Contract
Exhibit
4.2
THIS
INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY XXXXXXXX
XXXXXXX AND XXXXX XXXXXXX IN FAVOR OF XXXXX FARGO BANK, NATIONAL ASSOCIATION,
ACTING
THROUGH ITS XXXXX FARGO BUSINESS
CREDIT OPERATING
DIVISION,
DATED
NOVEMBER 7, 2007.
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No.
1
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$3,000,000
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Date:
November 7, 2007
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AND
INTERPHARM,
INC.
JUNIOR
SUBORDINATED SECURED 12% NOTE DUE 2010
THIS
NOTE
is a duly authorized and issued promissory note of INTERPHARM HOLDINGS INC.,
a
Delaware corporation (the “Company”),
and
INTERPHARM, INC., a New York corporation (“Interpharm”
and
together with the Company, the “Borrowers”)
designated as their Junior Subordinated Secured 12% Notes due 2010, in the
original aggregate principal amount of $3,000,000 (the “Note”).
FOR
VALUE
RECEIVED, the Borrowers, jointly and severally, promise to pay to the order
of
XXXXXXXX AND XXXXX XXXXXXX, as joint tenants with right of survivorship, or
their registered assigns (the “Holder”),
the
principal sum of three million ($3,000,000) dollars, on the Maturity Date (as
defined below), or such earlier date as the Notes are required or permitted
to
be repaid as provided hereunder, and to pay interest to the Holder on the then
outstanding principal amount of this Note in accordance with the provisions
hereof. Notwithstanding anything to the contrary contained herein, this Note
shall bear interest on the due and unpaid interest and outstanding principal
amount hereof from and after the occurrence and during the continuance of an
Event of Default at the rate (the “Default
Rate”)
equal
to eighteen percent (18%).
Interest
payable under this Note shall be computed on the basis of a year of 360 days
and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which interest is payable.
Payments
of principal and interest shall be made in lawful money of the United States
of
America to the Holder at its address as provided in Section 12
or by
wire transfer to such account specified from time to time by the Holder hereof
for such purpose as provided in Section 12.
1. Definitions.
In
addition to those terms defined above and elsewhere in this Note, for the
purposes of this Note, the following terms shall have the meanings here set
forth:
“Bankruptcy
Event”
means
any
of
the following events: (a) any Borrower commences a case or other proceeding
under any bankruptcy, reorganization, arrangement, adjustment of debt, relief
of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to such Borrower; (b) there is commenced against any
Borrower any such case or proceeding that is not dismissed within 60 days after
commencement; (c) any Borrower is adjudicated insolvent or bankrupt or any
order
of relief or other order approving any such case or proceeding is entered;
(d)
any Borrower suffers any appointment of any custodian or the like for it or
any
substantial part of its property that is not discharged or stayed within 60
days; (e) any Borrower makes a general assignment for the benefit of creditors;
(f) any Borrower fails to pay, or states that it is unable to pay or is unable
to pay, its debts generally as they become due; (g) any Borrower calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) any Borrower, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of effecting
any of the foregoing.
“Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
the City of New York are authorized or required by law to remain
closed.
“Change
of Control”
will
be
deemed to exist if (i) there occurs any consolidation, merger or other business
combination of any Borrower with or into any other corporation or other entity
or person (whether or not such Borrower is the surviving corporation), or any
other corporate reorganization or transaction or series of related transactions
in which in any of such events the voting stockholders of such Borrower prior
to
such event cease to own fifty percent (50%) or more of the voting power, or
corresponding voting equity interests, of the surviving corporation after such
event (including without limitation: (x) any “going private” transaction under
Rule 13e-3 promulgated pursuant to the Exchange Act or (y) any tender offer
by
the Company under Rule 13e-4 promulgated pursuant to the Exchange Act for twenty
percent (20%) or more of the Company's Common Stock), (ii) any person (as
defined in Section 13(d) of the Exchange Act), other than the Xxxxxxx Parties
(as defined below), together with their affiliates and associates (as such
terms
are defined in Rule 405 under the Securities Act), beneficially owns or is
deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise period) in excess of fifty percent (50%)
of the Company’s voting power, (iii) there is a replacement of more than
one-half of the members of the Company’s Board of Directors which is not
approved by those individuals who are members of the Company’s Board of
Directors on the date thereof, (iv) in one or a series of related transactions,
there is a sale or transfer of all or substantially all of the assets of the
Company, determined on a consolidated basis, or (v) any Borrower enters into
any
agreement providing for an event set forth in (i), (ii), (iii) or (iv)
above.
“Collateral
Agent”
means
Xxxxxxx Family Realty, LLC, a New York limited liability company, and its
successors and assigns.
“Common
Stock”
means
the common stock, par value $0.01 per share, of the Company.
2
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Lien”
means
any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.
“Maturity
Date” means
November 7, 2010.
“Original
Issue Date”
means
the date of the first issuance of the Note, regardless of the number of
transfers of the Note.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Security
Agreement”
means
the Security Agreement, dated as of the date hereof, made by each of the
Borrowers in favor of the Collateral Agent, as amended or supplemented from
time
to time in accordance with its terms.
“Security
Documents”
means
the Security Agreement, and all other security agreements, pledge agreements,
collateral assignments, mortgages, collateral agency agreements, control
agreements, deeds of trusts or other grants or transfers for security executed
by any Borrower creating (or purporting to create) a Lien upon property in
favor
of the Collateral Agent, in each case, as amended, modified, renewed, restated
or replaced, in whole or in part, from time to time, in accordance with its
terms.
“Senior
Credit Agreement”
means
the Credit and Security Agreement, dated as of February 9, 2006, by and between
Interpharm, Inc. and Xxxxx Fargo Bank, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreement may be amended, restated,
supplemented, refinanced, replaced, refunded or otherwise modified from time
to
time, whether by the same lender or any other lender or group of
lenders.
“Subsidiary”
means
any Person in which the Company or Interpharm, directly or indirectly, owns
capital stock or holds an equity or similar interest.
“Xxxxxxx
Parties”
means
P&K Holdings I, LLC, a New York limited liability company, Rajs Holdings I,
LLC, a New York limited liability company, Rametra Holdings I, LLC, a New York
limited liability company, Xxxxxxxx X. Xxxxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxxxx,
Xxx Xxxxxxx and Xxxx Xxxxxxx.
“Trading
Day”
means
(a) any day on which the Common Stock is listed or quoted and traded on its
primary Trading Market, (b) if the Common Stock is not then listed or
quoted and traded on any Eligible Market, then any day on which trading occurs
on the NASDAQ Global Market (or any successor thereto), or (c) if trading
ceases to occur on the NASDAQ Global Market (or any successor thereto), any
Business Day.
“Trading
Market”
means
the American Stock Exchange or any other Eligible Market, or any other national
securities exchange, market or trading or quotation facility on which the Common
Stock is then listed or quoted.
3
“Transaction
Documents”
means
this Note, the Security Documents and any other agreement, document or
instrument entered into or delivered, now or in the future, by any of the
Borrowers in connection with this Note or any of the other Transaction
Documents.
“Triggering
Event”
means
any of the following events: (a) any
of
the
Borrowers defaults in the timely performance of any other obligation under
the
Transaction Documents and such default continues uncured for a period of 10
calendar days after the date on which notice of such default is first given
to
such Borrower by the Holder (it being understood that no prior notice need
be
given in the case of a default that cannot reasonably be cured within such
10
days); or (b) the Company has not received an additional $5,000,000 investment
by November 30, 2007.
2. Payment
of Principal and Interest.
(a) Interest.
The
Company shall pay interest to the Holder on the aggregate then outstanding
principal amount of this Note at a rate equal to 12% per annum, payable
quarterly in arrears on each March 31, June 30, September 30 and December 31,
except if such date is not a Trading Day, in which case such interest shall
be
payable on the next succeeding Trading Day (each, an “Interest
Payment Date”).
The
first Interest Payment Date shall be December 31, 2007.
(b) Principal
Payment at Maturity.
The
Company shall pay the outstanding principal balance of this Note to the Holder
on the Maturity Date, together with any accrued and unpaid
interest.
(c) Post-Maturity
Interest.
In the
event the Company can not pay the outstanding principal of this Note due and
owing to the Holder on the Maturity Date, the Company shall continue to pay
interest to the Holder on the aggregate then outstanding principal amount of
this Note pursuant to the terms of Section
2(a)
herein
until such time as the aggregate principal amount has been paid to the Holders.
(d) Cash
or PIK Notes.
(i) Subject
to the conditions and limitations set forth below, from the Original Issue
Date
to a date twelve (12) months therefrom, the Company may pay interest on this
Note, at its option, (x) in cash or (y) by the Borrowers issuing an additional
Note with a principal amount equal to the interest then due and payable (a
“PIK
Note”).
(ii) Subject
to the conditions and limitations set forth below, from the date twelve (12)
months from the Original Issue Date through the Maturity Date, unless the Holder
otherwise consents, eight (8%) percent of the interest payment due shall be
paid
in cash, with the remaining four (4%) percent of the interest payment due paid
in (x) PIK Notes and/or (y) in cash, at the Company’s option.
4
(e) Prepayment.
Upon at
least thirty (30) days prior written notice to the Holder (which notice shall
indicate the date on which the prepayment will be made and the amount of such
prepayment), the Borrowers shall have the right to prepay, in whole or in part,
the Note, plus, in each case all accrued and unpaid interest (which for such
purpose shall be payable in cash only), if any, thereon to the date of such
prepayment, and plus, all other amounts, costs, expenses and liquidated damages
due hereunder (the “Prepayment
Price”).
3. Ranking
and Covenants.
(a) Except
pursuant to the Senior Credit Agreement and except additional indebtedness
of
$5,000,000 in initial principal amount to be funded by November 30, 2007 (the
“Existing
Indebtedness”)
and
all indebtedness of the Company, now or in the future, which by their terms
rank
senior to this Note, no indebtedness of any of the Borrowers is senior to this
Note in right of payment, whether with respect to interest, damages or upon
liquidation or dissolution or otherwise. Other than the Existing Indebtedness
and any renewal, refinancing or replacement thereof that does not exceed the
aggregate amount of the borrowing availability under the Senior Credit Agreement
as it exists on the date hereof, the Borrowers will not, and will not permit
any
Subsidiary to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, that is senior in any respect
to
the Borrowers’ obligations under the Notes, and the Borrowers will not, and will
not permit any Subsidiary to, directly or indirectly, incur any Lien on or
with
respect to any of its property or assets now owned or hereafter acquired or
any
interest therein or any income or profits therefrom.
4. Registration
of Notes.
The
Borrowers shall register the Notes upon records to be maintained by the
Borrowers for that purpose (the “Note
Register”)
in the
name of each record holder thereof from time to time. The Borrowers may deem
and
treat the registered Holder of this Note as the absolute owner hereof for the
purpose of any conversion hereof or any payment of interest or principal hereon,
and for all other purposes, absent actual notice to the contrary.
5. Registration
of Transfers and Exchanges.
The
Borrowers shall register the transfer of any portion of this Note in the Note
Register upon surrender of this Note to the Borrowers at their address for
notice set forth herein. Upon any such registration or transfer, a new Note,
in
substantially the form of this Note (any such new Note, a “New
Note”),
evidencing the portion of this Note so transferred shall be issued to the
transferee and a New Note evidencing the remaining portion of this Note not
so
transferred, if any, shall be issued to the transferring Holder. The acceptance
of the New Note by the transferee thereof shall be deemed the acceptance by
such
transferee of all of the rights and obligations of a holder of a Note. This
Note
is exchangeable for an equal aggregate principal amount of Notes of different
authorized denominations, as requested by the Holder surrendering the same.
No
service charge or other fee will be imposed in connection with any such
registration of transfer or exchange.
6. Intentionally
Omitted.
7. Intentionally
Omitted.
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8. Events
of Default.
(a) “Event
of Default”
means
any one of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of
any
administrative or governmental body), which remains uncured, to the extent
curable, for a period of ten (10) days following receipt by the Borrowers of
written notice from Xxxxx Xxxxxxx:
(i) any
default in the payment of principal, interest or liquidated damages in respect
of the Note, as and when the same becomes due and payable (whether on a date
specified for the payment of interest or the date on which the obligations
under
the Note mature or by acceleration, redemption, prepayment or
otherwise);
(ii) any
of
the Borrowers or any Subsidiary defaults in any of its obligations under any
other note or any mortgage, credit agreement (including the Senior Credit
Agreement) or other facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be secured
or
evidenced, any indebtedness for borrowed money or money due under any long
term
leasing or factoring arrangement of any Borrower or any Subsidiary and such
default results in an acceleration of indebtedness in an amount exceeding
$1,000,000, whether such indebtedness now exists or is hereafter created, and
such default results in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable;
(iii) a
material breach by any Borrower of its covenants, representations or warranties
hereunder, in any Transaction Document;
(iv) any
material provision hereof or any Transaction Document shall for any reason
cease
to be valid, binding and enforceable with respect to any party hereto or thereto
(other than the Holder) in accordance with its terms, or any such party
challenges the enforceability hereof or thereof, or shall assert in writing,
or
take any action or fail to take any action based on the assertion that any
provision hereof or any Transaction Document has ceased to be or is otherwise
not valid, binding or enforceable in accordance with its terms, or any security
interest provided for therein shall cease to be a valid and perfected security
interest in any of the collateral purported to be subject thereto;
or
(v) any
Borrower revokes or terminates or purports to revoke or terminate or fails
to
perform any of the terms, covenants, conditions provisions of any guarantee,
endorsement or other agreement of such party in favor of Collateral Agent or
the
Holder;
(vi) the
occurrence of a Bankruptcy Event; and
(vii) the
occurrence of a Triggering Event.
(b) At
any
time or times following the occurrence of an Event of Default, in addition
to
any other remedy available to the Holder hereunder or available under any
applicable law, the Holder shall have the option to elect, by notice to the
Borrowers (an “Event
Notice”),
to
require the Borrowers to repurchase all or any portion of the outstanding
principal amount of this Note, at a repurchase price equal to 115% of such
outstanding principal amount, plus all accrued but unpaid interest thereon
through the date of payment. The aggregate amount payable pursuant to the
preceding sentence is referred to as the “Event
Price.”
The
Borrowers shall pay the Event Price to the Holder no later than the third
Trading Day following the date of delivery of the Event Notice, and upon receipt
thereof the Holder shall deliver this Note so repurchased to the
Borrowers.
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(c) Upon
the
occurrence of any Bankruptcy Event, all amounts pursuant to Section
8(b)
shall
immediately become due and payable in full in cash, without any further action
by the Holder.
(d) In
connection with any Event of Default, the Holder need not provide and the
Borrowers hereby waive any presentment, demand, protest or other notice of
any
kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Any such declaration may be rescinded
and
annulled by the Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereto. The remedies under this Note or available under
applicable law shall be cumulative.
9. Intentionally
Omitted.
10. Intentionally
Omitted.
11. Intentionally
Omitted.
12. Notices.
Any and
all notices or other communications or deliveries hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the
facsimile number specified in this Section 12
prior to
6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day
after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section
12
on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt
by
the party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to any of the Borrowers, at 00 Xxxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx 00000, or (ii) if to the Holder, to the address or facsimile
number appearing on the Company’s Holders records or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section 12.
13. Miscellaneous.
(a) This
Note
shall be binding on and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. The Borrowers shall not be
permitted to assign this Note.
(b) Subject
to Section
13(a),
nothing
in this Note shall be construed to give to any person or corporation other
than
the Borrowers and the Holder any legal or equitable right, remedy or cause
under
this Note.
7
(c) Governing
Law; Venue; Waiver Of Jury Trial.
ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES
OF
CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING
IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE BORROWERS HEREBY WAIVES ALL RIGHTS TO A TRIAL BY
JURY.
(d) The
headings herein are for convenience only, do not constitute a part of this
Note
and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In
case
any one or more of the provisions of this Note shall be invalid or unenforceable
in any respect, the validity and enforceability of the remaining terms and
provisions of this Note shall not in any way be affected or impaired thereby
and
the parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and
upon
so agreeing, shall incorporate such substitute provision in this
Note.
(f) No
provision of this Note may be waived or amended except in a written instrument
signed, in the case of an amendment, by the Borrowers and the Holder or, or,
in
the case of a waiver, by the Holder. No waiver of any default with respect
to
any provision, condition or requirement of this Note shall be deemed to be
a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the Borrowers have caused this Note to be duly executed by
a
duly authorized officer as of the date first above indicated.
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