REVOLVING CREDIT AND LOAN AGREEMENT
DATED AS OF SEPTEMBER 1, 1999
KOS PHARMACEUTICALS, INC., a Florida corporation (the "Borrower"), and
XXXXXXX XXXXXXX, an individual residing in South Norwalk, Connecticut (the
"Lender"), agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Acquisition Price shall have the meaning ascribed thereto
in subsection (c) of Section 4.04 below.
SECTION 1.02. Acquisition Transaction shall mean (i) a merger or
consolidation, or any similar transaction, of Borrower into or with another
corporation or other entity (other than into or with a Related Company), (ii) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 20% or more of the voting
power of Borrower; (iii) the sale of all or substantially all of the assets of
the Borrower, or (iv) any substantially similar transaction.
SECTION 1.03. Adjusted Conversion Price shall mean the price for
conversion of part or all of the Note into Common Stock after adjustment as
provided in Section 4.04 of this Agreement.
SECTION 1.04. Advances shall mean the advances made under the Note and
pursuant to this Agreement, including without limitation any advances made prior
to the date hereof which were contemplated to be made pursuant to this
Agreement, which advances are deemed refinanced under the Note as of the Closing
Date.
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SECTION 1.05. Business Day shall mean any day other than a Saturday,
Sunday or other day on which the Borrower's business is closed.
SECTION 1.06. Closing Date shall mean the date on which the closing for
this Loan is held.
SECTION 1.07. Common Stock shall mean the capital common stock of the
Borrower, consisting of 50,000,000 authorized shares $.01 par value, of which
17,894,529 shares are issued and outstanding as of July 30, 1999.
SECTION 1.08. Compensation shall mean (i) any and all compensation,
including without limitation salaries, bonuses, commissions, fringe benefits,
deferred compensation, retirement benefit contributions and similar benefits,
paid to employees of the Borrower for services rendered, and (ii) any and all
compensation and payments, including without limitation payments reportable as
income to recipients on the various types of IRS Forms 1099, paid to recipients
for services rendered.
SECTION 1.09. Conversion Consideration shall have the meaning ascribed
thereto in Section 4.02 below.
SECTION 1.10. Conversion Date for any particular conversion of part or
all of the Note into Common Stock shall mean the date set by the Lender for
conversion in the Conversion Notice.
SECTION 1.09. Conversion Notice shall mean the Conversion Notice
described in Section 4.02.
SECTION 1.11. Conversion Price shall be $4.91 per share, determined as
the average of the closing prices of a share of Common Stock on the NASDAQ
National Market (as reported
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in The Wall Street Journal or, in the absence thereof, as reported by another
authoritative source mutually agreed upon by the Borrower and the holder hereof)
for the thirty (30) successive full trading days, ending on the full trading day
immediately prior to the First Advance Date, on which at least one share of
Common Stock is traded.
SECTION 1.12. Credit Facility shall mean the $50,000,000.00 revolving
credit facility made available by the Lender pursuant to the Note.
SECTION 1.13. Debt shall mean the debt of any Person at any date,
without duplication in calculating the amount thereof, arising from:
(i) all obligations of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds
(other than performance bonds), debentures, notes or
other similar instruments;
(iii) all trade credit and other obligations of such Person
to pay the deferred purchase price of property or
services;
(iv) all obligations of such Person as lessee under
capital leases; (v) all debt of others secured by a
lien on any asset of such Person, whether or not such
debt is assumed by such Person; and
(vi) all debt of others guaranteed by such Person.
SECTION 1.14. Environmental Complaint shall mean any complaint, order,
citation or notice of violation of Environmental Laws with regard to air
emissions, water discharges, surface contamination, noise emissions or any other
environmental, health or safety matter affecting the Borrower or any of its real
properties.
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SECTION 1.15. Environmental Laws means and includes the comprehensive
Environmental Response, Conservation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Toxic Substances Control Act, as
amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any
other "Superfund" or "Superlien" law, or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
Hazardous Materials, as now or at any time hereafter in effect.
SECTION 1.16. Environmental and Safety Requirements shall mean any and
all Environmental Laws and any other federal, state and local laws relating to
public health and safety, worker health and safety, and pollution or protection
of the environment, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of toxic or otherwise hazardous
materials, substances, or wastes into ambient air, surface water, groundwater,
subsurface soil or lands or otherwise relating to generation, the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of toxic or otherwise hazardous materials, substances or wastes.
SECTION 1.17. Event of Default shall mean an Event of Default under
Section 7.01.
SECTION 1.18. Exchange Act shall mean the Securities Exchange Act of
1934, as amended from time to time.
SECTION 1.19. First Advance Date shall mean the date of the first
Advance under the Note and this Agreement.
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SECTION 1.20. Hazardous Discharge shall mean the happening of any event
involving the generation, use, spill, discharge or storage, disposal or cleanup
of any Hazardous Materials not in compliance with Environmental Laws.
SECTION 1.21. Hazardous Material shall mean any pollutant, contaminant,
toxic substance, hazardous waste, hazardous material, hazardous substance,
petroleum or petroleum product, asbestos, polychlorinated biphenyls, underground
storage tanks and the contents thereof including, without limitation, any such
materials defined in or regulated pursuant to the Resource Conservation and
Recovery Act, as amended, the Comprehensive Environmental Response, Conservation
and Liability Act, as amended, the Federal Clean Water Act as amended, the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, or any other Environmental Law, whether existing as of the date
hereof, previously enforced, or subsequently enacted.
SECTION 1.22. Loan shall mean the loan made pursuant to Section 2.01
and the Note.
SECTION 1.23. Loan Documents shall mean this Agreement, the Note, the
Registration Rights Agreement, the Security Agreement, the Patent Security
Agreement, the UCC-1 financing statement executed in connection with the
Security Agreement, and each and every other document executed or delivered in
connection with the closing of this transaction, each such document being
referred to individually as a "Loan Document".
SECTION 1.24. Maturity Date shall mean December 31, 2003.
SECTION 1.25. New Securities shall have the meaning ascribed thereto in
subsection (b) of Section 4.04 below.
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SECTION 1.26. New Securities Issuance Price shall have the meaning
ascribed thereto in subsection (b) of Section 4.04 below.
SECTION 1.27. Note shall mean the promissory note referred to in
Section 2.01, substantially in the form of Exhibit I attached hereto and made a
part hereof.
SECTION 1.28. Patent Security Agreement shall mean the Patent,
Trademark and License Security Agreement of even date herewith granted by
Borrower to Lender as collateral security for the Note.
SECTION 1.29. Permissible Equipment Financing Indebtedness shall mean
Debt incurred for equipment financing in the ordinary course of business (i) in
an amount not in excess of $250,000.00 in the aggregate for any one transaction,
or (ii) for the lease or purchase of automobiles for use by employees. For the
purpose of defining a transaction, all equipment orders from the same vendor or
affiliated vendors made within a 30 day period for a group of similar or
interrelated items shall constitute one transaction.
SECTION 1.30. Permissible Letter of Credit Indebtedness shall mean Debt
incurred for the procurement of letters of credit (standby or documentary) in
the ordinary course of business in an amount not in excess of $2,000,000 in the
aggregate for all transactions at any one time. For the purpose of defining a
transaction, all letters of credit procured for the same underlying transaction
or a substantially related transaction shall constitute one transaction.
SECTION 1.31. Person means any individual, joint venture, corporation,
company, limited liability company, voluntary association, partnership, limited
partnership, limited liability partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of entity.
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SECTION 1.32. Registration Rights Agreement shall mean the Registration
Rights Agreement of even date herewith entered into by Borrower in favor of
Lender with respect to the Common Stock to be issued upon conversion of the Note
pursuant to Article IV of this Agreement.
SECTION 1.33. Related Company or Related Companies shall mean (i) any
direct or indirect subsidiary of Borrower; (ii) Kos Investments, Inc., a
Delaware corporation, and all successors thereto; (iii) Kos Holdings, Inc., a
Delaware corporation, and all successors thereto.
SECTION 1.34. Related Person or Related Persons shall mean any
stockholder of Kos Investments, Inc., a Delaware corporation, existing as of the
date of this Agreement.
SECTION 1.35. Request Notice shall mean a notice requesting an Advance
pursuant to Section 2.02 below, which notice shall be in the form and substance
attached hereto as Exhibit II hereto.
SECTION 1.36. Securities Act shall mean the Securities Act of 1933, as
amended from time to time.
SECTION 1.37. Security Agreement shall mean the Security Agreement of
even date herewith granted by Borrower to Lender as collateral security for the
Note.
SECTION 1.38. Stock Pledge Agreement shall mean the Stock Pledge
Agreement of even date herewith granted by the Borrower to Lender as collateral
security for the Note.
SECTION 1.39. Subsidiary shall mean Aeropharm Technology, Inc., a
Delaware corporation, which is a wholly owned subsidiary of Lender.
SECTION 1.40. Subsidiary Guaranty shall mean the Guaranty of even date
herewith granted by the Subsidiary to Lender guaranteeing repayment of the Note.
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SECTION 1.41. Subsidiary Security Agreement shall mean the Subsidiary
Security Agreement of even date herewith granted by the Subsidiary to Lender as
collateral security for the Subsidiary Guaranty.
SECTION 1.42. Take-Over Attempt shall mean any of the following
occurrences:
(a) Any person (other than a Related Company or a Related Person) shall
have acquired beneficial ownership or the right to acquire beneficial ownership
of securities representing 20% or more of the aggregate voting power of Borrower
or any Related Company (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the Exchange
Act, and the rules and regulations thereunder); or
(b) Any person shall have engaged in an Acquisition Transaction.
SECTION 1.43. Termination Date shall mean December 31, 2000.
ARTICLE II
THE LOAN
SECTION 2.01. The Loan. The Lender agrees, on the terms and conditions
hereinafter set forth, to make a Loan to the Borrower in an amount not to exceed
Fifty Million Dollars ($50,000,000.00) on the terms and conditions set forth
herein and in the Note.
SECTION 2.02. Making Advances.
(a) Upon the terms and subject to the conditions herein set forth,
the Lender shall from time to time make Advances to the
Borrower under the Loan up to an aggregate principal amount at
any one time outstanding not to exceed an amount equal to the
Credit Facility. Any sums advanced pursuant to this Section
and subsequently repaid may be re-borrowed from time to time,
subject to the requirements of Section 2.02.
(b) Borrower may use loan proceeds for any business purpose of
Borrower.
(c) Nothing herein shall obligate the Lender to make any Advance
in excess of the maximum amount of the Credit Facility, nor
prohibit the Lender from lending in excess of the maximum
amount of the Credit Facility, the making of any or all
Advances in excess of the maximum amount of the Credit
Facility to be in the sole and absolute discretion of the
Lender. If at any time an excess shall exist for any reason
other than as specifically authorized by Lender, the Borrower
shall repay to the Lender forthwith, without notice or demand,
such amount as shall be necessary to eliminate such excess.
(d) The Borrower shall give the Lender written or telegraphic
notice of its request for an Advance by submitting a Request
Notice at least three (3) Business Days prior to the requested
date of the Advance. Each Request Notice shall specify the
date and the amount of the requested Advance. Each Advance
shall be in the minimum amount of $5,000.00 and in integral
multiples of $1,000.00. The Lender shall make each Advance in
immediately available funds by wire transfer to a deposit
account designated by Borrower at its financial institution,
as soon as practicable, but in no event later than 3 business
days following the receipt by Lender of a Request Notice.
(e) The Lender shall not be obligated to make Advances aggregating
in excess of $12,000,000 during any fiscal quarter of
Borrower.
SECTION 2.03. Termination. Except as otherwise provided in this
Agreement, the provisions of Section 2.02 relating to the making of Advances
under the Note shall remain in effect until the Termination Date, and shall be
terminated at such time unless otherwise renewed or extended by the Lender.
Notwithstanding any such termination, and subject to Lender's right to
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exercise its rights and remedies under the Loan Documents upon the occurrence of
an Event of Default or otherwise, all of the provisions of this Loan Agreement
shall remain in effect while any part of the Loan remains outstanding, such
termination affecting only those provisions relating to the making of Advances.
All obligations of the Borrower in respect of the Note shall become due and
payable on the Maturity Date, without notice or demand.
SECTION 2.04. Excess Advances. Any Advances made at any time during the
term of the Loan by the Lender to the Borrower in excess of the face amount of
the Note shall, while outstanding, be deemed part of the indebtedness of
Borrower owed to the Lender under the Note and shall be equally subject to all
of the terms and provisions of this Agreement and the Loan Documents. Any
reference in any Loan Documents to the indebtedness or amounts owed under this
Agreement and the Note is hereby deemed to include such excess Advances.
SECTION 2.05. Increase in Loan Amount. The amount of the Loan may be
increased from time to time by the execution and delivery of an amendment to
this Agreement setting forth the amount of such increase, duly executed by the
Lender and the Borrower, and the execution and delivery by the Borrower of a
note in substantially the form of Exhibit I attached hereto in the principal
amount of such increase. Upon execution and delivery of any such note, any
reference to the term "Loan Documents" herein or in any Loan Document shall be
deemed to include reference to such note.
SECTION 2.06. Payments and Computations. The Borrower shall make each
payment under any Loan Document not later than 3:00 p.m. (New York City time) on
the day when due in lawful money of the United States of America to the Lender
at its address referred to in Section 9.02 in immediately available funds. All
computations of interest under the Note shall be
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made by the Lender on the basis of a 360-day year, for the actual number of days
(including the first day but excluding the last day) elapsed.
SECTION 2.07. Payment on Non-Business Days. Whenever any payment to be
made hereunder or under the Note shall be stated to be due on a day which is not
a Business Day, such payment may be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest.
SECTION 2.08. Termination of Facility. The Lender's obligation to make
available to the Borrower the Credit Facility and to make Advances thereunder
shall terminate, at the Lender's option, upon the occurrence of any of the
following events:
(i) termination of the availability of the Credit Facility
pursuant to Section 2.03; or
(ii) an Event of Default.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Closing. The obligation of the
Lender to close the Loan and make any Advances hereunder at closing shall be
subject to the condition precedent that the Lender shall have received on or
before the Closing Date the following, each dated the Closing Date, in form and
substance satisfactory to the Lender:
(a) The Note, duly executed by the Borrower;
(b) The Registration Rights Agreement, duly executed by the
Borrower;
(c) The Security Agreement, duly executed by the Borrower;
(d) The Patent Security Agreement, duly executed by the Borrower;
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(e) UCC-1 financing statements with respect to the security
interests granted to Lender under the Loan Documents for such
locations as the Lender may deem necessary to perfect the
Lender's security interests, duly executed by the Borrower;
(f) A conditional assignment of Borrower's lease(s) of real
property, together with a written consent to such assignment
from Borrower's landlord(s) and a written waiver by such
landlord(s) of certain rights of landlord under its lease(s)
in furtherance of the exercise by Lender of its rights under
the Security Agreement, all in form and substance satisfactory
to Lender;
(g) A binder of an endorsement to Borrower's fire, hazard and
extended coverage insurance policy (with a long form
endorsement) with respect to the assets given as collateral
pursuant to the Security Agreement showing the Lender as loss
payee in form satisfactory to the Lender and to Borrower's
comprehensive liability policy (with a long form endorsement)
and Borrower's product liability policy (with a long form
endorsement) with respect to Borrower's business showing the
Lender as an additional insured under such policy;
(h) A binder of an endorsement to business interruption coverage
insurance policy (with a long form endorsement) with respect
to Borrower's business showing the Lender as loss payee in
form satisfactory to the Lender;
(i) A certified copy of the resolutions of the board of directors
of the Borrower approving this transaction in the form
attached as Exhibit III;
(j) A certificate of the secretary or an assistant secretary of
the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign each Loan
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Document to which it is a party and the other documents to be
delivered by it hereunder;
(k) Copies of consents of third parties necessary for the
consummation of this transaction;
(l) The Subsidiary Guaranty, duly executed by the Subsidiary;
(m) The Subsidiary Security Agreement, duly executed by the
Subsidiary;
(n) The Stock Pledge Agreement, duly executed by the Borrower;
(o) A favorable opinion of counsel for the Borrower, in
substantially the form of Exhibit IV and as to such other
matters as the Lender may reasonably request; and
(p) Such other documents and information as the Lender may
reasonably request.
SECTION 3.02. Conditions Precedent to Advances. The obligation of the
Lender to make any Advances under the Note is subject to the condition precedent
that the Lender shall have received at least three Business Days before the date
of such Advance, in form and substance satisfactory to the Lender:
(a) A Request Notice, the representations and warranties contained within
which shall be true and accurate as of the date of the Advance being
requested;
(b) The representations and warranties contained in Section 5.0l below
shall be true and correct on and as of the date of such requested
Advance as though made on and as of such date;
(c) As of the date of such requested Advance, no event shall have occurred
and be continuing, or would result from the Advance requested thereby,
which would constitute an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or time elapse,
or both;
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(d) As of the date of such requested Advance, there shall not have occurred
any material adverse change in the business or financial operations or
condition of the Borrower or in its management;
(e) As of the date of such requested Advance, there shall not be any
pending, or to the best of its knowledge, threatened action or
proceeding affecting the Borrower before any court, governmental agency
or arbitrator which is likely to have a materially adverse effect on
the financial condition or operations of the Borrower;
(f) The Borrower shall waive any claim or defense based upon the occurrence
of any action or inaction of Lender on or prior to the date of such
requested Advance which Borrower believes at such time may (i) be
actionable against Lender, or (ii) give rise to a defense to payment
under the Loan Agreement or the Note for any reason, including without
limitation, commission of a tort or violation of any contractual duty
or duty implied at law;
(g) As of the date of such requested Advance, the death of Lender shall not
have occurred; (h) The Lender, together with Lender's spouse and
children and any entity of which Lender owns a majority interest, shall
continue to own directly and indirectly at least forty percent (40%) of
the outstanding shares of Common Stock of the Borrower; and
(i) Such approvals, opinions and documents as the Lender may reasonably
request.
ARTICLE IV
CONVERSION RIGHTS
SECTION 4.01. Right to Convert. The holder of the Note is entitled, at
his option, at any time and from time to time after the First Advance Date and
while the Note is outstanding or any principal, interest or other sum owing
under the Note or any other Loan Document is unpaid, to
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convert the principal amount of the Note (or any portion hereof which is
$100,000 or an integral multiple thereof) into shares of Common Stock, as said
shares shall be constituted on the Conversion Date, at the Conversion Price, or
if applicable, at the Adjusted Conversion Price in effect on the Conversion
Date. The right to convert the Note into Common Stock shall survive any
Acquisition Transaction, in which case the Conversion Price or the Adjusted
Conversion Price then in effect shall be subject to adjustment as set forth in
Section 4.04(c) below.
SECTION 4.02. Exercise of Conversion Rights. To exercise his right to
convert all or any portion of the Note into Common Stock, the holder of the Note
shall deliver the Conversion Notice and a photocopy of the Note to the Borrower
at its address designated in Section 9.02 below. The Conversion Notice shall be
in the form attached hereto as Exhibit V and shall set forth the Conversion
Date, the amount of principal owed under the Note to be converted into Common
Stock, whether any unpaid accrued interest is to be converted into Common Stock
and, if so, how much interest is to be converted, and the registered holder of
the Common Stock, if different from the holder of the Note. Within fifteen (15)
days after delivery of a fully completed Conversion Notice and a photocopy of
the Note by the holder of the Note or his designee, the Borrower shall deliver
to the holder of the Note or, if different, the designated registered holder of
the Common Stock, the following (which is hereinafter referred to collectively
as the "Conversion Consideration"): (i) the number of shares of Common Stock
determined in accordance with Section 4.03 hereof and the Note, (ii) payment in
New York Clearing House funds or other funds acceptable to the holder of the
Note of an amount equal to any portion of unpaid accrued interest owed under the
Note which is not converted into Common Stock as designated in the Conversion
Notice, (iii) if the Note is not fully converted into Common Stock, a
replacement Note for the remainder of the outstanding principal
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balance in the form of Exhibit I attached hereto, bearing interest at the same
rate as the original Note and maturing on the Maturity Date; and (iv) if the
Note is not fully converted into Common Stock, payment of cash in lieu of any
fractional shares of Common Stock, based on the then current market value of
Common Stock. No adjustment is to be made on conversion for dividends on shares
of Common Stock issued on conversion. Upon receipt of the Conversion
Consideration, the Lender shall promptly deliver to the Borrower at its address
designated in Section 9.02 below the Note, accompanied (if so required by the
Borrower) by instruments of transfer, in form satisfactory to the Borrower, duly
executed by the holder or by his duly authorized attorney in writing.
SECTION 4.03. Determination of Number of Shares. Upon exercise of his
conversion rights, the holder of the Note shall be entitled to the number of
shares of Common Stock determined by dividing the then outstanding principal
balance of this Note or such lesser amount of principal designated for
conversion in the Conversion Notice, plus the portion of unpaid accrued interest
designated for conversion in the Conversion Notice, by the Conversion Price or,
if applicable, the Adjusted Conversion Price. The Borrower is not required to
issue fractional shares upon any such conversion, but shall make adjustment
therefor in cash on the basis of the current market value of such fractional
interest unless only a portion of the Note is being converted, in which case the
amount of any fractional shares shall become part of outstanding principal under
the replacement Note.
SECTION 4.04. Adjusted Conversion Price. The Conversion Price shall be
adjusted as follows:
(a) In the event of any stock split, reverse stock split, stock
dividend or any other similar event, the Conversion Price or
any subsequent Adjusted Conversion Price then in
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effect shall be subject to an equitable adjustment to prevent
dilution or increment of the percentage entitlement of the
holder of the Note to convert to Common Stock. The Conversion
Price (or any subsequent Adjusted Conversion Price then in
effect) shall be adjusted so that the number of shares of
Common Stock issuable upon conversion of the Note shall
constitute the same proportionate percentage ownership of the
Borrower's Common Stock to which the holder of the Note would
have been entitled immediately prior to the occurrence of such
stock split, reverse stock split, stock dividend or other
similar event.
(b) The Conversion Price and any Adjusted Conversion Price after
adjustment pursuant to the terms of this subsection,
subsection (a) above or subsection (c) below shall be
decreased in the event of the issuance or sale (other than the
issuance or exercise of stock options pursuant to an officer,
director, employee or consultant stock option plan adopted by
the Borrower) of any Common Stock, or rights, options or
warrants to acquire Common Stock, or any other security
convertible to Common Stock (the "New Securities") which would
result in the holder of such New Securities in owning Common
Stock at a price per share less than the Conversion Price or
the Adjusted Conversion Price then in effect (the "New
Securities Issuance Price"). In this event, the Conversion
Price or the Adjusted Conversion Price then in effect shall be
reduced to the New Securities Issuance Price, which will then
become the Adjusted Conversion Price.
(c) In the event of an Acquisition Transaction in which holders of
Common Stock receive cash, property and/or securities with a
per share value (the "Acquisition Price") less
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than the Conversion Price or the Adjusted Conversion Price
then in effect, the Conversion Price or the Adjusted
Conversion Price then in effect shall be reduced to the
Acquisition Price, which will then become the Adjusted
Conversion Price in effect immediately after the Acquisition
Transaction.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrower. Except as
otherwise disclosed in a schedule or schedules attached hereto and made a part
hereof, the Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly
existing and its status is active under the laws of the State
of Florida, has the requisite power and authority to own its
properties and assets and to carry on its business as now
conducted, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in
which failure to so qualify would have a material adverse
effect on the transaction contemplated hereby.
(b) The authorized capital stock of the Borrower consists
exclusively of (A) 50,000,000 shares of Common Stock, par
value $.01 per share, of which 17,894,529 shares are issued
and outstanding as of July 30, 1999, and (B) 10,000,000 shares
of preferred stock, par value $.01 per share, of which no
shares are issued and outstanding. All issued and outstanding
shares of the capital stock of the Borrower and of each of its
subsidiaries have been fully paid, were duly authorized and
validly issued, are nonasesssable and have been issued
pursuant to an effective registration statement under the
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Securities Act or an appropriate exemption from registration
under the Securities Act and were not issued in violation of
the preemptive rights of any shareholder.
(c) The execution, delivery and performance by the Borrower of
this Agreement, the Note and each other Loan Document to which
the Borrower is a party have been duly authorized by all
necessary corporate action and do not and will not:
(i) require any consent or approval of the share-holders
of the Borrower not already obtained;
(ii) contravene the Borrower's governing documents;
(iii) violate any provision of any law, rule, regulation
(including, without limitation, Regulation X of the
Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree,
determination or award presently in effect having
applicability to the Borrower;
(iv) result in a breach of or constitute a default under
any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties
may be bound or affected; or
(v) result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security
interest or other charge or encumbrance of any nature
(other than arising under a Loan Document) upon or
with respect to any of the properties now owned or
hereafter acquired by the Borrower; and the Borrower
is not in default under any such law, rule,
regulation, order,
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writ, judgment, injunction, decree, determination or
award or any such indenture, agreement, lease or
instrument.
(d) No authorization or 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 and
performance by the Borrower of any Loan Document to which it
is or will be a party.
(e) This Agreement is, and each other Loan Document to which the
Borrower will be a party when delivered hereunder will be,
legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their
respective terms, and there has not occurred any action or
inaction of Lender which Borrower believes may (i) be
actionable against Lender, or (ii) give rise to a defense, to
payment hereunder or under the Note for any reason, including
without limitation, commission of a tort or violation of any
contractual duty or duty implied at law.
(f) The consolidated balance sheet of the Borrower as of December
31, 1998, and the related consolidated statements of
operations, shareholders' equity and cash flows for the fiscal
year then ended, audited by Xxxxxx Xxxxxxxx, LLP, copies of
which have been furnished to the Lender, fairly present the
financial condition of the Borrower as at such date and its
results of operations for the year then ended in accordance
with generally accepted accounting principles, consistently
applied, and since December 31, 1998 there has been no
material adverse change in such condition or operations.
19
(g) There is no pending, or to the best of its knowledge,
threatened action or proceeding affecting the Borrower before
any court, governmental agency or arbitrator which may
materially adversely affect the financial condition or
operations of the Borrower.
(h) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of
the Loan will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or
carrying any margin stock.
(i) There are no recorded and/or perfected mortgages, deeds of
trust, liens, security interests or, to the best of its
knowledge, other charges and encumbrances (including liens or
the retained titles of conditional vendors) of any nature
whatsoever on any properties of the Borrower other than those
permitted under Section 6.02(a) hereof.
(j) The Borrower has filed all tax returns (federal, state and
local) required to be filed and has paid all taxes shown
thereon to be due, including interest and penalties, or
provided adequate reserves for payment thereof.
(k) Environmental Matters.
(i) The Borrower has obtained all material permits,
licenses and other authorizations required under
Environmental and Safety Requirements, except for any
licenses, permits or authorizations the failure to
obtain which would not reasonably be expected to have
a material adverse effect on the operations or
financial condition of the Company.
20
(ii) The Borrower is in material compliance with all
material terms and conditions of any required
material permits, licenses, and authorizations and
with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in
any Environmental and Safety Requirements or any
notice or demand letters issued, entered, promulgated
or approved thereunder, except where the failure to
so comply would not reasonably be expected to have a
material adverse effect on the operations or
financial condition of Borrower.
(iii) The Borrower has not received any material written
notice, demand, complaint, or order from any
governmental authority or private party relating to
material environmental impairments or liabilities
with respect to the operation of its businesses or
any of its real properties or advising the Borrower
that it is potentially responsible for material
response costs or remediation with respect to a
release or threatened release of Hazardous Materials,
any of which, if adversely resolved, would reasonably
be expected to have a material adverse effect on the
operations or financial condition of the Borrower.
(iv) None of the real property owned or leased by the
Borrower is subject to a private or governmental lien
arising under Environmental Laws.
(l) No information, exhibit or report furnished by the Borrower to
the Lender in connection with the negotiation of this
Agreement or any other Loan Document or any representations
and warranties herein contains or contained any material
misstatement
21
of fact or omitted to state a material fact necessary to make
the statements contained therein not misleading. Borrower
acknowledges that the Lender is relying upon these
representations and warranties in making the loan contemplated
herein.
ARTICLE VI
COVENANTS OF THE BORROWER
SECTION 6.01. Affirmative Covenants. So long as the Note shall remain
unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property except to the
extent contested in good faith.
(b) Maintenance of Insurance. Maintain insurance with responsible
and reputable insurance companies or associations in such
amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower
operates.
(c) Maintenance of Properties, Etc. Maintain and preserve all of
its properties, necessary or useful in the proper conduct of
its business, in good working order and condition, ordinary
wear and tear excepted.
(d) Keeping of Records and Books of Account. Keep adequate records
and books of account, in which complete entries will be made
in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of
the Borrower.
22
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is necessary in view
of its business and operations or the ownership of its
properties and in which the failure to qualify would have a
material adverse effect on Borrower's business or prospects.
(f) Access to Records. At any reasonable time and from time to
time, upon at least three days' oral or written notice (unless
the Borrower is in default, in which case no notice shall be
necessary), permit the Lender or any agents or representatives
thereof during normal business hours to examine and at
Borrower's expense make copies of and abstracts from the
records and books of account of, and to visit the properties
of, the Borrower and to discuss the affairs, finances and
accounts of the Borrower with any of its officers or
directors; provided, however, that prior to the occurrence of
an Event of Default no such actions by the Lender shall be
taken in a manner that would disrupt Borrower in the conduct
of its business. Until such time as Lender enforces its rights
and exercises it remedies upon or after an Event of Default,
Lender shall keep confidential any information which it
obtains in the course of such examination and investigation
and shall not disclose such information to anyone other than
agents, representatives and advisors of Lender, except that
this obligation to keep information confidential shall not
apply to information that (i) is already in Lender's
possession, provided that such information is not known by
Lender to be subject to another confidentiality agreement with
or other obligation of secrecy to the Borrower or
23
another party, (ii) becomes generally available to the public
other than as a result of a disclosure by Lender or Lender's
agents, representatives or advisors or (iii) becomes available
to Lender on a nonconfidential basis from a source other than
the Borrower or its advisors, provided that such source is not
known by Lender to be bound by a confidentiality agreement
with or other obligation of secrecy to the Borrower or another
party.
(g) Reporting Requirements. Furnish to the Lender:
(i) as soon as available and in any event within
forty-five (45) days after the end of each quarter of
each fiscal year of the Borrower other than the
fourth quarter, a consolidated balance sheet of the
Borrower as of the end of such quarter and the
related consolidated statements of operations and
cash flows for the period commencing at the end of
the previous fiscal year and ending with the end of
such quarter, certified as to fairness of
presentation, generally accepted accounting
principles and consistency by the chief accounting
officer of the Borrower, together with a certificate
of such chief accounting officer stating that as of
the date of such certificate there is no continuing
Event of Default or event which, with notice or lapse
of time or both, would constitute an Event of
Default, or, if an Event of Default or such an event
has occurred and is continuing, a statement as to the
nature thereof and the action which the Borrower has
taken or proposes to take with respect thereto;
(ii) as soon as available and in any event within ninety
(90) days after the end of each fiscal year of the
Borrower, a consolidated balance sheet of the
24
Borrower as of the end of such fiscal year and the
related consolidated statements of operations,
shareholders' equity and cash flows for such fiscal
year, certified without material qualification by the
Company's independent public accountants acceptable
to the Lender, which shall be one of the six largest
national public accounting firms;
(iii) as soon as possible and in any event within five (5)
days after the Borrower has knowledge of the
occurrence of each Event of Default, continuing on
the date of such statement, the statement of the
chief accounting officer of the Borrower setting
forth details of such Event of Default or event and
the action which the Borrower has taken or proposes
to take with respect thereto;
(iv) as soon as available, and in any event within five
(5) days thereafter, notification of any proposed or
pending change of executive officers of the Borrower
(as defined in the rules and regulations of the
Securities and Exchange Commission);
(v) promptly after the commencement thereof, notice of
all actions, suits and proceedings before any court
or governmental department, commission, board,
bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower of the type described
in Section 5.01(g) hereof;
(vi) promptly after the furnishing thereof, copies of any
statement or report furnished to any financial
institution or other lender pursuant to the terms of
any loan or credit or similar agreement and not
otherwise required to be furnished to the Lender
pursuant to any other clause of this subsection (g);
25
(vii) as soon as available, and in any event within five
(5) days thereafter, notification of (X) any bona
fide proposal to Borrower or its shareholders, by
public announcement or written communication that is
or becomes the subject of public disclosure, to
engage in an Acquisition Transaction, or (B) the
commencement (as such term is defined in Rule 14d-2
under the Exchange Act) of, or the filing of a
registration statement under the Securities Act with
respect to, a tender offer or exchange offer to
purchase any shares of Common Stock such that, upon
consummation of such offer, such person would own or
control securities representing 10% or more of the
aggregate voting power of Borrower or any Related
Company; and
(viii) such other information respecting the condition or
operations, financial or otherwise, of the Borrower
as the Lender may from time to time reasonably
request.
SECTION 6.02. Negative Covenants. So long as the Note shall remain
unpaid, the Borrower will not, without the written consent of the Lender:
(a) Liens, Etc. Create or suffer to exist any lien, security
interest or other charge or encumbrance, or any other type of
preferential arrangement, upon or with respect to any of its
properties, whether now owned or hereafter acquired, or assign
any right to receive income, in each case to secure any Debt
of any Person, except that the foregoing restrictions shall
not apply to mortgages, deeds of trust, pledges, liens,
security interests or other charges or encumbrances:
26
(i) existing as of the date hereof and listed in Schedule
A attached hereto and made a part hereof;
(ii) for taxes, assessments or governmental charges or
levies on property of the Borrower if the same shall
not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good
faith and by appropriate proceedings;
(iii) imposed by law, such as carriers, landlord's,
warehousemen's and mechanics' liens and other similar
liens arising in the ordinary course of business;
(iv) arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age
pensions, or other social security or retirement
benefits, or similar legislation; or
(v) securing Permissible Equipment Financing Indebtedness
or Permissible Letter of Credit Indebtedness.
(b) Debt. Create or suffer to exist any Debt, except:
(i) Debt existing as of the date hereof and listed in
Schedule A attached hereto;
(ii) Debt under the Loan Documents;
(iii) Permissible Equipment Financing Indebtedness
(iv) Permissible Letter of Credit Indebtedness, including
without limitation the $3,000,000 Letter of Credit
Agreement dated July 17, 1999 with First Union
National Bank; provided that the indebtedness
thereunder shall at no time exceed the $2,000,000
limitation set forth in Section 1.30 above; and
27
(v) Debt authorized under subsection 6.02(c).
(c) Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise become
directly or contingently liable (including, without
limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to
supply funds to or otherwise invest in the debtor or otherwise
to assure the creditor against loss) in connection with any
Debt or indebtedness, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
(d) Loans and Investments. Lend or advance money, credit or
property to any Person or invest (by capital contribution or
otherwise) in any Person, or purchase or repurchase of the
stock or indebtedness or all or a substantial part of the
assets or properties of any Person, or agree to do any of the
foregoing, except for:
(i) direct obligations of, or obligations the principal
of and interest on which are unconditionally
guaranteed by, the United States of America and which
mature within one year from the date of acquisition
thereof;
(ii) investments in commercial paper of any corporation
with a maturity not in excess of thirty days from the
date of acquisition thereof and rated P-1 or better
by Xxxxx'x Investors services Inc., or A-1 or better
by Standard & Poor's Corporation;
(iii) investments in certificates of deposit with a
maturity not in excess of ninety days from the date
of acquisition thereof, issued by any commercial bank
organized and existing under the laws of the United
States of America or
28
under any state of the United States of America and
having a combined capital and undivided surplus of
not less than $100,000,000, provided, however, that
certificates of deposit at any one bank shall at no
time exceed ten percent (10%) of the undivided
capital and surplus of such bank;
(iv) accounts receivable owing to the Borrower, if created
or acquired in the ordinary course of business in
connection with the sale by the Borrower of inventory
and payable or dischargeable in accordance with
customary trade terms; commission advances and other
advances to officers and employees for travel and
other business-related expenses, each in the ordinary
course of business; and
(v) Loans and advances in each instance in an amount of
not more than $10,000 and in the aggregate with
respect to such loans and advances in an amount of
not more than $100,000.
(e) Mergers, Etc. Merge or consolidate with any Person in a
transaction after which the holders of voting shares of
Borrower (or of any class of voting shares of Borrower)
immediately prior to such transaction fail to own at least a
majority of the voting shares of the surviving entity (or of
the shares of such class of voting shares of the surviving
entity) following such transaction.
(f) Sales, Etc. of Assets. Sell, assign, lease or otherwise
dispose of (whether in one transaction or in a series of
transactions) substantially all of its assets (whether now
owned or hereafter acquired), or of substantially all of the
assets of any direct or indirect subsidiary of Borrower, to an
unaffiliated Person.
29
(g) Change in Board Control. Enter into a transaction after which
the members of the board of directors of Borrower immediately
prior to such transaction fail to constitute at least a
majority of the board of directors of the surviving entity
following such transaction.
(h) Change in Nature of Business. Make any material change in the
nature of the business of the Borrower, taken as a whole, as
carried on at the date hereof.
(i) Purchase of Securities. Purchase, acquire, redeem or retire,
or make any commitment to purchase, acquire, redeem or retire,
any of its capital stock, whether now or hereafter
outstanding.
(j) Issuance of Securities. Issue any stock or other securities in
addition to, in substitution for or in respect of its
currently outstanding capital stock, or raise capital or funds
from the capital markets in consideration for the present or
future issuance of any form of securities of the Borrower.
(k) Prohibited Transfers. Transfer, in any manner, either directly
or indirectly, any cash, property, or other assets to any
parent or any of its affiliates or subsidiaries, other than
sales made in the ordinary course of business and for fair
consideration on terms no less favorable than if such sale had
been an arms-length transaction between the Borrower and an
unaffiliated entity.
(l) Charter Amendments. Amend its articles or certificate of
incorporation without the prior written consent of Lender.
30
SECTION 6.03. Financial Covenants. So long as the Note shall remain
unpaid, the Borrower will not fail, without the prior written consent of the
Lender, to comply with the financial covenants set forth in Schedule B.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) The Borrower shall, unless the Lender otherwise consents in
writing, fail to pay any installment of principal of, or
interest on, the Note within ten (10) days after such payment
is due; or
(b) Any representation or warranty made by the Borrower (or any of
its officers) under or in connection with any Loan Document or
any other document delivered in connection therewith shall
prove to have been incorrect in any material respect when
made; or
(c) The Borrower shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document, or in
any other document delivered in connection therewith, on its
part to be performed or observed and, in the case of a term,
covenant or agreement other than one requiring payment of
funds to Lender, any such failure shall remain unremedied for
thirty (30) days after written notice thereof shall have been
given to such Borrower by the Lender; provided, however, that
if by the end of such thirty day period the Borrower has
substantially cured the applicable failure, and such failure
has not caused, and is not expected to immediately cause, a
material
31
adverse effect on the Borrower or its subsidiaries, the
Borrower shall have an additional thirty (30) days to remedy
the failure; or
(d) The Borrower shall:
(i) fail to pay any Debt of such Borrower to the Lender
(excluding Debt evidenced by the Note), or any
interest or premium thereon, when due (whether by
scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if
any, specified in the agreement or instrument
relating to such Debt, or
(ii) fail to pay any other Debt in excess of $250,000.00
(excluding Debt owed to the Lender) of such Borrower,
or any interest or premium thereon, when due (whether
by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if
any, specified in the agreement or instrument
relating to such Debt, or
(iii) fail to perform or observe any term, covenant or
condition on its part to be performed or observed
under any agreement or instrument relating to any
Debt, when required to be performed or observed, and
such failure shall continue after the applicable
grace period, if any, specified in such agreement or
instrument, if the effect of such failure to perform
or observe is to accelerate (or, in the case of Debt
owed to Lender, is to entitle Lender to accelerate)
the maturity of such Debt; or any such Debt shall be
declared to
32
be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment)
prior to the stated maturity thereof; or
(e) The Borrower shall admit in writing its inability to pay its
debts, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against
the Borrower seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, or
composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors,
or seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its
property, which proceeding is not dismissed within thirty (30)
days after being instituted; or the Borrower shall take any
corporate action to authorize any of the actions set forth
above in this subsection (f); or
(f) A non-appealable final judgment or order for the payment of
money shall be rendered against the Borrower to the extent to
which such judgment or order exceeds $250,000.00 (or, in the
case of insurance coverage for such payment, exceeds such
insurance payment by $250,000.00); or
(g) Any provision of any Loan Document after delivery thereof
shall for any reason cease to be valid and binding on the
Borrower which is a party thereto, or the Borrower shall so
state in writing; or
(h) Any material adverse change in the financial condition or
business operations of the Borrower shall occur and be
continuing; provided, however, that in no event shall the lack
of Borrower's working capital constitute such a material
adverse change; or
(i) The dissolution or liquidation of the Borrower; or
33
(j) The occurrence of an Acquisition Transaction; or
(k) A Take-Over Attempt.
SECTION 7.02. Remedies Upon Default. Upon the occurrence of an Event of
Default, the Lender may, at its option, either separately or cumulatively:
(a) declare the Note, all interest thereon and all other amounts
payable under this Agreement to be forthwith due and payable,
whereupon the Note, all such interest and all such amounts
shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower;
(b) convert the Note into common stock as provided in the Note and
this Agreement;
(c) exercise any or all of its rights or remedies permitted by
applicable law of a secured party under the Security Agreement
or the Patent Security Agreement;
(d) if such Event of Default occurs prior to the Termination Date,
notify the Borrower in writing of the termination of the
making of Advances under Section 2.02, upon which notification
the Borrower shall no longer be entitled to Advances under the
Note; and
(e) exercise any or all of its rights or remedies permitted by
applicable law in any capacity under the Loan Documents or
applicable law.
ARTICLE VII
INDEMNIFICATION AND LIMITATION ON LIABILITY OF LENDER
SECTION 8.01. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses in connection with the preparation, execution,
delivery, filing, and recording of the Loan Documents, and the other documents
to be delivered under the Loan
34
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of legal counsel for the Lender and fees and out-of-pocket expenses of
Lender's advisors with respect thereto, and all costs and expenses, if any,
including, without limitation, the reasonable fees and out-of-pocket expenses of
legal counsel for the Lender, in connection with the enforcement of the Loan
Documents and the other documents to be delivered under the Loan Documents, the
filing or recording of financing statements and other documents (including all
taxes in connection therewith) in public offices, the payment or discharge of
any taxes, insurance premiums or encumbrances, or in defending or prosecuting
any actions or proceedings arising out of or related to this Agreement or any
other Loan Document or any obligations of Borrower to the Lender and the amount
of all claims in connection therewith. In addition, the Borrower shall pay any
and all documentary or similar taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of the
Loan Documents and the other documents to be delivered under the Loan Documents,
in connection with the making of Advances and in connection with the conversion
of the Note into common stock of the Borrower and the registration of such stock
under the securities laws, and agrees to save the Lender harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
SECTION 8.02. General Indemnification. Except as otherwise provided in
the Registration Rights Agreement, Borrower hereby agrees to defend the Lender
and its officers, directors, agents, employees, and counsel from, and hold each
of them harmless against, any and all losses, liabilities, claims, damages,
interests, judgments, costs and expenses incurred by any of them, including
without limitation reasonable attorneys fees and disbursements, arising out of
or in connection with the making, administration, or enforcement of the Loan or
the execution of this
35
Agreement or any other Loan Document, other than as such may be caused by
Lender's or such other Person's willful misconduct. All obligations provided for
in this Section 8.02 shall survive any termination of this Agreement and any
other Loan Document.
SECTION 8.03. Environmental Indemnification.
(a) Borrower hereby agrees to defend the Lender and its officers,
directors, agents, employees, and counsel from, and hold each
of them harmless against, any and all losses, liabilities,
claims, damages, interests, judgments, costs (including
without limitation cleanup costs) and expenses incurred by any
of them, including without limitation reasonable attorneys
fees and disbursements, arising out of or in connection with
(i) the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission, discharging or release from,
any real property owned or leased by the Borrower of any
Hazardous Materials caused by, or within the control of, the
Borrower or claims asserted or arising under any Environmental
Laws, which may require the remediation of such Hazardous
Materials by the Borrower or the Lender or any successors or
assigns thereof, or (ii) any representation or warranty by the
Borrower contained in Section 5.01(k) being false or untrue in
any material respect.
(b) If the Borrower receives any written notice of (i) a Hazardous
Discharge affecting the Borrower or its real properties or
(ii) an Environmental Complaint from any Person, including,
without limitation, the United States Environmental Protection
Agency or any agency, department or authority of the State of
Florida, then the Borrower will give, within ten (10) Business
Days, oral and written notice of same to the Lender.
36
(c) Without limitation of its rights under this Agreement, the
Lender shall have the right, but not the obligation after
providing written notice to Borrower and a reasonable
opportunity for Borrower to respond, to enter onto any of
Borrower's real properties or in the event Borrower fails to
act or respond, to take such other reasonable actions as it
deems reasonably necessary or advisable to cleanup, remove,
resolve or minimize the impact of, or otherwise comply with
Environmental Laws, or participate in such actions, in
coordination with Borrower for so long as no Event of Default
exists, with respect to any such Hazardous Discharge or
Environmental Complaint upon its receipt of any formal written
notice from any Person, including, without limitation, the
United States Environmental Protection Agency, asserting the
existence of any Hazardous Discharge or Environmental
Complaint on or pertaining to any of the Borrower's real
properties which, if true, could reasonably be expected to
result in an order, suit or other action against the Borrower
affecting any part of its real properties by any governmental
agency or otherwise and which could reasonably be expected to
have a material adverse effect on Borrower's operations or
financial condition. All reasonable costs and expenses
incurred by the Lender in the exercise of any such rights
herein shall be payable by the Borrower upon demand, together
with interest thereon at a rate equal to the interest rate
payable under the Note.
(d) The indemnity obligations of the Borrower under this Section
8.03 shall survive payment of the Note.
SECTION 8.04. Limitation on Liability of Lender. The Borrower hereby
waives any claim or defense arising out of or in any way related to the Loan
based upon the occurrence of any
37
action or inaction of Lender on or prior to the Closing Date which Borrower
believes may (i) be actionable against Lender, or (ii) give rise to a defense to
payment hereunder or under the Note for any reason, including without
limitation, commission of a tort or violation of any contractual duty or duty
implied at law. Lender shall not be responsible for any lost profits of Borrower
arising from any breach of contract, tort or any other wrong arising from the
establishment, administration or collection of the Loan.
38
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision
of any Loan Document, this Agreement or the Note, nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed certified, return receipt requested, or telegraphed or delivered, if
to the Borrower, at its address at 0000 Xxxxxxxx Xxx Xxxxx, 00xx Xxxxx, Xxxxx,
XX 00000, Attention: President; if to the Lender, at its address at Xxxxxxx
Xxxxxxx, c/o Xxxxxx X. Xxxxxxx, P.C., 000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, with a copy to Xxxxxx X. Xxxxxxx, Esq. at such address,
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties.
SECTION 9.03. No Waiver; Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under any Loan Document preclude any other or further exercise thereof or
the exercise of any other right. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Accounting Terms. Except as otherwise stated herein, all
accounting terms not specifically defined herein or in any schedule or exhibit
hereto shall be construed in accordance with generally accepted accounting
principles, applied on a consistent basis
39
with those of the period ended December 31, 1998, modified to reflect those
changes in generally accepted accounting principles as may be mutually accepted
by Lender and Borrower for the purposes of this Agreement.
SECTION 9.05. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Lender is hereby authorized at any time
and from time to time, without notice to the Borrower (any such notice being
expressly waived by the Borrower), to set-off and apply any and all indebtedness
at any time owing by the Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement and the Note, irrespective of whether or not the
Lender shall have made any demand under this Agreement or the Note. The Lender
agrees promptly to notify the Borrower after any such set-off and application
made by the Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Lender
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Lender may have.
SECTION 9.06. Binding Effect; Governing Law. This Agreement shall
become effective when it shall have been executed by the Borrower and the Lender
and shall be binding upon and inure to the benefit of the Borrower, the Lender
and their respective successors and assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Lender. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of
Connecticut.
SECTION 9.07. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which
40
when so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement.
SECTION 9.08. Partial Invalidity. If any provision of this Agreement is
held to be invalid or unenforceable, such invalidity or unenforceability shall
not invalidate this Agreement as a whole but this Agreement shall be construed
as though it did not contain the particular provision or provisions held to be
invalid or unenforceable and the rights and obligations of the parties shall be
construed and enforced only to such extent as shall be permitted by law.
SECTION 9.09. Conflicts. In the event that any provision of this
Agreement conflicts with any of the Loan Documents delivered in connection with
the transaction contemplated herein, the terms of this Agreement shall control,
notwithstanding any such conflicts.
SECTION 9.10. Survival. The representations and warranties contained
herein shall survive the execution of this Agreement by the parties herein.
SECTION 9.11. WAIVER OF RIGHTS. BORROWER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION. BORROWER
HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL VALUATION,
APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS, NOW IN
FORCE OR WHICH MAY HEREAFTER BECOME LAW.
SECTION 9.12. SUBMISSION TO JURISDICTION; WAIVER OF BOND. THE BORROWER
HEREBY CONSENTS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT
LOCATED WITHIN THE STATE OF CONNECTICUT OR FLORIDA AND WAIVES ANY OBJECTION
WHICH THE BORROWER MAY
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HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS, TO THE CONDUCT OF ANY
PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR
MESSENGER DIRECTED TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 9.02 ABOVE
AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF
ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO THE
BORROWER'S ADDRESS. THE BORROWER WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH, MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE LENDER. NOTHING
CONTAINED IN THIS SECTION AFFECTS THE RIGHT OF THE LENDER TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECTS THE RIGHT OF THE LENDER TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR BORROWER'S PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION.
SECTION 9.13. WAIVER OF JURY TRIAL. THE BORROWER WAIVES, TO THE EXTENT
PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY WHICH BORROWER MAY HAVE IN ANY
PROCEEDING BETWEEN LENDER AND BORROWER.
SECTION 9.14. WAIVER OF PLAINTIFF'S RIGHTS. THE BORROWER HEREBY AGREES
NOT TO COMMENCE ANY LEGAL PROCEEDING AGAINST THE LENDER IN THE JURISDICTION OF
ANY LOCAL, OR FEDERAL
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COURT LOCATED WITHIN THE STATE OF FLORIDA UNLESS THE LENDER EXPRESSLY
CONSENTS THERETO IN WRITING.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above given.
KOS PHARMACEUTICALS, INC.
By: /s/Xxxxxx X. Xxxx
-------------------------------
Name: Xxxxxx X. Xxxx
Title: President and Chief Executive
Officer
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
XXXXXXX XXXXXXX
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On the ______ day of September, 1999, before me came Xxxxxx X. Xxxx, to
me known, who, being by me duly sworn, did depose and say that he resides at
No.______________________________________________________________; that he is
the President of Kos Pharmaceuticals, Inc., the corporation described in and
which executed, the foregoing instrument; that the foregoing instrument was
executed without corporate seal by order of the Board of Directors of said
corporation; that he signed his name thereto by like order.
------------------------------
Notary Public
My commission expires:
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On the ____ day of September, 1999, before me came Xxxxxxx Xxxxxxx, to
me known to be the individual described in, and who executed the foregoing
instrument, and acknowledged that he executed the same.
----------------------------
Notary Public
My Commission expires:
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LIST OF SCHEDULES AND EXHIBITS
------------------------------
SCHEDULES
---------
A - LIST OF DEBTS AND LIENS
B - FINANCIAL COVENANTS
EXHIBITS
--------
I - NOTE
II - REQUEST NOTICE
III - CORPORATE RESOLUTIONS OF BORROWER
IV - OPINION LETTER OF BORROWER'S COUNSEL
V - CONVERSION NOTICE
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SCHEDULE A
EXISTING DEBTS AND LIENS
1. Debt under Master Equipment Lease No. E119 dated April 15, 1998 with
Essex Capital, Inc. (assigned to Gramercy Leasing Services, Inc.)
2. Debt under Equipment Lease Agreement with Vendor Lease Management Group
for lease of 238 Mobile Pro 750C H/PC, S1424-04A03
3. $3,000,000 Line of Credit dated July 17, 1999 with First Union National
Bank.
4. $30,000,000 Revolving Credit and Loan Agreement dated as of July 1,
1998 payable to Lender.
5. Leases with Copyco dated June 26, 1997, July 31, 1997, August 13, 1997,
September 30, 1997, December 10, 1997 and one undated lease for Toshiba
office equipment and LAN software equipment subsequently assigned to
AT&T Capital Leasing.
6. Leases with Copyco dated March 17, 1998, March 23, 1998 and March 24,
1998 for Toshiba office equipment subsequently assigned to AT&T Capital
Leasing.
7. Lease with Danka dated June 10, 1996 for Canon office equipment.
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SCHEDULE B
FINANCIAL COVENANTS
1. So long as the Note shall remain unpaid, the Borrower will not, without
the prior written consent of the Lender:
(a) Operating Expenses. Incur operating expenses in any fiscal year
(exclusive of license fee payments) in excess of the following amounts
(determined on a cumulative basis):
------------------------------------ ---------------------------------
At end of
------------------------------------ ---------------------------------
------------------------------------ ---------------------------------
1st Quarter $ 25,000,000
------------------------------------ ---------------------------------
2nd Quarter $ 48,000,000
------------------------------------ ---------------------------------
3rd Quarter $ 72,000,000
------------------------------------ ---------------------------------
4th Quarter $ 95,000,000
------------------------------------ ---------------------------------
(b) Current Liabilities. Permit the total of accounts payable and accrued
expenses to exceed $12,000,000 for a continuous period of more than 30
days or to exceed $14,000,000 at any one time.
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EXHIBIT I
48
EXHIBIT II
REQUEST NOTICE
To: _________________________ (the "Lender")
the undersigned hereby certifies that it has been prepared consistent with the
terms, conditions and definitions of the Revolving Credit and Loan Agreement
between the Borrower and the Lender, dated September 1, l999 (the "Loan
Agreement").
The undersigned in his or her capacity as an officer of the Company further
certifies that:
l. The representations and warranties contained in Section 5.0l of the
Loan Agreement are correct on and as of the date hereof as though made on and as
of this date; and
2. No event has occurred and is continuing, or would result from the
Advance requested hereby, which constitutes an Event of Default (as defined in
the Loan Agreement) or would constitute an Event of Default but for the
requirement that notice be given or time elapse, or both;
3. There has not occurred any material adverse change in the business
or financial operations or condition of the Borrower or in its management;
4. There is no pending, or to the best of its knowledge, threatened
action or proceeding affecting the Borrower before any court, governmental
agency or arbitrator which is likely to have a materially adverse effect on the
financial condition or operations of the Borrower.
5. The Borrower hereby waives any claim or defense based upon the
occurrence of any action or inaction of Lender on or prior to the date hereof
which Borrower believes may (i) be actionable against Lender, or (ii) give rise
to a defense to payment under the Loan Agreement or the Note (as defined in the
Loan Agreement) for any reason, including without limitation, commission of a
tort or violation of any contractual duty or duty implied at law.
6. The above information is true and correct as of the date hereof.
Dated this_____day of_________,_________
-----------------------------------
By
Name:
Title:
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EXHIBIT V
CONVERSION NOTICE
To Kos Pharmaceuticals, Inc. [or any successor corporation]:
The undersigned owner of that certain Note dated September 1, 1999 in
the original principal amount of $50,000,000.00 made payable by Kos
Pharmaceuticals, Inc. (the "Company") to Xxxxxxx Xxxxxxx (the "Note") hereby
irrevocably exercises the option to convert the Note, or portion thereof (which
is $100,000 or an integral multiple thereof) below designated, into shares of
Common Stock of the Company in accordance with the terms of the Loan Agreement
referred to in the Note, effective as of the Conversion Date designated below,
and directs that the shares issuable and deliverable upon the conversion,
together with any check in payment for unpaid accrued interest and/or for
fractional shares and any note representing any unconverted principal amount
hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below.
Dated: ____________ ________________________________
---------------------------------
Signature
Conversion Date: _________________
Principal amount to be converted (in an integral multiple of $100,000, if less
than all): $______________
Unpaid accrued interest to be converted: $_____________
Principal amount of replacement Note, if any: $______________
Fill in for registration of shares of Common Stock and replacement Note (if
applicable) if to be issued otherwise than to the registered holder:
______________________________ Social Security or
(Name) Other Taxpayer
Identifying Number:
Address:
------------------------------- -------------------
-------------------------------
-------------------------------
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