UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report December 23, 1996
(Date of earliest event reported)
BRADLEY PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 33-36120 22-2581418
(State or other jurisdiction (Commission File Number) (IRS
Employer
of incorporation)
Identification Number)
383 Route 46 West, Fairfield, NJ
07004
(Address of principal executive offices)
(Zip Code)
201-882-1505
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
BRADLEY PHARMACEUTICALS, INC.
ITEM 5. OTHER EVENTS
On December 23, 1996, Bradley Pharmaceuticals, Inc. (the
"Registrant"), a New Jersey corporation, entered into Amendment Number 5
("Amendment No. 5") to the Asset Purchase Agreement (the "Purchase
Agreement"), dated November 10, 1993, by and between the Registrant and
Berlex Laboratories, Inc. ("Berlex"), a Delaware corporation, as amended by
Amendment Number One, dated November 19, 1993, Amendment Number
Two, dated December 9, 1993, by letter agreement, dated December 11,
1995 and Amendment Number Four, dated January 6, 1996. Amendment
No. 5 provides, among other things, that the Registrant make payments of
$250,000 on each of December 23, 1996 (the "Effective Date"), December
31, 1996, January 30, 1997 and February 18, 1997, $700,000 due on
March 17, 1997; $1.0 million due on May 15, 1997; and $100,000 per
month due June 15, 1997 through January 15, 1998. Payments of
$500,000 have been made to Berlex representing the December 23, 1996
and December 31, 1996 payments.
In addition, the Registrant issued to Berlex 1,000,000 Class A shares,
approximately 13% of the new public float of 7.7 million shares, which the
Registrant is required to use its best efforts to cause to be registered with
the Securities and Exchange Commission. A copy of Amendment No. 5 is
filed as Exhibit 10.1 hereto.
The Registrants and its subsidiary, Doak Dermatologics, Inc. also
granted Berlex a security interest in all of the Registrant and Doak's account
receivables to secure the payments of the first $1.7 million in payments and
executed a Confession of Judgment in the event the Registrant defaults in
timely making any of such $1.7 million in payments. The Security
Agreement is filed as Exhibit 10.2 and the Confession of Judgment is filed
as Exhibit 10.3.
It is the intention of the Registrant to use funds from operations
and/or additional financing from outside sources to fund the Berlex
obligation. The Registrant has no agreements to obtain such additional
financing but intends to use its best efforts to obtain additional financing.
There can be no assurance that the Registrant will be able to obtain such
additional financing, or if such additional financing is available, whether
the terms of such additional financing will be on terms acceptable to the
Registrant.
2
BRADLEY PHARMACEUTICALS, INC.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
7.1 Amendment No. 5 to Asset Purchase Agreement, dated
as of December 23, 1996, between Bradley
Pharmaceuticals, Inc. and Berlex Laboratories, Inc.
7.2 Security Agreement and subsidiary Security Agreement,
dated as of December 23, 1996, between Bradley
Pharmaceuticals, Inc., and Doak Dermatologics, Inc. and
Berlex Laboratories, Inc.
7.3 Confession of Judgement from Bradley Pharmaceuticals,
Inc. and Doak Dermatologics, Inc. with respect to the
March 1997 payment.
7.4 Bradley Pharmaceuticals, Inc. press release dated
December 23, 1996.
3
BRADLEY PHARMACEUTICALS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BRADLEY PHARMACEUTICALS, INC.
Date: January 9, 1997 By:/s/ Daniel Glassman
Name: Daniel Glassman
Title: Chairman & Chief Executive Officer
4
BRADLEY PHARMACEUTICALS, INC.
EXHIBITS INDEX
Exhibit Description Page
10.1 Amendment No. 5 to Asset Purchase 6
Agreement, dated as of December 23, 1996,
between Bradley Pharmaceuticals, Inc. and
Berlex Laboratories, Inc.
10.2 Security Agreement and subsidiary Security 27
Agreement, dated as of December 23, 1996,
between Bradley Pharmaceuticals, Inc., and Doak
Dermatologics, Inc. and Berlex Laboratories, Inc.
10.3 Confession of Judgement from Bradley 71
Pharmaceuticals, Inc. and Doak Dermatologics,
Inc. with respect to the March 1997 payment.
99.1 Bradley Pharmaceuticals, Inc. press release 72
dated December 23, 1996.
5
AMENDMENT NO. 5 TO ASSET PURCHASE AGREEMENT (this
"Amendment") dated as of December _, 1996, between BRADLEY
PHARMACEUTICALS, INC. , a New Jersey corporation ("Purchaser"),
and BERLEX LABORATORIES, INC., a Delaware corporation ("Seller",
and, together with Purchaser, the "Parties") .
W I T N E S S E T H:
WHEREAS, Purchaser and Seller previously entered into an Asset
Purchase Agreement dated as of November 10, 1993 as amended by
Amendment Nos. I and 2 thereto, by letter agreement dated December
11, 1995 and by Amendment No. 4 thereto dated as of January 5, 1996
(Amendment No. 4) (collectively, the "Original Asset Purchase
Agreement") , and desire to further amend the Original Asset Purchase
Agreement as provided herein (the Original Asset Purchase Agreement
as amended hereby and as may be further amended, restated,
supplemented or otherwise modified from time to time is hereinafter
referred to as the "Agreement).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
respective agreements hereinafter set forth, the Parties agree as follows:
1. Defined Terms.
(a) Capitalized terms used and not defined herein and defined in the
Original Asset Purchase Agreement shall have the meanings ascribed to
such terms in the Original Asset Purchase Agreement. When used in the
Agreement, the term "Agreement means the Agreement as defined
above.
(b) The following definitions shall be added to Section
1.01 of the Agreement:
"Amendment No. 5" shall mean Amendment No. 5 to this Agreement.
"Shares" shall mean one million (1,000,000) shares of the class A
common capital stock of Purchaser to be issued by Purchaser to Seller
pursuant to Amendment No. 5.
(c) The following definitions contained in section 1.01 of the Agreement
shall be amended to read in their entireties as follows:
"Security Agreement" shall mean the Security Agreement dated as of
the date hereof, executed by
Purchaser in favor of Seller, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Subsidiary Security Agreement" shall mean the Security
Agreement dated as of the date hereof, executed by Doak in favor of
Seller, and any other security agreement executed after the date hereof
by a Subsidiary in favor of Seller, as each may be amended, restated,
supplemented or otherwise modified from time to time."
(d) The term "Effective Date" shall mean the date on which this
Agreement is effective and all of the conditions precedent to the
effectiveness of this Amendment as described at Section 9 hereof, shall
have occurred.
2. Payment. Sections 2.03(g), (h) and (i) of the Original Asset
Purchase Agreement are hereby amended and restated in their entirety
as follows:
(g) Purchaser shall pay and deliver to Seller:
(i) the sum of $1.7 million which shall be paid via wire transfer
of immediately available funds to an account designated by Seller as
follows:
(A) Two Hundred Fifty Thousand Dollars ($250,000) shall be
paid on the Effective Date;
(B) Two Hundred Fifty Thousand Dollars ($250,000) shall be
paid on December 31, 1996;
(C) Two Hundred Fifty Thousand Dollars ($250,000) shall be
paid on January 30, 1997;
(D) Two Hundred Fifty Thousand Dollars ($250,000) shall be
paid on February 18, 1997; and
(E) Seven Hundred Thousand Dollars ($700,000) shall be paid
on March 17, 1997 (collectively the "March, 1997 Payment").
(ii) certificates representing the Shares which shall be delivered
to Seller as soon as reasonably practicable following the
Effective Date (evidencing 50,000 shares each, i.e. 20 certificates) but
in no event later than four (4) Business Days thereafter;
-6-
(iii) the sum of $1 million which shall be paid on May 15, 1997 via wire
transfer of immediately available funds to an account designated by
Seller; and
(iv) the sum of $800,000 which shall be paid in monthly installments of
$100,000 each on the fifteenth day of each month (the "Monthly
Payments") commencing June 15, 1997 and ending January 15, 1998
via wire transfer of immediately available funds to an account designated
by Seller provided, however; that if such day is not a Business Day, on
the Business Day immediately following such day.
Ninety-one (91) days after the payment in full by Purchaser in
accordance with (a) subsection (g)(i), Seller's security interest in the
Purchaser Collateral and the Subsidiary Collateral shall terminate, and (b)
subsections (g) (iii) and (g) (iv), Seller's security interest in the
Collateral described in the Trademark Security Agreement shall terminate;
provided, that any such security interest shall be 'terminated on a day
during such ninety-one (91) day period with respect to any collateral
that is pledged by Purchaser to a bona fide lender as collateral for a loan
to be made by such lender to Purchaser or Subsidiary on such day (pro-
vided that Seller is provided with reasonably acceptable written evidence
that such loan will be 'made on such day). Seller shall take all steps
necessary or desirable to effect a release of such security interests.
Purchaser hereby acknowledges that the Shares have value as of the
date hereof and are a material part of the consideration to be received
by Seller.
(h) his section intentionally left blank;
(I) his section intentionally left blank;"
The provisions of Section 2.03(1) of the Original Asset Purchase
Agreement is hereby amended and restated in its entirety as follows:
"For all purposes of this Agreement (including, without limitation,
sections 11.01(i) and 11.02 of this Agreement), (a) Purchase Price
payment or Purchase Price payments or Purchase Price Payments shall
mean each of the payments required pursuant to each of clauses (g) (i),
(iii) and (iv) (totaling $3,500,000) and (b) the payments referred to in
clause (a) immediately preceding constitute part of the Purchase Price.
Unless otherwise stated in writing by Seller, the account designated by
Seller to which all Purchase Price payments and interest payments shall
be made is an account in the name of
-7-
Berlex Laboratories, Inc., Mellon Bank, Pittsburgh, PA, Account No.
#0009902, ABA #043000261."
3. Grace Period. The parties further agree that notwithstanding the
provisions of Section 11.01 of the Original Asset Purchase Agreement,
Purchaser's failure to make the payments described in Sections 2.03(g),
(iii) and (iv) shall not be an Event of Default of the Agreement unless and
until Purchaser shall fail to make all of such payments on or before
January 15, 1998. Purchaser's failure to make any of the payments
described at Section 2. 03 (g) (i) shall be an Event of Default of this
Agreement. In the event Purchaser falls to make one or more payments
on the dates described in Section 2.03 (g) (iii) and (iv) , Purchaser shall
have a cumulative period of ninety (90) days (the "Grace Period") during
which no interest shall be due to Seller. The Grace Period shall not
apply to the payments described under Subsection 2.03 (g) (i) . After
Purchaser has exhausted the Grace Period, Purchaser shall pay interest
to Seller at the Prime Rate plus two percent (2%) on that portion of the
payments with respect to which Purchaser shall have failed to made to
Seller on its due date. The period with respect to which interest shall
be due shall not include the Grace Period. For illustrative purposes only,
assume that the payment due on May 15, 1997 is not made until thirty
(30) days thereafter. Purchaser's failure to make such payment shall not
be deemed to be an Event of Default nor shall Purchaser be required to
make any payment of interest or late payment with respect thereto.
Assume further that the monthly payment due June 15, 1997 is not
made until sixty-two (62) days thereafter. Purchaser's failure to make
such payment shall not be deemed to be an Event of Default. Purchaser
shall, however, be required to pay interest to Seller at the Prime Rate
plus two percent (2%) of, the two (2) day period by which the payment
otherwise due on June 15, 1997 was late in excess of the sixty (60)
days remaining on the Grace Period. Purchaser shall not be required to
make any other payment of interest or late payment with respect to
such payments.
4. Restrictions on Transfer of Shares. Seller acknowledges that the Shares
cannot be sold or transferred except pursuant to an effective registration
statement under the Act as defined in Section 5 of this Amendment or
a valid exemption from such Registration.
Seller agrees that prior to Seller offering for sale, transferor
assignment some or all of the Shares in a private sale (which shall be
deemed to exclude sales pursuant to Rule 144) either through a sale on
NASDAQ or on a national securities exchange (an "open Market Sale")
or a sale at which the price per share is determined or to be determined
by an agreement, written or otherwise, between Seller and the
prospective buyer of such shares, not on NASDAQ or on a national
securities exchange (an "Agreed Upon Sale"), (Shares to be offered for
sale by Seller are herein referred to as the "Offered Shares"), Seller
shall provide
-8-
Purchaser with the opportunity to purchase the Offered Shares at the
Sales Price (herein defined). Purchaser shall exercise such opportunity
by making payment of cash to Seller within five Business Days from
Purchaser's receipt of the Sales Notice (herein defined) provided that
Purchaser shall, at Seller's request, provide prior to such payment
evidence reasonably satisfactory to Seller that (A) the purchase of such
Offered Shares by Purchaser will not constitute a purchase in violation
of applicable corporate or other applicable law and (B) there will not
occur within ninety-one (91) days after the date of such payment any
of the events described in Section 11.01(iv) or (v) hereof. In the event
Seller makes such a request, such five (5) Business Day period shall be
extended by such time as is reasonably required for Purchaser to comply
with (A) and (B) above (but in no event more than two (2) additional
Business Days). if Purchaser fails to pay for the Offered Shares within
five (5) Business Days (as the same may be extended) of Purchaser's
receipt of the Sales Notice, Seller may sell such Offered Shares during
the next thirty (30) days, in the case of an Agreed Upon Sale, or ninety
(90) days in the case of an Open Market Sale, free of any right
whatsoever of Purchaser to purchase the Offered Shares; provided
however, that the sale of the Offered Shares shall, on an Open Market
Sale, be made on NASDAQ or on a national securities exchange and in
the event of an Agreed Upon Sale be made at a price not less than the
Offer Price (as defined below) . In the event Seller does not sell the
offered Shares within such thirty (30) (or ninety (90)) day period, the
rights contained in this Section 4 shall continue to apply to any
proposed private sale by Seller of the Shares as if no Sales Notice had
been given. "Sales Price" means (i) in the case of an Open Market Sale,
the price per share which is equal to the average of the bid and asked
price published in the Wall Street. Journal on the
Business Day before the Sales Notice is sent by Seller to Purchaser (or
if there is no bid and asked price on such last Business Day, on the most
recent day on which a bid and asked price had been published in the
Wall Street Journal) or (ii) in the case of an Agreed Upon Sale, the price
per share at which Seller proposes to sell the offered Shares (the
"Offered Price"). The Sales Notice shall be a written notice entitling
Purchaser to purchase the Offered Shares within such five Business Day
period and may be sent to Purchaser by fax, overnight mail (by federal
express, DHL or some other similar service), personal delivery and/or
certified mail, return receipt requested and, in the case of an Agreed
Upon Sale, contain the price per share at which Seller proposes to sell
the offered Shares. Purchaser's right to buy the Offered Shares shall
not apply if the Purchaser's common stock is not listed on NASDAQ or
any national securities exchange. The only restrictive legend to be
included on the Shares shall be the following legend: "The shares of
Class A Common Stock represented by the Certificate have not been
registered under the Securities Act of 1933, and cannot be sold or
transferred unless and until they are so
-9-
registered, or unless an exemption is then available. Upon the request
of Seller, after the effectiveness of the Registration Statement, such
restrictive legend shall be removed from the Certificates then owned by
Seller. No buyer of any of the Shares shall have any obligation to
determine whether Seller has complied with the provisions of Section 4
hereof and no claim can be asserted against any such buyer in
connection therewith, provided that the preceding part of this sentence
shall not in any manner excuse any breach by Seller of its obligations to
comply with Section 4 hereof. Once the Shares are sold to a third
party, Purchaser shall have no rights under this Section 4 hereof with
respect to such transferred Shares.
5. Registration Rights.
5.1 Defined Terms. As used in this Section 5 the following terms shall
have the following respective meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations thereunder, all as
the same shall be in effect from time to time;
(b) "Commission" shall mean the Securities and Exchange Commission,
or any other federal agency at the time administering the securities laws;
(c) "Prospectus" shall mean any preliminary Prospectus and final
Prospectus (as such may be amended or supplemented) which
constitutes Part I of a Registration Statement filed with the Commission;
(d) "Registration Expenses"' shall mean all expenses arising out of or
related to the preparation, filing, amendment (s) and supplementing(s)
of a Registration Statement, provided, however, that Registration
Expenses shall not include underwriting commission, fees and discounts,
if any, attributable solely to the inclusion of Seller's shares in such
Registration Statement, and any legal fees and disbursements for
counsel to Seller;
(e) "Registration Statement" shall mean a registration statement filed by
the Purchaser with the Commission for a public offering and sale of
securities of the Purchaser.
5.2 Purchaser's Registration, (a) Purchaser agrees that at Purchaser's
sole expense, (i) Purchaser shall, no later than April 30, 1997, file on its
behalf and on behalf of Seller with respect to the Shares a registration
statement in accordance with the Act; and (ii) Purchaser shall use its
best efforts to cause
-10-
Such Registration Statement to be declared effective by the commission
as soon thereafter as reasonably practicable.
(b) In addition, whenever Purchaser proposes to register any of its Class
A Common Stock (or securities convertible into or exercisable for its
Class A Common Stock) under the Act for its own account or the
account of any stockholder of Purchaser (a "Piggyback Registration"),
Purchaser shall give prompt notice to Seller of its intention to effect
such a registration and, subject to the remainder of this subsection (b),
shall include in such registration all Shares with respect to which
Purchaser has received a written request from Seller (which request shall
specify the number of Shares for inclusion therein) within thirty (30)
days after receipt by Seller of Purchaser's notice. If a Piggyback
Registration involves an underwritten offering and if the managing
underwriter in good faith advises Purchaser (in writing) that in its opinion
the number of securities requested to be included in such Piggyback
Registration exceeds the number that can be sold in such offering
without. materially adversely affecting the marketability of such offering
or the price at which such Securities can be sold, then Purchaser shall
be required to include in such Piggyback Registration the maximum
number of shares that such underwriter advises can be included,
allocated pro rata on the basis on the number of shares each stockholder
(including Seller)and Purchaser requests be included in such registration.
5.3 Registration Procedures. With respect to Purchaser's obligations
under this Section 5, if the Purchaser is required to use its best efforts
to effect and/or continue the registration of the Shares under the Act
(whether in connection with a Piggyback Registration or otherwise), the
Purchaser shall:
(a) File with the commission a Registration Statement with respect to
such Shares and subject to Section 5.4(b) below, use its best efforts to
cause that Registration Statement to become and remain effective;
(b) As expeditiously as possible prepare and file with the Commission
any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary
to keep the Registration Statement effective for a period of not less than
twelve (12) months plus any delay described in Section 5.4(b), or
through January 15, 1999, whichever date is later and in either case
plus a period equal to the Delay Period (as herein defined);
(c) As expeditiously as possible furnish to Seller such reasonable
numbers of copies of the Prospectus, including a preliminary prospectus,
in conformity with the requirements of the Act, and such other
documents as the Seller may reasonably request
-11-
in order to facilitate the sale or other disposition of the Shares owned by
the Seller;
(d) As expeditiously as possible use its best efforts to register or qualify
the Shares covered by the Registration Statement under the securities
or Blue Sky laws of such states or jurisdictions as the Seller or the
managing underwriter (or sole underwriter, as appropriate) deems
appropriate, and do any and all other acts and things that may be
necessary or desirable to enable the Seller to consummate the public
sale or other disposition in such jurisdictions of the Shares owned by the
Seller (including, without limitation, causing all Shares to be listed on
NASDAQ or on each securities exchange on which similar securities
issued by Purchaser are then listed) ; provided, however, that the
Purchaser shall not be required in connection with this Subsection 5.3(d)
to qualify as a foreign corporation or execute a general consent to
service of process in any jurisdiction; and
(e) Enter into an underwriting agreement with the underwriters
designated pursuant to Section 5.4 hereof containing customary terms
including representations, covenants, indemnifications and contribution
provisions.
If the Purchaser has delivered Prospectuses to the Seller and after
having done so the Prospectus must be amended or supplemented to
comply with the requirements of the Act, the Purchaser shall promptly
notify the Seller, Seller agrees to cease making offers of Shares
immediately upon such request and to return all prospectuses to the
Purchaser. The Purchaser shall promptly provide the Seller with revised
prospectuses and, following receipt of the revised prospectuses, the
Seller shall be free to resume making offers of the Shares. Prior to the
filing of any documents with the Commission from time to time pursuant
to this Section 5 that names Seller, Seller shall have the right to review
and comment on those sections of the Registration Statement,
Prospectus and other documents in which Seller is named. Except as
provided in the next preceding sentence and except with respect to any
written information furnished to Purchaser by Seller, or its underwriter
or its controlling person specifically for use in preparation thereof,
Purchaser shall cause the Registration Statement, any Prospectuses, all
other documents filed with the commission relating thereto to or
otherwise in connection therewith, and all amendments and/or
supplements to any of the foregoing to comply with the Act and all
other applicable laws.
-12-
5.4 Conditions to Registration. The following provisions shall also apply
to the registration of Seller's Shares:
(a) The Purchaser shall, in its sole discretion, select the underwriter or
underwriters, if any, who are to undertake the sale and distribution of
the Shares to be included in a Registration Statement filed in connection
with a Piggyback Registration under the provisions of this Section 5.
Purchaser shall have no obligation, in connection with any Piggyback
Registration, to use an underwriter or underwriters in connection with
the registration rights provided to Seller herein;
(b) The Purchaser, in connection with a Piggyback Registration, shall
have the right to require, if the offering is to be underwritten and
includes securities being offered for the account of the Purchaser, that
Seller delay any offering of the Shares to be included on their behalf for
a reasonable period of time not to exceed ninety (90) days (the "Delay
Period") after the effective date of such Registration Statement (upon
the Purchaser first having delivered to Seller the written opinion of its
managing or principal underwriter to the effect that the inclusion of such
securities in the Registration Statement will have a material adverse
effect on the marketing of such offering); provided, however, that all
officers, directors and five percent (5%) or greater shareholders also
delay offering securities to be sold on their behalf for such reasonable
period of time;
(c) Purchaser shall be required to keep the Registration Statement
effective (for which purpose the Purchaser shall be required to prepare
and file such amendments and supplements to the Registration
Statement and Prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective) for the period
set forth in Subsection 5. 3 (b) , pursuant to which Seller is entitled to
sell Shares and that Seller shall have the right, subject to the approval
of the Purchaser, which approval shall not be unreasonably withheld or
delayed, to select the underwriter or underwriters, if Seller desires any,
who are to undertake the sale and distribution of the Shares to be
offered for sale pursuant to such post-effective amendment to the
Registration Statement, and that I without limiting the generality of
Section 5.4 (but subject to section 5.5 below), any additional expenses
incurred by reason of the delayed registration of such securities (such
as the necessity to file a post-effective amendment) shall be borne solely
by the Purchaser;
(d) In connection with any request for registration, Seller shall be
required to furnish the Purchaser with all relevant information concerning
the proposed method of sale or other disposition of the Shares, the
identity and compensation to be paid to any proposed underwriters, if
any, to be employed at the
-13-
election of Seller in connection therewith, and such other information as
may be reasonably required by the Purchaser property to prepare and file
such Registration Statement in accordance with applicable provisions of
the Act (which includes the rules and regulations thereunder) . Upon
request of the Purchaser, such information shall be furnished by Seller
in writing.
5.5 Expenses. in connection with or otherwise relating to registrations
on behalf of Seller of any Shares under the Act pursuant to this Section
5, the Purchaser shall pay all Registration Expenses; provided, however,
that the Seller shall be required to bear that portion of the underwriting
commissions, fees and discounts, if any, attributable solely to the
inclusion of Seller's shares in such Registration Statement and the
inclusion of Seller's Shares in the related filings under securities or Blue
Sky laws of the several states; and further provided that the Seller shall
pay the legal fees and disbursements of counsel to Seller.
5.6 Indemnification.
(a) In connection with or otherwise relating to the registration of any
Shares under the Act pursuant to the provisions of this Amendment, the
Purchaser agrees to indemnify and hold harmless and defend the Seller,
each underwriter, if any, of such Shares, each other person, if any, who
controls Seller or any such underwriter within the meaning of the Act,
and Seller's officers, directors and counsel from and against any and all
losses, claims, damages, liabilities, joint or several, to which such Seller,
underwriter or controlling person or Seller's officers, directors and
counsel may become subject under the Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration
Statement under which such Shares were registered under the Act or
any Prospectus contained therein or related thereto, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse such Seller,
underwriter, controlling person or Seller's officers, directors and counsel
for any legal or any other fees or expenses reasonably incurred by such
Seller, underwriter, controlling person or Seller's officers, directors and
counsel in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Purchaser
will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement or such Prospectus in reliance upon
and in conformity
-14-
with written information furnished to the Purchaser by the party seeking
indemnification.
(b) In connection with or otherwise relating to the registration of any
Shares under the Act pursuant to the provisions hereof, Seller agrees to
indemnify and hold harmless the Purchaser, each person who controls
the Purchaser within the meaning of the Act, and each officer and
director of the Purchaser from and against any losses, claims, damages
or liabilities, joint or several, to which the Purchaser, such controlling
person or any such officer or director or counsel may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged true statement of any material fact
contained in any Registration Statement under which such Registrable
Shares were registered under the Act or any Prospectus contained
therein, or arise out of or are based upon the omission of alleged
omission to state therein a material fact required to be stated therein of
necessary to make the statements therein not misleading, which untrue
statement: or alleged untrue statement or omission or alleged omission
was made therein in reliance upon and in conformity with written
information furnished to the Purchaser by Seller or controlling person or
Sellers officers, directors and counsel specifically for use in connection
with the preparation thereof; and will reimburse the Purchaser, each
such controlling person and each such officer or director for any legal or
any other fees and expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability of
action.
(c) Each person entitled to indemnification hereunder (an Indemnitee)
agrees, as soon as is reasonably practicable after the receipt of notice
of any claim or action against it, to notify the party from whom
indemnity may be sought hereunder ("Indemnitor") in writing provided
that any such failure to promptly provide such notice shall not excuse
the Indemnitor from its obligations hereunder except to the extent the
Indemnitor is actually prejudiced thereby, and the Indemnitor shall
assume the defense of any such claim or action (and the cost thereof)
by counsel of the Indemnitor's own choosing, who shall be reasonably
satisfactory to such Indemnitee. Each Indemnitee shall have the right
to employ separate counsel in connection with any such claim or action
and to participate in the handling or defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnitee
unless the employment of such counsel has been specifically authorized
by the Indemnitor or the Indemnitor shall not have employed counsel to
have charge of the defense of such action or claim or such Indemnitee
shall have reasonably concluded that there may be defenses available to
the Indemnitee (in which case the Indemnitor shall not have the right to
direct the defense
-15-
of such action on behalf of such Indemnitee) , in any of which events
such fees and expenses shall be borne by the Indemnitor. The
Indemnitor, shall be free to settle any claims of action in respect to
which indemnity may be sought against it pursuant to this Subsection
(c); provided, however, that the Indemnitor shall not settle any such
claim or action if such settlement would result in the imposition against
Indemnitee of a judgement, decree or order in the nature of equitable
relief or otherwise require an acknowledgment of wrongdoing unless the
Indemnitor, has obtained the prior written consent of such Indemnitee
(which consent shall not be unreasonably withheld).
5.7 Compliance with Rule 144. The Purchaser shall take such actions
pursuant to or otherwise in connection with Rule 144 of the Commission
under the Act as is necessary to enable the Seller to make sales of
Registrable Shares pursuant to that Rule.
5.8 Assignment. Seller's rights under this Section 5 may be assigned
by Seller to a transferee or assignee of any of the Shares, provided that
Purchaser is given written notice of such assignment at the time of or
within a reasonable time after the assignment, stating the name and
address of the transferee or assignee and identifying the number of
Shares with respect to which such rights of Seller are being assigned.
6. Representations and Warranties of Seller. Seller represents
and warrants to Purchaser as follows:
(a) Organization and Good Standing; Subsidiary. Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and is duly qualified as a foreign
corporation in good standing and is authorized to do business under the
laws of the State of New Jersey.
(b)Authority. Seller has full corporate power and authority to execute
and deliver this Amendment and the other agreements, documents and
instructions executed and delivered and/or to be executed and delivered
by it in connection herewith and to consummate the transactions
contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of the Seller to
authorize the execution, delivery and performance by Seller of this
Amendment and of such other agreements, documents and instruments
and to consummate the transactions contemplated hereby and thereby
have been duly and properly taken and obtained. This Amendment has
been duly executed and delivered by Seller and constitutes., and such
other agreements, documents and instruments when duly executed and
delivered by Seller will constitute, legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their respective
terms. The
-16-
execution and delivery by Seller of this Amendment and such other
agreements, documents and instruments and the consummation by
Seller of the transactions contemplated hereby and thereby will not
violate any law, or conflict with, result in any breach of, constitute a
default (or an event which with notice or lapse of time or both would
become a default) or cause a Lien under, the corporate charter or by-laws
of Seller or any indenture, mortgage, lease, agreement or other
instrument to which Seller is a party or by which Seller or its properties
or assets is bound, except for any violations, conflicts, breaches or Liens
which individually or in the aggregate would not have a material adverse
effect on the business currently conducted by Seller. No approval,
authorization, consent of other order of, action of or filing with any
court, administrative agency or other governmental authority is required
for the execution and delivery by Seller of this Amendment or such other
agreements, documents and instruments or the consummation by Seller
of the transactions contemplated hereby or thereby.
(c)Security. Seller has no security interest in any asset of Purchaser or
Doak except for its security interest in the Collateral, as that term is
defined in and pursuant to the Trademark Security Agreement as
amended and the security interests created by the Security Agreement
and the Subsidiary Security Agreement.
(d)Disclosure. No representation or warranty by Seller in this
Amendment contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact required to make the
statements herein or therein contained not misleading.
7. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Seller as follows:
(a) Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its organization. Doak is the only Subsidiary of Purchaser.
(b)Authority. Purchaser has full corporate power and authority to
execute and deliver this Amendment and the other agreements,
documents and instruments executed and delivered and/or to be
executed and delivered by it in connection herewith and to consummate
the transactions contemplated hereby and thereby. All corporate acts
and other proceedings required to be taken to authorize such execution,
delivery and consummation have been duly and properly taken and
obtained. This Amendment has been duly executed and delivered by
Purchaser and constitutes, and such other agreements, documents and
instruments when duly executed and
-17-
delivered by Purchaser will constitute, legal, valid and binding obligations
of Purchaser enforceable against it in accordance with their respective
terms. The execution and delivery by Purchaser of this Amendment and
such other agreements, documents and instruments and the
consummation by Purchaser of the transactions contemplated hereby
and thereby will not violate any law, or conflict with, result in any
breach of, constitute a default (or an event which with notice or lapse
of time or both would become a default) or cause a Lien under, the
corporate charter or by-laws of Purchaser, or any indenture, mortgage,
lease, agreement or other instrument to which Purchaser is a party or by
which Purchaser or its properties or assets is bound, except for any
violations, conflicts, breaches or Liens which individually or in the
aggregate would not have a material adverse effect on the business
currently conducted by Purchaser or its assets (except Liens running in
favor of Seller). No approval, authorization, consent or other order of,
action of or filing with any court, administrative agency or other
governmental authority is required for the execution and delivery by
Purchaser of this Amendment and/or the execution and delivery by
Purchaser of such other agreements, documents and instruments or the
consummation by Purchaser of the transactions contemplated hereby or
thereby, except for filings and notices required by the commission or
pursuant to any securities law affecting Purchaser and Doak, in
connection with this Agreement.
(c) SEC Documents. Purchaser has furnished Seller with a true and
complete copy of each report, schedule, registration statement and a
definitive proxy statement filed by Purchaser with the SEC since January
1, 1995 (the "Recent Purchaser SEC Documents") which are all the
documents (other than preliminary material) that Purchaser was required
to file with the SEC since January 1, 1995. Except as set forth in
Purchasers Form IO-QSB filed with respect to the period ending on
September 30, 1996, as of their respective dates, and subject to any
qualifications contained herein, none of the Recent Purchaser SEC
Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading. Except to the
extent information contained in any Recent Purchaser SEC Document
has been revised or superseded by a later filed Recent Purchaser SEC
Document, and subject to any qualifications contained therein, none of
the Recent Purchaser SEC Documents currently contains any untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary in order to make the statements therein
not misleading. Except. as set forth in Purchaser's Form 10-QSB filed
with respect to the period ending on September 30, 1996, the financial
statements of Purchaser and Doak included in the Recent Purchaser SEC
Documents comply as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with
-18-
US GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by the rules applicable to the
preparation of reports on Form l0-QSB promulgated by the SEC) and
fairly present (subject, in the case of unaudited statements, to normal
audit adjustments) the consolidated financial position of Purchaser and
Doak as at the respective dates thereof and the consolidated results of
their operations and changes in cash flow for the respective periods then
ended.
(d) Absence of Certain Changes or Events. Since September 30, 1996,
there has not been or otherwise occurred any event which has had or,
to the best of Purchaser's knowledge, could have a material adverse
effect on the business, financial condition or results of operations of
Purchaser and Doak taken as a whole.
(e) Capitalization. As of the date prior to the date hereof,
(i) the authorized capital stock of Purchaser consists of 26,400,000
shares of Class A Common Stock and 900,000 shares of Class B
Common Stock, 2,000,000 shares of Preferred Stock and none other;
(ii) (A) 6,692,267 shares of Class A Common Stock, (B) 431,552 shares
of Class B Common Stock and 0 shares of preferred shares are issued
and outstanding; and (iii) 2,600,000 shares of Common Stock were
reserved for issuance upon exercise of options granted pursuant to
Purchaser's 1990 Stock Option Plan, 960,000 shares of Class A
common stock are reserved for issuance under the unit purchase option
plan for D.H. Blair & Co. arising out of a December, 1993 private
placement; warrants to acquire 60,000 shares of Claps A common stock
at $4.50 per share held by Upsher-Smith Laboratories, Inc. expiring
December 15, 1997 and warrants to acquire 150,000 shares of Class
A common stock at $4.50 per share are held by Tsumura International
Inc. expiring March 30, 1998. There are no other authorized shares of
capital stock (preferred or otherwise) of any kind or nature whatsoever
of Purchaser. Except as provided in clause (iii) of the next preceding
sentence, there are no options, warrants, subscriptions, or other rights,
agreements or commitments of any kind or nature whatsoever which
may, does or could directly or indirectly require the issuance, sale or
transfer by Purchaser of any shares of capital stock of Purchaser,
including, without limitation, any securities convertible into or,
exchangeable or exercisable for, or otherwise evidencing the right to
acquire, any shares of capital stock of Purchaser. All of the Shares have
been duly authorized and validly issued, are fully paid and non-assessable
and are not subject to, nor were they issued in violation of,
any preemptive rights, and are free and clear of all Liens excluding liens
or encumbrances caused or created by Seller. Purchaser has not
amended, restated or otherwise modified either its certificate of
incorporation or its by-laws from that provided by Purchaser to Seller in
connection
-19-
with Amendment No. 4. The last amendment of such document was
October 21, 1991.
(f) Agreements with Affiliates. There are no agreements or other
arrangements between or among Purchaser or any Subsidiary, on the
one hand, and any Affiliated Person, on the other hand, except as
described in the Recent Purchaser SEC Documents.
(g) Disclosure. No representation or warranty by Purchaser or Doak in
this Amendment or any other agreement, document or instrument
executed and delivered or to be executed and delivered by Purchaser or
Doak pursuant hereto or in connection herewith, contains or will contain
any untrue statement of material fact, or omits or will omit to state any
material fact required to make the statements herein or therein contained
not misleading.
8. Amendment of Section 11.01. (a) The parenthetical at the end
of clause (vi) is hereby deleted.
(b) A new clause (vil) is hereby added to Section 11.01, to
read in its entirety as follows:
" (vii) A registrar on statement respecting the Shares either (A)
has not been filed by the date set forth in Section 5.2 or (B) shall cease
to be effective for an aggregate of sixty (60) days unless the reason for
any such event is the fault of Seller or circumstances outside the control
of Purchaser."
9. Condition Precedent to Effective Date. This Agreement shall not
become effective until the date the following have occurred:
(a) Purchaser shall have made the Two Hundred Fifty Thousand
Dollars ($250,000) payment described at Section 2. 03 (g) (i) (A) ;
(b) The parties shall have executed and delivered the other documents
and agreements listed on Schedule A, contemplated by this Amendment,
the Security Agreement and the Subsidiary Security Agreement, all in
form and substance reasonably satisfactory to Seller.
Reference is made to that certain letter agreement dated December 9,
1996 pursuant to which Seller agreed to extend the date of the $2.6
Million payment due from Purchaser pursuant to the Original Asset
Purchase Agreement as the same shall have been effective prior to this
Amendment No. 5, from December 9, 1996 to December 19, 1996 (the
"Extension Letter") . Notwithstanding any requirement of the Extension
Letter that payment be made to Seller pursuant to
-20-
this Amendment No. 5 on or before December 19, 1996, and without
limiting the other provisions thereof, Purchaser's failure to make
payment on December 19, 1996 shall not be deemed to be an Event of
Default unless the Effective Date shall not occur on or prior to December
23, 1996.
10.Amendment of Section 12.10. The following phrase is hereby added
to Section 12.10 on the 9th line thereof between the words "sitting
therein" and the words ", and each such party,":
"(Provided that, anything to the contrary notwithstanding contained
herein, to the extent that the Courts of New York provided for above
decline to or cannot exercise jurisdiction over any subject matter in
whole or in part, any actions, proceedings and other matters which were
permitted hereunder to be brought in the Courts of New York may be
brought in any state or federal court in New Jersey) ."
11.Release. Purchaser, on behalf of itself and Doak, hereby completely
and forever waives, releases and discharges any claims, demands,
liabilities, agreements or other obligations of any kind and nature
whatsoever that either Purchaser or Doak or both has had, now has or
hereafter may, could or shall have against Seller and/or its officers,
directors and controlling persons with respect to any of the matters
relating to or otherwise in connection with this Agreement (including,
without limitation, the sale of the business by Seller to Purchaser on or
about December 10, 1993, including any claims previously raised in
writing by Purchaser, whether or not addressed to Seller), except, and
only except, the obligations of Seller (a) pursuant to Sections 4, 5 and
6 of Amendment No. 5; and (b) to indemnify Purchaser in respect of
claims which are in the nature of product liability claims asserted by
individuals for personal injury, and then only to such extent (and none
others) pursuant to Section 9.05(b) of the Original Asset Purchase
Agreement.
12.Confidentiality. Except in connection with an Event of Default, Seller
agrees to treat as confidential and not to disclose or use for purposes of
investment or trading for its own account or the account of others, any
information of a confidential or proprietary nature ("Confidential
Information") concerning Purchaser or Doak (i) unless such information
is or becomes a matter of public record through no fault of Seller or
Seller can demonstrate such information was known by Seller prior to
such disclosure, (ii) except for any information given to Seller by any
third party unless Seller knew or had a reasonable reason to believe that
such third party did not have a right to give such information to Seller
and (iii) except as Seller reasonably believes may be required by
-21-
any applicable law. In no event shall Seller use any Confidential
Information in violation of federal or state securities laws.
13Miscellaneous.
(a)Survival. The representations, warranties, covenants and agreements
contained in this Amendment and in any agreements, documents or
instruments delivered pursuant to this Amendment, shall survive the
closing of the transactions contemplated by this Amendment and shall
remain in full force and effect.
(b) Expenses. Purchaser and Seller confirm that, in connection with and
in satisfaction of Purchaser's obligation to reimburse Seller for Seller's
attorneys and other fees incurred in connection with or otherwise
relating to this Amendment (including in connection with the other
agreements, instruments and documents delivered pursuant to or in
connection with this Amendment), Seller has agreed to accept. and
Purchaser has agreed to pay Seller $25,000, and Purchaser will make
such payment on or before January 31, 1997.
(c) Further Assurances. From and after the date hereof, upon request
and at the cost and expense of Seller (except as otherwise provided in
this Amendment), Purchaser shall (and shall cause Doak and the other
Subsidiaries to) take, execute, acknowledge and deliver all such further
acts, assurances, deeds, assignments, transfers, conveyances and other
instruments and papers as may be required to carry out the transactions
contemplated in this Amendment and/or the other agreements,
documents or instruments delivered pursuant to or in connection with
this Amendment.
(d) Governing Law. This Amendment shall be governed by and
construed and interpreted in accordance with the laws of the State of
New York, without giving effect to principles of conflicts of law.
(e) Publicity. Each party shall be solely responsible for any press release
or any other public announcement it issues with respect to this
Amendment or the transactions contemplated hereby provided that,
without limiting the generality of the preceding clause, Purchaser shall
provide Seller with at least two Business Days opportunity to comment
on the press release Seller intends to issue upon the execution of this
Amendment. Except where required by law, each party shall provide the
other with reasonable advance notice of any such press release or public
announcement relating to this Amendment and the transactions
contemplated hereby and by the Original Asset Purchase Agreement.
-22-
(f) Severability. If any provision of the Agreement (including this
Amendment No. 5) or the application thereof to any Person(s) or
circumstances) shall be invalid of unenforceable to any extent, (i) the
remainder of this Agreement and the application of such provision to
other Person(s) or circumstances) shall not be affected thereby and (ii)
each such provision shall be enforced to the greatest extent permitted
by law.
(g) Counterparts. This Amendment may be executed in two or more
counterparts (and via fax), each of which shall constitute an original, but
all of which, when taken together, shall constitute but one instrument.
(h) Limited Amendment. The provisions of the Original Asset Purchase
Agreement (including the provisions of Section 6.15 thereof), as
amended by this Amendment, shall remain in full force and effect, and
except as expressly provided herein, shall remain unamended. The
provisions of all of the other agreements, documents and instruments
executed and delivered in connection with the original Asset Purchase
Agreement shall remain in full force and effect and shall remain
unamended. In the event of a conflict between the terms of this
Amendment, and the terms of the Original Asset Purchase Agreement,
the terms of this Amendment shall be controlling. Notwithstanding
anything to the contrary contained in the Agreement" the terms
"Security Agreement" and "Subsidiary Security Agreement" shall have
the meaning given them in Amendment No. 5, and, accordingly, the
Security Agreement and the Subsidiary Security Agreement shall be
deemed not to have terminated for purposes of Section 6.09 and the
last two sentences of Section 6.10 (but not Section 6.14) of the
Agreement.
(i) References to the Agreement.. From and after the date hereof, all
references to the Original Asset Purchase Agreement in the other
agreements, documents and instruments executed and delivered in
connection with the Original Asset Purchase Agreement shall mean the
Agreement.
(j) Amendment of Section 6. 14 (e) Section 6. 14 (e) is hereby amended
to add the words "and/or Amendment No. 5" after the words
"Amendment No. 4" in the two places in which the words "Amendment
No. 4" appear.
(k) Third Party Beneficiaries. Notwithstanding Section 12.16, the
individuals and/or entities other than Seller and Purchaser which are
referred to in Section 5 of this Amendment are intended third party
beneficiaries of such Section 5 and shall have the right to fully enforce
such provisions as fully as if they were a party hereto.
-23-
(1) Warehouseman's Letter. Purchaser shall use its best efforts to
obtain a letter, substantially in the form of Exhibit A hereto, from the
Warehouseman operating the warehouse in Memphis, Tennessee where
Purchaser and Doak accounting inventory.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the day and year first above written.
BRADLEY PHARMACEUTICALS, INC.
By:
Name: Daniel Glassman
Title: Chief Executive Officer
BERLEX LABORATORIES, INC.
By:
Name: Wolfgang Kunze
Title: Vice President
-24-
(1) Warehouseman's Letter. Purchaser shall use its best efforts to
obtain a letter, substantially in the form of Exhibit A hereto, from the
Warehouseman operating the warehouse in Memphis, Tennessee where
Purchaser and Doak accounting inventory.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the day and year first above written.
BRADLEY PHARMACEUTICALS, INC.
By:
Name: Daniel Glassman
Title: Chief Executive Officer
BERLEX LABORATORIES, INC.
By:
Name: Wolfgang Kunze
Title: Vice President
-25-
SCHEDULE A
Seller shall have received fully executed copies of:
1. Security Agreement.
2. Subsidiary Security Agreement.
3. Form UCC-ls covering Bradley Pharmaceuticals, Inc.'s
("Bradley") and Doak Dermatologics, Inc. Is ("Doak") accounts
receivables.
4. Account Debtor Letters from Bradley and Doak to be held in
escrow.
5. Confession of Judgement from each of Bradley and Doak with
respect to the March, 1997 Payment.
6. Account Report as of Friday, December 20, 1996 (If not available
on the Effective Date, to be delivered not later than December 27,
1996).
7. Assignment of Letters of Credit from Bradley and Doak to be held
in escrow.
8. Opinion of Witman Stadtmauer & Michaels, P.A.
9.Officer's Certificate (together with Board resolutions) from Bradley
and Doak.
-26-
SECURITY AGREEMENT dated as of December 23, 1996,
between BRADLEY PHARMACEUTICALS, INC., a New Jersey
corporation ("Purchaser"), and BERLEX LABORATORIES, INC., a
Delaware corporation ("Seller'').
WHEREAS, Purchaser and Seller have entered into that certain
Purchase Agreement dated as of November 10, 1993, as amended by
Amendment Nos. 1 and 2 thereto, by the letter agreement dated
December 11, 1995, and by Amendment No. 4 thereto (the "Original
Asset Purchase Agreement"), pursuant to which Purchaser agreed to
purchase all right, title and interest in and to certain assets of Seller;
and
WHEREAS, Purchaser has requested that Seller make certain
modifications to the timing of the payments required pursuant to the
Original Asset Purchase Agreement as provided in Amendment No. 5
to the Original Asset Purchase Agreement dated as of the date hereof
(the "Amendment"; the Original Asset Purchase Agreement, as
amended by the Amendment, and as may be further amended,
restated, supplemented or otherwise modified from time to time is
hereinafter referred to as the "Purchase Agreement" or "Asset
Purchase Agreement"), and Seller's agreement to make such
modifications and to execute and deliver the Amendment is
conditioned upon, among other things, execution by Purchaser of this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
promises contained herein and in the Purchase Agreement,
Purchaser and Seller hereby agree as follows:
SECTION 1. Definition of Terms Used Herein. All capitalized terms
used herein but not defined herein and defined in the Original Asset
Purchase Agreement shall have the meanings ascribed to such terms
in the Original Asset Purchase Agreement.
SECTION 2. Definition of Certain Terms Used Herein. As used herein
the following terms shall have the following meanings:
"Account" shall mean all items described or otherwise included
in the UCC definition thereof (in all cases whether now owned or
hereafter acquired or created by Purchaser and wherever located) and
all of the following, whether or not so described or included and
without limiting the generality of the foregoing (in all cases whether
now existing or hereafter acquired or created): all obligations of any
kind or nature at any time due or owing to Purchaser and all other
rights of Purchaser to receive payment pursuant to or arising from the
sale of inventory or other pharmaceutical products and/or the
provision of services (whether classified under the UCC or the law of
any other state as accounts, accounts receivable, instruments,
contract rights, chattel paper, general intangibles, or otherwise).
"Account Reports" shall mean, collectively, each account report in
substantially the form of Exhibit A hereto to be delivered by Purchaser
to Seller contemporaneously herewith and on a semi-monthly basis
after the date hereof pursuant to Section 5 hereof.
"Agreement" shall mean this Security Agreement as amended,
restated, supplemented or otherwise modified from time to time.
"Books and Records" shall mean all of the books and records of
Purchaser (including, without limitation, all computer programs, discs
or tape files, printouts and other computer prepared information and
the equipment containing such information) indicating, summarizing,
evidencing or otherwise containing information relating to, including,
without limitation, any which would or may otherwise be necessary
for the realization on, any of the Collateral.
"Collateral" shall mean all the following, whether now owned or
hereafter-acquired or created by Purchaser: (a) all Accounts, (b) all
guarantees of, and security or other Liens for payment of any
Accounts (including, without limitation, all rights of Purchaser under
or in connection with each letter of credit issued to or for the benefit
of Purchaser, including, without limitation, all rights to receive the
proceeds thereof), (c) all files, correspondence, customer lists,
computer programs, tapes, discs and related data processing
software, general ledgers, accounts ledgers, other information
respecting Accounts (including any identifying any Account debtor or
the amount owed by same), and all other Books and Records, (d) all
rights and remedies which Purchaser might exercise with respect to
any of the foregoing, and (e) all Proceeds and products of the items
described in the preceding clauses in this definition of Collateral,
provided, however, that Collateral shall not include any trademarks or
similar items of intellectual property.
"Event of Default" shall have the meaning assigned to such term in
the Purchase Agreement.
"Obligations" shall mean, collectively, (a) the principal under the
March 1997 Payment (as defined in the Purchase Agreement) and
interest payable under the Purchase Agreement in connection
therewith (including interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether a claim therefor is allowed or allowable in such
proceeding), when and as due, whether at maturity, by acceleration
or otherwise, (b) all other monetary obligations, including fees, costs,
expenses (including, without limitation, attorneys fees and expenses)
and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the
pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether a claim
-28-
therefor is allowed or allowable in such proceeding), of Purchaser to
Seller under each of the Purchase Agreement and each other
Operative Document with respect to the enforcement or collection of
the foregoing, and (c) all monetary and nonmonetary obligations of
Purchaser hereunder and of Doak under the Subsidiary Security
Agreement (as defined in the Purchase Agreement).
"Operative Documents" shall mean the Purchase Agreement,
this Agreement, the Subsidiary Security Agreements (as
defined in the Purchase Agreement), the Trademark Security
Agreement (as defined in the Purchase Agreement), the
Account Reports and all other documents or instruments
executed (or hereafter executed) by Purchaser and/or any one
or more of its Subsidiaries (as defined in the Purchase
Agreement) in connection with, arising out of or otherwise
relating to the Purchase Agreement, as each such agreement,
document or instrument is amended, restated, supplemented
or otherwise modified from time to time.
"Proceeds" shall mean means all items described or otherwise
included in the UCC definition thereof and all of the following,
whether or not so described or included and without limiting the
generality of the foregoing: any consideration received from the sale,
exchange, realization, or other disposition of any asset or property
that constitutes Collateral, any value received as a consequence of
the possession of any Collateral and any and all other amounts from
time to time paid or payable or realized under or in connection with
any of the Collateral (including, without limitation, insurance proceeds
paid or payable in respect of same).
"Security Interest" shall have the meaning assigned to such term in
Section 4.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the State of New York.
SECTION 3. Rule of Interpretation. The rules of interpretation
specified in Article I and subsection 12.12(a) of the Purchase
Agreement shall be applicable to this Agreement.
SECTION 4. Security Interest; Certain Rights of Seller; Limitations
on-Seller's Obligations. (a) As security for the payment and/or
performance, as the case may be, of the Obligations, Purchaser
hereby grants, assigns, pledges and transfers to Seller, its successors
and its assigns, a lien on and security interest in all of Purchaser's
right, title and interest in, to and under the Collateral (the "Security
Interest").
(b) Purchaser agrees at all times to keep such accurate and complete
accounting records with respect to the Collateral as are consistent
with its current practices and in
-29-
accordance with such prudent and standard practices used in
industries that are the same as or similar to those in which Purchaser
is engaged.
(c) Anything contained herein to the contrary notwithstanding,
Purchaser shall remain liable under each of its Accounts (and each
agreement giving rise thereto) to observe and perform all the
conditions and obligations to be observed and performed by it
thereunder. Seller shall have no obligation or liability under or
otherwise relating to any Account (or any agreement giving rise
thereto) by reason of or otherwise arising out of this Agreement or
the receipt by Seller of any payment relating to such Account
pursuant hereto, nor shall Seller be obligated in any manner to
perform any other obligations of Purchaser under or pursuant to any
Account (or any agreement giving rise thereto), to make any inquiry
as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any
Account (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(d) Seller authorizes Purchaser to collect the Accounts provided that
Seller may, with notice, curtail or terminate such authority at any time
after the occurrence and during the continuance of an Event of
Default. If required by Seller at any time after the occurrence and
during the continuance of an Event of Default, all Proceeds, when
collected by Purchaser, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper of any kind
whatsoever or other documents received on account of any Account
or in payment of any other Collateral, shall be promptly forwarded to
Seller by Purchaser, in precisely the form received, except for its
endorsement when required, and until so forwarded shall be deemed
to be held in trust by Purchaser for Seller and as Seller's property.
Without limiting Seller's remedies and other rights hereunder, upon
and during the continuance of an Event of Default, Seller may,
pursuant to the power of attorney granted by Purchaser to Seller in
Section 14 hereof, endorse in Purchaser's name any of the checks
and other items described in the preceding sentence.
(e) All Proceeds forwarded to Seller shall continue to be collateral
security for all of the Obligations and shall not constitute payment
thereof until applied as hereinafter provided. In no event shall any
checks, drafts or other instruments which are forwarded to Seller
pursuant hereto constitute final payment unless and until such
instruments have been collected.
(f) Upon the written request of Seller at any time after the occurrence
and during the continuance of an Event of Default, Purchaser will
notify account debtors and parties to the Accounts that the Accounts
have been assigned to Seller and that
-30-
payments shall he made directly to Seller. In addition, Seller may at
any time after and during the continuance of an Event of Default
notify such account debtors and parties (including by forwarding to
such account debtors and parties the forms of letter executed and
delivered by Purchaser to Seller on the date hereof, which letters may
be dated and completed (by way of example only, the name and
address of, and the amount owing by, the Account debtor) by Seller
in any manner Seller deems reasonably advisable). At any time after
the occurrence and during the continuance of an Event of Default
Seller may, in its own name or in the name of others, communicate
with account debtors and parties to the Accounts in order to verify
with them to Seller's satisfaction the existence, amount and terms of
any Accounts.
SECTION 5. Notices; Reports. Purchaser will promptly advise Seller,
in reasonable detail, at its address set forth in Section 12.08 of the
Purchase Agreement, of the occurrence of any event or circumstance
which could reasonably be expected to have a material adverse effect
on the aggregate value of the Collateral or on the Liens created
hereunder. On the 15th and the last day of each month, provided
such day is a Business Day and, if not, then on the next Business Day
thereafter, Purchaser will provide to Seller an Account Report as of
the next to last Business Day prior thereto. Prior to the 15th day of
each month, Purchaser will provide to Seller copies of its monthly
cash flow reports relating to the prior month, indicating the difference
between projections and actual results as well as operating
projections covering the next three months and projected gross
accounts receivable and net accounts receivable which are projected
to be reflected in the next three months' Account Reports. Purchaser
will also provide any other information relating to Purchaser, Doak
and each other Purchaser reasonably requested by Seller from time to
time. Such cash flow reports shall be in a form substantially similar
to the form provided by Seller to Purchaser except to the extent
required to provide the information required by this Section 5.
Notwithstanding the provisions of Section 11.01 of the Asset
Purchase Agreement, failure to provide the foregoing reports of cash
flow and Accounts Reports and/or non-willfully incorrect statements
therein will not be deemed to be a default for which Seller can
declare an Event of Default.
SECTION 6. Release; Termination. (a) This Agreement and the
Security Interest granted hereby shall terminate 91 days (such 91-day
period being the "Termination Period") after Seller's receipt in full of
the March 1997 Payment (as defined in the Purchase Agreement),
together with all accrued interest thereon, if any, and all other
obligations, if any; provided, that the Security Interest granted hereby
shall be terminated on a day that is during, but prior to the end of,
the Termination Period with respect to any Collateral that is pledged
by Purchaser to a bona fide lender as collateral for a loan to be made
by such lender to Purchaser or Doak on such day (provided
-31-
that Seller is provided with reasonably acceptable written evidence
that such loan will be made on such day); provided, further, that in no
event shall this Agreement terminate at any time when an Event of
Default under subsection 11.01 (iii), (iv) or (v) of the Purchase
Agreement has occurred and is continuing.
(b) In connection with any termination hereof pursuant to subsection 6
(a) , Seller shall immediately execute and deliver to Purchaser, at
Purchaser's expense, all termination statements in order to terminate
any financing statements filings and similar documents that Purchaser
shall reasonably request or deem advisable to evidence such
termination. Seller shall, upon the written request of Purchaser,
confirm its obligations under the preceding sentence with respect to
the termination hereof to a bona fide lender that is proposing to make
a loan to Purchaser secured by all or part of the Collateral which loan
will be used by Purchaser in whole or in part to pay the March 1997
Payment and Seller shall specifically confirm its obligation to execute
and deliver UCC-3 termination statements to such bona fide lender
upon Seller's bank's written confirmation to Seller that Seller has
timely received via wire transfer of immediately available funds the
March 1997 Payment. Any execution and delivery of termination
statements or documents pursuant to this Section 6 shall be without
recourse to or representation or warranty by Seller. Seller shall also
provide Purchaser with copies of any filed financing or continuation
statement or other documents filed, registered or recorded by or on
behalf of Seller. Seller acknowledges that, upon the termination
hereof pursuant to subsection 6(a), the powers granted to it pursuant
to Section 14 hereof shall immediately cease and agrees to attempt to
notify at its own cost and expense all persons with whom Seller has
acted as Purchaser's attorney-in-fact under Section 14(c) hereof that
it no longer has such power.
SECTION 7. Further Assurances; Return of Letters of Credit.
(a)Purchaser agrees, at its expense, to execute,acknowledge,
deliver and cause to be duly filed all such further
instruments and documents and take all such actions as Seller may
from time to time reasonably request to better assure and preserve
the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection
with the execution and delivery to or by Seller of this Agreement, the
granting of the Security Interest created hereby, the filing of any
financing statements, continuation statements or other documents in
connection herewith, historical credit information regarding one or
more Account debtors, the execution of any document necessary or
advisable in Seller's reasonable judgment to comply with the Federal
Assignment of Claims Act to the extent required by Section II(i)
hereof and/or any similar state statute or other law and the execution
and delivery of any document required to supplement this Agreement.
Purchaser also hereby authorizes Seller to file any such financing or
continuation statement and all other documents reasonably required
or desired by Seller to
-32-
be filed, registered or recorded to perfect any of the Liens in the
Collateral granted herein, without the signature of Purchaser to the
extent permitted by applicable law. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. Except as provided in the
immediately succeeding sentence, if any amount payable under or in
connection with any of the Collateral shall be or become evidenced,
covered or secured by any promissory note or other instrument or
chattel paper, bill of lading, document of title, warehouse receipt,
letter of credit or other document the possession of which is
necessary or reasonably desirable to enable Seller to perfect a
security interest therein, such promissory note or other instrument or
chattel paper, letter of credit or other document shall be, within two
Business Days of receipt thereof by or on behalf of Purchaser,
pledged and delivered to Seller, duly endorsed (if necessary) in a
manner reasonably satisfactory to Seller. Immediately (i) upon the
occurrence of an Event of Default described in Section 11.01(iii), (iv)
or (v) of the Purchase Agreement, and (ii) after the written request by
Seller upon the occurrence and during the continuance of any other
Event of Default, Purchaser shall deliver to Seller all documents of
title, bills of lading and other documents and instruments, duly
endorsed or executed (if necessary) in a manner reasonably
satisfactory to Seller, necessary to draw on any letter of credit
delivered or to be delivered to Seller in accordance with the terms
hereof. In addition, Seller may at any time after and during the
continuance of an Event of Default notify issuers of letters of credit in
which an interest was pledged to Seller pursuant hereto, and
confirming banks with respect thereto, of the assignment of the
proceeds of such letter of credit (including by forwarding to such
issuing and confirming banks the forms of letter executed and
delivered by Purchaser to Seller on the date hereof, which letters may
be dated and completed (by way of example only, the name and
address of the issuing or confirming bank and a description of the
letter of credit) by Seller in any manner Seller deems reasonably
advisable).
(b) Purchaser may not draw on any letter of credit issued to or for the
benefit of Purchaser as security for an Account, except as provided in
this subsection 7(b). For so long as no Event of Default has occurred
and is continuing Purchaser may, upon not less than three Business
Days' prior written notice to Seller, request the release of any letter of
credit previously delivered to Seller pursuant hereto. After receipt of
such notice from Purchaser, and provided no Event of Default has
occurred and is continuing, Seller shall promptly deliver to Purchaser
the original of the letter of credit to he drawn upon. Purchaser shall
submit all documents and take all other actions necessary to draw
upon such letter of credit to the issuing or confirming bank, as
appropriate, within five Business Days of its receipt of the original of
such letter of credit.
-33-
SECTION 8. Inspection and Verification. Seller and such persons as
Seller may designate shall have the right, at any reasonable time or
times during Purchaser's normal office hours, upon reasonable notice
and at Seller's own cost and expense, to inspect Purchaser's Books
and Records (and to make extracts and copies from such records) and
the other Collateral, to discuss Purchaser's affairs reasonably related
to the Collateral (including without limitation expected future sales)
with the officers of Purchaser and its independent accountants and to
obtain other information relating to the Collateral; provided, however,
that Seller shall treat all information of a confidential or proprietary
nature that it receives as confidential in accordance with Section 11
of the Amendment. Any discussion to be held with Purchaser's
officers or independent accountants shall be at such times as shall
not unreasonably interfere with Purchaser, Purchaser's officers or its
independent accountants.
SECTION 9. Taxes; Encumbrances. Purchaser agrees to pay and
discharge all taxes, assessments, charges, fees, security interests or
other Liens at any time levied or placed on the Collateral. At its
option, Seller may, if Purchaser fails following thirty days written
notice from Seller, discharge past due taxes, assessments, charges,
fees, security interests or other Liens at any time levied or placed on
the Collateral, and may pay for the maintenance and preservation of
the Collateral to the extent Purchaser fails to do so following thirty
days written notice from Seller as required by this Agreement or the
Purchase Agreement, and Purchaser agrees to reimburse Seller on
demand for any reasonable and documented expense incurred by it
pursuant to the foregoing authorization; provided, however, that
nothing in this Section 9 shall be interpreted as excusing Purchaser
from paying and discharging all taxes, assessments, charges, fees,
security interests or other Liens at any time levied or placed on the
Collateral as set forth herein.
SECTION 10. Representations and Warranties. Purchaser represents,
warrants and covenants to and with Seller that:
(a) Filings. Fully executed financing statements containing a description
of the Collateral have been delivered to Seller for filing in every
governmental, municipal or other office in the jurisdiction necessary
to establish a valid and perfected security interest in favor of Seller in
respect of the Collateral in which a security interest may be perfected
by filing a financing statement in the United States and its territories
and possessions, and no further filing or registration is necessary in
any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements.
(b) Validity of Security Interest. The Security Interest constitutes a
valid and, upon the filing of the financing statements referred to in
subsection 10(a), perfected
-34-
first priority security interest in all such Collateral in which a security
interest may be perfected by filing in the United States and its
territories and possessions.
(c) Absence of Other Liens. Purchaser owns the Collateral with respect
to which it has purported to grant the Security Interest hereunder and
has not granted any Lien on (including executing any UCC-1 financing
statements), and to the best of its knowledge, there are no Liens on
any such Collateral, except for claims for chargebacks and credits
arising in the ordinary course of business, none of which Liens have
been perfected under the Uniform Commercial Code, under any
mechanic's lien law, materialmen's lien law or other statute, or under
common law. No security agreement, financing statement or other
public notice with respect to all or any part of such Collateral is on file
or of record in any public office, except such as may have been filed
in favor of Seller pursuant to this Agreement.
(d) Accounts. The amount represented by Purchaser to Seller as owing
by each account debtor or by all account debtors in respect of the
Accounts in the Account Report delivered contemporaneously
herewith and in each Account Report delivered after the date hereof
pursuant to Section-5 is, as to the first Account Report on the date
hereof, and will be, as to each subsequent Account Report, the
correct amount actually owing by such Account debtor or debtors
thereunder, in each case listing the cumulative amount of all
estimated chargebacks (as reasonably estimated by Purchaser) of any
kind or nature whatsoever relating to such Accounts (including those
currently payable and those payable in the future). No amount
payable to Purchaser under or in connection with any of the Accounts
is, as to the first Account Report on the date hereof, or will be, as to
each subsequent Account Report, evidenced by any instrument,
chattel paper, letter of credit or other document the possession of
which is reasonably necessary or reasonably desirable to enable Seller
to perfect a security interest therein which has not been delivered to
Seller together with a pledge agreement reasonably satisfactory to
Seller. The aggregate amount of Accounts owed by Account debtors
that are governmental entities is not in excess of $100,000.
(e) Chief Executive office; Books and Records. Purchaser's chief
executive office and chief place of business is located at 383 Route
46 West, Fairfield, New Jersey. Purchaser keeps its Books and
Records concerning the Accounts and all other Collateral at the same
address. Approximately 33% (based upon by fair market value) of
Purchaser's inventory is kept at a warehouse located at 4605 Hickory
Hill Road, Memphis, Tennessee 38141. Purchaser has not at any
time within the past six months maintained its chief executive office
or chief place of business, its records concerning the Collateral at any
location except those described in this subsection 10(e). No
manufacturing operations are performed at any premises owned or
leased by Purchaser in New Jersey. All rent to each landlord of
Purchaser
-35-
and all fees due to any warehouseman operating a warehouse where
inventory of Purchaser is located has been paid through December
31, 1996.
(f) Miscellaneous. None of the Collateral constitutes, or is the Proceeds
of, farm products.
(g) Disclosure. No representation or warranty by Purchaser in this
Agreement or any other agreement, document or instrument to be
executed and delivered by Purchaser pursuant hereto, or any
information in any Schedule referred to herein or in any such
document or instrument, contains or will contain any untrue
statement of material fact, or omits or will omit to state any material
fact required to make the statements herein or therein contained not
misleading.
(h) Letters of Credit. There is no security for (including no letters of
credit securing or evidencing) the payment of any of the Accounts.
Purchaser shall deliver to Seller all letters of credit and/or instruments
hereafter received by or on behalf of Purchaser which evidence or
secure an Account. Purchaser shall use its best efforts, without any
material additional cost or expense, to cause each letter of credit
issued after the date hereof to or for the benefit of Purchaser as
security for any Account to provide that it is transferable (and not just
assignable). Pursuant to and in accordance with Section 14, Seller
will have the right, with respect to each letter of credit issued after
the date hereof to or for the benefit of Purchaser as security for any
Account, to draw upon and otherwise act as fully as Purchaser can
act with regard to such letter of credit.
SECTION 11. Covenants Regarding Collateral. Purchaser Covenants
and agrees with Seller that, from and after the date of this Agreement
until this Agreement is terminated in accordance with its terms:
(a) Maintenance of Records. Upon the request of Seller, Purchaser will
mark its Books and Records in a commercially reasonable manner to
evidence this Agreement and the Security Interest granted hereby.
After the occurrence of an Event of Default and at the written request
of Seller (and without limiting the generality of Seller's rights
hereunder), Purchaser shall turn over its Books and Records to Seller
or to its representative during normal business hours.
(b) Compliance with Laws, etc. Purchaser will comply with all laws,
rules and regulations and determinations of an arbitrator or a court or
other governmental authority, in each case applicable to or binding
upon the Collateral or any part thereof or to the operation of
Purchaser's business, except to the extent that failure to comply
therewith would not, individually or in the aggregate, have a material
adverse effect on the Collateral or the business, operations, property
or condition (financial or otherwise) of Purchaser and its Subsidiaries
(as defined in the
-36-
Purchase Agreement), taken as a whole, or on the ability of Purchaser
to perform its obligations hereunder and under the Purchase
Agreement.
(c) Limitations on Modifications to Agreements Giving Rise to Accounts.
Except in the ordinary course of Purchaser's business and consistent
with past practice, Purchaser will not amend, modify, terminate or
waive any provision of any agreement giving rise to any of the
Accounts in any manner which could reasonably be expected to
materially adversely affect the value of any such Account as
Collateral. Purchaser will perform and comply in all material respects
with all of its obligations under each such agreement.
(d) Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of business as generally conducted
by Purchaser over a period of time, Purchaser will not grant any
extension of the time for the payment of any of the Accounts,
compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partially, any person or entity liable
for the payment thereof, or allow any credit or discount whatsoever
thereon.
(e)Limitation on Liens. Purchaser will not contract,
create, incur, assume or suffer to exist any Lien upon or with respect
to any of the Collateral other than (i) Liens on trademarks none of
which constitutes Collateral (other than Deconamine which
constitutes collateral under the Trademark Security Agreement (as
defined in the Purchase Agreement)) granted by Purchaser to the
Persons who have sold or hereafter sell such trademarks to Purchaser
(or who sell stock to Purchaser as to which trademarks are assets
owned by the Corporation so sold), (ii) Liens relating to chargebacks
or other claims, none of which Liens are perfected under the Uniform
Commercial Code, under any mechanic's lien law, materialmen's law
or other statute, or under common law and all of which Liens are
subordinate to Seller's liens, and (iii) Liens in favor of Seller.
(f) Locations of Collateral; Place of Business. Purchaser will not
change, or permit to be changed, the location of its chief executive
office or chief place of business or the name or names used to
identify it in its business or the ownership or the location of its Books
and Records or any other Collateral without prior written notice to
Seller and unless all filings under the Uniform Commercial Code or
otherwise that are reasonably requested by Seller, have been made.
(g) Limitations on Dispositions of Collateral. Purchaser will not sell,
transfer, assign or otherwise divest itself of the Collateral, provided
that for so long as no Event of Default has occurred and is
continuing, Purchaser may use the Books and Records in the ordinary
course of its business until
-37-
written notice from Seller is received objecting to such use, and may
collect all amounts paid by or on behalf of any Account debtor in
accordance with Section 4(d).
(h) Ordinary Course Invoicing and Collections. Purchaser will invoice
its customers and collect Accounts from its customers in the ordinary
course of business as generally conducted by Purchaser over a period
of time.
(i) Assignment of Claims. Upon the occurrence and during the
continuance of an Event of Default, Purchaser will take all actions
necessary or reasonably requested by Seller to enable Seller to realize
directly upon Accounts owed by obligors that are governmental
entities, including complying with the terms of the Federal
Assignment of Claims Act and any similar state law or regulation.
Pursuant to and in accordance with Section 14, Seller shall have the
right to take all such actions as fully as Purchaser can do.
SECTION 12. Protection of Securitv. Purchaser shall, at its own cost
and expense, take any and all reasonable actions necessary or
appropriate to defend title to the Collateral against all persons and to
defend the Security Interest of Seller in the Collateral and the priority
thereof against any adverse Lien of any person or entity other than
Seller.
SECTION 13. Continuing Obligations of Purchaser. Purchaser shall
indemnify, defend and hold harmless Seller and its officers, directors,,
employees and agents and each of them severally, from and against
any and all (i) liabilities and obligations to be observed and performed
by Purchaser under each contract, agreement, interest or obligation
and (ii) claims or demands, as to clauses (i) and (ii), arising out of, in
connection with or otherwise relating to the Collateral, except to the
extent such claim or demand arises from Seller's failure to act in a
commercially reasonable manner. In addition, subject to the other
provisions of Article IX of the Asset Purchase Agreement (except the
provisions making Article IX the sole recourse of the parties)
Purchaser hereby agrees to indemnify and hold Seller harmless on an
after-tax basis from and against any and all Losses arising out of,
based upon or caused by the inaccuracy of any representation or the
breach of any warranty, covenant or agreement of Purchaser
contained herein, in the Amendment, or in any agreement or
certificate delivered by Purchaser in connection herewith or therewith.
The provisions of this Section 13 shall remain operative and in full
force and effect regardless of the termination of this Agreement, the
consummation of the transactions contemplated hereby, the
repayment of any of the obligations, the invalidity or unenforceability
of any term or provision of this Agreement or any other Operative
Document or any investigation made by or on behalf of Seller.
-38-
SECTION 14. Remedies Upon Default; Attorney-In-Fact. (a) Purchaser
hereby grants to Seller an irrevocable license (exercisable without
payment of royalty or other compensation to Purchaser), upon the
occurrence and during the continuance of an Event of Default (and
subject to Section 11.02 of the Purchase Agreement), to use any
Books and Records, including, without limitation, all computer
software and programs used for the compilation and printout of
information relating to the Accounts. Upon the occurrence and
during the continuance of an Event of Default (and subject to Section
11.02 of the Purchase Agreement), Purchaser agrees to deliver each
item of Collateral to Seller on demand, and it is agreed that Seller
shall have the right to take any or all of the following actions at the
same or different times, with or without legal process and with or
without additional notice or demand for performance (except for
providing notice as provided in Section 11.02 of the Purchase
Agreement): to take possession of the Collateral and, without liability
for trespass, to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the
Collateral and, generally, to exercise any and all rights and remedies
Seller may have under this Agreement or any other Operative
Document and any and all rights and remedies afforded to a secured
party under the UCC or its equivalent in other jurisdictions or other
applicable law in either the United States or any foreign jurisdiction.
Without limiting the generality of the foregoing, Purchaser agrees that
Seller shall have the right to sell or otherwise dispose of all or any
part of the Collateral at public or private sale, for cash, upon credit or
for future delivery as Seller shall reasonably deem appropriate. In
connection with the consummation of any such sale, Seller shall have
the right to assign, transfer and deliver to the purchaser or purchasers
thereof the Collateral so sold. Each such purchaser at any such sale
shall hold the property sold absolutely, free from any claim or right on
the part of Purchaser (regardless of whether Seller has any liability to
Purchaser by reason of any breach of any obligation hereunder), and
Purchaser hereby waives (to the fullest extent permitted by applicable
law) all rights of redemption, stay and appraisal which Purchaser now
has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
(b) Seller shall give Purchaser 10 Business Days' prior written notice
(which Purchaser agrees is reasonable notice within the meaning of
Section 9-504(3) of the UCC or its equivalent in other jurisdictions) of
Seller's intention to make any sale of Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and
the day on which the Collateral, or portion thereof, will first be
offered for sale. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as
Seller may fix and state in the notice (if any) of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold in
one lot as an entirety or in separate parcels, as Seller may (in its sole
and absolute discretion) determine.
-39-
Seller shall not be obligated to make any sale of any Collateral if it
shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. Seller may, without notice
or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned. In
case any sale of all or any part of the Collateral is made on credit or
for future delivery, the Collateral so sold may be retained by Seller
until the sale price is paid by the purchaser or purchasers thereof, but
Seller shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and,
in case of any such failure, such Collateral may be sold again upon
like notice. At any public sale made pursuant to this Section 14,
Seller may itself bid for or purchase, free from any right of
redemption, stay, valuation or appraisal on the part of Purchaser (all
said rights being also hereby waived and released to the fullest extent
permitted by applicable law), the Collateral or any part thereof offered
for sale and may make payment on account thereof by using any
claim then due and payable to Seller from Purchaser as a credit
against the purchase price, and it may, upon compliance with the
terms of sale, hold, retain and dispose of such property without
further accountability to Purchaser. For purposes hereof, once a
written agreement to sell the Collateral or any portion thereof has
been entered into, (i) Seller shall be free to carry out such sale
pursuant to such agreement and (ii) Purchaser shall not be entitled to
the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after Seller shall have entered into such
an agreement, all Events of Default shall have been remedied and the
Obligations defaulted on paid in full. As an alternative to exercising
the power of sale herein conferred upon it, Seller may proceed by a
suit or suits at law or in equity to foreclose this Agreement may file
any warrant of attorney, confession of judgment or similar document
(together with such other pleadings as may be necessary to
accomplish the purposes thereof (the preparation and filing of which
are hereby expressly authorized by Purchaser) and may sell the
Collateral or any portion thereof pursuant to a judgment or decree of
a court or courts having competent jurisdiction or pursuant to a
proceeding by a court-appointed receiver. Any sale pursuant to the
provisions of this Section 14 shall he deemed to conform to the
commercially reasonable standards as provided in Section 504(3) of
the UCC or its equivalent in other jurisdictions.
(c) Seller agrees with Purchaser that the powers provided in this
Section 14(c) shall not be exercisable until the number of days (if any)
provided in Section 11.02 of the Purchase Agreement for the exercise
of remedies by Seller has elapsed after the occurrence, and during the
continuance, of an Event of Default. Purchaser hereby irrevocably
constitutes and appoints Seller and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with
full
-40-
irrevocable power and authority in the place and stead of Purchaser
and in the name of Purchaser or in Sellers own name, from time to
time in Seller's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all action and to execute any and all
documents and instruments which may be reasonably necessary or
desirable to accomplish the purposes of this Agreement and, without
limiting the generality of the foregoing, Purchaser hereby gives Seller
and any officer or agent thereof the power and right to do the
following:
(i) In the case of any Account, at any time when the authority
of Purchaser to collect Accounts has been curtailed or terminated
pursuant to the first sentence of subsection 4(d), in the name of
Purchaser or its own name or otherwise, to take possession of and
indorse and collect any checks, drafts, notes, letters of credit,
acceptances or other instruments for the payment of moneys due
under any Accounts or with respect to any other Collateral, and to file
any claim or to take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by Seller for the
purpose of collecting any and all such moneys due under any such
Account or with respect to any other such Collateral whenever
payable (including, without limitation, to execute and present drafts
necessary to draw upon, and to exercise any other rights of
Purchaser under, any letter of credit issued for the benefit of
Purchaser as security for any Account in accordance with the terms
thereof); and
(ii) (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to
become due thereunder directly to Seller or as Seller shall direct
(including, without limitation, to direct the issuer of, and/or confirming
bank with respect to, any letter of credit issued for the benefit of
Purchaser as security for or to evidence any Account to forward all
proceeds payable thereunder to Seller); (B) to ask or demand for,
collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in
respect of or arising out of any of the Collateral; (c) to sign and
indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of
the Collateral; (D), to defend at Purchaser's expense any suit, action
or proceeding brought against Seller with respect to any Collateral; (E)
to settle, compromise or adjust any suit, action or proceeding
described in clause (D) above and, in connection therewith, to give
such discharges or releases as Seller may deem appropriate; and (F)
generally, to sell, transfer, pledge and make
-41-
any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though Seller were the absolute
owner thereof for all purposes, and to do, at Seller's option and
Purchaser's expense, at any time, or from time to time, all acts and
things which Seller deems necessary or advisable to protect, preserve
or realize upon the Collateral and the Security Interest and to effect
the intent of this Agreement, all as fully and effectively as Purchaser
might do.
(d) Without limiting any of Purchaser's rights under this Agreement or
otherwise, including, inter alia claims by Purchaser against Seller
arising out of the exercise of the powers granted hereunder,
Purchaser hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue of the powers granted in subsection 14(c).
Such power of attorney is a power coupled with an interest and shall
be irrevocable.
(e) The powers conferred on Seller under subsection 14(c) are to protect
Seller's interests in the Collateral and shall not impose any duty upon
Seller to exercise any such powers. Seller shall be accountable only
for amounts that Seller actually receives as a result of the exercise of
such powers, and neither Seller nor any of its officers, directors,
employees or agents shall be responsible to Purchaser for any act or
failure to act hereunder, except for their own gross negligence or
willful misconduct. Seller hereby agrees to indemnify and hold
Purchaser and its officers, directors, employees and agents and each
of them severally, from and against any and all liabilities and
obligations or claims or demands arising out of or in connection with
Seller's exercise of the power of attorney granted pursuant to Section
14(c) to the extent that such exercise is made in violation of the first
sentence of Section 14(c) or arises as a result of the gross negligence
or willful misconduct of Seller, its officers, directors, employees or
agents.
SECTION 15. Application of Proceeds of Sale. The proceeds of any
sale of Collateral pursuant to Section 14, as well as any Collateral
consisting of cash, shall be applied by Seller as follows:
FIRST, to the payment of Obligations (which include, without
limitation, principal and interest payable in connection with the March
1997 Payment, and all costs and expenses reasonably incurred by
Seller in connection with such sale, including, without limitation, all
court costs and the reasonable fees, other reasonable charges and
disbursements of its agents and legal counsel and any other
reasonable costs or expenses incurred in connection with the exercise
of any right or remedy hereunder or thereunder); and
-42-
SECOND, to Purchaser, its successor or assigns, or as a court of
competent jurisdiction may otherwise direct.
Seller shall have absolute discretion as to the time of application
and/or actual application of any such proceeds, monies or balances in
accordance with this Agreement. Upon any sale of the Collateral by
Seller (including pursuant to a power of sale granted by statute or
under a judicial proceedings, the receipt of Seller or of the officer
making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers
shall not be obligated to see to the application of any part of the
purchase money paid over to Seller or such officer or be answerable
in any way for the misapplication thereof.
SECTION 16. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section12.08 of the
Purchase Agreement.
SECTION 17. Security Interest Absolute. All rights of Seller
hereunder, the Security Interest granted hereunder and all obligations
of Purchaser hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Purchase
Agreement, any other Operative Document, any agreement with
respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, or any failure, omission,
delay or lack of diligence on the part of Seller to enforce, assert or
exercise any right, power or remedy under the Purchase Agreement
or any other Operative Document, (b) any change in the time, manner
or place of payment of or in any other term of, all or any of the
obligations (Including any compromise, surrender, settlement,
acceleration, release or termination of all or any of the obligations, or
any other amendment or waiver of or any consent to any departure
from the Purchase Agreement, any other Operative Document or any
other agreement or instrument, (c) any exchange, release or
non-perfection ofany Lien on the on the Collateral
or any other collateral
securing all or any of the Obligations, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing
or guaranteeing all or any of the obligations or (d) except as provided
in Section 6, any other circumstance that might otherwise constitute
a defense available to, or a discharge of, Purchaser in respect of the
obligations or this Agreement (other than the indefeasible payment in
full of the Obligations).
SECTION 18. Survival of Agreement. All covenants, agreements,
representations and warranties made by Purchaser herein and in the
certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Operative Document
shall be considered to have been relied upon by Seller and shall
survive the closing of the transactions contemplated hereby,
regardless of any investigation made by Seller or on its behalf, and,
except as otherwise provided in
-43-
Sections 13 and 20 hereof and in any other Section which provides
that certain provisions shall survive the termination of this Agreement,
shall continue in full force and effect until this Agreement is
terminated in accordance with its terms.
SECTION 19. Assignments. This Agreement shall be binding upon
Purchaser and Seller and their respective successors and assigns, and
shall inure to the benefit of Purchaser and Seller, and their respective
successors and assigns, except that Purchaser shall not have the
right to assign its rights hereunder or any interest herein or in the
Collateral (and any such attempted assignment shall be void). Seller
may not assign its rights hereunder without the consent of Purchaser,
except upon the occurrence and during the continuance of an Event
of Default.
SECTION 20. Reimbursement of Seller. (a) Purchaser agrees to pay
upon demand to Seller the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts or agents, that Seller may incur in connection with
(i) the custody or preservation of, or the sale of, collection from or
other realization upon any of the Collateral, (ii) the exercise,
enforcement or protection of any of the rights of Seller hereunder or
any other Operative Document or (iii) the inaccuracy in any material
respect of any representation herein or any other Operative
Document, or the failure of Purchaser to materially perform or observe
any of the provisions hereof or any other Operative Document. If
Purchaser shall fail to do any act or thing that it has covenanted to do
hereunder or any representation or warranty of Purchaser hereunder
shall be breached, Seller may, following thirty days written notice to
Purchaser (or such shorter cure period as may be set forth in clause
(ii) of Section 11.01 of the Purchase Agreement) of such failure or
breach in the case of failures or breaches which are curable pursuant
to the terms of clause (ii) of Section 11.01 of the Purchase
Agreement (but shall not be obligated to), do the same or cause it to
be done or remedy any such breach and there shall be added to the
Obligations the cost or expense incurred by Seller in so doing,
provided, that such thirty-day period shall not either (i) create any
cure period which does not exist under Section 11.01 or Section
11.02 of the Purchase Agreement, or (ii) expand any cure period
which is less than thirty days under Section 11.01 or Section 11-02
of the Purchase Agreement.
(b) Without limiting the generality of Purchaser's indemnification
obligations under the other Operative Documents and subject to
Seller's indemnification of Purchaser under the Purchase Agreement
(if any), Purchaser agrees to indemnify Seller and its affiliates
(collectively, the "Indemnitees") against, and hold each of them
harmless from, any and all losses, claims, demands, damages,
liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by or asserted against any of them arising out of,
in any way connected with, or as a result of, Purchaser's execution,
delivery or performance
-44-
(or non-performance) of this Agreement or any other Operative
Document or any claim, litigation, investigation or proceeding relating
hereto or to the Collateral, whether or not any Indemnitee is a party
thereto, provided that such indemnity shall not, as to any Indemnitee,
be available to the extent that such losses, claims, demands,
damages, liabilities or related expenses have resulted from such
Indemnitee's failure to act in a commercially reasonable manner or
from the gross negligence, bad faith or wilful misconduct of such
Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section 20 shall
remain operative and in full force and effect regardless of the
termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the obligations, the
invalidity or, unenforceability of any term or provision of this
Agreement or any other Operative Document or any investigation
made by or on behalf of Seller. All amounts due under this Section
20 shall be payable on written demand therefor and shall bear interest
from the date of incurrence of such liability at the Default Rate (as
defined in the Purchase Agreement). Purchaser's obligations under
this Section 20 shall survive the termination of this Agreement.
SECTION 21. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York
without reference to any applicable principles of conflict of laws.
SECTION 22. Waivers; Amendment. (a) No failure or delay of Seller
in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof
or the exercise of any other right or power. The rights and remedies
of Seller hereunder and under the other Operative Documents are
cumulative and are not exclusive of any rights or remedies that it
would otherwise have. No waiver of any provisions of this
Agreement or consent to any departure by Purchaser therefrom shall
in any event be effective unless the same shall be given in writing,
and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand
on Purchaser in any case shall entitle Purchaser to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered
into between Purchaser and Seller.
SECTION 23. Waiver of Jury Trial. Each party hereto hereby waives,
to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any litigation
-45-
directly or indirectly arising out of, under or in connection with this
Agreement. Each party hereto (a) certifies that no representative,
agent or attorney of any other party has represented, expressly or
otherwise, that such other party would not, in the event of litigation,
seek to enforce the foregoing waiver and (b) acknowledges that it and
the other parties hereto have been induced to enter into this
Agreement by, among other things, the mutual waivers and
certifications in this Section 23.
SECTION 24. Severabilitv. In the event any one or more of the
provisions contained in this Agreement or in any other Operative
Document should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of
a particular provision in a particular jurisdiction shall not in and of
itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provisions.
SECTION 25. Jurisdiction; Consent to Service of Process. (a) Each
party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court
or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment relating to any such
action or proceeding, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New
York State Court or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or the other
Operative Documents in any New York State or Federal court. Each
of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 16. Nothing in
this Agreement will affect the right of
-46-
any party to this Agreement to serve process in any other manner
permitted by law.
SECTION 26. Headings. Article, Section and subsection headings
used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 27. Counterparts. This Agreement may be executed in two
or more counterparts (and via fax), each of which shall constitute an
original, but all of which, when taken together, shall constitute but
one instrument.
SECTION 28. Specific Performance. Each party hereto
acknowledges and agrees that a breach-by such party of its
covenants contained herein may result in irreparable injury to the
other party for which there is no adequate remedy at law (whether or
not any such breach is a breach specified in Section 11.01 (ii) of the
Purchase Agreement) and that the other party shall be entitled to seek
specific enforcement of the same by means of a temporary restraining
order, a preliminary or permanent injunction and/or other equitable
relief issued by a court having jurisdiction thereof. The foregoing
remedies shall be in addition to, and not in lieu of, any other remedies
and relief to which either party may be entitled.
IN WITNESS WHEREOF, Purchaser and Seller have duly executed this
Agreement as of the day and year first above written
BRADLEY PHARMACEUTICALS, INC., INC.
By: Dan Glassman
Title:Chief Executive officer
BERLEX LABORATORIES, INC.
By: Wolfgang Kunze
Title:Chief Financial Officer
-47-
State of New Jersey
ss:
County of Morris
BE IT REMEMBERED, that on this 23rd day of December, 1996,
before me the subscriber, an attorney of the State of New Jersey,
personally appeared, Wolfgang Kunze, the Chief Financial Officer of
BERLEX LABORATORIES, INC., a Delaware Corporation, who, I am
satisfied, is the person who executed the within instrument as the
Chief Financial Officer of said corporation, and be acknowledged that
he signed and delivered the same as such officer, that the within
instrument is the voluntary act and deed of said corporation made by
virtue of authority of its board of directors and that it was sealed with
the proper corporate seal.
An Attorney of the State of New Jersey
-48-
(SECURITY AGREEMENT dated as of December 23, 1996, between
DOAK DERMATOLOGICS, INC., a New York corporation
("Subsidiary") , and BERLEX LABORATORIES, INC., a Delaware
corporation ("Seller")
WHEREAS, Subsidiary is a subsidiary of Bradley Pharmaceuticals, Inc.
("Purchaser");
WHEREAS, Purchaser and Seller have entered into that certain
Purchase Agreement dated as of November 10, 1993, as amended by
Amendment Nos. I and 2 thereto, by the letter agreement dated
December 11, 1995, and by Amendment No. 4 thereto (the "Original
Asset Purchase Agreement"), pursuant to which Purchaser agreed to
purchase all right, title and interest in and to certain assets of Seller;
WHEREAS, Purchaser has requested that Seller make certain
modifications to the timing of the payments required pursuant to the
Original Asset Purchase Agreement as provided in Amendment No. 5
to the Original Asset Purchase Agreement dated as of the date hereof
(the "Amendment"; the Original Asset Purchase Agreement, as
amended by the Amendment, and as may be further amended,
restated, supplemented or otherwise modified from time to time is
hereinafter referred to as the "Purchase Agreement" or "Asset
Purchase Agreement"), and Seller's agreement to make such
modifications and to execute and deliver the Amendment is
conditioned upon, among other things, execution by Subsidiary of this
Agreement; and
WHEREAS, Subsidiary and Purchaser are members of the same
consolidated group of companies and Subsidiary will derive
substantial direct and indirect benefit from the modifications
contemplated by the Amendment;
NOW THEREFORE, in consideration of the mutual covenants and
promises contained herein and in the Purchase Agreement, Subsidiary
and Seller hereby agree as follows:
SECTION 1. Definition of Terms Used Herein. All capitalized terms
used herein but not defined herein and defined in the Original Asset
Purchase Agreement shall have the meanings ascribed to such terms
in the Original Asset Purchase Agreement.
SECTION 2. Definition of Certain Terms Used Herein. As used herein
the following terms shall have the following meanings:
"Account" shall mean all items described or otherwise
included in the UCC definition thereof (in all cases whether now
owned or hereafter acquired or created by Subsidiary and wherever
located) and all of the following, whether or not so described or
included and without limiting the generality of the foregoing (in
all cases whether now existing or hereafter acquired or created): all
obligations of any kind or nature at any time due or owing to
Subsidiary and all other rights of Subsidiary to receive payment
pursuant to or arising from the sale of inventory or other
pharmaceutical products and/or the provision of services (whether
classified under the UCC or the law of any other state as accounts,
accounts receivable, instruments, contract rights, chattel paper,
general intangibles, or otherwise).
"Account Reports" shall mean, collectively, each account report in
substantially the form of Exhibit A hereto to be delivered by
Subsidiary to Seller contemporaneously herewith and on a semi-monthly
basis after the date hereof pursuant to Section 5 hereof.
"Agreement" shall mean this Security Agreement as amended,
restated, supplemented or otherwise modified from time to time.
"Books and Records" shall mean all of the books and records of
Subsidiary (including, without limitation, all computer programs, discs
or tape files, printouts and other computer prepared information and
the equipment containing such information) indicating, summarizing,
evidencing or otherwise containing information relating to, including,
without limitation, any which would or may otherwise be necessary
for the realization on, any of the Collateral.
"Collateral" shall mean all the following, whether now owned or
hereafter acquired or created by Subsidiary: (a) all Accounts, (b) all
guaranties of, and security or other Liens for payment of any
Accounts (including, without limitation, all rights of Subsidiary under
or in connection with each letter of credit issued to or for the benefit
of Subsidiary, including, without limitation, all rights to receive the
proceeds thereof), (c) all files, correspondence, customer lists,
computer programs, tapes, discs and related data processing
software, general ledgers, accounts ledgers, other information
respecting Accounts (including any identifying any Account debtor or
the amount owed by same), and all other Books and Records, (d) all
rights and remedies which Subsidiary might exercise with respect to
any of the foregoing, and (e) all Proceeds and products of the items
described in the preceding clauses in this definition of Collateral,
provided, however, that Collateral shall not include any trademarks or
similar items of intellectual property.
"Event of Default" shall have the meaning assigned to such term in
the Purchase Agreement.
"Existing Letter of Credit" shall mean the existing letter of credit
issued to or for the benefit of Subsidiary.
"Obligations" shall mean, collectively, (a) the principal under Section
the March 1997 Payment (as defined in the
-49-
Purchase Agreement) and interest payable under the Purchase
Agreement in connection therewith (including interest accruing during
the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether a claim therefor is allowed
or allowable in such proceeding), when and as due, whether at
maturity, by acceleration or otherwise, (b) all other monetary
obligations, including fees, costs, expenses (including, without
limitation, attorneys fees and expenses) and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether a claim therefor is allowed or allowable in such proceeding),
of Purchaser to Seller under each of the Purchase Agreement and
each other Operative Document with respect to the enforcement or
collection of the foregoing, and (c) all monetary and nonmonetary
obligations of Subsidiary hereunder and of Purchaser under the
Security Agreement (as defined in the Purchase Agreement).
Operative Documents" shall mean the Purchase Agreement, this
Agreement, the Security Agreement (as defined in the Purchase
Agreement), the Trademark Security Agreement (as defined in the
Purchase Agreement), the Account Reports and all other documents
or instruments executed (or hereafter executed) by Purchaser and/or
any one or more of its Subsidiaries (as defined in the Purchase
Agreement) in connection with, arising out of or otherwise relating to
the Purchase Agreement, as each such agreement, document or
instrument is amended, restated, supplemented or otherwise modified
from time to time.
"Proceeds" shall mean means all items described or otherwise
included in the UCC definition thereof and all of the following,
whether or not so described or included and without limiting the
generality of the foregoing: any consideration received from the sale,
exchange, realization, or other disposition of any asset or property
that constitutes Collateral, any value received as a consequence of
the possession of any Collateral and any and all other amounts from
time to time paid or payable or realized under or in connection with
any of the Collateral (including, without limitation, insurance proceeds
paid or payable in respect of same).
"Security Interest" shall have the meaning assigned to such term in
Section 4.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the State of New York.
SECTION 3. Rule of Interpretation. The rules of interpretation
specified in Article I and subsection 12.12(a) of the Purchase
Agreement shall be applicable to this Agreement.
-50-
SECTION 4. Security Interest; Certain Rights of Seller; Limitations on
Seller's Obligations. (a) As security for the payment and/or
performance, as the case may be, of the Obligations, Subsidiary
hereby grants, assigns, pledges and transfers to Seller, its successors
and its assigns, a lien on and security interest in all of Subsidiary's
right, title and interest in, to and under the Collateral (the "Security
Interest").
(b) Subsidiary agrees at all times to keep such accurate and complete
accounting records with respect to the Collateral as are consistent
with its current practices and in accordance with such prudent and
standard practices used in industries that are the same as or similar to
those in which Subsidiary is engaged.
(c) Anything contained herein to the contrary notwithstanding,
Subsidiary shall remain liable under each of its Accounts (and each
agreement giving rise thereto) to observe and perform all the
conditions and obligations to be observed and performed by it
thereunder. Seller shall have no obligation or liability under or
otherwise relating to any Account (or any agreement giving rise
thereto) by reason of or otherwise arising out of this Agreement or
the receipt by Seller of any payment relating to such Account
pursuant hereto, nor shall Seller be obligated in any manner to
perform any other obligations of Subsidiary under or pursuant to any
Account (or any agreement giving rise thereto), to make any inquiry
as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any
Account (or any agreement giving rise thereto), to present or file any
claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(d) Seller authorizes Subsidiary to collect the Accounts provided that
Seller may, with notice, curtail or terminate such authority at any time
after the occurrence and during the continuance of an Event of
Default. If required by Seller at any time after the occurrence and
during the continuance of an Event of Default, all Proceeds, when
collected by Subsidiary, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper of any kind
whatsoever or other documents received on account of any Account
or in payment of any other Collateral, shall be promptly forwarded to
Seller by Subsidiary, in precisely the form received, except for its
endorsement when required, and until so forwarded shall be deemed
to be held in trust by Subsidiary for Seller and as Seller's property.
Without limiting Seller's remedies and other rights hereunder, upon
and during the continuance of an Event of Default, Seller may,
pursuant to the power of attorney granted by Subsidiary to Seller in
Section 14 hereof, endorse in Subsidiary's name any of the checks
and other items described in the preceding sentence.
-51-
(e) All Proceeds forwarded to Seller shall continue to be collateral
security for all of the Obligations and shall not constitute payment
thereof until applied as hereinafter provided. In no event shall any
checks, drafts or other instruments which are forwarded to Seller
pursuant hereto constitute final payment unless and until such
instruments have been collected.
(f) Upon the written request of Seller at any time after the occurrence
and during the continuance of an Event of Default, Subsidiary will
notify account debtors and parties to the Accounts that the Accounts
have been assigned to Seller and that payments shall be made directly
to Seller. In addition, Seller may at any time after and during the
continuance of an Event of Default notify such account debtors and
parties (including by forwarding to such account debtors and parties
the forms of letter executed and delivered by Subsidiary to Seller on
the date hereof, which letters may be dated and completed (by way
of example only, the name and address of, and the amount owing by,
the Account debtor) by Seller in any manner Seller deems reasonably
advisable). At any time after the occurrence and during the
continuance of an Event of Default Seller may, in its own name or in
the name of others, communicate with account debtors and parties to
the Accounts in order to verify with them to Seller's satisfaction the
existence, amount and terms of any Accounts.
SECTION 5. Notices; Reports. Subsidiary will promptly advise Seller,
in reasonable detail, at its address set forth in Section 12.08 of the
Purchase Agreement, of the occurrence of any event or circumstance
which could reasonably be expected to have a material adverse effect
on the aggregate value of the Collateral or on the Liens created
hereunder. On the I5th and the last day of each month, provided
such day is a Business Day and, if not, then on the next Business Day
thereafter, Subsidiary will provide to Seller an Account Report as of
the next to last Business Day prior thereto. Prior to the 15th day of
each month, Subsidiary will provide to Seller copies of its monthly
cash flow reports relating to the prior month, indicating the difference
between projections and actual results as well as operating
projections covering the next three months and projected gross
accounts receivable and net accounts receivable which are projected
to he reflected in the next three months' Account Reports.
Subsidiary will also provide any other information relating to
Subsidiary reasonably requested by Seller from time to time. Such
cash flow reports shall be in a form substantially similar to the form
provided by Seller to Purchaser except to the extent required to
provide the information required by this Section 5. Notwithstanding
the provisions of Section 11.01 of the Asset Purchase Agreement,
failure to provide the foregoing. reports of cash flow and Accounts
Reports and/or non-willfully incorrect statements therein will not be
deemed to be a default for which Seller can declare an Event of
Default.
-52-
SECTION 6. Release; Termination. (a) This Agreement and the
Security Interest granted hereby shall terminate 91 days (such 91-day
period being the "Termination Period") after Seller's receipt in full of
the March 1997 Payment (as defined in the Purchase Agreement),
together with all accrued interest thereon, if any, and all other
obligations, if any; provided, that the Security Interest granted hereby
shall be terminated on a day that is during, but prior to the end of,
the Termination Period with respect to any Collateral that is pledged
by Subsidiary to a bona fide lender as collateral for a loan to be made
by such lender to Subsidiary or Purchaser on such day (provided that
Seller is provided with reasonably acceptable written evidence that
such loan will be made on such day); provided, further, that in no
event shall this Agreement terminate at any time when an Event of
Default under subsection 11.01 (iii), (iv) or (v) of the Purchase
Agreement has occurred and is continuing.
(b) In connection with any termination hereof pursuant to subsection
6(a), Seller shall immediately execute and deliver to Subsidiary, at
Subsidiary's expense, all termination statements in order to terminate
any financing statements filings and similar documents that Subsidiary
shall reasonably request or deem advisable to evidence such
termination. Seller shall, upon the written request of Subsidiary,
confirm its obligations under the preceding sentence with respect to
the termination hereof to a bona fide lender that is proposing to make
a loan to Subsidiary secured by all or part of the Collateral which loan
will be used by Subsidiary in whole or in part to pay the March 1997
Payment and Seller shall specifically confirm its obligation to execute
and deliver UCC-3 termination statements to such bona fide lender
upon Seller's bank's written confirmation to Seller that Seller has
timely received via wire transfer of immediately available funds the
March 1997 Payment. Any execution and delivery of termination
statements or documents pursuant to this Section 6 shall be without
recourse to or representation or warranty by Seller. Seller shall also
provide Subsidiary with copies of any filed financing or continuation
statement or other documents filed, registered or recorded by or on
behalf of Seller. Seller acknowledges that" upon the termination
hereof pursuant to subsection 6(a), the powers granted to it pursuant
to Section 14 hereof shall immediately cease and agrees to attempt to
notify at its own cost and expense all persons with whom Seller has
acted as Subsidiary's attorney-in-fact under Section 14(c) hereof that
it no longer has such power.
SECTION 7. Further Assurances; Return of Letters of Credit.
(a)Subsidiary agrees, at its expense, to execute, acknowledge, deliver
and cause to be duly filed all such further instruments and documents
and take all such actions as Seller may from time to time reasonably
request to better assure and preserve the Security Interest and the
rights and remedies created hereby, including the payment of any
fees and taxes required in connection with the execution and delivery
to or by Seller of this
-53-
Agreement, the granting of the Security Interest created hereby, the
filing of any financing statements, continuation statements or other
documents in connection herewith, historical credit information
regarding one or more Account debtors, the execution of any
document necessary or advisable in Seller's reasonable judgment to
comply with the Federal Assignment of Claims Act to the extent
required by Section 11(i) hereof and/or any similar state statute or
other law and the execution and delivery of any document required to
supplement this Agreement. Subsidiary also hereby authorizes Seller
to file any such financing or continuation statement and all other
documents reasonably required or desired by Seller to be filed,
registered or recorded to perfect any of the Liens in the Collateral
granted herein, without the signature of Subsidiary to the extent
permitted by applicable law. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. Except as provided in the
immediately succeeding sentence, if any amount payable under or in
connection with any of the Collateral shall be or become evidenced,
covered or secured by any promissory note or other instrument or
chattel paper, bill of lading, document of title, warehouse receipt,
letter of credit or other document the possession of which is
necessary or reasonably desirable to enable Seller to perfect a
security interest therein, such promissory note or other instrument or
chattel paper, letter of credit or other document shall be, within two
Business Days of receipt thereof by or on behalf of Subsidiary,
pledged and delivered to Seller, duly endorsed (if necessary) in a
manner reasonably satisfactory to Seller. Immediately (i) upon the
occurrence of an Event of Default described in Section 11.01(iii), (iv)
or (v) of the Purchase Agreement, and (ii) after the written request by
Seller upon the occurrence and during the continuance of any other
Event of Default, Subsidiary shall deliver to Seller all documents of
title, bills of lading and other documents and instruments, duly
endorser or executed (if necessary) in a manner reasonably
satisfactory to Seller, necessary to draw on any letter of credit
delivered or to be delivered to Seller in accordance with the terms
hereof. in addition, Seller may at any time after and during the
continuance of an Event of Default notify issuers of letters of credit in
which an interest was pledged to Seller pursuant hereto, and
confirming banks with respect thereto, of the assignment of the
proceeds of such letter of credit (including by forwarding to such
issuing and confirming banks the forms of letter executed and
delivered by Subsidiary to Seller on the date hereof, which letters may
be dated and completed (by way of example only, the name and
address of the issuing or confirming bank and a description of the
letter of credit) by Seller in any manner Seller deems reasonably
advisable).
(b) Subsidiary may not draw on any letter of credit issued to or for
the benefit of Subsidiary as security for an Account, except as
provided in this subsection 7(b). For so long as no Event of Default
has occurred and is continuing, Subsidiary may, upon not less than
three Business Days' prior written notice to Seller, request the release
of any letter of credit previously delivered to
-54-
Seller pursuant hereto. After receipt of such notice from Subsidiary,
and provided no Event of Default has occurred and is continuing,
Seller shall promptly deliver to Subsidiary the original of the letter of
credit to be drawn upon. Subsidiary shall submit all documents and
take all other actions necessary to draw upon such letter of credit to
the issuing or confirming bank, as appropriate, within five Business
Days of its receipt of the original of such letter of credit.
SECTION 8. Inspection and Verification. Seller and such persons as
Seller may designate shall have the right, at any reasonable time or
times during Subsidiary's normal office hours, upon reasonable notice
and at Seller's own cost and expense, to inspect Subsidiary's Books
and Records (and to make extracts and copies from such records) and
the other Collateral, to discuss Subsidiary's affairs reasonably related
to the Collateral (including without limitation expected future sales)
with the officers of Subsidiary and its independent accountants and to
obtain other information relating to the Collateral; provided, however,
that Seller shall treat all information of a confidential or proprietary
nature that it receives as confidential in accordance with Section 12
of the Amendment. Any discussion to be held with Subsidiary's
officers or independent accountants shall be at such times as shall
not unreasonably interfere with Subsidiary, Subsidiary's officers or its
independent accountants.
SECTION 9. Taxes; Encumbrances. Subsidiary agrees to pay and
discharge all taxes, assessments, charges, fees, security interests or
other Liens at any time levied or placed on the Collateral. At its
option, Seller may, if Subsidiary falls following thirty days written
notice from Seller, discharge past due taxes, assessments, charges,
fees, security interests or other Liens at any time levied or placed on
the Collateral, and may pay for the maintenance and preservation of
the Collateral to the extent Subsidiary fails to do so following thirty
days written notice from Seller as required by this Agreement or the
Purchase Agreement, and Subsidiary agrees to reimburse Seller on
demand for any reasonable and documented expense incurred by it
pursuant to the foregoing authorization; provided, however, that
nothing in this Section 9 shall be interpreted as excusing Subsidiary
from paying and discharging all taxes, assessments, charges, fees,
security interests or other Liens at any time levied or placed on the
Collateral as set forth herein.
SECTION 10. Representations and Warranties. Subsidiary
represents, warrants and covenants to and with Seller that:
(a) Filings. Fully executed financing statements containing a
description of the Collateral have been delivered to Seller for filing in
every governmental, municipal or other office in the jurisdiction
necessary to establish a valid and
-55-
perfected security interest in favor of Seller in respect of the
Collateral in which a security interest may be perfected by filing a
financing statement in the United States and its territories and
possessions, and no further filing or registration is necessary in any
such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements.
(b) Validity of Security Interest. The Security Interest constitutes a
valid and, upon the filing of the financing statements referred to in
subsection 10(a), perfected first priority security interest in all such
Collateral in which a security interest may be perfected by filing in the
United States and its territories and possessions.
(c) Absence of Other Liens. Subsidiary owns the Collateral with
respect to which it has purported to grant the Security Interest
hereunder and has not granted any Lien on (including executing any
UCC-1 financing statements) any such Collateral. There are no Liens
on any such Collateral which arose subsequent to the dates of the
Recent Purchaser SEC Documents (as defined in the Purchase
Agreement) pursuant to any law, rule or regulation relating to the
environment and to the best of its knowledge, there are no other
Liens on any such Collateral, except for claims for chargebacks and
credits arising in the ordinary course of business, none of which Liens
have been perfected under the Uniform Commercial Code, under any
mechanic's lien law, materialmen's lien law or other statute, or under
common law, No security agreement, financing statement or other
public notice with respect to all or any part of such Collateral is on file
or of record in any public office, except such as may have been filed
in favor of Seller pursuant to this Agreement.
(d) Accounts. The amount represented by Subsidiary to Seller as
owing by each account debtor or by all account debtors in respect of
the Accounts in the Account Report delivered contemporaneously
herewith and in each Account Report delivered after the date hereof
pursuant to Section 5 is, as to the first Account Report on the date
hereof, and will be, as to each subsequent Account Report, the
correct amount actually owing by such Account debtor or debtors
thereunder, in each case listing the cumulative amount of all
estimated chargebacks (as reasonably estimated by Subsidiary) of any
kind or nature whatsoever relating to such Accounts (including those
currently payable and those payable in the future). No amount
payable to Subsidiary under or in connection with any of the
Accounts is, as to the first Account Report on the date hereof, or will
be, as to each subsequent Account Report, evidenced by any
instrument, chattel paper, letter of credit or other document the
possession of which is reasonably necessary or reasonably desirable
to enable Seller to perfect a security interest therein which has not
been delivered to Seller together with a pledge agreement reasonably
satisfactory to Seller. The aggregate amount of Accounts owed by
Account debtors that are governmental entities, together with all
-56-
Accounts (as defined in the Security Agreement) owed by Account
(as defined in the Security Agreement) debtors that are governmental
entities, is not in excess of $100,000.
(e) Chief Executive Office; Books and Records. Subsidiary's chief
executive office and chief place of business is located at 383 Route
46 West, Fairfield, New Jersey. Subsidiary keeps its Books and
Records concerning the Accounts and all other Collateral at the same
address. Approximately 33% (based upon by fair market value) of
Subsidiary's inventory is kept at a warehouse located at 4605 Hickory
Hill Road, Memphis, Tennessee 38141. Subsidiary has not at any
time within the past six months maintained its chief executive office
or chief place of business, its records concerning the Collateral at any
location except those described in this subsection 10(e). No
manufacturing operations are performed at any premises owned or
leased by Subsidiary in New Jersey. All rent to each landlord of
Subsidiary and all fees due to any warehouseman operating a
warehouse where inventory of Subsidiary is located has been paid
through December 31, 1996.
(f) Miscellaneous. None of the Collateral constitutes, or is the
Proceeds of, farm products.
(g) Disclosure. No representation or warranty by Subsidiary in this
Agreement or any other agreement, document or instrument to be
executed and delivered by Subsidiary pursuant hereto, or any
information in any Schedule referred to herein or in any such
document or instrument, contains or will contain any untrue
statement of material fact, or omits or will omit to state any material
fact required to make the statements herein or therein contained not
misleading.
(h) Letters of Credit. There is no security for (including no letters of
credit securing or evidencing) the payment of any of the Accounts
other than the Existing Letter of Credit. The face amount of the
Existing Letter of Credit does not exceed $100,000. Subsidiary shall
deliver to Seller all letters of credit and/or instruments hereafter
received by or on behalf of Subsidiary which evidence or secure an
Account. Subsidiary shall use its best efforts, (A) to deliver the
Existing Letter of Credit to Seller as soon as possible after the date
hereof, and (B) without any material additional cost or expense, to
cause each letter of credit issued after the date hereof to or for the
benefit of Subsidiary as security for any Account to provide that it is
transferable (and not just assignable). Pursuant to and in accordance
with Section 14, Seller shall have the right, with respect to each
Existing Letter of Credit, and will have the right, with respect to each
letter of credit issued after the date hereof to or for the benefit of
Subsidiary as security for any Account, to draw upon and otherwise
act as fully as Subsidiary can act with regard to such Existing Letter
of Credit or other letter of credit, as the case may be.
-57-
SECTION 11. Covenants Regarding Collateral. Subsidiary covenants
and agrees with Seller that, from and after the date of this Agreement
until this Agreement is terminated in accordance with its terms:
(a) Maintenance of Records. Upon the request of Seller, Subsidiary
will mark its Books and Records in a commercially reasonable manner
to evidence this Agreement and the Security Interest granted hereby.
After the occurrence of an Event of Default and at the written request
of Seller (and without limiting the generality of Seller's rights
hereunder), Subsidiary shall turn over its Books and Records to Seller
or to its representative during normal business hours.
(b)Compliance with Laws, etc. Subsidiary will comply with all laws,
rules and regulations and determinations of an arbitrator or a court or
other governmental authority, in each case applicable to or binding
upon the Collateral or any part thereof or to the operation of
Subsidiary's business, except to the extent that failure to comply
therewith would not, individually or in the aggregate, have a material
adverse effect on the Collateral or the business, operations, property
or condition (financial or otherwise) of Purchaser and its Subsidiaries
(as defined in the Purchase Agreement), taken as a whole, or on the
ability of Subsidiary to perform its obligations hereunder.
(c) Limitations on Modifications to Agreements Giving Rise to
Accounts. Except in the ordinary course of Subsidiary's business and
consistent with past practice, Subsidiary will not amend, modify,
terminate or waive any provision of any agreement giving rise to any
of the Accounts in any manner which could reasonably be expected
to materially adversely affect the value of any such Account as
Collateral. Subsidiary will perform and comply in all material respects
with all of its obligations under each such agreement.
(d) Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of business as generally conducted
by Subsidiary over a period of time, Subsidiary will not grant any
extension of the time for the payment of any of the Accounts,
compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partially, any person or entity liable
for the payment thereof, or allow any credit or discount whatsoever
thereon.
(e) Limitation on Liens. Subsidiary will not contract, create, incur,
assume or suffer to exist any Lien upon or with respect to any of the
Collateral other than (i) Liens on trademarks none of which
constitutes Collateral granted by Subsidiary to the Persons who have
sold or hereafter sell such trademarks to Subsidiary (or who sell stock
to Subsidiary as to which trademarks are assets owned by the
Corporation so sold), (ii) Liens relating to chargebacks or other claims,
none of which Liens are perfected under the Uniform Commercial
Code, under any
-58-
mechanic's lien law, materialmen's law or other statute, or under
common law and all of which Liens are subordinate to Seller's liens,
and (iii) Liens in favor of Seller.
(f) Locations of Collateral; Place of Business. Subsidiary will not
change, or permit to be changed, the location of its chief executive
office or chief place of business or the name or names used to
identify it in its business or the ownership or the location of its Books
and Records or any other Collateral without prior written notice to
Seller and unless all filings under the Uniform Commercial Code or
otherwise that are reasonably requested by Seller have been made.
(g) Limitations on Dispositions of Collateral. Subsidiary will not sell,
transfer, assign or otherwise divest itself of the Collateral, provided
that for so long as no Event of Default has occurred and is
continuing, Subsidiary may use the Books and Records in the ordinary
course of its business until written notice from Seller is received
objecting to such use, and may collect all amounts paid by or on
behalf of any Account debtor in accordance with Section 4(d).
(h) Ordinary Course Invoicing and Collections. Subsidiary will invoice
its customers and collect Accounts from its customers in the ordinary
course of business as generally conducted by Subsidiary over a period
of time.
(i) Assignment of Claims. Upon the occurrence and during the
continuance of an Event of Default, Subsidiary will take all actions
necessary or reasonably requested by Seller to enable Seller to realize
directly upon Accounts owed by obligors that are governmental
entities, including complying with the terms of the Federal
Assignment of Claims Act and any similar state law or regulation.
Pursuant to and in accordance with Section 14, Seller shall have the
right to take all such actions as fully as Subsidiary can do.
SECTION 12. Protection of Securitv; Corporate Matters. Subsidiary
shall, at its own cost and expense, take any and all reasonable
actions necessary or appropriate to defend title to the Collateral
against all persons and to defend the Security Interest of Seller in the
Collateral and the priority thereof against any ad-verse Lien of any
person or entity other than Seller.
SECTION 13. Continuing Obligations of Subsidiary. Subsidiary shall
indemnify, defend and hold harmless Seller and its officers, directors,
employees and agents and each of them severally, from and against
any and all (i) liabilities and obligations to be observed and performed
by Subsidiary under each contract, agreement, interest or obligation
and (ii) claims or demands, as to clauses (i) and (ii), arising out of, in
connection with or otherwise relating to the Collateral, except
to the extent such claim or demand arises from Seller's failure to act
in a
-59-
commercially reasonable manner. In addition, subject to the other
provisions of Article IX of the Asset Purchase Agreement (except the
provisions making Article IX the sole recourse of the parties)
Subsidiary hereby agrees to indemnify and hold Seller harmless on an
after-tax basis from and against any and all Losses arising out of,
based upon or caused by the inaccuracy of any representation or the
breach of any warranty, covenant or agreement of Subsidiary
contained herein or in any agreement or certificate delivered by
Subsidiary in connection herewith. The provisions of this Section 13
shall remain operative and in full force and effect regardless of the
termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the obligations, the
invalidity or unenforceability of any term or provision of this
Agreement or any other Operative Document or any investigation
made by or on behalf of Seller.
SECTION 14. Remedies Upon Default; Attorney-In-Fact. (a)
Subsidiary hereby grants to Seller an irrevocable license (exercisable
without payment of royalty or other compensation to Subsidiary),
upon the occurrence and during the continuance of an Event of
Default (and subject to Section 11.02 of the Purchase Agreement), to
use any Books and Records, including, without limitation, all
computer software and programs used for the compilation and
printout of information relating to the Accounts. Upon the occurrence
and during the continuance of an Event of Default (and subject to
Section 11.02 of the Purchase Agreement), Subsidiary agrees to
deliver each item of Collateral to Seller on demand, and it is agreed
that Seller shall have the right to take any or all of the following
actions at the same or different times, with or without legal process
and with or without additional notice or demand for performance
(except for providing notice as provided in Section 11.02 of the
Purchase Agreement): to take possession of the Collateral and,
without liability for trespass, to enter any premises where the
Collateral may be located for the purpose of taking possession of or
removing the Collateral and ' generally, to exercise any and all rights
and remedies Seller may have under this Agreement or any other
Operative Document and any and all rights and remedies afforded to a
secured party under the UCC or its equivalent in other jurisdictions or
other applicable law in either the United States or any foreign
jurisdiction. Without limiting the generality of the foregoing,
Subsidiary agrees that Seller shall have the right to sell or otherwise
dispose of all or any part of the Collateral at public or private sale, for
cash, upon credit or for future delivery as Seller shall reasonably
deem appropriate. In connection with the consummation of any such
sale, Seller shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely,
free from any claim or right on the part of Subsidiary (regardless of
whether Seller has any liability to Subsidiary by reason of any breach
of any obligation hereunder),
and Subsidiary hereby waives (to the fullest extent permitted by
applicable law) all
-60-
rights of redemption, stay and appraisal which Subsidiary now has or
may at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
(b) Seller shall give Subsidiary 10 Business Days' prior written notice
(which Subsidiary agrees is reasonable notice within the meaning of
Section 9-504(3) of the UCC or its equivalent in other jurisdictions) of
Seller's intention to make any sale of Collateral. Such notice, in the
case of a public sale, shall state the time and place for such sale and
the day on which the Collateral, or portion thereof, will first be
offered for sale. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as
Seller may fix and state in the notice (if any) of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold in
one lot as an entirety or in separate parcels, as Seller may (in its sole
and absolute discretion) determine. Seller shall not be obligated to
make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have
been given. Seller may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and place to
which the same was so adjourned. In case any sale of all or any part
of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by Seller until the sale price is paid by the
purchaser or purchasers thereof, but Seller shall not incur any liability
in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public sale
made pursuant to this Section 14, Seller may itself bid for or
purchase, free from any right of redemption, stay, valuation or
appraisal on the part of Subsidiary (all said rights being also hereby
waived and released to the fullest extent permitted by applicable law),
the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable
to Seller from Subsidiary as a credit against the purchase price, and it
may, upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to Subsidiary. For
purposes hereof, once a written agreement to sell the Collateral or
any portion thereof has been entered into, (i) Seller shall be free to
carry out such sale pursuant to such agreement and (ii) Subsidiary
shall not be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after Seller shall
have entered into such an agreement, all Events of Default shall have
been remedied and the obligations defaulted on paid in full. As an
alternative to exercising the power of sale herein conferred upon it,
Seller may proceed by a suit or suits at law or in equity to foreclose
this Agreement, may file any warrant of
attorney, confession of judgment or similar document (together with
such other pleadings as may be necessary to accomplish the
purposes thereof (the
-61-
preparation and filing of which are hereby expressly authorized by
Subsidiary) and may sell the Collateral or any portion thereof pursuant
to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
Any sale pursuant to the provisions of this Section 14 shall be
deemed to conform to the commercially reasonable standards as
provided in Section 9-504(3) of the UCC or its equivalent in other
jurisdictions.
(c) Seller agrees with Subsidiary that the powers provided in this
Section 14(c) shall not be exercisable until the number of days (if any)
provided in Section 11.02 of the Purchase Agreement for the exercise
of remedies by Seller has elapsed after the occurrence, and during the
continuance, of an Event of Default. Subsidiary hereby irrevocably
constitutes and appoints Seller and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of
Subsidiary and in the name of Subsidiary or in Seller's own name,
from time to time in Seller's discretion, for the purpose of carrying out
the terms of this Agreement, to take any and all action and to
execute any and all documents and instruments which may be -reasonably
necessary or desirable to accomplish the purposes of this
Agreement and, without limiting the generality of the foregoing,
Subsidiary hereby gives Seller and any officer or agent thereof the
power and right to do the following:
(i) in the case of any Account, at any time when the
authority of Subsidiary to collect Accounts has been curtailed or
terminated pursuant to the first sentence of subsection 4(d), in the
name of Subsidiary or its own name, or otherwise, to take possession
of and indorse and collect any checks, drafts, notes, letters of credit,
acceptances or other instruments for the payment of moneys due
under any Accounts or with respect to any other Collateral, and to file
any claim or to take any other action or proceeding an any court of
law or equity or otherwise deemed appropriate by Seller for the
purpose of collecting any and all such moneys due under any such
Account or with respect to any other such Collateral whenever
payable (including, without limitation, to execute and present drafts
necessary to draw upon, and to exercise any other rights of
Subsidiary under, any letter of credit issued for the benefit of
Subsidiary as security for any Account in accordance with the terms
thereof); and
(ii) (A) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become
due thereunder directly to Seller or as Seller shall direct (including,
without limitation, to direct the issuer
of, and/or confirming bank with respect to, any letter of credit issued
for the benefit of Subsidiary as security for or to evidence any
Account to forward all proceeds payable thereunder to Seller); (B) to
ask or demand for, collect, receive payment of and receipt for, any
and all moneys, claims and other amounts due or
-62-
to become due at any time in respect of or arising out of any of the
Collateral; to sign and indorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments verifications, notices and other documents in connection
with any of the Collateral; (D) to defend at Subsidiary's expense any
suit, action or proceeding brought against Seller with respect to any
Collateral; (E) to settle, compromise or adjust any suit, action or
proceeding described in clause (D) above and, in connection
therewith, to give such discharges or releases as Seller may deem
appropriate; and (F) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though Seller were the absolute owner
thereof for all purposes, and to do, at Seller's option and Subsidiary's
expense, at any time, or from time to time, all acts and things which
Seller deems necessary or advisable to protect, preserve or realize
upon the Collateral and the Security Interest and to effect the intent
of this Agreement, all as fully and effectively as Subsidiary might do.
(d) without limiting any of Subsidiary's rights under this Agreement or
otherwise, including, inter alia, claims by Subsidiary against Seller
arising out of the exercise of the powers granted hereunder,
Subsidiary hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue of the powers granted in subsection 14(c).
Such power of attorney is a power coupled with an interest and shall
be irrevocable.
(e) The powers conferred on Seller under subsection 14(c) are to
protect Seller's interests in the Collateral and shall not impose any
duty upon Seller to exercise any such powers. Seller shall be
accountable only for amounts that Seller actually receives as a result
of the exercise of such powers, and neither Seller nor any of its
officers, directors, employees or agents shall be responsible to
Subsidiary for any act or failure to act hereunder, except for their
own gross negligence or willful misconduct. Seller hereby agrees to
indemnify and hold Subsidiary and its officers, directors, employees
and agents and each of them severally, from and against any and all
liabilities, and obligations or claims or demands arising out of or in
connection with Seller's exercise of the power of attorney granted
pursuant to Section 14(c) to the extent that such exercise is made in
violation of the first sentence of section 14(c) or arises as a result of
the gross negligence or willful
misconduct of Seller, its officers, directors, employees or agents.
SECTION 15. Application of Proceeds of Sale. The proceeds of
any sale of Collateral pursuant to Section 14, as well as any Collateral
consisting of cash, shall be applied by Seller as follows:
FIRST, to the payment of Obligations (which include, without
limitation, principal and interest payable in connection with the March
1997 Payment, and all costs
-63-
and expenses reasonably incurred by Seller in connection with such
sale, including, without limitation, all court costs and the reasonable
fees, other reasonable charges and disbursements of its agents and
legal counsel and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or
thereunder); and
SECOND, to Subsidiary, its successor or assigns, or as a court of
competent jurisdiction may otherwise direct.
Seller shall have absolute discretion as to the time of application
and/or actual application of any such proceeds, monies or balances in
accordance with this Agreement. Upon any sale of the Collateral by
Seller (including pursuant to a power of sale granted by statute or
under a judicial proceedings, the receipt of Seller or of the officer
making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers
shall not be obligated to see to the application of any part of the
purchase money paid over to Seller or such officer or be answerable
in any way for the misapplication thereof.
SECTION 16. Notices. All communications and notices hereunder
shall be in writing and given as provided in Section 12.08 of the
Purchase Agreement if to Seller, at its address set forth in Section
12.08 of the Purchase Agreement and if to Subsidiary, at the
following address: Doak Dermatologics, Inc., 383 Route 46 West,
Fairfield, New Jersey, Fax: (201) 575-5366 Attention: Chief
Executive Officer.
SECTION 17. Security Interest Absolute. All rights of Seller
hereunder, the Security Interest granted hereunder and all obligations
of Subsidiary hereunder shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Purchase
Agreement, any other Operative Document, any agreement with
respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, or any failure, omission,
delay or lack of diligence on the part of Seller to enforce, assert or
exercise any right, power or remedy under the Purchase Agreement
or any other Operative Document, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the
obligations (including any compromise, surrender, settlement,
acceleration, release or termination of all or any of the obligations), or
any other amendment or waiver of or any consent to any departure
from the Purchase Agreement, any other Operative Document or any
other agreement or instrument, (c) any exchange, release or non-perfection
of any Lien on the Collateral or any other collateral
securing all or any of the Obligations, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing
or guaranteeing all or any of the obligations or (d) except as provided
in Section 6,
-64-
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, Subsidiary in respect of the obligations
or this Agreement (other than the indefeasible payment in full of the
Obligations). The obligations and liabilities of Subsidiary hereunder
shall not be conditioned or contingent upon the pursuit by Seller at
any time of any right or remedy against Purchaser or against any
other person or entity which may be or become liable in respect of all
or any part of the Obligations or against any collateral security
therefor or guaranty thereof or right of offset with respect thereto.
The obligations of Subsidiary hereunder are primary.
SECTION 18. Survival of Agreement. All covenants, agreements,
representations and warranties made by Subsidiary herein and in the
certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Operative Document
shall be considered to have been relied upon by Seller and shall
survive the closing of the transactions contemplated hereby,
regardless of any investigation made by Seller or on its behalf, and,
except as otherwise provided in Sections 13 and 20 hereof and in any
other Section which provides that certain provisions shall survive the
termination of this Agreement, shall continue in full force and effect
until this Agreement is terminated in accordance with its terms.
SECTION 19. Assignments. This Agreement shall be binding upon
Subsidiary and Seller and their respective successors and assigns, and
shall inure to the benefit of Subsidiary and Seller, and their respective
successors and assigns, except that Subsidiary shall not have the
right to assign its rights hereunder or any interest herein or in the
Collateral (and any such attempted assignment shall be void). Seller
may not assign its rights hereunder without the consent of
Subsidiary, except upon the occurrence and during the continuance of
an Event of Default.
SECTION 20. Reimbursement of Seller. (a) Subsidiary agrees to pay
upon demand to Seller the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its counsel
and of any experts or agents, that Seller may incur in connection with
(i) the custody or preservation of ' or the sale of, collection from or
other realization upon any of the Collateral, (ii) the exercise,
enforcement or protection of any of the rights of Seller hereunder or
any other Operative Document or (iii) the inaccuracy in any material
respect of any representation herein or any other Operative
Document, or the failure of Subsidiary to materially perform or
observe any of the provisions hereof or any other Operative
Document. If Subsidiary shall fall to do any act or thing that it has
covenanted to do hereunder or any representation or warranty of
Subsidiary hereunder shall be breached, Seller may, following thirty
days written notice to Subsidiary (or such shorter cure period as may
be set forth in clause (ii) of Section 11.01 of the Purchase
Agreement) of such failure or breach in the case of failures or
breaches which are curable pursuant to the terms of clause (ii) of
Section 11.01
-65-
of the Purchase Agreement (but shall not be obligated to), do the
same or cause it to be done or remedy any such breach and there
shall be added to the Obligations the cost or expense incurred by
Seller in so doing, provided, that such thirty-day period shall not
either (i) create any cure period which does not exist under Section
11.01 or Section 11.02 of the Purchase Agreement, or (ii) expand
any cure period which is less than thirty days under Section 11.01 or
Section 11.02 of the Purchase Agreement.
(b) Without limiting the generality of Subsidiary's indemnification
obligations under the other Operative Documents and subject to
Seller's indemnification of Subsidiary under the Purchase Agreement
(if any), Subsidiary agrees to indemnify Seller and its affiliates
(collectively, the "Indemnitees) against, and hold each of them
harmless from, any and all losses, claims, demands, damages,
liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by or asserted against any of them arising out of,
in any way connected with, or as a result of, Subsidiary's execution,
delivery or performance (or non-performance) of this Agreement or
any other operative Document or any claim, litigation, investigation or
proceeding relating hereto or to the Collateral, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses,
claims, demands, damages, liabilities or related expenses have
resulted from such Indemnitee's failure to act in a commercially
reasonable manner or from the gross negligence, bad faith or wilful
misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this section 20 shall
remain operative and in full force and effect regardless of the
termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the obligations, the
invalidity or unenforceability of any term or provision of this
Agreement or any other Operative Document or any investigation
made by or on behalf of Seller. All amounts due under this Section
20 shall be payable on written demand therefor and shall bear interest
from the date of incurrence of such liability at the Default Rate (as
defined in the Purchase Agreement). Subsidiary's obligations under
this Section 20 shall survive the termination of this Agreement.
SECTION 21. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York
without reference to any applicable principles of conflict of laws.
SECTION 22. Waivers; Amendment. (a) No failure or delay of Seller
in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or
-66-
further exercise thereof or the exercise of any other right or power.
The rights
and remedies of Seller hereunder and under the other Operative
Documents are cumulative and are not exclusive of any rights or
remedies that it would otherwise have. No waiver of any provisions
of this Agreement or consent to any departure by Subsidiary
therefrom shall in any event be effective unless the same shall be
given in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No
notice or demand on Subsidiary in any case shall entitle Subsidiary to
any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered
into between Subsidiary and Seller.
SECTION 23. Waiver of Jury Trial. Each party hereto hereby waives,
to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any litigation directly or indirectly
arising
out of, under or in connection with this Agreement. Each party
hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other
party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties
hereto have been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications in this Section 23.
SECTION 24. Severability. in the event any one or more of the
provisions contained in this Agreement or in any other Operative
Document should be held invalid, illegal or unenforceable in any
respect, the validity, legality
enforceability of the remaining provisions contained therein shall not
in any way be affected or impaired being understood that the
invalidity of a particular
a particular jurisdiction shall not in and of itself validity of such
provision in any other jurisdiction). The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes
as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 25. Jurisdiction; Consent to Service of Process.
(a) Each party hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New
York State court or Federal court of the United States of America
sitting in New York City, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement,
or for recognition or enforcement of any judgment relating to any
such action or proceeding, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any
such action
-67-
or proceeding may be heard and determined in such New York State
Court or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law.
(b) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or the other
Operative Documents in any New York State or Federal court. Each
of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 16. Nothing in
this Agreement will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.
SECTION 26. Headings. Article, Section and subsection headings
used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 27. Counterparts. This Agreement may be executed in two
or more counterparts (and via fax), each of which shall constitute an
original, but all of which, when taken together, shall constitute but
one instrument.
SECTION 28. Specific Performance. Each party hereto
acknowledges and agrees that a breach by such party of its
covenants contained herein may result in irreparable injury to the
other party for which there is no adequate remedy at law (whether or
not any such breach is a breach specified in Section 11.01(ii) of the
Purchase Agreement) and that the other party shall be entitled to seek
specific enforcement of the same by means of a temporary restraining
order, a preliminary or permanent injunction and/or other equitable
relief issued by a court having jurisdiction thereof. The foregoing
remedies shall be in addition to, and not in lieu of, any other remedies
and relief to which either party may be entitled.
IN WITNESS WHEREOF, Subsidiary and Seller have duly executed this
Agreement as of the day and yet above written.
-68-
DOAK DERMATOLOGICS, INC.
By:
Name: Daniel Glassman
Title: Chief Executive Officer
BERLEX LABORATORIES, INC.
By:
Name: Wolfgang Kunze
Title: Chief Financial Officer
-69-
State of New Jersey
ss:
County of Morris
BE IT REMEMBERED, that on this 23rd day of December, 1996,
before me the subscriber, an attorney of the State of New Jersey,
personally appeared, Wolfgang Kunze, the Chief Financial Officer of
BERLEX LABORATORIES, INC., a Delaware Corporation, who, I am
satisfied, is the person who executed the within instrument as the
Chief Financial Officer of said corporation, and be acknowledged that
he signed and delivered the same as such officer, that the within
instrument is the voluntary act and deed of said corporation made by
virtue of authority of its board of directors and that it was sealed with
the proper corporate seal.
An Attorney of the State of New Jersey
-70-
COURT Index No.
COUNTY OF AFFIDAVIT OF
CONFESSION OF
Plaintiff(s) JUDGMENT
against
Defendant(s)
STATE OF NEW YORK, COUNTY OF ss.:
Daniel Glassman, being duly sworn, deposes and says; that deponent is (the
Chief Financial Officer of Bradley Pharmaceuticals, Inc. a corporation and is
duly authorized to make this affidavit on behalf of the corporate defendant
herein.
The defendant hereby confesses judgment herein and authorizes entry
thereof against
defendant in the sum of $1,700,000, plus interest at the rate equal to the prime
rate plus 4%.
Defendant resides at 383 Route 46 West, Fairfield
in the County of Essex, State of New Jersey Defendant authorizes entry of
judgement in New
York County, New York, if said residence address is not in New York State.
This confession of judgment is for a debt justly to become due to the
plaintiff arising from the following facts:
Pursuant to an Asset Purchase Agreement dated as of November 10, 1993,
as amended (the
"Purchase Agreement"), Bradley Pharmaceuticals, Inc. ("Bradley") purchased
certain assets from Berlex
Laboratories, Inc. ("Berlex") for an agreed upon price of approximately $16
million (subject to certain
adjustments) to be paid in installments. Bradley was unable to satisfy certain
of its payment obligation
under the Purchase Agreement. Berlex has agreed to restructure the payment
schedule and reduce the
amount due from Bradley to Berlex. Berlex and Bradley have agreed that $1.7
million of the remaining
payments due from Bradley under the Purchase Agreement shall be paid as follows:
(I) $250,000 shall be paid on December 23, 1996, (ii) $250,000 shall be paid on
December 31, 1996, (iii) $250,000 shall be paid on January 30, 1997,
(iv) $250,000 shall
be paid on February 18, 1997, and (v) $700,000 shall be paid on March 17, 1997,
and other amounts
(which other amounts are not the subject of this Affidavit of Confession of
Judgement) shall be payable
thereafter. To induce Berlex to restructure the payment schedule and reduce
the amount due, Bradley
agreed to the entry of judgment against it for $1.7 million (or any unpaid
balance thereof), plus interest
at the rate equal to the entry of judgment against it for $1.7 million (or any
unpaid balance thereof),
plus interest at the rate equal to the prime rate plus 4%, if Bradley fails to
timely satisfy any of its installment obligations described above.
This affidavit, if made in connection with an agreement for the purchase for
$1,500.00 or less any
commodities for any use other than a commercial or business use upon any plan of
deferred payments
whereby the price or cost is payable in two or more installments, was executed
subsequent to the time
a default occurred in the payment of an installment thereunder.
Sworn to before me this BRADLEY PHARMACEUTICALS, INC.
Day of December, 1996
BY:
The name signed must be printed beneath
Daniel Glassman, Chief Executive Officer
-71-