1
EXHIBIT 10.24
[SCOTIABANK LETTERHEAD]
July 2, 1998
Penwest Pharmaceuticals Co.,
a Washington corporation
0000 Xxxxx 00
Xxxxxxxxx, XX 00000-0000
Dear Sirs:
RE: Establishment of Revolving Term Credit Facility
in Favor of Penwest Pharmaceuticals Co.
The Bank of Nova Scotia (the "Bank") is pleased to advise that,
subject to your acceptance, the Bank will make available to Penwest
Pharmaceuticals Co., a Washington corporation (such corporation being the
"Borrower") the revolving term credit facility described in this agreement (the
"Credit Agreement") upon the following terms and conditions:
CREDIT A revolving term credit (the "Credit") in the amount of
FACILITIES US$15,000,000 (the "Commitment Amount") under which are
available U.S. dollar advances (each availment thereunder
being an "Availment").
BOOKING Portland Branch
POINT 000 X.X. Fifth Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000-2098
(the "Branch")
PURPOSES To fund working capital and general corporate purposes,
including capital expenditures.
CREDIT Commencing on the date that Penford Corporation, a
AVAILMENTS Washington corporation ("Penford"), ceases to own any of
the common stock of the Borrower, the Borrower may obtain
U.S. dollar advances under the Credit by the Borrower
selecting in respect of each such advance one of the
interest options as follows:
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(1) Base Rate Advances in a minimum amount of
US$100,000 and in whole multiples of US$10,000:
Alternate Base Rate.
(2) LIBOR Advances in whole multiples of US$1,000,000:
LIBO Rates (Reserve Adjusted) for 1, 2, or 3 month
LIBOR Periods, plus 1.25% per annum.
A LIBOR Period for a LIBOR Advance may not extend beyond
the termination date of the Credit.
The Borrower may convert from a LIBOR Advance to a Base
Rate Advance (a "Base Rate Conversion") or from a Base
Rate Advance to a LIBOR Advance (a "LIBOR Conversion");
provided that a Base Rate Conversion may only be made on
the expiry of the applicable LIBOR Period.
LIBOR Advances, LIBOR Conversions and renewals of LIBOR
Periods are offered subject to the availability to the
Bank of appropriate LIBO Rate quotations.
FACILITY Upon the Borrower's execution of this Credit Agreement,
FEE the Borrower shall pay in respect of the Credit a
non-refundable facility fee of US$60,000.
COMMIT- The Borrower shall pay, on the last Business Day of each
MENT FEE calendar quarter and on the final maturity of the Credit,
a commitment fee of 0.325% per annum, computed on the
unused portion of the Commitment Amount as it may be
reduced from time to time, calculated daily in arrears on
the basis of a 360-day year for the actual number of days
elapsed from the date of the Borrower's execution of this
Credit Agreement. The Borrower shall be entitled to cancel
all or any of the unused portion of the Commitment Amount
at such time without penalty on not less than 30 days'
written notice to the Bank and upon payment of all accrued
commitment fees to such date of cancellation, whereupon
the Commitment Amount shall be permanently reduced
accordingly.
MATURITY & The Credit shall revolve and may be drawn down until
REDUCTION OF August 31, 2000 when all amounts then outstanding or
COMMITMENT accrued in respect of such Credit shall be due and
AMOUNT payable; provided, however, that prior to such maturity
date, the Commitment Amount shall be permanently reduced
by the net proceeds ("Securities Proceeds") to the
Borrower of any sale by the Borrower or any subsidiary of
the Borrower of securities (as the term "securities" is
defined in Section 2(1) of the Securities Act of 1933, as
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amended), except the sale of securities to plan
participants pursuant to the Borrower's 401(k) plan or
equity incentive plans. Reduction of the Commitment Amount
to zero shall terminate the Credit, and all amounts then
outstanding or accrued in respect of the Credit shall be
due and payable. The Borrower shall give the Bank written
notice of the receipt of any Securities Proceeds on the
Business Day that the Borrower receives such Securities
Proceeds.
CALCULATION Determination of Rates. "Alternate Base Rate" means a
& PAYMENT variable interest rate per annum (as shall be in effect
from time to time) (rounded to the nearest 1/100 of 1%)
equal to the greater of: (a) the annual rate of interest
announced from time to time by the Bank in the United
States through the Branch as its "Base Rate"; and (b) the
Federal Funds Effective Rate plus 1/2 of 1% per annum. The
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum equal, for each day
during such period, to the weighted average of the rates
on overnight federal funds transactions with members of
the Federal Reserve System arranged by Federal Funds
brokers as published for such day (or, if such day is not
a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York or, for any day on
which such rate is not so published for such day by the
Federal Reserve Bank of New York, the average of the
quotations for such day for such transactions received by
the Bank from three Federal Funds brokers of recognized
standing selected by the Bank. If for any reason the Bank
shall have determined (which determination shall be
conclusive, absent manifest error) that it is unable to
ascertain the Federal Funds Effective Rate for any reason,
including without limitation, the inability or failure of
the Bank to obtain sufficient bids or publications in
accordance with the terms hereof, the rate announced by
the Bank through the Branch as its "Base Rate" shall be
the Alternate Base Rate until the circumstances giving
rise to such inability no longer exist.
The Alternate Base Rate is not necessarily intended to be
the lowest rate of interest determined by the Bank in
connection with extensions of credit. Changes in the rate
of interest on any Advances maintained as Base Rate
Advances will take effect simultaneously with each change
in the Alternate Base Rate. The Bank will give notice
promptly to the Borrower of changes in the Alternate Base
Rate.
The "LIBO Rate (Reserve Adjusted)" for each LIBOR Period
(being the applicable interest period chosen by the
Borrower for a LIBOR Advance) means a rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%)
determined pursuant to the following formula:
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LIBO Rate = LIBO Rate
(Reserve Adjusted) -------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any LIBOR Period
shall be determined by the Bank on the basis of the LIBOR
Reserve Percentage in effect and the applicable LIBO Rate
on the second Business Day prior to the commencement of
such LIBOR Period. The "LIBO Rate" for each LIBOR Period
means the rate of interest per annum at which the Bank is
offered deposits by prime banks in the London interbank
market, as at 11:00 a.m. (London, England time), on the
second Business Day prior to the commencement of such
LIBOR Period, in an amount of U.S. dollars similar to the
amount of the applicable LIBOR Advance for a deposit
period comparable to such LIBOR Period. "LIBOR Reserve
Percentage" means, relative to any LIBOR Period, the
reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other
reserves and taking into account any transitional
adjustments or other scheduled changes in reserve
requirements) specified by the Board of Governors of the
Federal Reserve System and then applicable to assets or
liabilities consisting of and including "Eurocurrency
Liabilities", as currently defined in Regulation D of the
Board of Governors of the Federal Reserve System, having a
term approximately equal or comparable to such LIBOR
Period.
Interest Calculation and Payment. Interest computed with
reference to the Alternate Base Rate shall accrue from day
to day for the actual number of days elapsed and shall be
calculated and payable monthly, not in advance, on the
last day of each calendar month, or on the next preceding
Business Day if the last day of the month is not a
Business Day. Interest computed with reference to a LIBO
Rate (Reserve Adjusted) shall accrue from day to day for
the actual number of days elapsed and shall be calculated
and payable at the end of the applicable LIBOR Period.
Interest computed with reference to the Alternate Base
Rate shall be calculated on the basis of a 365/366-day
year, but interest computed with reference to a LIBO Rate
(Reserve Adjusted) shall be calculated on the basis of a
year of 360 days.
LIBOR Periods. The Borrower shall designate the LIBOR
Period to apply to each LIBOR Advance in its notice of any
drawdown of such advance, any LIBOR Conversion, and any
renewal of an existing LIBOR Period, provided that, upon
failure of the Borrower to give notice of any such
designation, when applicable, as required under this
Credit Agreement, the Bank may either convert the affected
LIBOR Advance to a Base Rate
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Advance or designate a substitute LIBOR Period which will
apply to such advance for the purpose of determining the
interest rate with respect to same.
Default of Payment. Amounts not paid when due in respect
of a Base Rate Advance shall bear interest at the rate
applicable thereto, plus 2% per annum. Amounts not paid
when due in respect of a LIBOR Advance may be deemed a
Base Rate Advance by the Bank and the Bank may so convert
such advance. Any other unpaid monetary obligation of the
Borrower arising under this Credit Agreement shall be
deemed to be an amount not paid when due in respect of a
Base Rate Advance, as applicable. Interest payable under
this paragraph shall accrue from day to day for the actual
number of days elapsed and shall be calculated and payable
upon demand. The rights of the Bank under this paragraph
shall continue to apply from the date of such default for
so long as such default shall continue, both before and
after demand and judgment.
REPAYMENTS The Borrower may make without penalty any repayment or
prepayment of a Base Rate Advance in a minimum amount of
US$100,000 and in a whole multiple of US$10,000. The
Borrower may make any repayment of a LIBOR Advance in a
minimum amount of US$1,000,000 and in a whole multiple of
US$1,000,000, but any repayment in respect of a LIBOR
Advance may be made only on the last day of the LIBOR
Period for such Advance. If at any time the sum of the
aggregate outstanding principal amount of all Availments
exceeds the Commitment Amount (as it may be reduced from
time to time), the Borrower shall immediately upon notice
from the Bank make a mandatory prepayment of the
Availments in an aggregate amount equal to such excess.
SECURITY As continuing security for the present and future
indebtedness and liability of the Borrower to the Bank
hereunder, the Borrower shall cause to be executed and
delivered in favor of the Bank irrevocable guarantees by
Penford and Penford subsidiary, Penford Products Co., a
Delaware corporation ("Penford Products"), in form and
substance satisfactory to the Bank (each a "Guarantee"),
of the Borrower's obligations under this Credit Agreement.
Each Guarantee shall include the guarantor's agreement to
cause to be executed and delivered in favor of the Bank an
irrevocable guarantee of the Borrower's obligations under
this Credit Agreement by any material subsidiary of the
guarantor hereafter formed, which guarantee shall also be
in form and substance satisfactory to the Bank. As used in
this Credit Agreement, a "material subsidiary" of Penford
or Penford Products shall mean a subsidiary which owns
assets
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with a value equal to ten percent (10%) or more of the
value of the consolidated assets of Penford and its
subsidiaries.
REPRESEN- The Borrower represents and warrants that:
TATIONS AND
WARRANTIES (1) the Borrower is a corporation duly incorporated and
organized and validly subsisting under the laws of
the state of Washington and is duly qualified,
registered or licensed in all jurisdictions where
such qualification, registration or licensing is
required; the Borrower has all requisite capacity,
power and authority to own, hold under license or
lease its properties, to carry on its business as
now conducted and to otherwise enter into, and
carry out the transactions contemplated by, this
Credit Agreement.
(2) all necessary action has been taken to authorize
the execution, delivery and performance of this
Credit Agreement by the Borrower, and this Credit
Agreement is a legal, valid and binding obligation
of the Borrower, enforceable against the Borrower
by the Bank in accordance with its terms; it is not
contrary to any contractual restriction binding on
the Borrower; and the Borrower's execution and
delivery of the same neither requires a third party
consent nor would entitle any third party to
accelerate any debt owing to it.
(3) the execution, delivery and performance of this
Credit Agreement and the consummation of the
transactions contemplated herein do not and will
not conflict with, result in any breach or
violation of, or constitute a default under, the
terms, conditions or provisions of any law,
regulation, judgment, decree or order binding on or
applicable to the Borrower or by which the Borrower
benefits or to which any of its property is subject
or of any material agreement, lease, license,
permit or other instrument to which the Borrower is
a party or is otherwise bound or by which the
Borrower benefits or to which any of its property
is subject and do not require the consent or
approval of any other party or any governmental
body, agency or authority.
(4) except as set forth in a disclosure letter provided
to the Bank, there are no actions, suits,
inquiries, claims or proceedings (whether or not
purportedly on behalf of the Borrower) pending or
threatened against or affecting the Borrower before
any government, parliament, legislature, regulatory
authority, agency, commission, board or court or
before any private arbitrator, mediator or referee
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which in any case or in the aggregate may result in
any material adverse change:
(i) in the condition, financial or otherwise,
of the Borrower or any of its assets; or
(ii) in the ability of the Borrower to perform
its obligations under this Credit
Agreement, or in the ability of the Bank
to enforce any of such obligations.
(5) the Borrower is not in violation of any mortgage,
franchise, license, judgment, decree, order,
statute, ordinance, rule or regulation relating in
any way to it, to the operation of its business or
to its property or assets and which would result in
a material adverse change in its condition,
financial or otherwise, and the Borrower has all
necessary licenses, permits and consents to operate
its businesses where they are currently being
operated.
(6) no event has occurred which constitutes or which,
with giving of notice, lapse of time or both, would
constitute a material default under or in respect
of any material agreement or instrument in respect
of indebtedness to which the Borrower is a party or
to which any of its property or assets may be
subject.
(7) the Borrower has not:
(i) admitted its inability to pay its debts
generally as they become due or failed to
pay its debts generally as they become
due;
(ii) filed an assignment or petition in
bankruptcy or a petition to take advantage
of any insolvency statute;
(iii) made an assignment for the benefit of its
creditors;
(iv) consented to the appointment of a receiver
of the whole or any substantial part of
its assets;
(v) filed a petition or answer seeking a
reorganization, arrangement, adjustment or
composition under applicable bankruptcy
laws or any other applicable state or
federal law or statute; or
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(vi) been adjudged by a court having
jurisdiction a bankrupt or insolvent, nor
has a decree or order of a court having
jurisdiction been entered for the
appointment of a receiver, liquidator,
trustee or assignee in bankruptcy with
such decree or order having remained in
force and undischarged or unstayed for a
period of 60 days.
(8) any Employee Pension Benefits Plans, as defined in
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), of the Borrower meet,
as of the date of this Credit Agreement, the
minimum funding standards of 29 U.S.C. Section 1082
(Section 302 of ERISA), and no Reportable Event or
Prohibited Transaction, as defined in ERISA, has
occurred with respect to any Employee Benefit Plan
of the Borrower, as defined in ERISA.
(9) The Borrower has conducted a comprehensive review
and assessment of the Borrower's computer
applications and made inquiry of the Borrower's key
suppliers, vendors and customers with respect to
the "year 2000 problem" (that is, the risk that
computer applications may not be able to properly
perform date-sensitive functions after December 31,
1999) and, based on that review and inquiry, the
Borrower does not believe the year 2000 problem
will result in a material adverse change in the
financial condition or business prospects of the
Borrower.
All of the representations and warranties of the Borrower
contained herein shall survive the execution and delivery
of this Credit Agreement notwithstanding any investigation
made at any time by or on behalf of the Bank.
CONDITIONS TO Initial Drawdown. The right of the Borrower to obtain the
UTILIZATION initial drawdown hereunder is subject to the conditions
precedent that the Bank has received, in form and
substance satisfactory to it:
(1) a duly certified resolution of the Board of
Directors of the Borrower authorizing the Borrower
to execute, deliver and perform its obligations
under this Credit Agreement and any other agreement
or instrument required by this Credit Agreement,
together with executed copies of such
documentation;
(2) a certificate of a senior officer of the Borrower
setting forth the specimen signature of the
individual authorized to sign this Credit
Agreement;
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(3) a certificate of the Secretary of State of
Washington, dated within 30 days of the date of
this Credit Agreement, attesting to the continued
corporate existence of the Borrower in that state;
(4) a copy of the by-laws of the Borrower and all
amendments thereto, certified as a true copy by a
senior officer of the Borrower;
(5) a duly certified resolution of Penford authorizing
Penford to execute and deliver its Guarantee and to
perform its obligations under its Guarantee,
together with executed copies of such
documentation;
(6) a certificate of a senior officer of Penford
setting forth the specimen signature of the
individual authorized to sign its Guarantee;
(7) a duly certified resolution of Penford Products
authorizing Penford Products to execute and deliver
its Guarantee and to perform its obligations under
its Guarantee, together with executed copies of
such documentation;
(8) a certificate of a senior officer of Penford
Products setting forth the specimen signature of
the individual authorized to sign its Guarantee;
(9) such supporting and other certificates and
documentation as the Bank may reasonably request;
(10) favorable opinions of counsel, in form and
substance satisfactory to the Bank, concerning the
validity and enforceability of agreements and
instruments to be delivered to the Bank with
respect to the Credit and concerning any other
matter about which the Bank may reasonably request
an opinion of counsel;
and, in addition, that:
(11) Penford and Penford Products shall have duly
executed and delivered their respective Guarantees;
(12) no Event of Default shall have occurred and be
continuing, and the Bank shall have received a
certificate of the Borrower so certifying to the
Bank.
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(13) no material adverse change in the financial
condition or business prospects of the Borrower
shall have occurred since the preparation of the
Borrower's December 31, 1997 financial statements.
(14) no material adverse change in the financial
condition or business prospects of Penford shall
have occurred since the preparation of Xxxxxxx's
August 31, 1997 financial statements.
Each Utilization. The right of the Borrower to obtain at
any time any drawdown of an Availment (including the
initial drawdown) or any conversion from one Availment to
another or any renewal of a LIBOR Period hereunder (each a
"Utilization") is subject to the further conditions
precedent that at the time of such Utilization:
(1) in the case where such Utilization is a drawdown,
no event or circumstance has occurred and is
continuing, or would result from the making of such
Utilization, which constitutes an Event of Default
or would constitute an Event of Default but for the
requirement that notice be given or time elapse, or
both, or, which when considered by itself or
together with other past or then existing events or
circumstances, constitutes or would constitute a
material adverse change in the business prospects
or financial condition of the Borrower; and
(2) the representations and warranties of the Borrower
contained in this Credit Agreement shall be true
and correct in all material respects at the date of
such Utilization as if such representations and
warranties were made on such date.
NOTICE The Borrower shall give to the Bank, through the Bank's
subsidiary, Scotiabanc, Inc., Suite 0000, 000 Xxxxxxxxx
Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000, three Business Days'
notice of each Utilization or repayment in respect of a
LIBOR Advance and same Business Day's notice of each
Utilization or repayment in respect of any other type of
Availment. To be deemed given on a Business Day, a notice
must be delivered to the Bank on or before 9:00 a.m.,
Portland, Oregon time, on the Business Day. As used in
this Credit Agreement, a "Business Day" means any day
other than a Saturday, or a Sunday, or a day that banks
are lawfully closed for business in Portland, Oregon,
Atlanta, Georgia, or New York, New York, or, if in respect
of a LIBOR Advance, any other day on which transactions
cannot be carried out by and between banks in the London
interbank market.
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Any notice or communication shall be deemed to have been
given to a party hereunder when given in accordance with
the provisions of Exhibit A attached hereto. Each notice
or communication given by a party hereunder shall be
binding on it and shall not be revocable without the other
party's consent.
PAYMENTS All payments or disbursements made or required to be made
hereunder shall be in U.S. dollars in immediately
available funds as follows:
(1) in the case of disbursements to the Borrower, to
such account as the Borrower shall from time to
time designate in writing to the Bank;
(2) with respect to all amounts owed to the Bank, on
the due date, not later than 12:00 noon Portland,
Oregon time, by paying the Bank of Nova Scotia, New
York Agency, through the Fed Wire in Federal Funds
using ABA no. 000000000, for further credit to the
Loan Servicing Interbranch Account (Portland),
Account No.
6102-32;
or in such other manner as any party may from time to time
notify the other.
COVENANTS Except for the transactions described in that certain Form
10 filed with the United States Securities and Exchange
Commission on June 22, 1998, or as otherwise permitted by
the Bank, which permission shall not be unreasonably
withheld, the Borrower hereby covenants, until the
Borrower has fulfilled all of its obligations under this
Credit Agreement:
(1) not to permit a material change in the
organizational structure or operations of the
Borrower;
(2) to promptly notify the Bank of the occurrence of
any event or circumstance which constitutes an
Event of Default, or would constitute an Event of
Default but for the requirement that notice be
given or time elapse or both, and to provide to the
Bank a detailed statement of the steps, if any,
being taken to cure or remedy such default;
(3) to maintain the Borrower's existence as a
corporation under the laws of the state of
Washington and to have the Borrower qualified
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and remain duly qualified to carry on business and
own property in each jurisdiction in which such
qualification is necessary in view of the
Borrower's business and operations;
(4) to conduct the Borrower's business in the ordinary
course and in such a manner so as to comply in all
material respects with all applicable laws and
regulations and so as to preserve and protect, to
the extent consistent with the conduct of the
Borrower's business in the ordinary course, the
Borrower's property and assets and the earnings,
income and profits therefrom; to perform all
obligations incidental to any trust imposed upon
the Borrower by statute and to ensure that any
breaches of the said obligations and the
consequences of any such breach shall be promptly
remedied;
(5) to pay or cause to be paid all taxes, rates,
government fees and dues levied, assessed or
imposed upon the Borrower and upon its property or
assets or any part thereof, as and when the same
become due and payable, save and except when and so
long as the validity or amount of any such taxes,
rates, fees, dues, levies, assessments or imposts
is being contested in good faith by proper legal
proceedings, and shall deliver to the Bank, when
requested, the receipts and vouchers establishing
such payment;
(6) to keep proper books of account and records
covering all of the Borrower's business and affairs
on a current basis and to permit a representative
of the Bank to inspect the Borrower's books of
account, records and documents and to make copies
therefrom during reasonable business hours and upon
reasonable notice;
(7) if the Borrower changes its name, to promptly
notify the Bank in writing of the details of such
change;
(8) to promptly notify the Bank of any action, suit,
inquiry, claim or proceeding (collectively, a
"Proceeding"), whether or not purportedly on behalf
of the Borrower, commenced or threatened against or
affecting the Borrower before any government,
parliament, legislature, regulatory authority,
agency, commission, board or court or before any
private arbitrator, mediator or referee, if such
Proceeding would cause the aggregate potential
liability of the Borrower with respect to all
Proceedings pending against the Borrower to exceed
US$500,000, or if such Proceeding or the aggregate
of such Proceeding and all other Proceedings
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pending against the Borrower might result in any
material adverse change:
(i) in the condition, financial or otherwise,
of the Borrower; or
(ii) in the ability of the Borrower to perform
its obligations under this Credit
Agreement, or in the ability of the Bank
to enforce any of such obligations;
(9) not to create, incur, assume or suffer to exist any
security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or
interest in property to secure payment of a debt or
performance of an obligation or other priority or
preferential arrangement of any kind or nature
whatsoever (collectively, "Liens") upon any of its
property, revenues or assets, whether now owned or
hereafter acquired, except:
(i) Liens for taxes, assessments or other
governmental charges or levies not at the
time delinquent or thereafter payable
without penalty or being diligently
contested in good faith by appropriate
proceedings and for which adequate
reserves in accordance with GAAP shall
have been set aside on its books;
(ii) Liens of carriers, warehousemen,
mechanics, materialmen and landlords
incurred in the ordinary course of
business for sums not overdue or being
diligently contested in good faith by
appropriate proceedings and for which
adequate reserves in accordance with GAAP
shall have been set aside on its books;
(iii) Liens incurred in the ordinary course of
business in connection with worker's
compensation, unemployment insurance or
other forms of governmental insurance or
benefits, or to secure performance of
tenders, statutory obligations, leases and
contracts (other than for borrowed money)
entered into in the ordinary course of
business or to secure obligations on
surety or appeal bonds;
(iv) judgment Liens in existence less than 30
days after the entry thereof or with
respect to which execution has been
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stayed or the payment of which is covered
in full (subject to a customary
deductible) by insurance maintained with
responsible insurance companies; and
(v) Liens on property used or to be used by
the Borrower in the ordinary course of
business, securing payment of all or part
of the purchase price thereof, provided
that such Liens are limited to the
property so purchased and additions and
improvements thereto and proceeds thereof;
(10) not to create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any
indebtedness, other than, without duplication, the
following:
(i) indebtedness in respect of the Credit; and
(ii) unsecured indebtedness incurred in the
ordinary course of business (including
open accounts extended by suppliers on
normal trade terms in connection with
purchases of goods and services and up to
an aggregate of US$2,000,000 of letters of
credit reimbursement liability, but
excluding other indebtedness incurred
through the borrowing of money or
contingent liabilities) including, without
limitation, accrued expenses, taxes
payable, accrued environmental
liabilities, deferred employment benefits
and deferred income taxes, to the extent
incurred in the ordinary course of
business;
provided, however, that no indebtedness otherwise
permitted by clauses (i) or (ii) shall be permitted
if, after giving effect to the incurrence thereof,
any Default shall have occurred and be continuing;
(11) not to purchase or develop any real property
without the prior written consent of the Bank;
(12) not to declare, pay or make any dividend or
distribution (in cash, property or obligations) on
any shares of any class of capital stock (now or
hereafter outstanding) of the Borrower or on any
warrants, options or other rights with respect to
any shares or any class of capital stock (now or
hereafter outstanding) of the Borrower (other than
dividends or distributions payable in its common
stock or warrants to purchase its common stock or
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splitups or reclassifications of its stock into
additional or other shares of its common stock) or,
except as permitted in clause (20) below, to
repurchase any common stock or other equity
securities of the Borrower or its subsidiaries;
(13) not to make or assume any loan or make any advance
of money to any officer, director or employee of
the Borrower other than advances to employees for
expenses made in the ordinary course of business;
(14) not to liquidate or dissolve, consolidate with, or
merge into or with, any other corporation, or
purchase or otherwise acquire all or substantially
all of the assets of any Person (or of any division
thereof) except
(i) any subsidiary of the Borrower may
liquidate or dissolve voluntarily into,
and may merge with and into, the Borrower
or any other subsidiary of the Borrower so
long as, after giving effect thereto, the
Borrower is a surviving corporation, and
the assets or stock of any subsidiary of
the Borrower may be purchased or otherwise
acquired by the Borrower or any other
subsidiary of the Borrower; and
(ii) so long as no Event of Default has
occurred and is continuing or would occur
after giving effect thereto, the Borrower
or any of its subsidiaries may purchase
all or substantially all of the assets of
any Person, or acquire such Person by
merger; provided, however, that after
giving effect to any such merger the
Borrower or its subsidiary party thereto
is the surviving corporation.
As used in this Credit Agreement, "Person" means any
natural person, corporation, partnership, limited
liability company, firm, association, or trust;
(15) not to sell, lease, contribute or otherwise convey,
or grant options, warrants or other rights with
respect to, any or all of its assets (including
accounts receivable and capital stock of
subsidiaries) to any Person, unless such sale,
transfer, lease, contribution or conveyance or
grant is made in the ordinary course of its
business. For purposes of this covenant, the
license of the intellectual property or other
technology of the Borrower as part of
16
To: Penwest Pharmaceuticals Co. Page 16
collaborations or otherwise shall be deemed made in
the ordinary course of business;
(16) not to enter into, or cause, suffer or permit to
exist any arrangement or contract with any of its
other Affiliates unless such arrangement or
contract is fair and equitable to the Borrower and
is an arrangement or contract of the kind which
would be entered into by a prudent Person in the
position of the Borrower with a Person which is not
one of its Affiliates. As used in this Credit
Agreement, "Affiliate" means any other Person
which, directly or indirectly, controls, is
controlled by or is under common control with the
Borrower, other than Penford or its subsidiaries. A
Person shall be deemed to be "controlled by" any
other Person if such other Person possesses,
directly or indirectly, power (i) to vote 15% or
more of the securities (on a fully diluted basis)
having ordinary voting power for the election of
directors or managing general partners; or (ii) to
direct or cause the direction of the management and
policies of such Person whether by contract or
otherwise;
(17) not to take part in any dissolution or
reorganization or in any similar proceeding or
arrangement;
(18) not to use any part of the proceeds of the Credit
to purchase or carry "margin stock" as defined in
Regulation U of the Board of Governors of the
Federal Reserve System;
(19) not to purchase or redeem any of the capital stock
of the Borrower, except for the purchase of common
stock of the Borrower to be held in the Borrower's
401(k) plan where the purchase price of such stock
does not exceed US$200,000 in the aggregate in any
calendar year;
(20) not to make, incur, assume or suffer to exist any
investment in any other Person, except:
(i) Cash Equivalent Investments;
(ii) in the ordinary course of business,
investments made in connection with the
establishment or maintenance by the
Borrower of research and development
collaborations;
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To: Penwest Pharmaceuticals Co. Page 17
(iii) without duplication, investments permitted
as indebtedness pursuant to clause (10) of
this section;
(iv) in the ordinary course of business,
investments by the Borrower in any of its
subsidiaries, or by any such subsidiary in
any of its subsidiaries or any other
subsidiary, by way of contributions to
capital or loans or advances; and
(v) other investments in an aggregate amount
at any time not to exceed US$2,000,000
minus any losses on such investments;
provided, however, that no investment otherwise
permitted by clause (ii), (iii), or (iv) shall be
permitted to be made if, immediately before or
after giving effect thereto, any Event of Default
shall have occurred and be continuing. As used in
this Credit Agreement, "Cash Equivalent Investment"
means , at any
time:
(i) any obligation, maturing not more than one
year after such time, issued or guaranteed
by the United States government;
(ii) municipal notes or note funds rated at the
time of purchase, SP-1/A-1 or SP-2/A-2 by
Standard & Poor's Ratings Group or VMIG1
or VMIG2 by Xxxxx'x Investors Service,
Inc.; municipal bonds or bond funds rated
at the time of purchase, AAA or AA by
Standard & Poor's Ratings Group or Aaa or
Aa by Xxxxx'x Investors Service, Inc.; or
money market funds rated at the time of
purchase, A-1 by Standard & Poor's Ratings
Group or P-1 by Xxxxx'x Investors Service,
Inc.;
(iii) commercial paper, maturing not more than
nine months from the date of issue, which
is issued by (x) a corporation (other than
an Affiliate of any Obligor) organized
under the laws of any state of the United
States or of the District of Columbia and
rated at least A-2 by Standard & Poor's
Ratings Group or at least P-2 by Xxxxx'x
Investors Service, Inc., or (y) the Bank;
or
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To: Penwest Pharmaceuticals Co. Page 18
(iv) any certificate of deposit or bankers
acceptance, maturing not more than one
year after such time, which is issued by
either (i) a commercial banking
institution that is a member of the
Federal Reserve System and has a combined
capital and surplus and undivided profits
of not less than US$500,000,000, or (ii)
the Bank.
EVENTS OF Upon the occurrence and continuation of any Event of
DEFAULT Default, the Bank may terminate the Credit and/or
demand payment of all indebtedness and liability
outstanding and accrued thereunder to the date of demand
and proceed to take such steps as it deems fit including
proceedings to realize under any security it holds in that
respect.
An Event of Default shall occur if:
(1) the Borrower fails to pay any amount of principal,
interest, fees or other amounts within three
Business Days of when due under this Credit
Agreement; or
(2) the Borrower breaches any of its covenants
hereunder and such breach of covenant (other than a
covenant to pay) continues for ten Business Days or
more after notice to remedy same; provided,
however, that in the event that such breach cannot
reasonably be cured within ten Business Days after
notice to remedy same, the failure to cure such
breach within the ten Business Day cure period
shall not constitute an Event of Default if:
(i) substantial progress is made to cure such
breach within the ten Business Day cure
period;
(ii) cure is completed as soon as possible
after the ten Business Day cure period;
and
(iii) the passage of the ten Business Day cure
period will not jeopardize the ability of
the Bank to collect all sums due or to
become due to the Bank; or
(3) the Borrower makes any representation or warranty
hereunder which is incorrect in any material
respect when made and a cure is not effected within
ten Business Days or more after notice to remedy
same; provided, however, that in the event that
such cure cannot reasonably be effected within ten
Business Days after notice
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To: Penwest Pharmaceuticals Co. Page 19
to remedy same, the failure to cure within the ten
Business Day cure period shall not constitute an
Event of Default if:
(i) substantial progress is made to effect a
cure within the ten Business Day cure
period;
(ii) cure is completed as soon as possible
after the ten Business Day cure period;
and
(ii) the passage of the ten Business Day cure
period will not jeopardize the ability of
the Bank to collect all sums due or to
become due to the Bank; or
(4) the Borrower admits in writing its inability to pay
its debts generally; fails to pay a material amount
of any of its indebtedness when due and such
failure continues after any applicable grace period
specified in any agreement or instrument relating
to such indebtedness (provided, however, that the
failure to pay indebtedness in connection with the
Borrower's purchase of goods or services in the
ordinary course of business shall, if the Borrower
disputes such indebtedness in good faith, not be an
Event of Default hereunder for a period of 45 days
after the expiration of the applicable grace period
specified in any agreement or instrument relating
to such indebtedness); permits any material default
under any agreement or instrument relating to its
indebtedness, or any other event, to occur and to
continue after any applicable grace period
specified in such agreement or instrument and the
effect of such default or event is to accelerate
the maturity of a material amount of such
indebtedness; is the subject of (i) a voluntary
bankruptcy proceeding, or (ii) an involuntary
bankruptcy proceeding which is not dismissed within
60 days; or, becomes subject to any proceeding
seeking liquidation, rearrangement, relief of
creditors or the appointment of a receiver or
trustee over, or any judgment or order which has or
might have a material and adverse effect on, any
substantial part of its property; or
(5) any course of action is undertaken by the Borrower
which is intended to result in, or would result (in
the reasonable opinion of the Bank) in the transfer
of all or substantially all of the assets of the
Borrower; or
20
To: Penwest Pharmaceuticals Co. Page 20
(6) any person (as the term "person" is defined in the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")), or two or more persons acting in
concert, acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Exchange Act) of
one-third (1/3) or more of the outstanding shares
of voting stock of the Borrower; or
(7) the Borrower is dissolved; or
(8) Penford or Penford Products at any time breaches
any agreement, covenant or warranty under its
Guarantee and such breach is not cured within the
time specified for cure under the Guarantee or
waived by the Bank, or the Guarantee fails to
remain in full force and effect; or
(9) an event of default occurs and is continuing under
any credit agreement with Penford under which the
Bank is either the sole lender or a participating
lender, provided, however, that in no event shall a
default caused solely by a change in control of
Penford be deemed an Event of Default under this
Credit Agreement; or
(10) a material Reportable Event or Prohibited
Transaction, as defined in ERISA, occurs and is
continuing or a material accumulated funding
deficiency is incurred within the meaning of ERISA,
or a material liability to the Pension Benefit
Guaranty Corporation occurs and is continuing
which, in the opinion of independent Certified
Public Accountants of recognized standing selected
by the Borrower, will have a material adverse
financial effect on the financial condition of the
Borrower.
GAAP Any accounting terms used and not specifically defined
herein shall be construed in accordance with Generally
Accepted Accounting Principles as established by the
Financial Accounting Standards Board ("GAAP"),
consistently applied, and except as may be otherwise
provided herein all financial data and statements
submitted pursuant to this Credit Agreement shall be
prepared in accordance with such principles.
INDEMNITY If the introduction or implementation of or any change in
PROVISIONS or in the interpretation of, or any change in its
application to the Borrower of, any law or any regulation
or guideline issued by any central bank or other
governmental authority (whether or not having the force of
law), including, without limitation, any reserve or
special deposit requirement
21
To: Penwest Pharmaceuticals Co. Page 21
or any tax (other than tax on the Bank's general income)
or any capital requirement, has due to the Bank's
compliance the effect, directly or indirectly, of (i)
increasing the cost to the Bank of performing its
obligations hereunder; (ii) reducing any amount received
or receivable by the Bank or its effective return
hereunder; or (iii) causing the Bank to make any payment
or to forgo any return based on any amount received or
receivable by the Bank hereunder, then upon demand from
time to time the Borrower shall pay such amount as shall
compensate the Bank for any such cost, reduction, payment
or foregone return. The Borrower shall further indemnify
the Bank for all costs, losses and expenses incurred by
the Bank in connection with the early termination of any
LIBOR Period and agrees that the Bank shall have no
liability to the Borrower for any reason in respect of any
Availment other than on account of the Bank's negligence
or wilful misconduct. Any certificate of the Bank in
respect of the foregoing which presents the calculations
relied upon by the Bank in reasonable detail will be
conclusive and binding upon the Borrower, except for
manifest error, provided that the Bank shall determine the
amounts owing to it in good faith using any reasonable
averaging and attribution methods.
INDEMNITY FOR The Borrower hereby represents and warrants that the
ENVIRON- Borrower's businesses and assets and those of its
MENTAL subsidiaries are operated in material compliance with
HAZARDS applicable Environmental Laws and that no enforcement
action in respect thereof is threatened or pending, and
the Borrower covenants to and to cause its subsidiaries to
continue to so operate. If at any time the Bank has
reasonable grounds for believing that the Borrower or one
of its subsidiaries is not complying with applicable
Environmental Laws then the Bank may request that the
Borrower permit the Bank to conduct inspections, audits
and appraisals of all or any of the records, business and
assets of the Borrower and each of its subsidiaries, with
the Bank to be indemnified by the Borrower for reasonable
costs that it may incur with respect to such inspections,
audits and appraisals if any material violation of
applicable Environmental Laws is identified. The Borrower
shall not unreasonably withhold its consent to such
inspections, audits and appraisals, provided that
negotiations between the Borrower and the Bank have been
conducted which have resulted in the Bank and the Borrower
reaching agreement as to what constitute reasonable costs
for such inspections, audits or appraisals. If the Bank is
required to expend any funds in compliance with applicable
Environmental Laws, or court orders in respect thereof,
the Borrower shall indemnify the Bank in respect of such
expenditures as if an advance had been made to the
Borrower under this Credit Agreement for such purpose. For
purposes of this Credit Agreement, "Environmental Laws"
means the Comprehensive
22
To: Penwest Pharmaceuticals Co. Page 22
Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 et seq., as amended), the
Resource, Conservation and Recovery Act (42 U.S.C. Section
6901 et seq., as amended), and similar federal, state,
local and other statutes, ordinances, laws, rules and
regulations in connection with environmental conditions,
health and safety.
REPORTING The Borrower covenants to provide to the Branch, to the
attention of Corporate Banking:
(1) audited annual financial statements of the Borrower
within 120 days of each of its fiscal year-ends;
(2) unaudited quarterly financial statements of the
Borrower within 60 days of the end of each of the
first three quarters of each of the Borrower's
fiscal years;
(3) audited, annual, consolidated financial statements
of Penford within 120 days of the end of each of
Penford's fiscal years
(4) within 60 days of the end of each of the first
three quarters of each of the Borrower's fiscal
years and within 120 days of each of the Borrower's
fiscal year-ends, a certificate of a senior officer
of the Borrower that the officer has no knowledge
of any Event of Default, or of any event which,
with notice or lapse of time, would constitute an
Event of Default; and
(5) such other information as the Bank may reasonably
request.
WITHHOLDING All payments due hereunder shall be made free from any
TAXES & LEVIES withholding tax or levy (such taxes and levies, other than
taxes on the general income of the Bank, being the
"Taxes"). The Borrower shall pay any Taxes in addition to
such payments or shall indemnify the Bank for amounts paid
by the Bank in respect of any Taxes and shall obtain and
deliver to the Bank receipts in respect thereof.
EXPENSES All reasonable fees and out-of-pocket expenses of the
Bank, including without limitation the Bank's reasonable
attorney fees, in respect of preparation and enforcement
of this Credit Agreement or any other agreement or
instrument relating to the Credit, inspection and
investigation costs, and other like administrative costs
incurred during the currency of this Credit Agreement will
be for the account of the Borrower. In the event
litigation is commenced by a party hereto to enforce or
interpret any provision of this Credit Agreement, the
prevailing party in such litigation
23
To: Penwest Pharmaceuticals Co. Page 23
shall be entitled to receive, in addition to all other
sums and relief, its reasonable costs and attorney fees,
incurred both at and in preparation for trial and any
appeal or review, such amount to be set by the court(s)
before which the matter is heard. The Borrower also agrees
to pay any reasonable attorney fees incurred by the Bank
in connection with any bankruptcy or similar proceedings
wherein the Borrower is the debtor.
EVIDENCE OF The Borrower acknowledges that the actual recording of
INDEBTEDNESS interest, fees and other amounts due with respect to the
Credit under this Credit Agreement in an account of the
Borrower maintained by the Bank in respect thereof and
payments made under the Credit in accordance with this
Credit Agreement shall constitute, except for obvious
error, conclusive evidence of the Borrower's indebtedness
and liability from time to time under this Credit
Agreement in respect of the Credit; provided that the
failure of the Bank to record same in such account shall
not affect the obligation of the Borrower to pay or repay
such indebtedness and liability in accordance with this
Credit Agreement.
USURY The provisions of this Credit Agreement shall be subject
RESTRAINTS to any applicable law, regulation, order, rule or
direction ("Usury Restraint") which prohibits or restricts
the charging, receipt or retention of interest or other
amounts at the rates and amounts set forth herein (the
"Stated Rate") in excess (the "Excess") of the maximum
rates or amount (the "Maximum Rate") stipulated in the
Usury Restraint. The provisions of this Credit Agreement
shall not require the payment or permit the collection of
interest in excess of the Maximum Rate from time to time.
If the Bank complies (whether or not required to do so at
law) with such Usury Restraint, then, to the extent
permitted by law, a subsequent reduction in the Stated
Rate below the Maximum Rate shall be deemed not to reduce
the Stated Rate below the Maximum Rate until the total
amount of interest and other amounts earned and retained,
measured by a dollar amount, equals the amount of interest
and other amounts which would have been earned and
retained hereunder, inclusive of the Excess, measured by a
dollar amount, if the Stated Rate had not been held at the
Maximum Rate or any amount had not been refunded to the
Borrower.
SEVERABILITY The invalidity or unenforceability of any particular
provision of this Credit Agreement shall not affect any
other provision herein and the Agreement shall be
construed as if the invalid or unenforceable provision had
been omitted.
ASSIGNABILITY The Borrower may not assign this Credit Agreement. The
Bank, with the Guarantor's approval, which approval shall
not be unreasonably withheld,
24
To: Penwest Pharmaceuticals Co. Page 24
may assign or grant participation in its rights and
obligations hereunder, with each such assignee or
participant to be entitled to rely on the section headed
INDEMNITY PROVISIONS as set out above, provided, however,
that no assignment or participation shall increase the
liability of the Borrower for Taxes, indemnity or any
other amount payable by the Borrower to the Bank hereunder
over that for which the Borrower would be obligated in the
absence of such assignment or participation. The Bank may
also pledge its rights (but not its obligation to make the
advances under the Credit) under this Credit Agreement
and/or its advances hereunder to a Federal Reserve Bank in
support of borrowings made by the Bank from such Federal
Reserve Bank.
GOVERNING LAW This Credit Agreement shall be construed in accordance
& JURISDICTION with the law of the state of Oregon and for the purpose of
any legal actions or proceedings brought by the Bank in
respect of the same, the Borrower hereby irrevocably
submits to the non-exclusive jurisdiction of any state or
federal court of such state and acknowledge its competence
and the convenience and propriety of the venue and agree
to be bound by any judgment thereof and not to seek, and
hereby waive, any review of such judgments by the courts
of any other jurisdiction. IN ANY ACTION OR PROCEEDING
RELATING TO THIS CREDIT AGREEMENT, THE BORROWER WAIVES ANY
AND ALL RIGHTS TO TRIAL THEREOF BY JURY.
25
To: Penwest Pharmaceuticals Co. Page 25
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US AFTER
OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE
ENFORCEABLE. THE TERM "US" MEANS THE BANK.
Please indicate your acceptance of this Credit Agreement by signing
and returning the enclosed duplicate copy of this letter on or before July 2,
1998.
Yours truly,
THE BANK OF NOVA SCOTIA
by: /s/ XXXXXX X. XXXXXX
---------------------------
Xxxxxx X. Xxxxxx, Officer
Accepted this 2nd day of
July, 1998
Penwest Pharmaceuticals Co.,
a Washington corporation
By: /s/ XXXXXXXX X. GOOD
------------------------------------
Name: Xxxxxxxx X. Xxxx
------------------------------------
Title: V.P. Finance & Chief Finance Officer
------------------------------------
26
EXHIBIT A TO CREDIT AGREEMENT
NOTICE
Any notice or communication given under the Credit Agreement to which this
Exhibit is attached shall be deemed to have been given
(1) in the case of notice or communication to the Borrower, (i) upon
facsimile transmission to facsimile no. 000-000-0000 (confirming
telephone no. 000-000-0000), Attention: Xxxxxxxx X. Xxxx, or to such
other facsimile number of which the Bank notifies the Borrower
pursuant to this Exhibit; provided that transmission is confirmed by
the sender's facsimile machine, or (ii) upon delivery in writing to
the Borrower, Attention: Xxxxxxxx X. Xxxx, at its address as noted
on page 1 of the Credit Agreement, or at such other address of which
the Borrower notifies the Bank pursuant to this Exhibit;
(2) in the case of notice or communication to the Bank with respect to
administrative or operational issues, (i) upon facsimile
transmission to the Scotiabanc, Inc., facsimile no. 000-000-0000
(confirming telephone no. 000-000-0000), Attention: Xx. Xxxxx
Xxxxxxxx, or to such other facsimile number of which the Bank
notifies the Borrower pursuant to this Exhibit; provided that
transmission is confirmed by the sender's facsimile machine, or (ii)
upon delivery in writing to the Scotiabanc, Inc., Attention: Xx.
Xxxxx Xxxxxxxx, at Suite 2700, 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx,
Xxxxxxx 00000, or at such other address of which the Bank notifies
the Borrower pursuant to this Exhibit; and
(3) in the case of notice or communication to the Bank with respect to
credit issues, (i) upon facsimile transmission to the Branch,
facsimile no. 000-000-0000 (confirming telephone no. 000-000-0000),
Attention: Xxxxxx X. Xxxxxx, or to such other facsimile number of
which the Bank notifies the Borrower pursuant to this Exhibit;
provided that transmission is confirmed by the sender's facsimile
machine, or (ii) upon delivery in writing to the Branch at its
address as noted on page 1 of the Credit Agreement or at such other
address of which the Bank notifies the Borrower pursuant to this
Exhibit.
Notice or communication to the Scotiabanc, Inc. hereunder to be effective on a
certain Business Day must, unless otherwise provided in the Credit Agreement, be
given prior to 11:00 a.m. Atlanta, Georgia time on that Business Day. Notice or
communication to the Branch hereunder to be effective on a certain Business Day
must, unless otherwise provided in the Credit Agreement, be given prior to
11:00 a.m. Portland, Oregon time on that Business Day.
