EXHIBIT 10.1
REVOLVING CREDIT AND LOAN AGREEMENT
DATED AS OF JULY 1, 1998
KOS PHARMACEUTICALS, INC., a Florida corporation (the "Borrower"), and
XXXXXXX XXXXXXX, an individual residing at Valley Road, Xxxxxx Point, South
Norwalk, Connecticut (the "Lender"), agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. ADVANCE TERMINATION DATE shall mean July 1, 1999, or such
other date to which the Advance Termination Date is extended pursuant to the
terms of this Agreement.
SECTION 1.02. ADVANCES shall mean the advances made under the Note and
pursuant to this Agreement.
SECTION 1.03. BUSINESS DAY shall mean any day other than a Saturday,
Sunday or other day on which the Borrower's business is closed.
SECTION 1.04. CHANGE IN CONTROL shall mean the occurrence of any of the
events described in subsections (e), (f), (g) and (h) of Section 5.02.
SECTION 1.05. CLOSING DATE shall mean the date on which the closing for
this Loan is held.
SECTION 1.06. CREDIT FACILITY shall mean the $30,000,000.00 revolving
credit facility made available by the Lender pursuant to the Note.
SECTION 1.07. 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 1.08. 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.
SECTION 1.09. ENVIRONMENTAL LAWS means and includes the comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act, the Superfund Amendments and
Reauthorization Act of 1986, as
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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 1.10. 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 1.11. EVENT OF DEFAULT shall mean an Event of Default under
Section 6.01.
SECTION 1.12. 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.
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SECTION 1.13. HAZARDOUS MATERIAL shall mean any pollutant, contaminant,
toxic substance, hazardous waste, hazardous material, hazardous substance,
petroleum or petroleum product, asbestos, polychlorinated biphenyles,
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, Compensation 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 1.14. LOAN shall mean the loan made pursuant to Section 2.01
and the Note.
SECTION 1.15. LOAN DOCUMENTS shall mean this Agreement and the Note,
each such document being referred to individually as a "Loan Document".
SECTION 1.16. MATURITY DATE shall mean December 31, 2000, or such other
date to which the Maturity Date is extended pursuant to the terms of this
Agreement.
SECTION 1.17. 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 1.18. PERMISSIBLE EQUIPMENT FINANCING INDEBTEDNESS shall mean
Debt incurred for equipment financing in the ordinary
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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 on
transaction.
SECTION 1.19. 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 $250,000.00 in the
aggregate for any one transaction. 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 1.20. 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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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
Thirty Million Dollars ($30,000,000.00) 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) Loan proceeds may be used by Borrower 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 for any reason exist, the Borrower shall repay to the Lender forthwith,
without notice or demand, such amount as shall be
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necessary to eliminate such excess.
(d) The Borrower shall give the Lender at least three (3) Business
Days' prior written or telegraphic notice of its request for an Advance. Each
such notice shall specify the date and the amount of the requested Advance and
shall be in the form attached hereto as Exhibit II (a "Request Notice"). 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.
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 Advance 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
exercise its rights and remedies under the Loan Documents upon the occurrence of
an Event of Default or otherwise, all of th 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.
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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 8.02 in immediately available funds. All
computations of interest under the Note shall be made by the Lender on the basis
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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) A certified copy of the resolutions of the board of
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directors of the Borrower approving this transaction in the form attached as
Exhibit II;
(c) 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 Document to which it is a party and the
other documents to be delivered by it hereunder;
(d) Copies of consents of third parties necessary for the consummation
of this transaction;
(e) A favorable opinion of counsel for the Borrower, in substantially
the form of Exhibit III and as to such other matters as the Lender may
reasonably request; and
(f) 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 Request
Notice and such approvals, opinions and documents as the Lender may reasonably
request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of 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 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
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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,
writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
(c) 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.
(d) 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)
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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.
(e) The consolidated balance sheet of the Borrower as of December 31,
1997, and the related consolidated statements of operations, shareholders'
equity and cash flows for the fiscal year then ended, reviewed by Xxxxxx
Xxxxxxxx & Co., 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 March 31, 1998 there has
been no material adverse change in such condition or operations.
(f) 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.
(g) 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.
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(h) 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 5.02(a) hereof.
(i) 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.
(j) 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.
(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
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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.
(k) 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 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.
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ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. 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
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Borrower.
(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, permit the Lender or any
agents or representatives thereof during normal business hours to examine and
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 no such actions by the Lender shall be taken in a manner that
would disrupt Borrower in the conduct of its business.
(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, shareholders' equity and cash flows for the
period
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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
financial officer of the Borrower, together with a certificate of such
chief financial 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 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 financial officer of the
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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 in the
senior management of the Borrower;
(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 4.01(f) hereof; and
(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); and
(vii) such other information respecting the condition or
operations, financial or otherwise, of the Borrower as the Lender may
from time to time reasonably request.
(h) ISSUANCE OF SECURITIES. In the event that Borrower shall 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
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Borrower, Borrower shall give Lender notice of such occurrence within thirty
(30) days after such occurrence.
SECTION 5.02. 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:
(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,
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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 and
Permissible Letter of Credit Indebtedness;
(iv) Unsecured Debt with repayment terms PARI PASSU with or
inferior to the Debt under the Loan Documents;
(v) Debt authorized under subsection 5.02(c); and
(vi) Trade credit not in excess of $250,000.00 owing to
suppliers incurred in the ordinary course of Borrower's business and
paid within ninety (90) days after invoicing.
(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.
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(d) LOANS AND INVESTMENTS. Lend or advance money, credit or property to
any Person in excess of $250,000.00, or invest more than $250,000.00 in (by
capital contribution or otherwise) any Person, or purchase or repurchase ten
percent (10%) or more 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 under any state of the United States of
America and having a combined capital and undivided surplus of not less
than $50,000,000, 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;
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(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;
(v) commission advances and other advances to officers and
employees for travel and other business-related expenses, each in the
ordinary course of business; and
(vi) (vi) investments in any Person, acquisitions of ten
percent (10%) or more of the stock in any Person, and purchases of all
or a substantial part of the assets or properties of any Person,
provided that any such investment, acquisitions and purchases do not
exceed $4,000,000.00 for any particular transaction and $10,000,000.00
in the aggregate during the term of this Loan.
(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
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direct or indirect subsidiary of Borrower, to an unaffiliated Person.
(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) 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.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
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(a) The Borrower shall 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
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 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 in excess of $250,000.00 (excluding
Debt evidenced by the Note) 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
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instrument relating to such Debt, or
(ii) 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 such 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 the
maturity of such Debt; or any such Debt shall be declared to 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 (e); or
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(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 due to the lack of
growth of the Borrower or due to its inability to achieve its projections for
the number of prescriptions written for the Borrower's Niaspan(r) product
constitute such a material adverse change; or
(i) The dissolution or liquidation of the Borrower.
SECTION 6.02. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default, the Lender may, at its option:
(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;
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(b) if such Event of Default occurs prior to the Advance 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
(c) 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 7.01. 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 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
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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 and in connection with
the making of Advances, 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 7.02. GENERAL INDEMNIFICATION. 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 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 7.02 shall survive any
termination of this Agreement and any other Loan Document.
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SECTION 7.03. 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, spilla 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 4.01(j) 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.
(c) Without limitation of its rights under this Agreement,
30
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 7.03
shall survive payment of the Note.
SECTION 7.04. LIMITATION ON LIABILITY OF LENDER. The
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Borrower hereby waives any claim or defense arising out of or in any way related
to the Loan based upon the occurrence of any 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.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. 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 8.02. 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
32
33131, 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 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 8.03. 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 8.04. ACCOUNTING TERMS. Except as otherwise stated herein, all
accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles, applied on a
consistent basis with those of the period ended December 31, 1997, 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 8.05. 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
33
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 8.06. 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 8.07. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
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SECTION 8.08. 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 8.09. 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 8.10. SURVIVAL. The representations and warranties contained
herein shall survive the execution of this Agreement by the parties herein.
SECTION 8.11. 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 8.12. 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 AND
35
WAIVES ANY OBJECTION WHICH THE BORROWER MAY 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 8.02 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 8.13. 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.
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. XXXXXXX
----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Administrative Officer
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/s/ XXXXXXX XXXXXXX
-------------------------------
XXXXXXX XXXXXXX
37
