parties each hereby waive trial by jury
in any action or proceeding of any kind or nature in any court in which
an action may be commenced arising out of this Loan Agreement or the
Loan Documents. The Parties hereto agree that the state and federal
court which set in the City and State of New York shall have exclusive
jurisdiction to hear and determine any claims or disputes between
Borrower
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and Lender, pertaining directly or indirectly to this Loan Agreement or
to any matter arising therefrom. The parties each expressly submit and
consent in advance to such jurisdiction in any action or proceeding
commenced in such courts provided that such consent shall not be deemed
to be a waiver of personal service of the summons and complaint, or
other process or papers issued therein. The choice of forum set forth
in this Section 12.11 shall not be deemed to preclude the enforcement
of any judgment obtained in such forum or the taking of any action
under this Loan Agreement to enforce same in any appropriate
jurisdiction. The Parties waive any objections based upon forum
non-conveniens and any objection to venue of any action instituted
hereunder."
22. Schedule I to the Loan Agreement is hereby amended in its
entirety as set forth in Schedule I to the Third Amendment to the Loan
Agreement.
23. Limitation of Amendment. Except as amended above, the terms of
the Loan Agreement shall remain in full force and effect.
24. Governing Law. This Third Amendment and the rights of the
parties hereunder shall be governed in all respects by the laws of the State of
New York wherein the terms of this Third Amendment were negotiated.
25. Counterparts. This Third Amendment may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, Borrower and Lender have caused this Third
Amendment to be duly executed by their duly authorized officers all as of the
day and year first above written.
"BORROWER" "LENDER"
XXXXXX DRUG CO., INC. XXXXXX PHARMACEUTICALS, INC.
By:____________________________ By:_____________________________
Name: Xxxxxx X. Xxxxxxx Name: _________________________
Title: President and Chief Executive Officer Title: _________________________
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EXHIBIT A
Note
SCHEDULE I
Debentureholders Receiving In-Kind Interest Payments
All Existing Holders
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