AMENDMENT NO. 6 TO BUSINESS LOAN AGREEMENT
This Amendment No. 6 (this "Amendment") dated as of November 13, 1998
is between Dura Pharmaceuticals, Inc. (the "Borrower") and Bank of America
National Trust and Savings Association (the "Bank").
RECITALS
A. The Bank and the Borrower entered into that certain Business Loan
Agreement dated as of April 14, 1997, as modified by amendments dated May 8,
1997, July 30, 1997, October 28, 1997, June 25, 1998, and October 12, 1998 (as
amended, the "Agreement").
B. The Bank and the Borrower desire to amend the Agreement on the terms
and conditions set forth below:
AGREEMENT
1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Agreement.
2. AMENDMENTS. Effective as of September 28, 1998, the Agreement is
hereby amended as follows:
2.1 The following is added as a new Article 3A:
"3A COLLATERAL
3A.1 Stock of Certain Subsidiaries: Upon consummation
of the transactions described in Paragraph 6.24 below, the
Borrower's obligations under this Agreement will be secured by
the following property:
(a) Sixty-six percent (66%) of the issued
and outstanding common stock of Dura (Barbados)
Holding Company Ltd.;
(b) Sixty-six percent (66%) of the issued
and outstanding common stock of Dura (Barbados) Ltd.;
and
(c) Sixty-six percent (66%) of the issued
and outstanding common stock of Dura (Burmuda)
Trading Company Ltd.
2.2 The following is added as a new Paragraph 5.14:
"5.14 TAXES ON INCOME FROM FOREIGN SUBSIDIARIES.
Income received by the Borrower from its Foreign Subsidiaries (as
defined in Paragraph 6.6 below) is subject only to taxation by the
United States Internal Revenue Service and other state and local taxing
authorities within the United States of America."
2.3 Paragraph 6.3 is amended and restated in its
entirety to read as follows:
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"6.3 NET WORTH. To maintain on a consolidated basis
for each quarterly accounting period Net Worth equal to, on a
cumulative basis, at least the sum of:
(a) Four Hundred Thirty Million Dollars
($430,000,000); plus
(b) the sum of 50% of the net income after income
taxes (without subtracting losses) earned in each quarterly
accounting period commencing with the quarter ended September
30, 1998; PLUS
(c) the net proceeds from any equity securities
(including shares issued upon the exercise of stock options)
issued in each quarterly accounting period commencing with the
quarter ended September 30, 1998; plus
(d) any increase in stockholders' equity resulting
from the conversion of debt securities to equity securities
issued in each quarterly accounting period commencing with the
quarter ended September 30, 1998; MINUS
(e) the amount of treasury stock held by the Borrower
not to exceed Fifty Million Dollars ($50,000,000).
`Net Worth' means the gross book value of the
Borrower's assets less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves
against assets."
2.4 Paragraph 6.4 is amended and restated in its entirety
to read as follows:
"6.4 MAXIMUM ADJUSTED FUNDED DEBT TO EBITDA. To
maintain on a consolidated basis a ratio of (i) funded debt,
including all interest bearing obligations, less the sum of
the following up to an amount equal to the face amount of the
Notes issued pursuant to and as defined in the Indenture: (A)
domestic cash and domestic cash equivalents, (B) one hundred
percent (100%) of offshore cash balances up to an amount equal
to the capital directly or indirectly contributed to Dura
(Burmuda) Trading Company Ltd. (as of the date hereof, this
amount is Sixty Million Dollars ($60,000,000)), and (C) fifty
percent (50%) of such offshore cash balances in excess of such
capital contributions, to (ii) EBITDA of not greater than 1.75
to 1.00.
Upon the Bank's request from time to time , the
Borrower shall provide evidence acceptable to the Bank of cash
equivalents. For purposes of this Agreement, cash equivalents
means:
(a) domestic certificates of deposit or
domestic time deposits;
(b) U.S. treasury bills and other direct
obligations of the federal government;
(c) shares in domestic money market funds;
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(d) readily marketable obligations of an
agency of the United States of America that are
generally considered in the securities industry to be
implicit obligations of the federal government;
(e) prime bankers' acceptances and
commercial paper issued by financial institutions
rated as least A-1 by Standard & Poors Ratings Group
or at least P-1 by Moody's Investors Service, Inc.;
and
(f) repurchase agreements covering U.S.
government securities.
For purposes of this Agreement, `EBITDA' means net
income for such period, LESS, to the extent added in
determining such net income, interest income, PLUS, to the
extent deducted in determining such net income, (i) interest
expense, (ii) depreciation, (iii) depletion, (iv)
amortization, and (v) all federal, state, local and foreign
income taxes. This ratio will be calculated at the end of each
fiscal quarter using the results of that quarter and each of
the three immediately preceding quarters."
2.5 Paragraph 6.5 is amended and restated in its entirety
to read as follows:
"6.5 MINIMUM EBIT; MINIMUM U.S. EBIT. To maintain for
each quarterly accounting period (i) on a consolidated basis
EBIT of not less than zero dollars ($0); and (ii) on
consolidated basis only for the Borrower and its Domestic
Subsidiaries EBIT of not less than a NEGATIVE Six Million
Dollars (-$6,000,000) for the fiscal quarter ended September
30, 1998, and not less than a NEGATIVE One Million Dollars
(-$1,000,000) for each fiscal quarter thereafter.
For purposes of this Agreement: `EBIT' means net
income for such period, LESS, to the extent added in
determining such net income, interest income, PLUS, to the
extent deducted in determining such net income, (i) interest
expense and (ii) all federal, state, local and foreign income
taxes; `Domestic Subsidiaries' means direct or indirect
subsidiaries of the Borrower that is incorporated or otherwise
organized under the laws of (x) the United States of America,
(y) any state, territory, or possession of the United States
of America, or (z) any other jurisdiction located within
either the United States of America or any state, territory,
or possession of the United States of America; individually, a
`Domestic Subsidiary.'"
2.6 Paragraph 6.6 is amended and restated in its entirety
to read as follows:
"6.6 ADDITIONAL GUARANTIES. If at any time after the
date of this Agreement a subsidiary of the Borrower or any
guarantor becomes a Significant Subsidiary, to cause such
Significant Subsidiary to execute and deliver to the Bank, as
soon as reasonably practicable but not later than thirty (30)
days after the Bank's request therefor, a continuing guaranty
in the principal amount of at least Fifty Million Dollars
($50,000,000) and otherwise in form and substance acceptable
to the Bank, together with satisfactory
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evidence of such Significant Subsidiary's authority to execute
and deliver such guaranty. For purposes of this Agreement
`Significant Subsidiary' means a corporation (i) that is
wholly-owned by the Borrower or any guarantor and (ii) that
owns twenty percent (20%) or more of the Borrower's total
consolidated assets or twenty percent (20%) or more of the
Borrower's total consolidated sales for any fiscal quarter.
Notwithstanding the foregoing, `Significant Subsidiary' shall
not include any Foreign Subsidiary. `Foreign Subsidiary' means
any direct or indirect subsidiary of the Borrower that is not
a Domestic Subsidiary."
2.7 The following is added as a new Paragraph 6.24:
"6.24 PLEDGES OF STOCK. On or before December 15,
1998, to take all actions and execute and deliver to the Bank
all documentation (including without limitation opinion of
counsel), in form and substance satisfactory to the Bank, and
to cause all subsidiaries to take such actions and execute and
deliver to the Bank such documentation, necessary to grant to
the Bank a first position perfected security interest in and
to the following shares of stock: sixty-six percent (66%) of
the issued and outstanding shares of the common stock of Dura
(Barbados) Holding Company Ltd. owned by the Borrower;
sixty-six percent (66%) of the issued and outstanding shares
of common stock of Dura (Barbados) Ltd. owned by Dura
(Barbados) Holding Company Ltd.; and sixty-six percent (66%)
of the issued and outstanding shares of common stock of Dura
(Burmuda) Trading Company Ltd. owned by Dura (Barbados) Ltd.
2.8 The form of compliance certificate appearing as Exhibit A
to Amendment No. 3 to the Agreement as referenced in Paragraph 6.2(d)
is amended to read as set forth on Exhibit A to this Amendment.
3. REPRESENTATIONS AND WARRANTIES. When the Borrower signs this
Amendment, the Borrower represents and warrants to the Bank that: (a) there is
no event which is, or with notice or lapse of time or both would be, a default
under the Agreement (b) the representations and warranties in the Agreement are
true as of the date of this Amendment as if made on the date of this Amendment,
(c) this Amendment is within the Borrower's powers, has been duly authorized,
and does not conflict with any of the Borrower's organizational papers, and (d)
this Amendment does not conflict with any law, agreement, or obligation by which
the Borrower is bound.
4. EFFECT OF AMENDMENT. Except as provided in this Amendment, all of
the terms and conditions of the Agreement shall remain in full force and effect.
[Signatures continue on next page]
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This Amendment is executed as of the date stated at the beginning of
the Amendment.
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By: /s/ Susan J. Pepping
--------------------------------------------------
Name: Susan J. Pepping
Title: Vice President
DURA PHARMACEUTICALS, INC.
By: /s/ Erle T. Mast
--------------------------------------------------
Name: Erle T. Mast
--------------------------------------------------
Title: Vice President, Finance
--------------------------------------------------
By: /s/ Mitchell R. Woodbury
--------------------------------------------------
Name: Mitchell R. Woodbury
--------------------------------------------------
Title Senior V.P., General Counsel and Secretary
--------------------------------------------------
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EXHIBIT "A"
COMPLIANCE CERTIFICATE
To: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Reference is made to that certain Business Loan Agreement dated as of
April 14, 1997, as amended, between Bank of American National Trust and Savings
Association and Dura Pharmaceuticals, Inc., (the "Business Loan Agreement").
Capitalized terms not otherwise defined in this Certificate shall have the
meanings ascribed to them in the Business Loan Agreement. This Certificate is
delivered in accordance with Paragraph 6.2(d) of the Business Loan Agreement.
I. COMPLIANCE WITH FINANCIAL COVENANTS
Computations showing compliance with certain paragraphs of the Business
Loan Agreement are as follows:
PARAGRAPH 6.3; NET WORTH.. As of the date of the attached financial
statements, the Borrower's Net Worth, on a consolidated and cumulative basis, is
at least the sum of:
Calculated Net Worth from the immediately preceding
fiscal quarter. Net Worth amount as of the 6/30/98
fiscal quarter shall begin with $430,000,000. $____________
PLUS, in each quarterly accounting period, commencing with the
quarter ended 9/30/98 the sum of:
50% of net income after income taxes
(without subtracting losses), $____________
PLUS the net proceeds from the issuance of any equity
securities (including shares issued upon exercise
of stock options), $____________
PLUS any increase in stockholders' equity resulting
from the conversion of debt securities to equity
securities $____________
PLUS any increase in stockholders equity resulting from
the transactions as described in the Form S-3 dated
October 10, 1997 $____________
MINUS the amount of treasury stock held by the
Borrower not to exceed $50,000,000. $____________
minimum permitted $____________
Compliance Certificate
Page 2
actual Net Worth $____________
PARAGRAPH 6.4; ADJUSTED FUNDED DEBT TO EBITDA. As of the date of the
attached consolidated financial statements, the ratio of adjusted funded debt to
EBITDA was calculated as follows:
(a) The sum of:
All funded debt (including interest bearing obligations) $____________
MINUS the sum of the following not to exceed the
face amount of Notes issues under the Indenture: $_____________
domestic cash and domestic cash equivalents
100% of offshore cash balances not to exceed capital
contributed to Dura (Burmuda) Trading Company Ltd. $_____________
50% of other offshore cash balances $_____________
DIVIDED BY
(b) For the current fiscal quarter and each of the three immediately
preceding quarters, the sum of :
net income $_____________
MINUS interest income $(____________)
PLUS interest expense $_____________
PLUS depreciation $_____________
PLUS depletion $_____________
PLUS amortization $_____________
PLUS all federal, state, local and foreign income taxes $_____________
EBITDA $_____________
EQUALS (EXPRESSED AS A RATIO) __________:1.00
Compliance Certificate
Page 3
maximum permitted: 1.75 to 1.00
PARAGRAPH 6.5; MINIMUM EBIT; MINIMUM U.S. EBIT; For the fiscal quarter
ended as of the date of the attached consolidated financial statements,
consolidated EBIT was calculated as follows:
(a) the sum of:
net income $____________
MINUS interest income ($___________)
PLUS interest expense $____________
PLUS all federal, state, local and foreign income
taxes $____________
EQUALS $____________
minimum permitted: $0
EBIT for the Borrower and its Domestic Subsidiaries was calculated as
follows:
(a) the sum of:
U.S. net income $____________
MINUS U.S. interest income ($___________)
PLUS U.S. interest expense $____________
PLUS all federal, state, local,
and foreign taxes $____________
EQUALS $____________
minimum permitted:
quarter ended 9/30/98 ($6,000,000)
each quarter thereafter ($1,000,000)
PARAGRAPH 6.7; OTHER INDEBTEDNESS. As of the date of the attached
financial statements for the Borrower and its subsidiaries, the
outstanding amount of debts for
Compliance Certificate
Page 4
acquisition of fixed or capital assets permitted under Paragraph
6.7 (e) was $_______________.
maximum permitted in any single fiscal year: $5,000,000
(excludes debt pursuant to that certain Indenture
dated as of July 30, 1997)
PARAGRAPH 6.8; LIENS. As of the date of the attached financial
statements for the Borrower and its subsidiaries, the amount of
obligations secured by a lien under the last provision of Paragraph 6.8
was $______________.
maximum permitted in any fiscal year: $5,000,000
PARAGRAPH 6.9; CAPITAL EXPENDITURES. As of the date of the attached
financial statements for the Borrower and its subsidiaries, the total
amount expended year to date in fiscal year 1998 to acquire fixed or
capital assets was $_____________.
maximum permitted: $55,000,000
PARAGRAPH 6.11, DIVIDENDS. As of the date of the attached
financial statements for the Borrower and its subsidiaries, the total
amount of treasury stock was $_______________.
maximum permitted $50,000,000
PARAGRAPH 6.12; LOANS TO AFFILIATED COMPANIES. Since the date of
the Business Loan Agreement, the total amount of loans or other
extensions of credit made by the Borrower or any Domestic Subsidiary
(including subsidiaries of the Borrower) to its affiliates was
$___________________;
and the total investments in Foreign Subsidiaries was $___________;
and the total Loans to Dura (Bermuda) Trading
Company, Ltd. was $________________.
maximum permitted: $10,000,000
Investments in Foreign Subsidiaries permitted $90,000,000
Loans to Dura (Bermuda) Trading Company, Ltd.
permitted $190,000,000
PARAGRAPH 6.21 (h); ASSET ACQUISITIONS. Since the date of the
Business Loan Agreement, the total amount of asset acquisitions,
including license agreements and product rights, permitted under
Paragraph 6.21 (h) was $__________________.
Maximum permitted in aggregate $100,000,000
Compliance Certificate
Page 5
II PERFORMANCE OF OBLIGATIONS
A review of the activities of Borrower during the fiscal period
covered by this Certificate has been made under the supervision of the
undersigned with a view to determining whether during such fiscal period
Borrower performed and observed all of its obligations. The best
knowledge of the undersigned, during the fiscal period covered by this
Certificate, all covenants and conditions have been so performed and
observed by Borrower and no Event of Default or event which with notice
or lapse of time or both would be an Event of Default has occurred based
on the activities of Borrower and is continuing, with any exceptions set
forth below, in response to which Borrower has taken or propose to take
the following actions (if none, so state). Without limiting the
foregoing, the Borrower has no Significant Subsidiaries except those that
have executed and delivered to Bank a guaranty as required under
paragraph 6.6 of the Business Loan Agreement.
III. COMPLIANCE WITH INDENTURE
To the best knowledge of the undersigned, no event or circumstance has
occurred that constitutes violation of the Indenture Agreement, as
evidenced by the attached copy of the most recent Indenture compliance
certificate .
IV. NO MATERIAL ADVERSE CHANGE
To the best knowledge of the undersigned, no event or circumstance
has occurred that constitutes a Material Adverse Effect regarding
Borrower under Paragraph 8.7 of the Business Loan Agreement since the
date the most recent Certificate was executed and delivered, with any
exceptions being set forth below (if none, so state):
This Certificate is executed on _________, 19___, by a responsible
officer of Borrower. the undersigned hereby certify that each and every
matter contained herein is derived from Borrower's books and records and
is, to the best knowledge of the undersigned, true and correct.
Dated: ____________, 19___
Dura Pharmaceuticals, Inc.
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By: