SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 31, 1995
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Biocraft Laboratories, Inc.
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(Exact name of registrant as specified in charter)
Delaware 1-8867 22-1734359
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(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification no.)
18-01 River Road, Fair Lawn, New Jersey 07410
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 703-0400
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_________________________________________________________________
(Former name or former address, if changed since last report)
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Item 5. Other Events.
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As of August 31, 1995, Registrant entered into a three-year $25
million revolving credit facility (the "GECC Credit Facility") with General
Electric Capital Corporation ("GECC") pursuant to the terms and conditions
of a Credit Agreement ("Credit Agreement") of even date between the
parties. The GECC Credit Facility provides that Registrant may borrow up
to $25 million against a certain percentage of eligible accounts receivable
and inventory as provided for in the Credit Agreement. The outstanding
balance of any advances under the GECC Credit Facility bears interest at a
rate per annum of 3.25% above the rate for certain dealer placed commercial
paper, subject to certain adjustments as provided for in the Credit
Agreement.
Initially, advances under the GECC Credit Facility are secured by
all of Registrant's existing and hereafter acquired personal property
including accounts receivable, equipment, general intangibles, inventory
and other goods and personal property, but excluding equipment at
Registrant's Mexico, Missouri facilities. Upon the satisfaction of certain
conditions, including the receipt by GECC of a satisfactory appraisal of
the Registrant's inventory, GECC will release its security interest in
Registrant's personal property other than accounts receivable, inventory,
equipment located at Registrant's Elmwood Park, New Jersey and Fairfield,
New Jersey facilities, and certain related intangible property.
Registrant immediately used a portion of the proceeds from the
GECC Credit Facility to satisfy in full the indebtedness of Registrant to
NatWest Bank N.A. and Commerce Bank, National Association in the aggregate
principal amount of approximately $21 million. Registrant has terminated
its revolving credit facilities and term loans with those banks.
Registrant intends to use the balance of the proceeds of the GECC Credit
Facility for its ordinary working capital requirements.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
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(c) Exhibits
10.1 Credit Agreement dated as of August 31, 1995 between
Registrant and General Electric Capital Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Biocraft Laboratories, Inc.
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(Registrant)
Date September 11, 1995 By /s/ Brian S. Snyder
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Brian S. Snyder,
Vice President and
Controller
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Exhibit Index
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Exhibit Number Page
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10.1 Credit Agreement dated as of August 31, 1995
between Registrant and General Electric Capital Corporation. 5
4
EXHIBIT 10.1
CREDIT AGREEMENT
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CREDIT AGREEMENT, dated as of August 31, 1995, by and between BIOCRAFT
LABORATORIES, INC., a Delaware corporation ("Borrower"), and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("Lender").
RECITALS
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A. Borrower desires to borrow up to Twenty-Five Million Dollars
($25,000,000) from Lender, and Lender is willing to make certain loans to
Borrower of up to such amount upon the terms and conditions set forth
herein.
B. Capitalized terms used herein shall have the meanings ascribed to
them in Schedule A. All Schedules, Attachments and Exhibits hereto, or
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expressly identified to this Agreement, are incorporated herein by
reference, and taken together, shall constitute but a single agreement.
Unless otherwise expressly set forth herein, or in a written amendment
expressly referring to such Schedules, all Schedules referred to herein
shall mean the Schedules as in effect on the Closing Date. As used herein,
the plural shall include the singular, the singular shall include the
plural, and pronouns in any gender (masculine, feminine or neuter) shall
apply to all genders. These Recitals shall be construed as part of this
Agreement.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Revolving Credit Advances.
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(a) Upon and subject to the terms and conditions set forth
herein, Lender agrees to make available, from time to time, until the
Commitment Termination Date, for Borrower's use and upon the request of
Borrower therefor, advances (each, a "Revolving Credit Advance") against
Eligible Accounts and Eligible Inventory in an aggregate amount outstanding
which, pursuant to Section 1.1(b) below, shall not at any given time exceed
the Borrowing Availability less such reserves as Lender may reasonably deem
appropriate from time to time. Until all amounts outstanding in respect of
the Revolving Credit Loan shall become due and payable on the Commitment
Termination Date, but subject to the terms and conditions hereof, Borrower
may from time to time borrow, repay and reborrow under this Section 1.1(a).
Each Revolving Credit Advance shall be given in writing (by telecopy, hand
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delivery, or United States mail) by Borrower to the individual responsible
for Borrower as identified in Schedule 1.1(a) at the address specified
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thereon, given no later than 11:00 a.m. (New York time) on the Business Day
of the proposed Revolving Credit Advance. Each such notice (a "Notice of
Revolving Credit Advance") shall be substantially in the form of Exhibit A
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hereto, specifying therein the requested date, the amount of such Revolving
Credit Advance and such other information as may be required by Lender.
Lender shall be entitled to rely upon and shall be fully protected under
this Agreement in relying upon any Notice of Revolving Credit Advance
believed by Lender to be genuine and in assuming that the persons executing
and delivering the same were duly authorized unless the responsible
individual acting thereon for Lender shall have actual knowledge to the
contrary.
(b) The Revolving Credit Loan made by Lender shall be evidenced
by a note dated the Closing Date and substantially in the form of Exhibit C
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(the "Revolving Credit Note"). The Revolving Credit Note shall represent
the Obligation of Borrower to pay the amount of the Maximum Revolving
Credit Loan or, if less, the aggregate unpaid principal amount of all
Revolving Credit Advances made by Lender to Borrower with interest thereon
as prescribed in Section 1.5. The date and amount of each Revolving Credit
Advance and each payment of principal with respect thereto shall be
recorded on the books and records of Lender, which books and records shall
constitute prima facie evidence of the accuracy of the information therein
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recorded. The entire unpaid balance of the Revolving Credit Loan shall be
immediately due and payable on the Commitment Termination Date.
(c) Borrower shall furnish to Lender not later than Thursday of
each week, a Borrowing Base Certificate in substantially the form of
Exhibit B hereto, completed and signed by the chief executive officer, a
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financial officer or another officer acceptable to Lender, in its sole
discretion, of Borrower. The portion of the Borrowing Base attributable to
Eligible Accounts on each such Certificate shall be as of Saturday of the
preceding week and the portion of the Borrowing Base attributable to
Eligible Inventory on each such Certificate shall be as of the last day of
the immediately preceding Fiscal Month, unless the day on which such
Borrowing Base Certificate is delivered falls prior to the fifth (5th)
Business Day of a Fiscal Month in which event the Eligible Inventory on
such Certificate shall be as of the last day of the Fiscal Month preceding
the immediately preceding Fiscal Month. Borrower agrees that in making any
Revolving Credit Advance hereunder Lender shall be entitled to rely upon
the most recent Borrowing Base Certificate delivered to Lender by Borrower.
Borrower further agrees that Lender shall be under no obligation to make
any further Revolving Credit Advance if Borrower shall have failed to
deliver a Borrowing Base Certificate to Lender by the time specified above.
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1.2 Prepayment.
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(a) In the event that the outstanding balance of the Revolving
Credit Loan shall at any time exceed the Borrowing Availability, Borrower
shall immediately repay the Revolving Credit Loan in the amount of such
excess.
(b) Borrower shall have the right at any time upon thirty (30)
days prior written notice to Lender to voluntarily prepay the entire
Revolving Credit Loan and terminate Borrower's right to receive and
Lender's obligation to make Revolving Credit Advances, without premium or
penalty other than the prepayment fees as provided for in Schedule D. Upon
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such prepayment and termination, Borrower's right to receive Revolving
Credit Advances and Borrower's obligation to pay the Non-Use Fee shall
simultaneously terminate. Each such prepayment and termination shall be
accompanied by the payment of all accrued and unpaid interest and all Fees
and other remaining Obligations.
(c) If the unpaid principal balance of the Revolving Credit Loan
should at any time exceed the Borrowing Availability, the excess balance
shall nevertheless constitute Obligations that are secured by the
Collateral and entitled to all of the benefits thereof and of this
Agreement and the other Loan Documents and shall be evidenced by the
Revolving Credit Note.
1.3 Use of Proceeds. Borrower shall use the proceeds of the
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Revolving Credit Advances for the Refinancing of Borrower's existing credit
arrangements with NatWest Bank N.A. and Commerce Bank and for the financing
of Borrower's ordinary working capital needs.
1.4 Single Loan. The Revolving Credit Loan, all Revolving Credit
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Advances and all of the other Obligations of Borrower arising under this
Agreement and the other Loan Documents shall constitute one general
obligation of Borrower secured, until the Termination Date, by all of the
Collateral.
1.5 Interest on Revolving Credit Loan.
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(a) Borrower shall be obligated to pay interest to Lender on the
outstanding balance of the Revolving Credit Loan at a floating rate equal
to the Index Rate plus three and one-quarter percent (3.25%) per annum (the
"Stated Index Rate"); provided, however, that, in the event, if any, that
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the ratio of (i) EBIT to (ii) Interest Expense plus Cash Dividends Paid,
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for any Fiscal Year, as determined from Borrower's certified audited
financial statements for such Fiscal Year, is greater than 1.5 to 1.0 then
the Stated Index Rate will, for all purposes of this Agreement and the
other Loan Documents and commencing on the first day of the
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first calendar month following the date such certified audited financial
statements are received by Lender and continuing thereafter until the
earlier of (A) the first day of the first calendar month following any date
on which the ratio of (i) EBIT to (ii) Interest Expense plus Cash Dividends
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Paid, no longer is greater than 1.5 to 1.0 and (B) the day on which the
Revolving Credit Loan is repaid in full, be reduced to be a floating rate
equal to the Index Rate plus three percent (3.0%) per annum.
(b) Borrower shall pay interest to Lender (i) in arrears for the
preceding calendar month on the first day of each calendar month,
commencing on September 1, 1995, (ii) on the Commitment Termination Date,
and (iii) if any interest accrues or remains payable after the Commitment
Termination Date, upon demand by Lender.
(c) All computations of interest shall be made by Lender on the
basis of a three hundred and sixty (360) day year, in each case for the
actual number of days occurring in the period for which such interest is
payable. The Index Rate shall be determined (i) on the first Business Day
immediately prior to the Closing Date and (ii) thereafter, on the last
Business Day of each calendar month for calculation of interest for the
following month. Each determination by Lender of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error or bad faith.
(d) Upon the occurrence of any Default or Event of Default and
so long as any Default or Event of Default shall have occurred and be
continuing, the interest rate applicable to the Obligations (including,
without limitation, the Revolving Credit Loan) shall be increased by two
percent (2%) per annum above the rate otherwise applicable (the "Default
Rate").
(e) If any interest or other payment on the Revolving Credit
Loan becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(f) Notwithstanding anything to the contrary set forth in this
Section 1.5, if, at any time until payment in full of all of the
Obligations, the rate of interest payable hereunder exceeds the highest
rate of interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto (the
"Maximum Lawful Rate"), then in such event and so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder
shall be equal to the Maximum Lawful Rate; provided, that, if at any time
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thereafter the rate of interest payable hereunder is less than the Maximum
Lawful
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Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Lender from
the making of advances hereunder is equal to the total interest which
Lender would have received had the interest rate payable hereunder been
(but for the operation of this paragraph) the interest rate payable since
the Closing Date as otherwise provided in this Agreement. Thereafter, the
interest rate payable hereunder shall be the rate of interest provided in
Sections 1.5 (b) through (e) of this Agreement, unless and until the rate
of interest again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received
by Lender pursuant to the terms hereof exceed the amount which Lender could
lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate. In the event the Maximum
Lawful Rate is calculated pursuant to this paragraph, such interest shall
be calculated at a daily rate equal to the Maximum Lawful Rate divided by
the number of days in the year in which such calculation is made. In the
event that a court of competent jurisdiction, notwithstanding the
provisions of this Section 1.5(f), shall make a final determination that
Lender has received interest hereunder or under any of the Loan Documents
in excess of the Maximum Lawful Rate, Lender shall, to the extent permitted
by applicable law, promptly apply such excess first to any interest due and
not yet paid hereunder, then to the outstanding principal of the
Obligations, then to Fees and any other unpaid Obligations and thereafter
shall refund any excess to Borrower or as a court of competent jurisdiction
may otherwise order.
1.6 Eligible Accounts. Based on the most recent Schedule of Accounts
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delivered by Borrower to Lender and on other information available to
Lender, Lender shall determine which Accounts shall be deemed to be
"Eligible Accounts" for purposes of determining the amounts, if any, to be
advanced to Borrower. In determining whether a particular Account
constitutes an Eligible Account, Lender shall not include any such Account
which does not meet the criteria set forth in Schedule 1.6.
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1.7 Eligible Inventory. Based on the most recent Schedule of
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Inventory delivered by Borrower to Lender and on other information
available to Lender, Lender shall determine which Inventory shall be deemed
to be "Eligible Inventory" for purposes of determining the amounts, if any,
to be advanced to Borrower. In determining whether any particular Inventory
constitutes Eligible Inventory, Lender shall not include Inventory which
does not meet the criteria set forth in Schedule 1.7.
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1.8 Fees. As compensation for Lender's costs, skills and efforts
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incurred and expended in making the Revolving Credit Loan available to
Borrower, Borrower agrees to pay to Lender the fees set forth in
Schedule D.
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1.9 Cash Management Systems. On or prior to September 29, 1995,
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Borrower will establish, and Borrower will maintain until the Termination
Date, the cash management system described in Schedule B.
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1.10 Receipt of Payments. Borrower shall make each payment under this
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Agreement not later than 11:00 a.m. (New York time) on the day when due in
lawful money of the United States of America in immediately available funds
to the Collection Account. For purposes of computing interest and fees and
determining the Borrowing Availability, (a) all payments (including,
without limitation, cash sweeps) consisting of cash or wire or electronic
transfers in immediately available funds shall be deemed received by Lender
following deposit in the Collection Account, and (b) all payments
consisting of checks, drafts or similar non-cash items shall be deemed
received after good funds are collected by Lender.
1.11 Application and Allocation of Payments. Borrower irrevocably
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waives the right to direct the application of any and all payments at any
time or times hereafter received from or on behalf of Borrower, and
Borrower irrevocably agrees that Lender shall have the continuing exclusive
right to apply any and all such payments against the then due and payable
Obligations of Borrower and in repayment of Revolving Credit Loan, as
Lender may deem advisable. In the absence of a specific determination by
Lender with respect thereto, the same shall be applied in the following
order: (i) then due and payable Fees and expenses; (ii) then due and
payable interest payments; (iii) Obligations other than Fees, expenses and
interest and principal payments and (iv) then due and payable principal
payments on the Revolving Credit Loan. Lender is authorized to, and at its
option may, make or cause to be made Revolving Credit Advances on behalf of
Borrower for payment of all Fees, expenses, charges, costs, principal,
interest or other Obligations owing by Borrower under this Agreement or any
of the other Loan Documents, even if the making of such Revolving Credit
Advance causes the outstanding balance of the Revolving Credit Loan to
exceed the Borrowing Availability, and Borrower agrees that the making of
any such Advance in excess of the Borrowing Availability shall constitute
an automatic Event of Default entitling Lender to exercise all rights and
remedies available to Lender under this Agreement, the other Loan Documents
or applicable law or in equity.
1.12 Accounting. Lender will provide a monthly accounting of
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transactions under the Revolving Credit Loan to Borrower. 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, unless Borrower, within 30 days after the date any such accounting
is rendered, shall notify Lender in writing of any objection which Borrower
may have to any such accounting, describing the basis for such objection
with specificity. In that event, only those items expressly objected to
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in such notice shall be deemed to be disputed by Borrower. Lender's
determination, based upon the facts available, of any item objected to by
Borrower in such notice shall (absent manifest error) be final, binding and
conclusive on Borrower, unless Borrower shall commence a judicial
proceeding to resolve such objection within 60 days following Lender's
notifying Borrower of such determination.
1.13 Indemnity.
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(a) Borrower shall indemnify and hold Lender and Lender's
Affiliates, officers, directors, employees, attorneys and agents (each, an
"Indemnified Person"), harmless from and against any and all suits,
actions, costs, fines, deficiencies, penalties, proceedings, claims,
damages, losses, liabilities and expenses (including, but not limited to,
reasonable attorneys' fees and disbursements and other costs of
investigations or defense, including those incurred upon any appeal) (each,
a "Claim") which may be instituted or asserted against or incurred by any
such Indemnified Person as the result of credit having been extended under
this Agreement and the other Loan Documents or in connection with or
arising out of the transactions contemplated hereunder and thereunder,
including, without limitation, any and all Environmental Liabilities and
Costs; provided, that, Borrower shall not be liable for any indemnification
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to such an Indemnified Person to the extent that any such Claim results
from such Indemnified Person's gross negligence or willful misconduct.
NEITHER LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR
LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING
BEEN EXTENDED UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(b) In any suit, proceeding or action brought by Lender relating
to any Account, Chattel Paper, Contract, General Intangible, Instrument or
Document for any sum owing thereunder, or to enforce any provision of any
Account, Chattel Paper, Contract, General Intangible, Instrument or
Document, Borrower shall save, indemnify and keep Lender harmless from and
against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction of liability whatsoever of
the obligor thereunder arising out of a breach by Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to, or in favor of, such obligor or its
successors from Borrower, all such obligations of Borrower shall be and
remain enforceable against, and only against, Borrower and shall not be
enforceable against Lender.
(c) Borrower hereby acknowledges and agrees that Lender (i) is
not now, and has not ever been, in control of any of the
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Subject Property or the affairs of Borrower or any Subsidiary of Borrower,
and (ii) does not have the capacity through the provisions of this
Agreement or any other Loan Document to influence Borrower's or any such
Subsidiary's conduct with respect to the ownership, operation or management
of any of the Subject Property.
1.14 Access. Borrower shall, and shall cause each of its Subsidiaries
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to: (i) provide access during normal business hours to Lender and any of
its officers, employees and agents, as frequently as Lender reasonably
determines to be appropriate, upon advance notice (unless a Default or
Event of Default shall have occurred and be continuing, in which event no
notice shall be required and Lender shall have access at any and all
times), to the properties and facilities of Borrower or any of its
Subsidiaries; (ii) permit Lender and any of its officers, employees and
agents to inspect, audit and make extracts from all of Borrower's or such
Subsidiary's records, files and books of account; and (iii) permit Lender
to inspect, review and evaluate Borrower's or such Subsidiary's Inventory,
and Borrower's or such Subsidiary's Accounts and other records, at
Borrower's or any Subsidiary's locations and at premises not owned by
Borrower or such Subsidiary and Borrower agrees to render to Lender, at
Borrower's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Following any reasonable request
made from time to time therefor, Borrower shall, and shall cause each of
its Subsidiaries to, make available to Lender and its counsel, as quickly
as practicable under the circumstances, originals or copies of all books,
records, board minutes, contracts, insurance policies, environmental
audits, business plans, files, financial statements (actual and pro forma),
filings with Federal, state, local and foreign regulatory agencies, and
other instruments and documents which Lender may request. Borrower shall
deliver any document or instrument reasonably necessary for Lender, as it
may from time to time request, to obtain records from any service bureau or
other Person which maintains records for Borrower, and shall maintain
duplicate records or supporting documentation on media, including, without
limitation, computer tapes and discs, owned by Borrower. Borrower shall
instruct its certified public accountants and its banking and other
financial institutions to make available to Lender all such information and
records as Lender may reasonably request.
1.15 Taxes.
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(a) Any and all payments by or on behalf of Borrower hereunder
or under the Revolving Credit Note or any other Loan Document, shall be
made, in accordance with this Section 1.15, free and clear of and without
deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the
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Revolving Credit Note or any other Loan Document to Lender, (i) the sum
payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 1.15) Lender receives an amount equal to the sum
it would have received had no such deductions been made, (ii) Borrower
shall make such deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxing or other authority in accordance with
applicable law.
(b) Borrower shall indemnify and pay Lender, within ten (10)
days of demand therefor, for the full amount of any Taxes (including,
without limitation, any Taxes imposed by any jurisdiction on amounts
payable under this Section 1.15) paid by Lender and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally
asserted.
(c) Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to Lender, at its address referred to in
Section 10.8, the original or a certified copy of a receipt evidencing
payment thereof.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Revolving Credit Advance.
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Notwithstanding any other provision of this Agreement or any other Loan
Document and without affecting in any manner the rights of Lender
hereunder, Borrower shall have no rights under this Agreement (but shall
have all applicable obligations hereunder), and Lender shall not be
obligated to make any Revolving Credit Advances or to take, fulfill, or
perform any other action hereunder, until the following conditions have
been satisfied, in Lender's sole discretion, or waived in writing by
Lender:
(a) this Agreement or counterparts thereof shall have been duly
executed by, and delivered to, Borrower and Lender;
(b) Lender shall have received such documents, instruments and
agreements as Lender shall have requested in connection with the
transactions contemplated by this Agreement, including, without limitation,
all documents, instruments and agreements listed in the Schedule of
Documents, each in form and substance satisfactory to Lender;
(c) Lender shall have received evidence satisfactory to Lender
that all of the obligations of Borrower to NatWest Bank N.A. and Commerce
Bank under its loan agreements and arrangements as in effect with such
financial institutions immediately prior to the Closing Date will be
performed and paid in full from the proceeds of the initial Revolving
Credit Advance and that all Liens upon any
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of the property of Borrower in favor of NatWest Bank N.A. or Commerce Bank
shall have been terminated immediately upon such payment;
(d) Lender shall have received evidence satisfactory to Lender
that Borrower has obtained consents and acknowledgments of all Persons
whose consents and acknowledgments may be required, including, without
limitation, all requisite Governmental Authorities, to the terms and to the
execution and delivery of this Agreement and the other Loan Documents and
to the consummation of the transactions contemplated hereby and thereby;
(e) Lender shall have received evidence satisfactory to Lender
that the insurance policies provided for in Section 3.19 and Schedule 3.19
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are in full force and effect, together with appropriate evidence showing
loss payable or additional insured clauses or endorsements, as appropriate,
in favor or Lender and in form and substance satisfactory to Lender;
(f) all of the assets supporting the initial Revolving Credit
Advance and the amount, if any, of the reserves to be established on the
Closing Date shall be sufficient in value, as determined by Lender, to
provide Borrower with excess borrowing availability under the Revolving
Credit Loan of not less than $2,000,000;
(g) payment by Borrower of the Closing Fee in the amount of
$250,000 and all fees, costs, and expenses of closing (including fees and
disbursements of consultants and special loan counsel to Lender presented
as of the Closing Date);
(h) no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or
arises out of this Agreement or any of the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby and which,
in Lender's sole judgment, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan
Documents; and
(i) except as described in Schedule 3.5, since June 30, 1995 no
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event has occurred which could have a Material Adverse Effect.
2.2 Further Conditions to Each Revolving Credit Advance. It shall be
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a further condition to the funding of the initial and each subsequent
Revolving Credit Advance that the following statements shall be true on the
date of each such funding or advance:
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(a) all of Borrower's representations and warranties contained
herein or in any of the other Loan Documents shall be true and correct on
and as of the Closing Date and the date on which each such Revolving Credit
Advance is made, as though made on and as of such date, except to the
extent that any such representation or warranty expressly relates solely to
an earlier date and except for changes therein expressly permitted or
contemplated by this Agreement;
(b) no event shall have occurred and be continuing, or would
result from the making of any Revolving Credit Advance, which constitutes
or would constitute a Default or an Event of Default;
(c) after giving effect to such Revolving Credit Advance, the
aggregate principal amount of the Revolving Credit Loan shall not exceed
the Borrowing Availability without requiring that a payment be made to
Lender; and
(d) each of the conditions set forth in Section 2.1(a) through
Section 2.1(e), inclusive, and in Section 2.1(i) shall continue to be
satisfied by Borrower as of such date.
The request and acceptance by Borrower of the proceeds of any Revolving
Credit Advance shall be deemed to constitute, as of the date of such
request or acceptance, (i) a representation and warranty by Borrower that
all of the conditions in this Section 2.2 have been satisfied and (ii) a
confirmation by Borrower of the granting and continuance of all of Lender's
Liens pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Revolving Credit Loan, to make each
Revolving Credit Advance, and in each case as herein provided for, Borrower
makes the following representations and warranties to Lender, each and all
of which shall be true and correct as of the date of execution and delivery
of this Agreement, and shall survive the execution and delivery of this
Agreement:
3.1 Corporate Existence; Compliance with Law. Borrower and each
----------------------------------------
Material Subsidiary: (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation; (b) is duly qualified to do business and is in good standing
in each other jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, except for failures to
so qualify or be in good standing which do not and would not either
individually or in the aggregate have a Material Adverse Effect; (c) has
the requisite corporate power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease
the property it operates under lease, and to conduct its
-11-
<PAGE>
business as now, heretofore and proposed to be conducted; (d) except as set
forth on Schedule 3.1, has all licenses, permits, consents or approvals
------------
from or by, and has made all filings with, and has given all material
notices to, all Governmental Authorities having jurisdiction, including,
without limitation, the FDA and DEA to the extent required for such
ownership, operation and conduct; (e) is in compliance with its certificate
or articles of incorporation and by-laws; and (f) is in substantial
compliance with all applicable provisions of law, including, without
limitation, with all applicable provisions of the Biologics Act, the
Controlled Substances Act, the Drug Price Act, the Generic Drug Enforcement
Act, the Medicaid Reimbursement Act, the Food and Drug Act, all rules and
regulations of the FDA, all rules and regulations of the DEA and any other
law, rule or regulation applicable to the manufacture, marketing,
distribution or sale of drugs, where the failure to comply would have or
result in a Material Adverse Effect.
3.2 Executive Offices - Corporate or Other Names. The current
--------------------------------------------
locations of Borrower's executive offices and principal place of business
is set forth in Schedule 3.2 and, except as set forth in Schedule 3.2, such
------------ ------------
location has not changed during the preceding twelve months. During the
prior five years, except as set forth in Schedule 3.2, neither Borrower nor
------------
any of its Subsidiaries has been known as or used any corporate, fictitious
or trade name.
3.3 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by Borrower and each Material
Subsidiary of this Agreement, the Loan Documents and all instruments and
documents to be delivered by Borrower, or such Material Subsidiary to the
extent it is a party thereto, hereunder and thereunder, and the creation of
all Liens provided for herein and therein: (a) are within such Person's
corporate power; (b) have been duly authorized by all necessary or proper
corporate and stockholder action; (c) are not in contravention of any
provision of such Person's certificate or articles of incorporation or
by-laws; (d) will not violate any law or regulation, or any order or decree
of any court or governmental instrumentality; (e) will not conflict with or
result in the breach or termination of, constitute a default under or
accelerate any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which such Person is a party
or by which such Person or any of its property is bound; (f) will not
result in the creation or imposition of any Lien upon any of the property
of Borrower or any Material Subsidiary, other than those in favor of Lender
pursuant to the Loan Documents; and (g) do not require the consent or
approval of any Governmental Authority or any other Person, except those
referred to in Section 2.1(d), all of which will have been duly obtained,
made or complied with prior to the Closing Date. On or prior to the
Closing Date, each of the
-12-
<PAGE>
Loan Documents shall have been duly executed and delivered for the benefit
of or on behalf of Borrower and each shall then constitute a legal, valid
and binding obligation of Borrower, enforceable against it in accordance
with its terms.
3.4 Financial Statements and Projections. Borrower has delivered the
------------------------------------
financial statements and projections identified in Schedule 3.4, and each
------------
such financial statement complies with the description thereof contained in
Schedule 3.4.
-------------
3.5 Material Adverse Change. Neither Borrower nor any Material
-----------------------
Subsidiary, as of June 30, 1995, had any obligations, contingent
liabilities or liabilities for Charges, long-term leases or unusual forward
or long-term commitments which are not reflected in Borrower's Quarterly
Report on Form 10-Q for the Fiscal Quarter ended June 30, 1995 and which
could, alone or in the aggregate, have or result in a Material Adverse
Effect. Except as described in Schedule 3.5, there has been no material
------------
adverse deviation from the projections regarding Borrower's business dated
as of July 25, 1995 and provided to Lender. Except as otherwise permitted
hereunder, no dividends, advances or other distributions have been
declared, paid or made upon any Stock of Borrower and, since June 30, 1995,
no shares of Stock of Borrower have been, or are now required to be,
redeemed, retired, purchased or otherwise acquired for value by Borrower.
Except as described in Schedule 3.5, since June 30, 1995, no event has
------------
occurred which could result in a Material Adverse Effect.
3.6 Ownership of Property; Liens.
----------------------------
Except as described in Schedule 3.6, the real estate listed in
------------
Schedule 3.6 constitutes all of the real property owned, leased or used in
------------
its business by Borrower and each Material Subsidiary. Except as described
in Schedule 3.6, Borrower and each Material Subsidiary owns good and
------------
marketable fee simple title to all of its owned real estate, all of its
other properties and assets, and valid and marketable leasehold interests
in all of its Leases (both as lessor and lessee, sublessee or assignee),
and none of the properties and assets of Borrower and such Material
Subsidiary are subject to any Liens, except (x) Permitted Encumbrances and
(y) from and after the Closing Date, the Lien in favor of Lender pursuant
to the Collateral Documents. Borrower and each Material Subsidiary has
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and
has duly effected all recordings, filings and other actions necessary to
establish, protect and perfect its right, title and interest in and to all
such real estate and other assets or property. Except as described in
Schedule 3.6: (a) neither Borrower nor any Material Subsidiary nor any
------------
other party to any Lease described in Schedule 3.6 is in default of its
------------
obligations thereunder or has
-13-
<PAGE>
delivered or received any notice of default under any such Lease, and no
event has occurred which, with the giving of notice, the passage of time,
or both, would constitute a default under any such Lease; (b) neither
Borrower nor any Material Subsidiary owns or holds, or is obligated under
or a party to, any option, right of first refusal or any other contractual
right to purchase, acquire, sell, assign or dispose of any real property
owned or leased by such Person except as described in Schedule 3.6; and
------------
(c) no portion of any real property owned or leased by Borrower or any
Material Subsidiary has suffered any material damage by fire or other
casualty loss or a release or otherwise which has not heretofore been
completely repaired and restored to its original condition or is being
remedied. Except as described on Schedule 3.6, all permits required to
------------
have been issued or appropriate to enable the real property owned or leased
by Borrower or any Material Subsidiary to be lawfully occupied and used for
all of the purposes for which they are currently occupied, and used, have
been lawfully issued and are in full force and effect.
3.7 Restrictions; No Default. No contract, lease, agreement or other
------------------------
instrument to which Borrower or any Material Subsidiary is a party or by
which it or any of its properties or assets is bound or affected and no
provision of applicable law or governmental regulation has resulted in a
Material Adverse Effect, or insofar as Borrower can reasonably foresee
could have or will result in a Material Adverse Effect. Neither Borrower
nor any Material Subsidiary is in default, and to Borrower's knowledge no
third party is in default, under or with respect to any material contract,
agreement, lease or other instrument to which it is a party. No Default or
Event of Default has occurred and is continuing.
3.8 Labor Matters. There are no strikes or other labor disputes
-------------
against Borrower or any Material Subsidiary that are pending or, to
Borrower's knowledge, threatened. Hours worked by and payments made to
employees of Borrower and each Material Subsidiary have not been in
violation of the Fair Labor Standards Act or any other applicable law
dealing with such matters which could have a Material Adverse Effect. All
payments due from Borrower or any Material Subsidiary on account of
employee health and welfare insurance which could have or result in a
Material Adverse Effect if not paid have been paid or properly accrued as a
liability on the books of Borrower. Except as set forth in Schedule 3.8,
------------
neither Borrower nor any Material Subsidiary has any obligation under any
collective bargaining agreement, management agreement or employment
agreement, and a copy of each agreement listed in Schedule 3.8 has been
------------
provided to Lender. There is no organizing activity involving Borrower or
any Material Subsidiary pending or threatened by any labor union or group
of employees. Except as set forth in Schedule 3.8, there are no
------------
representation proceedings pending or threatened with the National Labor
Relations
-14-
<PAGE>
Board, and no labor organization or group of employees of Borrower or any
Material Subsidiary has made a pending demand for recognition, and there
are no complaints or charges against such Person pending or threatened to
be filed with any Federal, state, local or foreign court, governmental
agency or arbitrator based on, arising out of, in connection with or
otherwise relating to the employment or termination of employment by
Borrower or any Material Subsidiary.
3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. Except as set forth in Schedule 3.9, Borrower has no
------------ ------------
Subsidiaries, is not engaged in any joint venture or partnership with any
other Person, and is not an Affiliate of any other Person. Pacific
American Insurance Company, Inc. is the only Subsidiary of Borrower which
constitutes a Material Subsidiary. Borrower is the record and beneficial
owner of all of the issued and outstanding Stock of each such Subsidiary.
Except as set forth in Schedule 3.9, there are no outstanding rights to
------------
purchase, options, warrants or similar rights or agreements pursuant to
which Borrower or any Subsidiary of Borrower may be required to issue or
sell any Stock or other equity security. All outstanding Stock and
Indebtedness of Borrower and each Material Subsidiary is described in
Schedule 3.9.
------------
3.10 Government Regulation. Neither Borrower nor any Material
---------------------
Subsidiary (a) 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, or
(b) is subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act or any other
Federal, state or other statute that restricts or limits such Person's
ability to incur Indebtedness, to pledge its assets, or to perform its
obligations hereunder or under any other Loan Documents. The making of the
Revolving Credit Advances by Lender, the application of the proceeds and
repayment thereof by Borrower and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not
violate any provision of any such statute or any rule, regulation or order
of or issued by the Securities and Exchange Commission or any other
Government Authority.
3.11 Margin Regulations. Neither Borrower nor any Material Subsidiary
------------------
owns any "margin security," as that term is defined in Regulations G and U
of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), and none of the proceeds of the Revolving Credit Advances
will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the loans or
their extensions of credit under this Agreement to be
-15-
<PAGE>
considered a "purpose credit" within the meaning of Regulation G, T, U or X
of the Federal Reserve Board. Borrower will not take or permit to be taken
any action which might cause this Agreement or any document or instrument
delivered pursuant hereto to violate any regulation of the Federal Reserve
Board.
3.12 Taxes. All Federal income tax returns and all material state,
-----
local, foreign and other Federal tax returns, reports and statements,
including, without limitation, information returns (Form 1120-S), required
to be filed by Borrower or any Material Subsidiary have been filed with the
appropriate Governmental Authority and all Charges and other impositions
shown thereon to be due and payable 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. Borrower and each Material Subsidiary has paid when due
and payable all Charges required to be paid by it. Proper and accurate
amounts have been withheld by Borrower and each Material Subsidiary from
their respective employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable Federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Agencies. Schedule 3.12
-------------
sets forth those taxable years for which any of the tax returns of Borrower
or any Material Subsidiary are currently being audited by the IRS or any
other Governmental Authority and any assessments or threatened assessments
in connection with any such audit or otherwise currently outstanding.
Except as described in Schedule 3.12, neither Borrower nor any Material
-------------
Subsidiary has executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect
of extending, the period for assessment or collection of any Charges.
Neither Borrower nor any Material Subsidiary has filed a consent pursuant
to Section 341(f) of the IRC or agreed to have Section 341(f)(2) of the IRC
apply to any dispositions of subsection (f) assets (as such term is defined
in Section 341(f)(4) of the IRC). None of the property owned by Borrower
or any Material Subsidiary is property which is required to be treated as
being owned by any other Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in
effect immediately prior to the enactment of the Tax Reform Act of 1986, or
is "tax-exempt use property" within the meaning of Section 168(h) of the
IRC. Except as described in Schedule 3.12, neither Borrower nor any
-------------
Material Subsidiary has agreed or been requested to make any adjustment
under Section 481(a) of the IRC by reason of a change in accounting method
or otherwise. Neither Borrower nor any Material Subsidiary has any
obligation under any written tax sharing agreement.
-16-
<PAGE>
3.13 ERISA.
-----
(a) Schedule 3.13 lists all Plans maintained or contributed to
-------------
by Borrower or any Subsidiary of Borrower and all Qualified Plans
maintained or contributed to by any ERISA Affiliate, and separately
identifies the Title IV Plans, Multiemployer Plans, any multiple employer
plans subject to Section 4064 of ERISA, unfunded Pension Plans, Welfare
Plans and Retiree Welfare Plans. Each Qualified Plan has been determined by
the IRS to qualify under Section 401 of the IRC, and the trusts created
thereunder have been determined to be exempt from tax under the provisions
of Section 501 of the IRC, and, to the best knowledge of Borrower, nothing
has occurred which would cause the loss of such qualification or tax-exempt
status. Each Plan is in compliance in all material respects with the
applicable provisions of ERISA and the IRC, including, without limitation,
the filing of reports required under ERISA or the IRC which are true and
correct as of the date filed, and with respect to each Plan, other than a
Qualified Plan, all required contributions and benefits have been paid in
accordance with the provisions of each such Plan. Neither Borrower, any
Subsidiary of Borrower nor any other ERISA Affiliate, with respect to any
Qualified Plan, has failed to make any contribution or pay any amount due
as required by Section 412 of the IRC or Section 302 of ERISA or the terms
of any such plan. With respect to all Retiree Welfare Plans, the present
value of future anticipated expenses pursuant to the latest actuarial
projections of liabilities does not exceed $100,000, and copies of such
latest projections have been provided to Lender. With respect to Pension
Plans, other than Qualified Plans, the present value of the liabilities for
current participants thereunder using PBGC interest assumptions does not
exceed $100,000. Neither Borrower nor any Subsidiary of Borrower has
engaged in a prohibited transaction, as defined in Section 4975 of the IRC
or Section 406 of ERISA, in connection with any Plan which would subject
any such Person (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the IRC or any other
material liability.
(b) Except as set forth in Schedule 3.13: (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; (iii) there are no pending, or to the
knowledge of Borrower, threatened claims, actions or lawsuits (other than
claims for benefits in the normal course), asserted or instituted against
(x) any Plan or its assets, (y) any fiduciary with respect to any Plan or
(z) Borrower or any Subsidiary of Borrower or any other ERISA Affiliate
with respect to any Plan; (iv) neither Borrower nor any Subsidiary of
Borrower nor any other ERISA Affiliate has incurred or reasonably expects
to incur any Withdrawal Liability (and no event has occurred which, with
the giving of notice under
-17-
<PAGE>
Section 4219 of ERISA, would result in such liability) under Section 4201
of ERISA as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years neither Borrower nor any
Subsidiary of Borrower nor any other ERISA Affiliate has engaged in a
transaction which resulted in a Title IV Plan with Unfunded Liabilities
being transferred outside of the "controlled group" (within the meaning of
Section 4001(a)(14) of ERISA) of any such entity; (vi) no plan which is a
Retiree Welfare Plan provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment (except as may be required by Section 4980B of
the IRC and at the sole expense of the participant or the beneficiary of
the participant); (vii) to Borrower's knowledge, Borrower and each
Subsidiary of Borrower and each other ERISA Affiliate have complied in all
material respects with the notice and continuation coverage requirements of
Section 4980B of the IRC and the regulations thereunder; and (viii) no
liability under any Plan has been funded, nor has such obligation been
satisfied with, the purchase of a contract from an insurance company that
is not rated AAA by Standard & Poor's Corporation and the equivalent by
each other nationally recognized rating agency.
3.14 No Litigation. Except as set forth in Schedule 3.14 or Schedule
------------- ------------- ---------
3.18, no action, claim or proceeding is now pending or, to the knowledge of
----
Borrower, threatened against Borrower or any Subsidiary of Borrower, at
law, in equity or otherwise, before any court, board, commission, agency or
instrumentality of any Federal, state, or local or foreign government or
of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators which (a) challenges any such Person's right, power or
competence to enter into or perform any of its obligations under this
Agreement on any other Loan Document, or the validity or enforceability of
this Agreement or any other Loan Document or any action taken hereunder or
thereunder, or (b) if determined adversely, could have or result in a
Material Adverse Effect. To the knowledge of Borrower, except as set forth
in Schedule 3.18, there does not exist any state of facts which is
-------------
reasonably likely to give rise to any such proceedings.
3.15 Brokers. No broker or finder acting on behalf of Borrower or any
-------
Subsidiary of Borrower brought about the obtaining, making or closing of
the loans made pursuant to this Agreement or the transactions contemplated
by the Loan Documents and neither Borrower nor any Subsidiary of Borrower
has any obligation to any Person in respect of any finder's or brokerage
fees in connection therewith.
-18-
<PAGE>
3.16 Patents, Trademarks, Copyrights and Licenses. Except as
--------------------------------------------
otherwise set forth in Schedule 3.16, Borrower and each Material Subsidiary
-------------
owns all material licenses, patents, patent applications, copyrights,
service marks, trademarks, trademark applications and trade names necessary
to continue to conduct its business as heretofore conducted by it, now
conducted by it and proposed to be conducted by it, each of which is
listed, together with United States Copyright Office and United States
Patent and Trademark Office application or registration numbers, where
applicable, in Schedule 3.16. Except as set forth in Schedule 3.14,
------------- -------------
Borrower and each Material Subsidiary conducts business without
infringement or claim of infringement of any license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual
property right of others, and there is no infringement or claim of
infringement by others of any license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
Borrower or any Material Subsidiary.
3.17 Full Disclosure. No information contained in this Agreement, the
---------------
other Loan Documents, the Financials or any written statement furnished by
or on behalf of Borrower or any Material Subsidiary pursuant to the terms
of this Agreement or any other Loan Document, which has previously been
delivered to Lender, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which
they were made. Borrower has prepared and will prepare the Projections
with care and diligence and based upon assumptions which are reasonable,
all of which assumptions have been disclosed as part of the Projections.
The Liens granted to Lender pursuant to the Collateral Documents will at
the Closing Date be fully perfected first priority Liens in and to the
Collateral described therein, assuming the filing of UCC-1 Financing
Statements describing such Collateral in the jurisdictions set forth in
Schedule I to the Security Agreement. Borrower has provided Lender with a
true, complete and correct copy of each material contract, agreement or
other item requested by Lender.
3.18 Hazardous Materials. Except as set forth in Schedule 3.18, the
------------------- -------------
Subject Property is free of contamination from any Hazardous Material which
could reasonably be expected to have a Material Adverse Effect. In
addition, Schedule 3.18 discloses all existing or potential environmental
-------------
liabilities of Borrower or any Material Subsidiary of which Borrower has
knowledge, which would constitute or result in a Material Adverse Effect or
any Environmental Liabilities and Costs that would have a Material Adverse
Effect. Except as set forth in Schedule 3.18, neither Borrower nor any
-------------
Material Subsidiary has caused or suffered to occur any Release at, under,
above or within any real property which it owns or leases which would have
a Material Adverse Effect.
-19-
<PAGE>
Except as set forth in Schedule 3.18 and except for operations conducted in
-------------
accordance with applicable Environmental Laws or a Permit, neither Borrower
nor any Material Subsidiary is involved in operations which are reasonably
likely to lead to the imposition of any liability or costs on it, or any
owner of any premises which it occupies, under any Environmental Law, and
neither Borrower nor any Material Subsidiary has permitted any tenant or
occupant of such premises to engage in any such activity.
3.19 Insurance Policies. Part II of Schedule 3.19 lists all insurance
------------------ -------------
of any nature maintained for current occurrences by Borrower or any
Material Subsidiary, as well as a summary of the terms of all such
insurance. Borrower covenants that such insurance complies with and shall
at all times comply with the standards set forth in Part I of
Schedule 3.19.
-------------
3.20 Deposit and Disbursement Accounts. Schedule 3.20 lists all banks
--------------------------------- -------------
and other financial institutions at which Borrower or any Material
Subsidiary maintains deposits and/or other accounts, including, without
limitation, the Disbursement Account, and Schedule 3.20 correctly
-------------
identifies the name, address and telephone number of each such depository,
the name in which the account is held, a description of the purpose of the
account and the complete account number.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. Borrower covenants and agrees that from and
-------------------
after the Closing Date and until the Commitment Termination Date, it shall
deliver to Lender the Financial Statements, Notices and Projections at the
times and in the manner set forth in Schedule 4.1. Concurrently with the
------------
annual audited financial statements, Borrower shall deliver to Lender a
copy of the letter of Borrower's outside auditors addressed to Borrower and
indicating whether during the course of performing their audit of Borrower
and the Subsidiaries of Borrower they became aware of any Event of Default
under Section 6.11 of this Agreement and specifying each such Event of
Default, if any, of which they became aware.
4.2 Communication with Accountants. Borrower (for itself and each
------------------------------
Subsidiary) authorizes Lender to communicate directly with its and each
Subsidiary of Borrower's independent certified public accountants and tax
advisors and authorizes those accountants and advisors to disclose to
Lender any and all financial statements and other supporting financial
documents and schedules, including, without limitation, copies of any
management letter with respect to the business, financial condition or
other affairs of Borrower or such Subsidiary. On or before the Closing
Date, Borrower shall deliver a letter, in form and substance satisfactory
to Lender,
-20-
<PAGE>
addressed to such accountants and tax advisors instructing them to comply
with the provisions of Section 4 and authorizing Lender to rely on the
certified financial statements audited by such accountants.
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees (for itself and its Material
Subsidiaries) that, unless Lender shall otherwise consent in writing, from
and after the date hereof and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Borrower shall
------------------------------------------------
(and shall cause each Material Subsidiary to): (a) do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence and its rights and franchises; (b) continue to conduct
its business substantially as now conducted; (c) at all times maintain,
preserve and protect all of its material copyrights, patents, trademarks,
trade names and all other material intellectual property and rights as
licensee or licensor thereof, and preserve all the remainder of its
material properties, in use or useful in the conduct of its business, and
keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time make, or cause
to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices, so that the
business carried on in connection therewith may be properly conducted at
all times; (d) keep and maintain its Equipment and Fixtures in good
operating condition sufficient for the continuation of its business
conducted on a basis consistent with past practice and shall provide or
arrange for all maintenance and service and all repairs necessary for such
purpose; and (e) transact business only in such names as are set forth in
Schedule 3.2.
------------
5.2 Payment of Obligations.
----------------------
(a) Borrower shall: (i) pay and discharge or cause to be paid
and discharged all of its Obligations; (ii) prior to an Event of Default,
pay and discharge, or cause to be paid and discharged, its Indebtedness
(other than the Obligations); and (iii) subject to Section 5.2(b), pay and
discharge, or cause to be paid and discharged promptly, (A) all Charges
imposed upon it or any Material Subsidiary or its or their income and
profits, or any of its property (real, personal or mixed), and (B) all
lawful claims for labor, materials, supplies and services or otherwise,
before any thereof shall become in default.
(b) Borrower or any Material Subsidiary may in good faith
contest, by proper legal actions or proceedings, the validity or amount of
any Charges or claims arising under
-21-
<PAGE>
Section 5.2(a)(iii); provided, that, at the time of commencement of any
-------- ----
such action or proceeding, and during the pendency thereof (i) no Default
or Event of Default shall have occurred, (ii) adequate reserves with
respect thereto are maintained on the books of Borrower in accordance with
GAAP, (iii) such contest operates to suspend collection of the contested
Charges or claims and is maintained and prosecuted continuously with
diligence, (iv) none of the Collateral would be subject to forfeiture or
loss or any Lien by reason of the institution or prosecution of such
contest, (v) no Lien shall exist, be imposed or be attempted to be imposed
for such Charges or claims during such action or proceeding, (vi) if such
contest is terminated or discontinued adversely to Borrower or any Material
Subsidiary, Borrower or such Material Subsidiary shall promptly pay or
discharge such contested Charges and all additional charges, interest,
penalties and expenses, if any, and shall deliver to Lender evidence
acceptable to Lender of such compliance, payment or discharge, and
(vii) Lender has not advised Borrower that Lender reasonably believes that
nonpayment or nondischarge thereof could have or result in a Material
Adverse Effect.
5.3 Books and Records. Borrower shall (and shall cause each Material
-----------------
Subsidiary to) keep adequate records and books of account with respect to
its business activities, in which proper entries, reflecting all of its
consolidated and consolidating financial transactions, are made in
accordance with GAAP and on a basis consistent with the Financials referred
to in Schedule 3.4.
------------
5.4 Litigation. Borrower shall notify Lender in writing, promptly
----------
upon learning thereof, of any litigation commenced or threatened against
Borrower or any Material Subsidiary, and of the institution against any
such Person of any suit or administrative proceeding that (a) may involve
an amount in excess of $1,000,000 or (b) could have or result in a Material
Adverse Effect if adversely determined. Without limiting the generality of
the foregoing, Borrower shall also notify Lender of any and all claims,
actions, or lawsuits asserted or instituted, and of any threatened
litigation or claims, against Borrower or against any Subsidiary of
Borrower or any ERISA Affiliate in connection with any Plan maintained, at
any time, by Borrower or any Subsidiary of Borrower or any ERISA Affiliate,
or to which Borrower or any Subsidiary of Borrower or any ERISA Affiliate
has or had at any time any obligation to contribute, or against any such
Plan itself, or against any fiduciary of or service provided to any such
Plan.
5.5 Insurance.
---------
(a) Borrower shall, at its (or each Material Subsidiary's) sole
cost and expense, maintain or cause to be maintained the policies of
insurance described in Schedule 3.19 in form and with insurers recognized
-------------
as adequate by Lender. Such
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<PAGE>
policies shall be in such amounts as are set forth in Schedule 3.19.
-------------
Borrower shall notify Lender promptly of any occurrence causing a material
loss or decline in value of any real or personal property and the estimated
(or actual, if available) amount of such loss or decline. Borrower hereby
directs all present and future insurers under its "All Risk" policies of
insurance to pay all proceeds in excess of $100,000 payable thereunder with
respect to any Collateral directly to Lender, unless a Default or Event of
Default shall have occurred and be continuing in which event Borrower shall
direct all such insurers to pay all such proceeds to Lender. From and
after the occurrence of any Default or Event of Default, Borrower
irrevocably makes, constitutes and appoints Lender (and all officers,
employees or agents designated by Lender) as Borrower's true and lawful
agent and attorney-in-fact for the purpose of making, settling and
adjusting claims with respect to any Collateral, under the "All Risk"
policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for any proceeds of such "All Risk"
policies of insurance with respect to any Collateral, and for making all
determinations and decisions with respect to such "All Risk" policies of
insurance to the extent that they relate to any Collateral. In the event
Borrower at any time or times hereafter shall fail to obtain or maintain
(or fail to cause to be obtained or maintained) any of the policies of
insurance required above or to pay any premiums in whole or in part
relating thereto, Lender, without waiving or releasing any Obligations or
Default or Event of Default hereunder, may at any time or times thereafter
(but shall not be obligated to) obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect
thereto which Lender deems advisable. All sums so disbursed, including,
without limitation, attorneys' fees, court costs and other charges related
thereto, shall be payable on demand by Borrower to Lender and shall be
additional Obligations hereunder secured by the Collateral; provided,
--------
further, that, if and to the extent Borrower fails to promptly pay any of
------- ----
such sums upon Lender's demand therefor, Lender is authorized to, and at
its option may, make or cause to be made Revolving Credit Advances on
behalf of Borrower for payment thereof.
(b) Lender reserves the right at any time, upon review of
Borrower's risk profile, to require additional forms and limits of
insurance to adequately protect Lender's interests, in Lender's reasonable
opinion. Borrower shall, if so requested by Lender, deliver to Lender as
often as Lender may reasonably request, a report of a reputable insurance
broker, satisfactory to Lender, with respect to Borrower's insurance
policies.
(c) Borrower shall deliver to Lender endorsements to all of its
(i) "All Risk" and business interruption insurance naming Lender loss payee
and (ii) general liability and other liability policies naming Lender
additional insured.
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<PAGE>
5.6 Compliance with Laws. Borrower shall (and shall cause each
--------------------
Material Subsidiary to) comply in all material respects with all Federal,
state, local and foreign laws and regulations applicable to it, including,
without limitation, the Biologics Act, the Controlled Substances Act, the
Drug Price Act, the Generic Drug Enforcement Act, the Medicaid Rebate Act,
all rules and regulations of the DEA and any other law, rule or regulation
affecting the manufacture, marketing, distribution or sale of drugs, and
those relating to licensing, environmental, ERISA and labor matters, and
shall promptly notify Lender of any material violation, or receipt by
Borrower of any notice of material violation, of any Federal, state, local
or foreign law applicable to it, including, without limitation, any
material violation, or receipt by Borrower of any notice of material
violation, of the Biologics Act, the Controlled Substance Act, the Drug
Price Act, the Generic Drug Enforcement Act, the Medicaid Rebate Act, any
rule or regulation of the DEA or any other law, rule or regulation
affecting the manufacture, marketing, distribution or sale of drugs, or of
any law, rule or regulation relating to licensing, environmental, ERISA or
labor matters. Borrower shall (and shall cause each Material Subsidiary
to) be in substantial compliance with the Food and Drug Act and all rules
and regulations of the FDA; provided, however, that, any failure by
-------- ------- ----
Borrower or any such Material Subsidiary to be in substantial compliance
with the Food and Drug Act and the rules and regulations of the FDA shall
not constitute a Default or Event of Default hereunder unless there is or
would reasonably be anticipated to be a materially adverse effect or impact
on sales by Borrower of a product which accounted for three percent (3%) or
more of Borrower's total sales in the preceding Fiscal Year. Borrower
shall (and shall cause each Material Subsidiary to) promptly notify Lender
of any material violation, or receipt by Borrower of any notice of material
violation, of the Food and Drug Act or any rule or regulation of the FDA.
5.7 Agreements. Borrower shall (and shall cause each Material
----------
Subsidiary to) perform, within all required time periods (after giving
effect to any applicable grace periods), all of its obligations and enforce
all of its rights under each agreement to which it is a party, including,
without limitation, any leases and customer contracts to which it is a
party where the failure to so perform and enforce could have or result in a
Material Adverse Effect. Borrower shall not (and shall not permit any
Material Subsidiary to) terminate or modify any provision of any contract
or other agreement to which it is a party which termination or modification
would have or result in a Material Adverse Effect. Borrower shall perform
and comply with all obligations in respect of Accounts, Chattel Paper,
Contracts, Licenses, Instruments and Documents and all other agreements
constituting or giving rise to Collateral. Borrower shall not, without
Lender's prior written consent: (a) grant any extension of the time of
payment of any of the Accounts, Chattel Paper, Instruments or amounts due
under any
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<PAGE>
Contract, other than in the ordinary course of business consistent with
past practice; (b) compromise or settle the same for less than the full
amount thereof, other than in the ordinary course of business consistent
with past practice; (c) release, in whole or in part, any Person liable for
the payment thereof, other than in the ordinary course of business
consistent with past practice; or (d) allow any credit or discount
whatsoever thereon other than credits or trade discounts granted in the
ordinary course of business of Borrower consistent with past practice.
5.8 Supplemental Disclosure. At the request of Lender (in the event
-----------------------
that such information is not otherwise delivered by Borrower to Lender
pursuant to this Agreement), so long as there are any Obligations
outstanding hereunder, but not more frequently than once every three
months, Borrower will supplement (or cause to be supplemented) each
Schedule hereto or representation herein or in any other Loan Document with
respect to any matter hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such Schedule or as an exception to such representation or
which is necessary to correct any information in such Schedule or
representation which has been rendered inaccurate thereby; provided,
--------
however, that any such supplement to such Schedule or representation shall
------- ----
not be deemed an amendment thereof unless expressly consented to in writing
by Lender, and no such amendments, except as the same may be consented to
in a writing of Lender which expressly includes a waiver, shall be or be
deemed to be a waiver by Lender of any Default or Event of Default
disclosed therein. Borrower shall, if so requested by Lender, furnish to
Lender as often as Lender reasonably requests, statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as Lender may reasonably request, all in
reasonable detail, and Borrower shall advise Lender promptly, in reasonable
detail, of (a) any Lien, other than as expressly permitted pursuant to
Section 6.7, attaching to or asserted against any of the Collateral,
(b) any material change in the composition of the Collateral and (c) the
occurrence of any other event which could have a Material Adverse Effect
with respect to the Collateral or Lender's Lien thereon.
5.9 Environmental Matters. Borrower shall (and shall cause its
---------------------
Material Subsidiaries to): (a) comply in all material respects with the
Environmental Laws applicable to it; (b) notify Lender promptly after it
becomes aware of any Release upon any premises owned or occupied by it that
would have a Material Adverse Effect or give rise to a material
Environmental Liability or Cost; and (c) promptly forward to Lender a copy
of any order, notice, permit, application, or any communication or report
received by it in connection with any such Release or any other matter
relating to any Environmental Laws that may have a Material Adverse Effect
or give rise to a material Environmental Liability or Cost. The
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<PAGE>
provisions of this Section 5.9 shall apply whether or not the Environmental
Protection Agency, any other Federal agency or any state, local or foreign
environmental agency has taken or threatened any action in connection with
any Release or the presence of any Hazardous Materials.
5.10 Landlords' Agreements. Borrower shall obtain a landlord's
---------------------
agreement in form and substance acceptable to Lender from the lessor of any
leased premises.
5.11 Subsidiary. Prior to forming any new Subsidiary, Borrower shall
----------
provide prior written notice to Lender. In addition, prior to capitalizing
or otherwise providing or transferring cash or other property or assets in
any amount in excess of $20,000 to any Subsidiary, Borrower shall:
(i) provide not less than thirty (30) days prior written notice to Lender;
(ii) take all actions requested by Lender to protect and preserve Lender's
Collateral; and (iii) receive the prior written consent of Lender.
6. NEGATIVE COVENANTS
Borrower covenants and agrees (for itself and each Material
Subsidiary) that, without Lender's prior written consent, from and after
the date hereof until the Termination Date:
6.1 Mergers, Etc. Neither Borrower nor any Material Subsidiary
------------
shall, directly or indirectly, by operation of law or otherwise, merge
with, consolidate with, acquire all or substantially all of the assets or
capital stock of, or otherwise combine with, any Person or, except as
otherwise expressly permitted by Section 5.11, form any Subsidiary.
6.2 Investments; Loans and Advances. Except as otherwise expressly
-------------------------------
permitted by Section 6.3 or 6.4 below, or by the Security Agreement, or as
otherwise set forth in Schedule 6.2, neither Borrower nor any Material
------------
Subsidiary shall make any investment in, or make or accrue loans or
advances of money to, any Person, through the direct or indirect holding of
securities or otherwise, other than investments in, or loans or advances
to, another Person, if any, by Borrower which do not exceed an aggregate
outstanding amount of $200,000 at any time on or after the Closing Date.
6.3 Indebtedness. Neither Borrower nor any Material Subsidiary shall
------------
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness secured by Liens permitted under Section 6.7; (b) the
Obligations; (c) deferred taxes; (d) unfunded pension fund and other
employee benefit plan obligations and liabilities not to exceed $250,000
and then only to the extent they are permitted to remain unfunded under
applicable
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<PAGE>
law; (e) Indebtedness which is outstanding on the Closing Date and set
forth on Schedule 3.9; (f) Indebtedness, if any, incurred by Borrower after
------------
the Closing Date in an aggregate amount not to exceed $12,500,000 which
either (i) is unsecured or (ii) is secured by a mortgage on real property
only; provided, however, that, prior to incurring any such Indebtedness
-------- ------- ----
which is secured by a mortgage on real property or granting any such real
property mortgage (A) the terms and conditions of such mortgage shall have
been consented to in writing by Lender, which consent will not be
unreasonably withheld, and (B) Borrower shall have obtained a mortgagee
waiver, in form and substance satisfactory to Lender in all respects, from
the proposed mortgagee with respect to the premises proposed to be
mortgaged; and (g) Indebtedness related to sale-leaseback transactions;
provided, that, the aggregate amount of annual lease payments incurred with
-------- ----
respect to all such sale-leaseback transactions does not exceed $200,000 in
any Fiscal Year.
6.4 Affiliate and Employee Loans; Transactions and Employment
---------------------------------------------------------
Agreements. Except as otherwise expressly permitted hereunder, neither
----------
Borrower nor any Material Subsidiary shall enter into any lending,
borrowing or other commercial transaction with any of its officers, other
employees, directors, Subsidiaries, Affiliates or related parties without
the prior written consent of Lender, including, without limitation,
upstreaming and downstreaming of cash and intercompany advances, other than
(i) pursuant to the transactions described in Schedule 6.4, (ii) dividends
------------
and other distributions to Borrower from its Subsidiaries, (iii) full-time
employment agreements and incentive compensation and other employee benefit
programs with employees on commercially reasonable terms substantially
similar to the agreements and programs in effect on the Closing Date,
(iv) transactions with Affiliates which are not officers, other employees,
directors or Subsidiaries and which are made on an arm's length basis on
fair and reasonable terms no less favorable to Borrower or such Material
Subsidiary than would be obtained in a transaction with a Person that is
not an Affiliate, and (v) other transactions after the Closing Date
involving amounts which do not exceed $500,000 in the aggregate during the
term of this Agreement.
6.5 Capital Structure and Business. Borrower shall not: (a) make any
------------------------------
changes in any of its or any Material Subsidiary's business objectives,
purposes or operations which could in any way adversely affect the
repayment of the Obligations or have or result in a Material Adverse
Effect; or (b) without Lender's consent, which shall not be unreasonably
withheld, amend its or any Subsidiary of Borrower's articles or certificate
of incorporation or charter or by-laws. Neither Borrower nor any Material
Subsidiary shall engage in any business other than the businesses currently
engaged in by such Person and ancillary businesses in support thereof.
Borrower shall not make any change in its or any Material Subsidiary's
capital structure as described in Schedule
---------
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<PAGE>
3.9, including, without limitation, the issuance of any shares of stock,
---
options, warrants or other securities convertible into stock or any
revision of the terms of its outstanding Stock; provided, however, that,
-------- ------- ----
notwithstanding the foregoing, Borrower may issue shares of its common
stock to officers, other employees or directors in accordance with the
terms of Borrower's option, stock purchase and other benefit plans and its
dividend reinvestment plan, in each case as described on Schedule 6.5, and
------------
may issue and sell shares of its common stock to the public or in a private
placement to non-Affiliates (or to Affiliates with Lender's prior consent,
which will not be unreasonably withheld) solely for cash.
6.6 Guaranteed Indebtedness. Neither Borrower nor any Material
-----------------------
Subsidiary shall incur any Guaranteed Indebtedness except: (a) by
endorsement of instruments or items of payment for deposit to the general
account of Borrower, (b) for Guaranteed Indebtedness incurred for the
benefit of Borrower if the primary obligation is permitted by this
Agreement and (c) for Guaranteed Indebtedness incurred after the Closing
Date in outstanding amounts which in the aggregate do not exceed $100,000
at any time after the Closing Date.
6.7 Liens. Neither Borrower nor any Material Subsidiary shall create
-----
or permit to exist any Lien on any of its properties or assets, except for:
(a) presently existing or hereafter created Liens in favor of Lender; (b)
presently existing Liens set forth in Schedule 6.7; (c) Permitted
------------
Encumbrances; (d) purchase money liens with respect to financing, whether
provided by the vendor or a third party, for the purchase price of
equipment or fixtures acquired after the Closing Date in the ordinary
course of business, so long as such liens attach only to the equipment or
fixtures so acquired and the Indebtedness secured by such liens does not
exceed the purchase price of the equipment or fixtures so acquired;
(e) Liens encumbering real property in connection with Indebtedness
permitted by Subsection 6.3(f)(ii); provided, however, that, (i) any such
-------- ------- -----
Lien is limited to a mortgage on real property only; (ii) prior to the
granting of any such real property mortgage, the terms and conditions of
such mortgage shall have been consented to in writing by Lender, which
consent will not be unreasonably withheld, and (iii) prior to the granting
of such real property mortgage, Borrower shall have obtained a mortgagee
waiver, in form and substance satisfactory to Lender in all respects, from
the proposed mortgagee with respect to the mortgaged property; and
(f) other Liens securing Indebtedness in an aggregate amount at any point
in time not to exceed $2,000,000. Borrower shall defend the right, title
and interest of Lender in and to any and all of Borrower's rights under the
Chattel Paper, Contracts, Documents, General Intangibles and Instruments
and to the Inventory and in and to the Proceeds thereof against the claims
and demands of all Persons whomsoever.
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<PAGE>
6.8 Sale of Assets. Neither Borrower nor any Material Subsidiary
--------------
shall sell, transfer, convey, assign or otherwise dispose of any of its
assets or properties, including, without limitation, any of its Accounts;
provided, that, the foregoing shall not prohibit the sale of Inventory in
-------- ----
the ordinary course of business consistent with past practice or sales of
obsolete, surplus or otherwise unusable or unused equipment which do not
exceed $500,000 in the aggregate during the term of this Agreement.
6.9 Events of Default. Borrower shall not take any action or omit to
-----------------
take any action, which act or omission would constitute (a) a Default or an
Event of Default pursuant to, or noncompliance with any of, the terms of
this Agreement or any of the other Loan Documents, or (b) a material
default or an event of default pursuant to any material contract, lease,
mortgage, deed of trust, instrument, agreement or other material obligation
to which it is a party or by which it or any of its property is bound, or
any document creating a Lien.
6.10 ERISA. Neither Borrower nor any Subsidiary of Borrower nor any
-----
other ERISA Affiliate shall, without Lender's prior written consent,
acquire any new ERISA Affiliate that maintains or has an obligation to
contribute to a Pension Plan that has either an "accumulated funding
deficiency," as defined in Section 302 of ERISA, or any "unfunded vested
benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA in the case of
any plan other than a Multiemployer Plan and in Section 4211 of ERISA in
the case of a Multiemployer Plan. Additionally, neither Borrower nor any
Subsidiary of Borrower nor any ERISA Affiliate shall, without Lender's
prior written consent: (a) permit or suffer any condition set forth in
Schedule 3.13 to cease to be met and satisfied at any time; (b) terminate
-------------
any Pension Plan that is subject to Title IV of ERISA where such
termination could reasonably be anticipated to result in liability to
Borrower or any Subsidiary of Borrower; (c) permit any accumulated funding
deficiency, as defined in Section 302(a)(2) of ERISA, to be incurred with
respect to any Pension Plan; (d) fail to make any contributions or fail to
pay any amounts due and owing as required by the terms of any Plan before
such contributions or amounts become delinquent; (e) make a complete
withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan; (f) make a partial withdrawal (within the meaning of
Section 4201 of ERISA) from any Multiemployer Plan; or (g) at any time fail
to provide Lender with copies of any Plan documents or governmental reports
or filings, which from time to time may be requested by Lender.
6.11 Financial Covenants. Borrower shall not breach or fail to comply
-------------------
with any of the financial covenants (the "Financial Covenants") set forth
in Schedule 6.11.
-------------
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<PAGE>
6.12 Hazardous Materials. Except as set forth in Schedule 3.18,
------------------- -------------
Borrower shall not and shall not permit any Material Subsidiary or any
other Person within the control of Borrower to cause or permit a Release or
the presence, use, generation, manufacture, installation or storage of any
Hazardous Materials on, under, in or about any of its real property (owned
or leased) or the transportation of any Hazardous Materials to or from such
real property where such Release or presence, use, generation, manufacture,
installation or storage would violate, or otherwise form the basis for
liability under, any Environmental Laws in any material respect.
6.13 Sale-Leaseback Transactions. Neither Borrower nor any Material
---------------------------
Subsidiary shall engage in any sale-leaseback or other similar transaction
involving any of its assets, other than the sale-leaseback transactions
permitted by clause (g) of Section 6.3.
6.14 Cancellation of Indebtedness. Neither Borrower nor any Material
----------------------------
Subsidiary shall cancel any claim or debt owing to it, except in the
ordinary course of its business consistent with past practice.
6.15 Restricted Payments. Borrower shall not make any Restricted
-------------------
Payment, other than (i) repurchases of Borrower's common stock from
employees in the ordinary course of business consistent with past custom
and practice pursuant to the terms and conditions of Borrower's restricted
stock purchase plan in amounts which do not exceed $350,000 in the
aggregate during the term of this Agreement, and (ii) an annual dividend,
if any, on its common stock to the extent declared by Borrower's Board of
Directors and in no event to exceed $0.10 per share of common stock or
$1,500,000 in the aggregate; provided, however, that any and all such
-------- ------- ----
dividends received with respect to the 3,780,184 shares presently owned by
Harold Snyder, 3,780,186 shares presently owned by Beatrice Snyder or
1,000,000 shares presently held by trusts created by Harold Snyder and
Beatrice Snyder and as to which Beryl L. Snyder, Brian S. Snyder and Jay T.
Snyder, as trustees thereof, have joint dispositive and voting control
(such 3,780,184, 3,780,186 and 1,000,000 shares being collectively referred
to herein as the "Snyder Shares") shall be contemporaneously reinvested in
shares of common stock of Borrower pursuant to immediate and automatic
purchases of Borrower's common stock under its dividend reinvestment
program. Notwithstanding the proviso contained in the immediately
preceding sentence, in the event that an annual dividend in an amount not
to exceed $0.10 per share of common stock or $1,500,000 in the aggregate is
declared by Borrower's Board of Directors subsequent to March 31, 1997 and
(i) no Default or Event of Default then exists and Borrower is otherwise in
compliance with the terms and conditions of this Agreement and the other
Loan Documents, (ii) Borrower then has excess borrowing availability under
the Revolving Credit Loan of not less than $2,000,000 (both
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<PAGE>
before and after giving effect to the payment of such dividend) and
(iii) the aggregate amount of such annual dividend does not exceed net
earnings for the immediately preceding Fiscal Year, then such dividends
with respect to the Snyder Shares shall not be required to be
contemporaneously reinvested in shares of common stock of Borrower pursuant
to its dividend reinvestment program. Borrower shall not permit any
Subsidiary of Borrower to make any Restricted Payment other than dividends
or other distributions paid to Borrower by a Subsidiary.
6.16 Leases. Neither Borrower nor any Material Subsidiary shall enter
------
into or renew any lease of real property or other similar agreement or
arrangement or any amendment to any existing lease of real property or
other similar agreement or arrangement to which Borrower or any Material
Subsidiary is a party on the Closing Date without Lender's prior written
consent which will not be unreasonably withheld; provided, however, that,
-------- ------- ----
notwithstanding the foregoing, Borrower may enter into leases of real
property after the Closing Date so long as the aggregate amount of all
rents paid or committed to be paid under all such leases shall not exceed
$100,000 in the aggregate in any Fiscal Year.
6.17 Composition. Borrower shall not cause or suffer the occurrence
-----------
of any change in the composition of its Stockholders as of the Closing Date
which would result in any Stockholder or Stockholder group acquiring 20% or
more of any class of the Stock of Borrower unless the Snyder Family shall
continue to collectively own, beneficially and of record, at least a
majority (i.e., more than 50%) of the then outstanding shares of Stock of
Borrower having the right to vote for the election of directors of Borrower
under ordinary circumstances.
6.18 Bank Accounts. Neither Borrower nor any Subsidiary of Borrower
-------------
shall maintain any deposit, operating or other bank account except for
those accounts identified in Schedule 3.20 or accounts established after
-------------
the Closing Date with the prior written consent of Lender, which consent
shall not be unreasonably withheld.
6.19 Capital Expenditures. Borrower and its Subsidiaries on a
--------------------
consolidated basis shall not make, or become obligated to make, Capital
Expenditures in excess of $5,000,000 in the aggregate in the Fiscal Year
ending March 31, 1997 or in any Fiscal Year ending thereafter unless all
Capital Expenditures in each such Fiscal Year in excess of $5,000,000 are
financed with Indebtedness secured by Liens permitted under Subsection
6.7(d); provided, however, that, notwithstanding the foregoing: (i) in the
-------- ------- ----
Fiscal Year ending March 31, 1997, Borrower may make Capital Expenditures
in excess of $5,000,000 which are not financed with Indebtedness secured by
Liens permitted under Subsection 6.7(d) if (A) net income, determined in
accordance with GAAP, of Borrower and its
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<PAGE>
Subsidiaries on a consolidated basis for the immediately preceding Fiscal
Year was greater than $8,000,000, (B) then Eligible Inventory and Eligible
Accounts are sufficient in value, as determined by Lender, to provide
Borrower with then excess borrowing availability under the Revolving Credit
Loan of not less than $4,000,000 and (C) none of such Capital Expenditures
in excess of $5,000,000 are financed or otherwise directly or indirectly
paid for with proceeds of Revolving Credit Advances; and (ii) in the Fiscal
Year ending March 31, 1998, Borrower may make Capital Expenditures in
excess of $5,000,000 which are not financed with Indebtedness secured by
Liens permitted under Subsection 6.7(d) if (A) net income, determined in
accordance with GAAP, of Borrower and it Subsidiaries on a consolidated
basis for the immediately preceding Fiscal Year was greater than
$11,000,000, (B) then Eligible Inventory and Eligible Accounts are
sufficient in value, as determined by Lender, to provide Borrower with then
excess borrowing availability under the Revolving Credit Loan of not less
than $4,000,000 and (C) none of such Capital Expenditures in excess of
$5,000,000 are financed or otherwise directly or indirectly paid for with
proceeds of Revolving Credit Advances.
7. TERM
7.1 Termination. The financing arrangement contemplated hereby shall
-----------
be in effect until the Commitment Termination Date; provided, that, in the
-------- ----
event of a prepayment of any part of the Obligations prior to the
Commitment Termination Date with funds borrowed from any Person other than
Lender pursuant to this Agreement, the Revolving Credit Loan shall
immediately become due and payable in full, in cash, and Borrower shall pay
to Lender the applicable pre-payment fees set forth in Schedule D and
----------
simultaneously therewith pay to Lender, in full, in immediately available
funds, all current and liquidated Obligations arising under this Agreement
or any of the other Loan Documents and provide for payment of all other
Obligations in a manner satisfactory to Lender.
7.2 Extensions. So long as no Default or Event of Default has
----------
occurred and is continuing, the Commitment Termination Date may be extended
in one year increments by written agreement of Lender and Borrower executed
and mutually delivered not more than one hundred eighty (180) but at least
ninety (90) days prior to the end of the initial or of any renewal term, as
the case may be.
7.3 Survival of Obligations Upon Termination of Financing
-----------------------------------------------------
Arrangement. Except as otherwise expressly provided for in the Loan
-----------
Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in any
way affect or impair the Obligations, duties, indemnities and liabilities
of Borrower or any Subsidiary of Borrower, or the rights of Lender relating
to any unpaid
-32-
<PAGE>
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any
transaction or event, the performance of which is not required until after
the Commitment Termination Date. Except as otherwise expressly provided
herein or in any other Loan Document, all undertakings, agreements,
covenants, warranties and representations of or binding upon Borrower or
any Subsidiary of Borrower, and all rights of Lender, all as contained in
this Agreement and the other Loan Documents shall not terminate or expire,
but rather shall survive such termination or cancellation and shall
continue in full force and effect until such time as all of the Obligations
have been indefeasibly paid in full in accordance with the terms of the
agreements creating such Obligations.
8. EVENTS OF DEFAULT RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:
(a) Borrower shall fail to make any payment in respect of any
Obligations hereunder or under any of the other Loan Documents when due and
payable or declared due and payable, including, without limitation, any
payment of principal of, or interest on, the Revolving Credit Loan; or
(b) Borrower shall fail or neglect to perform, keep or observe
any of the provisions of Section 1.9 or Section 6, including, without
limitation, any of the provisions set forth in Schedule 6.11 or Schedule B,
------------- ----------
respectively, but excluding Subsection 6.9(b), Subsection 6.10(f) and
Section 6.12; or
(c) Borrower shall fail or neglect to perform, keep or observe
any term or provision of this Agreement (other than any such term or
provision referred to in paragraphs (a) or (b) above) or of any of the
other Loan Documents, and including, without limitation, of Subsection
6.9(b), Subsection 6.10(f) or Section 6.12, and the same shall remain
unremedied for a period ending on the first to occur of ten (10) days after
Borrower shall receive written notice of any such failure from Lender or
thirty (30) days after Borrower shall become aware thereof; or
(d) a default shall occur under any other agreement, document
or instrument to which Borrower or any Material Subsidiary is a party, or
by which any such Person or its property is bound, and such default
(i) involves the failure to make any payment, whether of principal,
interest or otherwise, and whether due by scheduled maturity, required
prepayment, acceleration, demand or otherwise, in respect of any
Indebtedness of such Person in an aggregate amount exceeding $1,500,000, or
(ii) causes (or
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permits any holder of such Indebtedness or a trustee to cause) such
Indebtedness, or a portion thereof in an aggregate amount exceeding
$1,500,000, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment; or
(e) any representation or warranty contained herein or in any
other Loan Document shall be untrue or incorrect, as of the date when made
or deemed made (including those made or deemed made pursuant to
Section 2.2); or
(f) any representation or warranty contained in any written
statement delivered pursuant to this Agreement or any other Loan Document
or in any report, financial statement or certificate made or delivered to
Lender by Borrower, shall be untrue or incorrect in any material respect,
as of the date when made or deemed made; or
(g) any of the assets of Borrower or any Subsidiary of Borrower
shall be attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors of such Person, and shall remain
unstayed or undismissed for sixty (60) consecutive days; or any Person
other than Borrower shall apply for the appointment of a receiver, trustee
or custodian for any of Borrower's assets (or those of any Subsidiary of
Borrower), and shall remain unstayed or undismissed for sixty (60)
consecutive days; or Borrower or any Subsidiary of Borrower shall have
concealed, removed or permitted to be concealed or removed, any part of its
property with intent to hinder, delay or defraud its creditors or any of
them or made or suffered a transfer of any of its property or the incurring
of an obligation which may be fraudulent under any bankruptcy, fraudulent
transfer or other similar law; or
(h) a case or proceeding shall have been commenced against
Borrower or any Subsidiary of Borrower in a court having competent
jurisdiction seeking a decree or order (i) under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other
applicable Federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of such Person or of any substantial
part of its properties, or (iii) ordering the winding up or liquidation of
the affairs of any such Person and such case or proceeding shall remain
undismissed or unstayed for sixty (60) consecutive days or such court shall
enter a decree or order granting the relief sought in such case or
proceeding; or
(i) Borrower or any Subsidiary of Borrower shall (i) file a
petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other
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<PAGE>
applicable Federal, state or foreign bankruptcy or other similar law,
(ii) consent to the institution of proceedings thereunder or to the filing
of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of any such Person or of any substantial part of its
properties, (iii) fail generally to pay its debts as such debts become due,
or (iv) take any corporate action in furtherance of any such action; or
(j) a final judgment or final judgments for the payment of money
in excess of $250,000 in the aggregate shall be rendered against Borrower
or any Material Subsidiary, unless the same shall be (i) fully covered by
insurance (for which the insurer has acknowledged responsibility in
writing) in accordance with Section 5.5, or (ii) vacated, stayed, bonded,
paid or discharged within a period of thirty (30) days from the date of
such judgment; or
(k) any other event shall have occurred which could have or
result in a Material Adverse Effect and Lender shall have given Borrower at
least fifteen (15) days notice thereof and Borrower shall not have cured
such event within such fifteen (15) day notice period; or
(l) any provision of any Collateral Document, after delivery
thereof pursuant to Section 2.1, shall for any reason cease to be valid,
binding and enforceable in accordance with its terms, or any security
interest created under any Collateral Document shall cease to be a valid
and perfected security interest or Lien in favor of Lender having the first
priority in any and all of the Collateral purported to be covered thereby;
(m) any additional representation, warranty, covenant, term or
condition provided for in Schedule 8.1 shall not be met, satisfied,
------------
performed or fulfilled in the manner and at the time specified in such
Schedule 8.1; or
------------
(n) there shall occur any Change in Control.
8.2 Remedies. If any Default or Event of Default shall have occurred
--------
and be continuing the rate of interest applicable to the Revolving Credit
Loan shall automatically increase to the Default Rate, as provided in
Section 1.5(d). If any Event of Default shall have occurred and be
continuing, or, in Lender's discretion, following the occurrence and during
the continuance of any Default, Lender's obligation to make further
Revolving Credit Advances shall terminate. In addition, if any Event of
Default shall have occurred and be continuing, Lender may, without notice,
take any one or more of the following actions: (a) declare all or any
portion of the Obligations to be forthwith due and payable, whereupon such
Obligations shall become and be due and payable; and/or
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<PAGE>
(b) exercise any of the rights and remedies provided to Lender under this
Agreement or any other Loan Document or at law or equity, including,
without limitation, all remedies provided under the Code; provided, that,
-------- ----
notwithstanding the foregoing, upon the occurrence of any Event of Default
specified in Sections 8.1 (g), (h) or (i), the Obligations shall
automatically become immediately due and payable without declaration,
notice or demand by Lender.
8.3 Waivers by Borrower. Except as otherwise provided for in this
-------------------
Agreement and applicable law, to the fullest extent permitted by applicable
law Borrower waives: (a) presentment, demand and protest, and notice of
presentment, dishonor, intent to accelerate, acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension
or renewal of any or all Loan Documents, notes, commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at
any time held by Lender on which Borrower may in any way be liable, and
hereby ratifies and confirms whatever Lender may do in this regard; (b) all
rights to notice and a hearing prior to Lender's taking possession or
control of, or to Lender's replevy, attachment or levy upon, the Collateral
or any bond or security which might be required by any court prior to
allowing Lender to exercise any of its remedies; and (c) the benefit of all
valuation, appraisal and exemption laws. Borrower hereby acknowledges that
it has been advised by counsel of its choice with respect to this
Agreement, the other Loan Documents and the transactions evidenced hereby
and thereby.
9. SUCCESSORS AND ASSIGNS
This Agreement and the other Loan Documents shall be binding on and
shall inure to the benefit of Borrower, Lender and their respective
successors and assigns, except as otherwise expressly provided herein or
therein. Borrower may not assign, transfer, hypothecate or otherwise
convey any of its rights, benefits, obligations or duties hereunder or
under any of the other Loan Documents without the prior written consent of
Lender. Any such purported assignment, transfer, hypothecation or other
conveyance by Borrower without the prior express written consent of Lender
shall be void. The terms and provisions of this Agreement and the other
Loan Documents are for the purpose of defining the relative rights and
obligations of Borrower and Lender with respect to the transactions
contemplated hereby and there are intended to be and shall be no third
party beneficiaries of any of the terms and provisions of this Agreement or
any of the other Loan Documents.
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<PAGE>
10. MISCELLANEOUS
10.1 Complete Agreement; Modification of Agreement. This Agreement
---------------------------------------------
and the other Loan Documents constitute the complete agreement between the
parties with respect to the subject matter hereof and thereof, supersede
all prior agreements, commitments, understandings or inducements (oral or
written, expressed or implied), and may not be modified, altered or amended
except by an agreement in writing signed by Borrower and Lender. Without
limiting the generality of the foregoing, any letter of interest, proposal
letter or commitment letter between Borrower and Lender or any of its
Affiliates predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be merged with and into
and superseded by this Agreement.
10.2 Fees and Expenses. Borrower shall reimburse Lender for all
-----------------
reasonable out-of-pocket expenses incurred in connection with (a) the
preparation, negotiation, execution, delivery and performance of this
Agreement and the other Loan Documents, including, without limitation, the
fees and expenses of all of its special counsel, advisors, consultants and
auditors (it being understood that the standard per diem for each such
auditor is $500 plus such auditor's out-of-pocket expenses) retained in
connection with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby and advice in connection
herewith and therewith, and (b) wire transfers to the account of Borrower.
Borrower shall reimburse Lender for all fees, costs and expenses,
including, without limitation, the fees, costs and expenses of counsel or
other advisors (including environmental and management consultants) for
advice, assistance or other representation in connection with:
(a) the forwarding to Borrower or any other Person on behalf of
Borrower by Lender of the proceeds of the Revolving Credit Advances;
(b) any amendment, modification or waiver of, or consent with
respect to, this Agreement or any of the other Loan Documents or advice in
connection with the administration of the loans made pursuant hereto or its
rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, Borrower or any other Person) in any way
relating to the Collateral, this Agreement, any of the other Loan Documents
or any other agreement to be executed or delivered in connection herewith
or therewith, whether as a party, witness or otherwise, including, without
limitation, any litigation, contest, dispute, suit, case, proceeding or
action, and any appeal or review thereof, in connection with a case
commenced by or against Borrower or any other Person that may be obligated
to Lender by virtue of this Agreement or any other Loan Document;
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<PAGE>
(d) any attempt to enforce any rights of Lender against Borrower
or any other Person that may be obligated to Lender by virtue of this
Agreement or any of the other Loan Documents;
(e) any effort (i) to monitor the Loan, or (ii) to evaluate,
observe or assess Borrower or its affairs, or (iii) to verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose
of the Collateral, including, without limitation, the attorneys' and other
professional and service providers' fees arising from such services
(including those in connection with any appellate proceedings). All
expenses, costs, charges and other fees incurred by such counsel and others
in any way or respect arising in connection with or relating to any of the
events or actions described in this Section 10.2 shall be payable on demand
by Borrower to Lender.
Without limiting the generality of the foregoing, such expenses, costs,
charges and fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers, management and
other consultants and paralegals; the $500 per diem per auditor charge for
Lender's field auditors; court costs and expenses; photocopying and
duplicating expenses; court reporter fees, costs and expenses; long
distance telephone charges; air express charges; telegram charges;
secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal or other
advisory services.
10.3 No Waiver. Lender's failure, at any time or times, to require
---------
strict performance by Borrower or any Material Subsidiary of any provision
of this Agreement or any other Loan Document shall not waive, affect or
diminish any right of Lender thereafter to demand strict compliance and
performance therewith. Any suspension or waiver of any Default or Event of
Default under this Agreement or any other Loan Document shall not suspend,
waive or affect any other Default or Event of Default under this Agreement
or any other Loan Document whether the same is prior or subsequent thereto
and whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of Borrower or any
Material Subsidiary contained in this Agreement or any other Loan Document
and no Default or Event of Default by Borrower or any Material Subsidiary
under this Agreement or any other Loan Document shall be deemed to have
been suspended or waived by Lender, unless such waiver or suspension is by
an instrument in writing signed by an officer or other authorized employee
of Lender and directed to Borrower specifying such suspension or waiver.
10.4 Remedies. Lender's rights and remedies under this Agreement
--------
shall be cumulative and nonexclusive of any other rights
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<PAGE>
and remedies which Lender may have under any other agreement, including,
without limitation, any other Loan Document, by operation of law or
otherwise. Recourse to the Collateral shall not be required.
10.5 Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
10.6 Conflict of Terms. Except as otherwise provided in this
-----------------
Agreement or any other Loan Document by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any
other Loan Document, the provision contained in this Agreement shall govern
and control.
10.7 Authorized Signature. Until Lender shall be notified by Borrower
--------------------
to the contrary in writing, the signature upon any document or instrument
delivered pursuant hereto and believed by Lender or any of Lender's
officers, agents or employees to be that of an officer of Borrower listed
in Schedule 10.7 shall bind Borrower and be deemed to be the act of
-------------
Borrower affixed pursuant to and in accordance with resolutions duly
adopted by Borrower's Board of Directors, and Lender shall be entitled to
assume the authority of each signature and authority of the person whose
signature it is or appears to be unless the person acting in reliance upon
such signature shall have actual knowledge of the fact that such signature
is false or the person whose signature or purported signature is presented
is without authority.
10.8 Notices. Except as otherwise expressly provided herein, whenever
-------
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon
either of the parties by the other party, or whenever either of the parties
desires to give or serve upon the other party any communication with
respect to this Agreement or any other Loan Document, each such notice,
demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given
or delivered (a) upon the earlier of actual receipt and three (3) days
after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
on a Business Day or, upon the next succeeding Business Day, when sent by
telecopy or other similar facsimile transmission on a day other than a
Business Day (in each case, with such telecopy or facsimile promptly
confirmed
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<PAGE>
by delivery of a copy by personal delivery or United States Mail as
otherwise provided in this Section 10.8), (c) one (1) Business Day after
deposit with a reputable overnight courier with all charges prepaid or
(d) when delivered, if hand delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in Schedule 10.8), or to such other address (or facsimile
-------------
number) as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or
other communication to any Person (other than Borrower or Lender)
designated in Schedule 10.8 to receive copies shall in no way adversely
-------------
affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
10.9 Section Titles. The Section titles contained in this Agreement
--------------
are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
10.10 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
10.11 Time of the Essence. Time is of the essence of this Agreement
-------------------
and each of the other Loan Documents.
10.12 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
-------------
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA. BORROWER HEREBY CONSENTS AND AGREES THAT THE
STATE OR FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN, NEW YORK CITY
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER AND
-------- ----
BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF MANHATTAN, CITY OF NEW
YORK; AND FURTHER, PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED
--- ------- -------- ----
OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH
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<PAGE>
COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
----- ---
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
----------
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY
SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
BORROWER AT THE ADDRESS SET FORTH IN SCHEDULE 10.8 OF THIS AGREEMENT AND
-------------
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.
10.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
--------------------
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE BETWEEN LENDER
AND BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO.
10.14 Confidentiality. (a) The Lender agrees to exercise all
---------------
reasonable efforts to keep any non-public information delivered or made
available to it pursuant to this Agreement or any other Loan Document
confidential from any Person other than officers, employees, agents,
designees or representatives of Lender who are or are expected to become
engaged in evaluating, approving, structuring or administering this
Agreement or any of the other Loan Documents, Revolving Credit Advances or
any other transaction contemplated hereby or thereby; provided, that,
-------- ----
nothing contained herein shall prevent Lender from disclosing such
information as required by any Governmental Authority or representative
thereof or pursuant to legal process or as required in connection with the
exercise of any right or remedy under this Agreement or any of the other
Loan Documents.
(b) Notwithstanding any other provision of this Agreement or any
other Loan Document, Borrower shall not be required to provide information
to Lender which Borrower is expressly prohibited from disclosing under the
terms of any law, including, without limitation, the Food and Drug Act and
published rules and regulations of the FDA thereunder. In the event that
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<PAGE>
Borrower is so prohibited from providing information to Lender,
Borrower shall notify Lender with specificity of the law which prohibits
disclosure of such information.
(c) Notwithstanding any other provision of this Agreement or any
other Loan Document, Borrower shall not be required to provide information
to Lender which Borrower is expressly prohibited from disclosing under the
terms of a contract or other written agreement between Borrower and a third
party. In the event that Borrower is so prohibited from providing
information to Lender, Borrower (i) shall notify Lender with specificity of
the contract or written agreement which prohibits disclosure of such
information and (ii) shall use its best efforts to obtain a waiver of the
provision(s) which prohibit Borrower from providing such information to
Lender or another accommodation which would enable such information to be
provided to Lender.
* * * * * * *
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of
the date first written above.
BIOCRAFT LABORATORIES, INC.
By: /s/ Brian Snyder
_____________________________
Name: Brian Snyder
___________________________
Title: Vice President and Controller
__________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Timothy B. Perusek
_____________________________
Name: Timothy B. Perusek
___________________________
Title: Duly Authorized Signatory
__________________________
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<PAGE>
SCHEDULE A
to
CREDIT AGREEMENT
Dated as of August 31, 1995
DEFINITIONS
-----------
See Attached
<PAGE>
SCHEDULE A
DEFINITIONS
-----------
Capitalized terms used in the Agreement shall have (unless otherwise
expressly provided elsewhere in the Agreement) the following respective
meanings when used in the Agreement:
"Account Debtor" shall mean any Person who may become obligated to Borrower
--------------
under, with respect to, or on account of, an Account.
"Accounts" shall mean all "accounts," as such term is defined in
--------
the Code, now owned or hereafter acquired by Borrower and, in any event,
including, without limitation: (i) all accounts receivable, other
receivables, book debts and other forms of obligations (other than forms of
obligations evidenced by Chattel Paper, Documents or Instruments) now owned
or hereafter received or acquired by or belonging or owing to Borrower,
whether arising out of goods sold or services rendered by it or from any
other transaction (including, without limitation, any such obligations
which may be characterized as an account or contract right under the Code);
(ii) all of Borrower's rights in, to and under all purchase orders or
receipts now owned or hereafter acquired by it for goods or services;
(iii) all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (iv) all monies due or to become
due to Borrower under all purchase orders and contracts for the sale of
goods or the performance of services or both by Borrower or in connection
with any other transaction (whether or not yet earned by performance on the
part of Borrower) now or hereafter in existence, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts; and (v) all collateral security and guarantees of any kind, now
or hereafter in existence, given by any Person with respect to any of the
foregoing.
"Affiliate" shall mean, with respect to any Person: (i) each
---------
Person that, directly or indirectly, owns or controls, whether
beneficially, or as a trustee, guardian or other fiduciary, five percent
(5%) or more of the Stock having ordinary voting power in the election of
directors of such Person; (ii) each Person that controls, is controlled by
or is under common control with such Person or any Affiliate of such
Person; or (iii) each of such Person's officers, directors, joint venturers
and partners. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to direct
or
<PAGE>
cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean the Credit Agreement, to which this
---------
Schedule A is attached or otherwise identified, including, without
----------
limitation, all Schedules, Exhibits and riders attached or otherwise
identified thereto, amendments, restatements and modifications and
supplements thereto, and any appendices, exhibits or schedules to any of
the foregoing, and shall refer to the Agreement as the same may be in
effect at the time such reference becomes operative; provided, that, any
-------- ----
reference to the Schedules to this Agreement shall be deemed a reference to
the Schedules as in effect on the Closing Date or in a written amendment
thereto executed by Borrower and consented to by Lender.
"Biologics Act" shall mean the Biologics Act as reenacted in
-------------
1944, as amended, and any successor statute.
"Borrower" shall mean Biocraft Laboratories, Inc., a Delaware
--------
corporation.
"Borrowing Availability" shall mean, at any time, the lesser at
----------------------
such time of (i) an amount equal to the Maximum Revolving Credit Loan and
(ii) the Borrowing Base.
"Borrowing Base" shall mean at any time an amount equal to the
--------------
sum at such time of:
(a) up to eighty percent (80%) of the value of Eligible
Accounts; plus
----
(b) the lesser of (i) up to sixty percent (60%) of the value of
Eligible Inventory, other than raw materials and work-in-
process, valued on a first-in, first-out basis (at the lower
of cost or market), and (ii) up to eighty percent (80%) of
the appraised forced liquidation value (net of expenses) of
Eligible Inventory, other than raw materials and work-in-
process, appraised in a manner satisfactory to Lender, in
its sole discretion; plus
----
(c) the lesser of (i) up to fifty percent (50%) of the value of
Eligible Inventory constituting raw materials or work-in-
process (deemed by Lender, in its sole discretion, to be
comparable to raw materials) valued on a first-in, first-out
basis (at the lower of cost or market) and (ii) up to eighty
percent (80%) of the appraised forced liquidation value (net
of expenses) of Eligible Inventory constituting raw
materials or work-in-
-2-
<PAGE>
process (deemed by Lender, in its sole discretion, to be
comparable to raw materials), appraised in a manner
satisfactory to Lender, in its sole discretion.
"Borrowing Base Certificate" shall mean a certificate in the form
--------------------------
attached to the Agreement as Exhibit B.
---------
"Business Day" shall mean any day that is not a Saturday, a
------------
Sunday or a day on which banks are required or permitted to be closed in
the State of New Jersey or New York.
"Capital Expenditures" shall mean all payments or accruals
--------------------
(including Capital Lease Obligations) for any fixed assets or improvements
or for replacements, substitutions or additions thereto, that have a useful
life of more than one year and that are required to be capitalized under
GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease
-------------
of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified
and accounted for as a capital lease on a balance sheet of such Person or
otherwise be disclosed as such in a note to such balance sheet, other than,
in the case of Borrower, any such lease under which Borrower is the lessor.
"Capital Lease Obligation" shall mean, with respect to any
------------------------
Capital Lease, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease or otherwise be disclosed in a note to such
balance sheet.
"Cash Collateral Account" shall have the meaning ascribed thereto
-----------------------
in Schedule B to the Agreement.
----------
"Cash Dividends Paid" shall mean, for any fiscal period of
-------------------
Borrower, cash dividends paid or deemed paid on Borrower's common stock,
less any such dividends which are contemporaneously reinvested in shares of
----
common stock of Borrower pursuant to immediate and automatic purchases of
Borrower's common stock under its dividend reinvestment program.
A "Change in Control" shall have occurred (i) if, at any time
-----------------
(and if any such time should exist) during which the Snyder Family
collectively owns less than a majority (i.e. no longer owns more than 50%)
of the then outstanding shares of Stock of Borrower having the right to
vote for the election of directors of Borrower under ordinary
circumstances, any Person or "group" has acquired "beneficial ownership"
(as such terms are defined under Section 13d-3 of and Regulation 13D under
the Securities Exchange Act of 1934, as amended), either directly or
indirectly, of more than
-3-
<PAGE>
twenty percent (20%) of the outstanding shares of Stock of Borrower having
the right to vote for the election of directors of Borrower under ordinary
circumstances or (ii) if at any time, more than fifty percent (50%) of the
members of Borrower's Board of Directors shall have been replaced by new
Directors not nominated for membership on the Board by a majority of
Directors who were Directors on the Closing Date.
"Charges" shall mean all Federal, state, county, city, municipal,
-------
local, foreign or other governmental taxes (including, without limitation,
taxes owed to the PBGC at the time due and payable), levies, assessments,
charges, liens, claims or encumbrances upon or relating to (i) the
Collateral, (ii) the Obligations, (iii) the employees, payroll, income or
gross receipts of Borrower, or any Material Subsidiary, (iv) the ownership
or use of any assets by Borrower or any Material Subsidiary, or (v) any
other aspect of Borrower's or any Material Subsidiary's business.
"Chattel Paper" shall mean all "chattel paper," as such term is
-------------
defined in the Code, now owned or hereafter acquired by Borrower, wherever
located.
"Closing Date" shall mean the Business Day on which the
------------
conditions precedent set forth in Section 2 of the Agreement have been
satisfied or waived, and the initial Revolving Credit Advance has been
made.
"Closing Fee" shall have the meaning assigned to it in Schedule D
----------- ----------
to the Agreement.
"Code" shall mean the Uniform Commercial Code as the same may,
----
from time to time, be in effect in the State of New York; provided, that,
-------- ----
in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of Lender's security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of New York, the term "Code" shall mean
the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions of the Loan Document relating to such
attachment, perfection or priority and for purposes of definitions related
to such provisions.
"Collateral" shall mean the property covered by the Collateral
----------
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 Lender to secure the
Obligations.
"Collateral Documents" shall mean the Security Agreement, the
--------------------
Copyright Assignment and the Trademark Assignment.
-4-
<PAGE>
"Collection Account" shall mean that certain account of Lender,
-------------------
account number 50232854, in the name of GECC/CAF Depositary at Bankers
Trust Company, 17 Wall Street, New York, New York, ABA number 021 001 033.
"Commitment Termination Date" shall mean the earliest of (i)
---------------------------
August 31, 1998,unless otherwise extended, if at all, pursuant to Section
7.2 of the Agreement, (ii) the date of termination of Lenders' obligation
to advance funds or permit existing advances to remain outstanding pursuant
to Section 8.2, and (iii) the date of prepayment in full by Borrower of the
Revolving Credit Loan in accordance with the provisions of Section 1.2(b).
"Concentration Account" shall have the meaning assigned to it in
---------------------
Schedule B to the Agreement.
----------
"Contracts" shall mean all the contracts, undertakings, or
---------
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any
right, title or interest, including, without limitation, any agreement
relating to the terms of payment or the terms of performance of any
Account.
"Controlled Substances Act" shall mean the Controlled Substances
-------------------------
Act of 1970, as amended, and any successor statute.
"Copyright Assignment" shall mean the copyright security
--------------------
agreement made in favor of Lender, by Borrower.
"Copyright License" shall mean any and all rights now owned or
-----------------
hereafter acquired by Borrower under any written agreement granting any
right to use any Copyright or Copyright registration.
"Copyrights" shall mean all of the following now owned or
----------
hereafter acquired by Borrower: (i) all copyrights and general intangibles
of like nature (whether registered or unregistered), now owned or existing
or hereafter adopted or acquired, all registrations and recordings thereof,
and all applications in connection therewith, including all registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and
(ii) all reissues, extensions or renewals thereof.
"DEA" shall mean the United States Drug Enforcement Agency and
---
any successor agency.
-5-
<PAGE>
"Default" shall mean any event which, with the passage of time or
-------
notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in Section
------------
1.5(d) of the Agreement.
"Disbursement Account" shall have the meaning assigned to it in
--------------------
Schedule B to the Agreement.
----------
"DOL" shall mean the United States Department of Labor or any
---
successor thereto.
"Documents" shall mean all "documents," as such term is defined
---------
in the Code, now owned or hereafter acquired by Borrower, wherever located,
including, without limitation, all bills of lading, dock warrants, dock
receipts, warehouse receipts or other documents of title.
"Drug Price Act" shall mean the Drug Price Competition and Patent
--------------
Restoration Act of 1984, as amended, and any successor statute.
"EBIT" shall mean, for any fiscal period of Borrower, (i) income
----
before interest and taxes, minus (ii) to the extent recognized in
-----
determining such income, extraordinary gains, but excluding any non-cash
charges from changes in inventory accounting method by Borrower and
excluding any non-cash charges from changes in GAAP, all as determined in
accordance with GAAP.
"Eligible Accounts" shall have the meaning assigned to it in
-----------------
Schedule 1.6 to the Agreement.
------------
"Eligible Inventory" shall have the meaning assigned to it in
------------------
Schedule 1.7 to the Agreement.
------------
"Environmental Laws" shall mean all Federal, state, local and
------------------
foreign laws, statutes, ordinances and regulations, now or hereafter in
effect, and in each case as amended or supplemented from time to time, and
any applicable judicial or administrative interpretation thereof relating
to the regulation and protection of human health, safety, the environment
and natural resources (including, without limitation, ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Sec.Sec. 9601 et seq.) ("CERCLA");
-- ---
the Hazardous Material Transportation Act, as amended (49 U.S.C. Sec.Sec.
1801 et
--
seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended
---
(7 U.S.C. Sec.Sec. 136 et seq.); the Resource Conservation and Recovery Act, as
-- ---
amended (42 U.S.C. Sec.Sec. 6901 et seq.) ("RCRA"); the Toxic Substance Control
-- ---
Act, as amended (15 U.S.C. Sec.Sec. 2601 et seq.); the Clean Air Act, as
amended -- ---
(42 U.S.C. Sec.Sec. 740 et seq.); the Federal Water
-- ---
-6-
<PAGE>
Pollution Control Act, as amended (33 U.S.C. Sec.Sec. 1251 et seq.); the
-- ---
Occupational Safety and Health Act, as amended (29 U.S.C. Sec.Sec. 651 et seq.)
-- ---
("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C. Sec.Sec. 300(f)
et seq.), and any and all regulations promulgated thereunder, and all
-- ---
analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes.
"Environmental Liabilities and Costs" shall mean all liabilities,
-----------------------------------
obligations, responsibilities, remedial actions, removal costs, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including, without limitation, all reasonable fees, disbursements
and expenses of counsel, experts and consultants and costs of investigation
and feasibility studies), fines, penalties, sanctions and interest incurred
as a result of any claim, suit, action or demand by any person or entity,
whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law (including, without
limitation, any thereof arising under any Environmental Law, permit, order
or agreement with any Governmental Authority) and which relate to any
health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Release, threatened
Release, or the presence of a Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974 (or any successor legislation thereto), as amended from time to time,
and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Borrower, any trade
---------------
or business (whether or not incorporated) under common control with
Borrower and which, together with Borrower, are treated as a single
employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to Borrower or any ERISA
-----------
Affiliate, (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of Borrower or any ERISA Affiliate
from a Title IV Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (iii) the complete or partial withdrawal of Borrower or any ERISA
Affiliate from any Multiemployer Plan; (iv) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as
a termination under Section 4041 of ERISA; (v) the institution of any
proceeding to terminate a Title IV Plan or Multiemployer Plan by the PBGC;
(vi) the failure to make required contributions to a Qualified Plan; or
(vii) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to
-7-
<PAGE>
administer, any Title IV Plan or Multiemployer Plan or the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in
----------------
Section 8.1 of the Agreement.
"FDA" shall mean the United States Food and Drug Administration
---
and any successor agency.
"Federal Reserve Board" shall have the meaning assigned to it in
---------------------
Section 3.11 of the Agreement.
"Fees" shall mean the fees due to Lender as set forth in
----
Schedule D to the Agreement or otherwise pursuant to the Agreement or one
----------
of the other Loan Documents.
"Financials" shall mean the financial statements referred to in
----------
Part I, Financial Statements, of Schedule 3.4.
------------
"Fiscal Month" shall mean any of the monthly accounting periods
------------
of Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting
--------------
periods of Borrower.
"Fiscal Year" shall mean the 12-month period of Borrower ending
-----------
March 31st of each year. Subsequent changes of the fiscal year of Borrower
shall not change the term "Fiscal Year," unless Lender shall consent in
writing to such change.
"Fixed Charges" shall mean, for any fiscal period of Borrower,
-------------
the sum of (i) cash interest expense paid or deemed paid in respect of
Funded Debt, plus (ii) regularly scheduled payments of principal paid or
----
deemed paid on Funded Debt, plus (iii) cash dividends paid or deemed paid,
----
less cash dividends contemporaneously reinvested in shares of common stock
of Borrower pursuant to immediate and automatic purchases of Borrower's
common stock under its dividend reinvestment program, plus (iv) cash taxes
----
paid or deemed paid, in each case of Borrower for such fiscal period.
"Food and Drug Act" shall mean the Food, Drug and Cosmetics Act
-----------------
of 1938, as amended, and any successor statute.
"Funded Debt" shall mean, with respect to Borrower, all of its
-----------
Indebtedness which by the terms of the agreement governing or instrument
evidencing such Indebtedness matures more than one year from, or is
directly or indirectly renewable or extendible at the option of Borrower
under a revolving credit or similar agreement or arrangement obligating the
lender or lenders to extend
-8-
<PAGE>
credit over a period of more than one year from, the date of creation
thereof, including, without limitation, Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt
extendible beyond one year at the option of the debtor, and shall also
include, without limitation, the Obligations and any subordinated debt of
Borrower and any Subsidiary of Borrower, but shall exclude that certain
litigation settlement reached in March 1990 between Borrower and Bristol
Myers Squibb Company with respect to a patent on Cefadroxil Monohydrate.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time, consistently
applied.
"GE Capital" shall mean General Electric Capital Corporation, a
----------
New York corporation.
"General Intangibles" shall mean all "general intangibles," as
-------------------
such term is defined in the Code, now owned or hereafter acquired by
Borrower and, in any event, including, without limitation, all right, title
and interest which Borrower may now or hereafter have in or under any
Contract, all customer lists, Patents, Trademarks, service marks, trade
names, business names, corporate names, trade styles, logos and other
source or business identifiers, and all applications therefor and reissues,
extensions or renewals thereof, rights in intellectual property, interests
in partnerships, joint ventures and other business associations, licenses,
permits, Copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models, drawings,
materials and records, goodwill (including, without limitation, the
goodwill associated with any Trademark, Copyright, Trademark registration,
Copyright registration, Trademark licensed under any Trademark License or
Copyright licensed under any Copyright License), all rights and claims in
or under insurance policies (including, without limitation, insurance for
fire, damage, loss and casualty, whether covering personal property, real
property, tangible rights or intangible rights, all liability, life, key
man and business interruption insurance, and all unearned premiums),
uncertificated securities, chooses in action, deposit accounts, rights to
receive tax refunds and other payments and rights of indemnification.
"Generic Drug Enforcement Act" shall mean the Generic Drug
----------------------------
Enforcement Act of 1992, as amended, and any successor statute.
"Goods" shall mean all "goods," as such term is defined in the
-----
Code, now owned or hereafter acquired by Borrower, wherever
-9-
<PAGE>
located, including, without limitation, movables, fixtures, equipment,
Inventory or other tangible personal property.
"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.
"Guaranteed Indebtedness" shall mean, as to any Person, any
-----------------------
obligation of such Person guaranteeing any indebtedness, lease, dividend or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, including, without limitation, any obligation or
arrangement of such Person: (i) to purchase or repurchase any such primary
obligation; (ii) to advance or supply funds (a) for the purchase or payment
of any such primary obligation or (b) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor; (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation; or (iv) to
indemnify the owner of such primary obligation against loss in respect
thereof.
"Hazardous Material" shall mean any substance, material or waste,
------------------
the generation, handling, storage, treatment or disposal of which is
regulated by, or forms the basis of liability now or hereafter under, any
Governmental Authority in any jurisdiction in which Borrower of any
Material Subsidiary has owned, leased or operated real property or disposed
of hazardous materials or by any Federal government authority, including,
without limitation, any material or substance which is (i) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste" or
other similar term or phrase under any Environmental Laws, or
(ii) petroleum or any fraction or by-product thereof, friable asbestos,
polychlorinated biphenyls or radioactive substances.
"Indebtedness" of any Person shall mean: (i) all indebtedness of
------------
such Person for borrowed money or for the deferred purchase price of
property or services (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured, but not including obligations
to trade creditors incurred in the ordinary course of business); (ii) all
obligations evidenced by notes, bonds, debentures or similar instruments;
(iii) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are
-10-
<PAGE>
limited to repossession or sale of such property); (iv) all Capital Lease
Obligations; (v) all Guaranteed Indebtedness; (vi) all Indebtedness
referred to in clauses (i), (ii), (iii), (iv) or (v) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property (including,
without limitation, accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Indebtedness; (vii) the Obligations; and (viii) all liabilities under
Title IV of ERISA.
"Index Rate" shall mean the latest rate for thirty-day dealer
----------
placed commercial paper (high grade unsecured notes sold through dealers by
major corporations in multiples of $1,000), which normally is published in
the "Money Rates" section of The Wall Street Journal.
"Instruments" shall mean all "instruments," as such term is
-----------
defined in the Code, now owned or hereafter acquired by Borrower, wherever
located, including, without limitation, all certificated securities and all
notes and other, without limitation, evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Interest Expense" shall mean, for any fiscal period of Borrower,
----------------
cash interest expense of Borrower and its Subsidiaries, on a consolidated
basis, for such period paid, accrued or deemed paid in respect of Funded
Debt.
"Inventory" shall mean all "inventory," as such term is defined
---------
in the Code, now or hereafter owned or acquired by, Borrower, wherever
located, and, in any event, including, without limitation, inventory,
merchandise, goods and other personal property which are held by or on
behalf of Borrower for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw materials,
work-in-process or materials used or consumed or to be used or consumed in
any Grantor's business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including, without limitation,
other supplies.
"IRC" shall mean the Internal Revenue Code of 1986, as amended,
---
and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
---
thereto.
"Leases" shall mean all of those leasehold estates in real
------
property now owned or hereafter acquired by Borrower, as lessee.
-11-
<PAGE>
"Lender" shall mean GE Capital and, if at any time GE Capital
------
shall decide to assign or syndicate all or any of the Obligations, such
term shall include such assignee or such other members of the syndicate.
"Liabilities" shall mean all liabilities of Borrower and its
-----------
Subsidiaries, on a consolidated basis, reflected on a balance sheet
prepared in accordance with GAAP, and shall include all Indebtedness.
"Lien" shall mean any mortgage or deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any lease or title retention
agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give,
any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"Material Subsidiary" shall mean any Subsidiary of Borrower which
-------------------
(i) has more than $20,000 in assets, (ii) has more than $20,000 in
liabilities (whether liquidated, contingent or otherwise), (iii) has, or
has ever had, any sales, or (iv) is otherwise significant to Borrower.
"Material Adverse Effect" shall mean a material adverse effect on
-----------------------
(a) the business, assets, operations, prospects or financial or other
condition of Borrower; (b) Borrower's ability to pay or perform the
Obligations under the Loan Documents in accordance with the terms thereof;
or (c) the Collateral or Lenders' Liens on the Collateral or the priority
of any such Lien; or (d) Lenders' rights and remedies under the Agreement
or any other Loan Document.
"Maximum Lawful Rate" shall have the meaning assigned to it in
-------------------
Section 1.5(f) of the Agreement.
"Maximum Revolving Credit Loan" shall mean, at any particular
-----------------------------
time, an amount equal to $25,000,000.
"Medicaid Rebate Act" means the Medicaid Prudent Purchasing Act
-------------------
of 1990, as amended, and any successor statute.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined
------------------
in Section 4001(a) (3) of ERISA, and to which Borrower, any Subsidiary of
Borrower or any other ERISA Affiliate is making, is obligated to make, has
made or been obligated to make, contributions on behalf of participants who
are or were employed by any of them.
-12-
<PAGE>
"Net Worth" shall mean the assets of Borrower and its
---------
Subsidiaries, on a consolidated basis, less (i) reserves applicable thereto
----
and (ii) the liabilities of Borrower and its Subsidiaries, on a
consolidated basis, but excluding any non-cash charges from changes in
inventory accounting method by Borrower and excluding any non-cash charges
from changes in GAAP, all as determined in accordance with GAAP.
"Non-use Fee" shall have the meaning assigned to it in Schedule D
----------- ----------
to the Agreement.
"Notice of Revolving Credit Advance" shall have the meaning
----------------------------------
assigned to it in Section 1.1 of the Agreement.
"Obligations" shall mean all loans, advances, debts, liabilities
-----------
and obligations, for the performance of covenants, tasks or duties or for
payment of monetary amounts (whether or not such performance is then
required or contingent or such amounts are liquidated or determinable)
owing by Borrower to Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced
by any note, agreement or other instrument, arising under the Agreement or
any of the other Loan Documents. This term includes, without limitation,
all principal, interest (including, without limitation, interest which
accrues after the commencement of any case or proceeding in bankruptcy
after the insolvency of or for the reorganization of Borrower), Fees,
Charges, expenses, attorneys' fees and any other sum chargeable to Borrower
under the Agreement or any of the other Loan Documents.
"Other Taxes" shall have the meaning assigned to it in
-----------
Section 1.15 of the Agreement.
"Patent License" shall mean rights under any written agreement
--------------
now owned or hereafter acquired by Borrower granting any right with respect
to any invention on which a Patent is in existence.
"Patents" shall mean all of the following in which Borrower now
-------
holds or hereafter acquires any interest: (i) all letters patent of the
United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or
any other country, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or Territory thereof, or any other
country; and (ii) all reissues, continuations, continuations-in-part or
extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
successor thereto.
-13-
<PAGE>
"Pension Plan" shall mean an employee pension benefit plan, as
------------
defined in Section 3(2) of ERISA (other than a Multiemployer Plan), which
is not an individual account plan, as defined in Section 3(34) of ERISA,
and which Borrower or, if a Title IV Plan, any ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Permitted Encumbrances" shall mean the following encumbrances:
----------------------
(i) Liens for taxes or assessments or other governmental Charges or levies,
either not yet due and payable or to the extent that nonpayment thereof is
permitted by the terms of Section 5.2(b)(ii) of the Agreement; (ii) pledges
or deposits securing obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar legislation;
(iii) pledges or deposits securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which Borrower is a party
as lessee made in the ordinary course of business; (iv) deposits securing
public, statutory or utility obligations of Borrower incurred in the
ordinary course of business; (v) inchoate and unperfected workers',
mechanics', suppliers' or similar liens arising in the ordinary course of
business; (vi) carriers', warehousemen's or other similar possessory liens
arising in the ordinary course of business and securing indebtedness not
yet due and payable in an outstanding aggregate amount not in excess of
$100,000 at any time; (vii) deposits securing, or in lieu of, surety,
appeal or customs bonds in proceedings to which Borrower is a party;
(viii) any attachment or judgment lien, unless the judgment it secures
shall not, within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 30 days after the expiration of any such stay; and (ix) zoning
restrictions, easements, licenses or other restrictions on the use of real
property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the use or value of
such real property, leases or leasehold estates.
"Person" shall mean any individual, sole proprietorship,
------
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity
or government (whether Federal, state, foreign, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Plan" shall mean, with respect to Borrower, any Subsidiary of
----
Borrower or any other ERISA Affiliate, at any time, an employee benefit
plan, as defined in Section 3(3) of ERISA, which Borrower maintains,
contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
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<PAGE>
"Proceeds" shall mean "proceeds," as such term is defined in the
--------
Code and, in any event, shall include, without limitation: (i) any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to
Borrower from time to time with respect to any of the Collateral; (ii) any
and all payments (in any form whatsoever) made or due and payable to
Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or agency (or any
person acting under color of governmental authority); (iii) any claim of
Borrower against third parties (a) for past, present or future infringement
or dilution of any Copyright or Copyright License or for injury to the
goodwill associated with any Copyright, Copyright registration or Copyright
licensed under any Copyright License, (b) for past, present or future
infringement of any Patent or Patent License or (c) for past, present or
future infringement or dilution of any Trademark or Trademark License or
for injury to the goodwill associated with any Trademark, Trademark
registration or Trademark licensed under any Trademark License; (iv) any
recoveries by Borrower against third parties with respect to any litigation
or dispute concerning any of the Collateral; and (v) any and all other
amounts from time to time paid or payable under or in connection with any
of the Collateral, upon disposition or otherwise.
"Projections" shall mean the projections referred to in Part II,
-----------
Projections, of Schedule 3.4 to the Agreement.
------------
"Qualified Plan" shall mean an employee pension benefit plan, as
--------------
defined in Section 3(2) of ERISA, which is intended to be tax-qualified
under Section 401(a) of the IRC, and which Borrower, any Subsidiary of
Borrower, or any other ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Refinancing" shall mean the repayment in full by Borrower of the
-----------
loans under which Borrower was obligated to NatWest Bank N.A. and Commerce
Bank immediately prior to the making of the Initial Advance.
"Release" shall mean, as to any Person, any release, spill,
-------
emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Materials in the
indoor or outdoor environment by such Person, including the movement of
Hazardous Materials through or in the air, soil, surface water, ground
water or property.
"Reportable Event" shall mean any of the events described in
----------------
Section 4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA.
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<PAGE>
"Restricted Payment" shall mean: (i) the declaration or payment
------------------
of any dividend or the occurrence of any liability to make any other
payment or distribution of cash or other property or assets in respect of a
Person's Stock, other than a dividend to the holders of Borrower's common
stock payable solely in shares of Borrower's common stock; (ii) any payment
on account of the purchase, redemption, defeasance or other retirement of a
Person's Stock or any other payment or distribution made in respect
thereof, either directly or indirectly; or (iii) any payment, loan,
contribution or other transfer of funds or other property to any
Stockholder of such Person.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing
--------------------
for continuing coverage or benefits for any participant or any beneficiary
of a participant after such participant's termination of employment, other
than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
"Revolving Credit Advance" shall have the meaning assigned to it
------------------------
in Section 1.1(a) of the Agreement.
"Revolving Credit Loan" shall mean the aggregate amount of
---------------------
Revolving Credit Advances outstanding at any time.
"Revolving Credit Note" shall mean a note dated the Closing Date,
---------------------
substantially in the form of Exhibit C to the Agreement evidencing the
---------
Obligation of Borrower to pay the aggregate amount of Revolving Credit
Advances outstanding from time to time (regardless of whether in excess of
the Maximum Revolving Credit Loan) together with all earned or accrued, but
unpaid, interest thereon calculated in accordance with the applicable rate
set forth in the Agreement.
"Schedule of Accounts" shall mean a schedule of all Accounts to
--------------------
be delivered by Borrower to Lender pursuant to Section 1.6 of the
Agreement.
"Schedule of Documents" shall mean the schedule, including all
---------------------
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Loan Documents and the
transactions contemplated thereunder, substantially in the form of
Schedule C to the Agreement.
----------
"Schedule of Inventory" shall mean the schedules of Inventory to
---------------------
be delivered by Borrower to Lender pursuant to Section 1.7 of the
Agreement, including, without limitation, Borrower's internal reports
classifying and valuing its Inventory.
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<PAGE>
"Security Agreement" shall mean the Security Agreement of even
------------------
date with the Agreement entered into between Lender and Borrower, including
all amendments, modifications and supplements thereto and restatements
thereof, and shall refer to the Security Agreement as the same may be in
effect at the time such reference becomes operative.
"Snyder Family" shall mean Harold Snyder, Beatrice Snyder, Brian
-------------
S. Snyder, Jay T. Snyder, Beryl L. Snyder or any spouse, child, parent,
grandparent or other lineal ancestor or descendent of any such individual
or any trust for the benefit of any such individual; provided, that, all
-------- ----
voting power with respect to any and all shares of Stock of Borrower held
by such trust is controlled by an individual who is a member or individuals
who are members of the Snyder Family.
"Snyder Shares" shall have the meaning assigned to it in Section 6.15
-------------
of the Agreement.
"Stated Index Rate" shall have the meaning assigned to it in
-----------------
Section 1.5(a) of the Agreement.
"Stock" shall mean all shares, options, warrants, general or
-----
limited partnership interests, participation or other equivalents
(regardless of how designated) of or in a corporation, partnership or
equivalent entity, whether voting or nonvoting, including, without
limitation, common stock, preferred stock, or any other "equity security"
(as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Stockholder" shall mean each holder of Stock of a Person.
-----------
"Subject Property" shall mean all real property owned, leased or
----------------
operated by Borrower, any Subsidiary of Borrower or any other Affiliate of
Borrower.
"Subsidiary" shall mean, with respect to any Person, (i) any
----------
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, Stock of any
other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned legally or beneficially by such Person and/or
one or more Subsidiaries of such Person, or with respect to which any such
Person has the right to vote or designate the vote of 50% or more of such
Stock whether by proxy, agreement, operation of law or otherwise, and
(ii) any partnership in which such Person or one or
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<PAGE>
more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more
than 50% or of which any such Person is a general partner or may exercise
the powers of a general partner.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
-----
withholdings, and all liabilities with respect thereto, excluding taxes
imposed on or measured by the net income of Lender by the Federal
government, the jurisdiction under the laws of which Lender is organized or
any political subdivision thereof.
"Termination Date" shall mean the date on which the Revolving
----------------
Credit Loan and any other Obligations have been completely discharged and
Borrower shall have no further right to borrow any monies or obtain other
credit extensions or financial accommodations under the Agreement.
"Title IV Plan" shall mean a Pension Plan, other than a
-------------
Multiemployer Plan, which is covered by Title IV of ERISA.
"Trademark Assignment" shall mean the trademark security
--------------------
agreement.
"Trademarks" shall mean all of the following now owned or
----------
hereafter acquired by Borrower: (i) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of
the United States, any State or Territory thereof, or any other country or
any political subdivision thereof, and (ii) all reissues, extensions or
renewals thereof.
"Unfunded Pension Liability" shall mean, at any time, the
--------------------------
aggregate amount, if any, of the sum of (i) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair
market value of all assets of such Title IV Plan allocable to such benefits
in accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions
in effect under such Title IV Plan, and (ii) for a period of five (5) years
following a transaction reasonably likely to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by
Borrower, any Subsidiary of Borrower or any other ERISA Affiliate as a
result of such transaction.
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<PAGE>
"Welfare Plans" shall mean any welfare plan, as defined in
-------------
Section 3(1) of ERISA, which is maintained or contributed to by Borrower,
any Subsidiary of Borrower or any other ERISA Affiliate.
"Withdrawal Liability" shall mean, at any time, the aggregate
--------------------
amount of the liabilities, if any, pursuant to Section 4201 of ERISA, and
any increase in contributions pursuant to Section 4243 of ERISA with
respect to all Multiemployer Plans.
Any accounting term used in the Agreement or any other Loan
Document shall have, unless otherwise specifically provided therein, the
meaning customarily given such term in accordance with GAAP, and all
financial computations thereunder shall be computed, unless otherwise
specifically provided therein, in accordance with GAAP consistently applied
throughout all relevant periods. That certain items or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. All other undefined terms contained
in the Agreement shall, unless the context indicates otherwise, have the
meanings provided for by the Code as in effect in the State of New York to
the extent the same are used or defined therein. The words "herein,"
"hereof" and "hereunder" or other words of similar import refer to the
Agreement as a whole, including the Exhibits and Schedules thereto, as the
same may from time to time be amended, restated, modified or supplemented,
and not to any particular section, subsection or clause contained in the
Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural,
and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
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