<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1997
REGISTRATION NO. 333-38753
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
KING PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TENNESSEE 2834 54-1684963
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
501 FIFTH STREET, BRISTOL, TENNESSEE 37620, (423) 989-8000
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
JOHN M. GREGORY
KING PHARMACEUTICALS, INC.
501 FIFTH STREET
BRISTOL, TENNESSEE 37620
(423) 989-8001
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------------
COPIES TO:
<TABLE>
<C> <C> <C>
LINDA M. CROUCH, ESQ. JOHN A. A. BELLAMY, ESQ. DAVID J. BEVERIDGE, ESQ.
BAKER, DONELSON, BEARMAN & KING PHARMACEUTICALS, INC. SHEARMAN & STERLING
CALDWELL 501 FIFTH STREET 599 LEXINGTON AVENUE
2000 FIRST TENNESSEE BUILDING BRISTOL, TENNESSEE 37620 NEW YORK, NEW YORK 10022
165 MADISON AVENUE (423) 989-8010 (212) 848-4000
MEMPHIS, TENNESSEE 38103
(901) 577-2262
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 4 is being filed solely for the purpose of amending
Items 13 and 16 of Part II of the Registration Statement (Registration No.
333-38753) and the filing of certain additional exhibits. This Amendment No. 4
does not contain a copy of the Prospectus included in the Registration
Statement, which is unchanged from Amendment No. 3 filed on December 8, 1997.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 58,501
NASD Filing Fee............................................. 18,440
Nasdaq National Market Listing Fee.......................... 1,000
Transfer Agent's Fee........................................ 15,000
Blue Sky Fees and Expenses.................................. 10,000
Printing and Engraving...................................... 125,000
Accounting Fees and Expenses................................ 175,000
Legal Fees and Expenses..................................... 150,000
Advisor Fees................................................ 1,121,800
Miscellaneous............................................... 150,259
----------
Total....................................................... $1,825,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Tennessee Code Annotated Sections 48-18-501 through 48-18-509 authorize a
corporation to provide for the indemnification of officers, directors, employees
and agents in terms sufficiently broad to permit indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended. The Company has adopted
the provisions of the Tennessee statute pursuant to Paragraph 9 of its Amended
and Restated Charter. Also, the Company will have upon consummation of the
offering a "Directors' and Officers' Liability Insurance Policy" which provides
coverage sufficiently broad to permit indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information reflects sales by the Company of unregistered
securities within the past three years. Share amounts and designations have been
adjusted for the stock split effected October 1997. The issuance by the Company
of the securities sold in the transactions referenced below were not registered
under the Securities Act of 1933, pursuant to the exemption contemplated in
Section 4(2) thereof, for transactions not involving a public offering. The
consideration paid to the Company in respect of each issuance was cash, unless
otherwise indicated.
In November 1994, an aggregate of 7,448,000 shares of the Company's Common
Stock was issued to Randall J. Kirk, Jefferson J. Gregory, C.B.B., L.L.C., A.
Willard Lester, John M. Gregory and Joseph R. Gregory in exchange for 76,000
shares of General Injectables and Vaccines, Inc. These securities were issued
pursuant to the exemption available under Section 4(2) of the Securities Act of
1933 (the "1933 Act").
In October 1995, an aggregate of approximately 1.1 million shares of the
Company's Common Stock was issued to John M. Gregory in exchange for 40,000
shares of the Company's Preferred Stock originally purchased for $800,000.00.
These securities were issued pursuant to the exemption available under Section
4(2) of the 1933 Act.
From January through October 1996, an aggregate of approximately 727,000
shares of the Company's Common Stock was issued to approximately 200 employees
of the Company under the Company's Employee Stock Purchase Plan. All such shares
were issued for $1.07 cash per share. These securities were issued pursuant to
the exemption available under Section 4(2) of the 1933 Act.
II-1
<PAGE> 4
In December 1996, the Company issued an additional approximately 2,500,000
shares of its Common Stock pursuant to a 15.0% stock dividend. These securities
were issued pursuant to the exemption available under Section 4(2) of the 1933
Act.
In October 1996, certain members of management and other existing
shareholders purchased approximately 3.9 million shares of the Company's Common
Stock for a purchase price of $1.07 per share. These securities were issued
pursuant to the exemption available under Section 4(2) of the 1933 Act.
In March 1997, 8,532,594 shares of the Company's Common Stock were issued
to The United Company in exchange for $8,750,000 in cash ($1.03 per share).
These securities were issued pursuant to the exemption available under Section
4(2) of the 1933 Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
*1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Charter of King Pharmaceuticals, Inc.
3.1(a) -- Second Amended and Restated Charter of King Pharmaceuticals,
Inc.
3.2 -- Bylaws of King Pharmaceuticals, Inc., as amended.
3.2(a) -- Amended and Restated Bylaws of King Pharmaceuticals, Inc.
4.1 -- Specimen Common Stock Certificate.
4.2 -- Form of Rights Agreement by and between King
Pharmaceuticals, Inc. and Union Planters National Bank.
*5.1 -- Opinion of Baker, Donelson, Bearman & Caldwell, P.C.
10.1 -- Promissory Note between RSR Acquisition Corporation
(predecessor to King Pharmaceuticals, Inc.) and RSR
Laboratories, Inc., dated December 28, 1993, in the amount
of $3,500,000.
10.2 -- Promissory Note between King Pharmaceuticals, Inc., and
General Injectables and Vaccines, Inc., dated October 6,
1994, in the amount of $4,700,000.
10.3 -- Loan Agreement between King Pharmaceuticals, Inc., and First
Tennessee Bank National Association, dated April 30, 1996;
associated Master Note in the amount of $3,500,000;
associated Promissory Note in the amount of $2,500,000.
10.4 -- Promissory Note between Monarch Pharmaceuticals, Inc. and
Roberts Laboratories, Inc., dated October 2, 1996, in the
amount of $5,500,000.
10.5 -- Loan Agreement by and among Monarch Pharmaceuticals, Inc.,
King Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated January 21, 1997; associated
Promissory Note in the amount of $1,750,000.
10.6 -- Loan Agreement by and among Monarch Pharmaceuticals, Inc.,
King Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated January 29, 1997; associated
Promissory Note in the amount of $1,750,000.
10.7 -- Promissory Note between King Pharmaceuticals, Inc., and
Signet Bank in the amount of $1,500,000, dated March 19,
1997.
10.8 -- Promissory Note between King Pharmaceuticals, Inc., and The
United Company, dated March 17, 1997, in the amount of
$1,750,000.
10.9 -- Loan Agreement by and among Monarch Pharmaceuticals, Inc.,
King Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated March 20, 1997; associated
Promissory Note in the amount of $5,000,000.
10.10 -- Loan and Security Agreement by and between King
Pharmaceuticals, Inc. and First American National Bank,
dated August 21; associated Revolving Credit Note in the
principal amount of $2,975,000; and associated Term
Promissory Note in the principal amount of $1,025,000.
10.11 -- Loan Agreement by and among King Pharmaceuticals, Inc.,
Monarch Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated September 10, 1997; associated
Promissory Note in the amount of $8,500,000.
</TABLE>
II-2
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.12 -- Asset Purchase Agreement by and among King Pharmaceuticals,
Inc., King Pharmaceuticals of Nevada, Inc. and Mallinckrodt
Chemical, Inc. for the disposition of the Anexsia Product
Line, dated December 13, 1995.
*10.12(a) -- Toll Manufacturing Agreement for APAP/Hydrocodone Bitartrate
Tablets by and between Mallinckrodt Chemical, Inc. and King
Pharmaceuticals, Inc.
10.13 -- Agreement between King Pharmaceuticals, Inc. and Ernest C.
Bourne dated July 30, 1997.
10.14 -- 1997 Incentive and Nonqualified Stock Option Plan for
Employees of King Pharmaceuticals, Inc.
*10.15 -- $52,000,000 Credit Agreement among King Pharmaceuticals,
Inc. and General Electric Capital Corporation, as Agent, for
certain Lenders dated November 26, 1997.
11.1 -- Statement regarding Computation of Per Share Earnings.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Baker, Donelson, Bearman & Caldwell, P.C.
(included as Exhibit 5.1).
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Price Waterhouse LLP.
24.1 -- Powers of Attorney (included on the signature page of this
Registration Statement).
27.1 -- Financial Data Schedule (for SEC use only).
27.2 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ------------------------------
* Filed herewith.
(b) Financial Statement Schedules -- Not applicable
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant for expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(iii) It will provide to the underwriters at the closing(s) specified
in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-3
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Bristol, State of Tennessee on December 9, 1997.
KING PHARMACEUTICALS, INC.
By: /s/ JOHN M. GREGORY
------------------------------------
John M. Gregory
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN M. GREGORY Chairman of the Board and December 9, 1997
- ----------------------------------------------------- Chief Executive Officer
John M. Gregory (principal executive
officer)
/s/ BRIAN G. SHRADER Chief Financial Officer December 9, 1997
- ----------------------------------------------------- (principal financial and
Brian G. Shrader accounting officer)
* Director December 9, 1997
- -----------------------------------------------------
Joseph R. Gregory
* Director December 9, 1997
- -----------------------------------------------------
Jefferson J. Gregory
* Director December 9, 1997
- -----------------------------------------------------
Ernest C. Bourne
* Director December 9, 1997
- -----------------------------------------------------
Lois A. Clarke
* Director December 9, 1997
- -----------------------------------------------------
D. Greg Rooker
* Director December 9, 1997
- -----------------------------------------------------
Ted G. Wood
Director
- -----------------------------------------------------
Frank W. De Friece, Jr.
* /s/JOHN M. GREGORY
---------------------------------------------------
As Attorney-in-Fact
</TABLE>
II-4
<PAGE> 7
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
*1.1 -- Form of Underwriting Agreement
3.1 -- Amended and Restated Charter of King Pharmaceuticals, Inc.
3.1(a) -- Second Amended and Restated Charter of King Pharmaceuticals,
Inc.
3.2 -- Bylaws of King Pharmaceuticals, Inc., as amended.
3.2(a) -- Amended and Restated Bylaws of King Pharmaceuticals, Inc.
4.1 -- Specimen Common Stock Certificate.
4.2 -- Form of Rights Agreement by and between King
Pharmaceuticals, Inc. and Union Planters National Bank.
*5.1 -- Opinion of Baker, Donelson, Bearman & Caldwell, P.C.
10.1 -- Promissory Note between RSR Acquisition Corporation
(predecessor to King Pharmaceuticals, Inc.) and RSR
Laboratories, Inc., dated December 28, 1993, in the amount
of $3,500,000.
10.2 -- Promissory Note between King Pharmaceuticals, Inc., and
General Injectables and Vaccines, Inc., dated October 6,
1994, in the amount of $4,700,000.
10.3 -- Loan Agreement between King Pharmaceuticals, Inc., and First
Tennessee Bank National Association, dated April 30, 1996;
associated Master Note in the amount of $3,500,000;
associated Promissory Note in the amount of $2,500,000.
10.4 -- Promissory Note between Monarch Pharmaceuticals, Inc. and
Roberts Laboratories, Inc., dated October 2, 1996, in the
amount of $5,500,000.
10.5 -- Loan Agreement by and among Monarch Pharmaceuticals, Inc.,
King Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated January 21, 1997; associated
Promissory Note in the amount of $1,750,000.
10.6 -- Loan Agreement by and among Monarch Pharmaceuticals, Inc.,
King Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated January 29, 1997; associated
Promissory Note in the amount of $1,750,000.
10.7 -- Promissory Note between King Pharmaceuticals, Inc., and
Signet Bank in the amount of $1,500,000, dated March 19,
1997.
10.8 -- Promissory Note between King Pharmaceuticals, Inc., and The
United Company, dated March 17, 1997, in the amount of
$1,750,000.
10.9 -- Loan Agreement by and among Monarch Pharmaceuticals, Inc.,
King Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated March 20, 1997; associated
Promissory Note in the amount of $5,000,000.
10.10 -- Loan and Security Agreement by and between King
Pharmaceuticals, Inc. and First American National Bank,
dated August 21; associated Revolving Credit Note in the
principal amount of $2,975,000; and associated Term
Promissory Note in the principal amount of $1,025,000.
10.11 -- Loan Agreement by and among King Pharmaceuticals, Inc.,
Monarch Pharmaceuticals, Inc., and First Tennessee Bank
National Association, dated September 10, 1997; associated
Promissory Note in the amount of $8,500,000.
10.12 -- Asset Purchase Agreement by and among King Pharmaceuticals,
Inc., King Pharmaceuticals of Nevada, Inc. and Mallinckrodt
Chemical, Inc. for the disposition of the Anexsia Product
Line, dated December 13, 1995.
*10.12(a) -- Toll Manufacturing Agreement for APAP/Hydrocodone Bitartrate
Tablets by and between Mallinckrodt Chemical, Inc. and King
Pharmaceuticals, Inc.
10.13 -- Agreement between King Pharmaceuticals, Inc. and Ernest C.
Bourne dated July 30, 1997.
10.14 -- 1997 Incentive and Nonqualified Stock Option Plan for
Employees of King Pharmaceuticals, Inc.
*10.15 -- $52,000,000 Credit Agreement among King Pharmaceuticals,
Inc. and General Electric Capital Corporation, as Agent, for
certain Lenders dated November 26, 1997.
11.1 -- Statement regarding Computation of Per Share Earnings
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Baker, Donelson, Bearman & Caldwell, P.C.
(included as Exhibit 5.1)
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Price Waterhouse LLP.
24.1 -- Powers of Attorney (included on the signature page of this
Registration Statement).
27.1 -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ------------------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 1.1
8,919,000 Shares
KING PHARMACEUTICALS, INC.
Common Stock
FORM OF UNDERWRITING AGREEMENT
December __, 1997
LEHMAN BROTHERS INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
HAMBRECHT & QUIST LLC
As Representatives of the several
Underwriters named in Schedule I,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
King Pharmaceuticals, Inc., a Tennessee corporation (the "Company"),
proposes to issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") 6,000,000 shares of the Company's common stock, no par value
per share (the "Common Stock"), and the shareholders named in Schedule II and
Schedule III hereto (the "Selling Shareholders") propose to sell severally to
the Underwriters an aggregate of 2,919,000 shares of Common Stock (together
with the 6,000,000 shares of Common Stock to be issued and sold by the Company,
the "Firm Shares"). In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, the Company
proposes to grant to the Underwriters an option to purchase up to 1,000,000
additional shares of Common Stock on the terms and for the purposes set forth
in Section 3 herein. The shares of Common Stock for which the Company has
granted the Underwriters an option to purchase are referred to herein as the
"Option Shares." The Firm Shares and any Option Shares purchased pursuant to
this Underwriting Agreement are hereinafter collectively called
<PAGE> 2
2
the "Shares." This is to confirm the agreement concerning the purchase of the
Shares from the Company and the Selling Shareholders by the Underwriters.
1. Representations, Warranties and Agreements of the Company. The Company
represents and warrants to, and agrees that:
(a) A registration statement on Form S-1 (File No. 333-38753) and
amendments thereto with respect to the Shares (i) have been prepared by
the Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, (ii) have been filed with the Commission
under the Securities Act and (iii) become effective under the Securities
Act. Copies of such registration statement and any amendments thereto
have been delivered by the Company to you as the representatives (the
"Representatives") of the Underwriters. As used in this Agreement,
"Effective Time" means the date and the time as of which such
registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Preliminary Prospectus"
means each prospectus included in such registration statement, or
amendments thereof, before it became effective under the Securities Act
and any prospectus filed with the Commission by the Company with the
consent of the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration statement
as amended at the Effective Time, including all information contained in
the final prospectus filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations in accordance with Section 6(a) hereof and
deemed to be a part of the registration statement as of the Effective
Time pursuant to paragraph (b) of Rule 430A of the Rules and Regulations;
and "Prospectus" means such final prospectus as first filed with the
Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules
and Regulations. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. "Rule 462(b)
Registration Statement" means a registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations related to the offering covered
by the Registration Statement.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations and do
not and will not, as of the applicable effective date (as to the
Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or
omit to state a material fact required to be stated
<PAGE> 3
3
therein or necessary to make the statements therein not misleading;
provided that no representation or warranty is made as to information
contained in or omitted from the Registration Statement or the Prospectus
in reliance upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein, which information is
comprised solely of the information set forth in Section 10(f) hereof.
(c) The Company and each of its subsidiaries (defined in Section 17)
have been duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good standing
as foreign corporations, in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification, and in which the failure to so
qualify would, in the aggregate, result in a material adverse effect on
the stockholders' equity, assets, liabilities, business, results of
operations, condition (financial or otherwise), cash flows, affairs or
prospects of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"), and have all power and authority necessary
(corporate and other) to own or hold their respective properties and to
conduct the businesses in which they are engaged. The Company has no
subsidiaries other than as identified on Annex A hereto.
(d) The Company has an authorized capitalization as set forth in the
Prospectus and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued and are fully paid, non-assessable and are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims.
(e) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and non-assessable and conform to the
description thereof contained in the Prospectus in the section entitled
"Description of Capital Stock."
(f) This Agreement has been duly authorized, executed and delivered
by the Company.
(g) The execution, delivery and performance of this Agreement by the
Company, the issuance and sale of the Shares (the "Offering") and the
other transactions contemplated hereby will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any
<PAGE> 4
4
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or any of its
subsidiaries is subject, which conflicts, breaches, violations or
defaults would have, individually or in the aggregate, a Material Adverse
Effect, nor will such actions result in any violation of the provisions
of the articles of incorporation or by-laws or other organizational
documents of the Company or any of its subsidiaries or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or assets; and except for the registration of
the Shares under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
the Securities Exchange Act of 1934 (the "Exchange Act") and applicable
state securities laws in connection with the purchase and distribution of
the Shares by the Underwriters, no consent, approval, authorization or
order of, or filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and performance of
this Agreement by the Company and the consummation of the Offering and
the other transactions contemplated hereby.
(h) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company or any of its subsidiaries owned
or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(i) Except as described in the Registration Statement or Prospectus,
the Company has not sold or issued any shares of Common Stock during the
six month period preceding the date of the Prospectus, including any
sales pursuant to Rule 144A under, or Regulations D or S of, the
Securities Act, other than shares issued under employee benefit plans,
qualified stock options plans or other employee compensation plans or
pursuant to outstanding options, rights or warrants. There is no
commitment, plan or arrangement to issue, and no outstanding option,
warrant or other right calling for the issuance of, any share of capital
stock of the Company or of any subsidiary or any security or other
instrument that by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company.
(j) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or
<PAGE> 5
5
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus nor has the Company incurred or undertaken
any liability or obligation, direct or contingent, that is material to
the Company except for liabilities or obligations (i) incurred or
undertaken in the ordinary course of business or (ii) described in the
Registration Statement; and, since such date, there has not been any
change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, consolidated financial condition,
shareholders' equity, results of operations or prospects of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus.
(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby, at
the dates and for the periods indicated, and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved. The pro forma
financial statements and other pro forma financial information filed as
part of the Registration Statement or included in the Prospectus present
fairly the information shown therein, have been prepared in accordance
with the Commissions rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma bases
described therein and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(l) Coopers & Lybrand L.L.P., who have certified certain financial
statements of the Company, certain financial information for the product
line Cortisporin, including related products, and certain financial
information for the additional branded product lines acquired from Glaxo
Wellcome, Inc. (the "Glaxo Lines") on November 14, 1997, whose reports
appear in the Registration Statement and the Prospectus and who have
delivered the initial letters referred to in Section 9(i)(A) hereof, are
independent certified public accountants as required by the Securities
Act and the Rules and Regulations; and Price Waterhouse, who have
certified certain financial information for the additional branded
product lines, manufacturing facility and contracts for manufacturing
products for third parties to be acquired from Warner-Lambert Company
pursuant to a Letter of Intent entered into on October 31, 1997 (the
"Warner Lines"), and who have delivered the initial letters referred to
in Section 9(i)(B) hereof, are independent certified public accountants
as required by the Securities Act and the Rules and Regulations.
<PAGE> 6
6
(m) The Company and each of its subsidiaries has good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case free and clear of all
liens, encumbrances, security interests, claims and defects, except such
as are described in the Prospectus or such as do not materially and
adversely affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by
the Company and each of its subsidiaries; and all real property and
buildings held under lease by the Company and each of its subsidiaries is
held by them under valid, subsisting and enforceable leases, with such
exceptions as would not have a Material Adverse Effect and do not
materially interfere with the use made and proposed to be made of such
property and buildings by the Company and each of its subsidiaries.
(n) The Company and each of its subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and as is customary for
companies engaged in similar businesses in similar industries.
(o) The Company and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights and licenses and other intangible properties
and assets which are both material and necessary for the conduct of their
businesses and have no reason to believe that the conduct of their
businesses will conflict with, and have not received any notice of any
claim of conflict with, any such rights of others, nor, to the best of
the Company's knowledge, is there an infringement by others of such
rights of the Company which could reasonably be expected to have a
Material Adverse Effect.
(p) Except as described in the Registration Statement and the
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property or assets of the Company or any of its subsidiaries is subject
which, if determined adversely to the Company or any of its subsidiaries,
might have a Material Adverse Effect; and to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(q) The Company is in compliance in all material respects with all
applicable rules and regulations of the Food and Drug Administration (the
"FDA"), the Federal Trade Commission (the "FTC"), the Consumer Product
Safety Commission, the United States Department of Agriculture, the Drug
Enforcement Agency (the "DEA"), the United States Environmental
Protection Agency ("EPA") and the Occupational Safety and Health
Administration ("OSHA") and all applicable
<PAGE> 7
7
laws, statutes, ordinances, rules or regulations, the enforcement of
which, individually or in the aggregate, would be reasonably expected to
have a Material Adverse Effect.
(r) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which
have not been described in the Prospectus or filed as exhibits to the
Registration Statement.
(s) No relationship, direct or indirect, exists between or among the
Company, on the one hand, and the directors, officers, shareholders,
customers or suppliers of the Company on the other hand, which is
required to be described in the Prospectus which is not so described.
(t) No labor disturbance by the employees of the Company or any of
its subsidiaries exists or, to the knowledge of the Company, is imminent
which might be expected to have a Material Adverse Effect.
(u) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined
in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has
not incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension
plan" or (ii) Section 412 or 4971 of the Internal Revenue Code of 1986,
as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company
would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(v) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof and
has paid all taxes due thereon, and no tax deficiency has been determined
adversely to the Company or any of its subsidiaries which has had (nor
does the Company have any knowledge of any tax deficiency which, if
determined adversely to the Company or any of its subsidiaries, might
have) a Material Adverse Effect.
(w) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company has not (i) issued securities or
granted options on any securities, (ii) incurred any liabilities or
obligations, direct or contingent, other than liabilities
<PAGE> 8
8
and obligations which were incurred in the ordinary course of
business, (iii) entered into any transaction not in the ordinary course
of business or (iv) declared or paid any dividend on its capital stock.
(x) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only
in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(y) Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws, (ii) except for any defaults or
events that, individually or in the aggregate, would not have a Material
Adverse Effect, in default in any material respect, and no event has
occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which it is a
party or by which it is bound or to which any of its properties or assets
is subject, or (iii) except for any violations or failures to obtain
that, individually or in the aggregate, would not have a Material Adverse
Effect, in violation in any material respect of any law, ordinance,
governmental rule, regulation or court decree to which it or its property
or assets may be subject or has failed to obtain any material license,
permit, certificate, franchise or other governmental authorization or
permit necessary to the ownership of its property or to the conduct of
its business.
(z) Neither the Company nor any of its subsidiaries nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(aa) Neither the Company nor any of its subsidiaries is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940 and the rules and regulations of the Commission
thereunder.
(ab) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of medical wastes,
toxic wastes,
<PAGE> 9
9
hazardous wastes or hazardous substances by the Company or any of
its subsidiaries (or, to the knowledge of the Company, any of their
predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or any of its subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order, judgment, decree
or permit, except for any violation or remedial action which would not
have, or could not be reasonably likely to have, singularly or in the
aggregate with all such violations and remedial actions a Material
Adverse Effect; there has been no material spill, discharge, leak,
emission, injection, escape, dumping or release of any kind onto such
property or of any medical wastes, toxic wastes, hazardous wastes or
hazardous substances due to or caused by the Company or any of its
subsidiaries or with respect to which the Company or any of its
subsidiaries had knowledge, except for any such spill, discharge, leak,
emission, injection, escapes, dumpings and releases which would not have
or would not be reasonably likely to have, singularly or in the aggregate
with all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a Material Adverse Effect; and the terms
"hazardous substances," "toxic wastes," "hazardous wastes" and "medical
wastes" shall have the meanings specified in any applicable local, state,
federal and foreign laws or regulations with respect to environmental
protection.
(ac) Except as described in the Registration Statement and the
Prospectus, (i) there are no outstanding warrants or options issued by
the Company to purchase any shares of the capital stock of the Company,
(ii) there are no statutory, contractual, preemptive or other rights to
subscribe for or to purchase any Common Stock that do not by their terms
terminate upon the First Delivery Date (as defined below), and (iii)
there are no restrictions upon transfer of the Common Stock pursuant to
the Company's articles of incorporation or by-laws.
(ad) The Company has not taken, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of the shares of Common Stock to facilitate the sale or
resale of the Shares.
(ae) The Shares are authorized for quotation on the Nasdaq National
Market and the Common Stock has been approved for listing, subject only
to official notice of issuance and evidence of satisfactory distribution.
(af) The Company and its subsidiaries possess adequate licenses,
franchises, authorizations or permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as currently conducted, and neither the Company nor
any such subsidiary has received any notice
<PAGE> 10
10
of proceedings relating to the revocation or modification of any
such license, franchise, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect, except as described in or
contemplated by the Prospectus.
(ag) The Company has complied and will comply with all of the
provisions of Florida H.B. 1771, codified as Section 517.075 of the
Florida Statutes, and all regulations promulgated thereunder relating to
issuers doing business in Cuba.
2. Representations, Warranties and Agreements of the Selling Shareholders.
Each Selling Shareholder severally and not jointly represents, warrants and
agrees with, each Underwriter:
(a) Each such Selling Shareholder that is an executive officer or
director of the Company as set forth in the Registration Statement has no
reason to believe that the representations and warranties of the Company
contained in Section 1 hereof are not materially true and correct, is
familiar with the Registration Statement and the Prospectus as amended or
supplemented and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement or the Prospectus
or any amendment or supplement thereto, as of the applicable filing date,
which has adversely affected or may adversely affect the business of the
Company and is not prompted to sell shares of Common Stock by any
information concerning the Company which is not set forth in the
Registration Statement and the Prospectus.
(b) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Custody Agreement and the Power
of Attorney referred to below and to perform such Selling Shareholder's
obligations under such agreements; the execution, delivery and
performance of this Agreement, the Custody Agreement and the Power of
Attorney by such Selling Shareholder and the consummation by such Selling
Shareholder of the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, note agreement or other agreement or instrument to which
such Selling Shareholder is a party or by which such Selling Shareholder
is bound or to which any of the property or assets of the Selling
Shareholder is subject, nor will such actions result in any violation of
the provisions of the charter or by-laws of any Selling Shareholder or
any statute, law, rule, regulation, ordinance, judgment, order or decree
of any government, governmental instrumentality or court having
jurisdiction over such Selling Shareholder or the property or assets of
such Selling Shareholder; and no consent, approval, authorization or
order of or declaration or filing with any government, governmental
instrumentality or court is required for the execution, delivery and
performance of this Agreement, the Custody Agreement and the Power
<PAGE> 11
11
of Attorney by such Selling Shareholder and the consummation by such
Selling Shareholder of the transactions contemplated hereby and thereby.
(c) Such Selling Shareholder has, and immediately prior to a
Delivery Date (as defined in Section 5 hereof) such Selling Shareholder
will have, good and valid title to the Shares to be sold by such Selling
Shareholder hereunder on such date, free and clear of all claims, liens,
encumbrances, equities, or security interests, and, upon delivery of such
Shares and payment therefore pursuant hereto, good and valid title to
such Shares free and clear of all claims, liens, encumbrances, equities,
security interests or restrictions on transfer will pass to the
Underwriters.
(d) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted
or which might reasonably be expected to cause or result, under the
Exchange Act or otherwise, in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Shares.
(e) Such Selling Shareholder has placed in custody under a custody
agreement (the "Custody Agreement" and together with all other similar
agreements executed by the other Selling Shareholders, the "Custody
Agreements") with Union Planters National Bank, Memphis, Tennessee as
custodian (the "Custodian") for delivery under this Agreement,
certificates in negotiable form (with signature guaranteed by a
commercial bank or trust company having an office or correspondent in the
United States or a member firm of the New York or American Stock
Exchanges) representing the Shares to be sold by such Selling Shareholder
hereunder.
(f) Such Selling Shareholder has duly and irrevocably executed and
delivered a power of attorney (the "Power of Attorney" and together with
all other similar agreements executed by the other Selling Shareholders,
the "Powers of Attorney"), appointing one or more persons, as
attorneys-in-fact with full power of substitution, and with full
authority (exercisable by any one or more of them) to execute and deliver
this Agreement and to take such action as may be necessary or desirable
to carry out the provisions hereof on behalf of such Selling Shareholder.
(g) Each such Selling Shareholder that is an executive officer or
director of the Company as set forth in the Registration Statement
severally represents, warrants and agrees that the Registration Statement
and the Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus, when they become effective or
are filed with the Commission, as the case may be, do not and will not,
as of the applicable effective date (as to the Registration Statement and
any amendment thereto) and as of the applicable filing date (as to the
Prospectus and any amendment or supplement thereto) contain any untrue
statement of a material fact
<PAGE> 12
12
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that no
representation or warranty is made as to information contained in or
omitted from the Registration Statement or the Prospectus in reliance
upon and in conformity with written information furnished to the Company
through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein; and further, each Selling Shareholder
severally represents, warrants and agrees that the Registration Statement
and the Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus, when they become effective or
are filed with the Commission, as the case may be, do not and will not,
as of the applicable effective date (as to the Registration Statement and
any amendment thereto) and as of the applicable filing date (as to the
Prospectus and any amendment or supplement thereto), with respect to any
information about the Selling Shareholder, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or
the Prospectus in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or on
behalf of any Underwriter specifically for inclusion therein.
3. Purchase of the Shares by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to issue and sell 6,000,000
Firm Shares and each Selling Shareholder hereby agrees to sell the number of
Firm Shares set opposite its/his/her name in Schedule 2 hereto, severally and
not jointly, to the several Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase the number of Firm Shares set
opposite that Underwriter's name in Schedule 1 hereto. Each Underwriter shall
be obligated to purchase from the Company, and from each Selling Shareholder,
that number of Firm Shares which represent the same proportion of the number of
Firm Shares to be sold by the Company, and by each Selling Shareholder, as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule 1 represents of the total number of Firm Shares to be purchased by all
of the Underwriters pursuant to this Agreement. The respective purchase
obligations of the Underwriters with respect to the Firm Shares shall be
rounded among the Underwriters to avoid fractional shares, as the
Representatives may determine.
In addition, the Company grants to the Underwriters an option to purchase
up to 1,000,000 Option Shares. Such option is granted for the purpose of
covering over-allotments in the sale of Firm Shares and is exercisable as
provided in Section 5 hereof. Option Shares shall be purchased severally for
the account of the Underwriters in proportion to the number of Firm Shares set
opposite the name of such Underwriters in Schedule 1 hereto. The respective
purchase obligations of each Underwriter with respect to the Option Shares
shall be adjusted by the Representatives so that no Underwriter shall be
obligated to
<PAGE> 13
13
purchase Option Shares other than in 100 share amounts. The price of both the
Firm Shares and any Option Shares shall be $_____ per share.
The Company and the Selling Shareholders shall not be obligated to deliver
any of the Shares to be delivered on any Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Shares to be
purchased on such Delivery Date as provided herein.
4. Offering of Shares by the Underwriters. Upon authorization by the
Representatives of the release of the Firm Shares, the several Underwriters
propose to offer the Firm Shares for sale upon the terms and conditions set
forth in the Prospectus.
5. Delivery of and Payment for the Shares. Delivery of and payment for
the Firm Shares shall be made at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York 10022 at 10:00 A.M. New York City time, on
the third full business day following the date of this Agreement (or if pricing
of the Firm Shares occurs after 4:30 P.M. New York City time, on the fourth
full business day thereafter) or at such other date or place as shall be
determined by agreement between the Representatives and the Company. This date
and time are sometimes referred to as the "First Delivery Date." On the First
Delivery Date, the Company and the Selling Shareholders shall deliver or cause
to be delivered certificates representing the Firm Shares to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company and the Selling Shareholders of the purchase price by
wire transfer in immediately available funds. Time shall be of the essence,
and delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter hereunder. Upon
delivery, the Firm Shares shall be registered in such names and in such
denominations as the Representatives shall request in writing not less than two
full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the certificates for the Firm Shares,
the Company and the Selling Shareholders shall make the certificates
representing the Firm Shares available for inspection by the Representatives in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the First Delivery Date.
The option granted in Section 3 will expire 30 days after the date of this
Agreement and may be exercised in whole or in part from time to time by written
notice being given to the Company by the Representatives. Such notice shall
set forth the aggregate number of Option Shares as to which the option is being
exercised, the names in which the Option Shares are to be registered, the
denominations in which the Option Shares are to be issued and the date and
time, as determined by the Representatives, when the Option Shares are to be
delivered; provided, however, that this date and time shall not be earlier than
the First Delivery Date, nor earlier than the second business day after the
date on which the
<PAGE> 14
14
option shall have been exercised nor later than the fifth business day after
the date on which the option shall have been exercised. The date and time
the Option Shares are delivered are sometimes referred to as a "Second Delivery
Date" and the First Delivery Date and any Second Delivery Date are sometimes
referred to as a "Delivery Date."
Delivery of and payment for the Option Shares shall be made at the
place specified in the first sentence of the first paragraph of this Section 5
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on such
Second Delivery Date. On such Second Delivery Date, the Company shall deliver
or cause to be delivered the certificates representing the Option Shares to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer in immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Option Shares
shall be registered in such names and in such denominations as the
Representatives shall request in the aforesaid written notice. For the purpose
of expediting the checking and packaging of the certificates for the Option
Shares, the Company shall make the certificates representing the Option Shares
available for inspection by the Representatives in New York, New York, not later
than 2:00 P.M., New York City Time, on the business day prior to such Second
Delivery Date.
6. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than the Commission's close of business on
the second business day following the execution and delivery of this
Agreement or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Securities Act; to make no further amendments or any
supplement to the Registration Statement or to the Prospectus except as
permitted herein; to advise the Representatives, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Representatives with copies thereof; to advise the
Representatives, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus, of
the suspension of the qualification of the Shares for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus
<PAGE> 15
15
or the Prospectus or suspending any such qualification, to use
promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration Statement
as originally filed with the Commission, and each amendment thereto filed
with the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to each of the Representatives such number
of the following documents as the Representatives shall reasonably
request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in each
case excluding exhibits other than this Agreement and the computation of
per share earnings); (ii) each Preliminary Prospectus, the Prospectus and
any amended or supplemented Prospectus; and, if the delivery of a
prospectus is required at any time after the Effective Time in connection
with the offering or sale of the Shares and if at such time any events
shall have occurred as a result of which the Prospectus as then amended
or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
when such Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary to amend or supplement the Prospectus in
order to comply with the Securities Act, to notify the Representatives
and, upon their request, to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended or
supplemented Prospectus which will correct such statement or omission or
effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish a copy
thereof to the Representatives and counsel for the Underwriters and
obtain the consent of the Representatives to the filing;
(f) As soon as practicable after the Effective Date, to deliver to
the Representatives and to make generally available to the Company's
security holders an earnings statement of the Company and its
subsidiaries (which need not be audited)
<PAGE> 16
16
complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal national
securities exchange upon which the Shares may be listed pursuant to
requirements of or agreements with such exchange or to the Commission
pursuant to the Exchange Act or any rule or regulation of the Commission
thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Shares for offering
and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distributions of the Shares;
except that in no event shall the Company be obligated in connection
therewith to qualify as a foreign corporation or execute a general
consent for service of process in any jurisdiction;
(i) For a period of 180 days from the date of the Prospectus, not
to, directly or indirectly, (1) offer for sale, sell, pledge or otherwise
dispose of (or, during such period, enter into any transaction or device
which is designed to, or could be expected to, result in the disposition
by any person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock (other than
the Shares and shares issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding options,
warrants or rights), or sell or grant options, rights or warrants with
respect to any shares of Common Stock or securities convertible into or
exchangeable for Common Stock (other than the grant of options pursuant
to option plans existing on the date hereof), or (2) enter into any swap
or other derivatives transaction that transfers to another, in whole or
in part, any of the economic benefits or risks of ownership of such
shares of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, in each case without the prior written
consent of Lehman Brothers Inc., and to cause each officer and director
of the Company, and each other holder of shares constituting (or shares
convertible into, or options exercisable for) at least three percent
(3.0%) of the outstanding common stock of the Company prior to
consummation of the Offering, to furnish to the Representatives, prior to
the First Delivery Date, a letter or letters, in form and substance
satisfactory to counsel for the Underwriters, pursuant to which each such
person shall agree not to, directly or indirectly, (1) offer for sale,
sell,
<PAGE> 17
17
pledge or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of
Common Stock or securities convertible into or exchangeable for Common
Stock or (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits
or risks of ownership of such shares of Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, in
each case for a period of 180 days from the date of the Prospectus,
without the prior written consent of Lehman Brothers Inc;
(j) To apply the net proceeds from the sale of the Shares being sold
by the Company as set forth in the Prospectus;
(k) To take such steps as shall be necessary to ensure that neither
the Company nor any of its subsidiaries shall become an "investment
company" within the meaning of such term under the Investment Company Act
of 1940 and the rules and regulations of the Commission thereunder;
(l) Prior to the Effective Date, to apply for the inclusion of the
Shares on the Nasdaq National Market and use its best efforts to complete
that listing, subject only to official notice of issuance, prior to the
First Delivery Date; and
(m) To comply with all registration, filings and reporting
requirements of the Exchange Act, which may from time to time be
applicable to the Company and to comply with all provisions of all
undertakings contained in the Registration Statement.
7. Further Agreements of the Selling Shareholders. Each Selling
Shareholder agrees:
(a) For a period of 180 days from the date of the Prospectus, not
to, directly or indirectly, (1) offer for sale, sell, pledge or otherwise
dispose of (or enter into any transaction or device which is designed to,
or could be expected to, result in the disposition by any person at any
time in the future of) any shares of Common Stock or securities
convertible into or exchangeable for Common Stock (other than the Stock)
or (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits
or risks of ownership of such shares of Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, in
each case without the prior written consent of Lehman Brothers Inc.
(b) That the Shares to be sold by the Selling Shareholder hereunder
which are represented by the certificates held in custody for the Selling
Shareholder, are
<PAGE> 18
18
subject to the interest of the Underwriters hereunder, that the
arrangements made by the Selling Shareholder for such custody are to that
extent irrevocable, and that the obligations of the Selling Shareholder
hereunder shall not be terminated by any act of the Selling Shareholder,
by operation of law, by the death or incapacity of any individual Selling
Shareholder or the occurrence of any other event; and
(c) To deliver to the Representatives prior to the First Delivery
Date a properly completed and executed United States Treasury Department
Form W-8 (if the Selling Shareholder is a non-United States person) or
Form W-9 (if the Selling Shareholder is a United States person).
8. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Shares and any taxes payable
in that connection; (b) the costs incident to the preparation, printing and
filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus,
all as provided in this Agreement; (d) the costs of producing and distributing
this Agreement and the Agreement Among Underwriters and any other related
documents in connection with the offering, purchase, sale and delivery of the
Shares; (e) the costs of delivering and distributing the Custody Agreements and
the Powers of Attorney; (f) the filing fees incident to securing any required
review by the National Association of Securities Dealers, Inc. of the terms of
sale of the Shares; (g) any applicable listing or other fees; (h) the fees and
expenses of qualifying the Shares under the securities laws of the several
jurisdictions as provided in Section 6(h) and of preparing, printing and
distributing a Blue Sky Memorandum (including related expenses and reasonable
fees of counsel to the Underwriters); and (i) all other costs and expenses
incident to the performance of the obligations of the Company and the Selling
Shareholders under this Agreement; provided that, except as provided in this
Section 8 and in Section 13, the Underwriters shall pay their own costs and
expenses, including the costs and expenses of their counsel, any transfer taxes
on the Common Stock which they may sell and the expenses of advertising any
offering of the Shares made by the Underwriters, and the Selling Shareholders
shall pay the fees and expenses of their respective counsel, the Custodian and
any attorney-in-fact, and any transfer taxes payable in connection with its
sale of Shares to the Underwriters.
9. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
and the Selling Shareholders contained herein, to the performance by the Company
and the Selling Shareholders of their respective obligations hereunder, and to
the following additional terms and conditions:
<PAGE> 19
19
(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 6(a); no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied with.
(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that the Registration Statement
or the Prospectus or any amendment or supplement thereto contains an
untrue statement of fact which, in the opinion of Shearman & Sterling,
counsel for the Underwriters, is material, or omits to state a fact
which, in the opinion of the Representatives, or in the opinion of
counsel to the Underwriters, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Custody
Agreements, the Powers of Attorney, the Shares, the Registration
Statement and the Prospectus, and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be
satisfactory in all respects to counsel for the Underwriters, and the
Company and the Selling Shareholders shall have furnished to such counsel
all documents and information that they may reasonably request to enable
them to pass upon such matters.
(d) Baker, Donelson, Bearman & Caldwell shall have furnished to the
Representatives its written opinion, as counsel to the Company, addressed
to the Underwriters and dated such Delivery Date, in form and substance
satisfactory to the Representatives, to the effect that:
(i) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which
their respective ownership or lease of property or the conduct of
their respective businesses requires such qualification, except to
the extent the failure to so qualify or be in good standing would
not have a Material Adverse Effect, and have all power and
authority necessary (corporate or other) to own or hold their
respective properties and to conduct the businesses in which they
are engaged;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus and all of the issued shares of capital stock of
the Company
<PAGE> 20
20
(including the shares of capital stock being offered on such
Delivery Date in connection with the Offering) have been duly and
validly authorized and issued, are fully paid and non-assessable
and conform to the description thereof contained in the Prospectus;
all of the issued shares of capital stock of its subsidiaries have
been duly and validly authorized and issued and are fully paid,
non-assessable and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims;
(iii) There are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of,
any Shares pursuant to the Company's articles of incorporation or
by-laws or any agreement or other instrument known to such counsel;
(iv) To the best knowledge of such counsel, there are no legal
or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property or assets of
the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect;
and, to the best knowledge of such counsel, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(v) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such
opinion, the Prospectus was filed with the Commission pursuant to
the subparagraph of Rule 424(b) of the Rules and Regulations
specified in such opinion on the date specified therein and, to the
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose is pending or threatened by the
Commission;
(vi) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior
to such Delivery Date (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations;
(vii) To the best knowledge of such counsel, there are no
contracts or other documents to which the Company or any of its
subsidiaries is a party which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by
the Securities Act or by the Rules and Regulations which have not
been described or filed as exhibits to the Registration
<PAGE> 21
21
Statement as required by the Rules and Regulations; and all
descriptions in the Prospectus of contracts and other documents are
accurate in all material respects and fairly present the
information purported to be shown;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company;
(ix) The execution, delivery and performance of this Agreement
by the Company, the issuance and sale of the Shares being delivered
on such Delivery Date by the Company and the other transactions
contemplated hereby do not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or by-laws or other
organizational documents of the Company or any of its subsidiaries
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their respective properties or
assets; and, except for the registration of the Shares under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Exchange Act and applicable state or foreign securities laws in
connection with the purchase and distribution of the Shares by the
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency
or body is required for the execution, delivery and performance of
this Agreement and the consummation of the other transactions
contemplated hereby;
(x) To the best knowledge of such counsel, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to
include any securities of the Company or any of its subsidiaries
owned or to be owned by such person in the securities registered
pursuant to the Registration Statement or granting such person the
right to file a registration statement under the Securities Act
with respect to such securities;
(xi) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property owned by them,
in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not
materially affect the value of
<PAGE> 22
22
such property and not materially interfere with the use made
and proposed to be made of such property by the Company and its
subsidiaries; and all real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries;
(xii) Neither the Company nor any of its subsidiaries is an
"investment company" within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the
Commission thereunder;
(xiii) The statements in the Registration Statement and the
Prospectus under the captions "Risk Factors--Certain Charter,
By-Laws and Statutory Provisions; Rights Agreement," "Management,"
"Certain Transactions," "Description of Capital Stock" "Shares
Eligible for Future Sale," and "Certain United States Federal Tax
considerations for Non-U.S. Holders of Common Stock" insofar as such
statements describe statutes, regulations, legal or governmental
proceedings, contracts or other documents referred to therein are
accurate and fairly summarize the information called for with
respect to such documents and matters and, insofar as such
statements constitute matters of law or legal conclusions, have been
reviewed by such counsel and fairly present the information
disclosed therein in all material respects;
(xiv) The Common Stock is duly authorized for listing on the
Nasdaq National Market, subject only to official notice of
issuance;
(xv) No consent or waiver of any party to any contract,
agreement, instrument, lease or license to which the Company is a
party, or to which any of its properties or assets are subject, is
required for the execution, delivery, or performance of this
Agreement, or the sale or delivery of the Stock;
(xvi) To the best knowledge of such counsel, there are no
statutes or regulations that are required to be described in the
Prospectus that are not described as required; and
(xvii) The form of certificate used to evidence the Common
Stock complies in all material respects with all applicable
statutory requirements, with any applicable requirements of the
charter and bylaws of the Company and the requirements of the
Nasdaq National Market.
<PAGE> 23
23
In rendering such opinion, such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the federal law of the
United States of America, the laws of the State of New York and the
General Corporation Law of the State of Tennessee, upon opinions of other
counsel, who shall be counsel satisfactory to counsel for the
Underwriters, in which case the opinion shall state that they believe you
and they are entitled to so rely. Such counsel may also state that it is
relying, in respect of matters of fact, upon certificates of officers of
the Company and its subsidiaries, provided that such counsel shall state
that it believes that both the Underwriters and it are justified in
relying upon such certificates. Such counsel shall also have furnished
to the Representatives a written statement, addressed to the Underwriters
and dated such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted as counsel
to the Company in connection with the preparation of the Registration
Statement, and is familiar with the documents incorporated by reference
in the Prospectus as of the Delivery Date, and (y) based on the
foregoing, no facts have come to the attention of such counsel which lead
it to believe that the Registration Statement, as of the Effective Date,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, that the Prospectus contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading or that the documents incorporated by reference in
the Prospectus (except for the financial statements, as to which such
counsel needs express no opinion), as of the dates they were filed with
the Commission, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) Baker, Donelson, Bearman & Caldwell shall have furnished to the
Representatives its written opinion, as counsel to the Selling
Shareholders named in Schedule II hereto, for whom it is acting as
counsel, addressed to the Underwriters and dated the First Delivery Date,
in form and substance satisfactory to the Representatives, to the effect
that:
(i) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of each such
Selling Shareholder and each of such Selling Shareholders has duly
authorized, executed and delivered such Selling Shareholder's
respective power of attorney;
(ii) Each Attorney-in-Fact has been duly authorized by each
such Selling Shareholder to deliver the Shares to be sold by such
Selling
<PAGE> 24
24
Shareholder on behalf of such Selling Shareholder in
accordance with the terms of this Agreement;
(iii) Immediately prior to the Delivery Date, to the knowledge
of such counsel after due inquiry of corporate or partnership books
and records, review of certificates representing the Shares to be
sold by such Selling Shareholder and all prior ownership interests
and review of all representations, warranties by and certificates
from such Selling Shareholders, each Selling Shareholder had good
and valid title to the Shares to be sold by such Selling
Shareholder hereunder on such date, free and clear of all claims,
liens, encumbrances, equities, or security interests and had full
right, power and authority to sell, transfer and deliver such
Shares pursuant to this Agreement;
(iv) Good and valid title to the Shares to be sold by each
Selling Shareholder under this Agreement, free and clear of all
claims, liens, encumbrances, equities or claims, has been
transferred to each of the several Underwriters, assuming that such
Underwriters have purchased such shares in good faith and without
notice of any such claim, lien, encumbrance, equities security
interests or restrictions on transfer or any other adverse claim
within the meaning of the Uniform Commercial Code; and
(v) Each Selling Shareholder has all necessary power and
authority to execute and deliver this Agreement, the Power of
Attorney and the Custody Agreement and to perform its obligations
under such agreements; all corporate action required to be taken by
such Selling Shareholder for the due and proper sale and delivery
of the Shares to be sold by the Selling Shareholder has been duly
and validly taken; the execution, delivery and performance of this
Agreement, the Power of Attorney and the Custody Agreement by the
Selling Shareholder and the consummation by the Selling Shareholder
of the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute,
any material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument known to such counsel to
which the Selling Shareholder is a party or by which the Selling
Shareholder is bound or to which any of the property or assets of
the Selling Shareholder is subject, nor will such actions result in
any violation of the charter or by-laws of the Selling Shareholder
or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Selling Shareholder or the property or assets
of the Selling Shareholder; and, except for the registration of the
Shares under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state
<PAGE> 25
25
or foreign securities laws in connection with the purchase and
distribution of the Shares by the Underwriters, no consent,
approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement, the
Power of Attorney or the Custody Agreement by the Selling
Shareholder and the consummation by the Selling Shareholder of the
transactions contemplated hereby and thereby.
In rendering such opinion, such counsel (i) may rely, as to all
matters governed by the laws of jurisdictions other than the federal law
of the United States of America, the laws of the State of New York and
the General Corporation Law of the State of Tennessee, upon opinions of
other counsel, who shall be counsel satisfactory to counsel for the
Underwriters, in which case the opinion shall state that they believe you
and they are entitled to so rely, and (ii) in rendering the opinion in
Section 9(e) above, rely upon a certificate of each Selling Shareholder
in respect of matters of fact as to ownership of and liens, encumbrances,
equities or claims on the shares of Common Stock sold by such Selling
Shareholder, provided that such counsel shall furnish copies thereof to
the Representatives and state that it believes that both the Underwriters
and it are justified in relying upon such certificate. On each Delivery
Date, such counsel shall also have furnished to the Representatives a
written statement, addressed to the Underwriters and dated such Delivery
Date, in form and substance satisfactory to the Representatives, to the
effect that (x) such counsel has acted as counsel to each Selling
Shareholder in connection with the preparation of the Registration
Statement, and (y) based on the foregoing, no facts have come to the
attention of such counsel which lead it to believe that the Registration
Statement, as of the Effective Date, contained any untrue statement of a
material fact relating to any Selling Shareholder or omitted to state
such a material fact required to be stated therein or necessary in order
to make the statements therein not misleading, or that the Prospectus
contains any untrue statement of a material fact relating to any Selling
Shareholder or omits to state such a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) Boult, Cummings, Conners & Berry, PLC shall have furnished to
the Representatives its written opinion, as counsel to the Selling
Shareholders named in Schedule III hereto for whom it is acting as
counsel, addressed to the Underwriters and dated the First Delivery Date,
in form and substance satisfactory to the Representatives, to the effect
that:
(i) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of each such
Selling Shareholder and each of such Selling Shareholders has duly
authorized,
<PAGE> 26
26
executed and delivered such Selling Shareholder's respective
power of attorney;
(ii) Each Attorney-in-Fact has been duly authorized by each
such Selling Shareholder to deliver the Shares to be sold by such
Selling Shareholder on behalf of such Selling Shareholder in
accordance with the terms of this Agreement;
(iii) Immediately prior to the Delivery Date, to the knowledge
of such counsel after due inquiry of corporate or partnership books
and records, review of certificates representing the Shares to be
sold by such Selling Shareholder and all prior ownership interests
and review of all representations, warranties by and certificates
from such Selling Shareholders, each Selling Shareholder had good
and valid title to the Shares to be sold by such Selling
Shareholder hereunder on such date, free and clear of all claims,
liens, encumbrances, equities, or security interests and had full
right, power and authority to sell, transfer and deliver such
Shares pursuant to this Agreement;
(iv) To the best knowledge of such counsel, good and valid
title to the Shares to be sold by each Selling Shareholder under
this Agreement, free and clear of all claims, liens, encumbrances,
equities or claims, has been transferred to each of the several
Underwriters, assuming that such Underwriters have purchased such
shares in good faith and without notice of any such claim, lien,
encumbrance, equities security interests or restrictions on
transfer or any other adverse claim within the meaning of the
Uniform Commercial Code; and
(v) To the best knowledge of such counsel, each Selling
Shareholder has all necessary power and authority to execute and
deliver this Agreement, the Power of Attorney and the Custody
Agreement and to perform its obligations under such agreements; all
corporate action required to be taken by such Selling Shareholder
for the due and proper sale and delivery of the Shares to be sold
by the Selling Shareholder has been duly and validly taken; the
execution, delivery and performance of this Agreement, the Power of
Attorney and the Custody Agreement by the Selling Shareholder and
the consummation by the Selling Shareholder of the transactions
contemplated hereby and thereby will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, any material indenture,
mortgage, deed of trust, loan agreement or other material agreement
or instrument known to such counsel to which the Selling
Shareholder is a party or by which the Selling Shareholder is bound
or to which any of the property or assets of the Selling
Shareholder is subject, nor will such actions
<PAGE> 27
27
result in any violation of the charter or by-laws of the
Selling Shareholder or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the Selling Shareholder or the property or
assets of the Selling Shareholder; and, except for the registration
of the Shares under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may
be required under the Exchange Act and applicable state or foreign
securities laws in connection with the purchase and distribution of
the Shares by the Underwriters, no consent, approval, authorization
or order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery
and performance of this Agreement, the Power of Attorney or the
Custody Agreement by the Selling Shareholder and the consummation
by the Selling Shareholder of the transactions contemplated hereby
and thereby.
In rendering such opinion, such counsel (i) may rely, as to all
matters governed by the laws of jurisdictions other than the federal law
of the United States of America, the laws of the State of New York (the
laws of which such counsel is allowed to assume, for purposes of such
opinion, are identical to the laws of the State of Tennessee) and the
General Corporation Law of the State of Tennessee, upon opinions of other
counsel, who shall be counsel satisfactory to counsel for the
Underwriters, in which case the opinion shall state that they believe you
and they are entitled to so rely, and (ii) in rendering the opinion in
Section 9(e) above, rely upon a certificate of each Selling Shareholder
in respect of matters of fact as to ownership of and liens, encumbrances,
equities or claims on the shares of Common Stock sold by such Selling
Shareholder, provided that such counsel shall furnish copies thereof to
the Representatives and state that it believes that both the Underwriters
and it are justified in relying upon such certificate. On each Delivery
Date, such counsel shall also have furnished to the Representatives a
written statement, addressed to the Underwriters and dated such Delivery
Date, in form and substance satisfactory to the Representatives, to the
effect that (x) such counsel has acted as counsel to each Selling
Shareholder in connection with the preparation of the Registration
Statement, and (y) based on the foregoing, no facts have come to the
attention of such counsel which lead it to believe that the Registration
Statement, as of the Effective Date, contained any untrue statement of a
material fact relating to any Selling Shareholder or omitted to state
such a material fact required to be stated therein or necessary in order
to make the statements therein not misleading, or that the Prospectus
contains any untrue statement of a material fact relating to any Selling
Shareholder or omits to state such a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
<PAGE> 28
28
(g) McKenna & Cuneo, L.L.P. shall have furnished to the
Representatives its written opinion, as special regulatory counsel to the
Company, addressed to the Underwriters and dated such Delivery Date, in
form and substance satisfactory to the Representatives to the effect
that:
(i) The statements and descriptions made in the Prospectus
under the captions "Risk Factors--Government Regulation" and
"Business--Government Regulation" to the extent that they
constitute matters of law or legal conclusions, have been reviewed
by us and fairly present the information required to be disclosed
therein in all material respects and nothing has come to our
attention which leads us to believe that (A) the information set
forth in the Registration Statement, or any amendment thereto,
under the captions referred to above as of the time the Registration
Statement became effective under the Securities Act, and as of the
Delivery Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (B) the
information set forth in the Prospectus, or in any supplement
thereto, under the captions referred to above as of its issue date
and as of such Delivery Date, contained an untrue statement of a
material fact or omitted to state a material fact, necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(ii) The execution and delivery of the Underwriting Agreement
and the consummation of the transactions contemplated in the
Underwriting Agreement do not and will not conflict with, or result
in a breach of any of the terms or provisions of, or constitute
default under, or result in the creation of a lien, charge or
encumbrance upon any property or assets of the Company or any of
its subsidiaries under any existing applicable federal or state
law, rule or regulation governing the sale or distribution of
pharmaceutical products of the pharmaceutical industry generally or
the relationship between pharmacists and customers.
(iii) Such counsel does not know of any federal or state law,
rules or regulations governing the sale or distribution of
pharmaceutical products or the pharmaceutical industry generally or
the relationship between pharmacists and customers, or any pending
or threatened legal or governmental proceedings in respect of such
statutes, rules or regulations, required to be described in the
Prospectus that are not described as required.
(iv) The descriptions in the Prospectus of the federal and
state laws, rules or regulations governing the sale or distribution
of pharmaceutical products or the pharmaceutical industry
generally, and the legal or
<PAGE> 29
29
governmental proceedings in respect of such laws, rules or
regulations, fairly summarize the information required to be shown.
(v) Such counsel has no reason to believe that the Company's
current business is not being conducted in material compliance with
currently applicable requirements under the Federal Food, Drug and
Cosmetic Act or that the U.S. Food and Drug Administration is
currently considering taking action that would result in withdrawal
from marketing of any of the Company's currently marketed products.
In giving its opinion, such counsel may state that (1) such
counsel's opinion is limited to matters governed by the applicable
regulations described above, and (2) such counsel has not conducted an
audit of the Company. The foregoing opinion may be qualified by
statements to the effect that (1) while such counsel has had
conversations with the Company's employees and the Company's regulatory
advisors and reviewed certain relevant documents as such counsel deems
necessary and appropriate, such counsel has not verified the accuracy or
validity of the facts set forth in the Prospectus, and (2) in such
counsel's examinations, such counsel has assumed the genuineness of all
signatures, the authenticity of all documents submitted to such counsel
as originals and the conformity with the originals of all documents
submitted to such counsel as copies.
(h) Roberts & Brownell, LLC shall have furnished to the
Representatives its written opinion, as special patent counsel for the
Company, addressed to the Underwriters (and stating that it may be relied
upon by counsel to the Underwriters) and dated such Delivery Date to the
effect that:
(i) The statements and descriptions made in the Prospectus
under the caption "Business--Patents, Trademarks and Proprietary
Property" to the extent that they constitute matters of law or
legal conclusions, have been reviewed by us and fairly present the
information required to be disclosed therein in all material
respects and nothing has come to our attention which leads us to
believe that (A) the information set forth in the Registration
Statement, or any amendment thereto, under the caption referred to
above as of the time the Registration Statement became effective
under the Securities Act, and as of the Delivery Date, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading and (B) the information set forth
in the Prospectus, or in any supplement thereto, under the caption
referred to above as of its issue date and as of such Delivery
Date, contained an untrue statement of a material fact or omitted
to state a material
<PAGE> 30
30
fact, necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(ii) Such counsel has no knowledge of any pending or
threatened legal or governmental proceeding relating to patents or
proprietary know-how owned or used by the Company or any of its
subsidiaries, to which the Company or any of its subsidiaries is a
party or to which any of the properties of the Company or any of
its subsidiaries is subject, except as disclosed in the
Registration Statement, which, if adversely decided, would have a
material adverse effect on the business, financial condition or
results of operations of the Company or any of its subsidiaries,
taken as a whole.
(iii) Such counsel has no knowledge of any infringement or
alleged infringement by the Company or any of its subsidiaries of
issued patent rights of others, except as disclosed in the
Registration Statement, which would have a material adverse effect
on the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole.
(i) You shall have received from Shearman & Sterling, counsel for
the Underwriters, such opinions dated such Delivery Date, with respect to
the Registration Statement, the Prospectus and other related matters as
you reasonably may request, and such counsel shall have received such
papers and information as they reasonably request to enable them to pass
upon such matters. In giving such opinions, Shearman & Sterling is
entitled to rely on the opinion of Baker, Donelson, Bearman & Caldwell,
counsel to the Company.
(j) (A) With respect to the letters of Coopers & Lybrand L.L.P.
delivered to the Representatives concurrently with the execution of this
Agreement (the "initial letters"), the Company shall have furnished to
the Representatives letters (the "bring-down letters") of such
accountants, addressed to the Underwriters and dated such Delivery Date
(i) confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01
of Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letters (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five
days prior to the date of the bring-down letters), the conclusions and
findings of such firms with respect to the financial information and
other matters covered by the initial letters and (iii) confirming in all
material respects the conclusions and findings set forth in the initial
letters; (B) with respect to the letters of Price Waterhouse delivered to
the Representatives concurrently with the execution of this Agreement
(the "initial letters"), the Company shall have furnished
<PAGE> 31
31
to the Representatives letters (the "bring-down letters") of such
accountants, addressed to the Underwriters and dated such Delivery Date
(i) confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01
of Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letters (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five
days prior to the date of the bring-down letters), the conclusions and
findings of such firms with respect to the financial information and
other matters covered by the initial letters and (iii) confirming in all
material respects the conclusions and findings set forth in the initial
letters.
(k) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of the Company signed by its
President and Chief Executive Officer or a Vice President and its Chief
Financial Officer stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery Date;
the Company has complied with all its agreements contained herein;
and the conditions set forth in Sections 9(a), 9(n), 9(o) and 9(p)
have been fulfilled;
(ii) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial
statements included in the Prospectus, any change in the capital
stock or long-term debt of the Company or any of its subsidiaries
or any change, in or affecting the general affairs, management,
business, financial condition, shareholders' equity or results of
operations of the Company and its subsidiaries taken as a whole,
except as set forth or contemplated in the Prospectus; and
(iii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective
Date, the Registration Statement and Prospectus did not include any
untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and (B) since the Effective
Date no event has occurred which should have been set forth in a
supplement or amendment to the Registration Statement or the
Prospectus.
(l) Each Selling Shareholder (or one or more attorneys-in-fact on
behalf of the Selling Shareholders) shall have furnished to the
Representatives a certificate, dated the Delivery Date, signed by, or on
behalf of, the Selling Shareholder (or one or more attorneys-in-fact)
stating that the representations, warranties and agreements
<PAGE> 32
32
of the Selling Shareholder contained herein are timely and correct
as of the Delivery Date and that the Selling Shareholder has complied
with all agreements contained herein to be performed by the Selling
Shareholder at or prior to the Delivery Date.
(m) Neither the Company nor any of its subsidiaries shall have
sustained, since the date of the latest audited financial statements
included in the Prospectus, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus; and since such date, there shall not have been any change in
the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, business,
financial condition, shareholders' equity, results of operations or
prospects of the Company and its subsidiaries taken as a whole, except as
set forth or contemplated in the Prospectus, the effect of which, in the
reasonable judgment of the Representatives, is so material and adverse as
to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered on such Delivery
Date on the terms and in the manner contemplated in the Prospectus.
(n) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or minimum prices
shall have been established on either of such exchanges or such market by
the Commission by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium
shall have been declared by Federal or state authorities, (iii) the
United States shall have become engaged in hostilities, there shall have
been an escalation in hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the
United States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United
States shall be such) as to make it, in the judgment of a majority in
interest of the several Underwriters, impracticable or inadvisable to
proceed with the public offering or delivery of the Shares being
delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(o) The Nasdaq National Market shall have approved the Shares for
listing, subject only to official notice of issuance and evidence of
satisfactory distribution.
(p) The Representatives shall have received Lock-up Letters from each
holder of shares constituting (or shares convertible into, or options
exercisable for) at
<PAGE> 33
33
least 3.0 percent of the Common Stock of the Company and each
officer and director of the Company.
(q) The National Association of Securities Dealers, Inc., upon
review of the terms of the underwriting arrangements for the public
offering of the Common Stock, shall have raised no objection thereto.
(r) Prior to any Delivery Date, the Company shall have furnished to
the Representatives such other information, certificates and documents as
they may reasonable request.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to
counsel for the Underwriters.
10. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Underwriter, its
officers and employees and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Shares), to which that Underwriter, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement, the Prospectus or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto any material fact required to be stated therein or necessary to make
the statements therein not misleading, or (iii) any act or failure to act or
any alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Common Stock or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon matters covered by
clause (i) or (ii) above (provided that the Company shall not be liable under
this clause (iii) to the extent that it is determined in a final judgment by a
court of competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or willful
misconduct) and shall reimburse each Underwriter and each such officer,
employee or controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that Underwriter, officer, employee or
controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however,
<PAGE> 34
34
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any such amendment or supplement in reliance upon and in
conformity with written information concerning such Underwriter furnished to
the Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein, which information is comprised solely of
the information set forth in Section 10(e) hereof. The foregoing indemnity
agreement is in addition to any liability which the Company may otherwise have
to any Underwriter or to any officer, employee or controlling person of that
Underwriter.
(b) The Selling Shareholders, severally in proportion to the number of
Shares to be sold by each of them hereunder, shall indemnify and hold harmless
each Underwriter, its officers and employees and each person, if any, who
controls any Underwriter within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action
in respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Shares), to which that
Underwriter, officer, employee or controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage, liability
or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus,
the Registration Statement or the Prospectus or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, Registration Statement or the Prospectus or in any amendment or
supplement thereto any material fact required to be stated therein or necessary
to make the statements therein not misleading, but in each case for each
Selling Shareholder that is not an executive officer or director of the Company
as set forth in the Registration Statement, only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information concerning such
Selling Shareholder furnished to the Company specifically for inclusion
therein, and shall reimburse each Underwriter, its officers and employees and
each such controlling person for any legal or other expenses reasonably
incurred by that Underwriter, its officers and employees or controlling person
in connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Selling Shareholders shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or in any such amendment or
supplement in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for inclusion
therein, which information is comprised solely of the information set forth in
Section 10(e) hereof; and provided further, that the aggregate liability shall
be limited to the
<PAGE> 35
35
gross proceeds received by such Selling Shareholder. The foregoing indemnity
agreement is in addition to any liability which the Selling Shareholders may
otherwise have to any Underwriter or any officer, employee or controlling
person of that Underwriter.
(c) Each Underwriter, severally and not jointly, shall indemnify and hold
harmless the Company, its officers and employees, each of its directors and
each person, if any, who controls the Company within the meaning of the
Securities Act and the Selling Shareholders, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company, any such director, officer or controlling person or any
Selling Shareholder may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto any
material fact required to be stated therein or necessary to make the statements
therein not misleading but in each case only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information concerning such
Underwriter furnished to the Company through the Representatives by or on
behalf of that Underwriter specifically for inclusion therein, and shall
reimburse the Company, any such director, officer or controlling person and
any Selling Shareholder for any legal or other expenses reasonably incurred by
the Company, any such director, officer or controlling person or any Selling
Shareholder in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Company or any such
director, officer, employee or controlling person.
(d) Promptly after receipt by an indemnified party under this Section 10
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 10, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have under this Section 10 except to the extent it has been materially
prejudiced by such failure, and provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 10. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any
other similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such
<PAGE> 36
36
claim or action, the indemnifying party shall not be liable to the indemnified
party under this Section 10 for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof other
than any reasonable costs of investigation; provided, however, that the
Representatives shall have the right to employ counsel to represent jointly the
Representatives and those other Underwriters and their respective officers,
employees and controlling persons who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by the Underwriters
against the Company or any Selling Shareholder under this Section 10, if in the
reasonable judgment of the Representatives, it is advisable for the
Representatives and those Underwriters, officers, employees and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Company and the
Selling Shareholders. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the indemnifying party or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(e) If the indemnification provided for in this Section 10 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 10(a), 10(b) or 10(c) in respect of any loss, claim, damage or
liability or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and each of the Selling Shareholders on the one hand
and the Underwriters on the other from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
each of the Selling Shareholders on the one hand and the Underwriters on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relative equitable considerations. The relative benefits received by the
Company and each of the Selling Shareholders on the one hand and the
Underwriters on the other with respect to such offering shall be deemed to be
in the same proportion as the total net proceeds from the offering of
<PAGE> 37
37
the Shares purchased under this Agreement (before deducting expenses) received
by the Company and each of the Selling Shareholders, on the one hand, and the
total underwriting discounts and commissions received by the Underwriters with
respect to the Shares purchased under this Agreement, on the other, bear to the
total gross proceeds from the offering of the Shares under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, each
of the Selling Shareholders or the Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company, each of the Selling
Shareholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 10(e) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability or
action in respect thereof, referred to above in this Section 10(e) shall be
deemed to include, for purposes of this Section 10(e), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 10(e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 10(e) are several in proportion to their respective
underwriting obligations and not joint.
(f) The Underwriters severally confirm and the Company acknowledges that
the statements with respect to the public offering of Common Stock by the
Underwriters set forth on the cover page of, the legend concerning
over-allotments on the inside front cover page of, and the concession and
reallowance figures appearing under the caption "Underwriting" in, the
Prospectus are correct and constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
11. Defaulting Underwriters. If, on either Delivery Date, any Underwriter
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the Shares
which the defaulting Underwriter agreed but failed to purchase on such Delivery
Date in the respective proportions which the number of shares of the Firm
Shares set opposite the name of the
<PAGE> 38
38
remaining non-defaulting Underwriters in Schedule I hereto bears to the total
number of the Firm Shares set opposite the names of all remaining
non-defaulting Underwriters in Schedule I hereto; provided, however, that the
remaining non-defaulting Underwriters shall not be obligated to purchase any of
the Shares on such Delivery Date if the total number of Shares which the
defaulting Underwriter agreed but failed to purchase on such date exceeds 9.09%
of the total number of Shares to be purchased on such Delivery Date, and any
remaining non-defaulting Underwriters shall not be obligated, to purchase more
than 110% of the number of Shares which it agreed to purchase on such Delivery
Date pursuant to the terms of Section 3. If the foregoing maximums are
exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representatives who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all Shares to be purchased on such Delivery Date. If
the remaining Underwriters, or other underwriters satisfactory to the
Representatives, do not elect to purchase the shares which the defaulting
Underwriter agreed but failed to purchase on such Delivery Date, this Agreement
(or, with respect to any Second Delivery Date, the obligation of the
Underwriters to purchase, and of the Company to sell, the Option Shares) shall
terminate without liability on the part of any non-defaulting Underwriters or
the Company or the Selling Shareholders, except that the Company will continue
to be liable for the payment of expenses to the extent set forth in Sections 8
and 13. As used in this Agreement, the term "Underwriter" includes, for all
purposes of this Agreement unless the context requires otherwise, any party not
listed in Schedule I hereto who, pursuant to this Section 10, purchases Firm
Shares which a defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company and the Selling Shareholders, for damages
caused by its default. If other underwriters are obligated to agree to
purchase the Shares of a defaulting or withdrawing Underwriter, either the
Representatives or the Company may postpone the First Delivery Date for up to
seven full business days in order to effect any changes that in the opinion of
counsel for the Company or counsel for the Underwriters may be necessary in the
Registration Statement, the Prospectus or in any other document or arrangement.
12. Termination. The obligations of the Underwriters hereunder may be
terminated by the Representatives by notice given to and received by the
Company and the Selling Shareholders prior to delivery of and payment for the
Firm Shares if, prior to that time, any of the events described in Sections
9(l) or 9(m) shall have occurred or if the Underwriters shall decline to
purchase the Shares for any reason permitted under this Agreement.
13. Reimbursement of Underwriters' Expenses. If the Company or any
Selling Shareholder shall fail to tender the Shares for delivery to the
Underwriters by reason of any failure, refusal or inability on the part of the
Company or any Selling Shareholder to
<PAGE> 39
39
perform any agreement on its part to be performed or because any other
condition of the Underwriters' obligations hereunder required to be fulfilled
by the Company or the Selling Shareholder is not fulfilled, the Company and the
Selling Shareholders will reimburse the Underwriters for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
incurred by the Underwriters in connection with this Agreement and the proposed
purchase of the Shares, and upon demand the Company and the Selling
Shareholders shall pay the full amount thereof to the Representatives. If this
Agreement is terminated pursuant to Section 11 by reason of the default of one
or more Underwriters, neither the Company nor any Selling Shareholder shall be
obligated to reimburse any defaulting Underwriter on account of those expenses.
14. Notices, Etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, 200 Vesey Street, New York, New York 10285, Attention:
Syndicate Department (Fax: (212) 528-8822), with a copy, in the case of
any notice pursuant to Section 10(d) to the Director of Litigation,
Office of the General Counsel, Lehman Brothers Inc., 3 World Financial
Center, 10th Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: John Gregory, Chairman (Fax: (423)
989-8006), with a copy to Linda M. Crouch, Baker, Donelson, Bearman &
Caldwell, 165 Madison Avenue, 1st Tennessee Building, 20th Floor,
Memphis, Tennessee 38103 (Fax: (901) 577-2303);
(c) if to any Selling Shareholder, shall be delivered or sent by
mail, telex or facsimile transmission to such Selling Shareholder at the
address set forth on Schedule II or Schedule III hereto and in the case
of any Selling Shareholder listed on Schedule III hereto, with a copy to
Samuel D. Lipshie, Boult, Cummings, Conners & Berry, PLC, 414 Union
Street, Suite 1600, P.O. Box 198062, Nashville, Tennessee 37219 (Fax:
(615) 252-6332);
provided, however, that any notice to an Underwriter pursuant to Section 10(d)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by
the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and
the Selling Shareholders shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Underwriters by
Lehman Brothers Inc. and the
<PAGE> 40
40
Company and the Underwriters shall be entitled to act and rely upon any
request, consent, notice or agreement given or made on behalf of the Selling
Shareholders by the Custodian.
15. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the Underwriters, the Company and the
Selling Shareholders and their respective personal representatives and
successors. This Agreement and the terms and provisions hereof are for the
sole benefit of only those persons, except that (A) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Underwriter within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Underwriters contained in
Section 10(c) of this Agreement shall be deemed to be for the benefit of
directors of the Company, officers of the Company who have signed the
Registration Statement any person controlling the Company within the meaning of
Section 15 of the Securities Act and the Selling Shareholders. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 15, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
16. Survival. The respective indemnities, representations, warranties and
agreements of the Company, the Selling Shareholders and the Underwriters
contained in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Shares and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.
17. Definition of the Terms "Business Day" and "Subsidiary." For purposes
of this Agreement (a) "business day" means any day on which the New York Stock
Exchange, Inc. is open for trading, (b) "subsidiary" has the meaning set forth
in Rule 405 of the Rules and Regulations.
18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF NEW YORK.
19. Consent to Jurisdiction. Each of the parties hereto consents to the
jurisdiction of and venue in federal and state courts located in the Borough of
Manhattan, City and State of New York, over any suit, action or proceeding with
respect to this Agreement.
20. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
<PAGE> 41
41
21. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE> 42
42
If the foregoing correctly sets forth the agreement between the Company
and the Underwriters, please indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
KING PHARMACEUTICALS, INC.
By
-------------------------------
SELLING SHAREHOLDERS
By
-------------------------------
As Attorney-in-Fact for the
Shareholders named in
Schedule II hereto
SELLING SHAREHOLDERS
By
-------------------------------
As Attorney-in-Fact for the
Shareholders named in
Schedule III hereto
Accepted:
LEHMAN BROTHERS INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
HAMBRECHT & QUIST LLC
as Representatives of the several
Underwriters named in Schedule I hereto
By LEHMAN BROTHERS INC.
By
-----------------------------
Authorized Representative
<PAGE> 43
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Underwriters Firm Shares
- ------------ -----------
<S> <C>
Lehman Brothers Inc...............................
Credit Suisse First Boston Corporation............
Hambrecht & Quist LLC.............................
----------
Total 8,919,000
==========
</TABLE>
<PAGE> 44
SCHEDULE II
<TABLE>
<CAPTION>
Names and Addresses Number of Number of
of Selling Shareholders Firm Shares Option Shares
- ------------------------------------ ----------- -------------
<S> <C> <C>
John M. and Joan P Gregory 220,137 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
The Lazarus Foundation, Inc. 75,000(1) 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Joseph R. Gregory 60,000 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Jefferson J. Gregory 50,000 0
and Terri D. White-Gregory
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
James E. and April M. Gregory 42,000 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
R. Henry Richards, M.D. 35,000 0
and Jean R. Richards
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Brian G. Shrader 65,000 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
King Pharmaceuticals Benevolent Fund, Inc. 175,000 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
Names and Addresses Number of Number of
of Selling Shareholders Firm Shares Option Shares
- ------------------------------------ ----------- -------------
<S> <C> <C>
Mary Ann and Herschel P. Blessing 90,000 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Mary and Fred Jarvis 29,000 0
c/o King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
A. Willard Lester 362,000 0
c/o General Injectables & Vaccines, Inc.
Route 21 and U.S. Hwy 52 South
Terrace Hill
Bastian, Virginia 24314
Peggy H. Sutphin 357,000 0
c/o General Injectables & Vaccines, Inc.
Route 21 and U.S. Hwy 52 South
Terrace Hill
Bastian, Virginia 24314
--------- ------
TOTAL 1,560,137 0
========= ======
</TABLE>
- ----------------
(1) The Lazarus Foundation, Inc. is a private foundation controlled by
Mr John Gregory.
<PAGE> 46
SCHEDULE III
<TABLE>
<CAPTION>
Names and Addresses Number of Number of
of Selling Shareholders Firm Shares Option Shares
- ------------------------------------ ------------ ------------
<S> <C> <C>
Randal J. Kirk
7335 Lee Highway
Radford, Virginia 24141 824,270 0
Carol Kirk
6654 Hickman Cemetery Road
Radford, Virginia 24141 748(1) 0
Joseph L. Kirk
6654 Hickman Cemetery Road
Radford, Virginia 24141 3,220(1) 0
Julian Kirk
7335 Lee Highway
Radford, Virginia 24141 5,474(1) 0
Kirkfield, L.L.C.
7335 Lee Highway
Radford, Virginia 24141 161,000(1) 0
Rahn Labs
7335 Lee Highway
Radford, Virginia 24141 42,151(1) 0
RJK, L.L.C
7335 Lee Highway
Radford, Virginia 24141 322,000(1) 0
---------- ------
TOTAL 1,358,863 0
========== ======
</TABLE>
- ----------------------------
(1) These shares are held by affiliates of Mr. Kirk (together with Mr. Kirk,
"Randal J. Kirk and affiliates").
<PAGE> 47
ANNEX A
Subsidiaries of the Company
Monarch Pharmaceuticals, Inc., a Tennessee corporation
King Pharmaceuticals of Nevada, Inc., a Nevada corporation
<PAGE> 1
EXHIBIT 5.1
BAKER DONELSON, BEARMAN & CALDWELL,
A PROFESSIONAL CORPORATION
2000 FIRST TENNESSEE BUILDING
MEMPHIS, TENNESSEE 38103
December 5, 1997
Board of Directors
King Pharmaceuticals, Inc.
501 Fifth Street
Re: Registration Statement on Form S-1
Dear Board of Directors:
We have acted as counsel to King Pharmaceuticals, Inc., a Tennessee
corporation (the "Company"), in connection with the registration of 8,919,000
shares of Common Stock (the "Common Stock") of the Company. The Company has
filed a Registration Statement on Form S-1 pursuant to the Securities Act of
1933, as amended (the "Registration Statement").
We have acted as counsel for the Company in connection with the
proposed transaction and have assisted with the preparation of the Registration
Statement and various corporate documents related thereto. We have examined and
relied upon the following documents and instruments for the purpose of giving
this opinion, which, to our knowledge and in our judgment, are all of the
documents and instruments that are necessary for us to examine for such purpose:
1. The Registration Statement, the prospectus filed therewith (the
"Prospectus") and all exhibits thereto;
2. A copy of the Company's Charter certified by the Tennessee
Secretary of State;
3. A copy of the Company's Bylaws certified by the Secretary of the
Company;
4. The minute book of the Company; and
<PAGE> 2
Board of Directors
December 5, 1997
Page 2
5. The stock records of the Company.
In giving our opinion, we have assumed without investigation the
authenticity of any document or instrument submitted to us as an original, the
conformity to the authentic original of any document or instrument submitted to
us as a certified, conformed or photostatic copy and the genuineness of all
signatures on such originals or copies.
Based upon the foregoing and having regard for such legal
considerations as we deem relevant, we are of the opinion that (i) the Company
is a corporation duly incorporated and validly existing under the laws of the
State of Tennessee and (ii) the Common Stock, when issued in accordance with the
Registration Statement, will be validly issued, fully paid and nonassessable.
Our opinion is subject to the following qualifications and limitations:
i. The opinions expressed herein are subject to the effect of
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights and equitable principles limiting the
availability of equitable remedies on the enforceability of contracts,
agreements and instruments.
ii. Members of our firm are qualified to practice law in the State of
Tennessee and nothing contained herein shall be deemed to be an opinion as to
any law, rule or regulation other than the law of the State of Tennessee and the
federal law of the United States.
iii. The opinions set forth herein are expressed as of the date hereof
and, except during the time prior to the effectiveness of the Registration
Statement filed with the Securities and Exchange Commission, we disclaim any
undertaking to advise you of any changes which may subsequently be brought to
our attention in the facts and the law upon which such opinions are based.
This opinion is intended to be used as an exhibit to the Registration
Statement filed with the Securities and Exchange Commission. Except for such
use, neither this opinion nor copies hereof may be relied upon by, delivered to,
or quoted in whole or in part without our prior written consent.
We consent to the reference of our firm name under the caption LEGAL
MATTERS in the Prospectus and to the use of our opinion as an exhibit to the
Registration Statement. In giving these consents, we do not admit that we come
within the category of persons whose consent is
<PAGE> 3
Board of Directors
December 5, 1997
Page 3
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
Baker, Donelson, Bearman &
Caldwell, a Professional
Corporation
By: Linda M. Crouch
<PAGE> 1
EXHIBIT 10.12a
TOLL MANUFACTURING AGREEMENT
FOR
APAP/HYDROCODONE BITARTRATE TABLETS
This Toll Manufacturing Agreement for APAP/Hydrocodone Bitartrate
Tablets ("Manufacturing Agreement") is made and entered into on and as of
December 13, 1995, by and between Mallinckrodt Chemical, Inc. ("Mallinckrodt"),
and King Pharmaceuticals, Inc. ("King").
WHEREAS, contemporaneously herewith, Mallinckrodt, King and King
Pharmaceuticals of Nevada, Inc. ("King-Nevada") have entered into an Asset
Purchase Agreement ("Asset Purchase Agreement") pursuant to which Mallinckrodt
is purchasing from King-Nevada, among other things and on the terms and
conditions stated therein, the Current Products and the Future Products, which
represent various dosage strengths of APAP/hydrocodone bitartrate tablets;
WHEREAS, Mallinckrodt and King recognize that it will require some
substantial period of time before all applicable regulatory requirements are met
allowing Mallinckrodt to commence the manufacture of commercial dosage
formulations represented by the Current Products or the Future Products (when
available) at Mallinckrodt's facilities or a facility designated by Mallinckrodt
and, in any event., Mallinckrodt is currently not capable of undertaking such
manufacture;
WHEREAS, King and Mallinckrodt therefore wish to provide for continued
production by King of the Current Products from and after the date hereof, and
the Future Products at such time as commercial production becomes possible,
until such time as it becomes possible for Mallinckrodt to commence manufacture
of dosage formulations elsewhere;
WHEREAS, both Mallinckrodt and King understand that the performance of
manufacturing services by King for an extended period of time is essential for
Mallinckrodt to realize the benefit of its bargain under the terms of the Asset
Purchase Agreement and, therefore, Mallinckrodt will be relying on King's
performance of such services on a continuing basis;
1
<PAGE> 2
WHEREAS, Mallinckrodt is willing to provide King, at no cost to King,
with the necessary quantities of APAP and hydrocodone bitartrate (hereinafter
jointly referred to as "Key Materials") to allow King to toll process the dosage
formulations represented by the Current Products and Future Products for the
benefit of Mallinckrodt;
WHEREAS, Mallinckrodt and King are willing to proceed with the toll
manufacturing of the dosage formulations represented by the Current Products and
Future Products (when available) on such terms and conditions as are set forth
herein; and
WHEREAS, any capitalized terms or any other terms specifically defined
in the Asset Purchase Agreement used herein shall have the meaning ascribed to
them in the Asset Purchase Agreement, unless otherwise expressly set forth
herein.
NOW, THEREFORE, in consideration of the premises, covenants and
representations of the parties set forth herein, and other good and sufficient
consideration receipt of which is hereby acknowledged, King and Mallinckrodt
agree as follows:
1. MANUFACTURING SERVICES.
(a) In consideration of the promises and undertakings of
Mallinckrodt set forth in the Asset Purchase
Agreement, and for the consideration provided herein
and in accordance with all terms, conditions,
representations and warranties set forth herein, for
the term hereof, and subject to Mallinckrodt's
purchase of required minimum volumes pursuant to the
provisions of Section 6 hereof, King will manufacture
Mallinckrodt's requirements for all tablet dosage
formulations that may be produced in accordance with
the right and authority for production granted
pursuant to any ANDAs (or supplements thereto)
concerning the Current Products or the Future
Products. All manufacturing by King in accordance
herewith shall take place at Kings Bristol Facility
or at such other facility owned or leased by King as
the parties may agree and as the FDA may approve. In
addition, all manufacturing by King hereunder shall
be done strictly in accordance with cGMP using the
manufacturing process described in the appropriate
ANDAs (or supplements thereto) concerning the Current
2
<PAGE> 3
Products and Future Products, as appropriate. At all
times during the term hereof, King will take all
actions necessary to ensure that it utilizes its
available Drug Enforcement Administration ("DEA")
manufacturing quota in such a manner as to guarantee
that Mallinckrodt will receive its full requirements
for APAP/hydrocodone bitartrate tablets hereunder and
will further take all actions available to it to
ensure that its manufacturing quota is consistently
maintained at a level that is adequate for the
performance of its obligations hereunder under any
reasonably possible set of circumstances that may
affect such performance. King will immediately, but
in no event more than five (5) days after receipt
thereof, provide Mallinckrodt with a copy of any
communication it receives from the DEA relative
to its quota for hydrocodone bitartrate or relating
in any manner whatsoever to its performance or its
ability to perform hereunder. During the existence of
this Manufacturing Agreement, King will provide
Mallinckrodt with a monthly report of its hydrocodone
bitartrate usage and availability, which report shall
be substantially in form attached hereto as Schedule
1(a).
(b) The precise dosage forms to be manufactured by King
relative to the Current Products and the agreed upon
specifications for each (including, without
limitation, specifications for all components and raw
materials, whether active or inactive, in addition to
finished product specifications) are described on
Exhibit A attached hereto. As commercial production
becomes available with respect to each of the Future
Products, the specifications for each of the dosage
forms to be produced with respect thereto will be
attached to this Manufacturing Agreement as part of
Exhibit A. There will be no changes made to the
specifications set forth on Exhibit A except with the
mutual written agreement of the parties; provided
that, King will immediately implement any changes in
product specifications requested by Mallinckrodt if
any such changes are permissible under the provisions
of the appropriate ANDA or supplement thereto, as
appropriate. In the event any change in product
specifications requested by Mallinckrodt would cause
King to incur additional direct manufacturing cost in
production hereunder, King shall notify
3
<PAGE> 4
Mallinckrodt writing, within ten (10) days after the
date of any requested specification change by
Mallinckrodt of the reason for and nature of any such
increased cost (as well as the timing anticipated for
any specification change) and if Mallinckrodt agrees
to pay such additional cost, King shall begin
implementation of any such requested specification
change at a time agreed upon by the parties; provided
that, it is understood that King shall not be
required to make any such specification change if
Mallinckrodt is unwilling to pay the cost therefor.
Notwithstanding the foregoing, the parties
acknowledge that it is possible that changes in
applicable laws, rules or regulations or actions of
the FDA, the DEA or any other regulatory agency may
require changes to be made in the agreed upon product
specifications. Should such an eventuality occur,
King will immediately notify Mallinckrodt in writing
of the nature of and reason for any such potential
specification changes and, subject to approval by
Mallinckrodt (which shall not unreasonably be
withheld), such changes will be implemented by King
as and when required (but not earlier than required)
and (i) any clearly demonstrable incremental direct
manufacturing cost increase occasioned thereby shall
be passed on to Mallinckrodt in the form of an upward
adjustment to the compensation to be paid to King
hereunder in accordance with Section 5 or (ii) any
clearly demonstrable incremental reduction in direct
manufacturing cost occasioned thereby shall be passed
on to Mallinckrodt in the form of a downward
adjustment to the compensation to be paid to King
hereunder in accordance with Section 5.
(c) King will, in conjunction with its manufacturing
services provided hereunder, insure that all tablets
manufactured are properly and safely packaged, as
appropriate, in sample containers, 100, 500 or 1000
count bottles or bulk containers, all as reasonably
instructed by Mallinckrodt. King will provide all
tablet container/closure systems and other packaging
materials required by King to perform its obligations
hereunder; provided that, all container/closure
systems to be utilized for packaging of tablets shall
be in accordance with the appropriate ANDA, supported
by adequate
4
<PAGE> 5
stability data and satisfactory to Mallinckrodt in
specification and actual quality.
(d) Provided Mallinckrodt is in compliance with its
obligations under Section 5 hereof and its obligation
to supply Key Materials hereunder, all
work-in-process and finished goods produced in
accordance herewith shall be and remain at all times
the sole and exclusive property of Mallinckrodt. King
shall not mortgage, pledge, cause a lien to be
created with respect to or otherwise encumber any of
such work-in-process or finished goods, or take any
other action which is inconsistent with
Mallinckrodt's absolute right of ownership thereto,
other than the processing and handling of such
material in the performance of King's obligations
hereunder. Upon expiration or termination of this
Manufacturing Agreement, King shall immediately ship
to Mallinckrodt or to a location designated by
Mallinckrodt, at Mallinckrodt's expense, King's
entire inventory of finished goods produced hereunder
against payment therefor in accordance with the terms
hereof. Furthermore, upon expiration or termination
hereof, King shall finish, package and ship to
Mallinckrodt or to a location designated by
Mallinckrodt, at Mallinckrodt's expense, all
work-in-process as finished product against payment
therefor in accordance with the terms hereof, even if
the processing, packaging and shipping of such
work-in-process requires King to continue production
beyond the formal date of termination or expiration
of this Manufacturing Agreement.
(e) Within three (3) months after the execution hereof,
and to the extent not already specifically provided
for herein, King and Mallinckrodt will work together
in good faith to establish intercompany procedures
and policies relative to the proper administration
and performance of this Manufacturing Agreement.
(f) The parties agree that no part of this Manufacturing
Agreement is intended to give Mallinckrodt any
authority or input as to the daily operation of
King's manufacturing, laboratory, packaging and
distribution processes, especially but not
exclusively with regard to the number of King
5
<PAGE> 6
employees involved with such processes. Mallinckrodt
shall not ask or suggest that King downsize its labor
force or lay of King employees in order to pass on to
Mallinckrodt an incremental cost savings nor will
Mallinckrodt ask, suggest or demand that King
purchase machinery or automated equipment which could
result in a reduction of King's labor force even if
the purchase of such machinery or automatic equipment
might result in King having reduced manufacturing or
packing costs. King agrees that it will not add any
cost to its provision of manufacturing services
hereunder except in good faith and as absolutely
required to carry out its obligations in accordance
herewith.
2. Raw Materials and Equipment.
(a) Mallinckrodt agrees to provide to King, during the
term hereof, such amounts of Key Materials as King
shall require to satisfy its obligations hereunder to
Mallinckrodt to produce APAP/hydrocodone bitartrate
tablets hereunder. Mallinckrodt agrees to employ
reasonable commercial efforts to provide quantities
of the Key Materials to King. King agrees that under
no circumstances will King disclose to any third
party the quantities of Key Materials received and
processed by King hereunder, unless King is required
to do so by law or at the direction of a court or any
governmental (state or federal) agency or entity.
Mallinckrodt represents and warrants to King that
the Key Materials so provided will meet the
specifications set forth on Exhibit B attached
hereto. King agrees to test each lot of Key Materials
received from Mallinckrodt prior to use in any
production hereunder to determine definitively
whether it meets the applicable specifications. If
any lot does not meet specifications, King shall
inform Mallinckrodt of such fact immediately and in
writing and Mallinckrodt, if it is in agreement that
any such lot does not meet applicable specifications,
shall as soon as practicable provide King with a new
lot of Key Materials meeting applicable
specifications, which replacement is acknowledged by
King to be its only remedy for the failure of a lot
of Key Materials to meet applicable specifications.
If, within ten (10) business days of being informed
by King that any lot of Key Materials does not meet
6
<PAGE> 7
specifications, Mallinckrodt does not agree with
King that any lot of Key Materials fails to meet
applicable specifications, the parties will arrange
for the lot in question to be tested by a mutually
acceptable independent laboratory for conformity with
specifications and the determination of such
laboratory (unless clearly erroneous) will be final
and binding upon the parties. The cost of any such
testing by the independent laboratory shall be home
by the party whose judgment was incorrect. Any lots
of Key Materials not meeting applicable
specifications shall, at the request of Mallinckrodt,
be destroyed by King or returned by King to
Mallinckrodt, in either case in the precise manner
specified by Mallinckrodt and at the expense of
Mallinckrodt. All Key Materials delivered to King in
accordance herewith shall be and remain at all times
the sole and exclusive property of Mallinckrodt. King
shall not mortgage, pledge, cause a lien to be
created with respect to or otherwise encumber any of
the Key Materials, or take any other action which is
inconsistent with Mallinckrodt's absolute right of
ownership thereto, other than the processing and
handling of the Key Materials in the performance of
King's obligations hereunder. Upon expiration or
termination of this Agreement, King shall
immediately return to Mallinckrodt or ship to a
location designated by Mallinckrodt, at
Mallinckrodt's expense, King's entire inventory of
unused Key materials.
(b) King will manufacture APAP/hydrocodone bitartrate
tablets hereunder by utilizing the pieces of
equipment described on Exhibit C attached hereto (as
they are or will be described in the appropriate
ANDAs or supplements thereto). King shall have the
responsibility and shall incur the expense, with
respect to all pieces of equipment utilized for
production and testing hereunder, to ensure that all
calibration and normal operating maintenance on,
cleaning of, repair to and replacement of such
equipment is performed as and when necessary and that
all such equipment is protected from theft, fire or
other casualty of any sort. King shall maintain all
maintenance and repair records with respect to such
equipment in accordance with the requirements imposed
by cGMP.
7
<PAGE> 8
(c) With the exception of the Key Materials to be
provided by Mallinckrodt in accordance with
subsection (a) of this Section 2, all other raw
materials and other resources required in connection
with production hereunder shall be provided by King
at its cost and expense, subject to reimbursement in
accordance with the relevant provisions hereof
Mallinckrodt shall have the right to approve in
advance all suppliers of raw materials in connection
with production hereunder. King represents and
warrants to Mallinckrodt that it currently has access
to, and during the entire term thereof will make all
reasonable efforts to ensure that it will continue to
have access to, sufficient supplies of raw materials,
utilities, container/closure systems, packaging
materials and all other required items to perform the
services required of it hereunder without
interruption, subject only to the occurrence of any
events covered by the provisions of Section 15
hereof. King agrees that it will conduct audits of
its suppliers of raw materials hereunder on a regular
basis to ensure that such suppliers are producing raw
materials in accordance with all applicable laws,
rules and regulations (including without limitation
the requirements of cGMP) and to ensure that such
suppliers will continue to be able to supply a
sufficient quantity and quality of raw materials.
King will supply Mallinckrodt with copies of all such
supplier audit reports. King agrees, at all times
during the term hereof, to use all reasonable efforts
to maintain an inventory of raw materials (other than
Key Materials), packaging materials and
container/closure systems sufficient to manufacture
Mallinckrodt's outstanding Quarter Forecast (as
defined in Section 7(a) below) for finished product.
King agrees that, should it (i) receive any
notification (whether written or oral) from any
supplier of any raw materials or other resources to
be provided by King hereunder that such supplier
either has the intention of discontinuing or
substantially reducing its supply of such raw
materials or other resources to King or (ii) become
aware of any facts or circumstances that make it
possible that there will be any shortage of any such
raw materials or resources or any other reason why
such raw materials or resources may be unavailable in
sufficient quantity or quality as and when needed,
then King shall promptly notify Mallinckrodt of the
nature of any such difficulty and shall keep
Mallinckrodt continuously
8
<PAGE> 9
informed of any change in circumstances and of its
best efforts, which it shall make in good faith, to
locate alternate sources of supply for the affected
raw materials and resource (which alternate sources
shall be subject to prior approval by Mallinckrodt
but which approval shall not unreasonably be
withheld).
(d) All Key Materials and other raw materials (including
container/closure systems) utilized by King in
production hereunder, as well as all work-in-process
and finished goods produced by King, shall be kept
physically and financially segregated by King from
its other properties and inventories and shall be
conspicuously marked as being the sole property of
Mallinckrodt. Key Materials, when and where
applicable, shall be stored, handled and used
hereunder in accordance with the requirements and
directives of the PDA and the DEA. Mallinckrodt
acknowledges that King will, during the existence of
this Manufacturing Agreement, purchase acetaminophen
and hydrocodone bitartrate from Mallinckrodt and
potentially other suppliers in order to manufacture
products other than the Current Products or Future
Products for third parties; provided, that such
manufacture for third parties will in no event be
accomplished by King in violation of Section 3.5 of
the Asset Purchase Agreement and, provided further
that, King will not utilize its DEA quota for
bydrocodone bitartrate for the manufacture of
products for any third parties unless and to the
extent that it has sufficient quota to meet all of
Mallinckrodt's requirements for finished goods
hereunder. Mallinckrodt will not make any claim of
ownership to any acetaminophen and hydrocodone
bitartrate purchased by King from Mallinckrodt (as
opposed to any Key Materials furnished hereunder by
Mallinckrodt's or from third parties as long as it is
intended for use other than for performance by King
under this Manufacturing Agreement.
(c) King shall execute such financing statements,
security agreements and other documents that
Mallinckrodt, in its sole judgment, deems advisable
to protect any of its ownership interests in the Key
Materials, or any work-in-process or finished goods
and to carry out the purposes of this
9
<PAGE> 10
Manufacturing Agreement. Mallinckrodt agrees that it
will pay the cost of preparing same and any recording
or filing fees payable in correction with the filing
or recording of a financing statement or similar
document.
3. Laboratory Testing Services, Quality Control and Yields.
(a) King will take all necessary steps to insure that it
has the equipment, instrumentation, resources and
trained personnel to provide all raw materials (other
than the Key Materials), in-process and product
assays, analysis and other testing as compliance with
cGP standards may require in connection with King's
production hereunder. Without limitation, King shall
provide a complete set of batch records, all
applicable deviation reports, out-of-specification
investigation reports and a complete certificate of
analysis for each lot of finished product produced
hereunder. Notwithstanding any other provision
hereof, and regardless of whether or not any
particular issue or detail is addressed by the terms
hereof, King shall at all times perform its
obligations hereunder in accordance with all
applicable cGMP standards.
(b) King shall be responsible for all process, cleaning
and methods validation, stability studies (including,
without limitation, the production of quality
control finished product batches for each of the
Current Products and, when available, the Future
Products on at least an annual basis) or other tests
and procedures necessary for the manufacture and
release of finished product hereunder in accordance
with cGMP and in accordance with the requirements of
any ANDA (or any supplement thereto).
(c) King agrees to conduct quality control sampling of
all raw materials, components, packaging materials
and container/closure systems purchased or furnished
by it promptly upon receipt of such materials and
systems and before use of any such materials and
systems in the production of finished goods
hereunder. King agrees that it will only utilize, in
connection with production hereunder, raw materials,
components, packaging materials and container/closure
systems that meet all applicable specifications and
10
<PAGE> 11
that have been sampled, tested and approved in
accordance with King's normal test procedures and
standard operating procedures.
(d) King shall maintain complete and accurate
documentation of all validation data, stability
testing data, batch records, quality control and
laboratory testing and any other data required under
cGMP, other FDA requirements or as otherwise
reasonably required by Mallinckrodt in connection
with King's production hereunder. King further agrees
to compile all data necessary for Mallinckrodt to
file an Annual Report and other periodic reports with
the FDA relative to the appropriate ANDAs or
supplements thereto concerning the Current Products
and the Future Products (as applicable), which data
shall be compiled in accordance with the requirements
of 21 CFR ss.314 and shall include, without
limitation, stability data, distribution data,
labeling, adverse reaction reports and data
concerning chemistry, manufacturing and control
changes. King agrees to conduct audits on a regular
basis with such frequency as Mallinckrodt may
reasonably direct to insure the integrity and
traceability of all data compiled by it to be
submitted in connection with or to be used in the
preparation of each Annual Report or other periodic
reports relative to each of the Current ANDAs and
Future ANDAs.
(e) In accordance with Section 8(a) below, Mallinckrodt
shall have the sole right and responsibility for
approving or rejecting any shipment of finished
products produced by King hereunder. In order for
Mallinckrodt to discharge the aforesaid
responsibility, King shall quarantine every lot of
finished product in accordance with Mallinckrodt
approved quarantine procedures until King receives
approval from Mallinckrodt's quality assurance
function for release of any such lot of finished
product, which approval (or not, as the case may be)
shall be provided by Mallinckrodt as quickly as
possible, but in no event later than ten (10)
calendar days from the date of King's initial quality
assurance release of finished product (which release
is accompanied by appropriate documentation) into
Mallinckrodt's quality assurance function. King will
audit all batch records with respect to any
particular lot of finished products in
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<PAGE> 12
accordance with Mallinckrodt approved procedures and
will provide Mallinckrodt's quality assurance
function with a complete set of all batch records (to
include all deviation and out-of-specification
investigation reports) with respect to such lot. In
particular, with respect to each lot of finished
goods produced hereunder, Mallinckrodt shall receive
from King a certificate of compliance (in a form and
executed by an individual reasonably satisfactory to
Mallinckrodt) stating that such lot of finished
products has been manufactured in accordance with
cGMP. King and Mallinckrodt will both take whatever
actions are necessary to ensure that all
discrepancies, problems or issues raised during the
batch record audit process are resolved as
expeditiously as possible prior to release from
quarantine of any lot of finished product.
(f) King guarantees to Mallinckrodt that it will employ
all possible efforts during the term hereof to
maximize yields of finished product. King
guarantees specifically to Mallinckrodt that each lot
of finished product produced hereunder will meet the
yield level for the particular strength in question
as set forth on Exhibit D, hereinafter with respect
to any particular dosage strength known as the "Yield
Guarantee Level." In the event that, with respect to
any lot or production run made and invoiced by King
in accordance with this Agreement, the actual yield
of finished product does not meet the Yield Guarantee
Level, there will be an adjustment in the
compensation payable to King hereunder as set forth
in Section 5 below.
(g) Yield calculations and testing shall be made by King
for each volume of finished product made by King in a
production run in accordance with the methods for
determining product yield set forth on Exhibit E
attached hereto, and prior to release of the finished
product for shipment. Any such yield calculations for
a particular lot of finished product shall be
included on the invoice sent to Mallinckrodt covering
such finished product. Mallinckrodt may, at any time
within thirty (30) days after the release date for
any particular volume of finished product, make its
own calculations and tests of product yield in
accordance with the methods set
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<PAGE> 13
forth on Exhibit E. In the event such calculation and
testing by Mallinckrodt indicates that there is a
discrepancy between the determination of actual yield
between Mallinckrodt and King, the parties shall
settle the differences among themselves or jointly
perform another test and calculation of product yield
through a mutually agreeable independent laboratory,
the results of which test shall be determinative. The
costs of any testing by an independent laboratory as
aforesaid shall be borne by the party whose rest
results were furthest from the result obtained by
such independent laboratory.
4. Labeling and Product Literature.
(a) King agrees to affix labels to all finished product
in accordance with Mallinckrodt's instructions unless
to do so would violate any state or federal statute
or regulation or would not conform to cGMP standards.
Until such time as Mallinckrodt otherwise directs,
King, at its expenses but subject to reimbursement
in accordance with the appropriate provisions of
Section 5 below, will be responsible for the printing
of package inserts and labels for all finished
products, King shall affix the appropriate lot number
and expiration date to each label that is placed on a
bottle or package of finished product. King will not
change or alter in any manner any product labeling
without the prior written consent of Mallinckrodt,
and it is understood that except as specifically
provided herein Mallinckrodt will be solely
responsible for the substantive content of all
labels. King shall maintain a system to ensure label
accountability and shall provide Mallinckrodt with an
inventory reconciliation of labels as often and in
such form as Mallinckrodt may reasonably require; in
no event shall King be required to provide such
reconciliation more than twice per calendar quarter
but such reconciliation shall be provided by King no
less often than quarterly and, in any case when
provided, such reconciliation shall be given to
Mallinckrodt no later than fifteen (15) days after
the end of any three (3) month period hereunder for
which such an inventory reconciliation is being
provided.
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<PAGE> 14
(b) Mallinckrodt will have sole responsibility, at its
expense, for the production of all material safety
data sheets, product bulletins and other product
literature relative lo the Current Products or the
failure Products. However, King agrees at all times
during the term hereof to provide Mallinckrodt with
any and all information in its knowledge or
possession that Mallinckrodt might find useful or
relevant in the preparation of any such product
literature, as and when King becomes aware of such
information provided that, it is understood that
King has no affirmative obligation whatsoever to
search for any such information.
(c) Mallinckrodt agrees that it will not engage in any
act which causes any packaged and labeled finished
product produced by King to become adulterated or
misbranded within the meaning of the federal Food,
Drug and Cosmetic Act, as amended.
5. Compensation for Services Performed by King.
(a) In return for the performance by King of the services
specified herein, Mallinckrodt agrees to pay King a
processing fee of Five Thousand Dollars ($5,000) per
batch of finished product in tablet form ("Tolling
Fee") (appropriately tested, bottled and labeled and
otherwise produced in accordance with the
requirements hereof, especially Sections 1, 2, 3 and
4 above), subject to adjustment hereunder due to its
failure to meet the Yield Guarantee Level. For
purposes of the immediately preceding sentence and
this Manufacturing Agreement, the term "batch"
assumes a production run of one million (1,000,000)
tablets (one million two hundred thousand (1,200,000)
for any dosage formulations having a strength of 5
mg. of hydrocodone bitartrate and 500 mg. of APAP).
In addition to the Tolling Fee described immediately
above, Mallinckrodt shall also pay King its direct
manufacturing costs associated with production
hereunder. The Tolling Fee and the direct
manufacturing costs associated therewith with respect
to any particular volume of finished product produced
by King hereunder shall be due and payable to King
within forty five (45) days after receipt by
Mallinckroddt of an invoice from King (and other
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<PAGE> 15
appropriate documentation as may be agreed)
indicating the Tolling Fees payable, the direct
manufacturing cost associated with the production
lots for which the invoice is being submitted the
number of batches and total number of tablets
produced, the number of kilograms of APAP and
hydrocodone bitartrate used in the finished product
being invoiced, the lot numbers of products produced
and the release date for each of those lots, and
certifying that the finished product for which
Mallinckrodt is being billed has been produced
finished in conformance with applicable
specifications, cGMP and the requirements hereof
(including without limitation that each batch
produced meets the Yield Guarantee Level or, if such
is the case, that any one or more batches invoiced
fails to meet the Yield Guarantee Level providing
specific details in that case as to the actual yield
achieved for each batch included in the invoiced
batch or batches) and is ready for release and
shipment.
(b) The Tolling Fee set forth above in subsection (a)
above shall remain firm until January 1, 1997 and
shall automatically be adjusted for each calendar
year thereafter, effective for orders delivered on or
after tile first day of January of each such calendar
year, to reflect increases or decreases in the
Producer Price Index as published by the
International Monetary Fund for the calendar year
prior to the year for which any such adjustment is to
take place.
(c) In the event that, with respect to any batch or
batches made and invoiced by King in accordance with
this Manufacturing Agreement, the actual yield of any
finished product batch invoiced is less than the
appropriate Yield Guarantee Level, the Tolling Fee
paid or payable with respect to such batch of
finished product shall be adjusted downward by the
amount set forth on Exhibit F hereto.
(d) In the event that application of the provisions set
forth in subsection (c) immediately above indicates
that a downward adjustment in the Tolling Fee is
required with respect to any particular volume of
finished product, King shall (i) if payment of the
Tolling Fee for such volume has already
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<PAGE> 16
been made, promptly refund the appropriate amount to
Mallinckrodt in cash or, if Mallinckrodt approves,
credit any such amount against future payments by
Mallinckrodt hereunder or, (ii) if payment of the
Toiling Fee for such volume has not been made, issue
a corrected invoice to Mallinckrodt for the
appropriate amount payable to King.
(e) Notwithstanding any other provision hereof, in the
event that as a consequence of any negligent action
or omission to act by King in the course of the
performance of its obligations hereunder all or any
portion of any batch, lot or other volume of Key
Materials is destroyed or otherwise rendered unusable
for the production of finished product hereunder,
then King (in addition to any adjustments to be made
to the Tolling Fee in accordance with this Section 5)
will pay to Mallinckrodt, within third (30) days of
the date of any request for payment by Mallinckrodt,
an amount equal to the average amount charged by
Mallinckrodt to other consumers of Key Materials for
an amount of such Key Materials equal to the volume
of Key Materials so destroyed or otherwise rendered
unusable, less fifteen Accent (l5%). Furthermore, it
is understood that King shall be responsible for and
Mallinckrodt notwithstanding any other provisions
hereof, shall have no responsibility or liability to
make payment for any batch or lot of finished
products that, through no act or omission to act on
the part of Mallinckrodt, fails to meet applicable
specifications, is the subject of a recall (whether
voluntary or involuntary), is not merchantable or fit
for its intended purposes or is adulterated or
misbranded. At Mallinckrodt's option all or any
portion of the amount King owes Mallinckrodt at any
given time pursuant to this subsection (e) may be
offset by Mallinckrodt against any Tolling Fee that
may be due to King hereunder, provided that in any
case where Mallinckrodt decides to exercise such
option it will give notice thereof to King.
(f) At all times during its performance hereunder, King
shall take whatever actions are reasonably available
to it to ensure that any increases in its direct
manufacturing cost applicable to such performance are
kept to an absolute minimum. King will at all times
keep Mallinckrodt fully
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<PAGE> 17
informed of any current or anticipated changes in its
direct manufacturing cost hereunder and will consult
with and seek Mallinckrodt's input concerning
the various courses of action or alternatives that
might be adopted to reduce, slow or prevent the
increase of any such cost.
6. Minimum Manufacturing Fee.
(a) Regardless of the amount of finished product that
Mallinckrodt requests King to produce during any
contract year during the initial term hereof and
provided that King is in compliance with its
obligations and the terms and conditions hereof,
Mallinckrodt hereby agrees to pay King a minimum fee
for each contract year ("Minimum Manufacturing Fee")
during such initial term as follows:
<TABLE>
<S> <C> <C> <C>
86 (i) first contract year $1,000,000,
97 (ii) second contract year $1,000,000,
98 (iii) third contract year $1,500,000,
99 (iv) fourth contract year $1,500,000, and
2000 (v) fifth contract year $2,000,000
</TABLE>
For purposes of the immediately preceding sentence,
the term "contract year" shall refer to the calendar
years 1996, 1997, 1998, 1999 and 2000 as appropriate,
except that the first contract year for the sake
of convenience, shall commence on December 13, 1995
and end on the last day of calendar year 1996.
(b) Notwithstanding the immediately preceding subsection
(a), the amount of the Minimum Manufacturing Fee
payable to King for the third, fourth and fifth
contract years that is in excess of One Million
Dollars ($1,000,000) shall only be payable to King
for those years in the event that FDA Approval has
been received for all of the Future Products on or
before the end of the thirtieth (30th) month after
the Closing Date. Further, notwithstanding the
immediately preceding subsection (a), the Minimum
Manufacturing Fee otherwise payable to King in
accordance herewith will
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<PAGE> 18
be reduced dollar-for-dollar in any given contract
year by the cumulative amount of (i) any and all
downward adjustments in Tolling Fees for batches
produced during such contract year that are made in
accordance with the provisions of subsection (c) of
Section 5 above, (ii) any amounts payable by King to
Mallinckrodt pursuant to subsection (e) of Section 5
above and (iii) any amounts payable by King to
Mallinckrodt pursuant to subsections (a) or (d) of
Section 8 below.
(c) Mallinckrodt agrees that if, for any given contract
year, Mallinckrodt has not requested King to produce
and King has not produced finished product in an
amount that, given the applicable Tolling Fee, would
provide King with payment (over and above
reimbursement for direct manufacturing costs) equal
to or in excess of the Minimum Manufacturing Fee for
that contract year, as adjusted pursuant to the
provisions of subsection (b) set forth immediately
above (the amount by which such payment is less than
the applicable Minimum manufacturing Fee to be
referred to herein as the "Minimum Manufacturing Fee
Shortfall"), Mallinckrodt shall either, at its
option, (i) make payment to King of the Minimum
Manufacturing Fee Shortfall within thirty (30)
days after the date on which it receives a correct
invoice from King setting forth the amount of any
such Minimum Manufacturing Fee Shortfall for the
contract year in question, or (ii) place an order
with King for the production of that amount of
finished product that would generate Tolling Fees
(assenting no downward adjustments pursuant to the
applicable provisions of Section 5) equal to or
greater than the Minimum Manufacturing Fee Shortfall.
In the event Mallinckrodt selects the latter option,
Mallinckrodt will provide King with the necessary
quantity of Key Materials to complete the processing
of such order and will make payment to King for the
production of such finished product in accordance
with procedures established in this Manufacturing
Agreement.
7. Forecasts, Order Placement and Delivery.
(a) Mallinckrodt will submit to King, in writing and on
or before the fifteenth (15th) of every month during
the term hereof, a forecast of its
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<PAGE> 19
monthly requirements for finished product during each
of the next three (3) months ("Quarter Forecast") and
its total anticipated monthly requirement for
finished product during the following twelve (12)
month period. Mallinckrodt will malceall forecasts in
good faith and will at all times present forecasts
which are as accurate as possible given the market
and other information available to Mallinckrodt, but
under no circumstances whatsoever shall any forecasts
made hereunder be deemed to be an order for the
production of finished goods or otherwise binding on
Mallinckrodt.
(b) Finished product shall be ordered by Mallinckrodt
only in writing. King is not entitled to accept
verbal orders of any kind for the production of
finished product. Any written work order will contain
the following information: (i) the precise quantity
of finished product desired along with an indication
of the package size mix required, (ii) the dosage
strength(s) of the finished product requested, (iii)
dates by which the ordered finished product must be
ready for release by Mallinckrodt's quality assurance
function and shipment, (iv) the anticipated shipping
destination for any finished goods and (v) such
other information as Mallinckrodt wishes to provide
or that King might find necessary or useful in
completing a specific work order. All work or
purchase orders must be submitted by Mallinckrodt to
King in writing at least sixty (60) days in advance
of the anticipated date of delivery by King.
(c) Finished. product shall be delivered F.O.B. King's
Bristol Facility at which time risk of loss and
responsibility for the product will transfer to
Mallinckrodt. King will be responsible to make such
arrangements regarding the shipping of finished
product to designated destinations as Mallinckrodt
shall reasonably request, at Mallinckrodt's expense.
Each shipment of finished product will be accompanied
by the information required by FDA, DEA and other
applicable regulations and as may reasonably be
required by Mallinckrodt.
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<PAGE> 20
8. Acceptance, Rejection and Results.
(a) If Mallinckrodt reasonably determines that any
finished product (whether in its possession or in the
possession of any distributor or customer) is
defective in material or workmanship, not in
conformance with applicable specifications, is
adulterated or misbranded, or is otherwise not in
compliance with the requirements of any of the ANDAs
(or supplements thereto) relating to the Current
Products or the Future Products (as applicable) or of
this Manufacturing Agreement, then Mallinckrodt at
its sole option and in addition to any other rights
it may have under this Manufacturing Agreement or
otherwise, may reject and return (either on behalf of
itself or on behalf of its customers and
distributors) any such finished products to King for
repackaging or disposal at King's expense. At the
time of any such rejection, Mallinckrodt shall
provide King with a written notice describing in
detail the circumstances surrounding the rejection
and Mallinckrodt's reasons therefor (with specific
reference to sections hereof as appropriate).
Mallinckrodt may reject such finished goods and
either return them to King or destroy or dispose of
them in the least expensive and most environmentally
sound manner and King shall be responsible for the
costs of any such return, destruction or disposal.
The amount already paid by Mallinckrodt to King
pursuant to Section 5 hereof for any finished goods
that are returned, destroyed or disposed of in
accordance herewith shall be refunded by King to
Mallinckrodt immediately upon written request from
Mallinckrodt and, in addition, King shall pay to
Mallinckrodt, to reimburse it for the loss of Key
Materials in connection with any such finished goods,
an amount equal to the amount payable to
Mallinckrodt for Key Materials pursuant to the first
sentence of Section 5(e) above. Notwithstanding the
preceding portions of this subsection (a), in the
event that King does not agree with Mallinckrodt that
any rejection and return of product by Mallinckrodt
is appropriate under the teens hereof, then, if such
disagreement cannot be resolved by the parties it
shall be referred by them to a mutually acceptable
independent consultant for determination as to
whether Mallinckrodt had a reasonable basis for
rejecting and returning the goods in question. If the
20
<PAGE> 21
consultant determines that Mallinckrodt had no such
reasonable basis, then Mallinckrodt shall reimburse
King for the costs incurred by King in connection
with any such rejection and return. It is agreed that
in no event will King have the right to refuse the
rejection and return of finished product and that
King will only have the right to financial
reimbursement after the fact if and when it is
determined in accordance with the procedure outlined
immediately above that such rejection and return was
improper.
(b) Any finished product received by Mallinckrodt, or by
its distributors or customers (if shipped directly to
either of then by King), from King that has not been
rejected by Mallinckrodt within sixty (60) days after
receipt or within thirty (30) days after the date on
which the recipient first became aware or should have
become aware of a basis for rejection, whichever
occurs later, shall be deemed to have been accepted.
(c) If Mallinckrodt reasonably decides to or is required
to initiate a product recall, withdrawal or field
correction with respect to, or if there is any
governmental seizure of, any finished product
manufactured hereunder which action is due, in whole
or in part, to (i) a failure of any lot of finished
product manufactured by King hereunder to conform to
applicable specifications (including, without
limitation, it being adulterated or misbranded),
required manufacturing processes, the requirements of
the appropriate ANDA (or supplement thereto) or any
warranty or other requirement set forth in this
Manufacturing Agreement, (ii) the failure by King to
comply in all respects with any applicable law, rule,
regulation, standard, court order or decree or (iii)
the negligent or intentional wrongful act or omission
of King, Mallinckrodt will notify King promptly of
the details regarding such action, including
providing copies of all relevant documentation
concerning such action. King will assist Mallinckrodt
in investigating any such situation, if Mallinckrodt
so requests, but all regulatory contacts that are
made and all activities concerning seizure, recall,
withdrawal or field correction will be initiated and
coordinated by Mallinckrodt, in accordance with
intercompany
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<PAGE> 22
standard operating procedures to be developed by the
parties in accordance with Section 1(e) above.
(d) If any such recall, withdrawal, field correction or
seizure occurs due solely to (i) a failure of any lot
or batch of finished product manufactured by King
hereunder to conform to applicable specifications
(including, without limitation, it being adulterated
or misbranded), required manufacturing processes, the
requirements of the appropriate Current ANDA or
future ANDA or any warranty or other requirement set
forth in this manufacturing Agreement, (ii) the
failure by King to comply in all respects with any
applicable law, rule, regulation, standard, court
order or decree or (iii) the negligent or intentional
wrongful act or omission of King, then King shall
bear the full cost and expense of any such seizure,
recall, withdrawal or field correction, including
without limitation finished product replacement to
the market from which there was a seizure, recall,
withdrawal or field correction and any and all third
parry fees such as (by way of example) fees charged
by wholesalers whose aid might be required in
connection with the recall process. If both King and
Mallinckrodt contribute to the cause of a seizure,
recall, withdrawal or field correction, the cost and
expenses thereof will be shared in proportion to each
party's contribution to the problem.
9. Regulatory Compliance.
(a) King will comply fully with all federal, state and
local laws, regulations and standards applicable to
production by King and its performance of its
obligations hereunder, including, without limitation,
all applicable regulations of or requirements under
licenses, registrations, permits or approvals from
the FDA and SEA.
(b) King will provide advance notification to
Mallinckrodt of any FDA or DEA inspection of the
Bristol Facility or, if not possible, while such
inspection is in progress and will furnish
Mallinckrodt promptly with pertinent portions of all
FDA or DEA inspection reports and related
22
<PAGE> 23
correspondence as and when these become available to King. To
the extent such inspections, reports or correspondence relate
to King's production or its performance of its obligations
hereunder, Mallinckrodt shall have the right to participate in
the inspection process and to provide meaningful input with
respect to the nature and specifics of any response to any FDA
or DEA inspection report and/or correspondence.
(c) King will concurrently perform process and cleaning
validation, analytical methods validation, and
installation/operating qualification and calibration of all
equipment and facilities utilized in the manufacture,
packaging, testing, storing and release of flushed product,
such validations, qualifications and calibrations to be in
accordance with all current FDA regulations. All such
validations, qualifications and calibrations will be reviewed
periodically, but no less often than annually, during the term
hereof, and through effective change control procedures insure
that such validation is current. Upon reasonable advance
notice and arrangement with King, Mallinckrodt will have the
right to observe the validation process and review the results
thereof upon request. In general, King will at all times in
the performance of its obligations hereunder comply with its
standard operating procedures and will make copies of such
standard operating procedures available to Mallinckrodt for
review upon request. King agrees to make such changes in its
standard operating procedures, to the extent they are utilized
in connection with King's performance hereunder, as
Mallinckrodt shall from time to time reasonably request,
provided that Mallinckrodt agrees to pay King for any
additional cost to King occasioned by such changes.
(d) Batch records, including information relating to the
manufacturing, packaging and quality control testing and
analysis for each lot of finished product produced hereunder,
will be prepared as and when King performs any such tasks.
These records shall include, without limitation, the
following: raw material and packaging or container/closure
component release, mixing and filling records, container and
component tracing records, equipment usage records, in-process
and final laboratory testing
23
<PAGE> 24
results, in-process and final physical inspection results,
labeling and packaging records, records relating to
deviations from approved procedures, out-of-specification
investigative reports and records generally concerning
investigative and corrective action by King. Mallinckrodt
shall have the right at any time and upon reasonable notice
during the term hereof to inspect King's batch records
relative to production hereunder. Batch records and all other
records relating to production hereunder shall be retained by
King for the longer of the duration of this Manufacturing
Agreement or the period required for meeting all rules and
regulations of the FDA and other applicable regulatory
agencies.
(e) King will notify Mallinckrodt immediately of any warning
(including any FDA Form 483), citation, indictment, claim,
lawsuit or proceeding issued or instituted by any federal,
state or local governmental entity or agency against King if,
and to the extent that, the manufacture of products hereunder
for Mallinckrodt is affected, or of any revocation of any
license or permit issued to King, to the extent that any
relate in any fashion to the Bristol Facility or King's
production or its performance of its obligations hereunder.
(f) King agrees to handle all raw materials used in connection
with its performance hereunder in a safe manner and in an
environmentally prudent fashion, strictly in accordance in all
cases with applicable federal, state and local laws, rules,
regulations and standards concerning, health, safety, the
environment or the handling and disposition of hazardous
materials or waste. Specifically, but without limitation, King
will take all steps necessary to insure that all waste
generated by King in connection with its performance hereunder
will be stored, transported and disposed of in a safe and
environmentally sound manner consistent with all federal,
state and local laws, rules and regulations.
(g) King shall notify Mallinckrodt of (i) any adverse drug
experience or reaction reports or any other reports or
information indicating that any of the finished products
hereunder have any toxicity, sensitivity reactions or
24
<PAGE> 25
are otherwise alleged to cause illness or injury of any kind
or are adulterated or misbranded or (ii) any product
complaints made by customers or that will or could cause a
"field alert" to be issued within twenty four (24) hours of
becoming aware of any such difficulties, and shall thereafter
cooperate with Mallinckrodt relative to any investigation or
inquiry that may be initiated by the FDA with respect thereto
(which Mallinckrodt shall have the right to direct and
control) and shall further provide Mallinckrodt with all data
or other information that Mallinckrodt may require in
connection with any reports or correspondence that
Mallinckrodt files with the FDA relative to any such adverse
drug reaction.
(h) Within twenty four (24) hours of King's discovery that any
batch or lot of finished products, which has previously been
approved in accordance with procedures set forth herein, is
out of specification King will notify Mallinckrodt immediately
of such fact along with details concerning the nature of any
such failure to meet specifications. King will make such
further internal investigation of any failure to meet
specifications that is appropriate under the circumstances and
otherwise consistent with its obligations hereunder.
(i) King will participate with Mallinckrodt in conducting annual
product reviews for the Current Products and Future Products
in accordance with intercompany procedures to be developed by
the parties pursuant to Section l(e) hereof. These will
include trend analysis of critical process parameters as well
as a review of stability, complaints and adverse drug reports.
(j) King will be responsible for taking annual quality control
stability samples in support of the ANDAs for the Current
Products and the Future Products, testing stability samples on
a timely basis, and providing Mallinckrodt with stability
reports for its product periodic reports. King will initiate a
stability failure investigation on any stability test failure
within twenty four (24) hours of learning of any such
deviation. King will
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<PAGE> 26
notify Mallinckrodt of a stability failure within twenty four
(24) hours of confirmation and cooperate with Mallinckrodt
should Mallinckrodt determine that there is a need for a field
alert.
(k) King will cooperate with Mallinckrodt in obtaining Drug Master
File reference authorizations from all approved suppliers as
soon as possible following the date hereof.
(1) King will conduct all reprocessing and rework of products in
accordance with its standard manufacturing and operating
procedures and in accordance with the requirements of the
appropriate ANDA (or supplement thereto). In any case, no
reprocessing or rework of products will be initiated by King
without written approval of Mallinckrodt's authorized
regulatory affairs personnel.
(m) Notwithstanding any other provision hereof, it is understood
by the parties that Mallinckrodt shall have sole and complete
responsibility for responding to any adverse drug reaction
reports, product complaints or making any contact with
customers or any regulatory agencies concerning any problems
with the finished products produced hereunder or the
manufacturing process by which they are produced.
10. Certain Representations and Warranties of King.
(a) King represents and warrants that all finished product
produced hereunder will (i) be of good quality, material and
workmanship, (ii) be free from defects, (iii) be produced in
compliance with the specific requirements of the appropriate
ANDA (or supplement thereto) and cGMPs applicable to the
product, and (iv) meet all specifications.
(b) King represents and warrants that there is no claim, suit,
proceeding or other investigation pending or, to the knowledge
of King, threatened against King in connection with
manufacture, sale or distribution of the Current Products or
Future Products or the King Business in general
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which might prevent or interfere with King's performance
under this Manufacturing Agreement or adversely affect the
rights and interests of Mallinckrodt hereunder in any way.
(c) King represents, warrants and guarantees to Mallinckrodt that
finished product produced hereunder by King is not, or will
not be (as appropriate):
(i) in violation of Sections 5 or 12 of the Federal Trade
Commission Act or improperly labeled under applicable
Federal Trade Commission Trade Practice Rules,
(ii) in violation of any of the provisions of the Fair
Packaging and Labeling Act,
(iii) adulterated or misbranded within the meaning of the
federal Food, Drug and Cosmetic Act, as amended, or
within the meaning of any applicable state or
municipal law in which the definitions of
adulteration and misbranding are substantially
identical with those contained in the federal Food,
Drug and Cosmetic Act, or articles which may not
under the provisions of Sections 404 or 505 of said
Act be introduced into interstate commerce or which
may not under substantially similar provisions of any
state or municipal law be introduced into commerce,
(iv) manufactured or sold in violation of the federal
Controlled Substances Act, as amended, or any
applicable state law,
(v) manufactured or sold in violation of any of the
provisions of the Fair Labor Standards Act of 1938,
as amended,
(vi) manufactured or sold in violation of The Occupational
Safety and Health Act of 1970, as amended,
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(vii) manufactured in violation of any applicable federal,
state or local environmental law or regulation, or
(viii) manufactured in violation of any agreement
(commercial or otherwise), judgment, order or decree
to which King is a party.
(d) King certifies that neither it nor any member of its staff has
been disqualified or debarred by the FDA for any purpose. If,
during the term of this Manufacturing Agreement, King becomes
aware that King or any member of its staff is or is about to
become a disqualified investigator or is or is about to be
debarred, King will immediately notify Mallinckrodt.
(e) King warrants and represents that neither it nor any member of
its staff have been charged with or convicted under federal
law for conduct relating to the development or approval,
including the process for the development or approval, of any
New Drug Application or ANDA, or otherwise relating to the
regulation of any drug product under the Generic Drug
Enforcement Act of 1992 or any other relevant statute, law or
regulation. If at any time King or any member of its staff is
charged with or convicted under federal or state law for
conduct relating to the development or approval, including the
process for development or approval, of any New Drug
Application, ANDA, or otherwise relating to the regulation of
any drug product under the Generic Drug Enforcement Act of
1992 or any other relevant statute, law or regulation, King
will give Mallinckrodt immediate written notice of same.
11. Certain Covenants of King.
King recognizes that its performance hereunder is absolutely critical
to Mallinckrodt's ability to secure the full benefit of the purchase of
the Purchased Assets under and pursuant to the Asset Purchase
Agreement. Therefore, during the term hereof (whether the initial term
or any renewal term) King will provide Mallinckrodt with certain
information concerning the activities and relative well-being
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of the King Business and will, in addition, agree to take or refrain
from taking certain actions in connection with the King Business, as
follows:
(a) Within ninety (90) days after the end of each fiscal year,
King shall provide to Mallinckrodt a statement of financial
condition of King for the previous fiscal year, including a
balance sheet and statement of earnings for such year,
certified as accurate by the chief executive and chief
financial officers of King, prepared in accordance with
generally accepted accounting principles on a basis consistent
with past practices.
(b) King will provide written notice to Mallinckrodt, as soon as
reasonably practicable and in any event within fifteen (15)
days after it acquires knowledge, of the commencement of, or
material threat of the commencement of, any action, suit or
proceeding, brought by any party (private or governmental),
before any court, arbitrator, commission or governmental body,
agency or official which may have an adverse effect on the
ANDA Business or King's continued performance hereunder. In
connection with any such notice King shall provide to
Mallinckrodt a description of the nature of any such pending
or threatened action as well as such other information as
Mallinckrodt may reasonably request.
(c) King will do all things necessary or appropriate to maintain
the value and usefulness of the Bristol Facility and all its
other assets and properties. King will keep the Bristol
Facility and all of its tangible property in good working
order and condition, ordinary wear and tear excepted, subject
to the dictates of commercial necessity and sound business
practice. King will maintain insurance on its properties in at
least such amounts and against at least such risks as are
usually insured against by companies of established repute
engaged in the same or similar business, including without
limitation (i) product liability insurance with limits of Ten
Million Dollars ($10,000,000) per occurrence and Ten Million
Dollars ($10,000,000) in the aggregate and with an appropriate
endorsement naming Mallinckrodt as an additional insured
party, (ii) insurance covering loss or damage with respect to
any Key Materials, work-in-process or
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finished product inventory in King's possession with an
appropriate endorsement naming Mallinckrodt as an additional
insured party, (iii) insurance on the Bristol facility and on
each and every item of equipment to be used in connection with
production hereunder within limits of Twenty Million Dollars
($20,000,000) for the building and Six Million Dollars
($6,000,000) for the equipment and (iv) a policy of insurance
for business interruption insuring all of King's business
activities, including without limitation the ANDA Business,
against all such risks as are ordinarily and normally insured
against under such policies.
(d) King will continue to engage in business of the same general
type as the King Business and will preserve, renew and keep
in full force and effect its corporate existence and take all
action reasonably necessary to maintain its rights, privileges
and permits (including any regulatory permits) necessary or
desirable in the normal conduct of business.
(e) Unless Mallinckrodt gives King its written consent (which
consent shall not, without business reason to Mallinckrodt, be
withheld) King will not engage in any transaction whereby it
(i) merges with any other person, firm or entity, (ii) sells
all, substantially all or a substantial portion of its assets
to any person, firm or entity, (iii) sells a controlling
interest in its voting securities to any person, firm or
entity, (iv) sells, leases or otherwise disposes of its
ownership of or control over the Bristol Facility or (v)
otherwise engages in a transaction that will have as its
intent or effect any change of ownership or control of King or
of the nature or character of King's business.
(f) As of a date thirty (30) days after the receipt by King of its
audited annual financial statements and thereafter, King shall
maintain stockholders' equity, as reported on King's annual
audited balance sheet, equal to or in excess of Twelve Million
Dollars ($12,000,000).
(g) King shall maintain a debt to equity ratio of no greater than
two and one half to one (2.5/1). For purposes hereof, "debt"
shall include, without
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limitation, all amounts payable under lines of credit, all
term financing from banks or financial institutions, all
notes payable, the current portion of long-term debt, and
long-term debt, and any other items normally denominated as
debt, all as reported on King's annual audited balance sheet.
For purposes hereof, "equity" shall mean stockholders' equity
as reported on King's annual audited balance sheet, as
adjusted for any changes in accounting practices subsequent to
December 31, 1994. In particular, without limitation, equity
shall be adjusted downward for the after tax cost of
development of ANDAs if such costs are recorded as an asset on
King's annual audited balance sheet.
(h) King will not create, assume or suffer to exist on any of its
assets used in any manner in connection with King's
performance hereunder any mortgage, lien, pledge, security
interest or encumbrance of any kind, except for (i) liens for
current taxes not yet due, (ii) those existing liens set forth
on Exhibit G attached hereto, and (iii) leases for equipment
to be used in connection with the King Business for
manufacturing, development, analytical and general office
management purposes. Within thirty (30) days after the Closing
Date, King will pay completely its obligations under that
certain term loan granted to King by First Union Bank as
described on Exhibit G hereto.
(i) King will not dividend to its shareholders any cash, assets or
other property except to the extent that any such dividends
would not have the effect of causing King to be in default
under either subsections (f) or (g) set forth above in this
Section 11.
(j) King will, as expeditiously as possible after the Closing
Date, use all possible efforts to make the corrections,
improvements and changes relative to manufacture of
APAP/hydrocodone bitartrate dosage forms that are set forth on
Exhibit H attached hereto. Once every year during the
existence of this Manufacturing Agreement, on or about the
anniversary of the date hereof, Mallinckrodt may conduct an
audit of King (i) to ensure that there has been compliance by
King with the requirements of this
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subsection (j) and (ii) to discuss what additional
corrections, improvements and changes might be made during the
year following any such audit.
12. Access and Audit.
(a) In addition to any rights Mallinckrodt may have pursuant to
Section 11(j) set forth above, Mallinckrodt, through its
employees, consultants or other representatives, will have the
right during normal business hours and upon fifteen (15) days
advance arrangement with King to inspect and audit King's
operations at the Bristol Facility to determine whether or not
King is complying in all respects with any of its obligations
hereunder. Mallinckrodt warrants that all such inspections and
audits shall be carried out in a manner calculated not to
unreasonably interfere with King's conduct of business at the
Bristol Facility and to insure the continued confidentiality
of King's other business and technical information. Further,
Mallinckrodt agrees to comply with all of King's safety and
security requirements during any visits to the Bristol
Facility.
(b) Upon at least fifteen (15) days advance notice, appropriate
employees or representatives of Mallinckrodt shall have the
right, periodically but no more often than quarterly, to audit
the books and records of King that relate in any fashion to
the provision by King of services hereunder or the rights of
Mallinckrodt hereunder. King will provide copies (at a minimal
charge) of all relevant documentation and appropriate King
personnel will be made available to answer questions and
provide information in connection with any such audit.
13. Ownership of Technology.
King acknowledges that, pursuant to the Asset Purchase Agreement of
even date herewith, Mallinckrodt owns all right, title and interest in
and to the Current Products and the Future Products. King further
acknowledges that Mallinckrodt will become the owner of all right,
title and interest in and to all technology, know-how, inventions,
discoveries, ideas, innovations, concepts, information or
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data, whether patentable or not, which results from the production of
finished product hereunder ("Proprietary Information"). Upon the
termination or expiration of this Manufacturing Agreement or upon
Mallinckrodt's request at any time, King agrees to deliver to
Mallinckrodt any and all documents or information relating to the
Proprietary Information and King further agrees, during the term
hereof, to keep Mallinckrodt apprised in writing of the nature of any
Proprietary Information that is developed as and when this occurs.
14. Warranties of Mallinckrodt.
(a) Mallinckrodt warrants to King that the Key Materials furnished
by Mallinckrodt hereunder will meet the specifications set
forth on Exhibit B attached hereto. In the event any lot of
Key Materials is not in conformance with applicable
specifications, King will give immediate written notice of the
nature of any such defect to Mallinckrodt and will furnish a
sample of any defective material to Mallinckrodt by the
fastest possible means. Mallinckrodt shall replace, at its own
expense, any lot of Key Materials that does not meet
applicable specifications, and shall reimburse King for its
actual, out-of-pocket costs in handling such material, but in
no event shall Mallinckrodt be liable to King for the payment
of special, incidental, indirect or consequential damages,
even if advised of the possibility of such damages. It shall
be a condition of Mallinckrodt's obligation to reimburse King
hereunder that Mallinckrodt receive complete documentation
proving the nature and amount of out-of-pocket costs incurred
by King. Notwithstanding any other provision hereof,
Mallinckrodt makes no representation or warranty of any kind,
express or implied, as to the merchantability, fitness for a
particular purpose or as to any other matter with respect to
the Key Materials, whether used alone or in combination with
any other material.
(b) Mallinckrodt represents, warrants and guarantees to King that
Key Materials furnished to King hereunder are not, or will not
be (as appropriate):
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(i) in violation of Sections 5 or 12 of the Federal Trade
Commission Act or improperly labeled under applicable
Federal Trade Commission Trade Practice Rules,
(ii) in violation of any of the provisions of the Fair
Packaging and Labeling Act,
(iii) adulterated or misbranded within the meaning of the
federal Food, Drug and Cosmetic Act, as amended, or
within the meaning of any applicable state or
municipal law in which the definitions of
adulteration and misbranding are substantially
identical with those contained in the federal Food,
Drug and Cosmetic Act, or articles which may not
under the provisions of Sections 404 or 505 of said
Act be introduced into interstate commerce or which
may not under substantially similar provision of any
state or municipal law be introduced into commerce,
(iv) manufactured or sold in violation of the federal
Controlled Substances Act, as amended, or any
applicable state law,
(v) manufactured or sold in violation of any of the
provisions of the Fair Labor Standards Act of 1938,
as amended,
(vi) manufactured or sold in violation of The Occupational
Safety and Health Act of 1970, as amended,
(vii) manufactured in violation of any applicable federal,
state or local environmental law or regulation, or
(viii) manufactured in violation of any agreement
(commercial or otherwise), judgment, order or decree
to which Mallinckrodt is a party.
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15. Force Majeure.
Neither party to this Manufacturing Agreement shall be liable for or be
in breach of any provision hereof for any failure or delay on its part
to perform any obligation (other than the obligation to make payments
when due) under any provision of this Manufacturing Agreement because
of an event of "force majeure", including, but not limited to, any act
of God, fire, flood, explosion, unusually severe weather, war,
insurrection, riot, sabotage, or any other cause whatsoever, whether
similar or dissimilar to those enumerated herein, beyond any
possibility of control of such party, if and only if the party affected
shall have used all possible efforts under the circumstances to avoid
such occurrence and to remedy it promptly if it shall have occurred
and, further, if and only if any such occurrence is not the result of
any failure by a party to perform fully its obligations hereunder which
failure is not itself caused by an event of "force majeure."
Notwithstanding the immediately preceding sentence, the occurrence of
an event of "force majeure" shall have no effect whatsoever on the
obligations or responsibilities of King under and pursuant to the terms
of Sections 4.1(b) and 4.1(c) of the Asset Purchase Agreement or any
other provision thereof placing upon King any liability, obligation or
responsibility. Without prejudice to or effect upon Mallinckrodt's
rights under the Asset Purchase Agreement, if an event of force
majeure in any given contract year causes a failure or delay in
performance hereunder by King for more than thirty (30) continuous days
during any given contract year, Mallinckrodt, at its option, may (i)
reduce the total quantity of finished product to be manufactured and
delivered hereunder and the Minimum Manufacturing Fee otherwise due
hereunder equitably and proportional (A) to the amount of time during
such year that performance has been prevented by the event of force
majeure and (B) to the extent of deliveries or performance not made or
not accepted as a result of such event of force majeure or (ii) may, at
its option extend the delivery or performance period by the amount of
time during which such delivery or performance was omitted or delayed.
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16. Relationship of Parties.
For all purposes hereof, King shall be deemed to be an independent
contractor and this Manufacturing Agreement shall not create an agency,
partnership, joint venture, or employer/employee relationship, and
nothing hereunder shall be deemed to authorize either party to act for,
represent or bind the other or any of its affiliates except as
expressly provided in this Manufacturing Agreement.
17. Confidentiality.
(a) King and Mallinckrodt shall maintain in confidence and not use
or disclose to any third party, except as is specifically
contemplated herein or is otherwise necessary to perform their
respective obligations under this Manufacturing Agreement, and
then only on a confidential basis satisfactory to both
parties, any information, including without limitation
business and technical information, experience or data
regarding any facility, programs, laboratories, processes,
products, costs, equipment operation or customers, relating to
the manufacture or sale of finished product hereunder; in
particular, but without limitation, the aforestated obligation
of confidentiality as it relates to King applies to the
Proprietary Information as defined in Section 13 hereof and
the aforestated obligation of confidentiality as it relates to
Mallinckrodt applies to information concerning the Bristol
Facility and the King Business. The foregoing obligations of
confidentiality and non-use shall survive the termination or
expiration of this Manufacturing Agreement for a period of
five (5) years. Nothing herein shall prevent either party from
disclosing any information required by statute or governmental
regulations to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining
such information in confidence have been practically exhausted
or from using information which (i) has been published or has
become part of the public domain other than by acts, omissions
or fault of such party, (ii) was lawfully received by such
party from a third party free of any obligation of confidence
to such third party, (iii) or a party can demonstrate from its
records was already in its possession prior to receipt
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thereof, directly or indirectly, from the other party. The
party asserting the applicability of one of the exclusions
from the obligation of confidentiality set forth in the
immediately preceding sentence shall have the burden of
proving the applicability of any such exclusion in any
particular circumstance.
(b) Each party acknowledges that any breach by it of the
confidentiality obligations set forth in this Section 17 would
cause the other party irreparable harm for which compensation
by monetary damages would be inadequate and, therefore, the
party that has been harmed by any such breach shall have the
right to an injunction or decree for specific performance, in
addition to any other rights and remedies such party may have
at law or in equity.
18. Indemnification.
(a) King hereby agrees to indemnify, defend and hold harmless
Mallinckrodt and its affiliates from and against any and all
demands, claims, actions, causes of action, assessments,
losses, damages, injuries, liabilities, costs and expenses,
including without limitation, interest, penalties and
reasonable attorneys' fees and expenses (collectively
"Damages") asserted against, resulting to, imposed upon or
incurred by Mallinckrodt or its affiliates, directly or
indirectly related to, arising out of or resulting from:
(i) any breach or failure of any of the representations,
warranties and covenants of King contained herein,
including (without limitation) any breach or failure
by King to perform any obligation contained herein,
including without limitation the production of
finished product hereunder strictly in accordance
with the requirements of the applicable ANDAs (or
supplements thereto), applicable cGMP requirements,
applicable laws, rules and regulations (including
without limitation FDA and DEA rules and regulations)
and any other requirements set forth herein,
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(ii) any failure of King, or anyone acting on behalf of
King, to observe or comply with any applicable
laws, rules or regulations related in any fashion
to King's performance hereunder, including without
limitation the handling or disposal of any materials
or wastes generated by King in connection with its
performance hereunder,
(iii) any imposition of liability or notice of
responsibility issued by any federal, state or local
authority related to the handling or disposal of any
materials or wastes used or generated by King in
connection with its performance hereunder,
(iv) the use or handling of the finished product produced
hereunder, except to the extent that any Damages are
caused by the failure of Key Materials supplied by
Mallinckrodt to meet applicable specifications or
otherwise caused by the Key Materials,
(v) any claim, notice or governmental action affecting
King or the Bristol Facility, including without
limitation any requirement for action or the payment
of monies to remediate any environmental condition at
the Bristol Facility, and
(vi) any Damages arising as a consequence of any of the
following:
(A) a recall, withdrawal or suspension of any
product registration, product license,
manufacturing license (e.g. an NDA or ANDA),
or other governmental license, approval or
consent with respect to any products
manufactured under this Manufacturing
Agreement,
(B) any injunction or other order issued by any
court of appropriate jurisdiction which
requires King or Mallinckrodt to recall
products manufactured under this
Manufacturing Agreement or requires King to
suspend its operations pending further
approval or authorization from
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a governmental official or agency or which
otherwise has a material adverse effect on
King's performance hereunder, or
(C) King, or any of its employees or affiliates,
is debarred under relevant sections of the
federal Food, Drug and Cosmetic Act or is
convicted of or formally charged with a
criminal offense relating to the development
or approval process or the manufacture or
sale of any drug or pharmaceutical product
or is otherwise convicted of or charged with
violation of any law that could subject it,
or them, to criminal penalty.
(b) Subject to the conditions and limitations set forth in Section
14 hereof, Mallinckrodt hereby agrees to indemnify, defend and
hold harmless King from and against any and all Damages
asserted against, resulting to, imposed upon or incurred by
King, directly or indirectly related to, arising out of or
resulting from:
(i) any breach or failure of any of the representations
and warranties of Mallinckrodt contained herein,
(ii) any breach or any failure of Mallinckrodt to perform
any obligation herein,
(iii) any Damages caused by the failure of Key Materials
supplied by Mallinckrodt to meet applicable
specifications, or otherwise caused by the Key
Materials, and
(iv) any Damages, to the extent and only to the extent
related to the Key Materials, arising as a
consequence of the following:
(A) a recall, withdrawal, or suspension of any
product registration, product license,
manufacturing license, or
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other governmental license, approval or
consent with respect to the production Key
Materials by Mallinckrodt, or
(B) any injunction or other order issued by any
court of appropriate jurisdiction which
requires Mallinckrodt to suspend its
operations relative to the production of Key
Materials pending further approval or
authorization from a governmental official
or agency or which otherwise has a material
adverse effect on Mallinckrodt's performance
hereunder.
(c) In the event that the Indemnified Party shall reasonably
believe that it has a claim for Damages ("Damage Claim"), it
shall give prompt notice in accordance herewith to the
Indemnifying Party of the nature and extent of such Damage
Claim and the Damages incurred by it. If the Damages are
liquidated in amount, the notice shall so state, and such
amount shall be deemed the amount of such Damage Claim of the
Indemnified Party against the Indemnifying Party (subject to
the right of the Indemnified Party to submit claims for
additional Damages incurred after the date of any such
notice). If the amount is not liquidated, the notice shall so
state and, in such event, such Damage Claim shall be deemed
asserted against the Indemnifying Party, but no payment or
satisfaction shall be made on account thereof until the amount
of such claim is liquidated.
(d) If the Indemnifying Party shall not, within thirty (30) days
after the giving of such notice by the Indemnified Party,
notify the Indemnified Party in accordance herewith that the
Indemnifying Party disputes the right of the Indemnified Party
to indemnity in respect of such Damage Claim, then any such
Damage Claim shall be paid or satisfied as follows: (i) if
said Damage Claim is liquidated, the full amount of Damages
associated with such Damage Claim shall be paid to the
Indemnified Party by the Indemnifying Party at the end of such
thirty (30) day period, or (ii) if the amount of such Damage
Claim is unliquidated at the time notice is
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originally given to the Indemnifying Party, the Indemnified
Party shall give a second notice to the Party when the
liquidated amount of such Damage Claim is known and, unless
the Indemnifying Party shall object in writing to such amount
(as opposed to the Damage Claim itself, as to which the right
to dispute had expired) within twenty (20) days after the
giving of said second notice, then payment of the Damages
associated with such Damage Claim shall be made by the
Indemnifying Party to the Indemnified Party at the end of such
twenty (20) day period.
(e) Any portion of the amount of Damages asserted by an
Indemnified Party in connection with a Damage Claim shall, if
not objected to by the Indemnifying Party in accordance with
the procedures established herein, be considered to be subject
to satisfaction by payment without further objection.
(f) If an Indemnifying Party shall notify the Indemnified Party
that it disputes any Damage Claim or the amount thereof (which
notice shall only be given if the Indemnifying Party has a
good faith belief that the Indemnified Party is not entitled
to indemnity or the full amount of indemnity as claimed) then
the parties hereto shall endeavor to settle and compromise
such claim, or may agree to submit the same to arbitration,
and, if unable to agree on any settlement or compromise or on
submission to arbitration, such claim shall be settled by
appropriate litigation, and any liability and the amount of
the Damages established by reason of such settlement,
compromise, arbitration or litigation, or incurred as a result
thereof, shall be paid and satisfied as provided herein.
(g) An Indemnified Party will promptly give notice to the
Indemnifying Party of any claim of a third party which may
reasonably be expected to result in a Damage Claim by the
Indemnified Party. An Indemnifying Party shall have the right
to direct the defense, compromise or settlement of such claim
with counsel selected by it, provided the Indemnifying Party
gives written notice to the Indemnified Party of its election
to do so within twenty (20) days after receipt of notice in
accordance with the preceding
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sentence. If the Indemnifying Party fails to so notify the
Indemnified Party of its election to defend any such third
party claim the Indemnified Party will (upon further notice
to the Indemnifying Party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of
and for the account and expense of the Indemnifying Party,
subject to the right of the Indemnifying Party to assume the
defense of such claim at any time prior to settlement,
compromise or final determination thereof if and only if such
assumption would not prejudice the defense of such claim or
the rights of the Indemnified Party.
(h) In the event an Indemnifying Party has assumed the defense of
any such claim, the Indemnified Party shall nonetheless have
the right to select its own counsel and participate in the
defense of such claim at and for its own expense and account,
subject to the right of the Indemnifying Party to retain
ultimate control of the management of the defense of such
claim, and further subject to the obligation of the
Indemnified Party reasonably to cooperate in all respects with
the Indemnifying Party for the effective defense of such
claim. Counsel for the Indemnified Party in such circumstances
shall consult and cooperate with counsel for the Indemnifying
Party in defending against any such third party claim.
(i) An Indemnifying Party shall not under any circumstances,
without the written consent of the Indemnified Party, settle
or compromise any claim or consent to the entry of any
judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of
such claim, in form and substance reasonably satisfactory to
the Indemnified Party.
(j) Notwithstanding anything to the contrary contained herein, if
a third party claim is made which the third party is
unequivocally willing to settle for the payment of money but
the Indemnified Party elects not to settle, then the
Indemnifying Party shall not be liable hereunder with respect
to any Damage Claim arising from such third party claim for
more than the amount which such third party at any time
unequivocally agrees in writing
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to accept in payment or compromise of the claim plus any
related costs and expenses incurred by the Indemnified Party
as of the date of such offer of settlement.
19. Term and Termination.
(a) Unless sooner terminated in accordance herewith, the initial
term of this Manufacturing Agreement shall commence on
December 13, 1995 and shall end on December 31, 2000, and
shall automatically be renewed for consecutive one (1) year
periods thereafter unless either party shall give written
notice to the other party, at least six (6) months prior to
the end of the initial term or any renewal term, that it does
not wish the Manufacturing Agreement to be renewed.
(b) This Manufacturing Agreement may be terminated by either party
for cause upon written notice to the other. For purposes of
the preceding sentence, "cause" shall mean (without
limitation): (i) any material breach of this Agreement by a
party which shall go uncorrected for a period of sixty (60)
days after written notice of such breach has been given to the
defaulting party, (ii) the institution by a party of voluntary
proceedings in bankruptcy or under any insolvency law or law
for the relief of debtors, (iii) the making by a party of an
assignment for the benefit of creditors or any dissolution or
liquidation, (iv) the filing of an involuntary petition under
any bankruptcy or insolvency law against a party, unless such
petition is dismissed or set aside within sixty (60) days from
the date of its filing, or (v) the appointment of a receiver
or trustee for the assets or business of a party, unless such
appointment is dismissed or set aside within sixty (60) days
from the date of such appointment.
(c) Notwithstanding subsection (b) set forth immediately above,
Mallinckrodt shall additionally have the right to terminate
this Manufacturing Agreement effective immediately upon
written notice to King in the event that (i) King suffers a
suspension of any product registration, product license,
manufacturing license (e.g., an NDA or ANDA), or other
43
<PAGE> 44
governmental license, approval or consent with respect to any
of its dosage pharmaceutical products, (ii) to the extent it
may adversely effect King's performance hereunder, King
suffers any injunction or other order issued by any court of
appropriate jurisdiction which requires it to recall products
or suspend its operations with respect to some or all of its
dosage pharmaceutical products pending further approval or
authorization from a governmental official or agency or which
otherwise has a material adverse effect on its dosage
pharmaceutical operations of any sort, or (iii) King, or any
of its employees or affiliates, is debarred under relevant
sections of the federal Food, Drug and Cosmetic Act or is
convicted of or formally charged with a criminal offense
relating to the development or approval process or the
manufacture or sale of any drug or pharmaceutical product or
is otherwise convicted of or charged with violation of any law
that could subject it, or them, to criminal penalty, (iv)
King is otherwise, on a consistent basis, not in material
compliance with any laws, rules, and regulations relative to
production hereunder or the performance of its obligations
hereunder, (v) King is unable or unwilling to produce
finished product conforming to all applicable specifications
and the requirements hereof as and when reasonably requested
by Mallinckrodt, (vi) an event of force majeure (as described
in Section 15 hereof) prevents full performance by King
hereunder on a consecutive basis for a period of one hundred
twenty (120) days, or (vii) King has repeatedly and
materially breached its obligations hereunder.
(d) The representations and warranties of the parties hereunder,
covenants which by their terms have effect after the
termination or expiration hereof, and the parties'
indemnification and confidentiality obligations shall survive
termination or expiration of this Manufacturing Agreement.
20. Assistance by King.
Upon termination of this Manufacturing Agreement by either party or at
any time during the term hereof, King agrees to supply, upon
Mallinckrodt's written request and at Mallinckrodt's sole expense,
reasonable assistance to Mallinckrodt
44
<PAGE> 45
or Mallinckrodt's designated representative in the manufacture of
finished dosage form products relative to the Current Products and the
Future Products by Mallinckrodt or Mallinckrodt's designated
representative.
21. Subcontracting.
King shall not subcontract or delegate performance of any of its
obligations under this Manufacturing Agreement without the prior
written consent of Mallinckrodt.
22. Remedies Cumulative.
The remedies provided in this Manufacturing Agreement shall be
cumulative and shall not preclude assertion by any party hereto of any
other rights (whether legal or equitable in nature) or the seeking of
any other remedies against any other party hereto.
23. Binding Effect and Assignment.
This Manufacturing Agreement shall inure to the benefit of and be
binding upon the parties hereto, their successors and assigns;
provided, however that neither party shall, without the prior written
consent of the other party, assign or transfer any of its rights,
benefits, obligations, or other interest under this Manufacturing
Agreement to any other party.
24. Notice.
All notices, consents, approvals or other notifications required to be
sent by one party to the other party hereunder shall be in writing and
shall be deemed served upon the other party if delivered by hand or
sent by United States registered or certified mail, postage prepaid,
with return receipt requested, addressed to such other party at the
address set out below, or the last address of such party as shall have
been communicated to the other party. If a party changes its address,
written notice shall be given promptly to the other party of the new
address. Notice shall be deemed given on the day it is mailed (in the
case of delivery by
45
<PAGE> 46
mail) or the date of delivery (in the case of delivery by hand) in
accordance with the provisions of this paragraph. The addresses for
notices are as follows:
If to Mallinckrodt:
Mallinckrodt Chemical, Inc.
16305 Swingley Ridge Drive
Chesterfield, Missouri 63017
Attention: Michael J. Collins, Group Vice President,
Pharmaceutical Specialties Group
with a copy to:
Mallinckrodt Chemical, Inc.
16305 Swingley Ridge Drive
Chesterfield, Missouri 63017
Attention: Jake A. Larimer
Vice President and General Counsel
If to King:
King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Attention: John M. Gregory, President
with a copy to:
King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Attention: John A.A. Bellany,
Vice President and General Counsel
46
<PAGE> 47
25. Governing Law and Jurisdiction
This Agreement shall be governed by and construed in accordance with
the substantive and procedural laws (as opposed to the conflicts of law
provisions of the State of Tennessee. In the event King initiates an
action against Mallinckrodt, such action shall be brought in either
the United States District Court for the Eastern District of Missouri
or in the state courts of Missouri and King hereby consents to personal
jurisdiction in said courts. King waives any and all rights to object
on any basis (including inconvenience of forum) to the jurisdiction of
such courts for the purpose of such litigation to enforce this
Agreement or any rights of Mallinckrodt with respect to the subject
matter hereof. In the event Mallinckrodt initiates an action against
King, such action shall be brought in the United States District Court
of the Eastern District of Tennessee in Greenville, Tennessee or in any
state court sitting in Sullivan County, Tennessee or in Washington
County, Tennessee and Mallinckrodt hereby consents to personal
jurisdiction in said courts. Mallinckrodt waives any and all rights to
object on any basis (including inconvenience of forum) to the
jurisdiction of such courts for the purpose of such litigation to
enforce this Agreement or any rights of King with respect to the
subject matter hereof.
26. Waiver.
The failure by any party to exercise any of its rights hereunder or to
enforce any of the terms or conditions of this Manufacturing Agreement
on any occasion shall not constitute or be deemed a waiver of that
party's rights thereafter to exercise any rights hereunder or to
enforce each and every term and condition of this Manufacturing
Agreement.
27. Modifications.
This Manufacturing Agreement may not be modified except by a writing
specifically referring to this Manufacturing Agreement and executed by
duly authorized representatives of both parties. The obligations of the
parties are governed by the terms and conditions of this Manufacturing
Agreement and none
47
<PAGE> 48
of the general terms and conditions of any Mallinckrodt purchase order
or any King acknowledgement or any substantially similar documents of
either party will in any case be controlling or supersede the
provisions hereof.
28. Precedence.
In the event of any conflict or inconsistency between the terms of
this Manufacturing Agreement and the Asset Purchase Agreement, the
latter shall prevail.
29. Severability.
A determination that any portion of this Manufacturing Agreement is
unenforceable or invalid shall not affect the enforceability or
validity of any of the remaining portions hereof or of this
Manufacturing Agreement as a whole. In the event that any part of any
of the covenants, sections or provisions herein may be determined by a
court of law or equity to be overly broad or against applicable
precedent or public policy, thereby making such covenants, sections or
provisions invalid or unenforceable, the parties shall attempt to reach
agreement with respect to a valid and enforceable substitute for the
deleted provisions, which shall be as close in its intent and effect as
possible to the deleted portions.
30. Headings.
The parties agree that the section and article headings are inserted
only for ease of reference, shall not be construed as part of this
Manufacturing Agreement, and shall have no effect upon the construction
or interpretation of any part hereof.
31. Counterparts.
This Manufacturing Agreement may be executed in several counterparts,
and each executed counterpart shall be considered an original of this
Manufacturing Agreement.
48
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Manufacturing
Agreement to be executed as of the day and year first above written.
KING PHARMACEUTICALS, INC MALLINCKRODT CHEMICAL, INC.
By:/s/ John M. Gregory By:/s/ Richard T. Higgons
------------------------------- ---------------------------------------
John M. Gregory, President Richard T. Higgons,
Vice President Strategic Development
49
<PAGE> 50
Schedule l(a)
Report Form for Hydrocodone Bitartrate Usage and Availability
<TABLE>
<CAPTION>
Kilograms of H ydrocodone
Date Lot Number Bitartrate Used Remaining Quota
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1/l/96 X kg.
1/8/96 ZZZ Y X-Y kg.
</TABLE>
<PAGE> 51
FIRST AMENDMENT
TO THE
TOLL MANUFACTURING AGREEMENT
FOR
APAP/HYDROCODONE BITARTRATE TABLETS
THIS AMENDMENT ("Amendment") dated as of February 14, 1997, is entered
into by and between Mallinckrodt Chemical, Inc. ("Mallinckrodt,") a Delaware
corporation, and King Pharmaceuticals, Inc. ("King") a Tennessee corporation.
WHEREAS, Mallinckrodt and King entered into and executed a Toll
Manufacturing Agreement for APAP/Hydrocodone Bitartrate Tablets (the
"Manufacturing Agreement") dated December 13, 1995; and
WHEREAS, the Manufacturing Agreement provides that King shall abide
by certain negative covenants, including a covenant that King shall not encumber
particular assets used in connection with King's performance under the
Manufacturing Agreement; and
WHEREAS, Mallinckrodt and King now desire that King be released from
certain negative covenants and restrictions contained in the Manufacturing
Agreement as herein specified, in consideration of Mallinckrodt being granted an
option to terminate the Manufacturing Agreement prior to commencement of the
fifth contract year of same at no additional cost, along with the alternative
option to continue the Manufacturing Agreement for three (3) years additional to
the current term of the Manufacturing Agreement, which expires on December 31,
2000, with the Minimum Manufacturing Fee for said additional three (3) years
being equal to the Minimum Manufacturing Fee for the Fifth contract year of the
Manufacturing Agreement as provided in this Amendment; and
WHEREAS, as additional consideration for King's release from said
covenants and restrictions as specified herein, John Gregory, CEO and
Chairman of the Board of King, has agreed to personally guarantee payment by
King to Mallinckrodt of any liabilities, costs and expenses, up to a total
maximum liability, including costs and expenses, of Two Million Dollars
<PAGE> 52
($2,000,000.00), arising from King's failure to perform its obligations under
the Manufacturing Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties hereinafter contained, the parties hereto agree
pursuant to Section 27 of the Manufacturing Agreement, to modify, amend and
supplement the Manufacturing Agreement as follows:
1. Line items (ii)-(v) of Section 6(a) of the Manufacturing Agreement shall
be amended, and line item (vi) shall be added, to provide for the purchase
by Mallinckrodt of a guaranteed number of whole batches at the established
Tolling Fee yielding a Minimum Manufacturing Fee as follows:
<TABLE>
<CAPTION>
Contract Year Guaranteed Minimum Minimum Manufacturing Fee
Number of Batches
<S> <C> <C>
(ii) second contract year 200 $1,000,000,
(iii) third contract year 250 $1,250,000,
(iv) fourth contract year 300 $1,500,000,
(v) fifth contract year 300 $1,500,000,
(vi) sixth, seventh and 300 $1,500,000.
eighth contract years (if applicable)
</TABLE>
2. Section 11 (e) of the Manufacturing Agreement shall he amended to read
in its entirety as follows:
Unless Mallinckrodt gives King its written consent (which consent
shall not, without business reason to Mallinckrodt, be withheld) King
will not engage in any transaction whereby it (i) merges with any
other person, firm or entity, or (ii) sells all, substantially all or a
substantial portion of its assets to any person, firm or entity.
3. The first sentence of Section 101(g) of the Manufacturing Agreement
shall be amended to read in its entirety as follows:
2
<PAGE> 53
King shall maintain a debt to city of no greater than three and one
half to one(3.5/1).
4. The first sentence of Section 11 (h) of the Manufacturing Agreement
shall be deleted in its entirety from Section 11 (h), and for the avoidance of
doubt, the sentence to be deleted follows:
King will not create, assume or suffer to exist on any of its assets
used in any manner in connection with King's performance hereunder any
mortgage, lien, pledge, security interest or encumbrance of any kind,
except for (i) liens for current taxes not yet due, (ii) those existing
liens set forth on Exhibit G attached hereto, and (iii) leases for
equipment to be usual in connection with the King Business for
manufacturing, development analytical and general office management
purposes.
5. Section 19(a) of the Manufacturing Agreement shall be amended by
adding the following at the end of the current text of said subsection:
Notwithstanding the foregoing, Mallinckrodt shall have the options and
right to terminate this Manufacturing Agreement on and as of December
31, 1999, at the end of the fourth year of the initial term at no
additional cost to Mallinckrodt, by providing written notice to King
prior to or on June 30, 1999, of Mallinckrodt's exercise of such option
to terminate the Manufacturing Agreement on and as of December 31,
1999. In the event that Mallinckrodt elects not to exercise such option
of early termination of this Manufacturing Agreement as set forth in
the immediate preceding sentence, Mallinckrodt shall have the option
and right to extend the initial term of this Manufacturing Agreement
for up to three (3) additional years ("Extension Option"), based on and
in accordance with all terns and conditions of this Manufacturing
Agreement relevant to the fifth and later years of the initial term.
Mallinckrodt may exercise the Extension Option by providing written
notice to King, at least six (6) months prior to the end of the
initial term, of Mallinckrodt's intent to extend the Manufacturing
Agreement for a specified number of years, not to exceed three (3)
years.
6. As an additional inducement to Mallinckrodt to modify and amend the
Manufacturing Agreement in the manner set forth herein, John M. Gregory, CEO
and Chairman of the Board of King, has agreed to execute a personal guaranty to
Mallinckrodt, up to a maximum liability of Two Million Dollars ($2,000,000.00),
in the form attached hereto as Exhibit A. It is understood that Mallinckrodt
accepts and is expressly relying upon the promises, covenants and affirmations
set forth in said personal guaranty in entering into this Amendment.
3
<PAGE> 54
7. All representations and warranties made the parties in this Amendment,
or delivered pursuant hereto, are incorporated in and constitute a part of the
Manufacturing Agreement. Any provision or term of this Amendment which may be
interpreted or perceived to conflict with or be inconsistent with any provision
or term, of the Manufacturing Agreement, although not specifically referenced in
this Amendment, or the Asset Purchase Agreement (the "Asset Purchase Agreement")
dated December 13, 1995, between Mallinckrodt, King, and King Pharmaceuticals of
Nevada, Inc., shall be interpreted to supersede any such conflicting or
inconsistent provision or term of the Manufacturing Agreement or the Asset
Purchase Agreement.
8. Except as specifically modified and amended hereby, all terms of the
Manufacturing Agreement shall remain in full force and effect.
IN WITNESS WHEREOF the parties hereto, by and through their duly
authorized representatives have executed this Amendment, as of the day and year
first above written.
KING PHARMACEUTICALS, INC.
By:/s/ John M. Gregory
-------------------------------------------------
John M. Gregory
Chief Executive Officer and Chairman of the Board
MALLINCKRODT CHEMICAL, INC.
By:/s/ Michael J. Collins
------------------------------------------------
Michael J. Collins
President, Pharmaceutical Specialities Division,
Mallinckrodt, Inc.
4
<PAGE> 55
EXHIBIT A
GUARANTY
Given this 14th day of February, 1997, by JOHN M. GREGORY, the
undersigned ("Guarantor"), to induce Mallinckrodt Chemical, Inc.
("Mallinckrodt"), to enter into the Amendment to the Toll Manufacturing
Agreement for APA,/Hydrocodone Bitartrate Tablets (the "Amendment") of even
date herewith, between Mallinckrodt and King Pharmaceuticals, Inc.
("King").
1. Obligation. The undersigned hereby guarantees to Mallinckrodt
payment by King of any liabilities, costs and expenses, up to a total maximum
liability, including costs and expenses, of Two Million Dollars ($2,000,000.00),
arising from any default by King in the performance of King's representations,
warranties and obligations to Mallinckrodt under the terms of the Toll
Manufacturing Agreement (the "Manufacturing Agreement") dated December 13, 1995,
between Mallinckrodt and King, but only on the condition that, in the event King
defaults in the performance of King's representations, warranties and
obligations under the Manufacturing Agreement, Mallinckrodt shall take
appropriate steps (but not beyond the issuance or return of an execution on
judgment) pursuant to the Manufacturing Agreement to recover from King so much
of the liability, costs and expenses arising from such default as can thereby
reasonably be obtained, before requiring payment of any part thereof from the
undersigned.
2. Term. This instrument shall constitute a continuing guaranty
covering the payment of all liabilities, costs and expenses arising from any
default by King in the performance of King's representations, warranties and
obligations under the Manufacturing Agreement, up to a maximum liability of Two
Million Dollars ($2,000,000.00), and shall be binding upon the undersigned until
King's fulfillment of all of its obligations under the Manufacturing
Agreement and termination or expiration of the Manufacturing Agreement in
accordance with the terms therein.
3. Applicable Law. This Guaranty has been delivered to Mallinckrodt in
the State of Tennessee and shall be construed and enforced in accordance with
the laws thereof without regard to its rules with respect to choice of law. No
provisions of this Guaranty may be
<PAGE> 56
modified, deleted, waived, or amended in any manner except by an agreement in
writing executed by the parties.
IN WITNESS WHEREOF the Guarantor has duly signed this Guaranty on the
date stated above with the firm intention to be bound by the terms thereof and
with the understanding that Mallinckrodt, as the beneficiary of this Guaranty,
is relying thereon.
GUARANTOR:
/s/ JOHN M. GREGORY
---------------------------
John M. Gregory
2
<PAGE> 1
EXHIBIT 10.15
================================================================================
$52,000,000
CREDIT AGREEMENT
AMONG
KING PHARMACEUTICALS, INC.,
AS BORROWER,
THE LENDERS SIGNATORIES HERETO,
THE PERSONS FROM TIME TO TIME ACTING
AS LETTER OF CREDIT ISSUERS HEREUNDER,
AND
GENERAL ELECTRIC CAPITAL CORPORATION,
AS AGENT
DATED NOVEMBER 26, 1997.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
COMMITMENT..................................................................................................... 1
Section 1.1. Commitments.................................................................................. 1
Section 1.2. Borrowing Options; Method of Borrowing.............................................. 2
Section 1.3. Evidence of Indebtedness............................................................ 3
Section 1.4. Interest............................................................................ 4
Section 1.5. Commitment and Other Fees........................................................... 4
Section 1.6. Repayment of Loans.................................................................. 5
Section 1.7. Reductions of Commitments........................................................... 5
Section 1.8. Computation of Interest and Fees.................................................... 7
Section 1.9. Maximum Interest Rate............................................................... 7
Section 1.10. Manner of Payment; Application of Payments.......................................... 7
Section 1.11. Return of Payments.................................................................. 7
LETTERS OF CREDIT.............................................................................................. 8
Section 2.1. Letters of Credit................................................................... 8
Section 2.2. Manner of Issuance.................................................................. 8
Section 2.3. Drawings Under Letters of Credit.................................................... 9
Section 2.4. Letter of Credit Fees; Administrative Fees; Interest................................ 11
Section 2.5. Limitation of Liability With Respect To Letters of Credit........................... 11
CONDITIONS TO EXTENSIONS OF CREDIT ............................................................................ 13
Section 3.1. Conditions to Initial Extension of Credit .......................................... 13
Section 3.2. Conditions to Issuance of Letters of Credit......................................... 16
Section 3.3. Conditions to Each Extension of Credit.............................................. 16
CERTAIN REPRESENTATIONS AND WARRANTIES OF BORROWER ............................................................ 18
Section 4.1. Organization; Power; Qualification; Subsidiaries.................................... 18
Section 4.2. Authorization and Compliance of Agreement, Notes and Extensions of Credit........... 18
Section 4.3. Litigation.......................................................................... 19
Section 4.4. Burdensome Provisions............................................................... 19
Section 4.5. No Adverse Change or Event.......................................................... 19
Section 4.6. No Adverse Fact..................................................................... 20
Section 4.7. Title to Properties................................................................. 20
Section 4.8. Environmental Matters............................................................... 20
Section 4.9. Debt................................................................................ 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 4.10. Patents, Trademarks, Etc............................................................ 20
Section 4.11. Solvency............................................................................ 20
Section 4.12. Security Interest................................................................... 21
Section 4.13. The Questionnaire................................................................... 21
Section 4.14 Labor Matters....................................................................... 21
Section 4.15. Governmental Regulation............................................................. 21
Section 4.16. Margin Regulations.................................................................. 22
Section 4.17. Taxes............................................................................... 22
Section 4.18. ERISA............................................................................... 22
Section 4.19. Brokers............................................................................. 23
COVENANTS...................................................................................................... 24
Section 5.1. Preservation of Existence and Properties, Scope of Business, Compliance with Law,
Payment of Taxes and Claims......................................................... 24
Section 5.2. Insurance........................................................................... 24
Section 5.3. Use of Proceeds..................................................................... 25
Section 5.4. Environmental Matters............................................................... 25
Section 5.5. Guaranties.......................................................................... 26
Section 5.6. Liens............................................................................... 26
Section 5.7. Merger, Consolidation, Acquisitions and Disposition of Assets....................... 26
Section 5.8. Transactions with Affiliates/Certain Account Debtors................................ 27
Section 5.9. Taxes of Other Persons.............................................................. 27
Section 5.10. Limitation on Restrictive Covenants................................................. 28
Section 5.11. Issuance or Disposition of Capital Securities....................................... 28
Section 5.12. Permitted Debt...................................................................... 28
Section 5.13. Limitations on Investments, Loans and Advances...................................... 28
Section 5.14. Additional Subsidiaries............................................................. 29
Section 5.15. Minimum Consolidated Net Worth...................................................... 30
Section 5.16. Leverage Ratio...................................................................... 30
Section 5.17. Interest Coverage Ratio............................................................. 30
Section 5.18. Fixed Charge Coverage Ratio......................................................... 30
Section 5.19. Capital Expenditures................................................................ 31
Section 5.20. Restricted Payments................................................................. 31
INFORMATION.................................................................................................... 32
Section 6.1. Financial Statements and Information to be Furnished................................ 32
Section 6.2. Accuracy of Financial Statements and Information.................................... 34
Section 6.3. Additional Covenants Relating to Disclosure......................................... 36
DEFAULT ....................................................................................................... 37
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 7.1. Events of Default................................................................... 37
Section 7.2. Remedies upon Event of Default...................................................... 39
CHANGES IN CIRCUMSTANCES ...................................................................................... 41
Section 8.1. Mandatory Suspension and Conversion of Eurodollar Rate Loans........................ 41
Section 8.2. Regulatory Changes.................................................................. 41
Section 8.3. Change of Lending Office............................................................ 42
Section 8.4. Funding Losses...................................................................... 43
Section 8.5. Determinations...................................................................... 43
THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND THE
LETTER OF CREDIT BANKS ............................................................................... 44
Section 9.1. Appointment and Authorization....................................................... 44
Section 9.2. Agent and Affiliates; Letter of Credit Issuer and Affiliates........................ 44
Section 9.3. Action by Agent and Letter of Credit Issuer......................................... 44
Section 9.4. Consultation with Experts........................................................... 45
Section 9.5. Liability of the Agent and Letter of Credit Issuers................................. 45
Section 9.6. Indemnification..................................................................... 45
Section 9.7. Credit Decision..................................................................... 45
Section 9.8. Successor Agent..................................................................... 46
Section 9.9. Security Documents, Etc............................................................. 46
INTERPRETATION ................................................................................................ 47
Section 10.1. Interpretation...................................................................... 47
Section 10.2. Accounting Matters.................................................................. 68
Section 10.3. Classes of Extensions of Credit and Types of Loans.................................. 68
Section 10.4. Captions............................................................................ 68
MISCELLANEOUS.................................................................................................. 69
Section 11.1. Notices............................................................................. 69
Section 11.2. Expenses; Indemnification........................................................... 71
Section 11.3. Rights Cumulative................................................................... 72
Section 11.4. Disclosure.......................................................................... 72
Section 11.5. Waivers; Amendments................................................................. 72
Section 11.6. Set-Off............................................................................. 73
Section 11.7. Assignment and Participations....................................................... 74
Section 11.8. Governing Law....................................................................... 76
Section 11.9. Judicial Proceedings; Waiver of Jury Trial.......................................... 76
Section 11.10. Severability of Provisions.......................................................... 77
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Section 11.11. Counterparts........................................................................... 77
Section 11.12. Entire Agreement....................................................................... 77
Section 11.13. Survival of Obligations................................................................ 77
Section 11.14. Successors and Assigns................................................................. 77
Section 11.15. Limitation of Liability................................................................ 77
</TABLE>
<PAGE> 6
TABLE OF CONTENTS
Exhibit A-1 Form of Eurodollar Revolving Note
Exhibit A-2 Form of Base Rate Revolving Note
Exhibit B-1 Form of Eurodollar Term Note
Exhibit B-2 Form of Base Rate Term Note
Exhibit C Form of Security Agreement
Exhibit D Form of Pledge Agreement
Exhibit E Form of Guaranty Agreement
Exhibit F Form of Subsidiary Security Agreement
Exhibit G Form of Subsidiary Pledge Agreement
Exhibit H Form of Mortgage
Exhibit I Form of Trademark Security Agreement
Exhibit J Form of Subsidiary Trademark Security Agreement
Exhibit K Form of Patent Security Agreement
Exhibit L Form of Credit Party Questionnaire
Schedule 1.2(b) Form of Notice of Borrowing
Schedule 3.1(a) Form of Certificate of the Secretary or an Assistant
Secretary of the Borrower
Schedule 3.1(b)-1 Form of Certificate of Secretary or Assistant
Secretary of Guarantor (Monarch)
Schedule 3.1(b)-2 Form of Certificate of Secretary or Assistant
Secretary of Guarantor (King of Nevada)
Schedule 3.1(c)-1 Form of Borrower's Closing Certificate (Monarch)
Schedule 3.1(c)-2 Form of Guarantor's Closing Certificate (King of
Nevada)
Schedule 3.1(c)-3 Form of Guarantor's Closing Certificate
Schedule 3.1(h) Form of Opinion of Borrower's and Guarantors' Counsel
Schedule 4.1 Schedule of Subsidiaries
Schedule 4.2 Schedule of Consents and Approvals
Schedule 4.3 Schedule of Litigation
Schedule 4.4 Burdensome Provisions
Schedule 4.7 Schedule of Existing Liens
Schedule 4.8 Environmental Matters
Schedule 4.9 Agreements Relating to Debt of Borrower and
Subsidiaries
Schedule 5.1 Schedule of Real Estate Holdings
Schedule 5.2 Schedule of Acceptable Insurance
Schedule 5.5 Schedule of Existing Guaranties
Schedule 5.10 Schedule of Contracts with Permitted Restrictive
Covenants
Schedule 6.1(a) Form of Certificate of Borrower with respect to
Quarterly Financial Statements
<PAGE> 7
Schedule 6.1(b) Form of Certificate of the Borrower as to Annual
Financial Statements
Schedule 6.1(c)(v) Form of Certificate of the Borrower as to Borrowing
Base
Schedule 6.1(c)(vi) Form of Certificate of the Borrower as to Monthly
Income Statements
Schedule 6.2 Schedule of Historical Financial Information
Schedule 10.1(a) Disbursement Account
Schedule 11.7 Assignment and Assumption Agreement
<PAGE> 8
CREDIT AGREEMENT
DATED NOVEMBER 26, 1997
KING PHARMACEUTICALS, INC., a Tennessee corporation (the
"Borrower"), the banks and financial institutions signatories hereto (the
"Lenders"), and any assignees that may become "Lenders" as provided herein,
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent (the
"Agent") and in its individual capacity ("GECC"), and any person that may from
time to time hereafter be designated by the Agent and the Borrower to serve as a
letter of credit issuer hereunder (each a "Letter of Credit Issuer" and,
collectively, the "Letter of Credit Issuers"), agree as follows (with certain
terms used herein being defined in Article X):
1.
COMMITMENT
Section 1.1 Commitments.
(a) Lenders' Commitments. Upon the terms and subject to the
conditions set forth herein, each of the Lenders severally, and not jointly,
agrees:
(i) from the Agreement Date to but excluding the Revolving
Credit Commitment Termination Date, to make Revolving Loans as provided
in Section 1.2 and to purchase participations in Letters of Credit
issued from time to time by a Letter of Credit Issuer, in an aggregate
principal amount at any time outstanding not to exceed the lesser of
(A) such Lender's Revolving Credit Commitment and (B) such Lender's
Proportionate Share of the Borrowing Base, and provided that the
outstanding amount of Letter of Credit Obligations arising under
Letters of Credit does not exceed at any time $3,000,000 (the "Letter
of Credit Commitment"), and provided further that the aggregate
outstanding amount of Revolving Loans plus the aggregate outstanding
amount of Letter of Credit Obligations, shall not exceed at any time
$12,000,000, as such amount may be reduced from time to time in
accordance with Section 1.7; and
(ii) from the Agreement Date to but excluding the Term Loan
Commitment Termination Date, to make Term Loans as provided in Section
1.2 in an aggregate outstanding amount not to exceed such Term Loan
Commitment, provided that the aggregate amount of the Term Loan
Commitments shall not exceed at any time $40,000,000, as such amount
may be reduced from time to time in accordance with Section 1.7.
(b) Letter of Credit Issuers' Commitment. Upon the terms and
subject to the conditions set forth herein and in any agreement pursuant to
which it may agree to serve as a Letter of
<PAGE> 9
Credit Issuer, each Letter of Credit Issuer agrees to issue, and to sell
participations in, its Letters of Credit as provided in Section 2.1.
(c) Proportional Participation. Each Lender shall make a Loan
with respect to each Borrowing and shall purchase a participation in each Letter
of Credit in the amount of its Proportionate Share of such Borrowing or Letter
of Credit.
Section 1.2 Borrowing Options; Method of Borrowing.
(a) Borrowing Options. Loans of any Class, at the option of
the Borrower, may be made as one or more Base Rate Borrowings or Eurodollar
Borrowings, or any combination thereof. Each Base Rate Borrowing shall be in a
minimum amount of $100,000. Each Eurodollar Borrowing shall be in a minimum
amount of $1,000,000 and in greater whole multiples of $100,000. There shall at
no time be in effect more than five Eurodollar Borrowings.
(b) Method of Borrowing. Whenever the Borrower desires to
incur a Borrowing it shall give the Agent notice of such requested Borrowing(s)
in the form of Schedule 1.2(b) (a "Notice of Borrowing") (which shall be
irrevocable), in the case of the incurrence of a Base Rate Borrowing one
Business Day, and in the case of the incurrence of a Eurodollar Borrowing, three
Business Days, before the requested date of such Borrowing, specifying: (i) the
requested date of the Borrowing(s), which shall be a Business Day, (ii) the
aggregate principal amount of the Borrowing(s) to be incurred, (iii) the Class
and Type of the Loans comprising such requested Borrowing(s), and (iv) in the
case of the incurrence of a Eurodollar Borrowing, the duration of the Interest
Period, subject to the provisions of the definition of Interest Period. In the
absence of an acceleration of the Obligations pursuant to Section 7.2, if a
request for a Eurodollar Borrowing is not made, or is not made in accordance
with this Section, upon the maturity of a Eurodollar Borrowing, and the Agent
shall not have received notice from the Borrower of its intention to repay such
Loans other than with the proceeds of a Rollover Borrowing at least one Business
Day prior to such maturity, then the Borrower shall be deemed to have requested
a Base Rate Borrowing in an amount necessary to repay such maturing Borrowing.
Any Notice of Borrowing received after noon (New York City time) shall be deemed
received on the following Business Day.
(c) Funding Of Loans. (i) After receiving a Notice of
Borrowing, the Agent shall notify each Lender of the contents of such Notice of
Borrowing, of such Lender's Proportionate Share of the requested Borrowing and,
in the case of a Eurodollar Borrowing, the applicable interest rate. Except as
provided in subsection (f) below and subject, in the case of Eurodollar
Borrowings, to the provisions of Article VIII, each Lender shall make available
to the Agent at the Agent's Office its Proportionate Share of any requested
Borrowing, in lawful money of the United States of America in immediately
available funds, prior to 12:00 Noon (New York City time) on the Business Day
requested for such Borrowing. The Agent shall, subject to the satisfaction of
the conditions set forth in Article III, by 3:00 p.m. (New York City time) on
such day, credit the amounts received by it in like funds to the Disbursement
Account or in such other manner as the Borrower and the Agent shall agree.
<PAGE> 10
(d) Rollover Borrowings. If any Lender makes a new Loan
hereunder on a day on which the Borrower is to repay all or any part of an
outstanding Loan from such Lender, such Lender shall apply the proceeds of its
new Loan to make such repayment (the amount of such new Loan made to repay a
maturing loan, a "Rollover Borrowing") and only an amount equal to the
difference (if any) between the amount being borrowed and the amount being
repaid shall be made available by such Lender as provided in subsection (e) of
this Section or remitted by the Borrower to the Agent as provided in Section
1.6.
(e) Agent May Assume Funding. Unless the Agent shall have
received notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to the Agent such Lender's Proportionate Share of
such Borrowing, the Agent may assume that such Lender has made such amount
available to it on the date of such Borrowing in accordance with subsection (c)
of this Section 1.2, and may, in reliance upon such assumption, make available
for the account of the Borrower on such date a corresponding amount. If and to
the extent that such Lender shall not have so made such Proportionate Share
available to the Agent such Lender shall pay to the Agent forthwith on demand,
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount is
paid to the Agent at the Federal Funds Rate. If such Lender shall pay to the
Agent, such corresponding amount, such amount so paid shall constitute such
Lender's Loan as part of such Borrowing for purposes of this Agreement. If such
Lender shall fail to pay such corresponding amount upon such demand, then the
Borrower shall, forthwith on demand, repay to the Agent, such corresponding
amount, together with interest thereon for each day from the date such amount is
made available to the Borrower until the date such amount is paid, at the
interest rate applicable at such time to Loans comprising such Borrowing.
(f) Lenders' Obligations Independent. The failure of any
Lender to make a Loan to be made by it as part of any Borrowing or to purchase
any participation hereunder shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date of such Borrowing or
to purchase any such participation. Neither the Agent nor any Lender shall be
responsible for the failure of any other person to make any Loan or to purchase
any participation hereunder on the date required therefor.
Section 1.3. Evidence of Indebtedness.
(a) Notes. The Loans by each Lender to the Borrower and the
Borrower's obligations to repay such Loans with interest in accordance with the
terms of this Agreement, shall be evidenced by (i) in the case of Base Rate
Revolving Loans, a single Base Rate Revolving Note and (ii) in the case of
Eurodollar Revolving Loans, a single Eurodollar Revolving Note.
(b) Authorization to Make Notations. Each Lender shall record,
and prior to any transfer of any Note shall endorse on the schedules forming a
part thereof appropriate notations to evidence the date, amount and maturity of
each Loan made by it and the date and amount of each payment of principal made
by the Borrower with respect thereto; provided that the failure of any Lender
<PAGE> 11
to make any such recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Notes. Each Lender is hereby irrevocably
authorized by the Borrower to so endorse its Note or Notes and to attach to and
make a part of its Note or Notes a continuation of any such schedule as and when
required.
(c) Loan Account and Accounting. Agent shall maintain a loan
account (the "Loan Account") on its books to record: (a) all Loans and Letter of
Credit Obligations, (b) all payments made by Borrower, and (c) all other debits
and credits as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by Borrower; provided that any failure to so record
or any error in so recording shall not limit or otherwise affect Borrower's duty
to pay the Obligations. Agent shall render to Borrower a monthly accounting of
transactions with respect to the Loans and Letter of Credit Obligations setting
forth the balance of the Loan Account. Unless Borrower notifies Agent in writing
of any objection to any such accounting (specifically describing the basis for
such objection), within thirty (30) days after the Borrower's receipt thereof,
each and every such accounting shall (absent manifest error) be deemed final,
binding and conclusive upon Borrower in all respects as to all matters reflected
therein. Only those items expressly objected to in such notice shall be deemed
to be disputed by Borrower.
Section 1.4 Interest.
(a) Rates. Each Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to, (i) so long as it is a
Base Rate Loan, the Base Rate as in effect from time to time plus the Applicable
Margin, (ii) so long as it is a Eurodollar Loan, the applicable Adjusted
Eurodollar Rate plus the Applicable Margin, and (iii) from and including the
date of the occurrence of any Default to but excluding the date that such
Default shall have been cured or waived in accordance herewith, the Default Rate
and all other Obligations bearing interest under this agreement shall also bear
interest at the Default Rate during such period.
(b) Default Rate Interest. If all or any part of a Loan or
other Obligation is not paid when due (whether at maturity, by reason of notice
of prepayment or acceleration or otherwise), such unpaid amount shall bear
interest for each day during the period from the date such amount became so due
until it shall be paid in full (whether before or after judgment) at a rate per
annum equal to the Default Rate.
(c) Payments. Interest due pursuant to this Agreement shall be
payable in arrears, (i) in the case of Base Rate Loans, on each Interest Payment
Date, (ii) in the case of any Eurodollar Loan, on the last day of each Interest
Period applicable thereto, and (iii) in the case of any Loan or other
Obligation, when any portion of such Loan, or other Obligation shall be due
(whether at maturity, by reason of prepayment or acceleration or otherwise), but
only to the extent then accrued on the amount then so due. Interest at the
Default Rate shall be payable on demand.
<PAGE> 12
Section 1.5 Commitment and Other Fees.
(a) Other Fees. The Borrower agrees to pay to the Agent such
fees as provided in the Fee Letter.
(b) Revolving Credit Commitment Fee. The Borrower agrees to
pay to the Agent for the account of each Lender, for each day from and including
the Agreement Date to but excluding the Revolving Credit Commitment Termination
Date, an amount equal to .375% per annum on the daily unused Revolving Credit
Commitment of such Lender (the "Revolving Credit Commitment Fee"). Absent the
occurrence and continuation of a Default, at any time following the first
anniversary of the Closing Date, this fee will reduce to 0.25% per annum from
and after the fifth Business Day following the Agent's receipt of notice from
the Borrower that the Leverage Ratio as determined from the financial statements
most recently delivered pursuant to Section 6.1(b) or (c) was less than 2.25:1,
and shall continue so reduced until the earlier of a Default and the delivery of
financial statements pursuant to Section 6.1(b) or (c) from which it can be
determined that the Leverage Ratio is greater than or equal to 2.25:1.
(c) Fees Payable in Arrears. All fees due pursuant to
Section 1.5(b), and the fees due pursuant to Section 2.4(a), shall be payable
monthly in arrears on the first Business Day in each Month , commencing with
January 2, 1997, on the applicable Termination Date and, in the case of the
Revolving Credit Commitment Fee, upon each reduction of such Commitment to the
extent accrued on the amount of such reduction.
Section 1.6. Repayment of Loans.
(a) Mandatory Payment. (i) All Revolving Loans outstanding
on the Revolving Credit Commitment Termination Date shall mature and
become immediately due and payable. On any date that the aggregate
outstanding principal amount of Revolving Loans and Letter of Credit
Obligations shall exceed the lesser of (x) the Borrowing Base and (y)
the Revolving Credit Commitments, the Borrower shall repay Revolving
Loans, and/or Letter of Credit Obligations in an amount equal to such
excess.
(ii) All Term Loans outstanding on the Term Loan Credit
Commitment Termination Date shall mature and become immediately due and
payable. On any date that the aggregate outstanding principal amount of
Term Loans shall exceed the Term Loan Credit Commitments, the Borrower
shall repay Term Loans in an amount equal to such excess.
(iii) All Eurodollar Loans shall mature and become due and
payable on the last day of the Interest Period applicable thereto.
(b) Optional Payment. The Borrower may at any time upon one
Business Days' notice prepay Base Rate Loans in whole or in part without premium
or penalty, except that any prepayment of Base Rate Loans shall be in an
aggregate principal amount of at least $100,000 and in greater whole multiples
of $50,000, subject, however, to the Borrower's right to repay all outstanding
Loans in full, and except that Eurodollar Loans may not be optionally prepaid.
Amounts to be prepaid
<PAGE> 13
shall irrevocably be due and payable on the date specified in the applicable
notice of prepayment, together with interest thereon as provided in Section
1.4(c).
(c) Revolving Credit. Prior to the Revolving Credit
Commitment Termination Date and subject to the terms and conditions hereof,
Revolving Loans may be repaid and reborrowed. Except in the case of Rollover
Borrowings, Term Loans may not be repaid and reborrowed.
Section 1.7. Reductions of Commitments.
(a) Optional Reductions of Commitments. Subject to the
following sentence, the Borrower may elect to reduce any Commitment, in whole or
in part, by (i) giving the Agent not less than 30 Business Days' prior written
notice thereof, (ii) in the case of the Revolving Credit Commitment and the Term
Loan Commitment, paying to the Agent for the ratable account of the Lenders the
amount by which the sum of all outstanding Loans thereunder exceeds such
Commitment as so reduced, together with any accrued and unpaid interest and fees
thereon. Partial reductions of Commitments of any Class pursuant to this Section
1.7 shall be in incremental amounts of $1,000,000.
(b) Mandatory Reduction of Commitments. (i) The Revolving
Credit Commitments shall reduce automatically to zero on the Revolving Credit
Commitment Termination Date.
(ii) The Term Loan Commitments shall reduce automatically (A)
to the amount of the Term Loans outstanding at the close of the Agent's
business on the Closing Date, (B) by $1,428,571.43 on the last day of
each Fiscal Quarter, commencing February 27, 1997, (C) by the amount of
any prepayment not made with the proceeds of a Rollover Borrowing, and
(D) to zero on the earlier of the Term Loan Commitment Termination Date
and the Revolving Credit Commitment Termination Date.
(iii) The Term Loan Commitments shall reduce by the amount by
which the Net Proceeds received by the Borrower or any Subsidiary
during any fiscal year from all asset dispositions (including
condemnation proceeds, but excluding proceeds of asset dispositions
permitted by clauses (x) and (y) to the proviso to Section 5.7) and
from all sales of Stock of Subsidiaries, exceeds $100,000 (such excess
amount, the "Excess Net Proceeds"). Such reduction shall occur on the
date that financial statements are delivered by the Borrower pursuant
to Section 6.1(c) and on each earlier date that the cumulative amount
of such Excess Net Proceeds not yet applied to reduce the Term Loan
Commitment shall exceed $100,000.
(iv) If Borrower issues any Capital Securities or any debt
securities, other than in connection with the IPO, no later than the
Business Day following the date of receipt of the proceeds thereof, the
Term Loan Commitments shall reduce in an amount equal to 50% of the Net
Proceeds of such issuance.
(v) Commencing with the delivery of the financial statements
for fiscal year 1998 and continuing until the Termination Date for each
year that the Leverage Ratio for such year as shown on such financial
statement, is greater than 2.5:1, the Term Loan Commitments shall
reduce on the earlier of the date which is ten (10) days after (A) the
date on which Borrower's
<PAGE> 14
annual audited Financial Statements for such Fiscal Year are delivered
pursuant to Section 6.1(c) and (B) the date on which such annual
audited Financial Statements were required to be delivered pursuant to
Section 6.1(c), in an amount equal to 75% of Excess Cash Flow for such
Fiscal Year. Each such prepayment shall be accompanied by a certificate
signed by the Borrower's chief financial officer certifying the manner
in which Excess Cash Flow and the resulting prepayment were calculated,
which certificate shall be in form and substance reasonably
satisfactory to Agent.
(c) Application of Commitment Reductions. Commitment
reductions pursuant to Sections 1.7(a), and 1.7(b)(iii) through (v) shall be
applied against commitment reductions required pursuant Section 1.7(b)(ii) in
the inverse order of the occurrence thereof.
(d) Ratable Reduction of Commitments. Each reduction in
Commitments pursuant to this Section 1.7 shall permanently reduce the
appropriate Commitment of each Lender by an amount equal to its Proportionate
Share of such reduction.
Section 1.8 Computation of Interest and Fees. Interest and fees due
pursuant to this Agreement that are calculated at a per annum rate, unless
expressly stated to the contrary with respect to a particular item of interest
or a particular fee, shall be computed on the basis of a year of 360 days, and
paid, in arrears, for the actual number of days elapsed (including the first but
excluding the last day, which, in the case of any Interest Period, means from
and including the first day of such Interest Period to but excluding the last
day thereof). If the date for any payment of principal is extended (whether by
operation of this Agreement, any provision of law or otherwise), fees payable
pursuant to this Agreement as well as interest, shall be payable for such
extended time.
Section 1.9 Maximum Interest Rate. Nothing contained in this Agreement
or any Note shall require the Borrower to pay interest at a rate exceeding the
Maximum Permissible Rate. If amounts payable to the Agent, any Letter of Credit
Issuer or the Lenders on any date would be treated as interest in excess of the
Maximum Permissible Rate, such amounts automatically shall be reduced to the
Maximum Permissible Rate, and payments for any subsequent period, to the extent
less than the Maximum Permissible Rate, shall, to that extent, be increased by
the amount of such reduction.
Section 1.10 Manner of Payment; Application of Payments. Unless
otherwise provided herein, all payments and deposits due from the Borrower to
the Lenders, the Agent or any Letter of Credit Issuer hereunder or under the
Notes, or under any Reimbursement Agreement, shall be made not later than 12:00
noon (New York time), on the due date thereof, in Dollars in funds immediately
available (i) in the case of Loans and other payments hereunder, other than
Reimbursement Obligations, to the Agent to the Agent's Account, for the account
of, (A) in the case of payments on account of Eurodollar Loans, the Lenders'
Eurodollar Lending Offices, (B) in the case of all other payments hereunder for
the account of the Lenders, the Lenders' Base Rate Lending Offices and (C) in
the case of all payments for the account of the Agent, the Agent's Office, and
(ii) in the case of any Reimbursement Obligation or any amounts due to any
Letter of Credit Issuer, at such Letter of Credit Issuer's Office, without any
deduction whatsoever, including, but not limited to, any deduction for any
set-off, recoupment, counterclaim or Tax.
<PAGE> 15
Section 1.11 Return of Payments. If the Agent or any Letter of Credit
Issuer shall be required by any court, trustee or debtor-in-possession or other
person to return any amount previously received by it in respect of the
Obligations under this Agreement or any Reimbursement Agreement, upon receipt
of notice from it, each Lender shall immediately pay over to it, such Lender's
Proportionate Share of the amount to be returned.
<PAGE> 16
2.
LETTERS OF CREDIT
Section 2.1 Letters of Credit.
(a) Purchase of Participations by Lenders. Simultaneously
with the issuance by any Letter of Credit Issuer of any Letter of Credit each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and participation
in such Letter of Credit (including, without limitation, all Obligations of the
Borrower with respect thereto except those expressly stated to be payable to the
Letter of Credit Issuer or the Agent hereunder or under the other Loan
Documents) and any documents or security therefor or Guaranty pertaining
thereto, equal to such Lender's Proportionate Share of such Letter of Credit.
The Agent shall promptly notify the Lenders upon the issuance of any Letter of
Credit issued after the Closing Date of the amount and expiration date thereof.
(c) Terms of Letters of Credit.
(i) Each Letter of Credit shall be in such form as the
Borrower, the Agent and the Letter of Credit Issuer issuing such Letter
of Credit shall agree. Each Letter of Credit shall expire on or prior
to the Revolving Credit Commitment Termination Date. The aggregate
stated amount of the Letters of Credit outstanding at any one time
shall not exceed $3,000,000. The Letters of Credit shall be issued
solely in connection with utility, bid, payment and/or performance
bonds, or to secure the Borrower's obligations in respect of worker's
compensation insurance.
(ii) In addition to any obligation of the Borrower hereunder
with respect to the Letters of Credit and drawings thereunder, the
Borrower's Reimbursement Obligations and any additional obligations in
respect of the Letters of Credit shall be set forth in, and shall be
evidenced by, the Reimbursement Agreements.
Section 2.2 Manner of Issuance. The Borrower shall deliver to the Agent
and any Letter of Credit Issuer prior to noon (New York City time) at least ten
days before the requested date of issuance of a Letter of Credit, a written
request (a "Letter of Credit Request") for the issuance of such Letter of Credit
together with all of the documents, materials and evidences required to be
delivered to the Agent pursuant to Article III prior to the issuance of such
Letter of Credit. Such request shall set forth: (i) the beneficiary of the
Letter of Credit, (ii) the stated amount thereof, (iii) if applicable, the
portions of such stated amount to be available for the payment of principal,
interest and premium (if any), (iv) the requested issue date, (v) the requested
expiration date, and (vi) the drawing conditions applicable thereto. On the
requested date of issuance of such Letter of Credit the Borrower shall deliver
to the Agent a duly executed Reimbursement Agreement in the form agreed to by
the Borrower, the Agent and the Letter of Credit Issuer issuing such Letter of
Credit (each a "Reimbursement Agreement") and such additional documents,
evidences and opinions as shall be required pursuant to Article III.
<PAGE> 17
Section 2.3 Drawings Under Letters of Credit.
(a) Notice to Lenders. Promptly upon receipt by any Letter of
Credit Issuer of any draft upon, or other notice of drawing under, a Letter of
Credit, such Letter of Credit Issuer shall give the Borrower, the Agent and each
Lender written or telephonic notice of the amount of such draft or notice of
drawing, of the Letter of Credit against which it is drawn and of the date upon
which such Letter of Credit Issuer proposes to honor such draft.
(b) Payments by Lenders. Each Lender hereby agrees that it
shall pay to any Letter of Credit Issuer prior to 2:00 p.m. (New York City time)
on the date each Letter of Credit Issuer honors each drawing under such Letter
of Credit Issuer's Letter of Credit such Lender's Proportionate Share of such
Letter of Credit drawing; provided, that, if the Borrower should pay in full or
in part any Letter of Credit drawing on the date thereof, the obligation of each
Lender to pay to such Letter of Credit Issuer pursuant to this Section its
proportionate share of such drawing shall be reduced by an amount equal to such
Lender's Proportionate Share of such payment. Amounts paid in excess of the net
amount so owed shall promptly be refunded by such Letter of Credit Issuer to
such Lender.
(c) Failure to Pay by Lenders. If any Lender shall fail to pay
the amount of its participation in a Letter of Credit drawing on the date such
amount is due in accordance with subsection (b) above, the Letter of Credit
Issuer to which such payment is due shall be deemed to have advanced funds on
behalf of such Lender. Each such advance shall be secured by such Bank's
participation interest, and such Letter of Credit Issuer shall be subrogated to
such Lender's rights hereunder in respect thereof. Such advance may be repaid by
application to such advance of any payment that such Lender is otherwise
entitled to receive under this Agreement. Any amount not paid by such Lender to
such Letter of Credit Issuer hereunder shall bear interest for each day from the
day such payment was due until such payment shall be paid in full at a rate per
annum equal to the Federal Funds Rate.
(d) Repayment by Borrower. The Borrower shall repay to each
Letter of Credit Issuer for the ratable account of the Lenders the amount of
each Letter of Credit Obligation under any Letter of Credit issued by such
Letter of Credit Issuer on the date provided in the applicable Reimbursement
Agreement (which, in the case of a drawing under a Letter of Credit, shall be
the date of such drawing); provided, that, notwithstanding anything in this
Agreement or any Reimbursement Agreement to the contrary, all Letter of Credit
Obligations (fixed or contingent, drawn or undrawn) not previously due and
payable shall become due and payable by the Borrower on the Revolving Credit
Commitment Termination Date. The amount of any Letter of Credit Obligation that
is not paid when due shall bear interest, payable on demand, from the due date
thereof until paid, at the Default Rate. The Borrower agrees that it shall be
indebted to each Lender in an amount equal to such Lender's Proportionate Share
of each Letter of Credit Obligation, including each drawing paid by any Letter
of Credit Issuer under a Letter of Credit.
(e) Borrower's Obligations Absolute. The obligation of the
Borrower to pay a Letter of Credit Issuer for the account of the Lenders, for
each Letter of Credit Obligation arising under the Letter of Credit issued by
such Letter of Credit Issuer shall be irrevocable, shall not be subject to any
<PAGE> 18
qualification or exception whatsoever and shall be binding in accordance with
the terms and conditions of this Agreement under all circumstances, including,
without limitation, the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or right
which the Borrower may have at any time against a beneficiary of any
Letter of Credit or any transferee of any Letter of Credit (or any
person for whom any such transferee may be acting), the Agent, such
Letter of Credit Issuer, the Lenders or any other Person, whether in
connection with this Agreement, any Reimbursement Agreement or any
Letter of Credit, the transactions contemplated herein or any unrelated
transactions;
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient (except for insufficiencies that are manifest) in any
respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement or the
other Loan Documents;
(v) any failure of the Agent or any Letter of Credit Issuer
to provide notice to the Borrower of any drawing under any Letter of
Credit;
(vi) the occurrence or continuance of any Default; or
(vii) any other reason that is not finally determined by a
court of competent jurisdiction to have been the result of gross
negligence or willful misconduct on the part of such Letter of Credit
Issuer.
The foregoing provisions shall not in any way act as a waiver of any
claim, right, or cause of action which the borrower may have against a
beneficiary of any Letter of Credit or any transferee of any Letter of Credit
(or any person for whom any such transferee may be acting), whether arising in
connection with this Agreement, and Reimbursement Agreement of any Letter of
Credit, the transactions contemplated herein, or any unrelated transactions.
(f) Lenders' Obligations Absolute. The obligation of each
Lender to pay to any Letter of Credit Issuer its Proportionate Share of each
drawing under a Letter of Credit issued by such Letter of Credit Issuer, (less
the amount thereof repaid by the Borrower as described above), shall be
irrevocable, unconditional, shall not be subject to any qualification or
exception whatsoever and shall be binding in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of this
Agreement;
<PAGE> 19
(ii) the existence of any claim, set-off, defense or other
right which the Borrower or any Lender may have at any time against the
other, the Agent, any Letter of Credit Issuer, any Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transactions;
(iii) any draft or any other document presented under this
Agreement proving to be forged, fraudulent, invalid or insufficient
(except for insufficiencies that are manifest) in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement;
(v) the occurrence or continuance of any Default; or
(vi) any other reason not constituting gross negligence or
willful misconduct on the part of the Letter of Credit Issuer issuing
such Letter of Credit.
Section 2.4 Letter of Credit Fees; Administrative Fees; Interest.
(a) Letter of Credit Fee. With respect to each Letter of
Credit, the Borrower shall pay (i) to the Agent for the account of each Lender,
a fee equal to the Applicable Percentage on such Lender's Proportionate Share of
the undrawn face amount of such Letter of Credit, and (ii) to each Letter of
Credit Issuer, the fee agreed upon by the Borrower and such Letter of Credit
Issuer in the applicable Reimbursement Agreement.
(b) Administrative Fees. In addition to the foregoing fees
payable to the Lenders, the Agent and the Letter of Credit Issuers, the Borrower
shall pay to each Letter of Credit Issuer the fees specified in the applicable
Reimbursement Agreement and such other administrative fees as such Letter of
Credit Issuer customarily charges in respect of letter of credit transactions
together with all telecommunication fees and other expenses incurred by such
Letter of Credit Issuer in connection with the issuance of, or any drawing
under, any Letter of Credit issued by such Letter of Credit Issuer for the
Borrower's account.
(c) Interest on Reimbursement Obligations. All Reimbursement
Obligations shall bear interest from and including the date of the creation
thereof until due at the Default Rate
Section 2.5 Limitation of Liability With Respect To Letters of Credit.
(a) As among the Borrower, the Lenders, the Agent and the Letter of Credit
Issuers, the Borrower assumes all risks of the acts and omissions of, or misuse
of any Letter of Credit by the beneficiaries of such Letter of Credit. Without
limiting the foregoing, the Agent, the Letter of Credit Issuers and the Lenders
shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any draft, demand, application or other documents
submitted by any party in connection with any Letter
<PAGE> 20
of Credit even if such document should in fact prove to be in any and
all respects invalid, insufficient, inaccurate, fraudulent or forged
(unless manifestly so);
(ii) the validity, genuineness or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason;
(iii) failure of the beneficiary of a Letter of Credit to
comply fully with the conditions required in order to draw upon such
Letter of Credit to the extent that the documents presented in
connection with a drawing manifestly comply with the terms of such
Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher;
(v) errors in interpretations of technical terms;
(vi) any loss or delay in the transmission or otherwise of
any document required to make a drawing under any Letter of Credit or
with respect to the proceeds thereof;
(vii) the misapplication by the beneficiary of a Letter of
Credit or of the proceeds of any drawing under such Letter of Credit;
or
(viii) any consequences arising from causes beyond the control
of Agent, the Letter of Credit Issuers or the Lenders, including,
without limitation, any act or omission, rightfully or wrongfully, of
any present or future governmental authority.
None of the above circumstances shall affect, impair or prevent the vesting of
any of the Agent's, the Letter of Credit Issuer's, or the Lenders' rights or
powers under this Agreement.
(b) In furtherance and extension, and not in limitation, of
the specified provisions set forth above, any action taken or omitted by the
Agent or any Letter of Credit Issuer under or in connection with any Letter of
Credit or any Related Documents, if taken or omitted in good faith, shall not
expose the Agent, any Letter of Credit Issuer or any Lender to any liability to
the Borrower or relieve the Borrower from any of its obligations hereunder.
<PAGE> 21
3.
CONDITIONS TO EXTENSIONS OF CREDIT
Section 3.1 Conditions to Initial Extension of Credit. The obligation
of each Lender to make the initial Extension of Credit is subject to the receipt
by the Agent of each of the following, in form and substance satisfactory to the
Agent and the Lenders:
(a) a certificate of the Secretary or an Assistant Secretary
of the Borrower substantially in the form of Schedule 3.1(a) with respect to the
officers of the Borrower authorized to execute and deliver this Agreement, the
Notes and the other Loan Documents, to which shall be attached copies of the
resolutions and bylaws referred to in such certificate;
(b) a certificate of the Secretary or an Assistant Secretary
of each Guarantor substantially in the forms of Schedule 3.1(b)-1 and Schedule
3.1(b)-2 with respect to the officers of such Guarantor authorized to execute
and deliver the Loan Documents to which it is a party, to which shall be
attached copies of the resolutions and bylaws referred to in such certificate;
(c) a closing certificate of a senior executive officer of
each of the Borrower and the Guarantor in the form of Schedule 3.1(c)-1,
3.1(c)-2 and 3.1(c)-3;
(d) a copy of the certificate of incorporation of the Borrower
and each Guarantor, certified by the Secretary of State of the State of the
state of its organization;
(e) a certificate of existence with respect to the Borrower
and each Guarantor, issued as of a recent date by the Secretary of State of such
Person's organization;
(f) unless covered by the good standing certificate, a tax
clearance certificate for the Borrower and each Guarantor, issued by the
Department of Revenue of the state of its incorporation and each state listed
for such Person on Schedule 4.1;
(g) a certificate of the Secretaries of State of each State
listed on Schedule 4.1 issued as of a recent date, to the effect that the
Borrower and each Guarantor listed for such State is qualified to do business as
a foreign corporation in such state;
(h) an opinion of Green & Hale, a professional corporation,
counsel for the Borrower and the Guarantors, dated the Closing Date, in the form
of Schedule 3.1(h);
(i) the Notes, duly executed by the Borrower and payable to
the order of each Lender;
(j) a copy of each Governmental Approval and other consent or
approval listed on Schedule 4.2;
(k) a duly executed counterpart of this Agreement;
<PAGE> 22
(l) a duly executed counterpart of the Guaranty Agreement;
(m) a duly executed counterpart of each of the Security
Agreement and the Pledge Agreement;
(n) a duly executed counterpart of the Subsidiary Security
Agreement and the Subsidiary Pledge Agreement;
(o) a duly executed counterpart of each of the Trademark
Security Agreement, the Subsidiary Trademark Security Agreement and the Patent
Security Agreement;
(p) a duly executed counterpart of the Mortgage and the Lien
Subordination Agreement;
(q) evidence that such action (including, without limitation,
the filing of appropriately completed and duly executed Uniform Commercial Code
financing statements, the payment of all taxes and recording fees and the
recording of the Mortgage) as may be necessary or desirable, in the opinion of
the Agent and its counsel, to perfect the Security Interest shall have been
taken;
(r) surveys with respect to the Secured Property consisting of
real property and policies of title insurance (or commitments therefor with all
conditions marked satisfied), issued by Fidelity National Title Insurance
Company (the "TIC"), insuring the perfection, enforceability and first priority
of the Lien created under the Mortgage in an amount not less than the Designated
Amount, subject only to the Permitted Encumbrances (as defined in the Mortgage)
and to such other exceptions as are satisfactory to the Agent, containing such
endorsements and affirmative assurances as have been previously agreed to by the
Agent, and evidence that the Borrower shall have paid to the TIC all expenses
and premiums of the TIC in connection with the issuance of such policies and in
addition shall have paid to the TIC an amount equal to all the recording and
stamp taxes payable in connection with such Mortgage;
(s) UCC, Lien, judgment and tax search reports for each
jurisdiction in which the Borrower or any Guarantor is located or has
Collateral, showing no Liens or financing statements of record against the
Borrower or such Guarantor, except Permitted Liens, and showing no litigation
that if adversely determined, could reasonably be expected to have or result in
a Materially Adverse Effect;
(t) certificates of insurance evidencing the existence of all
insurance required to be maintained or caused to be maintained pursuant to
Section 5. 2;
(u) full payment of all amounts payable by the Borrower to the
Agent or the Lenders on or before the Closing Date, including, without
limitation, all amounts due under the Fee Letter;
(v) evidence that, after completion of all transactions
contemplated to be completed on the Closing Date and the making of all
Borrowings required to be made hereunder on such date, the
<PAGE> 23
Borrower will have, on a pro forma basis, at least $4,000,000 of unused
borrowing availability under the Revolving Credit Commitment;
(w) evidence of the repayment of all Debt listed in part A of
Schedule 4.9 and the release of all Liens relating thereto;
(x) a duly executed counterpart of all agreements and
documents delivered or received or required to be delivered or received by the
Borrower in connection with the Acquisition, save and except the following:
the regulatory approvals and filings listed on Schedule 1.01(b) of
the Agreement for Purchase and Sale of Assets Relating to
Neosporin(R) and Polysporin(R) by and between Glaxo
Wellcome Inc. and Monarch dated November 14, 1997;
the product specifications listed on Schedule 1.12 of the Supply
Agreement for the Supply of Neosporin(R) and Polysporin(R) by
and between Glaxo Wellcome Inc. and Monarch dated
November 14, 1997;
the regulatory approvals and filings listed on Schedule
1.01(c) of the Agreement for Purchase and Sale of
Assets Relating to Septra(R), Proloprim(R),
Mantadil(R), and Kemadrin(R) by and between Glaxo
Wellcome Inc. and Monarch dated November 14, 1997;
and
the product specifications listed on Schedule 1.12 of the Supply
Agreement for the Supply of Septra(R), Proloprim(R),
Mantadil(R), and Kemadrin(R) by and between Glaxo Wellcome
Inc. and Monarch dated November 14, 1997,
together with a certificate of the chief executive officer of the Borrower that
such documents are complete and correct and evidence all agreements and
understandings of the parties in connection with the Acquisition, evidence that
the Acquisition has been consummated in accordance with the terms of such
documents and that the aggregate value of the consideration conveyed or to be
conveyed by the Borrower (including any assumed liabilities) and its Affiliates
to the seller in connection therewith is less than $25,000,000 and that the
aggregate amount of fees, closing costs and other transaction expenses
associated therewith, including the costs and closing fees associated with this
Credit Agreement and the other Loan Documents does not exceed $1,000,000;
(y) (i) satisfactory evidence that the Borrower and its
Subsidiaries have obtained all required consents and approvals of all Persons
including all requisite Governmental Authorities, to the execution, delivery and
performance of this Credit Agreement and the other Loan Documents and the
consummation of the Acquisition or (ii) an officer's certificate in form and
substance satisfactory to Agent affirming that no such consents or approvals are
required;
<PAGE> 24
(ii) a fully executed original of a pay-off letter
satisfactory to Agent confirming that, except as contemplated on Schedule 4.9,
all Debt listed on Part A of such Schedule will be repaid in full from the
proceeds of the initial Borrowing and all Liens upon any of the property of
Borrower or any of its Subsidiaries in favor of any prior lender shall be
terminated by such lender immediately upon such payment; and (ii) all letters of
credit issued or guaranteed by prior lender shall have been cash collateralized,
supported by a guaranty of Agent or supported by a Letter of Credit, as mutually
agreed upon by Agent, Borrower and the prior lender;
(iii) satisfactory evidence that the capital structure of
Borrower and each of its Subsidiaries and the terms and conditions of all
Indebtedness of such Credit Party shall be consistent with the Borrower's prior
written disclosures to the Agent, or otherwise acceptable to the Lenders in
their sole discretion;
(iv) a duly executed and completed initial Borrowing Base
Certificate; and
(v) such other documents, instruments and opinions as the
Agent shall reasonably request.
To the extent that the Agent agrees to make the initial Extension of
Credit on the Closing Date without all of the conditions specified in this
Section 3.1 being satisfied, such conditions shall not be deemed to be waived
hereunder, but the Borrower shall be deemed to have convenanted that it will
satisfy all such conditions within 30 days of the Closing Date.
Section 3.2 Conditions to Issuance of Letters of Credit. The obligation
of the Letter of Credit Issuer to issue any Letter of Credit, and the Lenders'
obligation to purchase participations therein, is subject to the satisfaction of
the following conditions:
(a) the Agent shall have received prior to the issuance of
any Letter of Credit, a duly executed and completed Letter of Credit Request and
the Reimbursement Agreement together with evidence satisfactory to the Agent
that the Borrowing Base, after giving effect to the issuance of such Letter of
Credit, is greater than or equal to the sum of the aggregate principal amount of
all Revolving Loans and Letter of Credit Obligations; and
(b) the Agent and the Letter of Credit Issuer shall be
reasonably satisfied with all terms, actions and proceedings relating to the
Letter of Credit and Reimbursement Agreement and all transactions contemplated
thereunder.
Section 3.3 Conditions to Each Extension of Credit. The obligation of
each Lender, the Agent and each Letter of Credit Issuer to make each Extension
of Credit, including the initial Extension of Credit, is subject to the
fulfillment of each of the following conditions to the reasonable satisfaction
of the Required Lenders, provided that the conditions specified in Section
3.3(a) and 3.3(b) shall not apply in the case of a Rollover Borrowing made prior
to an acceleration of the Obligations:
<PAGE> 25
(a) each of the Representations and Warranties shall be true
and correct at and as of the time of such Extension of Credit, with and without
giving effect to such Extension of Credit and to the application of the proceeds
thereof, except those expressly stated to be made as of a particular date which
shall be true and correct as of such date;
(b) no Default shall have occurred and be continuing at the
time of such Extension of Credit, with or without giving effect to such
Extension of Credit and to the application of the proceeds thereof;
(c) receipt by the Agent of such materials as may have been
requested pursuant to Section 6.1(c);
(d) such Extension of Credit will not contravene any
Applicable Law applicable to the Lenders, the Agent or any Letter of Credit
Issuer; and
(e) all legal matters incident to such Extension of Credit and
the other transactions contemplated by this Agreement shall be reasonably
satisfactory to counsel for the Agent.
Each Notice of Borrowing under Section 1.2 (other than a
request for a Rollover Borrowing made prior to an acceleration of the
Obligations) and each request for the issuance of a Letter of Credit under
Section 2.2 shall constitute a representation and warranty by the Borrower, made
as of the time of the making of such Extension of Credit, that the conditions
specified in clauses (a) and (b) have been fulfilled as of such time, unless a
notice to the contrary specifically captioned "Disclosure Statement" is received
by the Agent from the Borrower prior to 2:00 p.m. (New York City time) on the
Business Day preceding the date of the requested Extension of Credit. To the
extent that the Required Lenders agree to make any Extension of Credit after
receipt of a Disclosure Statement in accordance with the preceding sentence, the
representations and warranties pursuant to the preceding sentence will be deemed
made as modified by the contents of such statement and repeated at the time of
the making of such Extension of Credit as so modified. Any such modification
shall be effective only for the occasion on which the Required Lenders elect to
make such Extension of Credit, and unless expressly agreed by the Required
Lenders in writing to the contrary as provided in Section 11.5, shall not be
deemed a waiver or modification of any condition to any other or future
Extension of Credit.
<PAGE> 26
4.
CERTAIN REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce the Lenders, the Agent and the Letter of Credit
Issuers to enter into this Agreement and to make each Extension of Credit, the
Borrower represents and warrants as follows:
Section 4.1 Organization; Power; Qualification; Subsidiaries; Licenses;
Compliance with Laws; Title to Properties. (a) Each of the Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, has the
corporate power and authority to own its respective properties and to carry on
its respective business as now being and proposed to be conducted hereafter and
is duly qualified and is in good standing, and is authorized to do business, in
all jurisdictions in which the character of its properties or the nature of its
businesses requires such qualification or authorization, except for
qualifications and authorizations the lack of which, singly or in the aggregate,
has not had and is not reasonably likely to have a Materially Adverse Effect
upon the Borrower and its Subsidiaries, taken as a whole. Schedule 4.1 (as may
be modified by written notice entitled "Disclosure Statement" delivered by the
Borrower to the Agent with the consent of the Agent from time to time) sets
forth a complete and correct list of all Subsidiaries of the Borrower, and their
respective jurisdictions of incorporation and the record ownership of their
shares, with all Consolidated Subsidiaries being identified as such. Schedule
4.1 also sets forth for the Borrower and each Subsidiary each jurisdiction which
such person is required to qualify to do business. The Borrower or another
Subsidiary of the Borrower owns 100% of the outstanding Capital Securities of
each Subsidiary of the Borrower listed as such on Schedule 4.1 and has the
unrestricted right to vote, and (subject to limitations imposed by Applicable
Law and Permitted Restrictive Covenants) to receive dividends and distributions
on, all of the issued and outstanding shares of the Capital Securities of each
such Subsidiary, and all such shares of Capital Securities have been duly
authorized and issued and are fully paid and nonassessable.
(b) Each of the Borrower and its Subsidiaries (i) has all
Governmental Approvals, to the extent required for such ownership, operation and
conduct, except, in each case, to the extent that the failure to have such
Governmental Approval, individually or in the aggregate, has not had and could
not reasonably be expected to have or result in a Materially Adverse Effect;
(ii) is in compliance with its charter and by-laws; and (iii) is in compliance
with all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, has not had and could not reasonably be
expected to have or result in a Materially Adverse Effect.
Section 4.2 Authorization and Compliance of Agreement, Notes and
Extensions of Credit. Each of the Borrower and the Guarantors has the corporate
power, and has taken all necessary corporate (including stockholder, if
necessary) action to authorize it, to execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party in
accordance with the terms thereof, to borrow hereunder, to request the issuance
of Letters of Credit hereunder and to incur its other obligations under this
Agreement and each of the other Loan Documents to which it is a party. Each of
this Agreement and the other Loan Documents has been duly executed and delivered
by each
<PAGE> 27
of the Borrower and the Guarantors to the extent that it is party thereto, and
constitutes the legal, valid and binding obligation of such Person, enforceable
against such Person, in accordance with its terms. The execution, delivery and
performance of this Agreement and the other Loan Documents to which it is a
party by each of the Borrower and the Guarantors in accordance with their terms,
and the incurrence of Obligations thereunder, do not and will not (a) require
(i) any Governmental Approval, or (ii) any consent or approval of the
stockholders of the Borrower or any Guarantor that has not been obtained and is
not listed on, and a copy (certified in the case of Governmental Approvals) of
which is not attached to Schedule 4.2, (b) violate or conflict with, result in a
breach of, or constitute a default under, (i) any Contract to which the Borrower
or any Guarantor is a party or by which any of them or any of their properties
may be bound or (ii) any Applicable Law or (c) result in, or require the
creation of, any Lien upon any assets of the Borrower or any Guarantor other
than Liens created under this Agreement and the other Loan Documents in favor of
the Agent for the benefit of the Agent, the Lenders and the Letter of Credit
Issuers.
Section 4.3 Litigation. Except as set forth on Schedule 4.3, there are
not, in any court or before any arbitrator of any kind or before or by any
governmental or non-governmental body, any actions, suits or proceedings,
pending or threatened (nor, to the knowledge of the Borrower, is there any basis
therefor) against or in any other way relating to or affecting () the Borrower
or any Subsidiary or the business or any property of the Borrower or any
Subsidiary, except actions, suits or proceedings that, if adversely determined,
would not, singly or in the aggregate, have a Materially Adverse Effect on the
Borrower and its Subsidiaries, taken as a whole, or () the Security Interest,
this Agreement or any other Loan Document.
Section 4.4 Burdensome Provisions. Except as described on Schedule 4.4,
neither the Borrower nor any Subsidiary is a party to or bound by any Contract
or Applicable Law that could have a Materially Adverse Effect on (i) the
Borrower and its Subsidiaries, taken as a whole, or (ii) the Security Interest,
this Agreement or any of the other Loan Documents.
Section 4.5 No Adverse Change or Event. Since September 30, 1997, no
change in the business, assets, liabilities, financial condition, results of
operations or business prospects of the Borrower or any Subsidiary has occurred,
and no event has occurred or failed to occur, that has had or reasonably could
be expected to have, either alone or in conjunction with all other such changes,
events and failures, a Materially Adverse Effect on (i) the Borrower and its
Subsidiaries, taken as a whole, or (ii) the Security Interest, this Agreement or
any other Loan Document. In determining whether an adverse change has occurred,
it is understood that such an adverse change may have occurred, and such an
event may have occurred or failed to occur, at any particular time
notwithstanding the fact that at such time no Default shall have occurred and be
continuing. If a fact or circumstance disclosed in the financial statements
referred to in Section 6.2(a) or a Disclosure Statement, or if an action, suit
or proceeding disclosed in Schedule 4.3, should in the future have, or appear
reasonably likely to have, a Materially Adverse Effect upon the Borrower and the
Subsidiaries, taken as a whole, or upon this Agreement, the Security Interest or
any other Loan Document, such Materially Adverse Effect shall be a change or
event subject to Section 4.5 notwithstanding such disclosure.
<PAGE> 28
Section 4.6 No Adverse Fact. No fact or circumstance is known to the
Borrower, as of the Agreement Date, that, either alone or in conjunction with
all other such facts and circumstances, has had or reasonably could be expected
in the future to have a Materially Adverse Effect upon the Borrower and the
Subsidiaries, taken as a whole, or on the Security Interest, this Agreement or
any other Loan Document, that has not been set forth or referred to in the
financial statements referred to in Section 6.2(a) or in a writing specifically
captioned "Disclosure Statement" and delivered to the Agent prior to the
Agreement Date.
Section 4.7 Title to Properties. Each of the Borrower and the
Subsidiaries has title to its respective properties reflected on the financial
statements referred to in Section 6.2(a) subject to no Liens or adverse claims
except as disclosed thereon and except for Permitted Liens.
Section 4.8 Environmental Matters. () The Borrower and its
Subsidiaries (i) are and have been in compliance with all Environmental Laws;
(ii) have obtained, and are in compliance with, all Environmental Permits
required by Environmental Laws for the operations of their respective businesses
as presently conducted or as proposed to be conducted and all such Environmental
Permits are valid, uncontested and in good standing; (iii) are not involved in
operations that are likely to create, and know of no facts, circumstances or
conditions that are likely to result in, any Environmental Liabilities of such
Person, and have not permitted any current or former tenant or occupant of the
real estate to engage in any such operations; (iv) are aware of no litigation
arising under or related to any Environmental Laws, Environmental Permits or
Hazardous Material; (v) have not been notified that they may be a "potentially
responsible party" or received a request for information under CERCLA or
analogous state statutes; (vi) are aware of no facts, circumstances or
conditions that may result in any one of them being identified as a "potentially
responsible party" under CERCLA or analogous state statutes; and (vii) have
provided to Agent copies of all existing environmental reports, reviews and
audits and all written information pertaining to actual or potential
Environmental Liabilities, in each case relating to any such Person; except for
any of the foregoing as individually or in the aggregate with all such events,
have not had and could not reasonably be expected to have or result in a
Materially Adverse Effect.
Section 4.9 Debt All agreements relating to Debt of the Borrower or
any Subsidiary, or commitments or agreements to permit the Borrower or any
Subsidiary to incur Debt (other than any Loan Document) are described on
Schedule 4.9. The Borrower intends to use the proceeds of the credit provided
under this Agreement to repay and cancel all such Debt, except as described on
Part B on Schedule 4.9.
Section 4.10 Patents, Trademarks, Etc. Each of the Borrower and its
Subsidiaries owns, or is licensed or otherwise has the lawful right to use, all
Patents used in or necessary for the conduct of its business as currently
conducted. The use of such Patents by the Borrower or the Subsidiary using or
requiring the same, does not infringe on the rights of any Person, subject to
such claims and infringements as do not, in the aggregate, give rise to any
liability that is material to the Borrower and its Subsidiaries, taken as a
whole.
<PAGE> 29
Section 4.11 Solvency. (i) Each of the Borrower and its Subsidiaries
has received fair consideration and reasonably equivalent value for the
incurrence of its obligations hereunder and under the other Loan Documents to
which it is a party, (ii) after giving effect to the incurrence of such
obligations, (A) the present fair saleable value of each of the Borrower's and
its Subsidiaries' assets exceeds its liabilities, and (B) each retains
sufficient capital to meet the reasonably anticipated needs and risks of its
ongoing business, and (iii) after giving effect to the incurrence of such
obligations and the acquisition of such rights, (A) none has incurred, nor is it
obligated for, debts beyond its ability to pay such debts as they mature, and
(B) the present fair saleable value of its assets is greater than that needed to
pay its probable existing debts as they become due.
Section 4.12 Security Interest. The Security Interest constitutes a
valid and perfected Lien of first priority, that is enforceable against each of
the Borrower and its Subsidiaries and all third parties subject only to
Permitted Liens.
Section 4.13 The Questionnaire. Each Credit Party Questionnaire is
complete and correct in all respects.
Section 4.14 Labor Matters. As of the Closing Date (a) no strikes or
other material labor disputes against the Borrower or any Subsidiary are pending
or, to the Borrower's knowledge, threatened; (b) hours worked by and payment
made to employees of the Borrower and its Subsidiaries comply with the Fair
Labor Standards Act and each other federal, state, local or foreign law
applicable to such matter, except for such non compliances as, singly or in the
aggregate, have not had and could not reasonably be expected to have or result
in a Material Adverse Effect; (c) all payments due from the Borrower or any
Subsidiary for employee health and welfare insurance have been paid or accrued
as a liability on the books of such Person, except for such non-payments or
non-accruals as, individually or in the aggregate, have not had and could not
reasonably be expected to have or result in a Material Adverse Effect; (d)
except as set forth in Schedule 4.14, neither the Borrower nor any Subsidiary is
a party to or bound by any collective bargaining agreement, management
agreement, consulting agreement or any material employment agreement (and true
and complete copies of any agreements described on Schedule 4.14 have been
delivered to Agent); (e) there is no organizing activity involving the Borrower
or any Subsidiary pending or, to Borrower's knowledge, threatened by any labor
union or group of employees; (f) there are no representation proceedings pending
or, threatened with the National Labor Relations Board, and no labor
organization or group of employees of any such Person has made a pending demand
for recognition; and (g) except as set forth in Schedule 4.14, there are no
complaints or charges against any the Borrower or any Subsidiary pending or, to
the knowledge of the Borrower, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by any such
Person of any individual.
Section 4.15 Governmental Regulation. Neither the Borrower nor any
Subsidiary is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940 as amended. Neither the
Borrower nor any Subsidiary is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, or any other federal or
state statute that restricts or
<PAGE> 30
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Loans by the Lenders to Borrower, the incurrence of
the Letter of Credit Obligations on behalf of Borrower, the application of the
proceeds thereof and repayment thereof and the consummation of the Acquisition
will not violate any provision of any such statute or any rule, regulation or
order issued by the Securities and Exchange Commission.
Section 4.16 Margin Regulations Neither the Borrower nor any Subsidiary
is engaged, nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin security" as such terms are defined in Regulation U or
G of the Federal Reserve Board as now and from time to time hereafter in effect
(such securities being referred to herein as "Margin Stock"). Neither the
Borrower nor any Subsidiary owns any Margin Stock (except for investments
permitted pursuant to Section 6.2(a)(v)), and none of the proceeds of the Loans
or other Extensions of Credit will be used, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock, for the purpose of reducing
or retiring any Indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the Loans or
other extensions of credit under this Agreement to be considered a "purpose
credit" within the meaning of Regulation G, T, U or X of the Federal Reserve
Board. Neither the Borrower nor any Subsidiary will take or permit to be taken
any action which might cause any Loan Document to violate any regulation of the
Federal Reserve Board.
Section 4.17 Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
of the Borrower and its Subsidiaries have been filed with the appropriate
Governmental Authority and all charges have been paid prior to the date on which
any fine, penalty, interest or late charge may be added thereto for nonpayment
thereof (or any such fine, penalty, interest, late charge or loss has been
paid), excluding charges or other amounts being contested in accordance with
this Credit Agreement except for such filings or payments, the non-payment of
which, individually or in the aggregate, have not had and could not reasonably
be expected to have or result in a Materially Adverse Effect. Proper and
accurate amounts have been withheld by each of the Borrower and its Subsidiaries
from its respective employees for all periods in full and complete compliance
with all applicable federal, state, local and foreign law and such withholdings
have been timely paid to the respective Governmental Authorities except for such
withholdings and payments, the failure to make which, individually or in the
aggregate, have not had and could not reasonably be expected to have or result
in a Materially Adverse Effect. There are no pending or threatened assessments
currently outstanding. Neither the Borrower or any of its Subsidiaries nor, to
the Borrower's knowledge, their respective predecessors are liable for any
Taxes: (a) under any agreement (including any tax sharing agreements) or (b) as
a transferee.
Section 4.18 ERISA. (a) As of the Closing Date, Schedule 4.18 lists and
separately identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree
Welfare Plans. Copies of all such listed Plans, together with a copy of the
latest form 5500 for each such Plan, have been delivered to Agent. Each
Qualified Plan has been determined by the IRS to qualify under Section 401 of
the Code, and the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501 of the Code, and nothing has
occurred which would cause the loss of such qualification or tax-exempt status.
Each Plan is in material compliance with the applicable provisions
<PAGE> 31
of ERISA and the Code, including the filing of reports required under the Code
or ERISA. Neither the Borrower nor any ERISA Affiliate has failed to make any
contribution or pay any amount due as required by either Section 412 of the Code
or Section 302 of ERISA or the terms of any such Plan. Neither the Borrower nor
any ERISA Affiliate has engaged in a prohibited transaction, as defined
inSection 4975 of the Code, in connection with any Plan, which would subject any
of the Borrower's or its Subsidiaries to a material tax on prohibited
transactions imposed by Section 4975 of the Code.
(b) Except as set forth on Schedule 4.18: (i) no Title IV Plan
has any Unfunded Pension Liability; (ii) no ERISA Event or event described in
Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur, which individually or in the aggregate, has had or
could reasonably be expected to have or result in a Materially Adverse Effect;
(iii) there are no pending, or to the knowledge of Borrower, threatened claims
(other than claims for benefits in the normal course), sanctions, actions or
lawsuits, asserted or instituted against any Plan or any Person as fiduciary or
sponsor of any Plan, which have a reasonable risk of being determined adversely
and which, if so determined, individually or in the aggregate, could have a
Materially Adverse Effect; (iv) neither the Borrower nor any ERISA Affiliate has
incurred or reasonably expects to incur any liability as a result of a complete
or partial withdrawal from a Multiemployer Plan; (v) within the last five years
no Title IV Plan with Unfunded Pension Liabilities has been transferred outside
of the "controlled group" (within the meaning of Section 4001(a)(14) of ERISA)
of the Borrower or any ERISA Affiliate; and (vi) no liability under any Title IV
Plan has been satisfied with the purchase of a contract from an insurance
company that is not rated AAA by the Standard & Poor's Corporation or the
equivalent by another nationally recognized rating agency.
Section 4.19 Brokers. No broker or finder acting on behalf of the
Borrower or any Subsidiary brought about the obtaining, making or closing of the
Loans or the Related Transactions, and neither the Borrower nor any Subsidiary
has any obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
<PAGE> 32
5.
COVENANTS
So long as (i) any Letter of Credit Obligation is outstanding or (ii)
any Loan, indebtedness or other obligation is outstanding under this Agreement
or any Loan Document or (iii) any Commitment shall remain in effect or the
Lenders, the Agent or any Letter of Credit Issuer shall have any obligation to
make any Extension of Credit:
A. THE BORROWER SHALL AND SHALL CAUSE EACH SUBSIDIARY TO:
Section 5.1 Preservation of Existence and Properties, Scope of
Business, Compliance with Law, Payment of Taxes and Claims. (i) Preserve and
maintain its corporate existence and all of its other franchises, licenses,
rights and privileges, (ii) preserve, protect and obtain all Patents, and
preserve and maintain in good repair, working order and condition all other
property, required for the conduct of its business, (iii) engage only in the
manufacture and sale of pharmaceutical products, (iv) comply with all Applicable
Laws, (v) pay or discharge when due all Taxes owing by it or imposed upon its
property (for the purposes of this clause, such Taxes shall be deemed to be due
on the date after which they become delinquent), and all Liabilities that might
become a Lien on any of its properties (other than any Tax or Liability to the
extent secured by a Permitted Lien or, in the case of any Tax not secured by a
Lien, to the extent such Tax is being contested in good faith by appropriate
proceedings and the Borrower has set aside adequate reserves on its books in
accordance with Generally Accepted Accounting Principles), (vi) pay its trade
payables in the ordinary course of its business consistent with past practice
and industry practice, subject however, to the Borrower's right to dispute items
in good faith, and (vii) at its cost and expense, take all such further actions
and obtain all consents and Governmental Approvals required or that the Agent
reasonably shall request so that the Obligations and the Security Interest will
at all times be valid, binding and enforceable in accordance with their
respective terms and entitled to the priority contemplated under the Loan
Documents and otherwise to effectuate the intent of the Loan Documents, except
that this Section 5.1 (other than clause (i), insofar as it requires the
Borrower and the Subsidiaries to preserve their corporate existence, clauses
(iii), (v) and (vi)) shall not apply in any circumstance where noncompliance,
together with all other noncompliances, will not have a Materially Adverse
Effect on (A) the Borrower and the Subsidiaries, taken as a whole, or (B) the
Security Interest, this Agreement or the other Loan Documents.
Section 5.2 Insurance. (a) Maintain insurance with one or more
Acceptable Insurers against such risks and in such amounts as are specified on
Schedule 5.2, or as may be required by Applicable Law, or as reasonably may be
requested by the Agent and the Required Lenders.
(b) All premiums on insurance policies required under this
Section shall be paid by the Borrower. All insurance policies shall contain loss
payable clauses in the form submitted to the Borrower by the Agent or in other
form and substance satisfactory to the Agent, naming the Agent as loss payee,
for its benefit and the benefit of the Lenders and the Letter of Credit Issuers.
Such policies
<PAGE> 33
shall also name the Lenders, the Letter of Credit Issuers and the Agent as
additional insured parties, as their interest may appear, and shall provide
that:
(i) all proceeds thereunder that relate to losses or damages
sustained in respect of any item constituting a part of any Collateral
(under any Mortgage or other Security Document) shall be payable to the
Agent for the benefit of the Agent, the Letter of Credit Issuers and
the Lenders, as their interest may appear, and
(ii) such insurance shall not be affected by any unintentional
act or negligence on the part of the Borrower, any Subsidiary or other
owner of the policy or the property described in such policy.
All such insurance policies shall provide that the insurer shall, simultaneously
with the delivery to the Borrower or such Subsidiary of any notice under such
policy, deliver a copy of such notice to the Agent. All such insurance policies
and loss payable clauses shall provide that they may not be canceled, amended or
terminated unless the Agent is given at least the same number of days' notice
that the insurance company that issued such policies is required to give the
Borrower or any Subsidiary, but in no event less than 30 days' prior written
notice. So long as no Default has occurred and is continuing, proceeds of such
insurance for all losses equal to or less than $100,000 per occurrence shall be
paid directly to the Borrower. Proceeds for all losses in excess of $100,000 per
occurrence shall be paid directly to the Agent for the benefit of the Agent, the
Letter of Credit Issuers and the Lenders, whereupon the Agent shall apply such
proceeds as provided in the Security Documents. Proceeds held by the Agent shall
be as security for the Obligations pending application thereto.
(c) The Borrower will not use the Inventory or Collateral, or
permit the Inventory or Collateral to be used, unlawfully or in any manner
inconsistent with the terms of any insurance coverage.
Section 5.3 Use of Proceeds. Use (i) the proceeds of any Revolving Loan
for working capital purposes, to pay costs associated with this Agreement and
the other Loan Documents, and for general corporate purposes, (ii) the proceeds
of any Term Loan only to refinance the Debt listed on part A of Schedule 4.9, to
pay the purchase price and the costs associated with the Acquisition and (iii)
Letters of Credit shall be used only in connection with utilities, to secure
bid, performance or payment bonds, or to secure obligations in respect of
worker's compensation insurance. No Extension of Credit, and none of the
proceeds of any Extension of Credit shall be used to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulations G, T, U and X) or to extend
credit to others for the purpose of purchasing or carrying any margin stock. If
requested by the Agent, the Borrower will furnish to the Agent statements in
conformity with the requirements of Federal Reserve Form U-1 referred to in
Regulation U and
<PAGE> 34
will take all other action necessary or desirable to ensure that the Lenders and
the Extensions of Credit are at all times in compliance with Regulations G, T, U
and X.
Section 5.4 Environmental Matters. (i) Use and operate all of its
facilities and properties in material compliance with all Environmental Laws,
(ii) keep all necessary permits, approvals, certificates, licenses and
authorizations relating to environmental matters in effect and remain in
material compliance therewith, and (iii) handle all Hazardous Materials in
material compliance with all applicable Environmental Laws. In addition, the
Borrower shall and shall cause each Subsidiary to:
(a) immediately notify the Agent and provide copies upon
receipt of all written claims, complaints or notices (excluding routine fee or
schedule notices) relating to compliance with, and liabilities or obligations
under, Environmental Laws or related common law theories with respect to its
facilities or properties and shall promptly cure and have dismissed with
prejudice to the satisfaction of the Required Lenders any actions or proceedings
relating to compliance with Environmental Laws; and
(b) provide such information and certifications that the Agent
may reasonably request from time to time to evidence compliance with this
Section 5.4.
B. THE BORROWER SHALL NOT AND SHALL NOT PERMIT ANY SUBSIDIARY TO,
DIRECTLY OR INDIRECTLY:
Section 5.5 Guaranties. Become or remain liable with respect to any
Guaranty except that this Section 5.5 shall not apply to (i) Existing Guaranties
or (ii) Permitted Guaranties.
Section 5.6 Liens. Create, assume or incur, or permit or suffer to
exist or to be created, assumed or incurred, any Lien upon any of its properties
or assets of any character, whether now owned or hereafter acquired, or upon any
income or profits therefrom, except that this Section 5.6 shall not apply to (i)
Permitted Liens or (ii) the Security Interest; provided, however, that if,
notwithstanding this Section 5.6, any Lien to which this Section is applicable
shall be created or arise, all Obligations shall automatically be secured by
such Lien equally and ratably with the other Debt secured thereby, and the
holder of such other Debt, by accepting such Lien, shall be deemed to have
agreed thereto and to share with the Lenders, the Agent and the Letter of Credit
Issuers on that basis, the proceeds of such Lien, whether or not the lender's
Lien shall be perfected, provided further, however, that notwithstanding such
equal and ratable securing and sharing, the existence of such Lien shall
constitute a default in the performance or observance of this Section 5.6.
Section 5.7 Merger, Consolidation, Acquisitions and Disposition of
Assets. (a) Subject to the provisions of subsection (b) below and unless the
Required Lenders shall, in their
<PAGE> 35
sole discretion, otherwise give their prior written consent, (i) Merge or
consolidate with any Person, provided that, if after giving effect thereto no
Default would exist, this Section 5.7 shall not apply to (A) any merger or
consolidation of the Borrower with any Subsidiary, so long as the Borrower shall
be the continuing entity, or (B) any merger or consolidation of any Subsidiary
with any other Subsidiary if, after giving effect thereto, the continuing entity
is a Wholly-Owned Subsidiary of the Borrower that has no Liabilities other than
Permitted Debt, (ii) purchase, lease or otherwise acquire for cash, stock or
other consideration all or any substantial portion of the assets of any other
Person (which for the purposes of this Section shall mean (x) more than 5% of
the gross assets of such Person or (y) any business line, product line or brand
name, but shall not include the purchase of inventory in the ordinary course of
business), or (iii) sell, lease, transfer or otherwise dispose of any assets,
provided that this Section 5.7 shall not apply to (x) the creation of a
Permitted Lien, (y) any purchase or disposition of inventory or investments
permitted by Section 5.13(c) in the ordinary course of business or (z) the
disposition of any obsolete or retired property not used or useful in its
business the fair market value of which obsolete or retired property, singly or
when aggregated with all other such assets sold in any Fiscal Year, does not
exceed $250,000.
(b) Following the date that the Borrower shall receive no
less than $50,000,000 in Net Proceeds from the IPO, the Borrower may acquire the
stock or assets of another Person (including but not limited to brand names or
product lines) without the consent of the Required Lenders, notwithstanding
clause (ii) of subsection (a) above, for an aggregate consideration (whether
paid in cash, securities, property, assumption of liabilities or otherwise) not
to exceed an amount equal to the net proceeds from the IPO, subject to the
following criteria:
(i) the assets acquired (including but not limited to brand
names or product lines) or the business of the entity whose stock is
acquired shall be in the Borrower's current line of business or in a
line of business that is substantially related thereto;
(ii) the value of the total consideration to be paid or
provided by the Borrower and/ or its Subsidiaries for such acquisition
(other than an acquisition of assets constituting a brand name or
product line), whether in cash, securities or assumption of liabilities
shall not exceed $25,000,000;
(iii) immediately before and after giving effect to such
acquisition no Default shall have occurred or be continuing, and
(iv) (x) in the case of any acquisition, and (y) in the case
of any acquisition of assets constituting a brand name or a product
line where the total consideration shall exceed $10,000,000, the
Borrower shall provide the Agent with a certificate that: (A) such
acquisition complies with the terms hereof, (B) immediately before and
after
<PAGE> 36
giving effect to such acquisition no Default shall have occurred or be
continuing, and (C) demonstrating compliance with the financial
covenants contained herein on a pro forma basis as of the most recently
ended fiscal quarter, calculated giving effect to the acquisition as at
the beginning of the four fiscal quarter period for which such
calculation is made, provided that, no pro forma effect shall be given
to the earnings performance of an acquired asset in the case of an
acquisition of only assets constituting a brandname or a product line.
Section 5.8 Transactions with Affiliates. Effect any transaction with
any Affiliate except for transactions effected in the ordinary course of
business consistent with past practice and on a basis no less favorable to the
Borrower or a Subsidiary, as the case may be, than would at the time be
available to an unrelated third party for a comparable transaction in
arms-length dealing.
Section 5.9 Taxes of Other Persons. (i) File a consolidated tax return
with any other Person other than the Borrower and its Consolidated Subsidiaries,
or (ii) except as required by Applicable Law, pay any Taxes owing by any Person
other than the Borrower and its Consolidated Subsidiaries.
Section 5.10 Limitation on Restrictive Covenants. Enter into any
Contract, or otherwise create or cause or permit to exist or become effective
any consensual restriction, (i) purporting to restrict (whether by covenant,
event of default or otherwise) any Subsidiary from (A) paying dividends or
making any other distributions on shares of its capital stock held by the
Borrower or any Subsidiary, (B) paying any obligation owed to the Borrower or
any Subsidiary, (C) making any loan or advance to or investment in the Borrower
or in any Subsidiary or (D) transferring any of its property or assets to the
Borrower or any Subsidiary, or (ii) purporting to restrict the Borrower or any
Subsidiary from creating any Lien upon its property or assets whether now owned
or hereafter acquired or upon any income or profits therefrom, except in each
case ((i) and (ii)) for Permitted Restricted Covenants.
Section 5.11 Issuance or Disposition of Capital Securities. Issue any
of its Capital Securities or sell, transfer or otherwise dispose of any Capital
Securities of any of its Subsidiaries, except that this Section 5.11 shall not
apply to (i) any issuance by the Borrower of any of its Capital Securities in
the IPO and (ii) any issuance by a Subsidiary of its Capital Securities to the
Borrower provided that such shares are promptly delivered to the Agent in pledge
pursuant to terms of the Pledge and Security Agreement.
Section 5.12 Permitted Debt. Create, incur, assume or suffer to exist
any Debt, other than:
(a) Debt arising under this Agreement or the other Loan
Documents;
<PAGE> 37
(b) Existing Debt;
(c) Purchase Money Debt in an amount not to exceed at any time
outstanding (i) $7,500,000, minus (ii) all outstanding Existing Debt that
constitutes Purchase Money Debt;
(d) Guaranteed Debt consisting of endorsements of negotiable
instruments for deposit or collection in the ordinary course of business;
(e) Debt consisting of intercompany loans and advances made by
Borrower to any of its Subsidiaries or by any Wholly-Owned Subsidiary to
Borrower;
(f) Prior to January 31, 1998, the Contingent Put Option of
the United Company under Article 1.5 of that certain Stock Purchase Agreement
between the United Company and King Pharmaceuticals, Inc., dated March 17, 1997;
and
(g) Other Debt in an amount not to exceed at any time
outstanding $700,000.
Section 5.13 Limitations on Investments, Loans and Advances. Make any
advance, loan or other extension of credit to, or equity or other investment in,
any Person, except that, so long as at the time of such transaction, and
immediately after giving effect thereto, no Default would exist:
(a) (i) any Subsidiary may make payments to the Borrower and
(ii) any Subsidiary may make loans, advances, or other extensions of credit to,
or equity investments in, the Borrower, provided that any loan to the Borrower
shall be subordinated to the payment of the Obligations on terms satisfactory to
the Required Lenders;
(b) the Borrower or any of its Subsidiaries may create and
hold receivables owing to it, if such receivables are created in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms (provided that nothing in this clause (b) shall prevent the Borrower
or any of its Subsidiaries from offering such concessionary trade terms in
accordance with past practice, as management deems reasonable in the
circumstances);
(c) the Borrower and any Subsidiary may acquire and hold any
of the following:
(i) debt securities if (A) such securities are long-term
securities and rated "A" or higher by Moody's Investors Service, Inc.
("Moody's"), or "A" or higher by Standard & Poor's Corporation
("S&P's"), or (B) such securities have been issued or fully guaranteed
as to principal and interest by the United States of America or any
agency or instrumentality thereof whose obligations are backed by the
full faith and credit of the United States of America;
<PAGE> 38
(ii) commercial paper rated "P-1" or higher by Moody's or
"A-1" or higher by S&P's or has been given an equivalent rating by
another nationally recognized statistical rating agency;
(iii) certificates of deposit of, or demand or time deposits
in, the Agent, any Letter of Credit Issuer or the Lenders;
(iv) demand deposits in domestic banks that are insured by
the Federal Deposit Insurance Corporation, have combined capital and
surplus in excess of $300,000,000 and whose (or whose parent company's)
publicly held long-term debt securities, if any, meet the standards set
forth in item (i) above.;
(v) repurchase contracts covering securities that are
described in clause (i) above, and which contracts have a maturity not
exceeding the date fourteen days from the date of acquisition thereof
and which contracts are entered into with a bank meeting the
requirements of clause (iii) or (iv) above; and
(vi) other investments of any kind not exceeding $250,000 in
any fiscal year.
(d) the Borrower or any of its Subsidiaries may make
advances to employees or consultants for business expenses in the ordinary
course of business consistent with past practice;
Section 5.14 Additional Subsidiaries. Create or acquire any Subsidiary;
provided that, if notwithstanding this Section the Borrower shall acquire or
create any Subsidiary, it shall immediately cause such Subsidiary to become a
party to the Guaranty Agreement, the Subsidiary Pledge and Security Agreement
and to mortgage all of its real property assets, in each case, to secure the
Obligations. The Borrower shall immediately pledge, or cause to be pledged, 100%
of the capital stock of such Subsidiary to the Agent for the equal and ratable
benefit of the Agent, the Lenders, and the Letter of Credit Issuers, to secure
the Obligations pursuant to the Pledge and Security Agreement.
C. THE BORROWER SHALL NOT AT ANY TIME:
Section 5.15 Minimum Consolidated Net Worth. Permit Consolidated Net
Worth on any date during any fiscal year set forth below to be less than the
amount set forth for such fiscal year, plus the Net Proceeds received from the
issuance of any Stock of the Borrower:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1997 $11,000,000
1998 25,000,000
</TABLE>
<PAGE> 39
<TABLE>
<S> <C>
1999 35,000,000
2000 50,000,000
2001 65,000,000
2002 80,000,000
</TABLE>
Section 5.16 Consolidated Leverage Ratio. Permit the Consolidated
Leverage Ratio for any period ending during a period specified below to be less
than the amount specified opposite such period:
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
Closing Date through December 31, 1997 3.50 : 1.00
January 1, 1998 through June 30, 1998 3.25 : 1.00
July 1, 1998 through September 30, 1998 3.00 : 1.00
October 1, 1998 through March 31, 1999 2.75 : 1.00
April 1, 1999 through September 30, 1999 2.65 : 1.00
October 1, 1999 through March 31, 2000 2.50 : 1.00
April 1, 2000 through September 30, 2000 2.30 : 1.00
Thereafter 2.00 : 1.00
</TABLE>
Section 5.17 Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio for any period to be less than 4.00:1.00.
Section 5.18 Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any period ending during a period
specified below to be less than the amount the amount specified opposite such
period:
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
Closing Date through March 31, 1997 1.10 : 1.00
April 1, 1998 through September 30, 1998 1.15 : 1.00
October 1, 1998 through March 31, 1999 1.20 : 1.00
April 1, 1999 through September 30, 1999 1.35 : 1.00
Thereafter 1.50 : 1.00
</TABLE>
Section 5.19 Capital Expenditures. Permit Consolidated Capital
Expenditures during any fiscal year to exceed the amount specified for such year
below:
<PAGE> 40
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
<S> <C>
1998 $3,000,000
1999 3,500,000
2000 4,000,000
2001 4,500,000
Thereafter 5,000,000
</TABLE>
Section 5.20 Restricted Payments. Declare or make any Restricted
Payment, except that this Section 5.18 shall not prohibit any payment of salary
or bonuses, or payment or advance of business expenses to employees or
consultants who are shareholders in each case, so long as such payments are made
in the ordinary course of business consistent with past practices.
<PAGE> 41
6.
INFORMATION
Section 6.1 Financial Statements and Information to be Furnished. So
long as (i) any Loan or Letter of Credit Obligation is outstanding or (ii) any
other indebtedness or obligation is outstanding under this Agreement or any of
the other Loan Documents or (iii) the Lenders, the Agent or the Letter of Credit
Issuers shall have any Commitment or any obligation to make an Extension of
Credit, the Borrower shall furnish to each Lender, at its Base Rate Lending
Office, to the Agent, at the Agent's Office, and to each Letter of Credit Issuer
(if it is not also a Lender), at the address specified pursuant to Section 11.1:
(a) Monthly Reports. As soon as available and in any event
within 30 days after the end of each fiscal month of the Borrower:
(i) a balance sheet and income statement for the Borrower
and its Consolidated Subsidiaries for such month and the elapsed
portion of the fiscal year ended with the last day of such month,
setting forth in each case in comparative form the figures for the
corresponding periods of the previous fiscal year and the figures for
the corresponding periods from the most recently delivered projections;
(ii) a report showing sales and gross margins by product line
(in dollars and in units) for such month and the elapsed portion of the
fiscal year ended with the last day of such month, setting forth in
each case in comparative form the figures for the corresponding periods
of the previous fiscal year; and
(iii) a certificate of the president or chief financial
officer of the Borrower in the form of Schedule 6.1(a).
(b) Quarterly Reports. As soon as available and in any event
within 45 days after the close of each quarterly accounting period in each
fiscal year of the Borrower:
(i) consolidated and consolidating balance sheets of the
Borrower and its Consolidated Subsidiaries, as at the end of such
quarterly period and the related consolidated and consolidating
statements of income, shareholders' equity and cash flows of the
Borrower and its Consolidated Subsidiaries for such quarterly period
and the elapsed portion of the fiscal year ended with the last day of
such quarterly period, setting forth in each case in comparative form
the figures for the corresponding periods of the previous fiscal year
and the figures for the corresponding periods from the most recently
delivered projections, and showing sales and gross margins by product
line; and
(ii) a certificate with respect thereto of the president or
chief financial officer of the Borrower in the form of Schedule 6.1(b).
<PAGE> 42
(c) Annual Reports. As soon as available and in any event
within 90 days after the end of each fiscal year of the Borrower:
(i) audited consolidated and consolidating balance sheets of
the Borrower and its Consolidated Subsidiaries as at the end of such
fiscal year and the related consolidated and consolidating statements
of income, shareholders' equity and cash flows of the Borrower and its
Consolidated Subsidiaries for such fiscal year, setting forth in
comparative form the figures as at the end of and for the previous
fiscal year;
(ii) a report on the financial statements of the Borrower by
Coopers & Lybrand or other independent certified public accountants of
recognized standing satisfactory to the Required Lenders, which report
shall be unqualified as to scope of audit and shall state that, based
upon an audit conducted in accordance with generally accepted auditing
standards, such consolidated financial statements present fairly, in
all material respects, the consolidated financial condition of the
Borrower and its Consolidated Subsidiaries as at the end of such fiscal
year, and the consolidated earnings, shareholders' equity and cash
flows of the Borrower and its Consolidated Subsidiaries for such fiscal
year in accordance with Generally Accepted Accounting Principles
consistently applied throughout the periods involved;
(iii) a certificate of such accountants addressed and in form
and substance satisfactory, to the Required Lenders (A) confirming that
(1) the Borrower is authorized to deliver the report referred to in
clause (ii) to the Lenders pursuant to this Agreement and (2) it is
their understanding that the Lenders are relying on such report and
such certificate, and (B) stating that they have caused this Agreement
and the other Loan Documents to be reviewed and that, in making the
examination necessary for their report on such consolidated financial
statements, nothing came to their attention that caused them to believe
that, as of the date of such financial statements, any Default exists
or, if such is not the case, specifying such Default and its nature,
when it occurred and whether it is continuing; and
(iv) a certificate of the president or chief financial
officer of the Borrower, in the form of Schedule 6.1(c).
(d) Other Reports.
(i) Promptly upon receipt thereof, copies of any management
letters submitted to the Borrower, or the Board of Directors of the
Borrower, by its independent certified public accountants;
(ii) Promptly upon their becoming available, copies of: (i)
all financial statements, reports, notices and proxy statements made
publicly available by the Borrower or any of its Subsidiaries to its
debt or security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by the
<PAGE> 43
Borrower or any of its Subsidiaries with any securities exchange or
with the Securities and Exchange Commission or any governmental or
private regulatory authority; and (iii) all press releases and other
statements made available by the Borrower or any of its Subsidiaries to
the public concerning material adverse changes or developments in the
business of the Borrower or any of its Subsidiaries;
(iii) On the date not later than 30 days after the close of
each fiscal year and promptly upon and change or revision thereof,
board approved projections of its performance for each of the next
three fiscal years, with the first year's projections prepared on a
monthly basis, and the projections for the second and third years
prepared on a quarterly basis, and otherwise prepared in such detail as
the Agent shall request. Such projections shall be accompanied by a
certificate of the President or Chief Financial Officer of the Borrower
to the effect that the projections were prepared based on the best
assumptions currently available to management and that such assumptions
are reasonable based on the Borrower's historical performance. Such
projections shall also be accompanied by a management commentary
thereon including a discussion of any changes therein from the previous
projections and a discussion of all assumptions used in therein;
(iv) Promptly upon its becoming aware thereof, notice of each
federal statutory Lien, tax or other state or local government Lien or
other Lien (other than the Security Interest) filed against the
property of the Borrower or any of its Subsidiaries;
(v) On (A) the first Business Day of each calendar month, a
duly completed Borrowing Base Certificate as at the close of the last
Business Day of the preceding month in the form of Schedule 6.1(c)(v),
duly executed by the chief financial officer of the Borrower; and
(vi) From time to time and upon the request of the Agent,
such data, certificates, reports, statements, opinions of counsel,
documents or further information as any Lender, the Agent or any Letter
of Credit Issuer may reasonably request.
(e) Notice of Defaults, Litigation and Other Matters. Prompt
notice of: (i) any Default; (ii) any change or event referred to in Section 4.5;
(iii) any event or condition referred to in clauses (i) through and including
(vii) of Section 7.1(h), whether or not such event or condition shall constitute
an Event of Default; (iv) the commencement of any action, suit or proceeding or
investigation in any court or before any arbitrator of any kind or by or before
any governmental or non-governmental body against or in any other way relating
adversely to or affecting (A) the Borrower or any Subsidiary or any of their
businesses or properties, that, if adversely determined,
<PAGE> 44
might, singly or in the aggregate, have a Materially Adverse Effect on the
Borrower and its Subsidiaries, taken as a whole, or (B) this Agreement, the
other Loan Documents, the Security Interest, or any transaction contemplated
hereby or thereby; and (v) any amendment of the certificate of incorporation or
bylaws of the Borrower or any Subsidiary.
Section 6.2 Accuracy of Financial Statements and Information.
(a) Historical Financial Statements. The Borrower hereby
represents and warrants to the Lenders, the Agent and the Letter of Credit
Issuers: (i) that the financial statements listed on Schedule 6.2, are complete
and correct and present fairly, in accordance with Generally Accepted Accounting
Principles consistently applied throughout the periods involved, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as at their respective dates and the consolidated earnings,
shareholders' equity and cash flows of the Borrower and such Subsidiaries for
the respective periods to which such statements relate (except in the case of
unaudited interim financial statements for the absence of footnotes and normally
recurring year-end adjustments), and (ii) that, except as disclosed or reflected
in such financial statements or in Schedule 4.3, as at September 30, 1997,
neither the Borrower nor any of its Subsidiaries has any liabilities, contingent
or otherwise, nor any unrealized or anticipated losses, that, singly or in the
aggregate, have had or might have a Materially Adverse Effect on the Borrower
and its Subsidiaries, taken as a whole.
(b) Future Financial Statements. All financial statements
delivered pursuant to Section 6.1(a) or (b), shall be complete and correct and
present fairly, in accordance with Generally Accepted Accounting Principles
consistently applied throughout the periods involved, the consolidated financial
position of the Borrower and its Subsidiaries, as at their respective dates and
the consolidated earnings, shareholders' equity, and consolidated cash flows of
the Borrower and its Subsidiaries for the respective periods to which such
statements relate (subject, in the case of the financial statements delivered
pursuant to Section 6.1(a), to the absence of footnotes and normally recurring
year-end adjustments), and the furnishing of the same to the Lenders shall
constitute a representation and warranty by the Borrower made on the date the
same are furnished to the Lenders to that effect and to the further effect that,
except as disclosed or reflected in such financial statements, as at the
respective dates thereof, neither the Borrower nor any of its Subsidiaries had
any liability, contingent or otherwise, nor any unrealized or anticipated loss,
that, singly or in aggregate, has had or might have a Materially Adverse Effect
on the Borrower and its Subsidiaries, taken as a whole.
(c) Historical Information. The Borrower hereby represents and
warrants to the Lenders, the Agent and Letter of Credit Issuers that all
Information furnished to the Lenders, the Agent or the Letter of Credit Issuers
by or on behalf of the Borrower prior to the Agreement Date in connection with
or pursuant to this Agreement and the relationship established hereunder, at the
time the same was so furnished, but in the case of Information dated as of a
prior date, as of such date, (i) in the case of any such Information prepared in
the ordinary course of business, was complete and correct in the light of the
purpose prepared, and, in the case of any such Information the preparation of
which was requested by the Agent, was complete and correct in all material
<PAGE> 45
respects to the extent necessary to give true and accurate knowledge of the
subject matter thereof, and (ii) did not contain any untrue statement of a
material fact.
(d) Future Information. All Information furnished to the
Lenders, the Letter of Credit Issuers or the Agent by or on behalf of the
Borrower or its Subsidiaries on and after the Agreement Date in connection with
or pursuant to this Agreement or any other Loan Document or in connection with
or pursuant to any amendment or modification of, or waiver under, this Agreement
or any other Loan Document, shall, at the time the same is so furnished, but in
the case of Information dated as of a prior date, as of such date, (i) in the
case of any such prepared in the ordinary course of business, be complete and
correct in the light of the purpose prepared, and, in the case of any such
Information required by the terms of this Agreement or the preparation of which
was requested by the Lenders, the Letter of Credit Issuers or the Agent, be
complete and correct in all material respects to the extent necessary to give
true and accurate knowledge of the subject matter thereof, and (ii) not contain
any untrue statement of a material fact, and the furnishing of the same to the
Lenders, the Agent or the Letter of Credit Issuers shall constitute a
representation and warranty by the Borrower made on the date the same are so
furnished to the effect specified in clauses (i) and (ii).
(e) Change in Fiscal Year. The Borrower shall not change its
fiscal year.
Section 6.3 Additional Covenants Relating to Disclosure. From the
Agreement Date and until the Termination Date, the Borrower shall and shall
cause each of its Subsidiaries to:
(a) Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or necessary to permit (i) the
preparation of financial statements required to be delivered pursuant to Section
6.1 and (ii) the determination of the Borrower's compliance with the terms of
this Agreement and the other Loan Documents.
(b) Visits and Inspections. Permit representatives (whether or
not officers or employees) of the Agent, from time to time, as often as may be
reasonably requested, but only during normal business hours, to (i) visit and
inspect any of the properties of the Borrower or its Subsidiaries, (ii) inspect
and make extracts from their books and records, including but not limited to
management letters prepared by the Borrower's independent accountants, (iii)
discuss with their principal officers, and their independent accountants, their
respective businesses, assets, liabilities, financial condition, results of
operations and business prospects and (iv) audit and inspect the Mortgaged
Premises and the Collateral and the premises upon which any of the Collateral is
located, verify the amount, quality, quantity, value and condition of, or any
other matter relating to, the Collateral. In the event that any of the
Collateral is under the exclusive control of any third party, the Borrower shall
cause such parties to make such inspection rights available to the Agent.
<PAGE> 46
7.
DEFAULT
Section 7.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary, or within or without the control of the Borrower or
any of its Subsidiaries, or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or quasi-governmental body:
(a) The Borrower or any Subsidiary shall fail to pay (i) any
amount payable pursuant to this Agreement, the Notes or any other Loan Document
with respect to interest or periodic fees within three days of the due date
therefor and in the manner prescribed hereunder (ii) or any other Obligation
when and as due (whether at maturity, by reason of notice of prepayment,
acceleration or otherwise) in accordance with the terms of this Agreement, any
Note or other Loan Document;
(b) Any Representation and Warranty shall at any time prove
to have been incorrect or misleading in any material respect when made;
(c) The Borrower shall default in the performance or
observance of:
(i) any term, covenant, condition or agreement contained in
Section 3.1, Section 5.1(i) (insofar as such section requires the
preservation of the corporate existence of the Borrower), Section 5.3,
Section 5.5 through Section 5.20, Section 6.1, Section 6.2(e) or
Section 6.3(b); or
(ii) any term, covenant, condition or agreement contained in
this Agreement or any other Loan Document (other than a default in the
performance or observance of any other term, covenant, condition or
agreement which is elsewhere in this section specifically dealt with)
and such default shall continue unremedied for a period of 30 days
after any officer of the Borrower has knowledge thereof;
(d) The Borrower or any of its Subsidiaries shall fail to
pay, in accordance with its terms and when due and payable, the principal of, or
interest or premium on, any Debt having an aggregate outstanding balance in
excess of $100,000 (other than the Obligations), or the maturity of any such
Debt, in whole or in part, shall have been accelerated, or any such Debt, in
whole or in part, shall have been required to be prepaid prior to the stated
maturity thereof, in accordance with the provisions of any Contract evidencing,
providing for the creation of or concerning such Debt or, if any event shall
have occurred and be continuing that, with the passage of time or the giving of
notice or both, would permit any holder or holders of such Debt, any trustee or
agent acting on behalf of such holder or holders or any other Person so to
accelerate such maturity or require any such prepayment;
<PAGE> 47
(e) A default shall occur and be continuing under any Contract
(other than a Contract relating to Debt to which clause (d) of this Section 7.1
is applicable) binding upon the Borrower or any of its Subsidiaries, except such
a default that, together with all other such defaults, has not had and will not
have a Materially Adverse Effect on (i) the Borrower and its Subsidiaries, taken
as a whole, (ii) the Loan Documents or (iii) the Security Interest;
(f)(i) The Borrower or any of its Subsidiaries shall (A)
commence a voluntary case under the Federal bankruptcy laws (as now or hereafter
in effect), (B) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition or adjustment of debts, (C) consent to, or fail to contest in
a timely and appropriate manner, any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (D) apply for, or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its assets, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its debts (other than
those that are the subject of bona fide disputes) as they become due, (F) make a
general assignment for the benefit of creditors, or (G) take any corporate
action for the purpose of effecting any of the foregoing; or
(ii) A case or other proceeding shall be commenced against the
Borrower or any of its Subsidiaries in any court of competent
jurisdiction seeking (A) relief under the Federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up
or adjustment of debts, or (B) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower or any of its
Subsidiaries, or of all or any substantial part of the assets, domestic
or foreign, of the Borrower or any such Subsidiary, and, in each case,
such case or proceeding shall continue undismissed or unstayed for a
period of 60 days, or an order granting the relief requested in such
case or proceeding against the Borrower or any such Subsidiary
(including, but not limited to, an order for relief under such Federal
bankruptcy laws) shall be entered;
(g) (i) A judgment or order for the payment of money in an
amount that individually, or when aggregated with all other unpaid judgments
outstanding against the Borrower and its Subsidiaries, exceeds $200,000 shall be
entered against the Borrower or any of its Subsidiaries by any court, and (ii)
either (A) such judgment or order shall continue undischarged and/or unbonded or
unstayed for a period of 30 days or (B) enforcement proceedings shall have been
commenced upon such judgment or order;
(h) (i) Any Termination Event shall occur, (ii) any Person
shall engage in any Prohibited Transaction involving any Plan, (iii) any
Accumulated Funding Deficiency, whether or not waived, shall exist with respect
to any Plan, (iv) the Borrower or any ERISA Affiliate of the Borrower shall be
in "default" (as defined in ERISA Section 4219(c)(5)) with respect to payments
owing to a multiemployer plan (as defined in ERISA Section 4001(a)(3)) as a
result of the Borrower's or such ERISA Affiliate's
<PAGE> 48
complete or partial withdrawal (as described in ERISA Section 4203 or 4205) from
such Plan, (v) the Borrower or any ERISA Affiliate shall fail to pay when due
any amount that is payable by it to the PBGC or to a Plan under Title IV of
ERISA, (vi) a proceeding shall be instituted by a fiduciary of any Plan against
the Borrower or any ERISA Affiliate to enforce ERISA Section 515 and such
proceeding shall not have been dismissed within 30 days thereafter, or (vii) any
other event or condition shall occur with respect to a Plan, except that no
event or condition referred to in any of the clauses (i) through (vii) shall
constitute an Event of Default if it, together with all other events or
conditions at the time existing, has not subjected, or in the reasonable
determination of the Required Lenders would not subject, the Borrower or any of
its Subsidiaries to any Liability that, alone or in the aggregate with all such
Liabilities, would have a Materially Adverse Effect on the Borrower and its
Subsidiaries taken as a whole;
(i) The Security Interest shall cease to be fully perfected,
enforceable in accordance with its terms, and prior to the rights of any third
party in respect of any portion of the Collateral (except for Permitted Liens);
(j) Any material provision of any Loan Document, or any
portion of any obligation for the payment of money under any Loan Document shall
cease to be in full force and effect, or the Borrower or any of its Subsidiaries
or Affiliates shall so assert in writing or bring any action challenging the
enforceability or binding effect of any of the foregoing or of the Security
Interest or the priority of the Security Interest;
(k) A default or "Event of Default" as defined in any Loan
Document shall have occurred and be continuing;
(l) An event, condition or circumstance shall occur or exist
having a Materially Adverse Effect with respect to the Borrower and its
Subsidiaries, taken as a whole, or on this Agreement, the other Loan Documents,
the Security Interest or the Obligations; or
() There shall occur any Change of Control.
Section 7.2 Remedies upon Event of Default. (a) Upon the occurrence and
during the continuance of any Event of Default (other than one specified in
Section 7.1(f)) and in every such event, the Agent, if requested by the Required
Lenders, upon notice to the Borrower, may do any or all of the following: (i)
declare, in whole or, from time to time, in part, the Obligations to be, and the
Obligations shall thereupon become, due and payable to the Agent, the Letter of
Credit Issuers and the Lenders, (ii) demand in writing that the Borrower deliver
to the Agent at once and in full, an amount sufficient to reimburse the Agent,
the Letter of Credit Issuers and the Lenders for all outstanding Letter of
Credit
<PAGE> 49
Obligations, which amount shall become immediately due and payable by the
Borrower, and to the extent paid by the Borrower shall constitute a prepayment
under this Agreement, (iii) deliver, or cause the applicable Letter of Credit
Issuer to deliver, notice to any Letter of Credit beneficiary of such Event of
Default and require the Letter of Credit beneficiary to draw upon the applicable
Letter of Credit and to take other action as may be appropriate under the terms
of such Letter of Credit, (iv) terminate, in whole or, from time to time, in
part each Lender's Commitments, the Agent's and the Letter of Credit Issuers'
obligations hereunder and (v) exercise, or direct any Letter of Credit Issuer to
exercise, any rights or remedies provided herein, in any other Loan Document or
otherwise.
(a) Upon the occurrence of an Event of Default specified in
Section 7.1(f), automatically and without any notice to the Borrower, (i) the
Obligations shall be due and payable, including, without limitation, all
outstanding Letter of Credit Obligations, (ii) each Lender's Commitments shall
terminate, (iii) the Agent's and the Letter of Credit Issuers' obligations to
the Borrower hereunder shall terminate and (iv) the Agent, if requested by the
Required Lenders, or any Letter of Credit Issuer, if directed by the Agent, may
take such other actions as permitted to it hereunder, under any other Loan
Document or otherwise.
(b) Presentment, demand, protest or notice of any kind (other
than the notice provided for in the first sentence of this Section 7.2) are
hereby expressly waived. The remedies specified in this Section shall be in
addition to and not in limitation of the remedies set forth elsewhere herein and
in the other Loan Documents, existing at law or in equity.
<PAGE> 50
8.
CHANGES IN CIRCUMSTANCES
Section 8.1 Mandatory Suspension and Conversion of Eurodollar Rate
Loans. Any Lender's obligations to make or continue Loans as, or to convert
Loans into, Eurodollar Loans shall be suspended, all outstanding Eurodollar
Loans shall be converted on the last day of their applicable Interest Periods
(or, if earlier, in the case of clause (b) below, on the last day such Lender
may lawfully continue to maintain Loans of that Type or, in the case of clause
(c) below, the day determined by such Lender to be the last Business Day before
the effective date of the applicable restriction) into, and all pending requests
for the making or continuation of or conversion, into Loans of that Type shall
be deemed requests for, Base Rate Loans, if:
(a) on or prior to the determination of an interest rate for a
Eurodollar Loan for any Interest Period, the Agent reasonably determines that
for any reason the Eurodollar Rate cannot be determined as provided herein, or
any Lender shall reasonably determine that such Rate would not accurately
reflect the cost to such Lender of making or continuing a Loan as, or converting
a Loan into, a Eurodollar Loan for such Interest Period;
(b) at any time such Lender reasonably determines that any
Regulatory Change makes it unlawful or impracticable for such Lender to make or
maintain any Eurodollar Loan, or to comply with its obligations hereunder in
respect thereof; or
(c) such Lender reasonably determines that by reason of any
Regulatory Change it is restricted, directly or indirectly, in the amount that
it may hold of (A) a category of liabilities that includes deposits by reference
to which, or on the basis of which, the interest rate applicable to Eurodollar
Loans is directly or indirectly determined, or (B) the category of assets which
includes Eurodollar Loans.
The Agent or any such Lender, as the case may be, shall promptly notify the
Borrower and the other parties to this Agreement of any circumstances that would
make the provisions of this Section 8.1 applicable, but the failure to give any
such notice shall not affect such Lender's rights hereunder.
Section 8.2 Regulatory Changes. (a) If any Regulatory Change:
(i) shall subject the Agent, any Letter of Credit Issuer or
any Lender to any Tax, duty or other charge reasonably determined by
the Agent, such Letter of Credit Issuer or such Lender, as the case may
be, to be applicable to any Extension of Credit, to its obligation to
make or maintain any such Extension of Credit, or to this Agreement,
any Note or any other Loan Document, or shall, in the reasonable
<PAGE> 51
determination of the Agent, or any Lender, as the case may be, change
the basis of taxation of payments to such Lender or the Agent on the
principal of or interest on any Eurodollar Loan or of any other amounts
payable under this Agreement in respect of any Eurodollar Loan or its
obligation to make or maintain any Eurodollar Loan; or
(ii) shall impose, increase, modify or deem applicable any
reserve, special deposit, assessment, or other requirement or condition
against assets of, deposits with or to the account of, Extensions of
Credit by, or the Commitment or obligations of, any Lender, any Letter
of Credit Issuer or the Agent, or shall impose on the Agent or such
Lender or on any relevant interbank market for Dollars, any condition;
and the result of the foregoing, in the reasonable determination of the Agent,
such Letter of Credit Issuer or such Lender, as the case may be, is (x) to
reduce the amount of any sum received or receivable by such Lender with respect
to any Eurodollar Loan or the return to be earned by the Agent, such Letter of
Credit Issuer, or such Lender on any Extension of Credit, (y) to impose a cost
or increase any existing cost on the Agent, such Letter of Credit Issuer, or
such Lender, as the case may be, or any parent company of the Agent, such Letter
of Credit Issuer, or such Lender, that is attributable to the making or
maintaining of any Extension of Credit or its Commitment or its obligation to
make any Extension of Credit, or (z) to require the Agent, such Letter of Credit
Issuer, or such Lender, or any parent company of the Agent, such Letter of
Credit Issuer, or such Lender, to make any payment on or calculated by reference
to the gross amount of any amount received by it hereunder, under any Loan
Document or under any Note, then, within 15 days after request by the Agent,
such Letter of Credit Issuer, or such Lender, the Borrower shall pay to the
Agent, such Letter of Credit Issuer, or such Lender such additional amount or
amounts as the Agent, such Letter of Credit Issuer, or such Lender reasonably
determines will compensate it, or its parent company, for such reduction,
increased cost or payment. The Agent, such Letter of Credit Issuer, or any such
Lender, as the case may be, will promptly notify the Borrower of any Regulatory
Change of which it has knowledge and that will entitle the Agent, such Letter of
Credit Issuer, or such Lender to compensation pursuant to this Section 8.2, but
the failure to give such notice shall not affect the Agent, such Letter of
Credit Issuer, or such Lender's right to such compensation.
(b) If after the date hereof the Agent, any Letter of Credit
Issuer, or any Lender shall have reasonably determined that the adoption or
implementation of any applicable law, rule or regulation regarding capital
adequacy, or any change therein or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by it (or its Applicable Lending Office) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Person (or its parent) as a consequence of
such Person's obligations
<PAGE> 52
hereunder or obligations held by it, including, without limitation its
Commitments, Loans and participation interests in Letters of Credit to a level
below that which such Person (or its parent) could have achieved but for such
adoption, change or compliance (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, within 15 days after demand by such Person (with a copy
to the Agent), the Borrower shall pay to such Person such additional amount or
amounts as will compensate such Person (or its parent) for such reduction.
Section 8.3 Change of Lending Office. Any Lender will, if an event
occurs with respect to a Lending Office that makes Section 8.1 or 8.2
applicable, and if requested by the Borrower, use reasonable efforts to
designate another Lending Office or Offices, provided that such designation
would not, in the sole and absolute discretion of such Lender, be
disadvantageous to such Lender in any manner or contrary to such Lender's
policy. Any Lender may at any time and from time to time change any Lending
Office and shall give notice of any such change to the Borrower. Except in the
case of a change in Lending Offices made at the request of the Borrower, the
designation of a new Lending Office by a Lender shall not make operable the
provisions of clause (ii) or (iii) of Section 8.1 or entitle such Lender to make
a claim under Section 8.2 if the operability of such clause or such claim
results solely from such designation and not from a subsequent Regulatory
Change.
Section 8.4 Funding Losses. The Borrower shall pay to the Agent and
each Lender, upon request, such amount or amounts as such Person determines are
necessary to compensate it for any loss, cost or expense incurred by it as a
result of (i) any payment, prepayment, conversion or continuation of a
Eurodollar Loan on a date other than the last day of an Interest Period for such
Eurodollar Loan or (ii) a Eurodollar Loan for any reason not being made or
converted after the Borrower shall have given a Notice of Borrowing, or any
payment of principal of or interest thereon not being made on the date therefor
determined in accordance with the applicable provisions of this Agreement, in
each case whatever the reason for such event, including, without limitation, the
operation of Sections 1.6, 1.7, 7.2 or otherwise. In the case of a Eurodollar
Loan, at the election of such Lender, and without limiting the generality of the
foregoing, but without duplication, such compensation on account of losses
referred to in (i) and (ii) above may include an amount equal to the excess of
(x) the interest that would have been received from the Borrower under this
Agreement on any amounts to be reemployed during an Interest Period or its
remaining portion over (y) the interest component of the return that such Lender
determines it could have obtained had it placed such amount on deposit in the
London interbank market for a period equal to such Interest Period or its
remaining portion.
Section 8.5 Determinations. In making the determinations contemplated
by Sections 8.1, 8.2 and 8.4, the Agent, the Letter of Credit Issuers, and the
Lenders may make such reasonable estimates, assumptions, allocations and the
like that they, in good faith, reasonably determine to be appropriate, but a
Lender's, the Letter of Credit Issuers' or the Agent's selection thereof in
accordance with this Section 8.5, and the determinations made by a Lender, the
Letter of Credit Issuers, or the Agent on the basis thereof, shall be presumed
correct absent convincing evidence to the contrary. Any such Lender, Letter of
Credit Issuer or the Agent, as the case may be, shall furnish to the Borrower
<PAGE> 53
upon request a certificate outlining in reasonable detail the computation of any
amounts claimed by it under this Article VIII and the assumptions underlying
such computations.
<PAGE> 54
9.
THE ADMINISTRATIVE AGENT AND THE LETTER OF CREDIT BANKS
Section 9.1 Appointment and Authorization.
(a) Each Lender irrevocably appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers under
this Agreement, the Notes, the Security Documents and the Letters of Credit as
are delegated to the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
(b) Each Lender irrevocably authorizes each Letter of Credit
Issuer to issue the Letters of Credit as provided in this Agreement, and to take
all other actions specifically delegated to it under this Agreement and the
Reimbursement Agreements to which it is a party and as are reasonably incidental
thereto.
Section 9.2 Agent and Affiliates; Letter of Credit Issuer and
Affiliates. (a) GECC shall have the same rights and powers under this Agreement
and the Loan Documents as any other Lender and may exercise or refrain from
exercising the same as though it were not the Agent and GECC and its affiliates
may accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower, or any Subsidiary or Affiliate of the Borrower as if
it were not the Agent hereunder.
(b) Each Letter of Credit Issuer, acting in its individual
capacity, shall have the same rights and powers under this Agreement and the
other Loan Documents, and may exercise, or refrain from exercising such rights
as though it were not a Letter of Credit Issuer hereunder, and its affiliates
may accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or Affiliate of the Borrower as if
it were not a Letter of Credit Issuer hereunder.
Section 9.3 Action by Agent and Letter of Credit Issuer. The respective
obligations hereunder of the Agent and of the Letter of Credit Issuers are only
those expressly set forth herein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action with respect to
any Default, except as requested by the Required Lenders. The Agent and the
Letter of Credit Issuers shall in all cases be fully protected in acting or in
refraining from acting hereunder and under the other Loan Documents in
accordance with the written instructions signed by the Required Lenders and each
such instruction and any action taken or any failure to act pursuant thereto
shall be binding on all of the parties thereto, their successors and assigns.
Neither the Agent nor any Letter of Credit Issuer shall have any duty to
exercise any right, power or remedy hereunder or under any of the other Loan
Documents or to take any affirmative action hereunder or under any of the other
Loan Documents unless directed to do so by the Required Lenders and unless first
indemnified by the Lenders to its satisfaction against the costs and expenses of
taking such action.
Section 9.4 Consultation with Experts. Each of the Agent and the Letter
of Credit Issuers may consult with legal counsel (who may be counsel for the
Borrower), independent public
<PAGE> 55
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it hereunder or under the other Loan
Documents in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 9.5 Liability of the Agent and Letter of Credit Issuers. None
of the Agent, any Letter of Credit Issuer, or any of their respective directors,
officers, agents, or employees shall be liable for any action taken or not taken
by it in connection herewith (i) with the consent or at the request of the
Required Lenders or (ii) in the absence of its own gross negligence or willful
misconduct. None of the Agent, any Letter of Credit Issuer, or any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made by or on behalf of the Borrower in connection with this
Agreement, any of the other Loan Documents or any Extension of Credit hereunder;
(ii) the performance or observance of any of the covenants or agreements of the
Borrower or the Guarantors; (iii) the satisfaction of any condition specified in
Article III, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of this Agreement, the Notes,
any Letter of Credit, any Reimbursement Agreement, any Security Document or any
other instrument or writing furnished in connection herewith or therewith or the
Security Interest, or any filing in connection therewith. Neither the Agent nor
any Letter of Credit Issuer shall incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
Section 9.6 Indemnification. Each Lender shall, ratably based upon its
Proportionate Share of the Commitments, indemnify the Agent and each Letter of
Credit Issuer, to the extent not reimbursed by the Borrower, against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except such as results from the Agent's or such Letter of Credit
Issuer's, as the case may be, gross negligence or willful misconduct) that the
Agent or such Letter of Credit Issuer, as the case may be, may suffer or incur
in connection with this Agreement or any of the other Loan Documents or any
action taken or omitted hereunder or under any of the other Loan Documents by
the Agent or such Letter of Credit Issuer.
Section 9.7 Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, any Letter of Credit Issuer
or any other Lender, and based on such documents and information as it has
deemed appropriate (but without reliance upon the Agent's information memorandum
circulated by the Agent to the Lenders), made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent, any Letter of Credit
Issuer or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement or the other Loan
Documents.
Section 9.8 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Letter of Credit Issuers, the Lenders and the
Borrower. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint a successor Agent, which successor, or its parent company,
shall have its long term debt securities rated "A" or better (or the equivalent)
by
<PAGE> 56
S&P's or Moody's, or another nationally recognized securities rating firm. If no
such successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation, or the Required Lenders' removal then the retiring
Agent may, on behalf of the Lenders, appoint a successor meeting the
requirements set forth in the immediately preceding sentence. Upon the
acceptance of its appointment hereunder, such successor shall thereupon succeed
to and become vested with all the rights and duties of the retiring Agent and
the retiring Agent shall be discharged from its duties and obligations hereunder
and under the other Loan Documents. After any retiring Agent's resignation or
removal hereunder, the provisions of this Article shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent.
Section 9.9 Security Documents, Etc.
(a) The Letter of Credit Issuers and the Lenders hereby
authorize the Agent to enter into each of the Security Documents and to take all
action contemplated thereby. All rights and remedies under the Security
Documents may be exercised by the Agent for the benefit of (i) the Agent, the
Letter of Credit Issuers and the Lenders, and (ii) the Agent, the Letter of
Credit Issuers and the Lenders. The Agent may assign its rights and obligations
under any of the Security Documents to any affiliate thereof or to any trustee,
which assignee in each such case shall be entitled to all the rights of the
Agent under the applicable Security Document and all rights hereunder of the
Agent with respect to the applicable Security Document.
(b) Except as provided in Section 11.5 with respect to
releasing Collateral, in each circumstance where, under any provision of any
Security Document, the Agent shall have the right to grant or withhold any
consent, exercise any remedy, make any determination or direct any action by the
Borrower under such Security Document, the Agent shall act in respect of such
consent, exercise or remedies, determination or action, as the case may be, with
consent of and at the direction of the Required Lenders; provided, however, that
no such consent of the Required Lenders shall be required with respect to any
consent, determination or other matter that is, in the Agent's judgment,
non-material, ministerial or administrative in nature. In each circumstance
where any consent of or direction from the Required Lenders is required, the
Agent shall notify the Lenders in reasonable detail of the matter as to which
consent or direction is required and the Agent's proposed course of action with
respect thereto. In the event the Agent shall not have received a response from
any Lender within three Business Days after receipt of such written notice, such
Lender shall be deemed to have agreed to the course of action proposed by the
Agent.
<PAGE> 57
10.
INTERPRETATION
Section 10.1 Interpretation.
(a) Defined Terms. For the purposes of this Agreement:
"ACCEPTABLE INSURER" means an insurance company (i) having an
A.M. Best rating of "A" or better and being in a financial size category of X or
larger (as such category is defined as of the date hereof) or (ii) otherwise
reasonably acceptable to the Required Lenders.
"ACCOUNT" means any right of the Borrower to payment for goods
sold or leased, or for services rendered, by the Borrower that is not evidenced
by an instrument or chattel paper.
"ACQUISITION" means (i) the purchase by Borrower from Glaxo
Wellcome Inc. of the trademarks, know-how, regulatory filings and related
documentation, tradedress (if any) and certain finished good inventory relating
to the Septra(r), Proloprim(r), Mantadil(r), Kemadrin(r), and Pro-Kemadrin
product lines in the United States, its territories and possessions; (ii) the
purchase by Borrower from Glaxo Wellcome Inc. of the know-how, regulatory
filings and related documentation, tradedress (if any) and certain finished good
inventory relating to the prescription formulations of Neosporin(r) and
Polysporin(r); and (iii) the assignment to Borrower from Glaxo Wellcome Inc. of
Glaxo Wellcome Inc.'s right, title and interest in and to the trademarks for
Neosporin(r) and Polysporin(r) in the prescription field as such right, title or
interest existed under that certain Trademark, Patent, Copyright and Know-How
License Agreement dated June 30, 1996 between Warner-Lambert Company and Glaxo
Wellcome Inc.
"ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed to
that term in Section 302 of ERISA.
"ADJUSTED EURODOLLAR RATE" means for any Interest Period a
rate per annum (rounded upward, if necessary to the next higher 1/16 of 1%)
equal to the rate obtained by dividing (a) the Eurodollar Rate (similarly
rounded) for such Interest Period by (b) a percentage equal to 1 minus the
Reserve Requirement in effect from time to time during such Interest Period.
<PAGE> 58
"AFFILIATE" means any Person (other than the Borrower) (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Borrower, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Borrower, (iii) of which the Borrower or its Subsidiaries or Shareholders
beneficially own or hold 5% or more of the Voting Stock (or in the case of a
Person which is not a corporation, 5% or more of the equity interest), or (iv)
who is a member of the Board of Directors of the Borrower or a member of the
immediate family of any such Person. The term "immediate family" of any Person
shall include the spouse, brothers, sisters and descendants of such Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"AGENT" means GECC.
"AGENT'S ACCOUNT" means, an account of the Agent, the writing
instructions for which are as follows:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
ABA # 021-001-033
Acct. Name: GECC/CAFDepository
Acct. #: 50-232-854
Re: CFA 4632 King Pharmaceuticals
Attention: Vicki Brinson
and/or any account specified by the Agent to the Lenders from time to time.
"AGENT'S OFFICE" means the address of the Agent specified in
or determined in accordance with the provisions of Section 11.1.
"AGREEMENT" means this Agreement.
"AGREEMENT DATE" means the date as of which this Agreement is
dated.
"APPLICABLE LAW" means, anything in Section 11.8 to the
contrary notwithstanding, (i) all applicable common law and principles of equity
and (ii) all applicable provisions of all (A) constitutions, statutes, rules,
regulations and orders of governmental bodies, (B) Governmental Approvals and
(C) orders, decisions, judgments and decrees of all courts and arbitrators.
<PAGE> 59
"APPLICABLE MARGIN" means, (i) from the Closing Date, until
the first date upon which the Applicable Margin shall begin to adjust pursuant
to clause (ii) below, the Applicable Margins for any Class and Type of Loan
shall be the Margin set forth below for such Class and Type of Loan:
<TABLE>
<CAPTION>
REVOLVING LOANS TERM LOANS
BASE RATE MARGIN EURODOLLAR MARGIN BASE RATE MARGIN EURODOLLAR MARGIN
<S> <C> <C> <C>
0.00 2.25 0.50 2.75
</TABLE>
and, (ii) beginning on the date following the first anniversary of the Agreement
Date that is five Business Days following the Agent's receipt of financial
statements from the Borrower pursuant to Section 6.1(b) or (c) and continuing on
the date that is five business days following each subsequent receipt by the
Agent of financial statements from the Borrower pursuant to Section 6.1(b) or
(c), the Applicable Margin for any Class and Type of Loan shall adjust to the
percentage set forth below for such Class and Type of Loan opposite the
applicable Consolidated Leverage Ratio for the most recently ended fiscal
quarter of the Borrower as such ratio is determined from such financial
statements:
REVOLVING LOANS
<TABLE>
<CAPTION>
IF THE LEVERAGE RATIO IS: Base Rate Margin Eurodollar Margin
<S> <C> <C>
< 1.75x -0.50% 1.75%
< 2.25X, but > 1.75x -0.25% 2.00%
-
<2.75X, but > 2.25x 0% 2.25%
-
> 2.75x 0.25% 2.50%
-
</TABLE>
TERM LOANS
<TABLE>
<CAPTION>
IF THE LEVERAGE RATIO IS: Base Rate Margin Eurodollar Margin
<S> <C> <C>
< 1.75x 0% 2.25%
< 2.25X, but > 1.75x 0.25% 2.50%
-
<2.75X, but > 2.25x 0.50% 2.75%
-
> 2.75x 0.75% 3.00%
</TABLE>
Notwithstanding the foregoing, so long as a Default shall have occurred and be
continuing, the Applicable Margins shall be the highest rates specified above.
<PAGE> 60
"APPLICABLE PERCENTAGE" means, (i) from the Closing Date,
until the first date upon which the Applicable Percentage shall begin to adjust
pursuant to clause (ii) below, 2.25%, and (ii) beginning on the date following
the first anniversary of the Agreement Date that is five Business Days following
the Agent's receipt of financial statements from the Borrower pursuant to
Section 6.1(b) or (c) and continuing on the date that is five business days
following each subsequent receipt by the Agent of financial statements from the
Borrower pursuant to Section 6.1(b) or (c), the Applicable Percentage shall
adjust to the percentage set forth below opposite the applicable Consolidated
Leverage Ratio for the most recently ended fiscal quarter of the Borrower as
such ratio is determined from such financial statements:
<TABLE>
<CAPTION>
IF THE LEVERAGE RATIO IS : APPLICABLE PERCENTAGE
<S> <C>
< 1.75X 1.75%
< 2.25X, but > 1.75X 2.00%
<2.75X, but > 2.25X 2.25%
> 2.75 2.50%
-
</TABLE>
Notwithstanding the foregoing, so long as a Default shall have occurred and be
continuing, the Applicable Percentage shall be the highest rate specified above.
"BASE RATE" means for any day, a floating rate per annum equal
to the higher of (i) the rate publicly quoted from time to time by The Wall
Street Journal as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if The Wall Street Journal ceases quoting a base rate of
the type described, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus fifty (50) basis points per annum. Each change
in any interest rate provided for in the Agreement based upon the Base Rate
shall take effect at the time of such change in the Base Rate. The Base Rate is
a reference rate only and is not necessarily the lowest rate offered by the
Lenders to their customers.
"BASE RATE LENDING OFFICE" of a Lender means the branch or
office designated by such Lender from time to time as the branch or office of
such Lender at which Base Rate Loans are to be made and maintained. Each
Lender's initial Base Rate Lending Office is set forth on the signature pages
hereof.
"BASE RATE LOAN" means a Loan, the interest on which is, or is
to be, as the context may require, computed, as provided in Section 1.4(a), on
the basis of the Base Rate.
"BASE RATE REVOLVING NOTE" means a promissory note of the
Borrower in the form attached hereto as Exhibit A-2 payable to the order of a
Lender and evidencing such Lender's Revolving Loans that are Base Rate Loans.
<PAGE> 61
"BASE RATE TERM NOTE" means a promissory note of the Borrower
in the form attached hereto as Exhibit B-2 payable to the order of a Lender and
evidencing such Lender's Term Loans that are Base Rate Loans.
"BORROWING" means the aggregation of the Loans of a particular
Class and Type made by more than one Lender pursuant to a single Notice of
Borrowing on a single date and, if such Loans are Eurodollar Loans, for a single
Interest Period. A Borrowing is a "Base Rate Borrowing" if such Loans are Base
Rate Loans or a "Eurodollar Borrowing" if such Loans are Eurodollar Loans.
"BORROWING BASE" means, at any date, an amount equal to the
sum of (i) 70% of Customer Trade Accounts, plus (ii) 65% of Net Pharmaceutical
Inventory, in each case ((i) and (ii)) as shown on the most recent Borrowing
Base Certificate delivered by the Borrower to the Agent pursuant to Section
6.1(c)(v), minus (iii) the amount of any reasonable reserve against availability
established by the Agent and the Required Lenders from time to time in their
good faith discretion.
"BORROWING BASE CERTIFICATE" means a certificate of the
Borrower in the form of Schedule 6.1(c)(v).
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which banks in New York, New York are required or authorized to
close and, if the applicable Business Day relates to any Eurodollar Loan, on
which commercial banks are open for international business (including dealings
in Dollar deposits) in London.
"CAPITAL LEASE" means a lease giving rise to a Capitalized
Lease Obligation.
"CAPITAL SECURITIES" means, with respect to any Person, any
shares of capital stock of such Person or any security convertible into, or any
option, warrant or other right to acquire, any shares of capital stock of such
Person.
"CAPITALIZED LEASE OBLIGATION" means indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with Generally Accepted Accounting Principles.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time and in
effect.
<PAGE> 62
"CHANGE IN CONTROL" means, (i) prior to the IPO, any event,
transaction or occurrence as a result of which (A) the Borrower's stockholders
on the Agreement Date shall cease to own and control all of the economic and
voting rights associated with ownership of at least 80% of the outstanding
Capital Securities of all classes of Borrower on a fully diluted basis, or (B)
Borrower shall cease to own and control all of the economic and voting rights
associated with all of the outstanding Capital Securities of each of its
Subsidiaries and, (ii) following the IPO, (A) any person or group of persons
(within the meaning of the Securities Exchange Act of 1934, as amended) shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended) of 20% or more of the issued and outstanding shares of Capital
Securities of Borrower having the right to vote for the election of directors of
Borrower under ordinary circumstances; (B) during any period of twelve
consecutive calendar months, individuals who at the beginning of such period
constituted the board of directors of Borrower (together with any new directors
whose election by the board of directors of Borrower or whose nomination for
election by the stockholders of Borrower was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose elections or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office, or (C) Borrower shall
cease to own and control all of the economic and voting rights associated with
all of the outstanding Capital Securities of each of its Subsidiaries.
"CLASS" has the meaning ascribed to it in Section 10.3.
"CLOSING DATE" means the date on which the initial Extension
of Credit is made.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the property covered by the Mortgage and
the other Security Documents and any other property, real or personal, tangible
or intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Agent, on behalf of
itself, the Letter of Credit Issuers and Lenders, to secure the Obligations.
"COMMITMENT" means, (i) with respect to each Lender, a Term
Loan Commitment and/or a Revolving Credit Commitment and (ii) with respect to
any Letter of Credit Issuer, its commitment to issue a Letter of Credit; and
"Commitments" means any two or more of the foregoing, or, with respect to a
commitment to make Loans of any Class or to purchase participations in Letters
of Credit, the Commitments of all Lenders to make such Loans or to purchase such
participations.
"COMMITMENT FEE" means any of the amounts payable with respect
to a Commitment pursuant to Section 1.5.
<PAGE> 63
"COMMITMENT PERCENTAGE" means, with respect to any Lender's
Commitment of any Class, the percentage of all of the Lenders' Commitments of
such Class set forth opposite such Lender's name on the signature pages hereof.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate amount, of expenditures (including the portion of Capitalized Lease
Obligations incurred during such period) by the Borrower and its Subsidiaries
during that period that, in conformity with Generally Accepted Accounting
Principles, are included in "capital expenditures", "additions to property,
plant and equipment" or comparable items in the statement of cash flows of the
Borrower and its Subsidiaries.
"CONSOLIDATED CASH INTEREST EXPENSE" shall mean, for any
fiscal period of Borrower, that portion of Consolidated Interest Charges paid in
cash.
"CONSOLIDATED DEBT" means the sum of all Debt of the Borrower
and the Subsidiaries as consolidated in accordance with Generally Accepted
Accounting Principles, after elimination of all intercompany items.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Income for such period, plus all amounts deducted in determining such
Consolidated Net Income for such period for deprecation expense, amortization
and income tax expense, plus Consolidated Interest Charges.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means the ratio,
calculated on the last day of any fiscal quarter for the number of consecutive
fiscal quarters then most recently ended since the Closing Date (considered as a
single accounting period, but not to exceed four quarters), of: (i) Consolidated
Free Cash Flow for the period ended on the last day of such fiscal quarter, to
(ii) the sum of: (A) Consolidated Interest Charges for such period plus (B)
scheduled payments of principal on Consolidated Funded Debt for such period.
"CONSOLIDATED FREE CASH FLOW" means, for any period,
Consolidated EBITDA for such period, less Consolidated Capital Expenditures for
such period, less all amounts paid in cash in respect of income taxes during
such period, but excluding, however, up to $1,000,000 paid in fiscal year 1998
in respect of the 1995 tax audit adjustment relating to the sale of 7.5/750
[HCBT]/[APAP] and 5.0/500 [HCBT]/[APAP] sold to Mallinchrodt Chemical, Inc.
"CONSOLIDATED FUNDED DEBT" means, at any time, that portion of
Consolidated Debt that is, or at the time of its incurrence was, repayable over
a term in excess of one year or renewable at the option of the Borrower or a
Subsidiary for such a term.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the
aggregate amount of all interest on Debt (including payments in the nature of
interest under Capital Leases) that would, in accordance with Generally Accepted
Accounting Principles, be deducted in determining Consolidated Net Income for
such period.
<PAGE> 64
"CONSOLIDATED INTEREST COVERAGE RATIO" means the ratio,
calculated on the last day of any fiscal quarter for the number of consecutive
fiscal quarters then most recently ended since the Closing Date (considered as a
single accounting period, but not to exceed four quarters), of: (i) Consolidated
EBITDA for such period to (ii) the Consolidated Interest Charges for such
period.
"CONSOLIDATED NET INCOME," for any period, means the amount of
net income or net loss of the Borrower and its Subsidiaries, for such period
(taken as a cumulative whole) determined on a consolidated basis in accordance
with Generally Accepted Accounting Principles after elimination of intercompany
items and portions of income attributable to minority interests in Subsidiaries
(until such earnings are received by the Borrower), provided, that there shall
be excluded:
(i) any extraordinary gains and any gains on the sale or
other disposition of investments or of fixed or capital assets, and any
taxes on such excluded gains;
(ii) the proceeds of any life insurance policy;
(iii) net earnings and losses of any Subsidiary accrued prior
to the date it became a Subsidiary;
(iv) net earnings and losses of any entity, substantially
all the assets of which have been acquired in any manner, that were
realized by such entity prior to the date of such acquisition;
(v) net earnings and losses of any entity (other than a
Subsidiary) with which the Borrower or a Subsidiary shall have
consolidated or that shall have merged into or with the Borrower or a
Subsidiary, that were realized by such entity prior to the date of such
consolidation or merger;
(vi) net earnings of any business entity in which the
Borrower or any Subsidiary has an ownership interest unless such net
earnings shall have actually been received by the Borrower or such
Subsidiary in the form of cash distributions;
(vii) any portion of the net earnings of any Subsidiary of
any other business entity (other than a Subsidiary of the Borrower) in
which the Borrower or any Subsidiary has an ownership interest, that
for any reason (other than the provisions of this Agreement or the
other Loan Documents) is unable to be dividended to the Borrower or any
other Subsidiary;
(viii) earnings resulting from any reappraisal, reevaluation
or write-up of assets;
<PAGE> 65
(ix) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary; and
(x) any gain arising from the acquisition of any Capital
Securities of the Borrower or any Subsidiary of the Borrower.
"CONSOLIDATED NET WORTH" means at any time the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries less any
amount included therein with respect to Mandatorily Redeemable Stock (except to
the extent deducted in determining such consolidated stockholders' equity), as
of such time.
"CONTRACT" means an indenture, agreement (other than this
Agreement and any other Loan Document), other contractual restriction, lease,
instrument (other than the Notes), certificate of incorporation or charter, or
bylaw.
"CREDIT PARTY" means the Borrower and any Subsidiary.
"CREDIT PARTY QUESTIONNAIRE" means a credit party
questionnaire in the form of Exhibit L, delivered by each Credit Party to the
Agent in connection with the Closing Date.
"CUSTOMER TRADE ACCOUNTS" means the aggregate amount shown on
the consolidated balance sheet of the Borrower of accounts in respect of sales
of pharmaceutical products by the Borrower and its Subsidiaries to customers in
the ordinary course of business, net of any amount shown on such balance sheet
as a deduction therefrom for reserves, adjustments or discounts or for
allowances for doubtful accounts, provided that there shall not be deducted from
such aggregate amount that portion of reserve maintained for returns that does
not exceed 25% of such aggregate amount.
"DEBT" of any Person means at any time, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable that arise in the ordinary
course of business but only if and so long as the same are payable on customary
trade terms, (iv) Capitalized Lease Obligations of such Person, (v) all
Mandatorily Redeemable Stock of such Person owned by any Person other than such
Person, a Wholly-Owned Subsidiary of such Person that has no Debt other than the
Obligations (the amount of any such Stock to be determined for this purpose as
the higher of the liquidation preference of and the amount payable upon
redemption or mandatory repurchase of such Stock), (vi) all obligations of such
Person to purchase securities or other property that arise out of or in
connection with the sale of the same or substantially similar securities or
property, (vii) all obligations of such Person, whether fixed or contingent, to
reimburse any other Person in respect of amounts paid under a letter of credit
or similar instrument, (viii) all obligations with respect to interest rate and
currency swaps and similar obligations obligating such Person to make payments,
whether periodically or upon the happening of a contingency, except that
<PAGE> 66
if any agreement relating to such obligations provides for the netting of
amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligations shall be the net amount thereof,
(ix) all of the foregoing of others secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person,
and (x) all of the foregoing of others Guaranteed by such Person.
"DEFAULT" means any condition or event that constitutes an
Event of Default or that with the giving of notice or lapse of time or both,
would, unless cured or waived, become an Event of Default.
"DEFAULT RATE" means a rate per annum equal to the Base Rate
as in effect from time to time, plus the Applicable Margin, plus 2%; provided
that, if the amount in default is a Eurodollar Loan and the due date is a day
prior to the last day of an Interest Period therefor, the "Default Rate" for
such Loan shall be (x) from such day through the last day of such Interest
Period, the rate applicable to such Loan for such Interest Period as provided in
Section 1.4(a), plus 2%, and (y) thereafter the Base Rate as in effect from time
to time, plus the Applicable Margin, plus 2%.
"DESIGNATED AMOUNT" means $15,000,000.
"DISBURSEMENT ACCOUNT" means an account (each a "Disbursement
Account" and collectively, the "Disbursement Accounts") at a bank acceptable to
Agent into which Agent shall, from time to time, deposit proceeds of Loans made
to Borrower, which on the Closing Date is described on Schedule 10(a) hereto.
"DOLLARS" and the sign "$" mean lawful money of the United
States of America.
"ENVIRONMENTAL LAWS" means all applicable federal, state or
local statutes, laws, ordinances, codes, rules and regulations (including
consent decrees and administrative orders) relating to public health and safety
and the protection of the environment.
"ENVIRONMENTAL LIABILITIES" shall mean, with respect to any
Person, all liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive damages, property
damages, natural resource damages, consequential damages, treble damages, costs
and expenses (including all fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
<PAGE> 67
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
authorizations, certificates, approvals, registrations or other written
documents required by any Governmental Authority under any Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"ERISA AFFILIATE" means a trade or business including, a
Subsidiary or other Affiliate, that is a member of any group of organizations
within the meaning of Code Sections 414(b),(c),(m) or (o) of which the Borrower
or any Guarantor is a member.
"EURODOLLAR LENDING OFFICE" of a Lender means the branch or
office designated by such Lender from time to time, as the branch or office of
such Lender at which Eurodollar Loans are to be made and maintained. Each
Lender's initial Eurodollar Lending Office is set forth on the signature pages
hereof.
"EURODOLLAR RATE" for each Interest Period, a rate of interest
determined by Agent equal to the offered rate for deposits in United States
Dollars for the applicable Interest Period which appears on Dow Jones Markets
Page 3750 as of 11:00 a.m., London time, on the second full Business Day next
preceding the first day of such Interest Period (unless such date is not a
Business Day, in which event the next succeeding Business Day will be used)
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16th of
1%) or, if there is not a nearest one sixteenth of one percent (1/16th of 1%),
to the next highest one sixteenth of one percent (1/16th of 1%). If such
interest rates shall cease to be available from Dow Jones Markets, the
Eurodollar Rate shall be determined from such financial reporting service or
other information as shall be selected by the Agent.
"EURODOLLAR LOAN" means a Loan the interest on which is, or is
to be, as the context may require, computed, as provided in Section 1.4(a), on
the basis of the Adjusted Eurodollar Rate.
"EURODOLLAR REVOLVING NOTE" means a promissory note of the
Borrower in the form attached hereto as Exhibit A-1 payable to the order of a
Lender and evidencing such Lender's Revolving Loans that are Eurodollar Loans.
"EURODOLLAR TERM NOTE" means a promissory note of the Borrower
in the form attached hereto as Exhibit B-1 payable to the order of a Lender and
evidencing such Lender's Term Loans that are Eurodollar Loans.
<PAGE> 68
"EVENT OF DEFAULT" means any of the events specified in
Section 7.1.
"EXCESS CASH FLOW" shall mean, for any fiscal year of the
Borrower: (a) Consolidated EBITDA for such fiscal year, minus (b) the sum of (i)
Consolidated Cash Interest Expense for such fiscal year, plus (ii) all principal
payments made on Consolidated Funded Debt (other than Revolving Loans) during
such fiscal year, plus (iii) that portion of Capital Expenditures (including
Capital Lease Obligations) paid in cash during such fiscal year, plus (iv) any
amount deducted for income tax expense in determining Consolidated Net Income
that was paid in cash during such fiscal year, plus (c) any decrease in Working
Capital during such fiscal year, minus (d) any increase in Working Capital
during such fiscal year, plus (e) the cash portion of any extraordinary gains
during such fiscal year. For the purposes of this definition, "Working Capital"
shall mean the excess of Borrower's Current Assets over its Current Liabilities;
"Current Assets" shall mean all assets of Borrower that are or should be
classified as current on a consolidated balance sheet of Borrower prepared in
accordance with GAAP; and "Current Liabilities" shall mean all liabilities of
Borrower that are or should be classified as current on a consolidated balance
sheet of Borrower prepared in accordance with GAAP, but excluding the Revolving
Loans and the current portion of any other Funded Debt.
"EXISTING DEBT" means (i) Debt issued and outstanding on the
Agreement Date to the extent set forth in the financial statements delivered
pursuant to Section 6.2(a)(i) and on Schedule 4.9, (ii) Debt of a Person
outstanding at the time such Person becomes a Subsidiary of the Borrower but
only if such Debt was not incurred in contemplation thereof, and (iii) but only
if, immediately after giving effect thereto, no Default would exist, Debt that
(A) constitutes a renewal, extension or refunding of, but not an increase in the
principal amount of, Existing Debt that is such by virtue of clause (i) or (ii),
(B) is binding only on the obligor or obligors under the Existing Debt being
renewed, extended or refunded and (C) bears interest at a rate per annum that is
commercially reasonable at the time.
"EXISTING GUARANTY" means (i) a Guaranty outstanding on the
Agreement Date, to the extent set forth on Schedule 5.5, and (ii) but only if,
immediately after giving effect thereto, no Default would exist, a Guaranty that
(A) constitutes a renewal, extension or replacement of, but not an increase in
the principal amount or interest rate Guaranteed by (except for any increase in
interest rates that was commercially reasonable at the time of such increase),
of an Existing Guaranty that is such by virtue of clause (i), and (B) is binding
only on the obligor or obligors under the Guaranty being renewed, extended or
replaced.
"EXTENSION OF CREDIT" means any of the following: (i) a Loan,
(ii) the conversion of a Loan of one Type into a Loan of another Type, (iii) a
Letter of Credit and (iv) a participation interest in a Letter of Credit.
"FEDERAL FUNDS RATE" shall mean, for any day, a floating rate
equal to the weighted average of the rates on overnight federal funds
transactions among members of the Federal Reserve System, as determined by
Agent.
<PAGE> 69
"FEE LETTER" means the Letter Agreement dated October 31, 1997
between GECC and the Borrower.
"GECC" means General Electric Capital Corporation, a New York
corporation, in its individual capacity.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means the
generally accepted accounting principles as in effect in the United States of
America as in effect from time to time, consistently applied throughout the
periods involved.
"GOVERNMENTAL APPROVAL" means an authorization, consent,
approval, license or exemption of, registration or filing with, or report or
notice to, any governmental body, including, without limitation, any such
approval required under ERISA or by the PBGC.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GUARANTOR" means any Subsidiary of the Borrower.
"GUARANTY" by any Person means any obligation, contingent or
otherwise, of such Person, directly or indirectly, guaranteeing any Liability of
any other Person, or in any manner providing for the payment of any Liability of
any other Person or otherwise protecting the holder of such Liability against
loss (whether by agreement to keep well, to purchase assets, goods, securities
or services, to take or pay, to reimburse for payments made under performance
letters of credit or otherwise). The term "Guarantee", used as a verb, has a
correlative meaning.
"GUARANTY AGREEMENT" means the Guaranty Agreement, from the
Guarantors to the Agent, for the benefit of the Agent, the Letter of Credit
Issuers and the Lenders, dated the Agreement Date and in the form of Exhibit E
hereto.
"HAZARDOUS MATERIAL" means (a) any "hazardous substance" as
defined by CERCLA; (b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act ; (c) any petroleum products; or (d) any
pollutant, contaminant or hazardous, dangerous or toxic chemical, material or
substance within the meaning of any other applicable federal, state or local
Environmental Law.
"IPO" means the sale by the Company of its common stock in an
initial registered offering pursuant to a firm commitment underwriting upon the
terms and conditions described in its Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on October 24, 1997.
<PAGE> 70
"INFORMATION" means written data, services, reports,
statements (including, but not limited to, financial statements delivered
pursuant to or referred to in Sections 6.1 and 6.2), opinions of counsel,
documents and other information, whether, in the case of any such in writing,
the same was prepared by the Borrower or any other Person on behalf of the
Borrower.
"INTEREST PAYMENT DATE" means the last Business Day of each
month commencing December 31, 1997.
"INTEREST PERIOD" means a period commencing on the date of the
making of such Loan and ending, at the election of the Borrower, on the same day
in the first, second, or third calendar month thereafter, except that (i) any
Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall end on
the next preceding Business Day, (ii) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month in which such Interest
Period ends) shall end on the last Business Day of a calendar month, and (iii)
no Interest Period in respect of Eurodollar Revolving Loans shall extend past
the Revolving Credit Commitment Termination Date or the Term Loan Commitment
Termination Date, as applicable.
"LENDING OFFICE" with respect to any Lender means such
Lender's Base Rate Lending Office or the Eurodollar Lending Office, or both, as
the context may require. For purposes of Section 8.1 and 8.2, references to any
"Lender" shall be deemed to include reference to such Lender's applicable
Lending Office.
"LENDERS" means the financial institutions, funds or banks
signatories hereto, as the same may be amended from time to time, any assignees
thereof as provided in Section 11.7(a).
"LETTER OF CREDIT" means a Letter of Credit issued pursuant to
Section 1.1(a)(i) and Section 2.1.
"LETTER OF CREDIT ISSUER" means a Lender selected by the
Borrower with the consent of the Agent to issue a Letter of Credit, or a
financial institution selected by the Agent with the consent of the Borrower.
"LETTER OF CREDIT ISSUER'S OFFICE" means the office of a
Letter of Credit Issuer specified pursuant to Section 11.1.
"LETTER OF CREDIT OBLIGATION" means, in respect of each Letter
of Credit, the undrawn face amount of such Letter of Credit, plus the aggregate
amount of all Reimbursement Obligations with respect thereto.
"LETTER OF CREDIT OBLIGATIONS" means the sum of all Letter of
Credit Obligations.
<PAGE> 71
"LETTER OF CREDIT REQUEST" has the meaning ascribed to it in
Section 2.2.
"LIABILITY", as applied to a Person, means and include all
obligations of such Person that in accordance with Generally Accepted Accounting
Principles, shall be classified upon the balance sheet of such Person as
liabilities.
"LIEN", as applied to the property or assets (or the income or
profits therefrom) of any Person, means (in each case, whether the same is
consensual or nonconsensual or arises by Contract, operation of law, legal
process or otherwise): any mortgage, lien, pledge, attachment, financing
statement, levy, charge, or other security interest or encumbrance of any kind
in respect of any property or assets of such Person, or upon the income or
profits therefrom. For this purpose, the Borrower, the Guarantors or any
Subsidiary shall be deemed to own subject to a Lien any asset that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, Capitalized Lease or other title retention agreement
relating to such asset.
"LIEN SUBORDINATION AGREEMENT" means the agreement between the
United Companies and the Agent pursuant to which the United Companies shall
subordinate their Lien on the Mortgaged Premises to the Liens under the Mortgage
on terms and conditions satisfactory to the Agent.
"LOAN" means a Revolving Loan or a Term Loan, as the context
may require.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security
Documents, the Reimbursement Agreements, the Guaranty Agreement, the Fee Letter,
each Schedule to this Agreement and each document, instrument, certificate, and
opinion executed and delivered in connection with any of the foregoing.
"MANDATORILY REDEEMABLE STOCK" means, as applied to a Person,
any share of such Person's capital stock to the extent that it is redeemable,
payable or required to be purchased or otherwise retired or extinguished (i) at
a fixed or determinable date, whether by operation of a sinking fund or
otherwise, (ii) at the option of any Person other than such Person or (iii) upon
the occurrence of a condition not solely within the control of such Person, such
as a redemption required to be made out of future earnings.
"MATERIALLY ADVERSE EFFECT" means, (i) with respect to any
Person, a materially adverse effect on such Person's business, assets,
liabilities, financial condition, results of operations or business prospects,
(ii) with respect to a group of Persons "taken as a whole," a materially adverse
effect on such Persons' business, assets, liabilities, financial conditions,
results of operations or business prospects taken as a whole, if a consolidated
entity, on a consolidated basis in accordance with Generally Accepted Accounting
Principles, (iii) with respect to any Contract or any other obligation (other
than the Loan Documents), a materially adverse effect, as to the Borrower, upon
the binding nature, validity or enforceability thereof, (iv) with respect to
this Agreement and the other Loan Documents, an adverse effect, WHETHER OR NOT
MATERIAL, upon the binding nature, validity or enforceability of any provision
thereof or on the
<PAGE> 72
obligations of the Borrower for the payment of money thereunder and (v) with
respect to the Security Interest, an adverse effect, WHETHER OR NOT MATERIAL,
upon the priority, perfection, validity or enforceability thereof against the
Borrower, or any other Person.
"MAXIMUM PERMISSIBLE RATE" means, with respect to interest
payable on any amount, the rate of interest on such amount that, if exceeded,
could, under Applicable Law, result in (i) civil or criminal penalties being
imposed on any Lender or (ii) any Lender being unable to enforce payment of (or
if collected, to retain) all or part of such amount or the interest payable
thereon.
"MONARCH" means Monarch Pharmaceuticals, Inc., a Tennessee
corporation.
"MOODY'S" has the meaning ascribed to it in Section
5.13(c)(i).
"MORTGAGE" means, that certain Deed of Trust, Assignment of
Rents and Leases and Security Agreement from the Borrower to the Agent, dated
the Agreement Date, conveying all of the Borrower's right, title and interest in
and to the Borrower's manufacturing facilities located in Sullivan County, at
Bristol, Tennessee as security for the Obligations, in substantially the form of
Exhibit H.
"MORTGAGED PREMISES" means the Borrower's manufacturing
facilities located in Sullivan County, at Bristol, Tennessee.
"NET PHARMACEUTICAL INVENTORY" means the amount shown on the
consolidated balance sheet of the Borrower in accordance with Generally Accepted
Accounting Principals in respect of pharmaceutical inventory of the Borrower and
its Consolidated Subsidiaries, less any amounts shown thereon as deductions
thereto in respect of reserves or otherwise.
"NET PROCEEDS" means, with respect to the issuance or sale of
any security or asset, the proceeds of such sale or disposition, net of (A)
discounts, commissions and other reasonable and customary transaction costs,
fees and expenses properly attributable to such transaction and payable by
Borrower or any Subsidiary in connection therewith (in each case, paid to
non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens (to the extent such Liens constitute Permitted Liens hereunder), if any,
and (D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith (such net amount, the "Net Proceeds"),.
"NOTE" means a Base Rate Revolving Note or a Eurodollar
Revolving Note, as the context may require.
"NOTICE OF BORROWING" has the meaning ascribed to it in
Section 1.2.
"OBLIGATIONS" mean all loans, fees, indebtedness, liabilities,
obligations, Letter of Credit Obligations, covenants and duties of the Borrower
to the Lenders, the Agent and the Letter of Credit Issuers of every kind, nature
and description, direct or indirect, absolute or contingent, due
<PAGE> 73
or not due, in contract or tort, liquidated or unliquidated, arising under this
Agreement, or under the other Loan Documents, by operation of law or otherwise
in connection with the transactions contemplated hereby, now existing or
hereafter arising, and whether or not for the payment of money or the
performance or non-performance of any act, including, but not limited to, all
damages that the Borrower or any Subsidiary may owe to the Agent, any Letter of
Credit Issuer, and/or the Lenders by reason of any breach by the Borrower or any
Subsidiary of any representation, warranty, covenant, agreement or other
provision of this Agreement or any of the other Loan Documents.
"PATENTS" means patents, patent rights or licenses,
trademarks, trademark rights, trade names, trade name rights, copyrights, and
any other rights with respect to the foregoing.
"PATENT SECURITY AGREEMENT" means the Patent Security
Agreement between Monarch and the Agent, dated as of the Closing Date, in the
form of Exhibit K, and any similar agreement subsequently entered into between
the Agent, the Borrower or any Subsidiary.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED DEBT" means Debt permitted under Section 5.12.
"PERMITTED GUARANTY" means a Guaranty that is (i) an
endorsement of a negotiable instrument for collection in the ordinary course of
business and (ii) a Guaranty by any Subsidiary of the Borrower's obligations
hereunder.
"PERMITTED LIEN" means: (a) when used with respect to the
Borrower and its Subsidiaries (i) a Lien securing a tax, assessment or other
governmental charge or levy (excluding any Lien arising under any of the
provisions of ERISA), the claim of a materialman, mechanic, carrier,
warehouseman or landlord for labor, materials, supplies or rentals incurred in
the ordinary course of business, or a money judgment rendered by a court or
administrative tribunal, but in each case only if (A) such amount is not overdue
and payable or, in the case of a tax assessment or other governmental charge or
levy, if payment thereof shall not at the time be required to be made in
accordance with Section 5.1(v), (B) foreclosure, distraint, sale or other
similar proceedings shall not have been commenced or, if commenced, such
proceeding is being contested in good faith by appropriate action and any
execution in respect thereof has been bonded or stayed, and (C) such Lien,
together with all other such Liens, secures obligations that do not exceed
$100,000 in the aggregate; (ii) a Lien on the properties and assets of a
Subsidiary of the Borrower securing Debt owing to the Borrower; (iii) a Lien
consisting of a deposit or pledge made, in the ordinary course of business, in
connection with, or to secure payment of, obligations under worker's
compensation, unemployment insurance or similar legislation; (iv) a Lien
constituting an encumbrance in the nature of zoning restrictions, easements and
rights or restrictions of record on the use of real property that does not
materially detract from the value of such property or impair the use thereof in
the business of the Borrower or any Subsidiary; (v) a Lien existing on (A)
property of any Person at the time such Person becomes a Subsidiary or (B) any
asset prior to the acquisition thereof by the Borrower or a Subsidiary, but
only, in the case of either (A) or (B), if such Lien was not created in
contemplation thereof and so long as the obligation secured by such Lien
constitutes Permitted
<PAGE> 74
Debt and is not in default and such Lien is and will remain confined to the
property subject to it at the time such Person becomes a Subsidiary or such
property is acquired and to fixed improvements thereafter erected on such
property; (vi) a Lien in existence on the Agreement Date to the extent set forth
on Schedule 4.7 hereto, but only, in the case of each such Lien, to the extent
it secures Existing Debt; (vii) a Lien securing Purchase Money Debt but only if,
in the case of each such Lien: (A) such Lien shall at all times be confined
solely to the asset the purchase price of which was financed through the
incurrence of the Purchase Money Debt secured by such Lien and to fixed
improvements then or thereafter erected on such asset; (B) such Lien attached to
such asset within 30 days of the acquisition of such property; and (C) the
aggregate principal amount of Purchase Money Debt secured by such Lien at no
time exceeds an amount equal to 90% of the lesser of (1) the cost (including the
principal amount of such Debt, whether or not assumed) to the Borrower or a
Subsidiary of the asset subject to such Lien and (2) the fair value of such
asset at the time of such acquisition; (viii) a Lien constituting a renewal,
extension or replacement of a Lien constituting a Permitted Lien by virtue of
clause (vi), (vii) or (viii) of this definition, but only, in the case of each
such renewal, extension or replacement Lien, to the extent that the principal
amount of indebtedness secured by such Lien does not exceed the principal amount
of such indebtedness so secured at the time of the extension, renewal or
replacement, and that such renewal, extension or replacement Lien is limited to
all or a part of the property that secured the Lien extended, renewed or
replaced and to fixed improvements then or thereafter erected on such property;
and (ix) a Lien arising pursuant to an order of attachment, distraint or similar
legal process arising in the execution or other enforcement thereof is not
unstayed for more than 20 days, and (b) when used with respect to Collateral
means "Permitted Liens" as defined in the Security Agreement or "Permitted
Encumbrances" as defined in the Mortgage, as the case may be that is applicable
thereto.
"PERMITTED RESTRICTIVE COVENANTS" means (i) any covenant or
restriction contained in this Agreement or any other Loan Document, (ii) any
covenant or restriction binding upon any Person at the time such Person becomes
a Subsidiary of the Borrower if the same is not created in contemplation
thereof, (iii) any covenant or restriction of the type contained in Section 5.6
that is contained in any Contract evidencing or providing for the creation of or
concerning Purchase Money Debt, and only to the extent that such covenant
extends only to the asset subject to the Permitted Lien securing such Debt, (iv)
any covenant or restriction contained in any Contract listed on Schedule 5.10,
but only to the extent such covenant or restriction is there identified by
specific reference to the relevant section or paragraph of such Contract and/or
(v) any covenant or restriction that (A) is not more burdensome than an existing
Permitted Restrictive Covenant that is such by virtue of clause (ii), (iii) or
(iv), (B) is contained in a Contract constituting a renewal, extension or
replacement of the Contract in which such existing Permitted Restrictive
Covenant is contained and (C) is binding only on the Person or Persons bound by
such existing Permitted Restrictive Covenant.
"PERSON" means an individual, corporation, partnership, trust
or unincorporated organization, a government or any agency or political
subdivision thereof.
"PLAN" means, at any time, any employee benefit plan
(including a multiemployer plan), the funding requirements of which (under
Section 302 of ERISA or Section 412 of the Code)
<PAGE> 75
are, or at any time within six years immediately preceding the time in question
were, in whole or in part, the responsibility of the Borrower, any Guarantor or
an ERISA Affiliate.
"PLEDGE AGREEMENT" means the Pledge Agreement between the
Borrower and the Agent, dated as of the Agreement Date, in the form of Exhibit
D.
"PROHIBITED TRANSACTION" means a transaction that is
prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA.
"PROPORTIONATE SHARE" of a Lender in respect of any amount,
means the product obtained by multiplying such amount by such Lender's relevant
"Commitment Percentage" set forth by its name on the signature pages hereof.
"PURCHASE MONEY DEBT" means (i) Debt of the Borrower or a
Subsidiary that, within 30 days of such purchase, is incurred to finance part or
all of (but not more than) the purchase price of tangible assets in which
neither the Borrower nor any Subsidiary had at any time prior to such purchase
any interest other than a security interest and/or (ii) Debt (A) that
constitutes a renewal, extension or refunding of, but not an increase in the
principal amount of, Purchase Money Debt that is such by virtue of clause (i),
(B) is binding only on the obligor or obligors under the Purchase Money Debt
being renewed, extended or refunded and (C) bears interest at a rate per annum
that is commercially reasonable at the time.
"REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time, and any regulation
successor thereto.
"REGULATION G" means Regulation G of the Board of Governors of
the Federal Reserve System, as in effect from time to time, and any regulation
successor thereto.
"REGULATION T" means Regulation T of the Board of Governors of
the Federal Reserve System, as in effect from time to time, and any regulation
successor thereto
"REGULATION U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time, and any regulation
successor thereto.
"REGULATION X" means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time, and any regulation
successor thereto.
"REGULATORY CHANGE" means (i) any new, or any change in any
existing, Applicable Law, interpretation, directive or request (whether or not
having the force of law) or (ii) any change in the administration or enforcement
of any such Applicable Law, interpretation, directive or request, in each case,
that becomes effective after the Agreement Date, whether as a result of an
enactment by a government or any agency or political subdivision thereof, a
determination of a court or a regulatory authority, or otherwise.
<PAGE> 76
"REIMBURSEMENT AGREEMENT" means an agreement among a Letter of
Credit Issuer, the Borrower and the Agent with respect to the issuance of a
Letter of Credit.
"REIMBURSEMENT OBLIGATION" means, with respect to any Letter
of Credit, the Borrower's obligation to reimburse the Lenders and the Letter of
Credit Issuer for drawings thereunder as provided herein and in the relevant
Reimbursement Agreement.
"RELEASE" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment, including the movement
of Hazardous Material through or in the air, soil, surface water, ground water
or property.
"REPORTABLE EVENT" means, to the extent the same relates to or
affects a Plan, (i) any of the events set forth in ERISA Sections 4043(b) (other
than a Reportable Event as to which the provision of 30 days' notice to the PBGC
is waived under applicable regulations), 4068(f) or 4063(a) or the regulations
thereunder, (ii) any event requiring the Borrower, any Guarantor or any ERISA
Affiliate to provide security to a Plan under Code Section 401(a)(29) and (iii)
any failure to make a payment required by Code Section 412(m).
"REPRESENTATION AND WARRANTY" means each representation and
warranty made pursuant to or under (i) Section 3.3, Article IV, Section 6.2 or
any other provision of this Agreement or any other Loan Document, (ii) any
amendment of or waiver or consent under this Agreement or any other Loan
Document, (iii) any Schedule to this Agreement, any other Loan Document or any
such amendment, waiver or consent, or (iv) any statement contained in any
certificate, financial statement, legal opinion or other instrument or document
delivered by or on behalf of the Borrower or any Subsidiary pursuant to any Loan
Document, WHETHER OR NOT (except as expressly provided to the contrary herein),
IN THE CASE OF ANY REPRESENTATION OR WARRANTY REFERRED TO IN CLAUSE (i), (ii),
(iii) OR (iv) OF THIS DEFINITION, THE INFORMATION THAT IS THE SUBJECT MATTER
THEREOF IS WITHIN THE KNOWLEDGE OF THE BORROWER OR SUCH SUBSIDIARY.
"REQUIRED LENDERS" means, at any time, the Lenders holding at
least 51% of the then aggregate unpaid principal amount of the Loans and the
participations in Letter of Credit Obligations, or if no such obligations are
outstanding, the Lenders having at least 51% of the Commitments to make Loans or
to purchase participations in Letters of Credit.
"RESERVE REQUIREMENT" means at any time the then current
maximum rate for which reserves (including any marginal, supplemental or
emergency reserve) are required to be maintained under Regulation D by member
banks of the Federal Reserve System in New York City with deposits comparable in
amount to those of the Agent against "Eurocurrency liabilities", as that term is
used in Regulation D. The Adjusted Eurodollar Rates shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
<PAGE> 77
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended and
in effect from time to time.
"RESTRICTED PAYMENT" means as to any Person (i) any dividend
or other distribution on any shares of such Person's capital stock (other than
dividends payable solely in shares of its capital stock), (ii) any payment on
account of any subordinated debt or any Debt convertible into shares of such
Person's capital stock, (iii) any acquisition of any of such Person's Capital
Securities (except an acquisition of shares of such Person's capital stock upon
the conversion thereof into or the exchange thereof for other shares of its
capital stock), (iv) any advance, loan, financial accommodation or extension of
credit (other than accounts arising in arms-length transactions in the ordinary
course of business on customary trade terms) by such Person to any of its
Affiliates or (v) any payment or distribution to any principal shareholder,
director or any member of the immediate family of any of the foregoing or any
partnership, trust or other entity controlled directly or indirectly by any of
the foregoing.
"REVOLVING CREDIT COMMITMENT" means the commitment of each
Lender to make Revolving Loans pursuant to Section 1.1(a)(i) in the amount set
forth opposite such Lender's name on the signature pages hereof, as such amount
may be reduced from time to time pursuant to Section 1.7. Revolving Credit
Commitments means the sum of the Revolving Credit Commitments of all the
Lenders.
"REVOLVING CREDIT COMMITMENT FEE" has the meaning ascribed to
such term in Section 1.5(b)(iii).
"REVOLVING CREDIT COMMITMENT TERMINATION DATE" means the
earlier of (i) the date upon which the Revolving Credit Commitments reduce to
zero pursuant to Section 1.7 or Section 7.2, and (ii) November 26, 2002.
"REVOLVING LOAN" means an amount advanced pursuant to Section
1.1(a)(i).
"ROLLOVER BORROWING" has the meaning ascribed to such term in
Section 1.2(d).
"S&P'S" has the meaning ascribed to it in Section 5.13(c)(i).
"SECURITY AGREEMENT" means the Security Agreement between the
Borrower and the Agent, dated the Agreement Date, in the form of Exhibit C.
"SECURITY DOCUMENTS" shall mean, collectively, the Pledge
Agreement, the Security Agreement, the Subsidiary Pledge Agreement, the
Subsidiary Security Agreement, the Trademark Security Agreement, the Subsidiary
Trademark Security Agreement, the Patent Security Agreement, the Mortgage and
each other mortgage, deed of trust, security agreement, pledge agreement, or
other security or collateral document securing the Obligations.
<PAGE> 78
"SECURITY INTEREST" means the mortgages, pledges and
assignments to the Agent, for the ratable benefit of the Lenders, the Agent and
the Letter of Credit Issuers of a continuing Lien upon, the Collateral intended
to be effected by the terms of this Agreement and the other Loan Documents, and
the other acts, documents and agreements relating thereto.
"SUBSIDIARY" when used to determine the relationship of a
Person to another Person, means any Person of which (a) securities having
ordinary voting power to elect a majority of the board of directors (or other
persons having similar functions), or (b) other ownership interests ordinarily
constituting a majority voting interest, in each case, are at the time, directly
or indirectly, owned or controlled by such other Person, or by one or more other
Subsidiaries of such other Person, or by such other Person and one or more of
its Subsidiaries. Unless otherwise specified "Subsidiary" means a Subsidiary of
the Borrower.
"SUBSIDIARY PLEDGE AGREEMENT" means the Subsidiary Pledge
Agreement among the Guarantors and the Agent, dated as of the Agreement Date, in
the form of Exhibit G.
"SUBSIDIARY SECURITY AGREEMENT" means the Subsidiary Security
Agreement among the Guarantors and the Agent, dated as of the Agreement Date, in
the form of Exhibit F.
"SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means the Trademark
Security Agreement between Monarch and the Agent, dated as of the Closing Date,
in the form of Exhibit J, and any similar agreement subsequently entered into
between the Agent and any Subsidiary.
"SUBORDINATION AGREEMENT" means the Subordination Agreement
among the Borrower, the United Companies and the Agent, dated as of the
Agreement Date, in the form of Exhibit H.
"TAX" means any Federal, State or foreign tax, assessment or
other governmental charge or levy (including any withholding tax) upon a Person
or upon its assets, revenues, income or profits other than income and franchise
taxes imposed upon a Lender by the jurisdictions (or any political subdivision
thereof) in which such Lender or its Lending Office is located.
"TERM LOAN" means an amount advanced pursuant to Section
1.1(a)(ii).
"TERM LOAN COMMITMENT" means the commitment of each Lender to
make Term Loans pursuant to Section 1.1(a)(i) in the amount set forth opposite
such Lender's name on the signature pages hereof, as such amount may be reduced
from time to time pursuant to Section 1.7. Term Loan Commitments means the sum
of the Term Loan Commitments of all the Lenders.
"TERM LOAN COMMITMENT TERMINATION DATE" means the earlier of
(i) the date upon which the Term Loan Commitments reduce to zero pursuant to
Section 1.7 or Section 7.2, and (ii) November 26, 2002.
<PAGE> 79
"TERMINATION DATE" means (i) with respect to the Revolving
Credit Commitments, the Revolving Credit Commitment Termination Date and (ii)
with respect to the Term Loan Commitments, the Term Loan Commitment Termination
Date.
"TERMINATION EVENT" means (i) a Reportable Event, (ii) the
termination of a Plan, or the filing of a notice of intent to terminate a Plan,
or the treatment of a Plan amendment as a termination under Section 4041(c) of
ERISA, (iii) the institution of proceedings to terminate a Plan under Section
4042(a) of ERISA, or (iv) the appointment of a trustee to administer any Plan
under Section 4042(b) of ERISA.
"TRADEMARK SECURITY AGREEMENT" means the Trademark Security
Agreement between the Borrower and the Agent, dated as of the Agreement Date, in
the form of Exhibit I.
"TYPE" has the meaning ascribed to it in Section 10.3.
"UCC" means the Uniform Commercial Code as in effect in the
relevant jurisdiction.
"UNFUNDED BENEFIT LIABILITIES" means with respect to any Plan
at any time, the amount of unfunded benefit liabilities of such Plan at such
time as determined under Section 4001(18) of ERISA.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of a Person, all
of the Capital Securities and all other ownership interests and rights to
acquire ownership interests of which are, directly or indirectly, owned or
controlled by such Person or one or more Wholly-Owned Subsidiaries of such
Person or by such Person and one or more of such Subsidiaries.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references
herein (A) to any Person, other than the Borrower or any Guarantor,
shall be deemed to include such Person's successors, transferees and
assignees, but only, in the case of transferees and assignees of the
Lenders, to the extent the applicable transfer or assignment complies
with the provisions of this Agreement, (B) to the Borrower or any
Guarantor shall be deemed to include such Person's successors, (C) to
any Applicable Law specifically defined or referred to herein shall be
deemed references to such Applicable Law as the same may be amended or
supplemented from time to time, (D) to any Contract defined or referred
to herein shall be deemed references to such Contract (and, in the case
of any instrument, any other instrument issued in substitution
therefor) as the terms thereof may have been amended, supplemented,
waived or otherwise modified from time to time and (E) to any Loan
Document, as the terms thereof may have been amended, supplemented,
waived or otherwise modified from time to time in accordance with
Section 11.5 or any corresponding provision of such Loan Document.
<PAGE> 80
(ii) When used in this Agreement, the words "herein",
"hereof" and "hereunder" and words of similar import shall refer to
this Agreement as a whole and not to any provision of this Agreement,
and "Section," "Subsection," "Schedule" and "Exhibit" shall refer to
Sections and Subsections of, and Schedules and Exhibits to, this
Agreement unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes
the plural, and vice versa.
(iv) All terms defined in this Agreement shall have the same
defined meanings when used in any Note or, except as otherwise
expressly stated therein, any certificate, opinion or other Loan
Document or other document delivered pursuant hereto.
Section 10.2 Accounting Matters. Unless otherwise specified herein, all
accounting determinations hereunder and all computations utilized by the
Borrower and the Guarantors in complying with the covenants contained herein
shall be made, all accounting terms used herein shall be interpreted, and all
financial statements requested to be delivered hereunder shall be prepared, in
accordance with Generally Accepted Accounting Principles, consistently applied
throughout the periods involved. If the Agent or the Required Lenders shall
notify the Borrower that any change in GAAP adversely effects the calculation of
the financial covenants contained herein, such change shall not be effective
until the Agent, the Required Lenders and the Borrower shall have agreed on an
amendment to the affected covenant, that in the judgment of the Agent and the
Required Lenders, restores such covenant to its effect prior to such change.
Section 10.3 Classes of Extensions of Credit and Types of Loans.
Extensions of Credit hereunder are distinguished by "Class" and by "Type". The
"Class" of an Extension of Credit (or of a Commitment to make such Extension of
Credit) refers to the determination of whether such Extension of Credit arises
under the Revolving Loan Commitment or the Term Loan Commitment, each group of
which constitutes a Class. The "Type" of a Loan refers to the determination of
whether such Loan is a Eurodollar Loan or a Base Rate Loan. A Loan may be
identified by both Class and Type (e.g., a "Eurodollar Revolving Loan" indicates
that such Loan is both a Revolving Loan and a Eurodollar Loan).
Section 10.4 Captions. Article and Section captions in this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose.
<PAGE> 81
11.
MISCELLANEOUS
Section 11.1 Notices.
(a) Manner of Delivery. All notices and other communications
under this Agreement, including but not limited to materials delivered pursuant
to Article VI, shall, except in those cases where a telephonic notice is
expressly permitted, be in writing (which shall include communications by telex
and telecopy). All written notices and communications shall be sent by
registered or certified mail, postage prepaid, return receipt requested, by
prepaid telex or telecopier, reputable overnight courier, freight prepaid, or
delivered by hand.
(b) Addresses. All notices and other communications under this
Agreement shall be given at the following respective addresses and telex,
telecopier and telephone numbers and to the attention of the following Persons:
(i) If to the Borrower:
King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Telecopier No.: (423) 989-6282
Telephone No.: (423) 989-8010
Attention: John M. Gregory
Chairman of the Board & CEO
With a copy to:
Legal Department
King Pharmaceuticals, Inc.
501 Fifth Street
Bristol, Tennessee 37620
Attention: John A. A. Bellamy
Executive Vice President
and General Counsel
Telecopier No.: (423) 989-6282
Telephone No.: (423) 989-8010
<PAGE> 82
(ii) If to the Agent:
General Electric Capital Corporation
3379 Peachtree Road, Suite 560
Atlanta, Georgia 30326
Attention: John P. Crosby, Vice President
Telecopier No.: (404) 266-3538
Telephone No.: (404) 814-2609
with copies to:
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530
Attention: Colvin T. Leonard, III, Esq.
Telecopier No.: (404) 815-6555
Telephone No.: (404) 815-6172
and
General Electric Capital Corporation
201 High Ridge Road
Stanford, Connecticut 06927-5100
Attention: Corporate Counsel
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(iii) If to a Letter of Credit Issuer at its respective
address and telex, telecopier and telephone numbers set forth in the
Reimbursement Agreement to which such Letter of Credit Issuer is a
party;
(iv) If to the Lenders, at their respective address and
telex, telecopier and telephone numbers set forth on the signature
pages hereto (as the same may be amended from time to time);
or at such other address or telex, telecopier or telephone number or to the
attention of such other person as the party to whom such information pertains
may hereafter specify for the purpose in a notice to the other specifically
captioned "Notice of Change of Address".
(c) Effectiveness. Each notice and other communication
under this Agreement shall be effective or deemed delivered or furnished (i) if
given by mail, on the fifth Business Day after such communication is deposited
in the mail, addressed as above provided, (ii) if given by telex or telecopier,
when such communication is transmitted to the appropriate number determined as
above provided in this Section 11.1 and the appropriate answer-back is received
or receipt is otherwise
<PAGE> 83
acknowledged, (iii) if given by hand delivery or overnight courier, when left at
the address of the addressee addressed as above provided, and (iv) if given by
telephone, when communicated to the Person or to the holder of the office
specified as the Person or officeholder to whose attention communications are to
be given, or, in the case of notice by the Agent to the Borrower under Section
7.2, given by telephone as provided below, if such Person or officeholder is
unavailable at the time, to any other responsible officer of the Borrower,
except that notices of a change of address, telex, telecopier or telephone
number, and notices to the Agent shall not be effective, and materials furnished
to the Lenders pursuant to Article VI shall not be deemed furnished until
received, and in the case of the Agent, such notices and materials shall not be
deemed received until physically received by a responsible officer at the office
of the Agent set forth above, not later than noon (New York City time) on any
day if such day is to count as a Business Day for the purpose of determining the
adequacy of any notice to the Agent hereunder. Notices under Sections 1.2, 2.2,
2.3, and 7.2 may be by telephone, promptly confirmed in writing (which shall
include communications by telex and telecopy). The failure by the Agent to give
written confirmation of any such notice shall not effect the validity thereof.
In the event of a discrepancy between telephonic notice and the written
confirmation thereof, or in the event written confirmation of such notice is not
furnished, the telephonic notice as understood by the Agent will be deemed the
effective notice.
Section 11.2 Expenses; Indemnification. Whether or not any Extension of
Credit is made hereunder, the Borrower shall, on demand, pay or reimburse the
Lenders, the Agent and the Letter of Credit Issuers for (a) all transfer,
documentary, stamp and similar taxes, and all search, recording and filing fees,
if any, payable in connection with, arising out of or in any way related to the
execution, delivery and performance of this Agreement, the other Loan Documents
or the Extensions of Credit, and (b) all reasonable costs and expenses
(including fees and disbursements of legal counsel and other experts) incurred,
and all payments made, and indemnify and hold the Lenders, the Agent and the
Letter of Credit Issuers harmless from and against all losses suffered, in
connection with, arising out of, or in any way related to (i) the negotiation,
preparation, execution and delivery of (A) this Agreement and the other Loan
Documents, (B) any Extension of Credit and (C) (whether or not executed) any
waiver, amendment or consent hereunder or thereunder, or hereto or thereto, (ii)
the administration of this Agreement and the other Loan Documents, including
without limitation the matters set forth in Section 6.3(b)(iv) (other than
ordinary course overhead associated with regular employees of the Agent incurred
in the ordinary course of the administration of this Agreement absent an Event
of Default), (iii) consulting with respect to any matter in any way arising out
of, relating to, or connected with, this Agreement or any of the other Loan
Documents, including, but not limited to, the enforcement by the Lenders, the
Agent or the Letter of Credit Issuers of any of their rights hereunder or under
any of the other Loan Documents, or the performance by the Lenders, the Agent or
the Letter of Credit Issuers of any of their obligations hereunder or under any
other Loan Document, if any, (iv) protecting, preserving, exercising or
enforcing any of the rights of the Lenders, the Agent or the Letter of Credit
Issuers hereunder or under any of the other Loan Documents, (v) any claim
(whether asserted by the Lenders, the Agent, the Letter of Credit Issuers, the
Borrower, or any other Person and whether asserted before or after the payment,
performance and observance in full of the Borrower's obligations hereunder and
under the other Loan Documents) and the prosecution or defense thereof, in any
way arising under, related to, or connected with, this Agreement, or any of the
other Loan Documents or the relationship established hereunder or under the
other Loan Documents, and
<PAGE> 84
(vi) any governmental investigation arising out of, relating to, or in any way
connected with this Agreement or any of the other Loan Documents, provided that
the foregoing indemnity shall not be applicable to any loss suffered by any
Lender, the Agent or a Letter of Credit Issuer to the extent such loss is
determined by a judgment of a court that is binding on such Lender, the Agent or
such Letter of Credit Issuer, final and not subject to review on appeal, to be
the result of acts or omissions of such Lender, the Agent or such Letter of
Credit Issuer, constituting (x) gross negligence or willful misconduct, (y)
violations of law, or (z) its failure to observe any other standard expressly
applicable to it under any of the other provisions of this Agreement or any of
the other Loan Documents. The Agent shall have the right to charge any account
of the Borrower for amounts due under this Section, and may cause the Borrower
to incur a Borrowing in such amounts as may be necessary to repay such
Obligations.
Section 11.3 Rights Cumulative. The rights and remedies of the Lenders,
the Agent and the Letter of Credit Issuers under this Agreement and the other
Loan Documents shall be cumulative and not exclusive of, nor limiting upon, any
rights or remedies that they would otherwise have, and no failure or delay by
any Lender, the Agent or any Letter of Credit Issuer in exercising any right
shall operate as a waiver of it, nor shall any single or partial exercise of any
power or right preclude its other or further exercise or any other power or
right.
Section 11.4 Disclosure. The Agent, the Lenders and the Letter of
Credit Issuers may disclose to, and exchange and discuss with, any other Person
any information concerning the Borrower and any of its Subsidiaries (whether
received by the Agent, the Letter of Credit Issuers, the Lenders or such person
in connection with or pursuant to this Agreement or otherwise) only (i) as may
be required by Applicable Law, (ii) for the purpose of protecting, preserving,
exercising or enforcing any rights hereunder or under any of the other Loan
Documents, or consulting with respect to any such rights or any rights of the
Borrower or (iii) as reasonably required in connection with the making of
assignments and the sale of participations by the Lenders as provided in Section
11.7.
Section 11.5 Waivers; Amendments. (a) Any term, covenant, agreement or
condition of this Agreement or any Loan Document may be amended with the consent
of the Borrower, the Agent and the Required Lenders, or compliance therewith may
be waived in writing by the Agent and, in the case of a term, covenant,
agreement or condition contained in any Reimbursement Agreement, the Letter of
Credit Issuer party thereto, when authorized by the Required Lenders, and in any
such event, the failure to observe, perform or discharge any such covenant,
condition or obligation (whether such amendment is executed or such consent or
waiver is given before or after such failure) shall not be construed as a breach
of such covenant, condition or obligation or a Default hereunder, provided that
no such amendment, consent or waiver shall:
(i) affect the amount or extend the time of the Commitment of
any Lender, of the obligation of any Letter of Credit Issuer to issue
Letters of Credit or extend the expiration date of any Letter of
Credit, or of the obligation of the Agent, any Letter of Credit Issuer
or any Lender to pay amounts on account of Loans or Letters of Credit,
and thereby extend credit to the Borrower, without the prior written
consent of such Lender, such Letter of Credit Issuer or the Agent, as
the case may be;
<PAGE> 85
(ii) alter the time or times of payment of the principal of
or interest on any Obligation or with respect to any participation in a
Letter of Credit or any fees payable hereunder or any Loan Document, or
the amount of the principal of any Note, Reimbursement Obligation or
Letter of Credit, or the rates of interest, commission or fees, or
permit any subordination of principal, interest, or fees hereunder or
any Loan Document, without the prior written consent of the Lender,
Letter of Credit Issuer or Agent as to its interest in the
corresponding Obligation, participation interest, commission or fees;
(iii) alter any provision requiring the ratable application of
amounts received by the Agent in payment of, or for application on,
indebtedness under this Agreement or under any of the Notes or any
other Loan Document or any Obligation or Letter of Credit Obligation,
or change the parties or percentages required to authorize or direct
the taking of any action under this Agreement or any Loan Document,
without the prior written consent of the Agent and all the Lenders and,
to the extent such change adversely affects a Letter of Credit Issuer,
the prior written consent of such Letter of Credit Issuer;
(iv) release all or substantially all of the Collateral or
reduce the Security Interest, or change the definition of "Borrowing
Base" or any component thereof, without the prior written consent of
all the Lenders; or
(v) amend any term or provision of Article IX or Section
11.2 or any waiver, release or limitation of liability in favor of the
Agent or the Letter of Credit Issuer contained herein or in any other
Loan Document without the prior written consent of the Agent and, to
the extent the rights or obligations of any Letter of Credit Issuer are
adversely affected thereby, the prior written consent of such Letter of
Credit Issuer.
Except as set forth in this Section, each Letter of Credit Issuer agrees to act
upon the direction of the Required Lenders in all respects under its respective
Reimbursement Agreement. In addition to the foregoing rights, for the purpose of
this Section, the Letter of Credit Issuer shall be deemed to own and be entitled
to vote in an amount equal to the participation interest of any Lender that has
failed to pay any amount owing to the Letter of Credit Issuer hereunder.
(b) Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
Section 11.6 Set-Off.
(a) Exercise of Set-Off Rights. Upon the occurrence and
during the continuance of any Event of Default, each of the Agent, the Letter of
Credit Issuers and the Lenders, and each of its branches and offices, is hereby
authorized by the Borrower, at any time and from time to time, without notice to
the Borrower, (i) to set-off against, and to appropriate and apply to the
payment of the Obligations (whether matured or unmatured, fixed or contingent or
liquidated or unliquidated), any and all amounts owing by the Agent, such Letter
of Credit Issuer or such
<PAGE> 86
Lender, or any such office or branch, to the Borrower (whether payable in
Dollars or any other currency, whether matured or unmatured, and, in the case of
deposits, whether general or special time or demand and however evidenced) and
(ii) pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such Obligations and to return as unpaid for insufficient
funds any and all checks and other items drawn against any deposits so held as
such Person in its sole discretion may elect. The Borrower agrees, to the
fullest extent it may effectively do so under Applicable Law, that any holder of
a participation in any Extension of Credit may exercise rights of set-off and
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the Borrower in the
amount of such participation. The Agent, each Letter of Credit Issuer and each
Lender agrees to give the Borrower prompt notice following its exercise of any
set-off pursuant to this Section, but the failure to give such notice shall not
affect the effectiveness of such exercise.
(b) Sharing of Set-Offs. Each of the Agent, the Letter of
Credit Issuers and the Lenders agree that if it shall, by exercising any right
of set-off or counterclaim or otherwise, obtain any payment (whether voluntary
or involuntary), of a proportion of the Obligations held by it that is greater
than the proportion received by any other of them in respect of the Obligations
held by such other of them, the Agent, the Letter of Credit Issuer and/or the
Lender, as the case may be, receiving such proportionately greater payment shall
purchase such participations in the Obligations held by the other of them, and
such other adjustments shall be made, as may be required so that all such
payments in respect of the Obligations shall be shared by all of them pro rata.
Any party receiving such proportionately greater payment shall immediately
notify the Agent thereof. Promptly upon its receipt of such notice, the Agent
shall notify each of the Lenders and the Letter of Credit Issuers of the amount
or amounts received by one or more of the Lenders in excess of its Proportionate
Share thereof. On the immediately succeeding Business Day after the giving of
such notice by the Agent, the appropriate adjustments in the Obligations shall
be made as provided in this Section 11.6(b).
(c) No Impairment of Set-Off Rights. Nothing in subsection (b)
of this Section 11.6 shall impair the right of the Agent, any Letter of Credit
Issuer or any Lender to exercise any right of set-off or counterclaim it may
have, or to otherwise obtain payment, and to apply such amount to the payment of
indebtedness other than the Obligations.
Section 11.7 Assignment and Participations.
(a) Assignments. The Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and all the Lenders, and no such assignment or transfer of
any such obligations shall relieve the Borrower thereof unless the Lenders shall
have consented to such release in a writing specifically referring to the
obligation from which the Borrower is to be released. Any Lender may assign its
rights and delegate its obligations under this Agreement and the other Loan
Documents and further may assign, all or any part of any Extensions of Credit
made by it, or its Commitment or any other
<PAGE> 87
interest herein or in any other Loan Documents to another bank or entity;
provided, that, except in the case of an assignment by a Lender to one of its
branches or its affiliates, (i) the Agent and each Letter of Credit Issuer shall
have consented in writing to such assignment and the terms thereof, including
the amount of such assignment and the assignee thereof, but which consent shall
not be unreasonably withheld, (ii) the Agent shall have received a $5,000
assignment fee from the assignor Lender, and (iii) the Agent shall have received
an Assignment and Assumption Agreement in the form of Schedule 11.7 duly
executed by the assignee, the assignor Lender and the Agent; and provided
further that except (A) in the case of an assignment by a Lender to one of its
branches or affiliates or (B) in the case of an assignment to a bank, a fund or
an institutional investor with capital and surplus in excess of $300,000,000 or
any of whose securities are rated investment grade or above by any nationally
recognized rating service, the Borrower shall have given its prior written
consent which consent shall not be unreasonably withheld or delayed; as promptly
as practicable following its becoming a Lender hereunder, each assignee shall
notify the Borrower thereof and provide the Borrower with a copy thereof. Upon
any such assignment by a Lender pursuant to the terms hereof, the assignee
thereof shall have, to the extent of such assignment (unless otherwise provided
therein) the same rights and benefits as it would have if it were an original
Lender hereunder and under the Loan Documents, and such assignee shall assume
all of the obligations of a Lender hereunder and such assignor Lender shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required to effect such
assignments, assumptions and corresponding releases.
(b) Participations. Any Lender may from time to time sell or
otherwise grant participations in the Extensions of Credit, and the holder of
any such participation, if the participation agreement so specifically provides,
shall be entitled to all of the rights of a Lender hereunder respecting the
taking of any action directly affecting the extension of the final maturity of
the principal amount of, or any payment date for any interest on, a Loan
allocated to such participation, the reduction in the principal amount of, or
the rate of interest payable on, the Loans, the release of all or substantially
all of the Collateral, or the enforcement of the Obligations. Except as provided
in the preceding sentence and as provided in Article VIII or Section 11.6, a
holder of a participation shall not be deemed a Lender.
(c) Requirements Upon Transfer. If, pursuant to this
subsection, any interest in this Agreement or any Loan Document is transferred
to any assignee that is organized under the laws of any jurisdiction other than
the United States or any state thereof, the transferor Lender shall cause such
assignee concurrently with the effectiveness of such transfer, (i) to represent
to the transferor Lender (for the benefit of the transferor Lender, the Agent,
the Letter of Credit Issuers and the Borrower) that it is either (x) entitled to
the benefits of an income tax treaty with the United States that provides for an
exemption from United States withholding tax on interest and other payments
which may be made by the Borrower to other Loan Document; or (y) is engaged in
the trade or business within the United States, (ii) to furnish to the
transferor Lender, the Agent, the Letter of Credit Issuers and the Borrower
either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service
Form 1001 (wherein such assignee claims entitlement to complete
<PAGE> 88
exemption from U.S. federal withholding tax on all payments hereunder) and (iii)
to agree (for the benefit of the transferor Lender, the Agent, the Letter of
Credit Issuers and the Borrower) to provide to the transferor Lender, the Agent,
the Letter of Credit Issuers and the Borrower a new Form 4224 or Form 1001 upon
the obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations with regard to such
withholding tax exemption.
(d) Lender Covenants. Each Lender represents and warrants to
the Borrower, the Letter of Credit Issuers and the Agent that it is either (x) a
United States person (as defined in Section 7701(a)(30) of the Code); (y)
entitled to the benefits of an income tax treaty with the United States that
provides for an exemption from United States withholding tax on interest and
other payments which may be made by the Borrower to such Lender pursuant to the
terms of this Agreement or any other Loan Document; or (z) engaged in trade or
business within the United States. Each Lender that is organized under the laws
of any jurisdiction other than the United States or any State thereof (including
the District of Columbia) agrees to furnish to the Agent, the Letter of Credit
Issuers and the Borrower, prior to the date of the first interest payment
hereunder, two copies of either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 (wherein such Lender claims entitlement to
complete exemption from U.S. federal withholding tax on all payments hereunder)
and to provide to the Agent, the Letter of Credit Issuers and the Borrower a new
Form 4224 or Form 1001 upon the obsolescence of any previously delivered form
and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such Lender, and to
comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemptions.
Section 11.8 Governing Law. THIS AGREEMENT SHALL BE EFFECTIVE UPON
ACCEPTANCE BY THE LENDERS IN GEORGIA, AND THE AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE
STATE OF GEORGIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
Section 11.9 Judicial Proceedings; Waiver of Jury Trial. ANY JUDICIAL
PROCEEDING BROUGHT AGAINST THE BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENTS, MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN
THE CITY OF ATLANTA, STATE OF GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER (A) ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY RELATED APPELLATE COURT, AND
IRREVOCABLY AGREES (WITHOUT WAIVING ANY RIGHT TO APPEAL) TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AND (B) IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM (WITHOUT WAIVING ANY RIGHT THE
<PAGE> 89
BORROWER MAY HAVE TO REMOVE ANY SUCH JUDICIAL PROCEEDING TO THE UNITED STATES
DISTRICT COURT LOCATED IN THE CITY OF ATLANTA, STATE OF GEORGIA). THE BORROWER
HEREBY WAIVES, PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF PROCESS
UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
(WITH A COPY BY OVERNIGHT COURIER), AT ITS ADDRESS SPECIFIED OR DETERMINED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 11.1, AND SERVICE SO MADE SHALL BE
DEEMED COMPLETED ON THE FIFTH DAY AFTER SUCH SERVICE IS DEPOSITED IN THE MAIL.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT, ANY LETTER OF CREDIT
ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
LENDERS, THE AGENT OR THE LETTER OF CREDIT BANKS, INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE BROUGHT ONLY IN A COURT
LOCATED IN THE CITY OF ATLANTA AND STATE OF GEORGIA. THE BORROWER, THE AGENT,
EACH LETTER OF CREDIT ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING TO WHICH ANY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER AND WHETHER ARISING OR
ASSERTED BEFORE OR AFTER THE AGREEMENT DATE OR BEFORE OR AFTER PAYMENT,
OBSERVANCE AND PERFORMANCE IN FULL OF THE BORROWER'S OBLIGATIONS HEREUNDER OR
THEREUNDER.
Section 11.10 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by Applicable Law, the Borrower hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
Section 11.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which shall be deemed to constitute but one
original and shall be binding upon all parties, their successors and permitted
assigns.
Section 11.12 Entire Agreement. This Agreement and the other Loan
Documents, and the Notes executed in connection herewith embody the entire
agreement between the parties hereto relating to the subject matter hereof and
supersede all prior agreements, representations and understandings, if any,
relating to the subject matter hereof.
<PAGE> 90
Section 11.13 Survival of Obligations. Except as otherwise expressly
provided herein, the representations, warranties, rights and obligations of the
parties hereunder shall survive the execution of this Agreement, any
investigation of any matters by the Agent, any Letter of Credit Issuer or any
Lender and the extension and repayment of the Loans and other Obligations. This
Agreement, other than the indemnities set forth in Sections 9.6 and 11.2, which
shall survive, shall terminate upon the termination, expiration or reduction to
zero of the Lenders' Commitments and the payment in full of all outstanding
Loans, Letter of Credit Obligations and other Obligations.
Section 11.14 Successors and Assigns. Subject to the provisions of
Section 11.7, all of the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
Section 11.15 Limitation of Liability. Neither the Lenders, the Letter
of Credit Issuers, the Agent or any Affiliate thereof shall have any liability
with respect to, and, THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE
UPON, ANY CLAIM FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY
THE BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY
THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH.
<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
written above.
KING PHARMACEUTICALS, INC.,
as Borrower
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 92
"LENDERS"
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Commitments: Amount: Percentage:
Revolving:
Term
Total
Base Rate Lending Office:
Attention:
Eurodollar Lending Office:
Attention:
Address for purposes of Section 11.1:
Telecopier No.: (___) ___-____
Telephone No.: (___) ___-____
Attention:
