Exhibit 10.10
FOURTH AMENDMENT AND CONSENT
TO LOAN AND SECURITY AGREEMENT
FOURTH AMENDMENT AND CONSENT, dated as of May 5, 1998 (this "Amendment"),
to the Loan and Security Agreement referred to below by and among GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("Lender"), PAR
PHARMACEUTICAL, INC., a New Jersey corporation ("Borrower"), PHARMACEUTICAL
RESOURCES, INC., a New Jersey corporation ("Parent"), NUTRICEUTICAL RESOURCES,
INC., a New York corporation ("NRI"), and PARCARE, LTD., a New York corporation
("ParCare"). Parent, NRI and ParCare are hereinafter referred to as
"Guarantors".
W I T N E S S E T H
WHEREAS, Lender, Borrower and Guarantors are parties to that certain Loan
and Security Agreement, dated as of December 15, 1996 (as amended, supplemented
or otherwise modified prior to the date hereof, the "Loan Agreement");
WHEREAS, Lender, Borrower and Guarantors have agreed to amend the Loan
Agreement in the manner, and on the terms and conditions, provided for herein;
and
WHEREAS, Lender has agreed to consent to certain actions by Borrower and
Parent under the Loan Agreement in the manner, and on the terms and conditions,
provided for herein.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties to this Amendment hereby agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Loan Agreement.
2. Amendment to Section 5(d) of the Loan Agreement. Section 5(d) of the
Loan Agreement is hereby amended and restated in its entirety as of the
Amendment Effective Date (as hereinafter defined) to read as follows:
"(d) enter into any lending, borrowing or other commercial transaction
with any of its employees, directors, Affiliates or any other Credit
Party (including upstreaming and downstreaming of cash and
intercompany advances, and payments by a Credit Party on behalf of
another Credit Party which are not otherwise permitted hereunder)
other than (i) loans to employees in the ordinary course of business
in an aggregate outstanding amount not exceeding $50,000, (ii) those
transactions contemplated under the Merck Equity Documents and (iii)
indebtedness consisting of intercompany loans made by Borrower to
Parent provided that (A) Borrower and Parent shall record all
intercompany transactions on their books and records in a manner
satisfactory to Lender, (B) no Default or Event of Default would occur
and be continuing after giving effect to any such proposed
intercompany loan, and (C) the aggregate amount of all such
intercompany loans made by Borrower to Parent shall not exceed
(together with any dividends under Section 5(l)(iv) below) $1,200,000
in any Fiscal Year;"
3. Amendment to Section 5(i) of the Loan Agreement. Section 5(i) of the
Loan Agreement is hereby amended and restated in its entirety as of the
Amendment Effective Date to read as follows:
"(i) sell, transfer, convey, assign or otherwise dispose
of any of its assets or properties, including its
Accounts, or issue any shares of its Stock; provided, that
the foregoing shall not prohibit (i) the sale of Inventory
or obsolete or unnecessary Equipment or real estate in the
ordinary course of its business, (ii) the sale by Parent
of its Common Stock at Fair Market Value for cash
consideration so long as the proceeds thereof are applied
to prepayment of Revolving Credit Advances pursuant to
Section 1.2(c), (iii) issuance by Parent of shares of its
Common Stock upon exercise of the Warrants, (iv) issuance
by Parent to its employees of options to purchase its
Common Stock pursuant to the Stock Option Plans and
issuance of Common Stock upon exercise of such options,
(v) issuance by Parent to members of its Board of
Directors of options to purchase its Common Stock pursuant
to the 1997 Directors Stock Option Plan, adopted by the
Board of Directors of Parent on October 28, 1997, and
issuance of Common Stock upon exercise of such options,
and (vi) issuance by Parent to employees of Genpharm Inc.
of options to purchase up to an aggregate of 120,000
shares of its Common Stock pursuant to a stock option plan
to be adopted by the Board of Directors of Parent and
issuance of Common Stock upon exercise of such options."
4. Amendment to Schedule A to the Loan Agreement. Schedule A to the Loan
Agreement is hereby amended as of the Amendment Effective Date as follows:
(a) The definition of "Merck Equity Documents" is hereby amended and
restated in its entirety to read as follows:
'"Merck Equity Documents" shall mean,
collectively, the Merck Stock Purchase Agreement, the Clal
Letter Agreement, the Merck Services Agreements, the Merck
Distribution Agreement, the Merck Option Agreements and
the Merck Registration Rights Agreement."
(b) The definition of "Merck Stock Purchase Agreement" is hereby amended
and restated in its entirety to read as follows:
'"Merck Stock Purchase Agreement" shall mean that
certain Stock Purchase Agreement, dated March 25, 1998,
between Parent and Lipha Americas, Inc."
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(c) The definition of "Overadvance Limit" is hereby amended and restated in
its entirety to read as follows:
'"Overadvance Limit" shall mean for each period
the amount set forth below for such period:
Period Overadvance Limit
------ -----------------
2/17/98 through 4/1/98 $2,000,000
4/1/98 through 6/19/98 $2,500,000
6/20/98 and thereafter $ 0"
(d) The following new definitions shall be inserted in the proper
alphabetical order:
'"Clal Letter Agreement" shall mean that certain
letter agreement, dated March 25, 1998, among Parent,
Merck and Clal Pharmaceutical Industries Ltd.
"Merck Distribution Agreement" shall mean that
certain Agreement, dated as of March 25, 1998, between
Parent and Genpharm Inc."
'"Merck Option Agreements" shall mean,
collectively, that certain (i) Stock Option Agreement to
be entered into between Parent and Merck, and (ii) Stock
Option Agreement to be entered into between Parent and
Genpharm Inc., each in the form attached to the Merck
Stock Purchase Agreement."
'"Merck Registration Rights Agreement" shall mean that certain
Registration Rights Agreement to be entered into among Parent, Merck,
Genpharm Inc. and Lipha Americas, Inc. in the form attached to the
Merck Stock Purchase Agreement."
'"Merck Services Agreements" shall mean,
collectively, that certain (i) Services Agreement to be
entered into between Parent and Merck and (ii) Services
Agreement to be entered into between Parent and Genpharm,
each substantially in the form attached to the Merck Stock
Purchase Agreement."
5. Consent. (a) Lender hereby consents to the amendment by Borrower and
Parent of that certain Amended and Restated Distribution Agreement, dated as of
July 28, 1997, as amended, supplemented or otherwise modified from time to time,
among SANO Corporation ("SANO"), Borrower and Parent, in the manner, and on the
terms and conditions set forth in, that certain letter agreement, dated March
31, 1998, among SANO, Borrower and Parent, a copy of which is attached hereto as
Exhibit A.
(b) Lender hereby acknowledges that the form and substance of the Merck
Equity Documents are satisfactory to Lender and further consents, under all
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provisions of the Loan Agreement, to the execution and delivery thereof by
Parent and the consummation of the transactions contemplated therein; provided,
that all proceeds received by Parent under the Merck Equity Documents shall be
immediately contributed to the capital of Borrower and immediately applied by
Borrower to prepayment of Revolving Credit Advances pursuant to Section 1.2(c)
of the Loan Agreement. To the extent any proceeds remain after such prepayment,
Borrower shall immediately invest such proceeds solely in a "Permitted
Investment" until such time as any of the Credit Parties shall use such proceeds
for such uses as shall not be prohibited by the Loan Agreement. The parties
agree that such an investment and such uses shall not constitute a violation of
the Loan Agreement. For purposes of this Amendment, "Permitted Investment" shall
mean (i) marketable direct obligations issued or unconditionally guaranteed by
the United States of America or any agency thereof maturing no more than one
year from the date of creation thereof, (ii) commercial paper maturing no more
than one year from the date of creation thereof and currently having the highest
rating obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., (iii) certificates of deposit, maturing no more than one year
from the date of creation thereof, issued by commercial banks incorporated under
the laws of the United States of America, each having combined capital, surplus
and undivided profits of not less than $300,000,000 and having a senior secured
rating of "A" or better by a nationally recognize rating Agency (an "A Rated
Bank"), and (iv) time deposits, maturing no more than 30 days from the date of
creation thereof, with A Rated Banks. Notwithstanding anything to the contrary
contained in this Section 4(b), (A) Lender hereby reserves its right under
Section 3.25 of the Loan Agreement to perfect its Lien in the above-mentioned
proceeds and Permitted Investments and (B) Parent shall not amend, supplement or
otherwise modify the Merck Equity Documents after the date hereof, except for
those amendments, supplements or modifications (1) of the Merck Equity Documents
which do not materially and adversely affect Lender and the Credit Parties and
(2) of the Merck Distribution Agreement which are made in the ordinary course of
business. Parent shall promptly deliver to Lender all documents relating to such
amendments, supplements or modifications.
(c) Lender hereby consents to the proposed amendment to Article IV of
Parent's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 60,000,000 to 90,000,000 shares, and the amendment
to Section 6 of Article III of Parent's By-Laws, each of which shall be in the
respective form set forth on Exhibit B hereto.
(d) Lender hereby consents to the cancellation by Parent of indebtedness in
the original principal amount of $343,057.38 owing to it by Kenneth I. Sawyer in
accordance with the terms of the proposed form of Amended and Restated
Promissory Note, to be executed by Kenneth I. Sawyer in favor of Parent, the
form of which is attached hereto as Exhibit C.
6. Representations and Warranties. To induce Lender to enter into this
Amendment, each Credit Party hereby represents and warrants that:
A. The execution, delivery and performance by each Credit Party
of this Amendment: (i) are within their respective corporate powers;
(ii) have been duly authorized by all necessary corporate and
shareholder action; and (iii) are not in contravention of any
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provision of their respective certificates or articles of
incorporation or by-laws or other organizational documents.
B. This Amendment has been duly executed and delivered by or on
behalf of each Credit Party.
C. This Amendment constitutes a legal, valid and binding
obligation of each Credit Party enforceable against each Credit Party
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or at law).
D. No Default has occurred and is continuing both before and
after giving effect to this Amendment.
E. No action, claim or proceeding is now pending or, to the
knowledge of each Credit Party, threatened against any Credit Party,
at law, in equity or otherwise, before any court, board, commission,
agency or instrumentality of any federal, state, or local government
or of any agency or subdivision thereof, or before any arbitrator or
panel of arbitrators, which challenges any Credit Party's right,
power, or competence to enter into this Amendment or, to the extent
applicable, perform any of its obligations under this Amendment, the
Loan Agreement or any other Loan Document, or the validity or
enforceability of this Amendment, the Loan Agreement or any other Loan
Document or any action taken under this Amendment, the Loan Agreement
or any other Loan Document.
7. No Other Consents/Waivers. Except as otherwise provided herein, the Loan
Agreement shall be unmodified and shall continue to be in full force and effect
in accordance with its terms, and, except as expressly provided herein, this
Amendment shall not be deemed a waiver of, or consent under, any term or
condition of any Loan Document and shall not be deemed to prejudice any right or
rights which Lender may now have or may have in the future under or in
connection with any Loan Document or any of the instruments or agreements
referred to therein, as the same may be amended from time to time. This
Amendment shall constitute notice to Lender, pursuant to Section 3.8(a)(i) and
(iii) of the Loan Agreement, of the transactions contemplated by the Merck
Equity Documents.
8. Outstanding Indebtedness; Waiver of Claims. Each Credit Party hereby
acknowledges and agrees that as of April 29, 1998 the aggregate outstanding
principal amount of the Revolving Credit Loan is $10,374,430.37 and that such
principal amount is payable pursuant to the Loan Agreement without defense,
offset, withholding, counterclaim or deduction of any kind. Each Credit Party
hereby waives, releases, remises and forever discharges Lender and each other
Indemnified Person from any and all Claims of any kind or character, known or
unknown, which each Credit Party ever had, now has or might hereafter have
against Lender which relates, directly or indirectly, to any acts or omissions
of Lender or any other Indemnified Person on or prior to the date hereof.
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9. Expenses. Borrower hereby reconfirms its obligations pursuant to Section
10.2 of the Loan Agreement to pay and reimburse Lender for all reasonable
out-of-pocket expenses (including, without limitation, reasonable fees of
counsel) incurred in connection with the negotiation, preparation, execution and
delivery of this Amendment and all other documents and instruments delivered in
connection herewith.
10. Effectiveness. This Amendment shall become effective only upon
satisfaction in full in the judgment of the Lender of each of the following
conditions on or prior to May 8, 1998:
A. Amendment. Lender shall have received four original copies of
this Amendment duly executed and delivered by Lender and each Credit
Party.
B. Representations and Warranties. All representations and
warranties of or on behalf of each Credit Party in this Amendment and
all the other Loan Documents shall be true and correct in all respects
with the same effect as though such representations and warranties had
been made on and as of the date hereof and on and as of the date that
the other conditions precedent in this Section 10 have been satisfied,
except to the extent that any such representation or warranty
expressly relates to an earlier date.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12. Counterparts. This Amendment may be executed by the parties hereto on
any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
(SIGNATURE PAGES FOLLOW)
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
Borrower:
PAR PHARMACEUTICAL, INC.
By: /s/ Dennis O'Connor
--------------------------------
Name: Dennis O'Connor
Title: Vice President & Chief Financial
Officer
Lender:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Martin S. Greenberg
--------------------------------
Name: Martin S. Greenberg
Its: Duly Authorized Signatory
Parent:
PHARMACEUTICAL RESOURCES,
INC.
By: /s/ Dennis O'Connor
--------------------------------
Name: Dennis O'Connor
Title: Vice President & Chief Financial
Officer
(SIGNATURES CONTINUED ON NEXT PAGE)
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Subsidiary Guarantors:
NUTRICEUTICAL RESOURCES, INC.
By: /s/ Dennis O'Connor
--------------------------------
Name: Dennis O'Connor
Title: Vice President & Chief Financial
Officer
PARCARE, LTD.
By: /s/ Dennis O'Connor
--------------------------------
Name: Dennis O'Connor
Title: Vice President & Chief Financial
Officer
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