EXHIBIT 10.14
August 7, 1998
Pharmaceutical Formulations, Inc.
000 Xxxxxxxxxx Xxx.
Xxxxxx, Xxx Xxxxxx 00000
Re: Loan and Security Agreement, dated August 4, 1989, between The CIT
Group/Credit Finance, Inc., assignee of Fidelcor Business Credit
Corporation, and Private Formulations, Inc., predecessor by merger of
Pharmaceutical Formulations, Inc., ("Pharmaceutical") as amended by letters
dated February 16, 1990, April 9, 1991, August 21, 1991, March 6, 1992,
April 7, 1992, August 17, 1992, September 30, 1992, October 9, 1992, March
25, 1993, May 20, 1994, October 14, 1994, October 21, 1994, January 19,
1995, May 16, 1995, July 5, 1995, September 11, 1995, August 14, 1996,
January 23, 1997, April 8, 1997 and April, 1998 (the "Loan Agreement") and
all related security agreements, documents and instruments (collectively,
the "Financing Agreements")
Gentlemen:
You have requested and we have agreed to amend the Financing Agreements as set
forth below, effective as of the date hereof unless otherwise indicated.
Capitalized terms appearing below that are not defined below shall have the
meanings given in the Loan Agreement.
1. Section 3.3 of the Loan Agreement is hereby amended so as to read
in its entirety as follows:
"COLLATERAL HANDLING FEE. Borrower shall pay Lender annually,
commencing August 4, 1998 and on each August 4 thereafter during
the Term, a Collateral Handling Fee in the amount set forth in
Section 10.4(c)."
2. Section 3.4 of the Loan Agreement is hereby amended so as to read
in its entirety as follows:
"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 Term at the rate per annum set forth in Section
10.4(d), calculated upon the amount, if any, by which the Maximum
Credit exceeds the average outstanding daily principal balance
during the preceding month of all Revolving Loans, Accommodations
and any Term Loan."
3. Section 9.1 of the Loan Agreement is hereby amended so as to read
in its entirety as follows:
"TERM. This Agreement shall only become effective upon execution
and delivery by Borrower and Lender and shall continue in full
force and effect until August 4, 2001 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."
4. Section 9.2 of the Loan Agreement is hereby amended so as to read
in its entirety as follows:
"9.2 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 (i) one and one-half percent (1 1/2%) of
the Maximum Credit, as set forth in Section 10.1(a) hereof, if
the effective date of termination occurs on or prior to August 4,
1999; and (ii) one percent (1%) of the Maximum Credit if the
effective date of termination occurs after August 4, 1999 and on
or prior to August 4, 2000."
5. Section 10.1(a) of the Loan Agreement is hereby amended so as to
read in its entirety as follows:
"(a) Maximum Credit $25,000,000."
6. Section 10.1(b) of the Loan Agreement is hereby amended so as to
read in its entirety as follows:
"(b) Gross Availability Formulas:
Eligible Accounts Percentage: 85%
Eligible Inventory Percentages:
Primary Raw Materials 60%
Other raw materials 60%
Packaged finished goods 60%
Bulk finished goods 60%
Bottles and caps 35%
Gelatin capsules 60%."
7. Section 10.1(c) of the Loan Agreement is hereby amended so as to
read in its entirety as follows:
"(c) Sublimits for:
Walgreen Accounts $1,750,000
Eligible Inventory Whichever is less, $12,500,000
or 125% of the Accounts
Availability."
8. Section 10.3 of the Loan Agreement is hereby amended so as to read
in its entirety as follows:
"10.3 Accommodations:
(a) Lender's Charge for
Accommodations: 2% per annum
(b) Sublimit for
Accommodations: $1,000,000."
9. Section 10.4 of the Loan Agreement is hereby amended by adding the
following to the end thereof:
"(c) Collateral Handling Fee: $20,000 per annum
(d) Unused Line Fee: .20% per annum."
10. Section 10.4 of the Loan Agreement is hereby amended so as to read
in its entirety as follows:
"10.5 Financial Covenants:
(a) Net Worth:
As of the fiscal year end 6/30/99 $3,800,000
As of the fiscal year end 6/30/00 $4,800,000
As of the fiscal year end 6/30/01 $5,800,000
(b) Capital Expenditures:
During the period 7/l/98--6/30/99 $6,600,000
During the period 7/l/99--6/30/00 $6,100,000
During the period 7/l/00--6/30/01 $5,800,000
(c) Net Income: Not less than $150,000 per fiscal quarter and
not less than $1,000,000 per fiscal year."
11. The currently outstanding principal balance of the Third
Replacement Promissory Note, dated January 19, 1995, in the original principal
amount of $2,012,068, made payable by you and payable to us (the "Old Note") is
$570,000. We have concurrently herewith made an advance to you in the amount of
$630,000 (the "New Advance"). The New Advance, and the principal indebtedness of
$570,000 evidenced by the Old Note shall be evidenced by and payable in
accordance with the terms of the Fourth Replacement Promissory Note (the "New
Note"), in the original principal amount of $1,200,000, made by you on the date
hereof, which supersedes and replaces the Old Note. Accordingly, the terms "Term
Loan" and "Promissory Note" appearing in the Financing Agreements shall be
deemed to mean and include the New Note and the New Advance, and the New Advance
shall constitute an Obligation. You hereby affirm that accrued interest on the
Old Note is due and owing by you and shall be payable at the rate specified
therein through the date hereof and that accrued interest on the New Note on and
after the date hereof is due and owing by you and shall be payable by you as
accrued interest in accordance with the terms of the New Note. You hereby
consent to a new appraisal (the "Appraisal") of your machinery and equipment to
be performed on a walk-through basis by an appraiser acceptable to us, at your
expense. You understand and agree that notwithstanding the fact that the New
Advance is being made concurrently herewith in the amount of $630,000, the
results of the Appraisal may result in an adjustment to the amount of the Term
Loan if the then-outstanding amount of the Term Loan exceeds 80% of the auction
sale value of the eligible machinery and equipment as determined by the
Appraisal.
12. Section 2.1 of the Loan Agreement is hereby amended by adding the
following new sentence at the end of the first paragraph thereof, i.e., the
paragraph containing the definition of Revolving Loans:
"Revolving Loans may consist of Prime Rate Loans or Eurodollar
Rate Loans (as such terms are defined in Section 3.1A below),
subject to the limitations, however, set forth in this Agreement
in the case of Eurodollar Rate Loans."
13. The first and second sentences of Section 3.1(a) of the Loan
Agreement are hereby amended and restated in their entirety as follows:
"(a) Interest on the Revolving Loans 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 3.1A(d). The Interest Rate in
respect of Prime Rate Loans shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the
Prime Rate, effective as of the date of each such change."
14. Section 3 of the Loan Agreement is hereby amended by adding
thereto a new Section 3.6 as follows:
"3.6 (a) Borrower may from time to time request that Lender make
Eurodollar Rate Loans or that Prime Rate Loans be converted to
Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from
Borrower shall specify W the amount of the Prime Rate Loans (if
any) which will constitute Eurodollar Rate Loans or the amount of
the Eurodollar Rate Loan requested to be made or continued
(subject to the limits set forth below) and (y) the Interest
Period to be applicable to such Eurodollar Rate Loans. A request
for a borrowing of a Eurodollar Rate Loan which would exceed the
limitations set forth in this Section 3.6(a) or failure of
Borrower to request that an existing Eurodollar Rate Loan be
continued as a Eurodollar Rate Loan shall be deemed and shall in
each case constitute Borrower's election that such proposed
borrowing shall be a Prime Rate Loan; and failure by Borrower to
make such election described in clause (y) of the immediately
preceding sentence shall be deemed and shall constitute
Borrower's election that the Interest Period with respect to the
proposed borrowing shall be a one (1) month period. Subject to
the terms and conditions contained herein, three (3) Business
Days after receipt by Lender of such a request from Borrower,
Lender shall make such requested Eurodollar Rate Loan, such Prime
Rate Loans shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may be,
PROVIDE, THAT, (i) no Event of Default, or event which with
notice or passage of time or both would constitute an Event of
Default exists or has occurred and is continuing, (ii) no party
hereto shall have sent any notice of termination or non-renewal
of this Agreement, (iii) Borrower shall have complied with such
customary procedures as are established by Lender and specified
by Lender to Borrower from time to time for requests by Borrower
for Eurodollar Rate Loans, (iv) no more than four (4) Interest
Periods may be in effect at any one time, M the aggregate amount
of the Eurodollar Rate Loans must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess
thereof, (vi) after giving effect to any Eurodollar Rate Loan at
any time requested by Borrower, the aggregate principal amount of
all Eurodollar Rate Loans then outstanding shall not exceed the
lower of (A) $20,000,000 and (B) eighty (80%) percent of the
lowest principal amount of the Revolving Loans which it is
anticipated will be outstanding during the applicable Interest
Period, as determined by Lender (but with no obligation of Lender
to make such Revolving Loans, except as provided for in this
Agreement), and (vii) Lender shall have determined that the
Interest Period or Eurodollar Rate is available to Lender through
the Reference Bank and can be readily determined as of the date
of the request for such Eurodollar Rate Loan by Borrower. Any
request by Borrower that Lender make a Eurodollar Rate Loan, to
convert Prime Rate Loans to Eurodollar Rate Loans or to continue
any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United
States Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market to fund any Eurodollar Rate
Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the
Eurodollar Rate Loans.
(b) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest
Period, unless Lender has received and approved a request to
continue such Eurodollar Rate Loan at least three (3) Business
Days prior to such last day in accordance with the terms hereof.
Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event
that (i) an Event of Default or event which, with notice or
passage of time, or both, would constitute an Event of Default,
shall exist, (ii) this Agreement shall terminate or not be
renewed, or (iii) the aggregate principal amount of the Prime
Rate Loans which have previously been converted to Eurodollar
Rate Loans and Eurodollar Rate Loans made or continued, as the
case may be, at the beginning of an Interest Period shall at any
time during such Interest Period exceed the sum of the then
outstanding principal amount of the Term Loan (if any) plus the
Revolving Loans then available to Borrower under Section 2
hereof. Borrower shall pay to Lender, upon demand by Lender (or
Lender may, at its option, charge any loan account of Borrower)
any amounts required to compensate Lender, the Reference Bank or
any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person, as
a result of the conversion of Eurodollar Rate Loans to Prime Rate
Loans pursuant to any of the foregoing."
15. The Loan Agreement is hereby amended by adding thereto a new
Section 3.7 as follows:
"3.7 CHANGES IN LAWS AND INCREASED COSTS OF LOANS.
(a) Notwithstanding anything to the contrary contained
herein, all Eurodollar Rate Loans shall, upon notice by Lender to
Borrower, convert to Prime Rate Loans in the event that W any
change in applicable law or regulation (or the interpretation or
administration thereof) shall either (A) make it unlawful for
Lender, Reference Bank or any participant to make or maintain
Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (2) shall result in
the increase in the costs to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans by
an amount deemed by Lender to be material, or (C) reduce the
amounts received or receivable by Lender in respect thereof by an
amount deemed by Lender to be material or (ii) the cost to
Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans shall otherwise increase by
an amount deemed by Lender to be material. Borrower shall pay to
Lender, upon demand by Lender (or Lender may, at its option,
charge any loan account of Borrower) any amounts required to
compensate Lender, the Reference Bank or any participant with
Lender for any loss (including loss of anticipated profits), cost
or expense incurred by such person as a result of the foregoing,
including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A certificate of
Lender setting forth the basis for the determination of such
amount necessary to compensate Lender as aforesaid shall be
delivered to Borrower and shall be conclusive, absent manifest
error.
(b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the
last of the applicable Interest Period (whether pursuant to
acceleration, upon maturity or otherwise), including any payments
pursuant to the application of collections under Section 5 or any
other payments made with the proceeds of Collateral, Borrower
shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required
to compensate Lender, the Reference Bank or any participant with
Lender for any additional loss (including loss of anticipated
profits), cost or expense incurred by such person as a result of
such prepayment or payment, including, without limitation, any
loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such person
to make or maintain such Eurodollar Rate Loans or any portion
thereof."
16. The Loan Agreement is hereby amended by adding thereto new Section
3.1A as follows:
"SECTION 3.1A. ADDITIONAL DEFINITIONS
(a) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday, or other day on which commercial banks are authorized or
required to close under the laws of the State of New York, and a
day on which the Reference Bank and Lender are open for the
transaction of business, except that if a determination of a
Business Day shall relate to any Eurodollar Rate Loans, the term
Business Day shall also exclude any day on which banks are closed
for dealings in dollar deposits in the London interbank market or
other applicable Eurodollar Rate market.
(b) "EURODOLLAR RATE LOANS" shall mean any Revolving Loans
or portion thereof on which interest is payable based on the
Eurodollar Rate in accordance with the terms hereof.
(c) "EURODOLLAR RATE" shall mean with respect to the
Interest Period for a Eurodollar Rate Loan, the interest rate per
annum equal to the arithmetic average of the rates of interest
per annum (rounded upwards, if necessary, to the next
one-sixteenth (1/16) of one (1%) percent) at which Reference Bank
is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by
Borrower and approved by Lender) on or about 9:00 a.m. (New York
time) two (2) Business Days prior to the commencement of such
Interest Period in amounts substantially equal to the principal
amount of the Eurodollar Rate Loans requested by and available to
Borrower in accordance with the Agreement, with a maturity of
comparable duration to the Interest Period selected by Borrower.
(d) "INTEREST PERIOD" shall mean for any Eurodollar Rate
Loan, a period of approximately one (1), two (2), three (3) or
six (6) months duration as Borrower may elect, the exact duration
to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; PROVIDED, that, (i) any
Interest Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business
Day, unless such Business Day falls in another calendar month, in
which case such Interest Period shall end on the next preceding
Business Day; (ii) any Interest Period that begins on the last
Business Day of a calendar month or on a day for which there is
no numerically corresponding day in the calendar month or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall end on
the last Business Day of the applicable calendar month; and (iii)
Borrower may not elect an Interest Period which will end after
the last day of the then-current Term of this Agreement.
(e) "INTEREST RATE" shall mean, as to Prime Rate Loans, a
rate per annum of the Prime Rate less three-quarters (0.75%)
percent and, as to Eurodollar Rate Loans, a rate of two and
one-eighth (2.125%) percent per annum in excess of the Eurodollar
Rate (based on the Eurodollar Rate applicable for the Interest
Period selected by Borrower as in effect three (3) Business Days
after the date of receipt by Lender of the request of Borrower
for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate
previously quoted to Borrower).
(f) "PRIME RATE LOANS" shall mean any Revolving Loans or
portion thereof on which interest is payable based on the Prime
Rate in accordance with the terms hereof.
(g) "REFERENCE BANK" shall mean The Chase Manhattan Bank,
New York, New York, or its successor, or such other bank as
Lender may from time to time designate."
17. Section 10.4(a) of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
"[Intentionally Deleted.]"
We have agreed to the amendments set forth above in consideration of your
agreement to pay to us a facility fee in the amount of $75,000, which facility
fee is in addition to the facility fees heretofore charged to your account in
connection with other requests for changes in your accommodations, and which
shall be deemed fully earned, and may be charged to your account with us, on the
date hereof.
Except as herein above specifically provided, the Financing Agreements shall
remain unmodified and in full force and effect.
This amendment shall be null and void if not executed on or before August 7,
1998.
Please signify your agreement with the foregoing by signing and returning to us
the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/CREDIT FINANCE, INC.
By: /S/ XXXXX XXXXX
Title: VICE PRESIDENT
AGREED:
PHARMACEUTICAL FORMULATIONS, INC.
By: /S/ XXXXX XXXXXXXX
Title: VICE PRESIDENT/FINANCE
CONFIRMED:
EXTRA PARENT CORP.
By: /S/ XXXXX XXXXXXXX
Title: VICE PRESIDENT/FINANCE
