EXHIBIT 10.1
COMMERCIAL REVOLVING LOAN
AND TERM LOAN AGREEMENT
BETWEEN
FLEET BANK, N.A.
AND
PHARMACEUTICAL RESOURCES, INC.
December 28, 1995
TABLE OF CONTENTS
Section Headings Page
I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 1
1.01 Defined Terms . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms. . . . . . . . . . . . . . . . 7
II. LOAN FACILITIES. . . . . . . . . . . . . . . . . . . 7
2.01 Revolving Loans . . . . . . . . . . . . . . . . 7
2.02 Term Loan . . . . . . . . . . . . . . . . . . . 10
2.03 Indemnity . . . . . . . . . . . . . . . . . . . 10
III. INTEREST, TERMS AND FEES . . . . . . . . . . . . . . 11
3.01 Interest Rate . . . . . . . . . . . . . . . . . 11
3.02 Term and Termination. . . . . . . . . . . . . . 12
3.03 Repayments. . . . . . . . . . . . . . . . . . . 12
3.04 Prepayments . . . . . . . . . . . . . . . . . . 12
3.05 Fees. . . . . . . . . . . . . . . . . . . . . . 12
IV. CONDITIONS OF LENDING. . . . . . . . . . . . . . . . 13
V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 14
VI. COVENANTS. . . . . . . . . . . . . . . . . . . . . . 17
6.01 Financial Reporting . . . . . . . . . . . . . . 17
6.02 Affirmative Covenants . . . . . . . . . . . . . 18
6.03 Negative Covenants. . . . . . . . . . . . . . . 20
6.04 Financial Covenants . . . . . . . . . . . . . . 22
VII. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 23
7.01 Events of Default . . . . . . . . . . . . . . . 23
7.02 Cumulative Remedies . . . . . . . . . . . . . . 24
VIII.MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 25
8.01 Expenses. . . . . . . . . . . . . . . . . . . . 25
8.02 Set-off . . . . . . . . . . . . . . . . . . . . 25
8.03 Covenants to Survive, Binding Agreement . . . . 25
8.04 Cross-Default . . . . . . . . . . . . . . . . . 25
8.05 Amendments and Waivers. . . . . . . . . . . . . 25
8.06 Notices . . . . . . . . . . . . . . . . . . . . 26
8.07 Transfer of Lender's Interest . . . . . . . . . 26
8.08 New Laws. . . . . . . . . . . . . . . . . . . . 27
8.09 Section Headings, Severability, Entire
Agreement . . . . . . . . . . . . . . . . . . . 27
8.10 Counterparts. . . . . . . . . . . . . . . . . . 28
8.11 Governing Law; Consent to Jurisdiction. . . . . 28
8.12 Uniform Commercial Code . . . . . . . . . . . . 28
8.13 Further Assurances. . . . . . . . . . . . . . . 28
8.14 Prejudgment Remedy Waiver; Waivers. . . . . . . 28
8.15 Jury Trial Waiver . . . . . . . . . . . . . . . 29
Exhibits
Exhibit "A" - $16,000,000 Commercial Revolving Promissory
Note
Exhibit "B" - $1,500,000 Commercial Term Promissory Note
Exhibit "C" - Covenant Compliance Certificate
Schedules
Schedule "5(d)" - Litigation
Schedule "5(h)" - Liens and Encumbrances
Schedule "5(k)" - Leases
Schedule "5(n)" - Places of Business
Schedule "5(q)" - Union Contracts and Pension Plans
Schedule "5(t)" - Subsidiaries and Affiliates
Schedule "6.03(b)" - Indebtedness
Schedule "6.03(g)" - Sale and Lease of Assets
AGREEMENT dated December 28, 1995, between PHARMACEUTICAL
RESOURCES, INC., a New Jersey corporation with its principal office
located at One Ram Ridge Road, Spring Valley, New York 10977 (the
"Borrower") and FLEET BANK, N.A., a national banking association
with an office located at One Stamford Plaza, 263 Tresser
Boulevard, Stamford, Connecticut 06901 (the "Lender").
Recitals
A. The Borrower has requested that the Lender extend to the
Borrower the following loan facilities: (a) a $16,000,000
revolving loan facility, and (b) a $1,500,000 term loan facility.
B. The proceeds of the loan facilities shall be used for the
following purposes: (a) the revolving loan proceeds shall be used
for working capital purposes, equipment, acquisitions and general
corporate purposes; and (b) the term loan proceeds shall be used to
refinance an existing term loan facility with Midlantic Bank.
C. The Lender is willing to extend the loan facilities to
the Borrower, subject to the terms and conditions contained herein.
Agreement
In consideration of the Recitals, which are incorporated by
reference, the terms and conditions contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are acknowledged, the Borrower and the Lender, intending to be
bound legally, agree as follows:
I. DEFINITIONS.
1.01 Defined Terms. As used herein the following terms shall
have the following meanings:
(a) "Adjusted Libor Rate" shall mean with respect to any
Eurodollar Loan Interest Period, the rate per annum at which
deposits in dollars are offered by the Lender to prime commercial
banks in the London interbank market at approximately 11:00 A.M.
(Eastern Standard time) two Business Days before the first day of
such Interest Period in an amount approximately equal to the
principal amount of the Eurodollar Loan to which such Interest
Period is to apply and for a period of time comparable to such
Interest Period divided by one minus the Eurodollar Reserve
Percentage.
(b) "Affiliate", as applied to any Person, shall mean
any other Person directly or indirectly through one or more
intermediaries controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of
the Person, whether through the ownership of voting securities or
by contract or otherwise.
(c) "Agreement" shall mean this Commercial Revolving
Loan and Term Loan Agreement as the same from time to time may be
amended, supplemented or modified.
(d) "Business Day" shall mean a day on which commercial
banks in the State of Connecticut are not required or permitted by
law to remain closed and on which dealings are carried on in the
London interbank market.
(e) "Capital Assets" shall mean assets that in
accordance with GAAP are required or permitted to be depreciated or
amortized on the Borrower's balance sheet.
(f) "Capital Leases" shall mean capital leases,
conditional sales contracts and other title retention agreements
relating to the purchase or acquisition of Capital Assets.
(g) "Change of Control" shall mean the transfer, sale,
assignment, or pledge, in any manner whatsoever, which has the
effect of transferring more than fifty percent (50%) of the voting
stock of the Borrower to any Person who is not a shareholder of the
Borrower as of the date of this Agreement.
(h) "Commitment Letter" shall mean the letter agreement
between the Borrower and the Lender dated November 16, 1995.
(i) "Contractual Obligations" shall mean as to any
Person, any provision of any security issued by such Person or of
any agreement, instrument or undertaking to which such Person is a
party or by which it or any of its property is bound.
(j) "Cost of Funds Rate" shall mean the rate determined
by the Lender to be its marginal cost of funds for commonly
available liabilities issued by it on the date of each advance for
a period of thirty (30), sixty (60) or ninety (90) days adjusted to
reflect all additional costs to be incurred in maintaining or
paying any reserve or in connection with the payment by the Lender
or withholding by the Borrower of any taxes existing as of such
date for which the Lender is liable (other than in respect of
income taxes) as a result of its making a Cost of Funds Rate Loan.
(k) "Cost of Funds Rate Loans" shall mean Loans
hereunder that bear interest for the Interest Period applicable
thereto at the Cost of Funds Rate.
(l) "Current Ratio" shall mean, for the applicable
period, the ratio of Total Current Assets to Total Current
Liabilities.
(m) "Current Maturity of Long Term Debt ("CMLTD")" shall
mean the current maturity of long term Indebtedness paid during the
applicable period, including, but not limited to, amounts required
to be paid during such period under Capital Leases.
(n) "Default(s)" shall mean any of the events specified
in Section 7.01 below, whether or not any requirement for the
giving of notice, the lapse of time, or both, has been satisfied.
(o) "Dollars" and "$" shall mean lawful currency of the
United States of America.
(p) "Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA")" shall mean, for the applicable period,
income from continuing operations before the payment of interest
and taxes plus depreciation, amortization and other non-cash
charges (except accounting changes and one-time writeoffs)
determined in accordance with GAAP.
(q) "Environmental Laws" shall mean all present and
future laws, statutes, ordinances, rules, regulations, orders,
codes, licenses, permits, decrees, judgments, directives or the
equivalent of or by any Governmental Authority relating to or
addressing the protection of the environment or human health.
(r) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974 and all rules and regulations promulgated
pursuant thereto, as amended from time to time.
(s) "Eurodollar Loans" shall mean Loans hereunder that
bear interest for the Interest Period applicable thereto at the
Adjusted Libor Rate.
(t) "Eurodollar Reserve Percentage" means for any day,
that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement for a member bank of the Federal Reserve System in
respect of "Eurocurrency liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to
which the interest rate on Eurodollar Loans is determined or any
category of extensions of credit or other assets which includes
loans by a non-United States office of the Lender to United States
residents). The Adjusted Libor Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
(u) "Event(s) of Default" shall mean any of the events
specified in Section 7.01 below, provided that any requirement for
the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
(v) "Facility Fee" shall mean the fee set forth in
Section 3.05(a) below.
(w) "Fixed Rate Loan(s)" shall mean any Eurodollar
Loan(s) or Cost of Funds Loan(s).
(x) "Fixed Charge Coverage Ratio" shall mean, for the
applicable period, the ratio of EBITDA for the four quarters ending
on the test date to CMLTD as of the beginning of such four quarters
plus interest expense, income taxes and dividends for such four
quarters. For purposes of the calculation of Fixed Charge Coverage
Ratio, for each of the fiscal quarters in the fiscal year ending
September 28, 1996, EBITDA shall exclude THREE MILLION DOLLARS and
NO/100 ($3,000,000.00), (the "$3,000,000.00 Exclusion") of research
and development expenditures. After the fiscal year ending
September 28, 1996, and starting with the fiscal quarter ending
December 28, 1996, there is no longer the above $3,000,000.00
Exclusion.
(y) "Funded Debt" shall mean all debt obligations as
evidenced by a note or other instrument in the public and private
markets, excluding accounts payable and accrued obligations arising
out of the normal course of business.
(z) "Funded Debt to EBITDA Ratio" shall mean, for the
applicable period, the ratio of Funded Debt to EBITDA for the
rolling four (4) fiscal quarters.
(aa) "GAAP" shall mean generally accepted accounting
principals applied in a manner consistent with that employed in the
preparation of the financial statements described in Section 6.01
below.
(ab) "Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.
(ac) "Guarantor(s)" shall mean Par Pharmaceutical, Inc.,
Generic Innovations, Inc., Quad Pharmaceuticals, Inc., Par Printing
Enterprises, Inc., Advanced Biopharm, Inc., PRI Research, Inc., Par
Pharma Group, Ltd., PRX Distributors, Ltd. and ParCare, Ltd.
(ad) "Hazardous Materials" shall mean any material or
substance that, whether by its nature or use, is now or hereafter
defined as hazardous waste, hazardous substance, pollutant or
contaminant under any Environmental Laws which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is now or hereafter
regulated under any Environmental Laws, or which is or contains
petroleum, gasoline, diesel fuel or another petroleum hydrocarbon
product.
(ae) "Indebtedness" shall mean all obligations that in
accordance with GAAP should be classified as liabilities upon the
Borrower's balance sheet as liabilities.
(af) "Intangible Assets" shall mean assets that in
accordance with GAAP are properly classifiable as intangible
assets, including, but not limited to, goodwill, franchises,
licenses, patents, trademarks, trade names and copyrights.
(ag) "Interest Period" shall mean any thirty (30), sixty
(60) or ninety (90) day period during which a Loan bears interest
at the Adjusted Libor Rate or the Cost of Funds Rate as elected by
the Borrower in accordance with the terms of this Agreement.
(i) If any Interest Period would otherwise end on
a day which is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day unless such Interest
Period is with respect to a Eurodollar Loan and the result of such
extension would be to extend such Interest Period into another
calendar month, in which event such Interest Period shall end on
the immediately preceding Business Day.
(ii) Any Interest Period that would otherwise extend
beyond a Maturity Date shall end on the Maturity Date or, if the
Maturity Date shall not be a Business Day, on the next preceding
Business Day.
(ah) "Lien" shall mean any mortgage, pledge, security
interest, hypothecation, assignment, deposit arrangement,
encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable
law or any jurisdiction).
(ai) "Loan(s)" shall mean any loan made by the Lender to
the Borrower hereunder, whether a Revolving Credit Loan or the Term
Loan.
(aj) "Loan Document(s)" shall mean this Agreement, the
Notes and all other documents or agreements executed in connection
herewith, together with any amendments, supplements or
modifications hereto or thereto.
(ak) "Maturity Date(s)" shall mean individually or
collectively the Revolving Loan Maturity Date and the Term Loan
Maturity Date.
(al) "Net Worth" shall mean, for the applicable period,
the excess of the Borrower's Total Assets minus its Total
Liabilities.
(am) "Note(s)" shall mean the Revolving Loan Note and the
Term Note.
(an) "Obligations" shall mean and include all loans,
advances, interest, indebtedness, liabilities, obligations,
guaranties, covenants and duties at any time owing by the Borrower
to the Lender of every kind and description, whether or not
evidenced by any note or other instrument, whether or not for the
payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising, including but not limited to the indebtedness, liabilities
and obligations arising under this Agreement, the Notes and the
other Loan Documents, and all costs, expenses, fees, charges,
expenses and reasonable attorneys' fees incurred in connection with
any of the foregoing, or in any way connected with, involving or
related to the preservation, enforcement, protection and defense of
this Agreement, the Notes, the other Loan Documents, any related
agreement, document or instrument and the rights and remedies
hereunder or thereunder.
(ao) "Person" shall mean any individual, corporation,
limited liability company, limited liability partnership,
partnership, joint venture, trust, business trust, unincorporated
organization or any other juridical entity, or a government or
state or any agency or political subdivision thereof.
(ap) "Plan" shall mean any plan of a type described in
Section 4021(a) of ERISA in respect of which the Borrower is an
"employer" as defined in Section 3(5) of ERISA.
(aq) "Post Default Rate" shall mean at any time a rate of
interest equal to 1.0% per annum in excess of the rate of interest
that would otherwise be in effect.
(ar) "Prime Rate" shall mean the interest rate announced
by the Bank from time to time as the interest rate applicable to
commercial borrowers during the monthly interest period and may not
be the Lender's lowest or best rate. Any change in the Prime Rate
shall be effective immediately without notice on the date of the
change in the Prime Rate.
(as) "Prime Rate Loans" shall mean Loans hereunder that
bear interest at the Prime Rate.
(at) "Reportable Event" shall mean any of the events set
forth in Section 4043(b) of ERISA or the regulations thereunder.
(au) "Revolving Loan(s)" shall mean any Loan(s) made
pursuant to Section 2.01 below.
(av) "Revolving Loan Maturity Date" shall mean December
27, 1998.
(aw) "Revolving Loan Note" shall mean the Note referred
to in Section 2.01 below.
(ax) "Revolving Loan Commitment" shall mean the
obligation of the Lender to make Revolving Credit Loans to the
Borrower during the Revolving Loan Commitment Period pursuant to
the terms hereof as such Commitment is described in Section 2.01
below.
(ay) "Revolving Loan Commitment Period" shall mean the
period from the date hereof until the Revolving Loan Maturity Date.
(az) "Subsidiary or Subsidiaries" of any Person shall
mean any corporation or corporations of which the Person or one or
more of its Subsidiaries, owns, directly or indirectly, at least a
majority of the securities having ordinary voting power for the
election of directors.
(ba) "Tangible Net Worth" shall mean the excess of the
Borrower's Total Assets minus its Intangible Assets and its Total
Liabilities.
(bb) "Term Loan" shall mean the Loan made pursuant to
Section 2.02 below.
(bc) "Term Loan Maturity Date" shall mean December 27,
1998.
(bd) "Term Note" shall mean the Note referred to in
Section 2.02 below.
(be) "Total Assets" shall mean total assets determined in
accordance with GAAP.
(bf) "Total Current Assets" shall mean total current
assets determined in accordance with GAAP.
(bg) "Total Current Liabilities" shall mean total current
liabilities determined in accordance with GAAP.
(bh) "Total Liabilities" shall mean total liabilities
determined in accordance with GAAP.
1.02 Accounting Terms. Except as otherwise specifically set
forth in this Agreement, each accounting term used in this
Agreement shall have the meaning given to it under GAAP and shall
be determined on a consolidated basis. Any dispute or disagreement
between the Borrower and the Lender relating to the determination
of GAAP shall, in the absence of manifest error, be conclusively
resolved for all purposes hereof by the written opinion with
respect thereto, delivered to the Lender, of independent
accountants selected by the Borrower and approved by the Lender for
the purposes of auditing the periodic financial statements of the
Borrower.
II. LOAN FACILITIES.
2.01 Revolving Loans. Subject to the terms and conditions,
and relying upon the representations and warranties set forth in
this Agreement, the Lender, in its sole discretion, agrees to make
revolving loans (individually a "Revolving Loan" and, collectively,
the "Revolving Loans") to the Borrower at any time until terminated
as provided in Section 3.02(a) below, in the principal amount which
shall not exceed $16,000,000 at any one time (the "Revolving Loan
Commitment"). In addition to this Agreement, the Revolving Loans
shall be evidenced by the Commercial Revolving Promissory Note of
this date, a copy of which is attached hereto as Exhibit "A" (the
"Revolving Loan Note").
(a) Procedure For Revolving Loan Borrowing. Provided
that the Revolving Loan Commitment has not been terminated as
provided in Section 3.02(a) below, during the Revolving Loan
Commitment Period the Borrower may borrow under the Revolving Loan
Commitment by giving the Lender irrevocable notice of a request for
a Revolving Loan hereunder (i) in the case of Eurodollar Loans or
Cost of Funds Rate Loans two (2) Business Days before a proposed
borrowing or continuation or conversion and (ii) in the case of
Prime Rate Loans on or before the date such borrowing or
continuation or conversion is to be made but in no event more than
five (5) Business Days before a proposed borrowing or continuation
or conversion, such irrevocable notice setting forth (A) the amount
of the Loan requested, which shall not be less than $100,000, (B)
the requested borrowing date or Interest Period commencement date,
as the case may be, (C) whether the borrowing or Interest Period is
to be for a Eurodollar Loan, Cost of Funds Rate Loan or a Prime
Rate Loan or a combination thereof, and (D) if entirely or
partially a Eurodollar Loan or Cost of Funds Rate Loan, the length
of the Interest Period therefor, which shall be thirty (30), sixty
(60) or ninety (90) days. As used in this Section 2.01(a),
"conversion" shall mean the conversion from one interest rate to
another interest rate as more fully described in Section 2.01(b)
below. Such notice must be written (including, without limitation,
via facsimile transmission) and shall be sufficient if received by
11:00 a.m. (Eastern Standard Time) on the date on which such notice
is to be given. Unless notification is otherwise furnished by the
Borrower to the Lender (in a manner consistent with the
requirements of this Section 2.01 (a), Revolving Loans will be made
by credits to the Borrower's demand deposit account maintained with
the Lender. If the Borrower furnishes such notice but no election
is made as to the type of Revolving Loan or the Interest Period to
be applicable thereto, the Revolving Loan will automatically then
be made as a Prime Rate Loan until such required information is
furnished pursuant to the terms hereof.
(b) Continuation and Conversion of Revolving Loans.
With respect to Revolving Loans only, the Borrower shall have the
right at any time on prior irrevocable written or telex notice to
the Lender pursuant to Section 8.06 below to (i) continue any
Eurodollar Loan or Cost of Funds Rate Loan into a subsequent
Interest Period, (ii) convert any Eurodollar Loan or Cost of Funds
Rate Loan into a Prime Rate Loan, and (iii) convert any Prime Rate
Loan into a Eurodollar Loan or a Cost of Funds Rate Loan
(specifying the Interest Period to be applicable thereto), subject
to the following:
(A) in the case of a conversion of less than all of
the outstanding Revolving Loans, the aggregate principal
amount of Revolving Loans converted shall not be less
than $100,000 and shall be an integral multiple thereof;
(B) no Eurodollar Loan or Cost of Funds Rate Loan
shall be converted at any time other than at the end of
an Interest Period applicable thereto; and
(C) any portion of a Revolving Loan maturing or
required to be prepaid in less than thirty (30) days may
not be converted into or continued as a Eurodollar Loan
or a Cost of Funds Rate Loan.
In the event that the Borrower shall not give notice to continue
any Eurodollar Loan or Cost of Funds Rate Loan into a subsequent
Interest Period or convert any such Revolving Loan into a Revolving
Loan of another type, on the last day of the Interest Period
thereof, such Revolving Loan (unless prepaid) shall automatically
be converted into a Prime Rate Loan. The Interest Period
applicable to any Eurodollar Loan or Cost of Funds Rate Loan
resulting from a conversion or continuation shall be specified by
the Borrower in the irrevocable notice delivered by the Borrower
pursuant to this Section 2.01(b) and Section 8.06 below; provided,
however, that, if such notice does not specify either the type of
Revolving Loan or the Interest Period to be applicable thereto, the
Revolving Loan shall automatically be converted into, or continued
as, as the case may be, a Prime Rate Loan until such required
information is furnished pursuant to the terms hereof.
Notwithstanding anything to the contrary contained above, if an
Event of Default shall have occurred and is continuing, no
Eurodollar Loan or Cost of Funds Rate Loan may be continued into a
subsequent Interest Period and no Prime Rate Loan may be converted
into a Eurodollar Loan or a Cost of Funds Rate Loan.
(c) Ability to Borrow and Reborrow. Within the limits
of the Revolving Loan Commitment, so long as no Default or Event of
Default has occurred and is continuing, the Borrower may borrow,
repay and reborrow Revolving Loan funds.
2.02 Term Loan.
(a) Subject to the terms and conditions contained in
this Agreement, and relying upon the representations and warranties
set forth in this Agreement, the Lender is extending to the
Borrower a $1,500,000 Term Loan as evidenced by the $1,500,000
Commercial Term Promissory Note of this date, a copy of which is
attached hereto as Exhibit "B" (the "Term Note").
(b) Extension of Term Loan. The Term Loan shall be made
as a Prime Rate Loan unless and until the Borrower furnishes notice
that the Term Loan is to be made, or converted, as the case maybe
to a Eurodollar Loan or a Cost of Funds Rate Loan. Such notice
must be written (including, without limitation, via facsimile
transmission) and shall be sufficient if received by 11:00 a.m.
(Eastern Standard Time) on which date such notice is to be given.
Such notice shall be furnished at least two (2) Business Days prior
to the first day such Adjusted Libor Rate or Cost of Funds Rate is
to apply.
(c) Continuation and Conversion of Term Loan. With
respect to the Term Loan, the Borrower shall have the right at any
time on prior irrevocable written or telex notice to the Lender
pursuant to Section 8.06 below to (i) continue any Eurodollar Loan
or Cost of Funds Rate Loan into a subsequent Interest Period, (ii)
convert any Eurodollar Loan or Cost of Funds Rate Loan into a Prime
Rate Loan and (iii) convert any Prime Rate Loan into a Eurodollar
Loan or Cost of Funds Rate Loan (specifying the Interest Period),
subject to the following: no Eurodollar Loan or Cost of Funds Rate
Loan shall be converted at any time other than at the end of the
Interest Period applicable thereto; and the Term Loan may not be
converted into a Cost of Funds Rate Loan or Eurodollar Loan if less
than thirty (30) days remain prior to the Maturity Date. In the
event that the Borrower shall not give notice to continue any
Eurodollar Loan or Cost of Funds Rate Loan into a subsequent
Interest Period or to convert the Term Loan into a Eurodollar Loan
or Cost of Funds Rate Loan, and the last day of the Interest Period
thereof, the Term Loan (unless prepaid) shall be automatically
converted into a Prime Rate Loan. The Interest Period applicable
to any Eurodollar Loan or Cost of Funds Rate Loan resulting from a
conversion or continuation shall be specified by the Borrower in
the irrevocable notice delivered by the Borrower pursuant to
Section 8.06 below; provided, however, that in the event each such
notice does not specify either the type of interest rate elected or
the Interest Period to be applicable thereto, the Term Loan shall
automatically be converted into, or continued as, as the case
maybe, a Prime Rate Loan until such required information is
furnished pursuant to the terms hereof. Notwithstanding anything
to the contrary contained above, if in an Event of Default shall
have occurred and is continuing, no Eurodollar Loan or Cost of
Funds Rate Loan may be continued into a subsequent Interest Period
and no Prime Rate Loan may be converted into a Eurodollar Loan or
a Cost of Funds Rate Loan.
2.03 Indemnity. The Borrower will indemnify the Lender
against any reasonable costs or expenses, arising out of
development of deposits, which the Lender may sustain or incur as
a consequence of any default in payment or default in prepayment of
the principal amount of any Loan or any part thereof or interest
accrued thereon, as and when due and payable (at the due date
thereof, by and after notice of prepayment or otherwise), or the
occurrence of any Event of Default. The Lender shall provide to
the Borrower a statement, signed by an officer of the Lender and
supported where applicable by documentary evidence, explaining the
amount of any such cost or expense.
III. INTEREST, TERMS AND FEES.
3.01 Interest Rate.
(a) The Loans shall bear interest as follows:
(i) When the Funded Debt to EBITDA Ratio of the
Borrower on a consolidated basis is less than or equal to 1.0 to
1.0, (x) all Eurodollar Loans will bear interest at the Adjusted
Libor Rate plus 0.75%; (y) all Cost of Funds Rate Loans shall bear
interest at the Cost of Funds Rate plus 0.75%; and (z) all Prime
Rate Loans shall bear interest at the Prime Rate.
(ii) When the Funded Debt to EBITDA Ratio of the
Borrower on a consolidated basis is greater than 1.0 to 1.0, but
less than 2.0 to 1.0, (x) all Eurodollar Loans shall bear interest
at the Adjusted Libor Rate plus 1.0%; (y) all Cost of Funds Rate
Loans shall bear interest at the Cost of Funds Rate plus 1.0%; and
(z) all Prime Rate Loans shall bear interest at the Prime Rate.
(iii) When the Funded Debt to EBITDA Ratio of the
Borrower on a consolidated basis is greater than or equal to 2.0 to
1.0, (x) all Eurodollar Loans shall bear interest at the Adjusted
Libor Rate plus 1.25%; (y) all Cost of Funds Rate Loans shall bear
interest at the Cost of Funds Rate plus 1.25%; and (z) all Prime
Rate Loans shall bear interest at the Prime Rate.
(b) Post Default Rate. Upon the occurrence of an Event
of Default or after the Maturity Date, the Loans shall bear
interest at the Post Default Rate.
(c) Lawful Interest. It is the intent of the parties
that the rate of interest and all other charges to the Borrower be
lawful. If for any reason the payment of a portion of interest,
fees or charges as required by this Agreement would exceed the
limit established by applicable law which a commercial lender such
as the Lender may charge to a commercial borrower such as the
Borrower, then the obligation to pay interest or charges shall
automatically be reduced to such limit and, if any amounts in
excess of such limits shall be paid, then such amounts shall be
applied to the unpaid principal amount of the Obligations of the
Borrower to Lender or refunded so that under no circumstances shall
the interest or charges required hereunder exceed the maximum rate
allowed by law.
3.02 Term and Termination.
(a) Revolving Loan. Unless sooner terminated as a
result of the occurrence of an Event of Default, the Revolving Loan
Commitment shall terminate and be due and payable in full on the
Revolving Loan Maturity Date. Upon termination of the Revolving
Loan Commitment, the Borrower shall have no ability to receive, and
the Lender shall have no obligation to make any further advances
under the Revolving Loan Commitment. All of the rights, interest
and remedies of the Lender and Obligations of the Borrower under
this Agreement and the other Loan Documents shall survive
termination of the Revolving Loan Commitment until all of the
Obligations of the Borrower are fully satisfied.
(b) Term Loan. Unless payment is accelerated as a
result of the occurrence of an Event of Default, the Term Loan
shall be repaid as set forth in the Term Note and shall be due and
payable in full on the Term Loan Maturity Date.
3.03 Repayments. Any payments made by the Borrower to the
Lender shall be credited first to late charges, costs and expenses,
then to accrued and unpaid interest and then to the outstanding
principal balance due in the inverse order of maturity.
3.04 Prepayments.
(a) Prime Rate Loans. The Borrower may prepay any Prime
Rate Loans without any penalty or premium.
(b) Fixed Rate Loans. If any principal payment on any
Fixed Rate Loan hereunder is made for any reason whatsoever on a
date prior to the end of the applicable Interest Period for such
Loan, the Borrower shall: (i) pay to the Lender interest accrued
thereon; and (ii) on demand, indemnify the Lender against all
losses including actual loss of profit and expenses suffered by it
in liquidating or otherwise employing deposits acquired to fund
such Fixed Rate Loan until the end of the applicable Interest
Period. A certificate of the Lender as to the amount required to
be paid by the Borrower under this subsection 3.04(b) shall
accompany such demand and shall be final and conclusive, except in
the case of manifest error or bad faith.
3.05 Fees.
(a) Facility Fee. As additional consideration for the
Revolving Loan Commitment, the Borrower shall pay to the Lender
each quarter a non-refundable facility fee in arrears (the
"Facility Fee"). In the event that the Funded Debt to EBITDA Ratio
of the Borrower on a consolidated basis is less than or equal to
2.0 to 1.0, the Facility Fee will be in an amount equal to 0.0625%
on the unused portion of the Revolving Loan Commitment for
the preceding quarter. In the event that the Funded
Debt to EBITDA Ratio of the Borrower on a
consolidated basis is greater than 2.0 to 1.0, the
Facility Fee equal to 0.375% on the unused portion of the Revolving
Loan Commitment on an annual basis. The Funded Debt to EBITDA
Ratio shall be tested and the Facility Fee paid on a quarterly
basis each January 1, April 1, July 1, and October 1.
(b) Commitment Fee. As additional consideration for
the extension of the Revolving Loan, the Term Loan and the
$2,500,000 term loan facility extended by Fleet Credit Corporation
to the Borrower on this date, the Borrower has paid to the Lender
a non-refundable commitment fee in the amount of $40,000, which
Commitment Fee shall be deemed fully earned.
IV. CONDITIONS OF LENDING.
The Borrower agrees that the Loans are subject to fulfillment
by the Borrower of the following conditions precedent, all in form,
scope and substance satisfactory to the Lender and its counsel in
their sole discretion:
(a) Evidence of Corporate Action. The Lender shall have
received certified copies of all corporate action taken by the
Borrower to authorize the execution, delivery and performance of
this Agreement, the Notes, the other Loan Documents, and the
borrowings to be made hereunder, together with copies of the
Borrower's Certificate of Incorporation and Bylaws, all amendments
thereto, and such other papers and documents as the Lender or its
counsel may require.
(b) Notes. The Lender shall have received the duly
executed Notes drawn to its order.
(c) Guaranty. The Lender shall have received the
unconditional and joint and several Guaranties of each of the
Guarantors in form and content satisfactory to the Lender.
(d) Master Security Agreement. The Lender shall have
received from Par Pharmaceutical, Inc. the duly executed Master
Security Agreement in form and content satisfactory to the Lender
pursuant to which Par Pharmaceutical, Inc. shall grant to the
Lender a first priority security interest in certain machinery and
equipment of Par Pharmaceutical, Inc.
(e) UCC-1 Financing Statements. The Lender shall have
received from the Par Pharmaceutical, Inc. the duly executed UCC-1
Financing Statements covering the collateral described in the
Master Security Agreement.
(f) Insurance. The Lender shall have received
evidence of casualty, liability and business interruption insurance
in such amounts and with such companies satisfactory to the Lender,
and the Lender shall be named as a loss payee on all such insurance
with respect to any loss or damage to the collateral covered by the
Master Security Agreement (i) after an Event of Default, or (ii)
which loss or damage is in excess of $100,000 prior to an Event of
Default.
(g) Opinion of Counsel. The Borrower shall provide the
Lender with an opinion from counsel in form and content
satisfactory to the Lender opining to, among other things, the
valid, binding and enforceable nature of the Loan Documents and the
authority of the Borrower and the Guarantor to enter into the Loan
Documents.
(h) Other. The Lender shall have received such other
documents as the Lender deems necessary.
V. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender that:
(a) Good Standing and Qualification. The Borrower is
a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey. The Borrower has all
requisite corporate power and authority to own and operate its
properties and to carry on its business as presently conducted and
is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction wherein the character of the
properties owned or leased by it therein or in which the
transaction of its business therein makes such qualification
necessary, except where the failure to so qualify would not have a
material adverse effect on the Borrower's condition, financial or
otherwise.
(b) Corporate Authority. The Borrower has full
corporate power and authority to enter into and perform its
obligations under this Agreement, to make the borrowings
contemplated herein, to execute and deliver the Notes, and the
other Loan Documents and to incur the obligations provided for
herein and therein, all of which have been duly authorized by all
necessary and proper corporate action. No other consent or
approval or the taking of any other action in respect of
shareholders or of any public authority is required as a condition
to the validity or enforceability of this Agreement, the Notes or
any of the other Loan Documents. The execution and delivery of
this Agreement is for valid corporate purposes and will not violate
the Borrower's certificate of incorporation or bylaws.
(c) Binding Agreements. This Agreement constitutes, and
the Notes and the other Loan Documents delivered in connection
herewith shall constitute, valid and legally binding obligations of
the Borrower, enforceable in accordance with their respective
terms, except as enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and general principles of equity.
(d) Litigation. Except as set forth in Schedule
"5(d)", there are no actions, suits, proceedings or investigations
pending or, to the Borrower's knowledge, threatened against the
Borrower before any court or administrative agency, which either in
any case or in the aggregate, if adversely determined, would
materially and adversely affect the financial condition, assets or
operations of the Borrower, or which question the validity of this
Agreement, the Notes, or any of the other Loan Document, or any
action to be taken in connection with the transaction contemplated
hereby.
(e) No Conflicting Law or Agreements. To the best of
the Borrower's knowledge, the execution, delivery and performance
by the Borrower of this Agreement, the Notes and the other Loan
Documents (i) do not violate any provision of the Certificate of
Incorporation or Bylaws of the Borrower, (ii) do not violate any
order, decree or judgment, or any provision of any statute, rule or
regulation, (iii) do not violate or conflict with, result in a
breach of or constitute (with notice or lapse of time, or both) a
default under any shareholder agreement, stock preference
agreement, mortgage, indenture or contract to which the Borrower is
a party, or by which any of its properties are bound, and (iv) do
not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or assets of
the Borrower except as contemplated herein.
(f) Taxes. With respect to all taxable periods of the
Borrower, the Borrower has filed all tax returns required to be
filed by it and has paid all federal, state, municipal, franchise
and other taxes shown on such filed returns has reserved against
the same, as required by GAAP, and the Borrower knows of no unpaid
assessments against it.
(g) Financial Statements. The Borrower has delivered
to the Lender the certified consolidated balance sheet of the
Borrower as of September 30, 1995, and the certified related
consolidated statements of income, retained earnings and cash flows
for the fiscal year then ended. Such statements fairly present the
consolidated financial condition of the Borrower as of the dates
and for the periods referred to therein and have been prepared in
accordance with GAAP applied on a consistent basis by the Borrower
throughout the periods involved. There are no liabilities, direct
or indirect, fixed or contingent, of the Borrower as of the date of
the balance sheet which are not reflected therein or in the notes
thereto, other than liabilities or obligations not material in
amount or which are not required to be reflected in corporate
balance sheets prepared in accordance with GAAP. There has been no
material adverse change in the financial condition, business,
operations, affairs or prospects of the Borrower since the date of
such financial statements.
(h) Existence of Assets and Title Thereto. The Borrower
has good and marketable title to its properties and assets,
including the properties and assets reflected in the financial
statements referred to above. These properties and assets are not
subject to any mortgage, pledge, lien, lease, security interest,
encumbrance, restriction or charge except those permitted under the
terms of this Agreement or as set forth in Schedule "5(h)", and
none of the foregoing prohibit or interfere with ownership of the
Borrower's assets or the operation of its business presently
conducted thereon.
(i) Regulations G, T, U and X. The proceeds of the
borrowings hereunder will not be used, directly or indirectly, for
the purposes of purchasing or carrying any margin stock in
contravention of Regulations G, T, U or X promulgated by the Board
of Governors of the Federal Reserve System.
(j) Compliance. The Borrower is not in default with
respect to or in violation of any order, writ, injunction or decree
of any court or of any federal, state, municipal or other
governmental department, commission, board, bureau, agency,
authority or official, or in violation of any law, statute, rule or
regulation including, but not limited to, all Environmental Laws to
which it or its properties is or are subject, where such default or
violation would materially and adversely affect the financial
condition of the Borrower. The Borrower represents that it has not
received notice of any such default from any party. To the best of
the Borrower's knowledge, the Borrower is not in default in the
payment or performance of any of its material obligations to any
third parties or in the performance of any mortgage, indenture,
lease, contract or other agreement to which it is a party or by
which any of its assets or properties are bound.
(k) Leases. The Borrower enjoys quiet and undisturbed
possession under all material leases under which it is operating,
and all such leases are valid and subsisting and the Borrower is
not in default under any of its leases. The leases to which the
Borrower is currently a party are set forth on the attached
Schedule "5(k)".
(l) Pension Plans. To the best of the Borrower's
knowledge, no fact, including but not limited to any "Reportable
Event", as that term is defined in Section 4043 of ERISA, as the
same may be amended from time to time exists in connection with any
Plan of the Borrower which might constitute grounds for termination
of any such Plan by the Pension Benefit Guaranty Corporation
("PBGC") or for the appointment by the appropriate United States
District Court of a Trustee to administer any such Plan. No
"Prohibited Transaction" as defined by ERISA exists or will exist
upon the execution and delivery of this Agreement or the
performance by the parties hereto of their respective duties and
obligations hereunder. The Borrower agrees to do all acts
including, but not limited to, making all contributions necessary
to maintain compliance with ERISA and agrees not to terminate any
such Plan in a manner or do or fail to do any act which could
result in the imposition of a lien on any property of the Borrower
pursuant to Section 4068 of ERISA. The Borrower has not incurred
any withdrawal liability under the Multiemployer Pension Plan
Amendment Act of 1980. The Borrower has no unfunded liability in
contravention of ERISA.
(m) Office. The chief executive office and principal
place of business of the Borrower, and the office where its records
are kept are as set forth in the first paragraph of this Agreement.
(n) Places of Business. The Borrower has no other places
of business at any location other than those set forth in the
attached Schedule "5(n)".
(o) Contingent Liabilities. The Borrower is not a party
to any suretyship, guarantyship, or other similar type agreement;
and it has not offered its endorsement to any individual, concern,
corporation or other entity. To the best of the Borrower's
knowledge, the Borrower has no material contingent liabilities
except as reflected in its annual and quarterly reports on SEC
Forms 10-K and 10-Q respectively.
(p) Contracts. No contract, governmental or
otherwise, to which the Borrower is a party, is subject to
renegotiation, nor is the Borrower in default of any material
contract.
(q) Union Contracts and Pension Plans. The Borrower is
not a party to any collective bargaining, union or pension plan
agreement, except as set forth on the attached Schedule "5(q)".
The union contracts set forth on Schedule "5(q)" are in full force
and effect and are not currently subject to the renegotiation. The
Borrower is in full compliance with the terms and conditions of all
such union contracts and knows of no threatened work stoppage by
any union members.
(r) Licenses. To the best of the Borrower's knowledge,
the Borrower has all licenses, permits, approvals and other
authorizations required by any government, agency or subdivision
thereof, or from any licensing entity necessary for and material to
the conduct of its business, all of which the Borrower represents
to be current, valid and in full force and effect.
(s) Financial Information. All financial information
submitted by the Borrower to the Lender, whether previously or in
the future, is and will be true and correct and complete in all
material respects.
(t) Parent, Affiliate or Subsidiary
Corporations. The Borrower has no parent corporation and, except
as set forth on the attached Schedule "5(t)", has no domestic or
foreign Affiliate or Subsidiary corporations.
VI. COVENANTS.
6.01 Financial Reporting. The Borrower covenants and
agrees that from the date hereof until payment in full of all
Obligations and the termination of this Agreement, the Borrower
shall furnish to the Lender the following, all to be prepared on a
consolidated basis and in conformity with GAAP, applied on a basis
consistent with the preceding period:
(a) a copy of the Borrower's SEC Form 10-K upon filing
of same with the Securities and Exchange Commission;
(b) a copy of the Borrower's SEC Form 10-Q upon filing
of same with the Securities and Exchange Commission;
(c) Covenant Compliance Certificate in the form of the
attached Exhibit "C" upon the filing of the Borrower's SEC Forms
10-Q and 10-K with the Securities and Exchange Commission;
(d) promptly upon the Lender's written request from time
to time, such other information about the financial condition and
operations of the Borrower as the Lender may reasonably request.
6.02 Affirmative Covenants. The Borrower covenants and
agrees from the date hereof until payment in full of all
obligations under, and termination of, this Agreement, the Borrower
shall:
(a) Insurance and Endorsement. Keep its properties
and business insured against fire and other hazards (so-called "All
Risk" coverage) in amounts and with companies reasonably
satisfactory to the Lender covering such risks as are herein set
forth; maintain public liability coverage, against claims for
personal injuries or death; and maintain all worker's compensation,
employment or similar insurance as may be required by applicable
law. All insurance shall be in amounts reasonably satisfactory to
the Lender and shall contain such terms, be in such form, be for
such periods, and be written by carriers reasonably satisfactory to
the Lender. Without limiting the generality of the foregoing, such
insurance must provide that it may not be cancelled without thirty
(30) days prior written notice to the Lender. In the event of
failure to provide and maintain insurance as provided herein, the
Lender may, at its option, provide such insurance and charge the
amount thereof to the Revolving Loans. The Borrower shall furnish
to the Lender certificates or other satisfactory evidence of
compliance with the foregoing insurance provisions.
(b) Taxes and Other Liens. Comply with all statutes
and government regulations and pay all taxes, assessments,
governmental charges or levies, or claims for labor, supplies, rent
and other obligations made against it or its property which, if
unpaid, might become a lien or charge against the Borrower or its
properties, except liabilities being contested in good faith and
against which, if requested by the Lender, the Borrower shall set
up reserves in amounts and in form reasonably satisfactory to the
Lender.
(c) Place of Business. Maintain its chief places of
business and chief executive offices at the address set forth in
the beginning of this Agreement, unless, the Borrower shall have
given the Lender thirty (30) days prior written notice of any
change in such places of business.
(d) Inspections. Allow the Lender by or through any of
its officers, attorneys, accountants or other agents designated by
the Lender, for the purpose of ascertaining whether or not each and
every provision hereof and of the other Loan Documents, is being
performed, to enter the offices and plants of the Borrower on
reasonable prior notice, during regular business hours to examine
or inspect any of the properties, books and records or extracts
therefrom, to make copies of such books and records or extracts
therefrom, and to discuss the affairs, finances and accounts
thereof with the Borrower all at such times and as often as the
Lender or any representatives of the Lender may reasonably request,
at the Lender's cost prior to an Event of Default and at the
Borrower's cost after an Event of Default.
(e) Litigation. Advise the Lender of the commencement
or threat of litigation, including arbitration proceedings and any
proceedings before any governmental agency, which is instituted
against the Borrower and is reasonably likely to have a material
adverse effect upon the condition, financial, operating or
otherwise, of the Borrower or where the amount involved or claimed
is in excess of Five Hundred Thousand and 00/100 DOLLARS
($500,000.00) or in excess of One Million and 00/100 DOLLARS
($1,000,000.00) in the aggregate in any fiscal year.
(f) Maintain Existence. Maintain its corporate existence
and comply with all applicable statutes, rules and regulations.
(g) Maintain Assets. Maintain its properties in good
repair, working order and operating condition, except for unused or
obsolete equipment. The Borrower shall immediately notify the
Lender of any event causing material loss in the value of its
assets.
(h) ERISA. (i) Promptly notify the Lender in writing
of the occurrence of any Reportable Event, as defined in Section
4043 of ERISA, if a notice of such Reportable Event is required
under ERISA to be delivered to the PBGC within 30 days after the
occurrence thereof, together with a description of such Reportable
Event and a statement of the action the Borrower intends to take
with respect thereto, together with a copy of the notice thereof
given to the PBGC.
(ii) Promptly notify the Lender if the Borrower receives an
assessment of withdrawal liability in connection with a complete or
partial withdrawal with respect to any multiemployer plan to which
the Borrower is a party, together with a statement of the action
that the Borrower intends to take with respect thereto.
(i) Notice of Certain Events. Give prompt written
notice to the Lender of:
(i) any dispute that arises between the Borrower
and any governmental regulatory body or law enforcement agency,
which if adversely determined would have a material adverse effect
on the condition of the Borrower, financial or otherwise;
(ii) any labor controversy resulting or likely to
result in a strike or work stoppage against the Borrower;
(iii) any proposal by any public authority to acquire
the assets or business of the Borrower;
(iv) any proposed or actual change of the name,
identity or corporate structure of the Borrower;
(v) any other matter which has resulted or is
likely to result in a material adverse change in the financial
condition or operations of the Borrower; and
(j) Defaults. Give prompt written notice to the Lender
upon the occurrence of any Default or Event of Default, signed by
the president or chief financial officer of the Borrower describing
such occurrence and the steps, if any, being taken to cure the
default.
(k) Account Duties. Comply with any and all federal,
state and local laws affecting its business, including, but not
limited to, payment of all federal and state taxes. The Borrower
agrees to indemnify and hold the Lender harmless from all claims,
actions and losses, including reasonable attorneys' fees and costs
actually incurred by the Lender arising from any contention, that
there has been a failure to comply with such laws.
(l) Audit by Lender; Fees. In addition to the
inspections in Section 6.02(d), permit the Lender to audit the
books and records of the Borrower at such times and in such manner
and detail as the Lender deems, in the Lender's reasonable
discretion, are necessary. After and Event of Default, the Borrower
shall promptly pay the Lender all audit fees and any reasonable
out-of-pocket expenses incurred in connection with any such audit.
The Lender may charge any such audit fees and out-of-pocket
expenses to the Borrower's demand deposit account. Prior to an
Event of Default, the Lender shall be responsible for all of its
audit fees and any out-of-pocket expenses incurred in connection
with any such audit.
(m) Officers and Directors. Promptly notify the Lender
in writing upon the occurrence of a Change of Control.
6.03 Negative Covenants. The Borrower covenants and agrees
that from the date hereof until payment in full of all Obligations
and termination of this Agreement, the Borrower shall not without
the prior written consent of the Lender:
(a) Encumbrances. Incur or permit to exist any lien,
mortgage, charge or other encumbrance against any of its properties
or assets, whether now owned or hereafter acquired, except: (i)
pledges or deposits in connection with or to secure worker's
compensation, unemployment or liability insurance; (ii) tax liens
which are being contested in good faith and in compliance with this
Agreement; and (iii) those listed on the attached Schedule "5(h)".
(b) Limitation on Indebtedness. Except as set forth on
the attached Schedule "6.03(b)", create or incur any indebtedness
or obligation for trade debt or borrowed money, or issue or sell
any debt obligations of the Borrower to any lender or Person other
than the Lender.
(c) Contingent Liabilities. Assume, guaranty, endorse
or otherwise become liable upon the obligations of any person, firm
or corporation (other than Guarantors), or enter into any purchase
or option agreement or other arrangement having substantially the
same effect as such a guarantee, except by the endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
(d) Consolidation or Merger. Merge into or consolidate
with or into any corporation.
(e) Use of Revolving Loans for Acquisition. Use greater
than NINE MILLION FIVE HUNDRED THOUSAND and 00/100 DOLLARS
($9,500,000.00) of the Revolving Loan Commitment in the aggregate
for all acquisitions of stock or assets of any other Person.
(f) Acquisition of Stock of the Borrower; Dividends.
Purchase, acquire, redeem or retire, or make any commitment to
purchase, acquire, redeem or retire (i) any of the common stock of
the Borrower, whether now or hereafter outstanding in excess of the
aggregate of $500,000 per year; (ii) any of the preferred stock of
the Borrower, whether now or hereafter outstanding; or declare or
pay any dividend, or make any distribution to any of its
stockholders in excess of twenty-five percent (25%) of net income
of the Borrower in any fiscal year.
(g) Sale and Lease of Assets. Sell, lease or
otherwise dispose of any of its assets, in excess of ONE MILLION
and 00/100 Dollars ($1,000,000.00) per event or ONE MILLION and
00/100 Dollars ($1,000,000.00) per annum, except for sales of
inventory and dispositions of unused or obsolete equipment in the
ordinary course of business and except as set forth on the attached
Schedule 6.03(g).
(h) Name Changes. Change its corporate name or conduct
its business under any trade name other than as set forth in this
Agreement.
(i) Capital Expenditures. Make any expenditure for
any asset which would be a fixed asset, or any expenditures for any
leases including, but without limitation, capitalized or
conditional sales contracts, in excess of EIGHT MILLION and 00/100
DOLLARS ($8,000,000.00) in the aggregate per annum. For the
purpose of this covenant, the entire amount paid over the life of
any capitalized lease or conditional sales contract shall be deemed
to be paid in the first year of such lease or sales contract.
(j) Change of Control. Suffer any Change in Control of
the Borrower.
(k) Prohibited Transfers. Transfer, in any manner,
either directly or indirectly, any cash, property, or other assets
to any parent or any Affiliate or Subsidiary other than a
Guarantor, and other than sales made in the ordinary course of
business and for fair consideration on terms no less favorable than
if such sale had been an arms-length transaction between the
Borrower and an unaffiliated entity.
(l) Use of Proceeds. Apply any of the proceeds from
the Loans to any Affiliate or Subsidiary other than a Guarantor if
such Affiliate or Subsidiary is not a party to this Agreement.
(m) No Management Change. Suffer any change in the
senior management of the Borrower which the Lender deems, in its
reasonable discretion, to be a material adverse change.
(n) Leasebacks. Lease any real estate or other
capital asset from any lessor who shall have acquired such property
from the Borrower.
(o) Business Operations. Engage in any business
other than the business in which it is currently engaged or a
business reasonably related thereto.
6.04 Financial Covenants. The Borrower agrees and
covenants that from the date hereof until payment in full and
performance of all Obligations, the Borrower shall, at the end of
each fiscal quarter on a consolidated basis, be in compliance with
the following financial covenants, all determined in accordance
with GAAP:
(a) Net Worth. Maintain a Net Worth of not less than
SIXTY-FIVE MILLION and 00/100 DOLLARS ($65,000,000) increasing at
the rate of not less than seventy-five percent (75%) of quarterly
net income (after tax) to the Borrower.
(b) Ratio of Funded Debt to Tangible Net Worth.
Maintain a ratio of Funded Debt to Tangible Net Worth not to exceed
the following:
Ratio Dates
0.40 to 1.0 from October 1, 1995 through and including
September 28, 1996.
0.35 to 1.0 from September 29, 1996 through and including
September 27, 1997
0.30 to 1.0 from September 28, 1997 through and including
September 26, 1998
(c) Fixed Charge Coverage Ratio. Maintain, as of each
of the dates set forth below, a Fixed Charge Coverage Ratio as
follows, to be calculated on a rolling four quarter basis:
Ratio Dates
1.20 to 1.0 December 28, 1995
1.20 to 1.0 June 29, 1996
1.20 to 1.0 September 28, 1996
1.25 to 1.0 December 28, 1996 and at the end of each fiscal
quarter thereafter
(d) Current Ratio. Maintain a Current Ratio of not less
than 2.0 to 1.0.
VII. DEFAULT.
7.01 Events of Default. The Obligations shall, at the option
of the Lender, become immediately due and payable without notice or
demand unless otherwise provided herein upon the occurrence of any
of the following events (collectively, "Events of Default" and
individually, an "Event of Default"):
(a) failure of the Borrower to pay any installment of
principal or interest or any other Obligation arising under this
Agreement, the Notes or the other Loan Documents or such failure by
a guarantor or surety for any of the Obligations within ten (10)
days when due (unless payments are made by auto-debit from the
Borrower's accounts with the Lender in which case no grace period
shall apply);
(b) breach of any of the Obligations by the Borrower or
any guarantor or surety including, without limitation, any
covenant, representation or warranty contained herein, or the
Borrower's failure to perform any act, duty or obligation as
required by this Agreement or any of the other Loan Documents which
shall continue for a period of thirty (30) days after notice to the
Borrower thereof;
(c) the making by the Borrower of any material
misrepresentation of a material fact to the Lender;
(d) insolvency (failure of the Borrower to pay its debts
as they mature or when the fair value of the Borrower's assets is
less than its liabilities) of the Borrower or any guarantor or
surety for the Obligations, appointment of a receiver or custodian,
or assignment for the benefit of creditors or the commencement of
any proceedings under any bankruptcy or insolvency law by or
against the Borrower or any guarantor or surety for the
Obligations; appointment of a committee of creditors or liquidating
banks, or offering of a composition or extension to creditors by,
for or of the Borrower; however, if an involuntary bankruptcy
petition is filed, an Event of Default shall not occur unless such
petition is not dismissed within sixty (60) days of filing;
(e) the loss, renovation or failure to renew any
governmental license and/or permit now held or hereafter acquired
by the Borrower which materially and adversely affects the ability
of the Borrower to continue its operations as presently conducted;
(f) an Event of Default in any other Loan Document or
other agreements between the Lender and the Borrower or any
guarantor or surety of the Obligations;
(g) except as otherwise permitted pursuant to this
Agreement, the filing of any lien, voluntary or involuntary against
any of the assets of the Borrower or any guarantor or surety of the
Obligations which in the case of an involuntary lien is not
discharged of record within sixty (60) days of filing;
(h) dissolution of the Borrower or any guarantor or
surety of the Obligations;
(i) failure by the Borrower to pay or perform any other
Indebtedness in excess of $500,000, or if any such other
Indebtedness shall be accelerated, or if there shall exist any
default under any instrument, document or agreement governing,
evidencing or securing such other Indebtedness;
(j) a material adverse change in the condition of the
Borrower, financial or otherwise, as determined by the Lender in
its reasonable discretion;
Upon the happening of any one or more Events of Default, any
requirements upon the Lender to make further Revolving Loans
hereunder shall terminate. The Borrower expressly waives any
presentment, demand, protest, notice of protest or other notice of
any kind after the occurrence of such Event of Default. The Lender
may proceed to enforce the rights of the Lender whether by suit in
equity or by action at law, whether for specific performance of any
covenant or agreement contained in this Agreement, the Notes or any
other Loan Documents, or in aid of the exercise of any power
granted in either this Agreement, the Note or the other Loan
Documents, or it may proceed to obtain judgment or any other relief
whatsoever appropriate to the enforcement of such rights, or
proceed to enforce any legal or equitable right which the Lender
may have by reason of the occurrence of any Event of Default
hereunder.
7.02 Cumulative Remedies. The enumeration of the Lender's
rights and remedies set forth in this Article is not intended to be
exhaustive and the exercise by the Lender of any right or remedy
shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative and shall be in addition to any
other right or remedy given hereunder or under any other agreement
between the parties or which may now or hereafter exist in law or
at equity or by suit or otherwise. No delay or failure to take
action on the part of Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or privilege preclude
other or further exercise thereof or the exercise of any other
right, power or privilege or shall be construed to be a waiver of
any event of default. No course of dealing between the Borrower
and the Lender or their employees shall be effective to change,
modify or discharge any provision of this Agreement or to
constitute a waiver of any default.
VIII. MISCELLANEOUS.
8.01 Expenses. Whether or not the transaction herein
contemplated shall be consummated, the Borrower agrees to pay all
out-of-pocket expenses (including the Lender's counsel of $26,500
plus disbursements) of the Lender incurred in connection with the
preparation of this Agreement, the Notes and the other Loan
Documents. The Borrower further agrees to pay for all reasonable
expenses of the Lender including, but not limited to reasonable
attorneys' fees for any amendments or supplements to this
Agreement, the Notes and the other Loan Documents and all expenses
(including reasonable fees and expenses of the Lender or the
Lender's counsel) incidental to the collection of monies due
hereunder or under the Notes or the other Loan Documents and/or the
enforcement of the rights (including the protection thereof) of the
Lender under any provisions of this Agreement, and the Notes and
the other Loan Documents.
8.02 Set-off. The Borrower gives the Lender a lien and right
of setoff for all the Obligations upon and against all its
deposits, credits, collateral and property now or hereafter in the
possession or control of the Lender or in transit to it. The
Lender may, upon demand or the occurrence of any Event of Default,
apply or set off the same, or any part thereof, to any Obligations
of the Borrower to the Lender.
8.03 Covenants to Survive, Binding Agreement. All covenants,
agreements, warranties and representations made herein, in the
Notes, in the other Loan Documents, and in all certificates or
other documents of the Borrower shall survive the advances of money
made by the Lender to the Borrower hereunder and the delivery of
the Notes, and the other Loan Documents. All such covenants,
agreements, warranties and representations shall be binding upon
and inure to the benefit of the Lender and its successors and
assigns, whether or not so expressed.
8.04 Cross-Default. The Loans shall be cross-defaulted with
each other, with the $2,500,000 term loan facility of this date of
the Borrower with Fleet Credit Corporation and with current and
future financing accommodations extended or to be extended by the
Lender or Fleet Credit Corporation to the Borrower so that an Event
of Default under any loan or lease to the Borrower shall be an
Event of Default hereunder and under all of the other loans and
leases extended by the Lender or Fleet Credit Corporation.
8.05 Amendments and Waivers. This Agreement, the Notes, the
other Loan Documents, and any term, covenant or condition hereof or
thereof may not be changed, waived, discharged, modified or
terminated except by a writing executed by the parties hereto or
thereto. Notwithstanding the foregoing and without limiting the
Lender's right to exercise any of its other rights or remedies
hereunder, in the event that the Lender, in its sole discretion,
elects to waive compliance by the Borrower of any terms or
conditions set forth in this Agreement, the Notes or any other Loan
Documents, the Borrower shall pay to the Lender all costs and
expenses in connection therewith including, but not limited to,
reasonable attorneys' fees. The failure on the part of the Lender
to exercise, or the Lender's delay in exercising, any right, remedy
or power hereunder or under the Notes or the other Loan Documents
shall not preclude any other or future exercise thereof, or the
exercise of any other right, remedy or power.
8.06 Notices. All notices, requests, consents, demands and
other communications hereunder shall be in writing and shall be
deemed effective five (5) days after being of being mailed by
registered or certified first class mail or within one (1) day
after being delivered by an overnight courier to the respective
parties to this Agreement as follows:
If to the Borrower: Pharmaceutical Resources, Inc.
One Ram Ridge Road
Spring Valley, New York 10977
Attention: Mr. Kenneth G. Mosesian
With a copy to: Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017-5582
Attention: John D. Vaughan, Esq.
If to the Lender: Fleet Bank, N.A.
One Stamford Forum
263 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Mr. John V. Raleigh
With a copy to: Diserio Martin O'Connor & Castiglioni
One Atlantic Street
Stamford, Connecticut 06901
Attention: Kevin T. Katske, Esq.
8.07 Transfer of Lender's Interest. The Borrower agrees
that the Lender, in its sole discretion, may freely sell, assign or
otherwise transfer participations, portions, co-lender interests or
other interests in all or any portion of the indebtedness,
liabilities or obligations arising in connection with or in any way
related to the financing transactions of which this Agreement is a
part. In the event of any such transfer, the transferee may, in
the Lender's sole discretion, have and enforce all the rights,
remedies and privileges of the Lender. The Borrower consents to
the release by the Lender to any potential transferee, so long as
such transferee is a financial institution, of any and all
information including, without limitation, financial information
pertaining to the Borrower as the Lender, in its sole discretion,
may deem appropriate, provided such transferee executes a
confidentiality agreement with respect to all documents and
information pertaining to the Borrower. If such transferee so
participates with the Lender in making loans or advances hereunder
or under any other agreement between the Lender and the Borrower,
the Borrower grants to such transferee and such transferee shall
have an is hereby given a continuing lien and security interest in
any money, securities or other property of the Borrower in the
custody or possession of such transferee, including the right of
set off, to the extent of such transferee's participation in the
Obligations.
8.08 New Laws. In the event that any law, regulation, treaty
or official directive or the interpretation or application thereof
by any court or governmental authority or the compliance with any
guideline or request of any governmental authority:
(a) subjects the Lender to any tax with respect to any
amounts payable hereunder or under the Notes by the Borrower or
otherwise with respect to the transactions contemplated hereunder,
except for taxes on the overall net income of the Lender; or
(b) imposes, modifies or deems applicable any deposit,
insurance, reserve, special deposit, capital maintenance or similar
requirement against assets held by, or deposits in or for the
account of, or loans or advances or commitments to make the
Revolving Loans or advances by the Lender, other than such
requirements the effect of which is included in the determination
of the interest rates for the Revolving Loans or advances made
thereunder; or
(c) imposes upon the Lender any other condition with
respect to the Revolving Loans or advances to be made thereunder;
and the result of any of the foregoing is to increase the cost of
the Lender, reduce the income receivable by or return on equity of
the Lender or impose any expense upon the Lender with respect to
the Revolving Loans or advances thereunder, the Lender shall so
notify the Borrower. The Borrower agrees, after prompt notice is
sent by the Lender to the Borrower, to pay the Lender the amount of
such increases in cost, reduction in income, reduced return on
equity or additional expenses as and when such cost, reduction in
income, reduced return on equity or additional expense is incurred
or determined, plus interest, upon presentation by the Lender of a
statement in the amount and setting forth the Lender's calculation
thereof, in determining such amount, the Lender may use any
reasonable averaging and attribution methods; which statement shall
be deemed true and correct absent manifest error.
8.09 Section Headings, Severability, Entire Agreement. Section
and subsection headings have been inserted herein for convenience
of the Lender only and shall not be construed as part of this
Agreement. Every provision of this Agreement, the Notes and the
other Loan Documents is intended to be severable; if any term or
provision of this Agreement, the Notes, the other Loan Documents,
or any other document delivered in connection herewith shall be
invalid, illegal or unenforceable for any reason whatsoever, the
validity, legality and enforceability of the remaining provisions
hereof or thereof shall not in any way be affected or impaired
thereby. All Exhibits and Schedules to this Agreement shall be
deemed to be part of this Agreement. This Agreement, the other
Loan Documents, and the Exhibits and Schedules attached hereto and
thereto embody the entire agreement and understanding between the
Borrower and the Lender and supersede all prior agreements and
understandings relating to the subject matter hereof unless
otherwise specifically reaffirmed or restated herein.
8.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when so executed and
delivered shall be an original, and it shall not be necessary when
making proof of this Agreement to produce or account for more than
one counterpart.
8.11 Governing Law; Consent to Jurisdiction. This Agreement
and the other Loan Documents, and all transactions, assignments and
transfers hereunder and thereunder, and all the rights of the
parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the state of
Connecticut. The Borrower agrees that the Superior Court for the
Judicial District of Stamford/Norwalk or the United States District
Court for the District of Connecticut at Bridgeport shall have
jurisdiction to hear and determine any claims or disputes
pertaining to the financing transactions of which this Agreement is
a part and/or to any matter arising or in any way related to this
Agreement or any other agreement between the Lender and the
Borrower expressly submits and consents in advance to such
jurisdiction in any action or proceeding.
8.12 Uniform Commercial Code. The Borrower shall comply with,
and Lender shall have all the rights and remedies of a secured
party under the Uniform Commercial Code, as enacted in Connecticut,
as amended.
8.13 Further Assurances. At the request of the Lender, the
Borrower agrees that at its expense, it shall promptly execute and
deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Lender may
reasonably request, in order to exercise and enforce its rights and
remedies hereunder.
8.14 Prejudgment Remedy Waiver; Waivers. THE BORROWER
ACKNOWLEDGES THAT THE LOANS EVIDENCED HEREBY ARE COMMERCIAL
TRANSACTIONS AND WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE
ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH THE LENDER MAY DESIRE TO USE, AND FURTHER WAIVES
DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT,
PROTEST AND NOTICE OF ANY RENEWALS OR EXTENSIONS. THE BORROWER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, WILLINGLY AND
VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS.
8.15 Jury Trial Waiver. THE BORROWER WAIVES TRIAL BY JURY IN
ANY COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING
IN CONNECTION WITH OR IN ANY WAY RELATED TO THE FINANCING
TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART OR THE ENFORCEMENT
OF ANY OF LENDER'S RIGHTS. THE BORROWER ACKNOWLEDGES THAT IT MAKES
THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND WITHOUT
DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS
OF THIS WAIVER WITH ITS ATTORNEYS.
The parties have executed this Agreement on December 28, 1995.
Signed in the presence of:
____________________________ PHARMACEUTICAL RESOURCES, INC.
____________________________ By /s/Robert I. Edinger
------------------------------
Its Executive Vice President
____________________________ FLEET BANK, N.A.
____________________________ By /s/John Raleigh
-----------------------------
Its Vice President
STATE OF CONNECTICUT )
) ss.: Stamford
COUNTY OF FAIRFIELD )
On this the 28th day of December, 1995, before me, the
undersigned officer, personally appeared Robert Edinger, who
acknowledged himself to be the Executive Vice President of
Pharmaceutical Resources, Inc., a New Jersey corporation, and that
he, as such officer, being authorized so to do, executed the
foregoing instrument for the purposes therein contained and
acknowledged the same to be his free act and deed individually and
as such officer, and the free act and deed of the corporation.
IN WITNESS WHEREOF, I hereunto set my hand.
___________________________________
Kevin T. Katske
Commissioner of the Superior Court
STATE OF CONNECTICUT )
) ss.: Stamford
COUNTY OF FAIRFIELD )
On this the 28th day of December, 1995, before me, the
undersigned officer, personally appeared John V. Raleigh, who
acknowledged himself to be the Vice President of Fleet Bank, N.A.,
a national banking association, and that he, as such officer, being
authorized so to do, executed the foregoing instrument for the
purposes therein contained and acknowledged the same to be his free
act and deed individually and as such officer, and the free act and
deed of the national banking association.
IN WITNESS WHEREOF, I hereunto set my hand.
___________________________________
Kevin T. Katske
Commissioner of the Superior Court