LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the
undersigned Lender concerning loans and other credit
accommodations to be made by Lender to Borrower.
SECTION 1. PARTIES
-------
1.1 The "BORROWER" is the person, firm, corporation or
other entity, identified as the Borrower in Section 10.6(c) and
its successors and assigns. If more than one Borrower is
specified in Section 10.6(c), all references to Borrower shall
mean each of them, jointly and severally, individually and
collectively, and the successors and assigns of each. When
Borrower is used in this Agreement to refer to all of the
borrowers collectively, it is sometimes referred to as
"BORROWERS" for purposes of context and clarity.
1.2 The "LENDER" is THE CIT GROUP/CREDIT FINANCE, INC. and
its successors and assigns.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
-------------------------------------
2.1 Revolving Loans.
---------------
Lender shall, subject to the terms and conditions contained
herein, make revolving loans to each Borrower ("REVOLVING LOANS")
in amounts requested by such Borrower from time to time, but not
in excess of such Borrower's Net Availability existing
immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding
Obligations (as defined in Section 4.2 hereof) of all Borrowers
to exceed the Maximum Credit.
(a) The "MAXIMUM CREDIT" is set forth in Section 10.1(a)
hereof.
(b) The "GROSS AVAILABILITY" shall be calculated at any
time as to each Borrower as (i) the product obtained by
multiplying the outstanding amount of Eligible Accounts, net of
all taxes, discounts, allowances and credits given or claimed
with respect to such Borrower, by the Eligible Accounts
Percentage set forth in Section 10.1(b),
plus:
----
(ii) the product(s) obtained by multiplying the applicable
Eligible Inventory Percentage(s), if any, set forth in Section
10.1(b) by the values (as determined by Lender based on the lower
of cost or market) of Eligible Inventory of such Borrower, but
the aggregate amount for all Borrowers when added together shall
not exceed any sublimits set forth in Section 10.1(c),
(c) The "NET AVAILABILITY" shall be calculated at any time
as to each Borrower as an amount equal to the Gross Availability
of such Borrower minus the aggregate amount of all then-
outstanding Obligations of such Borrower to Lender other than the
then-outstanding principal balance of the Term Loans attributable
to such Borrower, if any. The principal amount of Revolving
Loans which Lender makes to a single Borrower at any given time
shall not, except at the sole discretion of Lender, exceed the
Net Availability of such Borrower.
(d) "ELIGIBLE ACCOUNTS" are accounts created by a Borrower
in the ordinary course of its business which are and remain
acceptable to Lender for lending purposes. General criteria for
Eligible Accounts are set forth below but may be revised from
time to time by Lender, in its sole judgment, on fifteen (15)
days' prior written notice to Borrower. Lender shall, in general,
deem accounts to be Eligible Accounts if: (1) such accounts arise
from bona fide completed transactions and have not remained
unpaid for more than the number of days after the invoice date
set forth in Section 10.1(d); (2) the amounts of the accounts
reported to Lender are absolutely owing to Borrower and do not
arise from sales on consignment, guaranteed sale or other terms
under which payment by the account debtors may be conditional or
contingent (other than the chargebacks and rebates (the
"Chargebacks") given or allowed by Borrower to its customers in
connection with its sales of Deconamine, Carmol and other
pharmaceutical products); (3) the account debtor's chief
executive office or principal place of business is located in the
United States, or if the account debtor's chief executive office
or principal place of business is located outside the United
States, such accounts are insured by credit insurance or secured
by a letter of credit issued or confirmed by a domestic bank, in
each case acceptable to Lender; (4) such accounts do not arise
from progress xxxxxxxx retainages or xxxx and hold sales; (5)
there are no contra relationships, setoffs, counterclaims or
disputes existing with respect thereto and there are no other
facts existing or threatened which would impair or delay the
collectibility of all or any portion thereof other than the
Chargebacks; (6) the goods giving rise thereto were not at the
time of the sale subject to any liens except those permitted in
this Agreement; (7) such accounts are not accounts with respect
to which the account debtor or any officer or employee thereof is
an officer, employee or agent of or is affiliated with Borrower,
directly or indirectly, whether by virtue of family membership,
ownership, control, management or otherwise; (8) such accounts
are not accounts with respect to which the account debtor is the
United States or any State or political subdivision thereof or
any department, agency or instrumentality of the United States,
any State or political subdivision, unless there has been
compliance with the Assignment of Claims Act or any similar State
or local law, if applicable; (9) Borrower has delivered to Lender
or Lender's representative such documents as Lender may have
requested pursuant to Section 5.8 hereof in connection with such
accounts and Lender shall have received a verification of such
account, satisfactory to it, if sent to the account debtor or any
other obligor or any bailee pursuant to Section 5.4 hereof; (10)
there are no facts existing or threatened which might result in
any material adverse change in the account debtor's financial
condition; (11) such accounts owed by a single account debtor or
its affiliates do not represent more than twenty (20%) percent of
all otherwise Eligible Accounts (accounts excluded from Eligible
Accounts solely by reason of this subsection (11) shall
nevertheless be considered Eligible Accounts to the extent of the
amount of such accounts which does not exceed twenty (20%)
percent of all otherwise Eligible Accounts); (12) such accounts
are not owed by an account debtor who is or whose affiliates are
past due upon other accounts owed to Borrower comprising more
than twenty-five (25%) percent of the accounts of such account
debtor or its affiliates owed to Borrower; (13) such accounts are
owed by account debtors whose total indebtedness to Borrower does
not exceed the amount of any customer credit limits as
established, and changed, from time to time by Lender on notice
to Borrower (accounts excluded from Eligible Accounts solely by
reason of this subsection (13) shall nevertheless be considered
Eligible Accounts to the extent the amount of such accounts does
not exceed such customer credit limit); and (14) such accounts
are owed by account debtors deemed creditworthy at all times by
Lender.
(e) "ELIGIBLE INVENTORY" is inventory owned by a Borrower
which is and remains acceptable to Lender for lending purposes
and is located at one of the addresses set forth in Section
10.6(e). Eligible Inventory shall not include (i) inventory
consisting of work-in-process, samples, sales literature,
promotion items, and slow moving or obsolete inventory, (ii)
inventory not manufactured in compliance with all applicable Good
Manufacturing Standards ("CGMP Standards"), (iii) inventory in
the possession of a bailee, consignee or processor or located at
a location leased by Borrower, unless such bailee, consignee,
processor or landlord, as applicable, delivers to Lender an
agreement in form and substance satisfactory to Lender, together
with such Uniform Commercial Code financing statements as Lender
shall require, and (iv) inventory located at a location owned by
Borrower which is subject to a mortgage in favor of any person
other than Lender, unless such person delivers to Lender an
agreement in form and substance satisfactory to Lender.
(f) Lender shall have a continuing right to deduct reserves
in determining the Gross Availability ("RESERVES"), and to
increase and decrease such Reserves from time to time, if and to
the extent that, in Lender's sole judgement, such Reserves are
necessary to protect Lender against any state of facts which
does, or would, with notice or passage of time or both,
constitute an Event of Default or have an adverse effect on any
Collateral, including but not limited to the right to adjust the
Reserves and/or the Eligible Accounts Percentage to levels
acceptable to Lender if Lender determines in its sole discretion
that such adjustments are necessary due to, among other things, a
change in either (i) the customers of Borrower that are buying
pharmaceuticals subject to Chargebacks, or (ii) the potential
dilution of all of Borrowers' accounts due to Chargebacks. Lender
may, at its option, implement Reserves by designating as
ineligible a sufficient amount of accounts or inventory which
would otherwise be Eligible Accounts or Eligible Inventory so as
to reduce Gross Availability by the amount of the intended
Reserve.
(g) Subject to the terms and conditions hereof,
including but not limited to the existence of sufficient Gross
and Net Availability, Borrowers agree to borrow sufficient
amounts from time to time so that the average annual outstanding
principal balance of the Revolving Loans and the Term Loan, if
any ("AVERAGE ANNUAL LOAN BALANCE"), shall equal or exceed the
principal amounts set forth below and in Section 10.1(e) as the
Minimum Borrowing. Borrower will maintain Gross Availability or
Net Availability in amounts sufficient to permit Borrower to
comply with the Minimum Borrowing requirement. In the event
Borrower does not borrow sufficient amounts to meet or exceed the
Minimum Borrowing requirement, or in the event Borrower fails to
maintain Gross and Net Availability at all times at amounts
sufficient to permit Borrower to comply with the Minimum
Borrowing requirement, then, in either of such event(s):
(i) During the first Loan Year of this Agreement,
if the Average Annual Loan Balance is below $750,000,
Borrower shall pay and Lender shall receive
compensation equal to the amount by which $750,000
exceeds the Average Annual Loan Balance, multiplied by
the applicable Interest Rate specified in Section
10.4(a) of this Agreement (averaged over the course of
the first Loan Year), payable at the first anniversary
of the Closing Date (as defined in Section 2.5 hereof);
(ii) During the second Loan Year and each Loan
Year thereafter, Borrower shall pay and Lender shall
receive compensation equal to the amount by which
$1,000,000 exceeds the Average Annual Loan Balance,
multiplied by the applicable Interest Rate specified in
this Agreement (averaged over the course of the
applicable Loan Year), payable at the second
anniversary of the Closing Date and each anniversary
thereafter, as applicable.
A "LOAN YEAR" means any period during the Term commencing on
________ in one year and ending on _____ in the next following
year, with the first Loan Year being the period commencing on
__________, 1997 and ending on ________, 1998.
Notwithstanding the provisions of the immediately preceding
sentence, Lender shall have no obligation to disburse to Borrower
any amounts deemed to have been borrowed for purposes of meeting
the Minimum Borrowing requirement unless Borrower has actually
requested such disbursement from Lender and unless the Gross and
Net Availability for Borrower is sufficient to support such
disbursement.
2.2 The amount of any term loan being made by Lender to
Borrower is set forth in Section 10.2 ("Term Loan").
2.3 Accommodations.
--------------
(a) Lender may, in its sole discretion, issue or cause to
be issued, from time to time at Borrower's request and on terms
and conditions and for purposes satisfactory to Lender, credit
accommodations consisting of letters of credit, bankers'
acceptances, merchandise purchase guaranties or other guaranties
or indemnities for Borrower's account ("Accommodations").
Borrower shall execute and perform additional agreements relating
to the Accommodations in form and substance acceptable to Lender
and the issuer of any Accommodations, all of which shall
supplement the rights and remedies granted herein. Any payments
made by Lender or any affiliate of Lender in connection with the
Accommodations shall constitute additional Revolving Loans to
Borrower.
(b) In addition to the fees and costs of any issuer in
connection with issuing or administering Accommodations, Borrower
shall pay monthly to Lender, on the first day of each month, a
charge on open Accommodations at the rate per annum (if any) set
forth in Section 10.3 (the "Accommodation Charges").
(c) No Accommodation will be issued unless the full amount
of the Accommodation requested, plus fees and costs for issuance,
is less than the Net Availability existing immediately prior to
the issuance of the requested Accommodation, or if the requested
Accommodation would cause the outstanding Obligations to exceed
the Maximum Credit, or cause the open amount of Accommodations to
exceed, at any time, the Accommodation sublimit (if any) set
forth in Section 10.3.
(d) All indebtedness, liabilities and obligations of any
sort whatsoever, however arising, whether present or future,
fixed or contingent, secured or unsecured, due or to become due,
paid or incurred, arising or incurred in connection with any
Accommodation shall be included in the term "Obligations", as
defined herein, and shall include, without limitation, (i) all
amounts due or which may become due under any Accommodation; (ii)
all amounts charged or chargeable to Borrower or to Lender by any
bank, other financial institution or correspondent bank which
opens, issues or is involved with such Accommodations; (iii)
Lender's Accommodation Charges and all fees, costs and other
charges of any issuer of any Accommodation; and (iv) all duties,
freight, taxes, costs, insurance and all such other charges and
expenses which may pertain directly or indirectly to any
Obligations or Accommodations or to the goods or documents
relating thereto.
(e) Borrower unconditionally agrees to indemnify and hold
Lender harmless from any and all loss, claim or liability
(including reasonable attorneys' fees) arising from any
transactions or occurrences relating to any Accommodation
established or opened for Borrower's account, the Collateral
relating thereto and any drafts or acceptances thereunder,
including any such loss or claim due to any action taken by an
issuer of any Accommodation. Borrower further agrees to
indemnify and hold Lender harmless for any errors or omissions in
connection with the Accommodations, whether caused by Lender, by
the issuer of any Accommodation or otherwise. Borrower's
unconditional obligation to indemnify and hold Lender harmless
under this provision shall not be modified or diminished for any
reason or in any manner whatsoever, except for Lender's wilful
misconduct. Borrower agrees that any charges made to Lender by
any issuer of any Accommodation shall be conclusive on Borrower
and may be charged to Borrower's account.
(f) Lender shall not be responsible for: the conformity of
any goods to the documents presented; the validity or genuineness
of any documents; delay, default, or fraud by the Borrower or
shipper and/or anyone else in connection with the Accommodations
or any underlying transaction.
(g) Borrower agrees that any action taken by Lender, if
taken in good faith, or any action taken by an issuer of any
Accommodation, under or in connection with any Accommodation,
shall be binding on Borrower and shall not create any resulting
liability to Lender. In furtherance thereof, Lender shall have
the full right and authority to clear and resolve any questions
of non-compliance of documents; to give any instructions as to
acceptance or rejection of any documents or goods; to execute for
Borrower's account any and all applications for steamship or
airway guarantees, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances, or documents; and to
agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any
of the applications or Accommodations. All of the foregoing
actions may be taken in Lender's sole name, and the issuer
thereof shall be entitled to comply with and honor any and all
such documents or instruments executed by or received solely from
Lender, all without any notice to or any consent from Borrower.
None of the foregoing actions described in this subsection (g)
may be taken by Borrower without Lender's express written
consent.
2.4 Certain Amounts Due Upon Demand.
-------------------------------
Lender may, in its sole discretion, make or permit Revolving
Loans, Accommodations or other Obligations in excess of the
Maximum Credit, Gross or Net Availability or applicable formulas
or sublimits. All or any portion of such excess(es) shall be
immediately due and payable upon Lender's demand.
2.5 Cash Losses; Reduction in Advance Percentages.
---------------------------------------------
In the event Borrowers' Cash Losses, cumulative from the date of
this Agreement (the "Closing Date") through the initial Term of
this Agreement, exceed $350,000, and such losses in excess of
$350,000 are not cured by cash contributions to capital, the
pledge to Lender of cash collateral on terms acceptable to Lender
or by such other contribution to Borrowers as is satisfactory to
Lender within three (3) months of such loss, then Lender, at its
option, can on ten (10) days' notice, reduce the Eligible
Accounts Percentage and/or the Eligible Inventory Percentage.
Cash Losses for the purpose of this Agreement are defined as net
income plus depreciation minus debt service minus non-financed
capital expenditures plus cash equity contributions, all
determined in accordance with generally accepted account
principles consistently applied.
SECTION 3. INTEREST AND FEES
3.1 Interest.
-------
(a) Interest on the Revolving Loans and Term Loans (if any) shall
be payable by Borrower on the first day of each month, calculated
upon the closing daily balances in the loan account of Borrower
for each day during the immediately preceding month, at the per
annum rate set forth as the Interest Rate in Section 10.4(a). The
Interest Rate shall increase or decrease by an amount equal to
each increase or decrease, respectively, in the Prime Rate (as
defined below), effective as of the date of each such change. On
and after any Event of Default (but only during the continuance
of such Event of Default) or termination or non-renewal hereof,
interest on all unpaid Obligations shall accrue at a rate equal
to two percent (2%) per annum in excess of the Interest Rate
otherwise payable until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment
against Borrower or the exercise of any other right or remedy by
Lender), and all such interest shall be payable on demand. In no
event shall charges constituting interest exceed the rate
permitted under any applicable law or regulation, and if any
provision of this Agreement is in contravention of any such law
or regulation, such provision shall be deemed amended to conform
thereto.
(b) The "PRIME RATE" is the rate of interest publicly
announced by The Chase Manhattan Bank in New York, New York, or
its successors, and assigns from time to time as its prime rate
(the Prime Rate is not intended to be the lowest rate of interest
charged by The Chase Manhattan Bank to its borrowers).
3.2 Facility Fee.
------------
Borrower shall pay Lender on the Closing Date, on each
anniversary of the Closing Date, a Facility Fee in the amount set
forth in Section 10.4(b), which fee for the initial term of this
Agreement is fully earned as of the date hereof.
3.3 Account Servicing Fee.
---------------------
If applicable, Borrower shall pay Lender monthly, on the first
day of each month during the initial and each renewal Term an
Account Servicing Fee for the immediately preceding month (or
part thereof) in the amount set forth in Section 10.4(c).
3.4 Unused Line Fee.
---------------
Borrower shall pay Lender monthly, on the first day of each
month, in arrears, an Unused Line Fee for each month during the
initial and each renewal Term at the rate per annum set forth in
Section 10.4(d), calculated upon the amount, if any, by which
$1,000,000 exceeds the average outstanding daily principal
balance during the preceding month of all Revolving Loans,
Accommodations and any Term Loan.
3.5 Charges to Loan Account.
-----------------------
At Lender's option, all payments of principal, interest, fees,
costs, expenses and other charges provided for in this Agreement,
or in any other agreement now or hereafter existing between
Lender and Borrower, may be charged on the date when due, as
principal to any loan account of Borrower maintained by Lender.
Interest, fees for Accommodations, the Unused Line Fee and any
other amounts payable by Borrower to Lender based on a per annum
rate shall be calculated on the basis of actual days elapsed over
a 360-day year.
3.6 Credit Balances.
---------------
For purposes of calculating any interest, fees, balances or
expenses hereunder, the outstanding daily principal balance of
the Revolving Loans shall be deemed to be zero in the event that
the outstanding daily principal balance of the Revolving Loans is
a credit balance.
SECTION 4. GRANT OF SECURITY INTEREST
--------------------------
4.1 Grant of Security Interest.
--------------------------
To secure the payment and performance in full of all Obligations,
each Borrower hereby grants to Lender a continuing security
interest in and lien upon, and a right of setoff against, and
Borrower hereby collaterally assigns and pledges to Lender, all
of the Collateral, including any Collateral not deemed eligible
for lending purposes.
4.2 "OBLIGATIONS"
-------------
shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and
obligations of every kind, nature and description owing by
Borrowers to Lender and/or its affiliates, including principal,
interest, charges, fees and expenses, however evidenced, whether
as principal, surety, endorser, guarantor or otherwise, whether
arising under this Agreement or otherwise, whether now existing
or hereafter arising, whether arising before, during or after the
initial or any renewal Term or after the commencement of any case
with respect to any Borrower under the United States Bankruptcy
Code or any similar statute, whether direct or indirect, absolute
or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured,
original, renewed or extended and whether arising directly or
howsoever acquired by Lender including from any other entity
outright, conditionally or as collateral security, by assignment,
merger with any other entity, participations or interests of
Lender in the obligations of any Borrower to others, assumption,
operation of law, subrogation or otherwise and shall also include
all amounts chargeable to Borrower under this Agreement or in
connection with any of the foregoing.
4.3 "COLLATERAL" shall mean all of the following property
of each Borrower:
All now owned and hereafter acquired right, title and
interest of each Borrower in, to and in respect of all: accounts,
interests in goods represented by accounts, returned, reclaimed
or repossessed goods with respect thereto and rights as an unpaid
vendor; contract rights; chattel paper; investment property;
general intangibles (including, but not limited to, tax and duty
refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing,
trade secrets, goodwill, processes, drawings, blueprints,
customer lists, licenses, whether as licensor or licensee, choses
in action and other claims, and existing and future leasehold
interests in equipment and fixtures); documents; instruments;
letters of credit, bankers' acceptances or guaranties; cash
monies, deposits, securities, bank accounts, deposit accounts,
credits and other property now or hereafter held in any capacity
by Lender, its affiliates or any entity which, at any time,
participates in Lender's financing of Borrowers or at any other
depository or other institution; agreements or property securing
or relating to any of the items referred to above;
All now owned and hereafter acquired right, title and
interest of each Borrower in, to and in respect of goods,
including, but not limited to:
All inventory, wherever located, whether now
owned or hereafter acquired, of whatever
kind, nature or description, including all
raw materials, work-in-process, finished
goods, and materials to be used or consumed
in Borrower's business; and all names or
marks affixed to or to be affixed thereto for
purposes of selling same by the seller,
manufacturer, lessor or licensor thereof;
All equipment and fixtures, wherever located,
whether now owned or hereafter acquired,
including, without limitation, all machinery,
equipment, motor vehicles, furniture and
fixtures, and any and all additions,
substitutions, replacements (including spare
parts), and accessions thereof and thereto;
All consumer goods, farm products, crops,
timber, minerals or the like (including oil
and gas), wherever located, whether now owned
or hereafter acquired, of whatever kind,
nature or description;
All now owned and hereafter acquired right, title and interests
of each Borrower in, to and in respect of any personal property
in or upon which Lender has or may hereafter have a security
interest, lien or right of setoff;
All present and future books and records relating to any of the
above including, without limitation, all computer programs,
printed output and computer readable data in the possession or
control of any Borrower, any computer service bureau or other
third party;
All products and proceeds of the foregoing in whatever form and
wherever located, including, without limitation, all insurance
proceeds and all claims against third parties for loss or
destruction of or damage to any of the foregoing.
SECTION 5. COLLECTION AND ADMINISTRATION
-----------------------------
5.1 Collections.
-----------
Each Borrower shall, at such Borrower's expense and in the manner
requested by Lender from time to time, direct that remittances
and all other proceeds of accounts and other Collateral shall be
sent to a lock box designated by and/or maintained in the name of
Lender, and deposited into a bank account now or hereafter
selected by Lender and maintained in the name of Lender under
arrangements with the depository bank under which all funds
deposited to such bank account are required to be transferred
solely to Lender. Borrower shall bear all risk of loss of any
funds deposited into such account. In connection therewith,
Borrower shall execute such lock box and bank account agreements
as Lender shall specify. Any collections or other proceeds
received by Borrower shall be held in trust for Lender and
immediately remitted to Lender in kind.
5.2 Payments.
--------
All Obligations shall be payable at Lender's office set forth
below or at Lender's bank designated in Section 10.6(b) or at
such other bank or place as Lender may expressly designate from
time to time for purposes of this Section. Lender shall apply
all proceeds of accounts or other Collateral received by Lender
and all other payments in respect of the Obligations to the
Revolving Loans whether or not then due or to any other
Obligations then due, in whatever order or manner Lender shall
determine. For purposes of determining Gross and Net Availability
and for the calculation of Minimum Borrowings, remittances and
other payments with respect to the Collateral and Obligations
will be treated as credited to the loan account of Borrower
maintained by Lender and Collateral balances to which they
relate, upon the date of Lender's receipt of advice from Lender's
bank that such remittances or other payments have been credited
to Lender's account or in the case of remittances or other
payments received directly in kind by Lender, upon the date of
Lender's deposit thereof at Lender's bank, subject to final
payment and collection. In computing interest charges, the loan
account of Borrower maintained by Lender will be credited with
remittances and other payments three (3) Business Days after the
day Lender has received advice of receipt of remittances in
Lender's account at Lender's Bank. For purposes of this
Agreement, "Business Day" shall mean any day other than a
Saturday, Sunday or any other day on which banks located in
states where Lender has its offices are authorized to close.
5.3 Loan Account Statements.
-----------------------
Lender shall render to Borrower monthly a loan account statement.
Each statement shall be considered correct and binding upon
Borrower as an account stated, except to the extent that Lender
receives, within sixty (60) days after the mailing of such
statement, written notice from Borrower of any specific
exceptions by Borrower to that statement.
5.4 Direct Collections.
------------------
Lender may, at any time, whether or not an Event of Default has
occurred, without notice to or assent of Borrower, (a) notify any
account debtor that the accounts and other Collateral which
includes a monetary obligation have been assigned to Lender by
Borrower and that payment thereof is to be made to the order of
and directly to Lender, (b) send, or cause to be sent by its
designee, requests (which may identify the sender by a pseudonym)
for verification of accounts and other Collateral directly to any
account debtor or any other obligor or any bailee with respect
thereto, and (c) demand, collect or enforce payment of any
accounts or such other Collateral, but without any duty to do so,
and Lender shall not be liable for any failure to collect or
enforce payment thereof. At Lender's request, all invoices and
statements sent to any account debtor, other obligor or bailee,
shall state that the accounts and such other Collateral have been
assigned to Lender and are payable directly and only to Lender.
5.5 Attorney-in-Fact.
----------------
Each Borrower hereby appoints Lender and any designee of Lender
as Borrower's attorney-in-fact and authorizes Lender or such
designee, at Borrower's sole expense, to exercise at any times in
Lender's or such designee's discretion all or any of the
following powers, which powers of attorney, being coupled with an
interest, shall be irrevocable until all Obligations have been
paid in full: (a) receive, take, endorse, assign, deliver, accept
and deposit, in the name of Lender or Borrower, any and all cash,
checks, commercial paper, drafts, remittances and other
instruments and documents relating to the Collateral or the
proceeds thereof, (b) transmit to account debtors, other obligors
or any bailees notice of the interest of Lender in the Collateral
or request from account debtors or such other obligors or bailees
at any time, in the name of Borrower or Lender or any designee of
Lender, information concerning the Collateral and any amounts
owing with respect thereto, (c) notify account debtors or other
obligors to make payment directly to Lender, or notify bailees as
to the disposition of Collateral, (d) take or bring, in the name
of Lender or Borrower, all steps, actions, suits or proceedings
deemed by Lender necessary or desirable to effect collection of
or other realization upon the accounts and other Collateral, (e)
after an Event of Default, change the address for delivery of
mail to Borrower and to receive and open mail addressed to
Borrower, (f) after an Event of Default, extend the time of
payment of, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all
accounts or other Collateral which includes a monetary obligation
and discharge or release the account debtor or other obligor,
without affecting any of the Obligations, and (g) execute in the
name of Borrower and file against Borrower in favor of Lender
financing statements or amendments with respect to the
Collateral.
5.6 Liability.
---------
Each Borrower hereby releases and exculpates Lender, its
officers, employees and designees, from any liability arising
from any acts under this Agreement or in furtherance thereof,
whether as attorney-in-fact or otherwise, whether of omission or
commission, and whether based upon any error of judgment or
mistake of law or fact, except for gross negligence or willful
misconduct. In no event will Lender have any liability to
Borrower for lost profits or other special or consequential
damages.
5.7 Administration of Accounts.
--------------------------
After written notice by Lender to Borrower and automatically,
without notice, after an Event of Default, Borrower shall not,
without the prior written consent of Lender in each instance, (a)
grant any extension of time of payment of any of the accounts or
any other Collateral which includes a monetary obligation, (b)
compromise or settle any of the accounts or any such other
Collateral for less than the full amount thereof, (c) release in
whole or in part any account debtor or other person liable for
the payment of any of the accounts or any such other Collateral,
or (d) grant any credits, discounts, allowances, deductions,
return authorizations or the like with respect to any of the
accounts or any such other Collateral.
5.8 Documents.
---------
At such times as Lender may request and in the manner specified
by Lender, Borrower shall deliver to Lender or Lender's
representative, as Lender shall designate, copies or original
invoices, agreements, proofs of rendition of services and
delivery of goods and other documents evidencing or relating to
the transactions which gave rise to accounts or other Collateral,
together with customer statements, schedules describing the
accounts or other Collateral and/or statements of account and
confirmatory assignments to Lender of the accounts or other
Collateral, in form and substance satisfactory to Lender and duly
executed by Borrower. Without limiting the provisions of Section
5.7, Borrower's granting of credits, discounts, allowances,
deductions, return authorizations or the like will be promptly
reported to Lender in writing. In no event shall any such
schedule or confirmatory assignment (or the absence thereof or
omission of any of the accounts or other Collateral therefrom)
limit or in any way be construed as a waiver, limitation or
modification of the security interests or rights of Lender or the
warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper
delivered to Lender by Borrower may be destroyed or otherwise
disposed of by Lender six (6) months after receipt by Lender,
unless Borrower requests their return in writing in advance and
makes prior arrangements for their return at Borrower's expense.
5.9 Access.
------
From time to time as requested by Lender, at the sole expense of
Borrower, Lender or its designee shall have access, prior to an
Event of Default during normal business hours and on or after an
Event of Default at any time, to all of the premises where
Collateral is located for the purposes of inspecting the
Collateral, and all Borrower's books and records (provided, that
in conducting such inspections, Lender shall use reasonable
efforts not to disturb unnecessarily the conduct of Borrower's
ordinary business operations), and Borrower shall permit Lender
or its designee to make such copies of such books and records or
extracts therefrom as Lender may request. Without expense to
Lender, Lender may use such of Borrower's personnel, equipment,
including computer equipment, programs, printed output and
computer readable media, supplies and premises for the collection
of accounts and realization on other Collateral as Lender, in its
sole discretion, deems appropriate. Borrower hereby irrevocably
authorizes all accountants and third parties to disclose and
deliver to Lender at Borrower's expense all financial
information, books and records, work papers, management reports
and other information in their possession regarding Borrower, but
only following the occurrence and during the continuance of an
Event of Default.
5.10 Environmental Audits.
--------------------
From time to time, as requested by Lender, at the sole expense of
Borrower, Borrower shall provide Lender, or its designee,
complete access (during normal business hours and if no Event of
Default then exists upon reasonable prior notice) to all of
Borrower's facilities for the purpose of conducting an
environmental audit of such facilities as Lender or its designees
may deem necessary. Borrower agrees to cooperate with Lender
with respect to any environmental audit conducted by Lender or
its designee pursuant to this Section 5.10.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS
-------------------------------------------
Borrower hereby represents, warrants and covenants to Lender
the following, the truth and accuracy of which, and compliance
with which, shall be continuing conditions of the making of loans
or other credit accommodations by Lender to Borrower:
6.1 Financial and Other Reports.
---------------------------
Each Borrower shall keep and maintain its books and records in
accordance with generally accepted accounting principles,
consistently applied. Borrower shall, at its sole expense, on or
before the fifteenth (15th) day of each month, deliver to Lender:
(a) true and complete monthly agings of its accounts receivable,
accounts payable and notes payable, including a monthly aging of
all sales, with sales subject to Chargebacks segregated from all
other sales; (b) weekly inventory reports; and (c) monthly
internally prepared interim financial statements. Annually,
Borrower shall deliver audited financial statements of Borrower
accompanied by the report and opinion thereon of independent
certified public accountants acceptable to Lender, as soon as
available, but in no event later than ninety (90) days after the
end of Borrower's fiscal year. All of the foregoing shall be in
such form and together with such information with respect to the
business of Borrower or any guarantor, as Lender may in each case
reasonably request.
6.2 Trade Names.
-----------
Borrower may from time to time render invoices to account debtors
under its trade names set forth in Section 10.6(g) after Lender
has received prior written notice from Borrower of the use of
such trade names and as to which, Borrower agrees that: (a) each
trade name does not refer to another corporation or other legal
entity, (b) all accounts and proceeds thereof (including any
returned merchandise) invoiced under any such trade names are
owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement, and (c)
all schedules of accounts and confirmatory assignments including
any sales made or services rendered using the trade name shall
show Borrower's name as assignor and Lender is authorized to
receive, endorse and deposit to any loan account of Borrower
maintained by Lender all checks or other remittances made payable
to any trade name of Borrower representing payment with respect
to such sales or services.
6.3 Losses.
------
Borrower shall promptly notify Lender in writing of any loss,
damage, investigation, action, suit, proceeding or claim relating
to a material portion of the Collateral or which may result in
any material adverse change in Borrower's business, assets,
liabilities or condition, financial or otherwise.
6.4 Books and Records.
-----------------
Borrower's books and records concerning accounts and its chief
executive office are and shall be maintained only at the address
set forth in Section 10.6(d). Borrower's only other places of
business and the only other locations of Collateral, if any, are
and shall be the addresses set forth in Section 10.6 hereof,
except Borrower may change such locations or open a new place of
business after thirty (30) days prior written notice to Lender.
Prior to any change in location or opening of any new place of
business, Borrower shall execute and deliver or cause to be
executed and delivered to Lender such financing statements,
financing documents and security and other agreements as Lender
may reasonably require, including, without limitation, those
described in Section 6.14.
6.5 Title.
-----
Borrower has and at all times will continue to have good and
marketable title to all of the Collateral, free and clear of all
liens, security interests, claims or encumbrances of any kind
except in favor of Lender and except, if any, those set forth on
Schedule A hereto.
6.6 Disposition of Assets.
---------------------
Borrower shall not directly or indirectly: (a) sell, lease,
transfer, assign, abandon or otherwise dispose of any part of the
Collateral or any material portion of its other assets (other
than sales of inventory to buyers in the ordinary course of
business) or (b) consolidate with or merge with or into any other
entity, or permit any other entity to consolidate with or merge
with or into Borrower except that any of the Borrowers other than
Xxxxxxx Pharmaceuticals, Inc. may merge with or into Xxxxxxx
Pharmaceuticals, Inc. provided Xxxxxxx Pharmaceuticals, Inc. is
the surviving corporation or (c) form or acquire any interest in
any firm, corporation or other entity.
6.7 Insurance.
---------
Borrower shall at all times maintain, with financially sound and
reputable insurers, insurance (including, without limitation, at
the option of Lender, earthquake insurance) with respect to the
Collateral and other assets. All such insurance policies shall be
in such form, substance, amounts and coverage as may be
satisfactory to Lender and shall provide for thirty (30) days'
prior written notice to Lender of cancellation or reduction of
coverage. Borrower hereby irrevocably appoints Lender and any
designee of Lender as attorney-in-fact for Borrower to obtain at
Borrower's expense, any such insurance should Borrower fail to do
so and, following the occurrence and during the continuance of an
Event of Default to adjust or settle any claim or other matter
under or arising pursuant to such insurance or to amend or cancel
such insurance. Borrower shall deliver to Lender evidence of such
insurance and a lender's loss payable endorsement satisfactory to
Lender as to all existing and future insurance policies with
respect to the Collateral. Borrower shall deliver to Lender, in
kind, all instruments representing proceeds of insurance received
by Borrower. Lender may apply any insurance proceeds received at
any time to the cost of repairs to or replacement of any portion
of the Collateral and/or, at Lender's option, to payment of or as
security for any of the Obligations, whether or not due, in any
order or manner as Lender determines.
6.8 Compliance With Laws.
--------------------
Borrower is and at all times will continue to be in compliance
with the requirements of all material laws, rules, regulations
and orders of any governmental authority relating to its business
(including laws, rules, regulations and orders relating to taxes,
payment and withholding of payroll taxes, employer and employee
contributions and similar items, securities, employee retirement
and welfare benefits, employee health and safety, or
environmental matters) and all material agreements or other
instruments binding on Borrower or its property. All of
Borrower's inventory shall be produced in accordance with the
requirements of the CGMP Standards and the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and
orders related thereto. Borrower shall pay and discharge all
taxes, assessments and governmental charges against Borrower or
any Collateral prior to the date on which penalties are imposed
or liens attach with respect thereto, unless the same are being
contested in good faith and, at Lender's option, Reserves are
established for the amount contested and penalties which may
accrue thereon.
6.9 Accounts.
--------
With respect to each account deemed an Eligible Account, except
as reported in writing to Lender, Borrower has no knowledge that
any of the criteria for eligibility are not or are no longer
satisfied. As to each account, except as disclosed in writing to
Lender at the time such account arises (a) each is valid and
legally enforceable and represents an undisputed bona fide
indebtedness incurred by the account debtor for the sum reported
to Lender, (b) each arises from an absolute and unconditional
sale of goods, without any right of return or consignment, or
from a completed rendition of services, (c) each is not, at the
time such account arises, subject to any defense, offset,
dispute, contra relationship, counterclaim, or any given or
claimed credit, allowance or discount other than the Chargebacks,
and (d) all statements made and all unpaid balances and other
information appearing in the invoices, agreements, proofs of
rendition of services and delivery of goods and other
documentation relating to the accounts, and all confirmatory
assignments, schedules, statements of account and books and
records with respect thereto, are true and correct in all
material respects and in all material respects what they purport
to be.
6.10 Equipment.
---------
With respect to Borrower's equipment, Borrower shall keep the
equipment in good order and repair, and in running and marketable
condition, ordinary wear and tear excepted.
6.11 Financial Covenants.
-------------------
Borrower shall at all times maintain working capital and net
worth (each as determined in accordance with generally accepted
accounting principles, in effect on the date hereof, consistently
applied) in the amounts (if any) set forth in Section 10.5(a) and
(b) and Borrower shall not, directly or indirectly, expend or
commit to expend, for fixed or capital assets (including capital
lease obligations) an amount in excess of the capital expenditure
limit (if any) set forth in Section 10.5(c) in any fiscal year of
Borrower.
6.12 Affiliated Transactions.
-----------------------
No Borrower will, directly or indirectly: (a) lend or advance
money or property to, guarantee or assume indebtedness of, or
invest (by capital contribution or otherwise) in any person,
firm, corporation or other entity; or (b) declare, pay or make
any dividend, redemption or other distribution on account of any
shares of any class of stock of Borrower now or hereafter
outstanding except that any of the Borrowers other than Xxxxxxx
Pharmaceuticals, Inc. may make distributions to any other
Borrower or to Xxxxxxx Pharmaceuticals, Inc. and any Borrower may
make distributions in capital stock (or any options or warrants
for such stock); or (c) make any payment of the principal amount
of or interest on any indebtedness owing to any officer,
director, shareholder, or affiliate of Borrower; or (d) except in
the ordinary course of its business, and not to exceed $50,000 in
the aggregate for all Borrowers in any Loan Year, make any loans
or advances to any officer, director, employee, shareholder or
affiliate of Borrower, (e) enter into any sale, lease or other
transaction with any officer, director, employee, shareholder or
affiliate of Borrower on terms that are less favorable to
Borrower than those which might be obtained at the time from
persons who are not an officer, director, employee, shareholder
or affiliate of Borrower.
6.13 Fees and Expenses.
-----------------
Borrowers shall pay, on Lender's demand, all costs, expenses,
filing fees and taxes payable in connection with the preparation,
execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement and all other existing
and future agreements or documents contemplated herein or related
hereto, including any amendments, waivers, supplements or
consents which may hereafter be made or entered into in respect
hereof, or in any way involving claims or defense asserted by
Lender or claims or defense against Lender asserted by Borrower,
any guarantor or any third party directly or indirectly arising
out of or related to the relationship between Borrower and Lender
or any guarantor and Lender, including, but not limited to the
following, whether incurred before, during or after the initial
or any renewal Term or after the commencement of any case with
respect to Borrower or any guarantor under the United States
Bankruptcy Code or any similar statute: (a) all costs and
expenses of filing or recording (including Uniform Commercial
Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees,
if applicable); (b) all title insurance and other insurance
premiums, appraisal fees, fees incurred in connection with any
environmental report, audit or survey and search fees; (c) all
fees as then in effect relating to the wire transfer of loan
proceeds and other funds and fees then in effect for returned
checks and credit reports; (d) all expenses and costs heretofore
and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate set
forth in Section 10.4(e) for Lender's examiners in the field and
office; and (e) the costs, reasonable fees and disbursements of
in-house and outside counsel to Lender, including but not limited
to such fees and disbursements incurred as a result of litigation
between the parties hereto, any third party and in any appeals
arising therefrom.
6.14 Further Assurances.
------------------
At the request of Lender, at any time and from time to time, at
Borrower's sole expense, Borrower shall execute and deliver or
cause to be executed and delivered to Lender, such agreements,
documents and instruments, including waivers, consents and
subordination agreements from mortgagees or other holders of
security interests or liens, landlords or bailees, and do or
cause to be done such further acts as Lender, in its discretion,
deems necessary or desirable to create, preserve, perfect or
validate any security interest of Lender or the priority thereof
in the Collateral and otherwise to effectuate the provisions and
purposes of this Agreement. Borrower hereby authorizes Lender to
file financing statements or amendments against Borrower in favor
of Lender with respect to the Collateral, without Borrower's
signature and to file as financing statements any carbon,
photographic or other reproductions of this Agreement or any
financing statements signed by Borrower.
6.15 Revolving Loan.
--------------
The Revolving Loan will not at any time exceed the Net
Availability unless Lender has consented.
6.16 Environmental Condition.
-----------------------
None of Borrower's properties or assets has ever been designated
or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any
environmental protection statute. No lien arising under any
environmental protection statute has attached to any revenues or
to any real or personal property owned by Borrower. Borrower has
not received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state
governmental agency any action or omission by Borrower resulting
in the releasing, or otherwise exposing of hazardous waste or
hazardous substances into the environment. Borrower is in
compliance (in all material respects) with all statutes,
regulations, ordinances and other legal requirements pertaining
to the production, storage, handling, treatment, release,
transportation or disposal of any hazardous waste or hazardous
substance.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
------------------------------
7.1 Events of Default.
-----------------
All Obligations shall be immediately due and payable, without
notice or demand, and any provisions of this Agreement as to
future loans and credit accommodations by Lender shall terminate
automatically, upon the termination or non-renewal of this
Agreement or, at Lender's option, upon or at any time after the
occurrence or existence of any one or more of the following
"EVENTS OF DEFAULT":
(a) Any Borrower fails to pay when due any of the
Obligations or fails to perform any of the terms of this
Agreement or any other existing or future financing, security or
other agreement between such Borrower and Lender or any affiliate
of Lender;
(b) Any representation, warranty or statement of fact made
by any Borrower to Lender in this Agreement or any other
agreement, schedule, confirmatory assignment or otherwise, or to
any affiliate of Lender, shall prove inaccurate or misleading in
any material respect;
(c) Any guarantor revokes, terminates or fails to perform
any of the terms of any guaranty, endorsement or other agreement
of such party in favor of Lender or any affiliate of Lender;
(d) Any judgment or judgments aggregating in excess of
$25,000 or any injunction or attachment is obtained against
Borrower or any guarantor which remains unstayed for a period of
ten (10) days or is enforced;
(e) Borrower or any guarantor or a general partner of a
guarantor or Borrower (which is a partnership), being a natural
person, dies, or Borrower or any guarantor which is a partnership
or corporation, is dissolved, or Borrower or any guarantor which
is a corporation fails to maintain its corporate existence in
good standing, or the usual business of Borrower or any guarantor
ceases or is suspended;
(f) Any change in the chief executive officer or
controlling ownership of Borrower;
(g) Borrower or any guarantor becomes insolvent, makes an
assignment for the benefit of creditors, makes or sends notice of
a bulk transfer or calls a general meeting of its creditors or
principal creditors;
(h) Any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in effect
or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed by or against Borrower or any guarantor;
(i) The indictment or threatened indictment of Borrower or
any guarantor under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against
Borrower or any guarantor, pursuant to which statute or
proceedings the penalties or remedies sought or available include
forfeiture of any material portion of the property of Borrower or
such guarantor;
(j) Any default or event of default occurs on the part of
Borrower under any agreement, document or instrument to which
Borrower is a party or by which Borrower or any of its property
is bound, creating or relating to any indebtedness of Borrower to
any person or entity other than Lender if the effect of such
default or event of default is to accelerate, or to permit the
acceleration of the maturity of such indebtedness;
(k) Lender in good faith believes that either (i) the
prospect of payment or performance of the Obligations is
materially impaired or (ii) the Collateral is not sufficient to
secure fully the Obligations; or
(l) any material change occurs in the nature or conduct of
Borrower's business.
7.2 Remedies.
--------
Upon the occurrence of an Event of Default and at any time
thereafter, Lender shall have all rights and remedies provided in
this Agreement, any other agreements between Borrower and Lender,
the Uniform Commercial Code or other applicable law, all of which
rights and remedies may be exercised without notice to Borrower,
all such notices being hereby waived, except such notice as is
expressly provided for hereunder or is not waivable under
applicable law. All rights and remedies of Lender are cumulative
and not exclusive and are enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more
occasions and in any order Lender may determine. Without limiting
the foregoing, Lender may (a) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender, (b)
with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any
portion of the Collateral, (c) require Borrower, at Borrower's
expense, to assemble and make available to Lender any part or all
of the Collateral at any place and time designated by Lender, (d)
collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (e) extend the time of payment of,
compromise or settle for cash, credit, return of merchandise, and
upon any terms or conditions, any and all accounts or other
Collateral which includes a monetary obligation and discharge or
release the account debtor or other obligor, without affecting
any of the Obligations, (f) sell, lease, transfer, assign,
deliver or otherwise dispose of any and all Collateral
(including, without limitation, entering into contracts with
respect thereto, by public or private sales at any exchange,
broker's board, any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or
for future delivery, with the Lender having the right to purchase
the whole or any part of the Collateral at any such public sale,
all of the foregoing being free from any right or equity of
redemption of Borrower, which right or equity of redemption is
hereby expressly waived and released by Borrower. If any of the
Collateral is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, ten (10)
days prior notice by Lender to Borrower designating the time and
place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall
be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover
any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which
might otherwise be required.
7.3 Application of Proceeds.
-----------------------
Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other
disposition of the Collateral to payment of any of the
Obligations, in whole or in part (including reasonable attorneys'
fees and legal expenses incurred by Lender with respect thereto
or otherwise chargeable to Borrower) and in such order as Lender
may elect, whether or not then due. Borrower shall remain liable
to Lender for the payment of any deficiency together with
interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including reasonable
attorneys' fees and legal expenses.
7.4 Lender's Cure of Third Party Agreement Default.
----------------------------------------------
Lender may, at its option, cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, discharge taxes, liens,
security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur
any expense or perform any act which, in Lender's sole judgment,
is necessary or appropriate to preserve, protect, insure,
maintain, or realize upon the Collateral. Lender may charge
Borrower's loan account for any amounts so expended, such amounts
to be repayable by Borrower on demand. Lender shall be under no
obligation to effect such cure, payment, bonding or discharge,
and shall not, by doing so, be deemed to have assumed any
obligation or liability of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND
CONSENTS
--------------------------------------------
8.1 JURY TRIAL WAIVER.
-----------------
EACH BORROWER AND LENDER EACH WAIVE ALL RIGHTS TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST
THE OTHER WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, THE OBLIGATIONS, THE COLLATERAL, ANY ALLEGED TORTIOUS
CONDUCT BY BORROWER OR LENDER, OR, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN
BORROWER AND LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR LOST
PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
8.2 Counterclaims.
-------------
Borrower waives all rights to interpose any claims, deductions,
setoffs or counterclaims of any kind, nature or description in
any action or proceeding instituted by Lender with respect to
this Agreement, the Obligations, the Collateral or any matter
arising therefrom or relating thereto, except compulsory
counterclaims.
8.3 Jurisdiction.
------------
Borrower hereby irrevocably submits and consents to the
nonexclusive jurisdiction of the State and Federal Courts located
in the State in which the office of Lender designated in Section
10.6(a) is located and any other State where any Collateral is
located with respect to any action or proceeding arising out of
this Agreement, the Obligations, the Collateral or any matter
arising therefrom or relating thereto. In any such action or
proceeding, Borrower waives personal service of the summons and
complaint or other process and papers therein and agrees that the
service thereof may be made by certified mail (return receipt
requested) directed to Borrower at its chief executive office set
forth herein or other address thereof of which Lender has
received notice as provided herein, service to be deemed complete
five (5) days after mailing, or as permitted under the rules of
either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated in a Federal Court
located in the district, or a State Court in the State and
County, in which the office of Lender designated in Section
10.6(a) is located and Borrower waives any objection based on
FORUM NON CONVENIENS and any objection to venue in connection
therewith.
8.4 No Waiver by Lender.
-------------------
Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights or
remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. A waiver by Lender of any right or
remedy on any one occasion shall not be construed as acquiescence
to or waiver of any such right or remedy which Lender would
otherwise have on any future occasion, whether similar in kind or
otherwise.
SECTION 9. TERM OF AGREEMENT; MISCELLANEOUS
9.1 Term.
----
This Agreement shall only become effective upon execution and
delivery by Borrower and Lender and shall continue in full force
and effect for a term of three (3) years from the date hereof and
shall be deemed automatically renewed for successive terms of two
(2) years thereafter unless terminated as of the end of the
initial or any renewal term (each a "TERM") by either party
giving the other written notice at least sixty (60) days' prior
to the end of the then-current Term.
9.2 Early Termination.
-----------------
Borrower may also terminate this Agreement by giving Lender at
least thirty (30) days prior written notice at any time upon
payment in full of all of the Obligations as provided herein,
including the early termination fee provided below. Lender shall
also have the right to terminate this Agreement at any time upon
or after the occurrence of an Event of Default. If Lender
terminates this Agreement upon or after the occurrence of an
Event of Default, or if Borrower shall terminate this Agreement
as permitted herein effective prior to the end of the then-
current Term, in addition to all other Obligations, Borrower
shall pay to Lender, upon the effective date of termination, in
view of the impracticality and extreme difficulty of ascertaining
actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits, an early
termination fee equal to $60,000 if Borrowers' written notice of
termination is received by Lender or termination by Lender is
effective prior to the end of the second Loan Year of the initial
Term of this Agreement, and $40,000 if such termination occurs at
any time thereafter, other than at the end of the then-current
Term.
9.3 Additional Cash Collateral.
--------------------------
Upon termination of this Agreement by Borrower, as permitted
herein, in addition to payment of all Obligations which are not
contingent, Borrower shall deposit such amount of cash collateral
as Lender determines is necessary to secure Lender from loss,
cost, damage or expense, including reasonable attorneys' fees, in
connection with any open Accommodations or remittance items or
other payments provisionally credited to the Obligations and/or
to which Lender has not yet received final and indefeasible
payment.
9.4 Notices.
-------
Except as otherwise provided, all notices, requests and demands
hereunder shall be (a) made to Lender at its address set forth in
Section 10.6(a) and to Borrower at its chief executive office set
forth in Section 10.6(d), or to such other address as either
party may designate by written notice to the other in accordance
with this provision, and (b) deemed to have been given or made:
if by hand, immediately upon delivery; if by telex, telegram or
telecopy (fax), immediately upon receipt; if by overnight
delivery service, one day after dispatch; and if by first class
or certified mail, three (3) days after mailing.
9.5 Severability.
------------
If any provision of this Agreement is held to be invalid or
unenforceable, such provision shall not affect this Agreement as
a whole, but this Agreement shall be construed as though it did
not contain the particular provision held to be invalid or
unenforceable.
9.6 Entire Agreement; Amendments; Assignments.
-----------------------------------------
This Agreement contains the entire agreement of the parties as to
the subject matter hereof, all prior commitments, proposals and
negotiations concerning the subject matter hereof being merged
herein. Neither this Agreement nor any provision hereof shall be
amended, modified or discharged orally or by course of conduct,
but only by a written agreement signed by an authorized officer
of Lender and Borrower. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their
respective successors and assigns, except that any obligation of
Lender under this Agreement shall not be assignable nor inure to
the successors and assigns of Borrower.
9.7 Discharge of Borrower.
---------------------
No termination of this Agreement shall relieve or discharge
Borrower of its Obligations, grants of Collateral, duties and
covenants hereunder or otherwise until such time as all
Obligations to Lender have been indefeasibly paid and satisfied
in full, including, without limitation, the continuation and
survival in full force and effect of all security interests and
liens of Lender in and upon all then existing and thereafter-
arising or acquired Collateral and all warranties and waivers of
Borrower.
9.8 Usage.
-----
All terms used herein which are defined in the Uniform Commercial
Code shall have the meanings given therein unless otherwise
defined in this Agreement and all references to the singular or
plural herein shall also mean the plural or singular,
respectively.
9.9 Joint and Several Liability.
---------------------------
The liability of the Borrowers for all amounts due to Lender
under this Agreement shall be joint and several regardless of
which Borrower actually receives loans or other extensions of
credit hereunder or the amount of such loans received or the
manner in which Lender accounts for such loans or other
extensions of credit or on its books and records. Each
Borrower's Obligations with respect to Revolving Loans made to it
or Accommodations issued for its account, and related fees, costs
and expenses, and each Borrower's Obligations arising as a result
of the joint and several liability of the Borrowers hereunder,
with respect to Revolving Loans made to the other Borrowers
hereunder or Accommodations issued for the account of the other
Borrowers hereunder, together with the related fees, costs and
expenses, shall be separate and distinct obligations, all of
which are primary obligations of each Borrower.
Each Borrower's Obligations arising as a result of the joint
and several liability of the Borrowers hereunder with respect to
loans or other extensions of credit made to the other Borrowers
hereunder shall, to the fullest extent permitted by law, be
unconditional irrespective of (i) the validity, enforceability,
avoidance or subordination of the Obligations of the other
Borrowers or of any promissory note or other document evidencing
all of any part of the Obligations of the other Borrowers, (ii)
the absence of any attempt to collect the Obligations from any of
the other Borrowers, any other guarantor, or any other security
therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of
any indulgence by Lender with respect to any provision of any
instrument evidencing the Obligations of the other Borrowers, or
any part thereof, or any other agreement now or hereafter
executed by the other Borrowers and delivered to Lender, (iv) the
failure by Lender to take any steps to perfect and maintain its
security interest in, or to preserve its rights to, any security
or collateral for the Obligations of the other Borrowers, (v)
Lender's election, in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the
Bankruptcy Code, (vi) any borrowing or grant of a security
interest by the other Borrowers, as debtor-in-possession under
Section 364 of the Bankruptcy Code, (vii) the disallowance of all
or any portion of Lender's claim(s) for repayment of the
Obligations of the other Borrowers under Section 502 of the
Bankruptcy Code, or (viii) any other circumstance which might
constitute a legal or equitable discharge or defense of a
guarantor or of the other Borrowers. With respect to each
Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to
loans or other extensions of credit made to the other Borrowers
hereunder, such Borrower waives, until the Obligations shall have
been paid in full and the Loan Agreement shall have been
terminated, any right to enforce any right of subrogation or any
remedy which Lender now has or may hereafter have against any
Borrower, any endorser or any guarantor of all or any part of the
Obligations, and any benefit of, and any right to participate in,
any security or collateral given to Lender to secure payment of
the Obligations or any other liability of the Borrowers to
Lender, whether any such right arises by way of suretyship or
otherwise.
Upon any Event of Default, Lender may, at its sole election,
proceed directly and at once, without notice, against any
Borrower to collect and recover the full amount, or any portion
of the Obligations, without first proceeding against any other
Borrower or any other person, or against any security or
collateral for the Obligations. Each Borrower consents and
agrees that Lender shall not be under any obligation to xxxxxxxx
any assets in favor of such Borrower or against or in payment of
any or all of the Obligations.
9.10 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance
with the laws of the State in which the office of Lender set
forth in Section 10.6(a) below is located.
9.11 Agency of Xxxxxxx Pharmaceuticals, Inc. for each other
Borrower.
-------------------------------------------------------
--------
Each of the other Borrowers appoints Xxxxxxx Pharmaceuticals,
Inc. as its agent for all purposes relevant to this Agreement,
including (without limitation) the giving and receipt of notices
and the execution and delivery of all documents, instruments and
certificates contemplated herein and all modifications hereto.
Any acknowledgment, consent, direction, certification or other
action which might otherwise be valid or effective only if given
or taken by all of the Borrowers or by a Borrower other than
Xxxxxxx Pharmaceuticals, Inc., acting singly, shall be valid and
effective if given or taken only by Xxxxxxx Pharmaceuticals,
Inc., whether or not any of the other Borrowers joins therein.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: $3,000,000.00
(b) Gross Availability Formulas:
Eligible Accounts Percentage
(applicable to each Borrower): 45%
Eligible Inventory Percentages
(applicable to each Borrower):
Finished Goods 40%
Raw Materials 40%
(c) Inventory Sublimit(s): $1,000,000 in the aggregate
with respect to all advances against Eligible
Inventory, but not to exceed at any given time (i) 250%
of all outstanding advances against Eligible Accounts,
or (ii) $100,000 against Eligible Inventory consisting
of raw materials.
(d) Maximum days after Invoice Date for Eligible Accounts:
90 days.
(e) Minimum Borrowing: $750,000 during the first Loan
Year and $1,000,000 for each Loan Year thereafter, as
more fully provided in Section 2.1(g) hereof.
10.2 Term Loan: Not applicable.
10.3 Accommodations: Not applicable.
10.4 Interest, Fees & Charges:
(a) Interest Rate: Prime Rate (as defined in Section
3.1(b) hereof) plus 2.25% per annum
(b) Facility Fee: (i) $15,000, payable in full out of the
initial advances to be made to Borrowers hereunder, and
(ii) $30,000 payable in full at each anniversary of the
Closing Date during the initial Term of this Agreement,
which Facility Fee for the initial Term of this
Agreement shall be fully earned as of the Closing Date.
The Facility Fee for each renewal Term of this
Agreement is $60,000, $30,000 of which is payable on
the first day of each renewal Term (the "RENEWAL DATE")
and $30,000 is payable on the first anniversary of the
Renewal Date. The Facility Fee for each renewal Term
is fully earned as of the Renewal Date of each Term and
payment of the Facility Fee for the initial Term and
each renewal Term is secured by the Collateral.
(c) Account Servicing Fee: Not applicable.
(d) Unused Line Fee: per annum 0.5%
(e) Field Examination per diem $650
10.5 Financial Covenants:
(a) Working Capital: Not applicable.
(b) Net Worth: Not applicable.
(c) Capital Expenditures: per fiscal year Not applicable,
10.6 (a) Lender's Office: 00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(b) Lender's Bank: Bank of America Illinois
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(c) Borrower: (i) Xxxxxxx Pharmaceuticals, Inc., a New
Jersey corporation ("Xxxxxxx")
(ii) Xxxx Dermatologics, Inc., a New York
corporation ("Xxxx")
(iii) Xxxxxxx Pharmaceuticals (Canada),
Inc., a Canadian corporation
(iv) Xxxxxxx Pharmaceuticals Overseas, Ltd.,
a U.S. Virgin Islands corporation
(d) Borrower's Chief
Executive Office: (i) 000 Xxxxx 00 Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
(e) Locations of Eligible
Inventory Collateral: (i) 000 Xxxxx 00 Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
(ii) 00 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
(iii) 00 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx
(iv) c/o DDN/Obergfel
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
(v) 000 Xxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
(f) Borrower's Other
Offices and Locations
of Collateral: (i) 000 Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxx Xxxxxx, Xxxxxxxx 00000
(ii) c/o Altaire Pharmaceuticals
00 Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxx Xxxxxx, Xxx Xxxx 00000
(iii) c/o Xxxxx Last, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx Xxxxxx, Xxx Xxxx 00000
(iv) c/o Amide Pharmaceuticals, Inc.
000 Xxxx Xxxx xxxxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
(v) c/o Denison Pharmaceuticals
60 Xxxxxx Xxxx
Pawtucket, Providence County, Rhode Island 02862
(vi) c/o XX Xxxxxx Labs
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx Xxxxxx, Xxx Xxxx, 00000
(vii) c/o KV Pharmaceuticals
0000 Xxxxx Xxxxxx Xxxx
Xx. Xxxxx, Xx. Xxxxx Xxxxxx, Xxxxxxxx 00000
(viii) c/o Hi Tech Pharmacal
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx Xxxxxx, Xxx Xxxx 00000
(ix) c/o Lini, Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
(x) c/o Packaging Coordinators
K Street & Erie Avenue
Philadelphia, Philadelphia County, Pennsylvania 19124
(xi) c/o Phoenix Labs
000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000
(xii) c/o Xxxx-Xxxx, Inc.
000 Xxxxxx Xxxxxx
Xxxxx Xxxxxxxxxx, Xxx Xxxxxx 00000
(xiii) c/o Thames Pharmacal
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx Xxxxxx, Xxx Xxxx 00000
(xiv) c/x X Xxxxxxx & Co.
0000 Xxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
(g) Borrower's Trade
Names for Invoicing: Kenwood Laboratories
IN WITNESS WHEREOF, Borrower and Lender have duly
executed this Agreement this ___ day of _______, 1997.
Lender:
THE CIT GROUP/CREDIT FINANCE, INC.
By:_____________________________
Title:__________________________
Borrower:
XXXXXXX PHARMACEUTICALS, INC.
By:_____________________________
Title:__________________________
XXXX DERMATOLOGICS, INC.
By:_____________________________
Title:__________________________
XXXXXXX PHARMACEUTICALS (CANADA), INC.
By:_____________________________
Title:__________________________
XXXXXXX PHARMACEUTICAL OVERSEAS, LTD.
By:_____________________________
Title:__________________________
SCHEDULE A
PERMITTED LIENS
