WAIVER AND AMENDMENT NO. 3
TO
LOAN AND SECURITY AGREEMENT
THIS WAIVER AND AMENDMENT NO. 3 ("Waiver and Amendment") is entered into as
of June 19, 2000, by and among LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LaSalle") and the other financial institutions listed on the
signature lines hereto (collectively, "Lenders"), LaSalle as agent for Lenders
(in such capacity, "Agent") and XXXXXXX PHARMACEUTICALS, INC., a Delaware
corporation, with its principal office at 000 Xxxxx 00X, Xxxxxxxxx, Xxx Xxxxxx
00000 and XXXX DERMATOLOGICS, INC., a New York corporation, with its principal
office at 000 Xxxxx 00X, Xxxxxxxxx, Xxx Xxxxxx 00000 (each a "Borrower" and
jointly and severally, "Borrowers").
BACKGROUND
Borrowers, Agent and Lenders are parties to a Loan and Security Agreement
dated as of April 7, 1999 (as amended, supplemented or otherwise modified from
time to time, the "Loan Agreement") pursuant to which Agent and Lenders provide
Borrowers with certain financial accommodations.
Borrowers have requested that Agent and Lenders (i) waive certain Events of
Default that have occurred and (ii) amend the Loan Agreement, and Agent and
Lenders are willing to do so on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Borrowers by Agent and/or
Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Loan Agreement.
2. Waiver. Subject to satisfaction of the conditions precedent set forth
in Section 4 below, Agent and Lenders hereby waive the Events of Default that
have occurred as a result of the non-compliance of Xxxxxxx and its Subsidiaries
with (a) Paragraph 14(n)(i) of the Loan Agreement solely for the fiscal quarter
ending March 31, 2000, but only to the extent that the Tangible Net Worth of
Xxxxxxx and its Subsidiaries at the end of such fiscal quarter was not less than
negative One Hundred Fifty Five Thousand Dollars (-$155,000), (b) Paragraph
14(n)(ii) of the Loan Agreement solely for the fiscal quarter ending March 31,
2000, but only to the extent that the Interest Coverage Ratio of Xxxxxxx and its
Subsidiaries at the end of such fiscal quarter was not less than (-15.85) to
1.00, (c) Paragraph 14(n)(iii) of the Loan Agreement solely for the fiscal
quarter ending March 31, 2000, but only to the extent that the Debt Service
Coverage Ratio of Xxxxxxx and its Subsidiaries at the end of such fiscal quarter
was not less than (-30.7) to 1.00 and (d) Paragraph 14(n)(vi) of the Loan
Agreement solely for the fiscal quarter ending March 31, 2000, but only to the
extent that the Minimum EBITDA of Xxxxxxx and its Subsidiaries at the end of
such fiscal quarter was not less than negative Three Million Eight Hundred Sixty
Five Thousand Dollars(-$3,865,000).
3. Amendment to Loan Agreement. Subject to satisfaction of the conditions
precedent set forth in Section 4 below,
(a) The following definition in Section 1 of the Loan Agreement is
deleted in its entirety:
"Interest Coverage Ratio"
(a) The following definitions in Section 1 of the Loan Agreement are
amended in their entirety to provide as follows:
""Debt Service Coverage Ratio" shall mean, with respect to any
applicable fiscal period, the following for Borrowers on a consolidated basis:
the ratio of (A) EBITDA, minus taxes, minus non-financed Capital Expenditures
and any non-financed expenditure incurred in connection with the acquisition of
New Trademarks made during such period, to (B) current principal maturities of
long term debt and capitalized leases paid or scheduled to be paid during such
period, plus any prepayments of indebtedness owed to any Person (except trade
payables and revolving loans) and paid during such period, plus interest expense
deducted from net income for such period."
""EBITDA" shall mean, with respect to any applicable fiscal
period, the following for Xxxxxxx and its Subsidiaries on a consolidated basis,
each calculated for such period: net income before taxes for such period
(excluding pre-tax gains or losses on the sale of assets (other than the sales
of Inventory in the ordinary course of business) and excluding other pre-tax
extraordinary gains or losses) plus interest expense, depreciation, amortization
and other non-cash charges (including the non-cash charge in the amount of
$3,897,000 solely for the fiscal quarters ending June 30, 2000, September 30,
2000 and December 31, 2000 which was incurred as the result of the write down
of the Deconamine trademark in the fiscal quarter ended March 31, 2000) deducted
in determining net income for such period, minus interest income calculated in
determining net income for such period.
""Acquisition Loan Commitment" shall mean the sum of $1,500,000."
""Revolving Loan Commitment" shall mean the sum of $3,500,000."
""Total Credit Facility" shall mean the sum of $5,000,000."
(b) Section 1 of the Loan Agreement is amended to include the
following definition in its appropriate alphabetical place:
""Cash Flow Projections" shall have the meaning specified in
paragraph 11(c)(i) hereof."
(c) Paragraph 3(a) of the Loan Agreement is amended in its entirety to
provide as follows:
"(a) Mandatory Prepayments. If any Borrower sells any Trademarks,
or if any Borrower sells any real property subject to a Mortgage or if
any of the Collateral is damaged, destroyed or taken by condemnation,
Borrowers shall pay to Agent, for its benefit and for the ratable
benefit of Lender, unless otherwise specifically provided herein or
otherwise agreed to by Agent, as and when received by Borrowers and as
a mandatory prepayment of the Acquisition Loans to be applied against
the last maturing installments of principal thereof, in the inverse
order thereof (or, at Agent's option, such of the other Liabilities
of Borrowers as Agent may elect), a sum equal to the proceeds (net of
reasonable expenses incurred directly in connection with any such
sale) received by Borrowers from (i) such sale or (ii) such damage,
destruction or condemnation."
and Sub-Paragraphs 3(a)(i) and (ii) of the Loan Agreement are deleted in their
entirety.
(d) Paragraph 5(a) of the Loan Agreement is amended in its entirety to
provide as follows:
"(a) Rates of Interest. Interest accrued on all Loans shall be
due on the earliest of (i) the first day of each month (for the
immediately preceding month), computed through the last calendar day
of the preceding month, (ii) the occurrence of an Event of Default
in consequence of which Required Lenders elect to accelerate the
maturity and payment of the Liabilities, or (iii) termination of this
Agreement pursuant to paragraph 12 hereof. Except as otherwise
provided in paragraph 5(c) hereof, interest shall accrue on: (1)
the unpaid principal balance of the Acquisition Loans made to
Borrowers outstanding at the end of each day at a fluctuating rate per
annum equal to two and one-half per cent (2.5%) above the Prime Rate
and (2) the principal amount of the Revolving Loans made to Borrowers
outstanding at the end of each day at a fluctuating rate per annum
equal to one and one-half per cent (1.5%) above the Prime Rate. The
rate of interest payable on the Loans shall increase or decrease by an
amount equal to any increase or decrease in the Prime Rate, effective
as of the opening of business on the day that any such change in the
Prime Rate occurs. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, the principal amount of
all Loans shall bear interest on demand at a rate per annum equal to
(a) with respect to the Acquisition Loans, the rate of interest then
in effect under paragraph 5(a)(1) plus two percent (2%) and (b) with
respect to Revolving Loans, the rate of interest then in effect
under paragraph 5(a)(2) plus two percent (2%)."
(e) Paragraph 11(c)(i) of the Loan Agreement is amended in its
entirety to provide as follows:
"(i) statements of cash flow of Xxxxxxx and its Subsidiaries on a
consolidated basis for the period from the beginning of the then
current Fiscal Year of Borrowers to the end of such fiscal quarter
which, in each instance, are satisfactory to Agent in all respects
("Cash Flow Projections"),"
(f) Paragraph 14(k) of the Loan Agreement is amended in its entirety
to provide as follows:
"(k) such Borrower shall not make any (i) investment in any
Person, whether in cash, securities or other property of any kind,
other than direct obligations of the United States; or (ii) loans or
advances to any Person."
(g) Paragraph 14(n)(i) of the Loan Agreement is amended in its
entirety to provide as follows:
"(i) Consolidated Tangible Net Worth. Xxxxxxx and its
Subsidiaries, on a consolidated basis, shall maintain as of the end of
each fiscal quarter after the fiscal quarter ending March 31, 2000 a
Tangible Net Worth of not less than the sum of (1) negative One
Hundred Fifty Five Thousand Dollars (-$155,000) and (2) an aggregate
amount equal to ninety percent (90%) of the net income after taxes of
Xxxxxxx and its Subsidiaries, on a consolidated basis, provided,
however, that such aggregate amount shall not be reduced by the amount
of any net loss before taxes of Xxxxxxx and its Subsidiaries, on a
consolidated basis, for any preceding fiscal quarter."
(h) Paragraph 14(n)(ii) of the Loan Agreement is amended in its
entirety to provide as follows:
"(ii) [Intentionally omitted.]"
(i) Paragraph 14(n)(iii) of the Loan Agreement is amended in its
entirety to provide as follows:
"(iii) Consolidated Debt Service Coverage Ratio. Xxxxxxx and its
Subsidiaries, on a consolidated basis, shall maintain as of the end of
the fiscal quarter ending December 31, 2000 and as at the end of each
fiscal quarter thereafter a Debt Service Coverage Ratio, calculated on
a rolling twelve-month basis for each twelve-month period ending on
the last day of each such fiscal quarter, of not less than 1.25 to
1.0."
(j) Paragraph 14(n)(vi) of the Loan Agreement is amended in its
entirety to provide as follows:
"(vi) Minimum EBITDA. Xxxxxxx and its Subsidiaries, on a
consolidated basis, shall maintain as of the end of each of the
following fiscal quarters EBITDA, calculated on a rolling twelve-month
basis for each twelve-month period ending on the last day of each
such fiscal quarter, of not less than the following:
For the Fiscal Quarter Ending Minimum EBITDA
----------------------------- --------------
6/30/00 (-$85,000)
9/30/00 $400,000
12/31/00 $2,400,000"
3/31/01 and as at the end of 90% of the Cash Flow
each fiscal quarter thereafter Projections of Xxxxxxx and its
Subsidiaries."
(k) A new paragraph 14(r) is inserted immediately after Paragraph
14(q) of the Loan Agreement and provides as follows:
"(r) Xxxxxxx and its Subsidiaries, on a Consolidated basis, shall
not incur a net loss (as determined under GAAP) of more than (i) Four
Million Eight Hundred Fifty Thousand Dollars ($4,850,000) for the six-
month period ending June 30, 2000, (ii) Four Million Five Hundred
Fifty Thousand Dollars ($4,550,000) for the nine-month period ending
September 30, 2000 and (iii) Two Million Five Hundred Thousand Dollars
($2,500,000) for the twelve-month period ending December 31, 2000."
(l) A new paragraph 14(s) is inserted immediately after Paragraph
14(r) of the Loan Agreement and provides as follows:
"(s) Borrowers shall maintain an Excess Availability of at least
Two Hundred Fifty Thousand Dollars ($250,000) at all times."
4. Conditions of Effectiveness. This Waiver and Amendment shall become
effective upon satisfaction of the following conditions precedent: Agent shall
have received (i) four (4) copies of this Waiver and Amendment executed by
Borrowers and Lenders and consented to by Guarantors and (ii) such other
certificates, instruments, documents, agreements and opinions of counsel as
may be required by Agent or its counsel, each of which shall be in form and
substance satisfactory to Agent and its counsel.
5. Representations and Warranties. Borrowers hereby represent and warrant
as follows:
(a) This Waiver and Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrowers and are enforceable
against Borrowers in accordance with their respective terms.
(b) Upon the effectiveness of this Waiver and Amendment, Borrowers
hereby reaffirm all covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agree that all
such covenants, representations and warranties shall be deemed to have been
remade as of the effective date of this Waiver and Amendment.
(c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Waiver and Amendment.
(d) Borrowers have no defense, counterclaim or offset with respect to
the Loan Agreement.
6. Effect on the Loan Agreement.
----------------------------
(a) Upon the effectiveness of Section 3 hereof, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended herein, the Loan Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Waiver and
Amendment shall not, except as expressly provided in Section 2, operate as a
waiver of any right, power or remedy of Agent or Lenders, nor constitute a
waiver of any provision of the Loan Agreement, or any other documents,
instruments or agreements executed and/or delivered under or in connection
therewith.
7. Governing Law. This Waiver and Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and shall be governed by and construed in accordance with the laws of
the State of Illinois.
8. Headings. Section headings in this Waiver and Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Waiver and Amendment for any other purpose.
9. Counterparts. This Waiver and Amendment may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute one and the same
agreement.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, this Waiver and Amendment has been duly executed as of
the day and year first written above.
XXXXXXX PHARMACEUTICALS, INC.
By:__________________________________
Name:
Title:
XXXX DERMATOLOGICS, INC.
By:___________________________________
Name:
Title:
LASALLE BUSINESS CREDIT, INC.
as a Lender and as Agent
By:___________________________________
Name:
Title
Consented and Agreed To:
Guarantors:
XXXXXXX PHARMACEUTICALS
OVERSEAS, LTD.
By:____________________________
Name:
Title:
XXXXXXX PHARMACEUTICALS
(CANADA) INC.
By:____________________________
Name:
Title:
