<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - K/A1
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For Fiscal Year Ended October 1, 1994
Commission File Number 1-10827
PHARMACEUTICAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-3122182
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE RAM RIDE ROAD, SPRING VALLEY, NEW YORK 10977
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (914) 425-7100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
The New York Stock Exchange, Inc.
Common Stock $.01 par value The Pacific Stock Exchange, Inc.
--------------------------------
The New York Stock Exchange, Inc.
Common Stock Purchase Rights The Pacific Stock Exchange, Inc.
--------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Series A Convertible Preferred Stock, $.0001 par value
------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days: Yes [x] No
-------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in Part III of this Form 10-K/A or any amendment
to this Form 10-K/A. [x]
---------
$130,772,610
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF DECEMBER 19, 1994 (ASSUMING SOLELY FOR PURPOSES OF THIS
CALCULATION THAT ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ARE
"AFFILIATES").
14,593,395
Number of shares of common stock outstanding as of December 19, 1994
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- ------- --------------------------------------------------
DIRECTORS
The Company's Certificate of Incorporation provides that the Board shall be
divided into three classes, with the term of office of one class expiring each
year. The Class I and Class III directors of the Company have terms which
expire in 1997 and 1996, respectively. The terms of office of the Class II
directors expire in 1995. The following table sets forth certain information
with respect to each of the Class I, II and III directors and the year each was
first elected as a director:
<TABLE>
<CAPTION>
Age Year
(as of of First
Name 1/18/95) Election
---- -------- --------
<S> <C> <C>
CLASS II
Andrew Maguire, Ph.D. (1)(3)........................... 55 1990
Since January 1990, President and Chief Executive
Officer of Appropriate Technology International, a
not-for-profit development assistance corporation
and, since January 1989, a Senior Vice President of
Washington Financial Group, an investment banking
firm. From June 1987 to January 1989, Executive
Vice President of the North American Securities
Administrators Association.
Melvin H. Van Woert, M.D. (1)(3)....................... 65 1990
Since 1974, Physician and Professor of Neurology
and Pharmacology and Doctoral Faculty, Mount Sinai
Medical Center, New York.
CLASS I
Mark Auerbach (1)(2)................................... 56 1990
Since June 1993, the Senior Vice President and
Chief Financial Officer of Central Lewmar L.P., a
distributor of fine papers. From August 1992 to
June 1993, a partner of Marron Capital L.P., an
investment banking firm. From July 1990 to August
1992, President, Chief Executive Officer and
Director of Implant Technology Inc., a manufacturer
of artificial hips and knees. From February 1989 to
August 1990, Managing Director-Corporate Finance of
F.N. Wolf & Co., Inc., an investment banking firm.
From 1978 to February 1989, President and Chief
Executive Officer of Keystone Camera Products
Corp., a manufacturer of camera products. Director
of Oakhurst Capital, a distributor of automotive
parts and accessories.
H. Spencer Matthews (2)(4)............................. 73 1990
Since 1986, President and Chief Executive Officer
of Dispense-All South Coast, Inc., Dispense-All
Capital Area, Inc., Dispense-All Central Florida,
Inc. and Dispense-All of Louisiana, Inc., four
companies which are wholesalers of juice
concentrates. Rear Admiral, United States Navy
(Retired).
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
Diana L. Sloane (4).................................... 34 1990
Since March 1993, Vice President-Regulatory and
Scientific Affairs of the Company and of
Pharmaceutical, Inc. From February 1992 to March
1993, Vice President-Regulatory Affairs and Quality
of the Company and of Pharmaceutical, Inc. From
March 1990 to February 1992, Group Vice President-
Regulatory Affairs of Pharmaceutical, Inc. From
March 1988 to March 1990, Associate Director-
Regulatory Affairs of Superpharm Corporation, a
subsidiary of Orlove Enterprises, Inc., a company
engaged in the manufacture and distribution of
pharmaceutical and other products ("Superpharm").
From May 1987 to March 1988, Manager-Compliance of
Superpharm.
CLASS III
Kenneth I. Sawyer (3)(4)............................... 49 1989
Since October 1990, Chairman of the Board of the
Company. Since October 1989, President and Chief
Executive Officer of the Company. From September
1989 to October 1989, Interim President and Chief
Executive Officer of the Company. From August 1989
to September 1989, counsel to the Company. From May
1989 to August 1989, an attorney in private
practice. From prior to 1987 to May 1989, Vice
President and General Counsel of Orlove
Enterprises, Inc., a company engaged in the
manufacture and distribution of pharmaceutical and
other products. Director of Acorn Venture Capital
Corporation, a closed-end investment company.
Robin O. Motz, M.D., Ph.D.(2)(3)....................... 55 1992
Since July 1978, Assistant Professor of Clinical
Medicine, Columbia University College of Physicians
and Surgeons. Physician engaged in a private
practice of internal medicine.
</TABLE>
- ---------------------------------
(1) A member of the Audit Committee of the Board of the Company.
(2) A member of the Compensation and Stock Option Committee of the Board of the
Company.
(3) A member of the Nominating Committee of the Board of the Company.
(4) A member of the Executive Committee of the Board of the Company.
EXECUTIVE OFFICERS
The executive officers of the Company consist of Mr. Sawyer as President,
Chief Executive Officer and Chairman of the Board, Ms. Sloane as Vice President,
Regulatory and Scientific Affairs, Robert I. Edinger as Executive Vice
President, Finance, Chief Financial Officer and Secretary. The executive
officers of Par Pharmaceutical, Inc., the Company's principal operating
subsidiary ("Par"), consist of Mr. Sawyer, Ms. Sloane and Mr. Edinger, as well
as Stuart A. Rose, Executive Vice President, Operations of Par, and Robert M.
Fisher, Jr., Vice President, Corporate Development, Sales and Marketing of Par.
The following table sets forth certain information with respect to the
executive officers of the Company and Par who are not directors or nominees for
election as a director:
<TABLE>
<CAPTION>
Age (as of
Name 1/18/95)
---- ----------
<S> <C>
Robert I. Edinger...................................... 54
Since January 1995, Executive Vice President,
Finance, Chief Financing Officer and Secretary of
the Company and since June 1993, Vice President,
Chief Financial Officer and Secretary of
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
the Company. From 1990 to June 1993, Executive Vice
President of Bonjour Group, Ltd., a licensing
company. From 1986 to 1990, President and Chief
Financial Officer of OCP America, a wholesale drug
distribution company.
Stuart A. Rose, Ph.D. ................................. 52
Since January 1995, Executive Vice President,
Operations of Par. From 1990 to 1994, Vice
President, Manufacturing and Materials Supply,
Lederle International Division of American Cyanamid
Company, a company engaged in the manufacture of
generic pharmaceuticals. From 1984 to 1990,
President and General Manager, Lederle Parenterals,
Inc., a company engaged in the manufacture of
generic pharmaceuticals.
Robert M. Fisher, Jr. ................................. 47
Since October 1993, Vice President, Corporate
Development, Sales and Marketing of Par. From March
1993 to October 1993, Vice President, Corporate
Development of F.H. Faulding USA, a company engaged
in the manufacture of pharmaceuticals. From 1992 to
1993, Vice President, Business Development, PUREPAC
Pharmaceutical Company, a company engaged in the
manufacture of generic pharmaceuticals, and from
1989 to 1992, Vice President and General Manager of
Rondex Laboratories at PUREPAC.
</TABLE>
3
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
- ------- ----------------------
The following table sets forth compensation earned by or paid, during fiscal
years 1992 through 1994, to the Chief Executive Officer of the Company and the
three additional most highly compensated executive officers (over $100,000)
serving as executive officers of the Company and/or Par during fiscal 1994 (the
"Named Executives"). The Company awarded or paid such compensation to all such
persons for services rendered in all capacities during the applicable fiscal
years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------- ----------------------
Restricted Securities
Name and Stock Underlying All Other
Principal Position Year Salary($) Bonus($) Awards($)(1) Options(#) Compensation($)(2)
- ------------------ ---- --------- -------- ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth I. Sawyer 1994 408,238 100,000 - - 59,159
President, Chief 1993 413,215 200,000 - 500,000 70,802
Executive Officer 1992 331,170 250,000 - 120,000 31,591
and Chairman
Diana L. Sloane 1994 208,097 22,500 - - 25,493
Vice President- 1993 179,423 40,000 - 130,000 22,953
Regulatory and 1992 140,496 115,000 - 45,000 9,535
Scientific Affairs
Robert I. Edinger 1994 180,000 50,000 - - 795
Executive 1993 58,846 25,000 - 40,000 76
Vice President,
Chief Financial
Officer & Secretary
Robert M. Fisher, Jr. 1994 122,359 26,500 - 10,000 474
Vice President,
Corporate Development,
Sales & Marketing,
Par
</TABLE>
- -------------------------
(1) The Company believes that at the end of fiscal 1994, the Named Executives
did not hold any shares of restricted stock.
(2) For fiscal year 1994, includes insurance premiums paid by the Company for
term life insurance for the benefit of the Named Executives as follows:
Mr. Sawyer-$2,438; Ms. Sloane-$528; Mr. Edinger-$795; and Mr. Fisher-$474.
Also includes $20,111 contributed by the Company for the benefit of each of
Mr. Sawyer and Ms. Sloane under the Par Pharmaceutical Retirement Plan, and
$4,854 contributed by the Company on behalf of Ms. Sloane to the Company
401(k) Plan. The amount for Mr. Sawyer also includes $36,610, representing
the maximum potential estimated dollar value of the Company's portion of
insurance premium payments from a split-dollar life insurance policy as if
1994 premiums were advanced to the executive without interest until the
earliest time the premium may be refunded by Mr. Sawyer to the Company.
Stuart A. Rose has been hired as Executive Vice President, Operations of
Par beginning January 16, 1995. As a result, Dr. Rose received no compensation
from the Company or Par during fiscal year 1994.
4
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Option Term
------------------------------
% of Total
Shares Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted (#) in Fiscal Year Price ($) Date 0% ($) 5% ($) 10% ($)
- ---- ----------- ------------- --------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert M. Fisher, Jr.(1) 10,000 13.5% 13.875 10/21/98 0 177,084 223,458
</TABLE>
- -------------------------
(1) Represents options granted pursuant to the Company's 1990 Stock Incentive
Plan on October 22, 1993, of which 5,000 became exercisable on October 22,
1994 and 5,000 will become exercisable on October 22, 1995.
The following table sets forth the stock options exercised by the Named
Executives during fiscal 1994 and the value, as of October 1, 1994, of
unexercised stock options held by the Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)
------------------------- -------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Kenneth I. Sawyer 0 0 1,000,000 0 2,445,000 0
Diana L. Sloane 20,000 309,875 162,480 27,520 191,250 0
Robert I. Edinger 0 0 26,660 13,340 0 0
Robert M. Fisher, Jr. 0 0 0 10,000 0 0
</TABLE>
COMPENSATION OF DIRECTORS
For service on the Board, directors who are not employees of the Company or
any of its subsidiaries receive an annual retainer of $10,000, a fee of $1,000
for each meeting of the Board attended, and a fee of $1,000 for each committee
meeting attended. Directors who are not eligible to receive options under any
other plan of the Company also are granted options to purchase 6,000 shares of
Common Stock per year, or 18,000 shares of Common Stock per year if the director
waives the annual retainer, pursuant to the 1989 Directors' Stock Option Plan.
Directors who are employees of the Company or any of its subsidiaries receive no
additional remuneration for serving as directors or as members of committees of
the Board. Directors are entitled to reimbursement for out-of-pocket expenses
incurred in connection with their attendance at Board and committee meetings.
In fiscal 1994, H. Spencer Matthews received an additional $5,497 in
compensation from the Company for providing his expertise in connection with
ongoing potential sales of pharmaceutical products to the Russian Republic. Dr.
Melvin H. Van Woert received an additional $13,550 in compensation from the
Company for providing his expertise in connection with a drug to be developed by
the Company.
5
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION ARRANGEMENTS
The Company has entered into employment agreements with Mr. Sawyer, Ms.
Sloane, Mr. Edinger, Mr. Fisher and Dr. Rose. Each of the employment agreements
with Mr. Sawyer, Ms. Sloane and Mr. Edinger provides for the officer's
employment in his or her current position through the dates set forth below,
subject to earlier termination by the Company for Cause (as such term is defined
in the respective agreements). Mr. Sawyer's term of employment expires on
October 4, 1995, but will be automatically extended each year for an additional
one-year period unless either party provides written notice by July 4 of such
year that he or it desires to terminate the agreement. Ms. Sloane's term of
employment expires on March 31, 1995. Mr. Edinger's and Mr. Fisher's terms of
employment expire on October 13, 1995. Dr. Rose's term of employment expires on
January 16, 1996. Each such employment agreement provides that the officer
will receive specified salary, bonuses, stock options, stock awards and other
employee benefits, as the case may be. Under the agreement with Mr. Sawyer, the
Company is required to use its best efforts to cause him to be elected and re-
elected to the Board during his term of employment. Mr. Sawyer, pursuant to the
terms of his employment agreement, is and will be required to serve, if so
elected, on the Board of Directors of the Company and any subsidiary, as well as
any committees thereof.
Each of the foregoing employment agreements provides for certain payments upon
termination of the officer's employment as a result of a material breach by the
Company of his or her employment agreement following a Change of Control of the
Company. A material breach by the Company of the employment agreements includes,
but is not limited to, termination without Cause and a change of the officer's
responsibilities. In the case of Mr. Sawyer, he is entitled to receive, if such
a termination occurs within two years following a Change of Control of the
Company, a lump sum payment equal to the lesser of three times the sum of his
annual base salary and most recent bonus or the maximum amount permitted without
the imposition of an excise tax on Mr. Sawyer or the loss of a deduction to the
Company under the Internal Revenue Code of 1986, as amended (the "Code"), plus
reimbursement of certain legal and relocation expenses incurred by Mr. Sawyer as
a result of the termination of his employment and maintenance of insurance,
medical and other benefits for 24 months or until Mr. Sawyer is covered by
another employer for such benefits. In the case of Ms. Sloane, she is entitled
to receive a lump sum payment equal to twice her prior year's aggregate annual
compensation and the cost of continuing certain benefits for up to 24 months if
such a termination occurs following a Change of Control. In the case of Messrs.
Edinger and Fisher and Dr. Rose, each is entitled to receive severance
compensation amounting to 12 months continuation of his base salary payable in
12 monthly installments plus maintenance of medical and other benefits for 12
months or until such employee is covered by another employer for such benefits
if earlier.
In addition, Mr. Sawyer's employment agreement provides for the Company to
purchase a residence within the vicinity of the Company's principal offices for
Mr. Sawyer to occupy for the duration of his term of employment. In this
connection, the Company purchased a condominium for the price of $415,000, which
Mr. Sawyer leased from the Company from September 15, 1994, until April 22,
1994, when the Company sold the residence for $415,000 with the express approval
of Mr. Sawyer. (See "Certain Relationships and Related Transactions.")
PENSION PLAN
The Company maintains a defined benefit plan (the "Pension Plan") intended to
qualify under Section 401(a) of the Code. Effective October 1, 1989, the Company
ceased benefit accruals under the Pension Plan with respect to service after
such date. The Company intends that distributions will be made, in accordance
with the terms of the Plan, to participants as of such date and/or their
beneficiaries. The Company will continue to make contributions to the Pension
Plan to fund its past service obligations. Generally, all employees of the
Company or a participating subsidiary who completed at least one year of
continuous service and attained 21 years of age were eligible to participate in
the Pension Plan. For benefit and vesting purposes, the Pension Plan's "Normal
Retirement Date" is the date on which a participant attains age 65 or, if later,
the date of completion of 10 years of service. Service is measured from date of
employment. The retirement income formula is 45% of the highest consecutive
five-year average basic earnings during the last 10 years of employment, less
83/1//3% of the participant's Social Security benefit, reduced proportionately
for years of service less than 10 at retirement. The normal form
6
<PAGE>
of benefit is a life annuity, or for married persons, a joint and survivor
annuity. None of the Named Executives had any years of credited service under
the Pension Plan.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee"), consisting entirely of non-employee directors, approves all of the
policies and programs pursuant to which compensation is paid or awarded to the
Company's executive officers and key employees. The Committee held eight
meetings in fiscal 1994. In reviewing overall compensation for fiscal 1994, the
Committee focused on the Company's objectives to attract and retain executives
of the highest caliber, to encourage the highest level of performance from such
executives and to align the financial interests of the Company's management with
that of its shareholders by offering awards that can result in the ownership of
Common Stock. The Company did not utilize specific formulae or guidelines in
reviewing and approving executive compensation.
ELEMENTS OF EXECUTIVE COMPENSATION PROGRAM. The key elements of the
Company's executive compensation program consist of base salary, annual bonus,
stock options through participation in the Company's 1986 Stock Option Plan and
stock options and other incentive awards through participation in the Company's
1990 Stock Incentive Plan. In awarding or approving compensation to executives
in fiscal 1994, the Committee reviewed the performance and profitability of the
Company, the present and potential contribution of the executive to the Company
and the ability of the Company to attract and retain qualified executives in
light of the Company's prior regulatory review of its operations, lawsuits
asserted against it and its financial condition.
Base Salary. Base salaries for executives were determined primarily by
reference to individual performance, the principal job duties and
responsibilities undertaken by such persons, industry norms and other relevant
criteria. In order to attract and retain certain key executives, the Company
has offered these executives long-term employment contracts which provide for
specified base salaries.
Annual Bonus. The Committee determined the annual bonus to be paid to its
executives for fiscal 1994 performance. The amount of each individual bonus was
determined based upon an assessment of the general financial performance of the
Company during the fiscal year and the individual's contribution to such
performance, as opposed to determination by reference to a formal, goal-based
plan. The Committee adopted this approach owing, in part, to uncertainties
caused by previous regulatory review of its operations and various lawsuits
asserted against the Company arising out of the acts of its prior management.
Given the lack of predictability of such regulatory review and the litigation
and the effects thereof, the Committee believed it was more effective to assess
performance achievements on a historical basis rather than setting benchmarks,
the achievement of which was largely out of the control of the Company and may
not have reflected the executives' efforts.
Stock Options and Other Awards. The Company's 1986 Stock Option Plan
provides for stock option awards and the Company's 1990 Stock Incentive Plan
provides for stock option and other equity-based awards. Under all such Plans,
the size of each award and the persons to whom such awards are granted is
determined by the Committee based upon the nature of services rendered by the
executive, the present and potential contribution of the grantee to the Company
and the overall performance of the Company. The Committee believes that grants
of stock options will enable the Company to attract and retain the best
available talent and encourage the highest level of performance in order to
continue to serve the best interests of the Company and its shareholders. Stock
options and other equity-based awards provide executives with the opportunity to
acquire equity interests in the Company and to participate in the creation of
shareholder value and to benefit correspondingly with increases in the price of
the Company's Common Stock.
COMMITTEE'S ACTIONS FOR 1994. In determining the amount and form of executive
compensation to be paid or awarded for fiscal 1994, the Committee considered
both the Company's overall financial performance during the fiscal year and its
future objectives and challenges. The Committee approved awards of annual
bonuses for certain executives, reflecting both the Company's financial
performance for fiscal 1994 and the individual's contribution to such
performance. The Committee also awarded stock options (including options to one
Named Executive),
7
<PAGE>
extended the period in which such options are exercisable and accelerated the
vesting dates of previously awarded options, for certain key employees.
In reviewing and awarding compensation to executive officers for fiscal 1994,
the Committee considered the performance and other criteria discussed earlier in
this report. In addition, the Committee took into account the following specific
factors:
(i) the removal of the Company from the U.S. Food and Drug Administration's
Application Integrity Assessment Program;
(ii) the settlement of several significant litigations against the Company;
and
(iii) the efforts of executive officers in negotiating and implementing the
distribution agreements with Genpharm, Inc. and The Generics Group B.V.
The Committee will continue to consider these and other factors in reviewing and
awarding compensation to the Company's executive officers in the future.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Committee approved an employment
agreement in October 1992 for Mr. Sawyer with the Company. In approving such
employment agreement, the Committee authorized a base salary of $358,238 for Mr.
Sawyer in fiscal year 1994. In addition to his base salary, Mr. Sawyer was
awarded by the Committee a bonus of $100,000 for fiscal year 1994 performance
and a cost of living allowance of $50,000.
In reviewing and setting Mr. Sawyer's compensation, the Committee recognized
his substantial role in (i) settling three significant lawsuits against the
Company, (ii) negotiating and implementing several joint venture agreements for
the Company, (iii) improving the manufacturing capacities of the Company, (iv)
working to explore strategic alternatives for the Company and (v) diversifying
the Company's customer base.
Recently enacted Internal Revenue Code Section 162(m) limits deductions for
federal income tax purposes for certain executive compensation in excess of $1
million. Certain types of compensation are deductible only if performance
criteria are specified in detail and payments are contingent upon stockholder
approval of the compensation arrangement. The level of salaries and bonus to
the Named Executives paid by the Company do not exceed this limit.
COMPENSATION AND STOCK OPTION COMMITTEE
Mark Auerbach
H. Spencer Matthews
Robin O. Motz
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee conducted deliberations concerning executive
compensation during the last completed fiscal year. None of the Committee
members are executive officers of the Company. None of the executive officers of
the Company has served on the board of directors or on the compensation
committee of any other entity, any of whose officers served on the Board of the
Company.
8
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total return of the Company's Common
Stock with the cumulative total return of the New York Stock Exchange Composite
Index and the S&P/ (R)/ Health Care Drugs Index for the annual periods from
September 30, 1989 to September 30, 1994. The graph assumes $100 was invested on
September 30, 1989 in the Company's Common Stock and $100 was invested at that
time in each of the Indexes. The comparison assumes that all dividends are
reinvested.
[Performance Graph Appears Here]
<TABLE>
<CAPTION>
==========================================================================================
SEPT. 89 SEPT. 90 SEPT. 91 SEPT. 92 SEPT. 93 SEPT. 94
<S> <C> <C> <C> <C> <C> <C>
PHARMACEUTICAL RESOURCES $100 $ 83 $ 70 $113 $215 $149
NYSE COMPOSITE INDEX $100 $ 90 $119 $132 $151 $157
S&PO HEALTH CARE DRUGS INDEX $100 $108 $166 $161 $130 $157
==========================================================================================
</TABLE>
9
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------- --------------------------------------------------------------
OWNERSHIP OF VOTING SECURITIES
The following table sets forth, as of the close of business on January 18,
1995, the beneficial ownership of the Common Stock by (i) each person known
(based solely on a review of Schedules 13D or 13G filed) to the Company to be
the beneficial owner of more than 5% of the Common Stock, (ii) each director and
nominee for election as a director of the Company, (iii) the Named Executives,
and (iv) all directors and current executive officers of the Company and Par, as
a group (based upon information furnished by such persons). Under the rules of
the Securities and Exchange Commission, a person is deemed to be a beneficial
owner of a security if such person has or shares the power to vote or direct the
voting of such security or the power to dispose of or to direct the disposition
of such security. In general, a person is also deemed to be a beneficial owner
of any securities of which that person has the right to acquire beneficial
ownership within 60 days. Accordingly, more than one person may be deemed to be
a beneficial owner of the same securities. As of January 18, 1995, an aggregate
of 14,633,773 shares of Common Stock were outstanding.
<TABLE>
<CAPTION>
Name and Address Amount of Percentage of
---------------- --------- -------------
of Common Common
-- ------ ------
Beneficial Owner Stock Stock
---------------- ----- -----
<S> <C> <C>
Kenneth I. Sawyer(1)(2)(3)................................. 1,005,505 6.4
Diana L. Sloane(1)(2)...................................... 191,710 *
Robert I. Edinger(1)....................................... 40,000 *
Mark Auerbach(1)(2)........................................ 29,000 *
Andrew Maguire(1)(2)....................................... 51,000 *
H. Spencer Matthews(1)(2).................................. 36,000 *
Melvin H. Van Woert, M.D.(1)(2)............................ 66,990 *
Robin O. Motz, M.D., Ph.D.(1)(2)........................... 24,000 *
Robert M. Fisher, Jr.(1)................................... 5,870 *
Stuart A. Rose(1).......................................... 2,000 *
All directors and executive officers (as of 1/18/95) as a
group (ten persons).................................... 1,452,075 9.0
</TABLE>
- ---------------
* Less than 1%.
(1) The business address of each of these individuals, for the purposes hereof,
is in care of Pharmaceutical Resources, Inc., One Ram Ridge Road, Spring
Valley, New York 10977.
(2) A director of the Company.
(3) Includes 355 shares of Common Stock as to which Mr. Sawyer shares
beneficial ownership with one former shareholder of Quad Pharmaceuticals,
Inc. ("Quad"), a subsidiary of the Company, pursuant to an agreement dated
May 29, 1990. (See "Voting Arrangements.")
VOTING ARRANGEMENTS
On May 29, 1990, Mr. Sawyer was granted proxies by three former shareholders
of Quad (the "Additional Proxies") to vote any shares of Common Stock owned by
him (which amounted to 355 shares at January 30, 1995) on all matters that might
come before a meeting of the Company's shareholders, including the election of
directors. The Additional Proxies terminate upon the earlier of May 29, 2000, or
the date on which the shareholder granting the proxy no longer owns any shares
of voting stock of the Company. The foregoing proxies were granted to help
assure certain governmental agencies that were involved in the investigation and
review of the generic drug industry that the Company's shareholders are
supportive of the new management established by the Company since September
1989.
10
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- ----------------------------------------------
In July 1993, the Company purchased a condominium for $415,000 (subject to
certain closing adjustments). Beginning on September 15, 1993, the Company
leased the condominium to Kenneth I. Sawyer, the President, Chief Executive
Officer and Chairman of the Board of the Company, for a period equal to the term
of his employment agreement at $2,600 per month, which represented the fair
market value as determined by a disinterested third party. The Company sold the
condominium on April 22, 1994, for $415,000 with the express consent of Mr.
Sawyer and, as a result, the lease terminated. (See "Employment Agreements and
Termination Arrangements.")
11
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------- ---------------------------------------------------------------
(a)(1) & (2) Financial Statements.
See Index to Financial Statements after Signature Page.
(a)(3) Exhibits.
3.1 Certificate of Incorporation of the Registrant. (4)
3.1.1 Certificate of Amendment to the Certificate of Incorporation of
the Registrant, dated August 6, 1992--incorporated by reference to the
Registrant's Registration Statement on Form 8-A (Commission File No.
0-20834), filed with the Commission November 10, 1992.
3.2 By-Laws of the Registrant, as amended and restated. (3)
4 Rights Agreement, dated August 6, 1991, between the Registrant and
Midlantic National Bank, as Rights Agent. (5)
4.1 Amendment to Rights Agreement, dated as of April 27, 1992. (3)
10.1 1983 Stock Option Plan of the Registrant, as amended. (2)
10.2 1986 Stock Option Plan of the Registrant, as amended. (2)
10.3 1989 Directors' Stock Option Plan of the Registrant, as amended.
(5)
10.4 1989 Employee Stock Purchase Program of the Registrant. (7)
10.5 1990 Stock Incentive Plan of the Registrant, as amended. (2)
10.6 Form of Retirement Plan of Par. (12)
10.6.1 First Amendment to Par's Retirement Plan, dated October 26,
1984. (6)
10.7 Form of Retirement Savings Plan of Par. (12)
10.7.1 Amendment to Par's Retirement Savings Plan, dated July 26,
1984. (13)
10.7.2 Amendment to Par's Retirement Savings Plan, dated November 1,
1984. (13)
10.7.3 Amendment to Par's Retirement Savings Plan, dated September
30, 1985. (13)
10.8 Par Pension Plan, effective October 1, 1984. (4)
10.9 Employment Agreement, dated as of October 4, 1992, among the
Registrant, Par and Kenneth I. Sawyer. (1)
12
<PAGE>
10.10 Lease Agreement between Par and the County of Rockland Industrial
Development Agency, dated as of October 1, 1984. (6)
10.10.1 Lessee Guaranty between Par and Midlantic National Bank,
dated as of October 1, 1984. (6)
10.10.2 Mortgage from County of Rockland Industrial Development
Agency to Midlantic National Bank, as Trustee, dated as of October 1,
1984. (13)
10.10.3 Security Agreement between County of Rockland Industrial
Development Agency and Midlantic National Bank, as Trustee, dated as
of October 1, 1984. (13)
10.11 Term Loan Agreement, dated September 18, 1987, between
Midlantic National Bank/North and Par. (11)
10.11.1 Note and Indenture, dated September 18, 1987, between
Midlantic National Bank/North and Par. (11)
10.12 Revolving Credit Agreement, dated February 20, 1992, between
Par and Midlantic National Bank. (1)
10.13 Agreement Concerning Term Loans, dated February 20, 1992,
between Par and Midlantic National Bank. (1)
10.14 Amendments to Term Note, dated February 20, 1992. (1)
10.15 Lease for premises located at 12 Industrial Avenue, Upper
Saddle River, New Jersey, between Par and Charles and Dorothy Horton,
dated October 21, 1978 and extension dated September 15, 1983. (12)
10.15.1 Extension of Lease, dated November 8, 1989, between Par and
Charles and Dorothy Horton relating to premises at 12 Industrial
Avenue, Upper Saddle River, New Jersey. (9)
10.16 Lease, dated November 7, 1986, between Ramapo Corporate Park,
Inc. as landlord, and Par as tenant. (4)
10.16.1 Amendment by letter dated March 10, 1988 to the lease, dated
November 7, 1986, between Ramapo Corporate Park, Inc. as lessor and
Par as lessee. (10)
10.17 Lease, dated December 15, 1987, between Ram Ridge Estates Corp.
as lessor and Par as lessee. (10)
10.18 Standstill Agreements and Irrevocable Proxies, each dated May
29, 1990, between Par and each of Asrar Burney, Dulal Chatterji, and
Raja Feroz. (8)
10.19 Agreement of Purchase and Sale, dated June 4, 1992, among Quad,
Par, and The Liposome Company, Inc. (1)
10.19.1 Modification of Agreement of Purchase and Sale, dated July
24, 1992, among Quad, Par, and The Liposome Company, Inc. (1)
13
<PAGE>
10.20 Employment Agreement, dated as of April 1, 1993, between Par
and Diana L. Sloane. (14)
10.21 Employment Agreement, dated as of May 19, 1993, between the
Registrant and Robert I. Edinger. (14)
10.22 Distribution Agreement, dated as of October 16, 1993, between
Genpharm, Inc., the Registrant and PRX Distributors, Ltd. (14)
10.23 Agreement, dated as of September 30, 1993, between National
Union Fire Insurance Company of Pittsburgh and Par. (14)
10.24 Settlement Agreement and Release, dated as of November 29,
1993, between Mylan Laboratories, Inc., the Registrant, Par and Quad.
(14)
10.25 Settlement Agreement and Release, dated as of January 6, 1994,
between Minnesota Mining & Manufacturing Company, Riker Laboratories,
Inc., the Registrant and Par. (14)
10.26 Settlement Agreement and Release, dated as of December 22,
1993, between United States Trading Corporation, Marvin Sugarman,
Liquipharm, Inc., the Registrant and Par. (14)
10.27 Letter Agreement, dated April 30, 1993, between The Generics
Group B.V. and Par. (16)
10.28 Distribution Agreement, dated as of February 24, 1994, between
Sano Corporation, the Registrant and Par, as amended. (16)
10.29 Mortgage and Security Agreement, dated May 4, 1994, between
Urban National Bank and Par. (15)
10.29.1 Mortgage Loan Note, dated May 4, 1994. (15)
10.29.2 Corporate Guarantee, dated May 4, 1994, by the Registrant to
Urban National Bank. (15)
10.30 Non-exclusive Distribution, Exclusive Supply Agreement, dated
as of September 13, 1994, between Mova Pharmaceutical Corporation and
Par. (16)
10.31 Non-exclusive Distribution, Exclusive Supply Agreement, dated
as of September 13, 1994, between Mova Pharmaceutical Corporation and
Par. (16)
10.32 Letter Agreement, dated as of October 13, 1994, between Par and
Robert I. Edinger. (16)
10.33 Term Loan Agreement, dated as of November 29, 1994, between
Midlantic Bank, NA and Par.
10.34 Amended and Restated Revolving Credit Agreement, dated as of
November 29, 1994, between Midlantic Bank, NA and Par.
14
<PAGE>
10.34.1 Revolving Loan Note, dated November 29, 1994.
10.35 Amended and Restated Agreement Concerning Term Loans, dated as
of November 29, 1994, between Midlantic Bank, NA and Par.
10.36 Letter Agreement, dated as of October 13, 1994, between Par and
Robert M. Fisher, Jr.
10.37 Letter Agreement, dated as of December 19, 1994, between Par and
Stuart A. Rose.
11 Computation of per share data. (16)
13 1994 Annual Report to Shareholders, to be filed by amendment.
22 Subsidiaries of the Registrant. (16)
24 Consent of Richard A. Eisner & Company, LLP.
27 Financial Data Schedule
- ----------------------------------
(1) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended October 3, 1992 and incorporated
herein by reference.
(2) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Proxy Statement dated August 10, 1992 and
incorporated herein by reference.
(3) Previously filed with the Securities and Exchange Commission as an
Exhibit to Amendment No. 1 on Form 8 to the Registrant's Registration
Statement on Form 8-B, filed May 15, 1992, and incorporated herein by
reference.
(4) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended September 28, 1991 and
incorporated herein by reference.
(5) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Proxy Statement dated August 14, 1991 and
incorporated herein by reference.
(6) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K (Commission File No. 1-
9449) for the year ended September 29, 1990 and incorporated herein by
reference.
(7) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Proxy Statement dated August 16, 1990 and
incorporated herein by reference.
15
<PAGE>
(8) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Current Report on Form 8-K dated May 29, 1990 and
incorporated herein by reference.
(9) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K for 1989 and incorporated
herein by reference.
(10) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K for 1988 and incorporated
herein by reference.
(11) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K for 1987 and incorporated
herein by reference.
(12) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Registration Statement on Form S-1 (No. 2-86614) and
incorporated herein by reference.
(13) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Registration Statement on Form S-1 (No. 33-4533) and
incorporated herein by reference.
(14) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrants' Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended October 2, 1993 and incorporated
herein by reference.
(15) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Quarterly Report on Form 10-Q (Commission
File No. 1-10827) for the quarter ended April 2, 1994 and incorporated
herein by reference.
(16) Previously filed the Securities and Exchange Commission as an
Exhibit to the Registrant's Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended October 1, 1994 and incorporated
herein by reference.
16
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: January 27, 1995 PHARMACEUTICAL RESOURCES, INC.
------------------------------
(REGISTRANT)
By: /s/ Kenneth I. Sawyer
------------------------------------
Kenneth I. Sawyer
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kenneth I. Sawyer President, Chief Executive Officer, and Chairman of January 27, 1995
- ------------------------- the Board of Directors
Kenneth I. Sawyer
/s/ Robert I. Edinger Vice President, Chief Financial Officer and January 27, 1995
- ------------------------- Secretary
Robert I. Edinger (Principal Accounting and Financial Officer)
/s/ Diana L. Sloane Vice President--Regulatory and Scientific Affairs January 27, 1995
- ------------------------- and Director
Diana L. Sloane
/s/ Mark Auerbach Director January 27, 1995
- -------------------------
Mark Auerbach
/s/ Andrew Maguire Director January 27, 1995
- -------------------------
Andrew Maguire
/s/ H. Spencer Matthews Director January 27, 1995
- -------------------------
H. Spencer Matthews
/s/ Robin O. Motz Director January 27, 1995
- -------------------------
Robin O. Motz
/s/ Melvin Van Woert Director January 27, 1995
- -------------------------
Melvin Van Woert
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
<C> <S> <C>
3.1 Certificate of Incorporation of the Registrant. (4)
3.1.1 Certificate of Amendment to the Certificate of Incorporation of the
Registrant, dated August 6, 1992-incorporated by reference to the
Registrant's Registration Statement on Form 8-A (Commission File
No. 0-20834), filed with the Commission November 10, 1992.
3.2 By-Laws of the Registrant, as amended and restated. (3)
4 Rights Agreement, dated August 6, 1991, between the Registrant and
Midlantic National Bank, as Rights Agent. (5)
4.1 Amendment to Rights Agreement, dated as of April 27, 1992. (3)
10.1 1983 Stock Option Plan of the Registrant, as amended. (2)
10.2 1986 Stock Option Plan of the Registrant, as amended. (2)
10.3 1989 Directors' Stock Option Plan of the Registrant, as amended.
(5)
10.4 1989 Employee Stock Purchase Program of the Registrant. (7)
10.5 1990 Stock Incentive Plan of the Registrant, as amended. (2)
10.6 Form of Retirement Plan of Par. (12)
10.6.1 First Amendment to Par's Retirement Plan, dated October 26, 1984.
(6)
10.7 Form of Retirement Savings Plan of Par. (12)
10.7.1 Amendment to Par's Retirement Savings Plan, dated July 26, 1984.
(13)
10.7.2 Amendment to Par's Retirement Savings Plan, dated November 1, 1984.
(13)
10.7.3 Amendment to Par's Retirement Savings Plan, dated September 30,
1985. (13)
10.8 Par Pension Plan, effective October 1, 1984. (4)
10.9 Employment Agreement, dated as of October 4, 1992, among the
Registrant, Par and Kenneth I. Sawyer. (1)
10.10 Lease Agreement between Par and the County of Rockland Industrial
Development Agency, dated as of October 1, 1984. (6)
10.10.1 Lessee Guaranty between Par and Midlantic National Bank, dated as
of October 1, 1984. (6)
10.10.2 Mortgage from County of Rockland Industrial Development Agency to
Midlantic National Bank, as Trustee, dated as of October 1, 1984.
(13)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
<C> <S> <C>
10.10.3 Security Agreement between County of Rockland Industrial
Development Agency and Midlantic National Bank, as Trustee, dated
as of October 1, 1984. (13)
10.11 Term Loan Agreement, dated September 18, 1987, between Midlantic
National Bank/North and Par. (11)
10.11.1 Note and Indenture, dated September 18, 1987, between Midlantic
National Bank/North and Par. (11)
10.12 Revolving Credit Agreement, dated February 20, 1992, between Par
and Midlantic National Bank. (1)
10.13 Agreement Concerning Term Loans, dated February 20, 1992, between
Par and Midlantic National Bank. (1)
10.14 Amendments to Term Note, dated February 20, 1992. (1)
10.15 Lease for premises located at 12 Industrial Avenue, Upper Saddle
River, New Jersey, between Par and Charles and Dorothy Horton,
dated October 21, 1978 and extension dated September 15, 1983. (12)
10.15.1 Extension of Lease, dated November 8, 1989, between Par and Charles
and Dorothy Horton relating to premises at 12 Industrial Avenue,
Upper Saddle River, New Jersey. (9)
10.16 Lease, dated November 7, 1986, between Ramapo Corporate Park, Inc.
as landlord, and Par as tenant. (4)
10.16.1 Amendment by letter dated March 10, 1988 to the lease, dated
November 7, 1986, between Ramapo Corporate Park, Inc. as lessor and
Par as lessee. (10)
10.17 Lease, dated December 15, 1987, between Ram Ridge Estates Corp. as
lessor and Par as lessee. (10)
10.18 Standstill Agreements and Irrevocable Proxies, each dated May 29,
1990, between Par and each of Asrar Burney, Dulal Chatterji, and
Raja Feroz. (8)
10.19 Agreement of Purchase and Sale, dated June 4, 1992, among Quad,
Par, and The Liposome Company, Inc. (1)
10.19.1 Modification of Agreement of Purchase and Sale, dated July 24,
1992, among Quad, Par, and The Liposome Company, Inc. (1)
10.20 Employment Agreement, dated as of April 1, 1993, between Par and
Diana L. Sloane. (14)
10.21 Employment Agreement, dated as of May 19, 1993, between the
Registrant and Robert I. Edinger. (14)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
<C> <S> <C>
10.22 Distribution Agreement, dated as of October 16, 1993, between
Genpharm, Inc., the Registrant and PRX Distributors, Ltd. (14)
10.23 Agreement, dated as of September 30, 1993, between National Union
Fire Insurance Company of Pittsburgh and Par. (14)
10.24 Settlement Agreement and Release, dated as of November 29, 1993,
between Mylan Laboratories, Inc., the Registrant, Par and Quad.
(14)
10.25 Settlement Agreement and Release, dated as of January 6, 1994,
between Minnesota Mining & Manufacturing Company, Riker
Laboratories, Inc., the Registrant and Par. (14)
10.26 Settlement Agreement and Release, dated as of December 22, 1993,
between United States Trading Corporation, Marvin Sugarman,
Liquipharm, Inc., the Registrant and Par. (14)
10.27 Letter Agreement, dated April 30, 1993, between The Generics Group
B.V. and Par. (16)
10.28 Distribution Agreement, dated as of February 24, 1994, between Sano
Corporation, the Registrant and Par, as amended. (16)
10.29 Mortgage and Security Agreement, dated May 4, 1994, between Urban
National Bank and Par. (15)
10.29.1 Mortgage Loan Note, dated May 4, 1994. (15)
10.29.2 Corporate Guarantee, dated May 4, 1994, by the Registrant to Urban
National Bank. (15)
10.30 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of
September 13, 1994, between Mova Pharmaceutical Corporation and
Par. (16)
10.31 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of
September 13, 1994, between Mova Pharmaceutical Corporation and
Par. (16)
10.32 Letter Agreement, dated as of October 13, 1994, between Par and
Robert I. Edinger. (16)
10.33 Term Loan Agreement, dated as of November 30, 1994, between
Midlantic Bank, NA and Par.
10.34 Amended and Restated Revolving Credit Agreement, dated as of
November 30, 1994, between Midlantic Bank, NA and Par.
10.34.1 Revolving Loan Note, dated November 30, 1994.
10.35 Amended and Restated Agreement Concerning Term Loans, dated as of
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
<C> <S> <C>
November 30, 1994, between Midlantic Bank, NA and Par.
10.36 Letter Agreement, dated as of October 13, 1994, between Par and
Robert M. Fisher, Jr.
10.37 Letter Agreement, dated as of December 19, 1994, between Par and
Stuart A. Rose.
11 Computation of per share data. (16)
13 1994 Annual Report to Shareholders, to be filed by amendment.
22 Subsidiaries of the Registrant. (16)
24 Consent of Richard A. Eisner & Company, LLP.
27 Financial Data Schedule
</TABLE>
- ------------------------------
(1) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended October 3, 1992 and
incorporated herein by reference.
(2) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Proxy Statement dated August 10, 1992
and incorporated herein by reference.
(3) Previously filed with the Securities and Exchange Commission as an
Exhibit to Amendment No. 1 on Form 8 to the Registrant's
Registration Statement on Form 8-B, filed May 15, 1992, and
incorporated herein by reference.
(4) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended September 28, 1991 and
incorporated herein by reference.
(5) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Proxy Statement dated August 14, 1991
and incorporated herein by reference.
(6) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K (Commission File No.
1-9449) for the year ended September 29, 1990 and incorporated
herein by reference.
(7) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Proxy Statement dated August 16, 1990 and
incorporated herein by reference.
(8) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Current Report on Form 8-K dated May 29, 1990 and
incorporated herein by reference.
<PAGE>
(9) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K for 1989 and
incorporated herein by reference.
(10) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K for 1988 and
incorporated herein by reference.
(11) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Annual Report on Form 10-K for 1987 and
incorporated herein by reference.
(12) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Registration Statement on Form S-1 (No. 2-86614)
and incorporated herein by reference.
(13) Previously filed with the Securities and Exchange Commission as an
Exhibit to Par's Registration Statement on Form S-1 (No. 33-4533)
and incorporated herein by reference.
(14) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrants' Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended October 2, 1993 and
incorporated herein by reference.
(15) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Quarterly Report on Form 10-Q
(Commission File No. 1-10827) for the quarter ended April 2, 1994
and incorporated herein by reference.
(16) Previously filed the Securities and Exchange Commission as an
Exhibit to the Registrant's Annual Report on Form 10-K (Commission
File No. 1-10827) for the year ended October 1, 1994, and
incorporated herein by reference.
<PAGE>
EXHIBIT 10.33
TERM LOAN AGREEMENT
by and between
MIDLANTIC BANK, NATIONAL ASSOCIATION
and
PAR PHARMACEUTICAL, INC.
Dated as of November 30, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE NO.
I. DEFINITIONS............................................................ 1
II. GENERAL TERMS...................................................... 6
2.01. Term Loan................................................... 6
2.02. Repayment of Principal; Prepayment.......................... 7
2.03. Applicable Interest Rate; Payment of Interest............... 7
2.04. [Intentionally Left Blank].................................. 8
2.05. Security for the Note....................................... 8
2.06. Use of Proceeds............................................. 9
2.07. Term........................................................ 9
III. CONDITIONS OF MAKING THE TERM LOAN................................. 9
3.01. Term Loan.................................................... 9
3.02. Subsequent Advances......................................... 11
IV. REPRESENTATIONS AND WARRANTIES..................................... 11
4.01. Financial Statements........................................ 12
4.02. Organization, Etc........................................... 12
4.03. Authorization; Compliance, Etc.............................. 12
4.04. Governmental and Other Consents............................. 13
4.05. Proceedings................................................. 13
4.06. Compliance with Laws and Agreements......................... 13
4.07. Title to Collateral......................................... 14
4.08. Other Names or Entities..................................... 14
4.09. No Insolvency............................................... 14
4.10. Full Disclosure............................................. 15
4.11. Tax Returns; Tax Examination................................ 15
4.12. Pension Plans, Etc.......................................... 15
4.13. Licenses, Etc............................................... 17
4.14. O.S.H.A..................................................... 18
4.15. Ownership of Borrower....................................... 18
4.16. Patents, Trademarks, Etc.................................... 18
4.17. Brokers, Etc................................................ 18
4.18. [Intentionally Left Blank].................................. 19
4.19. Environmental Matters....................................... 19
4.20. Enforceability............................................ 20
4.21. Investment Company Act; Public Utility Holding
Company Act............................................. 20
4.22. Federal Reserve Regulations............................... 20
V. FINANCIAL COVENANTS................................................ 21
5.01. Maximum Capital Expenditures................................ 21
5.02. Minimum Working Capital..................................... 21
5.03. Tangible Net Worth.......................................... 21
5.04. Restricted Payments......................................... 21
5.05. Debt to Tangible Net Worth Ratio.......................... 22
5.06. Minimum Interest Coverage................................. 22
-i-
<PAGE>
SECTION PAGE NO.
- ------- --------
VI. AFFIRMATIVE COVENANTS.............................................. 22
6.01. Preservation of Assets; Compliance with Laws, Etc......... 22
6.02. Insurance................................................. 23
6.03. Taxes, Etc.............................................. 24
6.04. Notice of Proceedings, Defaults, Adverse
Change, Etc............................................. 24
6.05. Financial Statements and Reports.......................... 25
6.06. Inspection................................................ 27
6.07. Accounting System......................................... 27
6.08. Yield Protection............................................ 27
6.09. Additional Assurances..................................... 28
6.10. Environmental Indemnification............................. 28
6.11. Principal Business........................................ 30
VII. NEGATIVE COVENANTS................................................. 30
7.01. Indebtedness.............................................. 30
7.02. Liens..................................................... 31
7.03. Disposition of Assets..................................... 32
7.04. Dividends and Other Distributions........................... 32
7.05. Sale Leaseback............................................ 32
7.06. Acquisition............................................... 33
7.07. Fundamental Changes....................................... 33
7.08. Change in Business........................................ 33
7.09. Accounts Receivable....................................... 33
7.10. Transactions with Affiliates.............................. 34
7.11. Illegal Activities........................................ 34
VIII. DEFAULTS............................................................ 34
8.01 Defaults.................................................. 34
IX. REMEDIES ON DEFAULT, ETC........................................... 38
9.01. Remedies.................................................... 38
9.02. Default Rate................................................ 39
9.03. Cross Default............................................... 39
X. MISCELLANEOUS...................................................... 40
10.01. Survival................................................... 40
10.02. Expenses................................................... 40
10.03. Indemnification; Limitation of Liability................... 40
10.04. Setoffs, Etc............................................... 41
10.05. Governing Law.............................................. 42
10.06. Amendment; Modification.................................... 42
10.07. Waiver..................................................... 42
10.08. Notice..................................................... 43
10.09. Successors and Assigns..................................... 44
10.10. Consent to Jurisdiction, Service of Process................ 44
10.11. Waivers.................................................... 45
10.12. No Derogation.............................................. 45
10.13. Severability............................................... 45
-ii-
<PAGE>
SECTION PAGE NO.
- ------- --------
10.14. Section Headings........................................... 46
10.15. Amendment of Other Agreements.............................. 46
10.16. Accounting Principles...................................... 46
10.18. Knowledge and Discovery.................................... 46
10.19. Integration................................................ 47
-iii-
<PAGE>
TERM LOAN AGREEMENT
-------------------
THIS TERM LOAN AGREEMENT is made as of the 30th day of November, 1994, by
and between MIDLANTIC BANK, NATIONAL ASSOCIATION, a national banking
association (the "Lender"), and PAR PHARMACEUTICAL, INC., a New Jersey
corporation (the "Borrower").
I. DEFINITIONS
-----------
As used herein the following terms shall have the following respective
meanings:
Accountants: the meaning specified in Section 6.05.
-----------
Adjusted EBIT: as of the date of determination, earnings before
-------------
interest expense and taxes (excluding any and all extraordinary items and
settlements recorded in the fourth quarter of fiscal year 1993) plus
depreciation, amortization and other non-cash charges as determined, on a
consolidated basis, in accordance with generally accepted accounting principles
on a basis consistent with that employed by the Accountants in preparing the
financial statements referred to in Section 6.05.
Advance(s): an advance of loan proceeds constituting all or a
----------
portion of the Term Loan as applicable.
Affiliate(s): as applied to any Person, a spouse or relative of such
------------
Person within the third degree of consanguinity, any partner, shareholder,
member, director, officer or manager of such Person, any corporation,
association, partnership, joint venture, firm or other entity of which such
Person is a partner, shareholder, venturer, member, director, officer or
manager, and any other Person directly or indirectly controlling, controlled
by, or under common control with, such Person.
Affiliate Company: any one or more of Pharmaceutical Resources,
-----------------
Inc., a New Jersey corporation, Quad Pharmaceutical, Inc., an Indiana
corporation, PRX Distributors, Ltd., a Delaware corporation, Par Printing
Enterprises, Inc., a New Jersey corporation, Advanced Biopharm Inc., a Delaware
corporation, Generic Innovations, Inc., a New Jersey corporation, and their
respective successors and assigns (with all such companies referred to
collectively as the "Affiliate Companies").
Benefit Liabilities: the meaning specified in Section 4.12.
-------------------
Borrower: the meaning specified in the Preamble.
--------
Business Day: any day on which banks in the State of New Jersey are
------------
generally open to conduct regular banking business.
Capital Expenditure: any payment made directly or indirectly for the
-------------------
purpose of acquiring or constructing fixed assets, real property or equipment
which, in accordance with generally accepted accounting principles, would be
added as a debit to the fixed asset account of the Person making such
expenditure, including, without limitation, amounts paid or payable for labor
or under any conditional sale or other title retention agreement or under any
Lease or other periodic payment arrangement which is of such a nature that
payment obligations of the lessee or obligor thereunder would be required by
generally accepted accounting principles to be capitalized on the balance sheet
of such lessee or obligor.
Capital Lease: any Lease of property (real, personal or mixed)
-------------
which, in accordance with generally accepted accounting principles, would be
capitalized on the lessee's balance sheet or for which the amount of the asset
and liability thereunder as if so capitalized should be disclosed in a note to
such balance sheet.
CERCLA: the meaning specified in Section 4.19.
------
<PAGE>
COBRA: the meaning specified in Section 4.12.
-----
Code: the Internal Revenue Code of 1986, as amended from time to
----
time.
Collateral: collectively, any and all collateral referred to herein
----------
or in the Security Documents, or any of them.
Commonly Controlled Entity: the meaning specified in Section 4.12.
--------------------------
Current Assets: As applied to any Person, the consolidated current
--------------
assets of the Person, determined in accordance with generally accepted
accounting principles on a basis consistent with that employed by the
Accountants in preparing the financial statements referred to in Section 6.05.
Current Liabilities: As applied to any Person, the consolidated
-------------------
current liabilities of the Person, determined in accordance with generally
accepted accounting principles on a basis consistent with that employed by the
Accountants in preparing the financial statements referred to in Section 6.05.
Default Rate: the meaning specified in Section 9.02.
------------
Disbursement Request: the meaning specified in Section 2.01(b).
--------------------
Drawdown Date: in relation to any Advance, the day on which such
-------------
Advance is made or to be made to the Borrower pursuant to the terms and
conditions of this Agreement.
ISRA: the meaning specified in Section 4.19(a).
----
Employee Benefit Plans; Employee Pension Plan; and Employee Welfare
--------------------------------------------------------------------
Plan: the respective meanings specified in Section 4.12.
- ----
ERISA: the meaning specified in Section 4.12.
-----
Event of Default: the meaning specified in Article VIII.
----------------
Fiscal Quarters: the Borrower's accounting periods ending on the
---------------
Saturday nearest the end of each December, March, June and September.
Fiscal Year: shall mean the fiscal year of the Borrower ending on
-----------
the Saturday nearest September 30.
Funded Debt: in relation to any Person at any particular time, all
------------
Indebtedness of such Person at such time: (i) in respect of any money borrowed
by such Person, (ii) under or in respect of any guarantee (whether direct or
indirect) by such person of any Indebtedness for borrowed money of any other
Person, or (iii) evidenced by any loan or credit agreement, promissory note,
debenture, bond, guarantee or other substantially similar obligation to pay
money.
Guarantees: the meaning specified in Section 2.05(b).
----------
Guarantors: the Affiliate Companies.
----------
Hazardous Material: the meaning specified in Section 4.19.
------------------
Indebtedness or indebtedness: as applied to any Person, (a) all
----------------------------
items (except items of capital stock,
-2-
<PAGE>
capital or paid-in surplus or of retained earnings) which, in accordance with
generally accepted accounting principles, would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as at the date as of which Indebtedness is to be determined, including
any Lease which in accordance with generally accepted accounting principles
consistently applied would constitute indebtedness, (b) all indebtedness
secured by any mortgage, pledge, security, lien or conditional sale or other
title retention agreement to which any property or asset owned or held by such
Person is subject, whether or not the indebtedness secured thereby shall have
been assumed, and (c) all indebtedness of others which such Person has directly
or indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or otherwise sold with recourse or
agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which such Person has agreed to supply or advance
funds (whether by way of loan, stock or equity purchase, capital contribution
or otherwise) or otherwise to become directly or indirectly liable.
Interest Expense: As applied to any Person for any period, the
----------------
aggregate amount (determined in accordance with generally accepted accounting
principles) of interest accrued (whether or not paid) during such period by
such Person in respect of all Indebtedness for borrowed money and the interest
portion of all amounts accrued (whether or not paid) during such period by such
Person in respect of all Capital Leases.
Involuntary Petition: the meaning specified in paragraph (j) of
--------------------
Article VIII.
Lease(s): any lease of, or other periodic payment arrangement for
--------
the use or possession of, property (real, personal or mixed).
Lender: Midlantic Bank, National Association and its successors and
------
assigns.
Licenses: the meaning specified in Section 4.13.
--------
Multiemployer Plan: the meaning specified in Section 4.12.
------------------
Net Income: As applied to any Person for any fiscal period, the
----------
consolidated net income (or loss) of such Person, excluding any extraordinary
income (or loss) or non-cash gains or loss of such Person for such period
(taken as a cumulative whole), after deducting all operating expenses,
provisions for all taxes and reserves (including reserves for deferred income
taxes) and all other proper deductions, all determined in accordance with
generally accepted accounting principles on a basis consistent with that
employed by the Accountants in preparing the financial statements referred to
in Section 6.05, adjusted to exclude results from discontinued operations (to
the extent not accounted for as an extraordinary item) and the cumulative
effects of any changes in accounting principles.
Note: the Secured Promissory Note of the Borrower of even date
----
herewith in the form of Schedule 2.01A hereto, as the same may be amended
--------------
or restated or replaced from time to time.
PBGC: the meaning specified in Section 4.12.
----
Person or person: any individual, corporation, partnership, joint
----------------
venture, trust or unincorporated organization or any government or any agency
or political subdivision thereof.
Premises: the meaning specified in Section 4.19.
--------
PRI: Pharmaceutical Resources, Inc., a New Jersey corporation.
---
Prime Rate: the rate of interest announced from time to time by
----------
Lender as its "prime rate" or "prime lending rate," which rate is determined
from time to time by Lender as a means of pricing some loans to its
-3-
<PAGE>
customers and is neither tied to any external rate of interest or index nor
necessarily reflects the lowest rate of interest actually charged by Lender to
any particular class or category of customers.
RCRA: the meaning specified in Section 4.19.
----
Rents: for any periods, the aggregate amount of payments by the
-----
Borrower which are accrued (whether or not paid by the Borrower) during such
period in respect of all Leases except Capital Leases.
Security Document(s): the meaning specified in Section 2.05.
--------------------
Stockholder(s): with respect to any corporation all Persons who at
--------------
any time hold or acquire capital stock of such corporation.
Tangible Net Worth: As applied to any Person at any time,
------------------
stockholders' equity of such Person, minus the amount thereof attributable to
intangibles (including but not limited to goodwill, capitalized software and
excess purchaser costs), all as determined, on a consolidated basis, in
accordance with generally accepted accounting standards.
Term Loan: the meaning specified in Section 2.01(a).
---------
Term Loan Commitment: the meaning specified in Section 2.01(a).
--------------------
Termination Date: the meaning specified in Section 2.01(a).
----------------
Transaction Documents: the meaning specified in Section 4.02.
---------------------
Treasury Rate: on the date of computation, the then weekly average
-------------
yield on United States Treasury Notes adjusted to a constant maturity of 4
years as made available by the Federal Reserve Bank rounded to the next-highest
one-eighth of one percent (0.125%).
Unmatured Event of Default: any event or condition, which, after
--------------------------
notice or lapse of time, or both, would constitute an Event of Default.
Working Capital: the difference, determined in accordance with
---------------
generally accepted accounting principles on a basis consistent with that
employed by the Accountants in preparing the financial statements referred to
in Section 6.05, between Current Assets minus Current Liabilities.
All accounting terms not specifically defined herein shall be construed
in accordance with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements referred to in
Section 4.01 hereof.
II. GENERAL TERMS
-------------
Section 2.01. Term Loan.
------------ ---------
(a) Term Loan. Subject to the terms and conditions contained in
---------
this Agreement, and provided that no Event of Default or Unmatured Event of
Default has occurred, the Lender agrees to make a loan (the "Term Loan") to the
Borrower, in one or more advances (an "Advance" or collectively the
"Advances"), upon the written request of Borrower, from the date hereof until
December 31, 1994 (the "Termination Date"), in the aggregate principal amount
of up to Four Million Dollars ($4,000,000.00) (the "Term Loan Commitment").
The Term Loan shall be evidenced by the Note.
-4-
<PAGE>
(b) Procedures for Making Advances. Whenever the Borrower desires
------------------------------
to receive an Advance, the Borrower will furnish the Lender a written request
(referred to as a "Disbursement Request"), by telecopier or otherwise, which
shall (i) be received by the Lender at the address for notices under Section
10.08 hereof, no later than 2:00 p.m. New Jersey time one (1) Business Day
prior to the Drawdown Date of such Advance and (ii) specify (A) the Drawdown
Date (which must be a Business Day) and (B) the amount of such Advance and (C)
the bank account of the Borrower with the Lender to which payment of the
proceeds of the Advance is to be made and (iii) contain a representation from
the Company that the proceeds of the requested Advances shall be used
exclusively for the purposes provided for under Section 2.06 of this Agreement.
Subject to the terms and conditions of this Agreement, the Lender will make the
Advance available to the Borrower by 2:00 p.m., New Jersey time, on the
Drawdown Date by crediting the proceeds of such Advance to an account of the
Borrower specified in the Disbursement Request.
Section 2.02. Repayment of Principal; Prepayment.
------------ ----------------------------------
(a) Principal in Respect of Term Loan. The Term Loan shall be
---------------------------------
payable without setoff, deduction or counterclaim in forty-eight (48) equal
consecutive monthly installments of principal, each in an amount equal to one
forty-eighth (1/48) (rounded to the nearest whole dollar amount) of the
principal amount outstanding on the Termination Date, commencing January 31,
1995, and continuing on the last day of each calendar month thereafter until
December 31, 1998, when all remaining outstanding principal and accrued
interest thereon shall be due and payable in full without setoff, deduction or
counterclaim.
(b) If not otherwise paid when due, the Lender may, at its discretion,
charge the amount of any payment of principal or interest due on the Term Loan
or any other amount that shall become due from the Borrower to the Lender under
this Agreement, to any checking or loan account of the Borrower or apply any
Collateral proceeds or other funds received by the Lender against payment of
any such amount.
(c) The Lender shall have no obligation to relend principal balances
repaid.
Section 2.03. Applicable Interest Rate; Payment of Interest.
------------ ---------------------------------------------
(a) Term Loan Interest Rate. (i) Subject to the Borrower's
-----------------------
option to convert to a fixed rate of interest pursuant to the provisions of
Section 2.03(a)(ii) and subject to the provisions of Section 9.02 hereof, the
outstanding principal balance of the Term Loan shall bear interest from the
date of Advance until payment in full, both before and after maturity, at a
fluctuating rate per annum equal to the Prime Rate.
(ii) Provided no Event of Default or Unmatured Event of Default
has occurred and subject to the provisions of Section 9.02 hereof, the Borrower
may elect to convert to a Treasury Rate interest rate by providing the Lender
notice of such election no earlier than December 1, 1994 and no later than
December 27, 1994 in the form attached hereto as Schedule 2.03 (the
-------------
"Conversion Notice"). If the Lender receives the Conversion Notice within the
above period, and provided no Event of Default or Unmatured Event of Default
has occurred prior to January 1, 1995, then from and after January 1, 1995,
subject to Section 9.02 hereof, the outstanding principal balance of the Term
Loan shall bear interest until payment in full, both before and after maturity,
at a fixed rate equal to the Treasury Rate plus 250 basis points.
(b) Payment Dates. Interest on the Note shall be payable
-------------
monthly in arrears without setoff, deduction or counterclaim on the last day of
each calendar month commencing December 31, 1994 and continuing on the last day
of each calendar month thereafter and after maturity, whether by reason of
acceleration, payment, prepayment or otherwise.
(c) Interest Calculations. Interest shall be computed on the
---------------------
basis of a three hundred sixty (360) day year counting the actual number of
days elapsed.
-5-
<PAGE>
(d) Lawful Rate. If the interest rate calculated in
-----------
accordance with the terms of any provision of this Agreement, or the aggregate
of all amounts due hereunder which are contracted for, charged or collected
shall, at any time under any circumstances, exceed the maximum permitted by any
law then applicable to the Term Loan, then for such period as the rate or
amount contracted for, charged or collected would exceed the maximum permitted
by such law (and no longer) the rate payable on the Term Loan or so contracted
for, charged or collected shall be reduced to the maximum permitted by such
law. In the event the Lender ever collects, or applies, as interest, any
amount in excess of the maximum permitted by law, such excess amount shall be
deemed a prepayment of such portion of the amounts due hereunder as are deemed
to constitute principal of a loan, and if all amounts so deemed to constitute
principal have been or are thereby paid in full, any remaining excess shall be
paid to the Borrower to the extent permitted by law.
Section 2.04. [Intentionally Left Blank].
------------
Section 2.05. Security for the Note.
------------ ---------------------
The Borrower's obligations and indebtedness to the Lender hereunder
and under the Note shall be secured at all times by:
(a) a Security Agreement of the Borrower of even date herewith
granting Lender a continuing first priority security interest in all presently
owned and hereafter acquired accounts, inventory, machinery, equipment and
fixtures (excluding leasehold improvements located at 2 Ram Ridge Road, Spring
Valley, New York), subject only to the existing liens in favor of Lender and
liens, if any, expressly permitted under this Agreement; and
(b) the joint and several, absolute and unconditional guarantees
of the Guarantors (the "Guarantees").
All agreements and instruments described or contemplated in this
Section 2.05, together with any and all other agreements and instruments
heretofore or hereafter securing the Note and the Borrower's obligations
hereunder or otherwise executed in connection with this Agreement, shall in all
respects be acceptable to the Lender and its special counsel in form and
substance and such agreements and instruments, as the same may be amended from
time to time, are sometimes hereinafter referred to collectively as the
"Security Documents" and individually as a "Security Document". The Borrower
agrees to take such action as the Lender may reasonably request from time to
time in order to cause the Lender to be secured at all times as described in
this Section 2.05, and the Lender's security interests to be perfected at all
times.
Section 2.06. Use of Proceeds.
------------ ---------------
The proceeds of the Term Loan shall be used by the Borrower
exclusively to finance the expenditures set forth in Schedule 2.06
-------------
(attached hereto and made a part hereof) made by the Borrower in Fiscal Year
1994 and capital expenditures to be made by the Borrower for purchases made in
the first Fiscal Quarter of 1995, as represented on an amendment to
Schedule 2.06 provided to the Lender by the Borrower with the
- -------------
corresponding Disbursement Request.
Section 2.07. Term.
------------ ----
This Agreement, the Note, the Security Documents and all other
agreements relating to the Term Loan contemplated hereby shall in all respects
remain in full force and effect until final payment in full of the Note and all
other Indebtedness to the Lender under this Agreement and the Security
Documents.
-6-
<PAGE>
III. CONDITIONS OF MAKING THE TERM LOAN.
----------------------------------
Section 3.01. Term Loan.
------------ ---------
The obligation of the Lender to make the initial Advance under Term Loan
hereunder is subject to the following conditions:
(a) The representations and warranties set forth in this Agreement and
in the Security Documents shall be true and correct on and as of the date
hereof and shall be true and correct in all material respects as of the date
the Term Loan is made, and the Borrower shall have performed all obligations
which were to have been performed by it hereunder prior to the date the Term
Loan is made.
(b) The Borrower shall have executed and delivered to the Lender (or
shall have caused to be executed and delivered to the Lender by the appropriate
Persons) the following:
(i) The Note;
(ii) The Security Documents, together with any other documents
required or contemplated by the terms thereof;
(iii) A certificate of the Secretary of the Borrower certifying
(A) the names and true signatures of the incumbent officers of the
Borrower authorized to sign this Agreement, the Note and the other
Security Documents, (B) the resolutions of the Board of Directors of the
Borrower authorizing the execution and delivery of this Agreement, the
Note and the Security Documents, as applicable, (C) the by-laws of the
Borrower and (D) that the Borrower's corporate charter or articles of
incorporation has not been amended since the date of the certified copy
of such document delivered pursuant to clause (iv) below;
(iv) A copy of the corporate charter or articles of
incorporation, certified by the Secretary of State of the state of
organization, of the Borrower;
(v) A completed Disbursement Request directing the Lender to
disburse funds;
(vi) Certificates of good standing (both as to corporation law
and tax matters) issued by the state in which the Borrower is organized
and any other state in which the failure to qualify would have a material
adverse effect on the Borrower.
(vii) A certificate from an officer of the Borrower reasonably
satisfactory to the Lender certifying (A) that the representations set
forth in Section 4 are true and correct, (B) that no Event of Default has
occurred and (C) to such other matters as Lender may reasonably request;
(viii) Certificates of insurance evidencing all insurance
coverage and policy provisions required in this Agreement and the
Security Documents together with loss payable endorsements in favor of
the Lender with respect to each casualty insurance policy of the
Borrower;
(ix) Such other supporting documents, subordinations, waivers,
consents, releases, resolutions and certificates as the Lender may
reasonably request; and
(x) Proper financing statements, executed by the Borrower as
debtor,
-7-
<PAGE>
naming the Lender as secured party to be filed under the Uniform
Commercial Code of all appropriate jurisdictions or any comparable law as
may be necessary or, in the opinion of the Lender, desirable to perfect
the security interests created pursuant to the Security Documents.
(c) The Lender shall have received the favorable written opinions of
counsel for the Borrower, dated the date of the Term Loan, reasonably
satisfactory to the Lender in scope and substance.
(d) All legal matters incident to the transactions hereby contemplated
shall be satisfactory to counsel for the Lender.
(e) Neither an Event of Default nor an Unmatured Event of Default shall
have occurred and be continuing or result or occur as a result of the entry
into any of the Transaction Documents or the making of the Term Loan.
Section 3.02. Subsequent Advances.
------------ -------------------
The obligation of the Lender to make any subsequent Advance of the Term
Loan not made at the time of closing is subject to the following conditions
precedent:
(a) All warranties and representations set forth in this
Agreement shall be true and accurate in all material respects as of the
Drawdown Date which representations and warranties shall be deemed to have been
stated in full as if set forth at length in Borrower's Disbursement Request.
(b) The Borrower shall have delivered an executed and
completed Disbursement Request to the Lender.
(c) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing as of the Drawdown Date.
IV. REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to the Lender (which
representations and warranties shall survive the delivery of the Note and the
making of the Term Loan) that:
Section 4.01. Financial Statements.
------------ --------------------
The Borrower has heretofore furnished to the Lender the consolidated
balance sheet of PRI as at July 2, 1994, and PRI's consolidated statement of
operations and retained earnings and statements of cash flows, for the fiscal
year or other period ending on such date. Said financial statements and
balance sheet have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of preceding
periods, and are complete and correct in all material respects and fairly
present the financial condition of the Borrower as at said dates and the
results of operations of the Borrower for the periods indicated, subject to
year end adjustments. Since July 2, 1994, there has occurred no material
adverse change in the Borrower's or (on a consolidated basis) PRI's business,
assets, properties or condition (financial or otherwise), operations, or
performance, other than as fully disclosed in said balance sheet and financial
statements. Neither the Borrower nor any of the Affiliate Companies has any
contingent obligations, liabilities for taxes or unusual forward or long-term
commitments material to the Borrower or to them taken as a whole except as
specifically mentioned in the foregoing financial statements.
-8-
<PAGE>
Section 4.02. Organization, Etc.
------------ -----------------
The Borrower (a) is a corporation duly organized and validly existing
under the laws of the State of New Jersey and is duly qualified to transact
business in each jurisdiction where the failure to so qualify would have a
material adverse effect on the Borrower, (b) has the power and authority to own
its properties and to carry on its business as now being conducted and as
presently contemplated, (c) has the corporate power and authority to execute
and deliver, and perform its obligations under, this Agreement, the Note and
the Security Documents (collectively, the "Transaction Documents") to which it
is a party or signatory, and (d) except as set forth on Schedule 4.02, has
--------------
no subsidiaries as of the date hereof.
Section 4.03. Authorization; Compliance, Etc.
------------ -------------------------------
The execution and delivery of, and the performance by the Borrower of its
obligations under, the Transaction Documents have been duly authorized by all
requisite corporate action and will not violate any provision of law, any
order, judgment or decree of any court or other agency of government, the
corporate charter, articles of incorporation or by-laws of the Borrower or,
except as disclosed in Schedule 4.04, any material indenture, agreement or
other instrument to which the Borrower or PRI is a party, or by which the
Borrower or PRI is bound, or, except as disclosed in Schedule 4.04, be in
conflict with, result in a breach of, or constitute (with due notice or lapse
of time or both) a default under, or except as may be permitted under this
Agreement, result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of the
Borrower or (on a consolidated basis) of PRI pursuant to, any such
--
indenture, agreement or instrument, except in favor of the Lender.
Section 4.04. Governmental and Other Consents.
------------ -------------------------------
Except as described in Schedule 4.04 hereto, the Borrower is not
-------------
required to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any governmental instrumentality or other
agency, or any other Person, in connection with or as a condition to the
execution, delivery or performance of any of the Transaction Documents.
Section 4.05. Proceedings.
------------ -----------
Except as disclosed in Schedule 4.05 hereto, there is no claim,
-------------
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency, or any arbitration board or tribunal, now
pending or, to the knowledge of the Borrower, threatened (nor is the Borrower
aware of any facts which could likely result therein), (a) which questions the
validity of any of the Transaction Documents, or any action taken or to be
taken pursuant hereto or thereto, or (b) against or affecting the Borrower or
any Affiliate Company, or to the knowledge of Borrower any other Affiliate of
the Borrower, or any assets of any such party, which, if adversely determined,
either in any case or in the aggregate, could reasonably be expected to have a
material adverse effect on the business, operations, properties, assets or
condition, financial or otherwise, of the Borrower.
Section 4.06. Compliance with Laws and Agreements.
------------ -----------------------------------
Except as otherwise disclosed in Schedule 4.06 hereto, neither the
-------------
Borrower nor any of the Affiliate Companies is a party to any agreement or
instrument or subject to any corporate or other restriction materially and
adversely affecting the business, operations, properties assets or condition,
financial or otherwise, of Borrower or (on a consolidated basis) of PRI.
--
Neither the Borrower nor any of the Affiliate Companies is in violation of any
provision of its corporate charter, articles of incorporation or by-laws and is
not in violation in any material respect of any indenture, agreement or
instrument to which it is a party or by which it is bound or, to the best of
the Borrower's knowledge and belief, of any provision of law, the violation of
which could have a material adverse effect upon the Borrower or (on a
--
consolidated basis) upon PRI, or any order,
-9-
<PAGE>
judgment or decree of any court or other agency of government. Without
limiting the scope of the foregoing, (a) the Borrower and each of the Affiliate
Companies and each of their properties, machinery, facilities and other
business assets is in compliance in all material respects with all federal and
state laws and regulations (including, without limitation, all regulations,
rules, orders and requirements of the United States Food and Drug
Administration) the violation of which could reasonably be expected to have a
material adverse effect upon the Borrower or (on a consolidated basis) upon
--
PRI, neither the Borrower nor any of the Affiliate Companies is charged with,
nor to the knowledge of Borrower, under investigation with respect to any
violation of any such law, rule or regulation, and (c) neither Borrower nor any
of the Affiliate Companies has nor is now engaged in any illegal activity,
including without limitation, a pattern of racketeering activity, that could
subject any of the Borrower's or (on a consolidated basis) upon PRI's
--
assets to forfeiture or seizure.
Section 4.07. Title to Collateral.
------------ -------------------
Except as specified on Schedule 4.07 hereto, the Borrower has good
-------------
title to all of the Collateral free and clear of all mortgages, security
interests, restrictions, liens and encumbrances of any kind, including, without
limitation, liens or encumbrances in respect of unpaid taxes, except liens and
encumbrances in favor of Lender or expressly permitted under this Agreement.
The Borrower enjoys quiet possession under all Leases material to its business
to which it is lessee, and all of such Leases are valid, subsisting and in full
force and effect.
Section 4.08. Other Names or Entities.
------------ -----------------------
Except as disclosed on Schedule 4.08 to this Agreement, none of
-------------
Borrower's business is conducted through any corporate subsidiary,
unincorporated association or other entity and Borrower has not, within the
seven years preceding the date of this Agreement (a) changed its name, (b) used
any name other than the name stated at the beginning of this Agreement, or (c)
merged or consolidated with, or acquired the assets of, any other corporation
or business.
Section 4.09. No Insolvency.
------------ -------------
Neither the borrowings made by the Borrower under this Agreement nor the
execution, delivery and performance of the Note and the Security Documents
render or will render the Borrower insolvent or unable to pay its debts as they
become due; the Borrower is not contemplating either the filing of a petition
by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a substantial portion of its property, and the Borrower
has no knowledge of any person contemplating the filing of any such petition
against the Borrower.
Section 4.10. Full Disclosure.
------------ ---------------
No statement of fact made by or on behalf of any Person (other than the
Lender) in this Agreement, the Security Documents, or any certificate or
schedule furnished to the Lender pursuant hereto or thereto contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained therein or herein not misleading. There is no fact
presently known to the Borrower which has not been disclosed to the Lender in
writing which materially affects adversely, or, which could likely materially
affect adversely the business, operations, properties, assets or condition,
financial or otherwise, of the Borrower.
Section 4.11. Tax Returns; Tax Examination.
------------ ----------------------------
(a) Except as set forth in Schedule 4.11 hereto, the Borrower has
-------------
filed (or caused to be filed) all federal, state and local tax returns required
to be filed, and has paid or made adequate provision for the payment of all
material federal, state and local taxes, franchise fees, charges and
assessments.
-10-
<PAGE>
(b) The federal income tax returns of the Borrower have been examined
by the Internal Revenue Service (or closed by applicable statute) for all tax
periods prior to and including the tax year ending September, 1990. All
deficiencies that have been asserted against the Borrower as a result of such
examination have been fully paid or finally settled or are being contested in
good faith, and no issue has been raised in any such examination that, by
application of similar principles reasonably can be expected to result in the
assertion of a material deficiency for any other year not so examined, except
to the extent that such deficiency has been reserved for in the financial
statements described in Section 4.01. The Borrower has not taken any
------------
reporting positions for which it does not have a reasonable basis and does not
anticipate any further material tax liability with respect to the tax years
that have not been closed. For purposes of this Section 4.11 the term
------------
"Borrower" shall include each other Person with which the Borrower files
consolidated or combined income tax returns or reports.
Section 4.12. Pension Plans, Etc.
------------ -------------------
(a) Plans. Except as set forth in Schedule 4.12 hereto,
----- -------------
neither the Borrower nor any entity with which Borrower would be aggregated (a
"Commonly Controlled Entity") under Section 414(b), (c), (m), or (o) of the
Code, maintains or contributes to any pension, profit sharing or other similar
plan providing for a program of deferred compensation to any employee or former
employee.
(b) Funding of Employee Benefit Plans. Except as set forth in
---------------------------------
Schedule 4.12 hereto, all contributions and other payment required to be
- -------------
made by the Borrower or any Commonly Controlled Entity to all employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which either the Borrower or any Commonly
Controlled Entity maintains or to which any of them contributes (the "Employee
Benefit Plans") have been made or reserves adequate for such purposes have been
set aside and reflected on the Borrower's financial statements. With respect
to any such Employee Benefit Plan which is an employee pension benefit plan, as
defined in Section 3(2) of ERISA (an "Employee Pension Plan"), there is no
accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, and no waiver of the minimum funding standard has
been applied for or obtained from the Internal Revenue Service under Section
412(d) of the Code. No lien has arisen under Section 412(n) of the Code with
respect to the assets of the Borrower. The Borrower has no reason to believe
that the level of contributions required to be made to each multiemployer plan,
as defined in Section 4001(a)(3) of ERISA to which the Borrower or any Commonly
Controlled Entity contributed or contributes (a "Multiemployer Plan") is not
sufficient to maintain the level of benefits under such plan now in effect or
scheduled to become effective in the future.
(c) Fiduciary Duties, Prohibited Transactions and Administration.
------------------------------------------------------------
Neither the Borrower nor any Commonly Controlled Entity has breached any
fiduciary duty imposed on it under Part 4 of Title I of ERISA with respect to
any Employee Benefit Plan and has not engaged in any nonexempt prohibited
transaction, as defined in Section 406 of ERISA and Section 4975 of the Code.
Each Employee Benefit Plan has been and is administered in all material
respects in accordance with its terms and applicable laws, rules and
regulations.
(d) Status of Funded Pension Plans. Except as set forth in
------------------------------
Schedule 4.12 hereto, each funded Employee Pension Plan has been determined
- -------------
by the Internal Revenue Service to be qualified under Section 401(a) or Section
403(a) of the Code and nothing has occurred which would cause the loss of such
qualification or the imposition of any material tax liability or penalty under
the Code or ERISA on the Borrower. With respect to each Employee Pension Plan
which is subject to Title IV of ERISA, other than Multiemployer Plans, (1)
neither the Borrower nor any Commonly Controlled Entity has failed to make
required contributions or incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC"), (2) no reportable event, as defined in Section
4043(b) of ERISA, has occurred, (3) except as set forth in Schedule 4.12 the
actuarial present value of the benefit liabilities, as defined in Section
4001(a)(16) of ERISA ("Benefit Liabilities"), does not exceed the fair market
value of the assets available to provide the Benefit Liabilities. Neither the
Borrower nor any Commonly Controlled Entity knows of any facts or circumstances
which likely
-11-
<PAGE>
will, if known by the PBGC, give rise to any liability to the PBGC under Title
IV of ERISA (other than for premium payments). With respect to Multiemployer
Plans, neither the Borrower nor any Commonly Controlled Entity has withdrawn or
partially withdrawn, as described in Subtitle E of Title IV of ERISA from any
Multiemployer Plan, and there exists no condition or set of circumstances which
could likely result in any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in
any material liability to the Borrower or any Commonly Controlled Entity.
(e) Status of Employee Welfare Plans. No Employee Benefit Plan
--------------------------------
which is an employee welfare benefit plan, as defined in Section 3(1) of ERISA
(an "Employee Welfare Plan"), provides for continuing benefits or coverage for
any participant (or beneficiary) after the termination of the participant's
employment except as may be required by Section 601 of ERISA and Section 4980B
of the Code ("COBRA") and regulations thereunder or by applicable state
statutory law. With respect to any Employee Welfare Plan, Borrower and each
Commonly Controlled Entity have complied with the notice and continuation
coverage requirements of COBRA and regulations thereunder such that there would
not result in any loss of any material deduction under Section 162 of the Code
or any material tax, penalty or liability to the Borrower.
(f) Claims. There are no claims (other than claims for benefits in
------
the normal course), actions or lawsuits asserted or instituted with respect to,
and neither Borrower nor any Commonly Controlled Entity has knowledge of any
threatened claims or litigation with respect to, any Employee Benefit Plan or
any fiduciary thereof, except as set forth in Schedule 4.12.
-------------
Section 4.13. Licenses, Etc.
------------ --------------
The Borrower and each Affiliate Company possess or have otherwise been
granted all material governmental approvals, authorizations, licenses and
permits required in connection with the conduct by the Borrower of its business
as presently conducted including without limitation, from the United States
Food and Drug Administration (such approvals, authorizations, licenses and
permits, together with any extensions, modifications or renewals thereof and
any additional approvals, authorizations, licenses or permits hereafter issued
or granted to the Borrower and to each Affiliate Company, being herein
sometimes referred to collectively as the "Licenses"). All existing Licenses
are in full force and effect, are duly issued or granted in the name of, or
validly assigned to, the Borrower or such Affiliate Company, and the Borrower
or such Affiliate Company have full power and authority to operate thereunder.
Section 4.14. O.S.H.A.
------------ --------
Borrower and each Affiliate Company have duly complied with, and
its facilities, business, leaseholds, equipment and other property are in
compliance, in all material respects, with the provisions of the federal
Occupational Safety and Health Act and all rules and regulations thereunder and
all similar state and local laws, rules and regulations; and there are no
outstanding citations, notices or orders of non-compliance issued to Borrower
or relating to its facilities, business, leaseholds, equipment or other
property under any such law, rule or regulation.
Section 4.15. Ownership of Borrower.
------------ ---------------------
PRI owns beneficially and of record all of the issued and outstanding
capital stock of the Borrower and such shares are held free of any assignment,
pledge, lien, security interest, charge, option or other encumbrance, except
for liens and security interests granted to Lender, and there are no warrants,
options or other rights to acquire shares of the Borrower's capital stock of
any class.
-12-
<PAGE>
Section 4.16. Patents, Trademarks, Etc.
------------ -------------------------
The Borrower owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses, and all rights with respect to the
foregoing, necessary for the conduct of its business as now conducted, without
any known conflict with the rights of others.
Section 4.17. Brokers, Etc.
------------ -------------
The Borrower has not dealt with any broker, finder, commission agent or
other similar person in connection with the Term Loan or the transactions
contemplated by this Agreement, and the Borrower is not under any obligation to
pay any broker's fee, finder's fee or other similar compensation or commission
in connection with such transactions and the Borrower covenants and agrees to
indemnify and hold harmless the Lender from and against, any and all broker's
fees, finder's fees or other similar compensation or commission in connection
with such transactions.
Section 4.18. [Intentionally Left Blank]
------------
Section 4.19. Environmental Matters. (a) Except as may be
------------ ---------------------
otherwise specifically stated in Schedule 4.19, neither the Borrower nor,
-------------
to the best of the Borrower's knowledge, any other Person:
(i) has ever caused, permitted, or suffered to exist any oil,
friable asbestos, hazardous waste, hazardous substance, or other hazardous
material (as defined under applicable law including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. Sections 9601(14) and (33); the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 6903(5); the New Jersey Industrial
Site Recovery Act ("ISRA") N.J.S. 13:1K-6, et. seq., all of which is
collectively referred to herein as "Hazardous Material") to be spilled, placed,
held, located or disposed of on, nor are any now existing on, any real estate
legally or beneficially owned by the Borrower or leased by the Borrower (the
"Premises"), or into the atmosphere, any body of water, any wetlands or the
Premises;
(ii) has any knowledge that any Premises has ever been used
(whether by the Borrower or, to the best of the Borrower's knowledge and
belief, by any other Person) as a treatment, storage or disposal (whether
permanent or temporary) site for any Hazardous Material;
(iii) has any knowledge of any notice of violation, lien or other
notice issued by any governmental agency with respect to the environmental
condition of the Premises, the improvements thereon, any other property owned
by the Borrower or any other property which was previously included in the
property description of the Premises or such other real property, or with
respect to the release of Hazardous Material at, upon, under or within the
Premises, the improvements or such other real property, or the past or ongoing
migration of Hazardous Material from neighboring lands or to the Premises or
the improvements; and
(iv) has any knowledge of any asbestos-containing materials,
PCBs, radon gas, or urea formaldehyde foam insulation at, upon, under or within
the Premises or any improvements thereon.
(v) is by classification subject to ISRA by virtue of its
Standard Industrial Classification number being set forth in ISRA.
(b) Except as disclosed in Schedule 4.19 to this Agreement, no
-------------
property owned or used by Borrower and located in the State of New Jersey is an
"industrial establishment" within the meaning of ISRA or is or has been used
for the generation, manufacture, refining, transportation, treatment, storage,
handling or disposal of any "hazardous substances" or "hazardous wastes" within
the meaning of ISRA. The following are all of the Standard Industrial
Classification Codes applicable to the properties and operations of Borrower:
-13-
<PAGE>
2834
- ----
(c) Except as disclosed in Schedule 4.19 to this Agreement,
-------------
Borrower is in compliance in all material respects with all applicable federal,
state and local statutes, rules, regulations, orders and other provisions of
law relating to air emissions, water discharge, noise emissions, solid and
liquid disposal, hazard waste and substances, and other environmental, health
and safety matters.
Section 4.20. Enforceability.
------------ --------------
This Loan Agreement, the Note and the Security Documents constitute the
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
general principles of equity.
Section 4.21. Investment Company Act; Public Utility Holding Company Act.
------------ ----------------------------------------------------------
The Borrower is not an "investment company" as that term is defined in,
and is not otherwise subject to regulation under, the Investment Company Act of
1940. The Borrower is not a "holding company" as that term is defined in, and
is not otherwise subject to regulation under, the Public Utility Holding
Company Act of 1935.
Section 4.22. Federal Reserve Regulations.
------------ ---------------------------
The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying any margin stock (within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System of the United States), and no part
of the proceeds of the Term Loan will be used to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock or for any purpose that violates, or is
inconsistent with, the provisions of Regulations G, T, U or X of said Board of
Governors.
V. FINANCIAL COVENANTS.
-------------------
The Borrower covenants and agrees that, so long as the Lender has any
obligation to extend credit to the Borrower hereunder, or there remains
outstanding any portion of the principal of, or interest on, the Note, or there
remains outstanding any other Indebtedness to the Lender, whether now existing
or arising hereafter, under this Agreement, the Note or the Security Documents,
the Borrower will:
Section 5.01. Maximum Capital Expenditures.
------------ ----------------------------
Not pay or become obligated to pay Capital Expenditures in any Fiscal
Year listed below which in the aggregate for such Fiscal Year exceed the amount
specified below opposite such Fiscal Year:
Fiscal Year Maximum Capital Expenditures
----------- ----------------------------
1994 $15,000,000
1995 $0
1996 (through March 31, 1996) $2,000,000
provided, however, the Borrower may carry forward into and use in
- ------------------
subsequent years amounts unused in any year so long as so doing would not
result in the occurrence of an Event of Default or an Unmatured Event of
Default.
-14-
<PAGE>
Section 5.02. Minimum Working Capital.
------------ -----------------------
Maintain at all times minimum Working Capital of Borrower of Ten Million
Dollars ($10,000,000).
Section 5.03. Tangible Net Worth.
------------ ------------------
Maintain at all times a minimum Tangible Net Worth of Borrower of
Twenty-Three Million Dollars ($23,000,000.00).
Section 5.04. Restricted Payments.
------------ -------------------
Borrower may, to the extent otherwise permitted by law, pay the dividends
described in Schedule 5.04, and unless there shall have occurred and be
--------
continuing an Event of Default or an Unmatured Event of Default, or unless such
an Event of Default or Unmatured Event of Default shall arise as a result of
the payment hereinafter described, the Borrower may, to the extent otherwise
permitted by applicable law, declare and pay dividends to its Stockholders in
cash or property, or purchase, redeem, retire or otherwise acquire any shares
of any class of its capital stock or return any capital to its Stockholders
which cumulatively do not in the aggregate exceed in any Fiscal Year an amount
equal to (i) fifty-percent (50%) of the Borrower's Net Income for the
immediately preceding Fiscal Year, minus (ii) the amount of any dividend or
distribution described in Schedule 5.04 paid in the same Fiscal Year.
--------
Section 5.05. Debt to Tangible Net Worth Ratio.
------------ --------------------------------
Not cause, suffer or permit the ratio of the Borrower's Funded Debt to
the Borrower's Tangible Net Worth as of the end of any Fiscal Quarter or Fiscal
Year to exceed 1.0:1.0.
Section 5.06. Minimum Interest Coverage.
------------ -------------------------
Borrower shall maintain at all times (as measured on a rolling four (4)
fiscal quarter basis as evidenced by the quarterly and annual financial
statements provided pursuant to Section 6.05 hereof) a ratio of Adjusted EBIT
to total cash interest expense during such period on all Indebtedness of at
least 1.5:1.0.
Section 5.07. Minimum Percentage of PRI.
------------ -------------------------
Not cause, suffer or permit its assets to be or become less than eighty
percent (80%) of the consolidated assets of PRI.
VI. AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that, so long as the Lender has any
obligation to extend credit to the Borrower hereunder, or there remains
outstanding any portion of the principal of, or interest on, the Note, or there
remains outstanding any other Indebtedness to the Lender, whether now existing
or arising hereafter, under this Agreement, the Note, or the Security
Documents, the Borrower will:
Section 6.01. Preservation of Assets; Compliance with Laws, Etc.
------------ -------------------------------------------------
Do or cause to be done all things necessary to preserve, renew and keep
in full force and effect its existence as a corporation, and all material
Licenses and franchises and comply in every material respect with all laws and
regulations applicable to it or the conduct of its business or ownership or use
of its properties (including without limitation, those related to food and
drugs, environmental, health and safety matters and ERISA) and all material
agreements to which it is a party the violation of which could have a material
adverse
-15-
<PAGE>
effect upon the Borrower; at all times maintain, preserve and protect all
material trade names and preserve all the remainder of its material property
used or useful in the conduct of its business and keep the same in good repair,
working order and condition (reasonable wear and tear and damage by fire or
other casualty covered by insurance excepted).
Section 6.02. Insurance.
------------ ---------
(a) Keep all of its insurable properties now or hereafter owned
adequately insured at all times against loss or damage by fire or other
casualty; provide and maintain (or cause to be provided and maintained), at its
expense, comprehensive general property, products liability, workers'
compensation and business interruption insurance protecting against such
liabilities, losses and damages and in such amounts and with such deductibles
as are reasonably acceptable to the Lender, in each case issued by financially
sound and reputable insurers, and, upon request of the Lender, furnish to the
Lender satisfactory evidence of the same; notify the Lender of any material
change in the insurance maintained on the Borrower's properties after the date
hereof and furnish the Lender satisfactory evidence of any such change;
provided that each insurance policy shall: (i) as to the Collateral, be "all
risk" "full replacement cost" insurance against loss, damage or destruction
with such deductibles as are reasonably acceptable to the Lender and name the
Lender (A) as an additional insured and the sole loss payee or (B) as the sole
loss payee pursuant to a so-called "standard mortgagee clause", (ii) provide
that no action of the Borrower, any of the Affiliate Companies or any tenant or
sub-tenant shall void such policy as to the Lender, (iii) provide that the
Lender shall be notified of any proposed cancellation of such policy at least
thirty (30) days in advance thereof and will have the opportunity to correct
any deficiencies justifying such proposed cancellation; and ensure that all
insurance payable with respect to the Collateral is payable to no party other
than the Lender and the Borrower. In the event that the Borrower shall default
in the performance of its obligations under this Section 6.02, the Lender may,
at its option, effect such insurance coverage with an insurer acceptable to the
Lender and add the premium(s) paid therefor to the principal amount of the
indebtedness incurred pursuant hereto, and the amount of such premium shall be
payable by the Borrower on demand with interest thereon at the highest rate
payable hereunder.
(b) Notwithstanding any other provision of this Agreement to the
contrary, prior to the occurrence of an Event of Default or an Unmatured Event
of Default, the Borrower may collect and deposit in any account of the Borrower
at the Lender the proceeds of insurance of Collateral which in the aggregate
with all such proceeds and the book value of all sales or dispositions under
Section 7.03(b) (other than the unused liquid pharmaceutical machinery referred
to therein) do not in the aggregate exceed $200,000 in any one Fiscal Year of
the Borrower or exceed $800,000 from the date of this Agreement; provided, that
the Borrower notifies the Lender in writing of the collection and deposit of
such insurance proceeds, the Collateral loss which resulted in such insurance
proceeds and the aggregate of all insurance proceeds then collected to date
under this paragraph; provided, further, however, to the extent any such
proceeds are used to repair or purchase replacement Collateral against which
the Lender possesses a lien of the same priority as the Lender's lien was
against the Collateral subject to the loss, then the amount of such insurance
proceeds so used will not be included in the computation under this paragraph.
Section 6.03. Taxes, Etc.
------------ -----------
Pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income and profits or upon any of its property, real, personal or mixed, or
upon any part thereof, before the same shall become in default, as well as all
lawful claims for labor, materials and supplies or otherwise, which if unpaid,
might become a lien or charge upon such properties or any part thereof;
provided, however, that the Borrower shall not be required to pay and
- -------- -------
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate legal proceedings and it shall have set aside on its books
adequate reserves with respect to any such tax, assessment, charge, levy or
claim, so contested;
-16-
<PAGE>
and provided, further that, in any event, payment of any such tax,
-------- -------
assessment, charge, levy or claim shall be made before any of Borrower's or (on
a consolidated basis) PRI's property shall be seized or sold in satisfaction
thereof.
Section 6.04. Notice of Proceedings, Defaults, Adverse
------------ ----------------------------------------
Change, Etc.
------------
Promptly (and in any event within five days of the Borrower's
discovery thereof) give written notice to the Lender of (a) any proceedings
instituted or threatened in any federal, state or local court or before any
commission, agency or other regulatory body, whether federal, state or local,
which, if adversely determined, could reasonably be expected to have a material
adverse effect upon its business, operations, prospects, properties, assets, or
condition, financial or otherwise; (b) any notices of default received by the
Borrower (together with copies thereof, if requested by the Lender) with
respect to alleged defaults under or violations of any of its material
licenses, permits, approvals or franchises (including the Licenses), or any
material agreements to which the Borrower is a party or any alleged defaults
with respect to any evidence of Indebtedness of the Borrower, which
Indebtedness is in an amount which equals or exceeds $500,000, or any mortgage,
indenture or other agreement relating thereto; (c) any material adverse change
in the condition, financial or otherwise, or prospects of the Borrower, or (d)
the occurrence of any Event of Default or Unmatured Event of Default.
Section 6.05. Financial Statements and Reports.
------------ --------------------------------
Furnish to the Lender:
(a) (i) Within ninety (90) days after the end of each Fiscal
Year, PRI's consolidated, audited balance sheet and statements of operations
and retained earnings, and statements of cash flows, together with supporting
schedules, prepared in accordance with generally accepted auditing standards
consistently applied and certified without qualification by its independent
certified public accountants selected by the Borrower and reasonably acceptable
to the Lender (which absent any material adverse change may remain as Richard
A. Eisner & Company) (the "Accountants"), the form of such consolidated
financial statements to be satisfactory to the Lender (which consolidated
financial statements may be in the form required to be annexed to or
incorporated in PRI's Annual Report on Form 10-K), showing the consolidated
financial condition of PRI at the close of such Fiscal Year and the results of
operations during such year, together with a statement to the effect that such
Accountants have examined the provisions of this Agreement and that, to the
best of their knowledge, no Event of Default or Unmatured Event of Default has
occurred (or, if such an event has occurred, a statement explaining its nature
and extent); provided, however, that in issuing such statement, such
-------- -------
Accountants shall not be required to exceed the scope of normal auditing
procedures conducted in connection with their opinion referred to above,
and
- ---
(ii) Within ninety (90) days after the end of each Fiscal
Year, Borrower's consolidating balance sheet and statements of operations and
retained earnings and statements of cash flows, together with supporting
schedules, certified by the chief financial officer of PRI as presenting fairly
the financial condition of the Borrower at the close of such Fiscal Year and as
having been prepared in accordance with generally accepted accounting
principles, the form of such consolidating financial statements to be
satisfactory to the Lender;
(b) Within sixty (60) days after the end of each of the first
three Fiscal Quarters of each Fiscal Year, PRI's consolidated (and if the
Borrower is not in compliance with the obligations of Section 5.07 above, then
also Borrower's) balance sheet and statements of operations and retained
earnings and cash flows, together with supporting schedules, prepared by PRI or
the Borrower, as the case may be, in accordance with generally accepted
accounting principles, consistently applied (which consolidated financial
statements may be in the form required to be annexed to or incorporated in
PRI's Quarterly Report on Form 10-Q) and
-17-
<PAGE>
certified by the chief financial officer of PRI, such balance sheet to be as of
the end of such Fiscal Quarter and such statements of income to be for the
quarter then ended and the period from the beginning of the then current Fiscal
Year to the end of such quarter (in each case subject to normal audit and
year-end adjustments);
(c) Concurrently with the delivery of any annual financial statements
required by Section 6.05(a) and any quarterly financial statements required by
Section 6.05(b), a certificate in the form of Schedule 6.05 hereto signed
-------------
by the corporate treasurer or the chief financial officer of the Borrower
setting forth the calculations contemplated in Article V of this Agreement, and
certifying as to the fact that such Person has examined the provisions of this
Agreement and that no Event of Default or Unmatured Event of Default has
occurred (or, if such an event has occurred, a statement explaining its nature
and extent and setting forth the steps the Borrower proposes to take to cure or
prevent any Event of Default);
(d) Promptly upon delivery to any Person other than the Borrower or the
Affiliate Companies or their respective accountant's or legal counsel, a copy
of any report, certificate, letter or other writing which in any manner
describes, discusses or indicates the occurrence of any Event of Default or any
occurrence with which the mere passage of time or the giving of notice or both
would or will become an Event of Default with respect to any Indebtedness of
Borrower or any Affiliate Company for borrowed money.
(e) Promptly upon receipt thereof, and in any event within five (5) days
after such receipt, copies of all correspondence and notices received by the
Borrower from federal and state government regulatory agencies (including
without limitation, the United States Environmental Protection Agency, the New
Jersey Department of Environmental Protection and Energy, the United States
Food and Drug Administration, and the Internal Revenue Service) relating to any
potential or actual adverse action or determination taken or which may be taken
against Borrower or any of its Affiliates.
(f) As soon as reasonably possible and in any event within ten (10) days
after request therefor, such other information regarding the operations,
assets, business, affairs and financial condition of the Borrower as the Lender
may reasonably request from time to time;
(g) Immediately upon their becoming available, copies of each filing
made (including those items which are deemed not officially "filed") with the
Securities and Exchange Commission, including without limitation, a copy of
each registration statement, Form 10-K, Form 10-Q, Form 8-K, Form 8 and each
proxy statement and annual report, in each case with a copy of the exhibits
thereto other than exhibit copies of which were previously delivered to Lender.
Section 6.06. Inspection.
------------ ----------
Permit employees, agents and representatives of the Lender to inspect, on
prior notice during normal business hours, the Premises and the Borrower's
books and records and to make abstracts or reproductions thereof, including,
without limitation, permitting the Lender to inspect any and all equipment or
other assets comprising collateral security for the Term Loan and any and all
maintenance records and agreements with respect to such equipment and other
assets. In no event will any Person be permitted to photograph or videotape
any portion of the Premises or any of the Borrower's operations prior to the
occurrence of an Event of Default.
Section 6.07. Accounting System.
------------ -----------------
Maintain complete and accurate books and records of all its operations
and properties and a standard system of accounting in accordance with generally
accepted accounting principles consistently applied.
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<PAGE>
Section 6.08. Yield Protection. If any change in any law,
------------ ----------------
regulation or guideline or in the interpretation thereof, or any order or
ruling by any regulatory body, court or other governmental authority, or
compliance by Lender with any request or directive (whether or not having the
force of law) of any such regulatory body, court or authority, shall impose,
modify, or deem applicable to Lender any reserve, capital, special deposit or
other requirement or condition affecting loans made or assets held by Lender or
deposits in or for the account of Lender, and the result of any such event is
increased cost or reduced benefit to Lender in maintaining the Term Loan (as
determined by Lender's reasonable allocation of the aggregate of such increased
costs or reduced benefits to Lender resulting from such event), Borrower shall
pay to Lender from time to time, within 10 days after demand, additional
amounts sufficient to compensate Lender for such increased cost or reduced
benefit from the date of such event, together with interest on each such amount
from a date 10 days after the date demanded at the rate then applicable to the
Term Loan. A certificate setting forth in reasonable detail such increased
cost or reduced benefit shall be conclusive as to the amount thereof, absent
manifest error. Lender shall not be required to accept any payment of
principal of the Term Loan which bears interest at the Treasury Rate in advance
of its due date unless the Borrower shall, at such time, also pay all
reemployment costs incurred by the Lender as a result of such early repayment
and such payment of principal shall be applied in inverse order of maturity.
Section 6.09. Additional Assurances.
------------ ---------------------
From time to time hereafter, execute and deliver or cause to be executed
and delivered, such additional instruments, certificates and documents, and
take all such actions, as the Lender shall reasonably request for the purpose
of implementing or effectuating the provisions of this Agreement, the Note or
the Security Documents, and upon the exercise by the Lender of any power,
right, privilege or remedy pursuant to this Agreement or the Security Documents
which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, execute and
deliver or cause to be executed and delivered all related applications,
certifications, instruments and other documents and papers.
Section 6.10. Environmental Indemnification.
------------ -----------------------------
In respect of all environmental matters:
(a) Without in any way limiting the generality of Section 6.01, comply
in every material respect with the requirements of all federal, state, and
local environmental laws; notify the Lender promptly in the event of any spill,
hazardous waste pollution or contamination affecting the Premises; forward to
the Lender promptly any notices relating to such matters received from any
governmental agency; and pay promptly when due any fine or assessment against
the Premises unless the same is being contested by Borrower in good faith in
appropriate legal proceedings and it shall have set aside on its books adequate
reserves with respect to any such fine or assessment, but in any event payment
of any such fine or assessment shall be made before any of Borrower's or (on a
consolidated basis) PRI's property shall be seized or sold in satisfaction
thereof;
(b) not become involved, and not permit any tenant or subtenant of any
of the Premises to become involved, in any operations at the Premises
generating, manufacturing, storing, disposing, refining or handling Hazardous
Material or any other activity that could lead to the imposition on the Lender,
Borrower or the Premises of any liability or lien under any environmental laws;
(c) immediately contain and remove any Hazardous Material (other than
that which is generated, used and disposed of in the ordinary course of
business in compliance with applicable law) found on the Premises, which work
must be done in compliance with applicable laws and at the Borrower's expense;
and the Borrower agrees that the Lender has the right, at its sole option but
at the Borrower's expense, to have an environmental engineer or other
representative review the work being done;
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(d) promptly upon the request of the Lender, based upon the Lender's
reasonable belief that a Hazardous Waste or other environmental problem exists
with respect to the Premises, provide the Lender with an environmental site
assessment report or an update of any existing report, all in scope, form and
content and performed by such company as may be reasonably satisfactory to the
Lender;
(e) not take any action or permit any tenant or subtenant of any of the
Premises to take any action, which will cause any of the Premises to be
considered an "industrial establishment" as that term is defined under ISRA;
(f) indemnify, defend, and hold the Lender harmless from and against any
claim, cost, damage (including, without limitation, consequential damages),
expense (including, without limitation, reasonable attorneys' fees and
expenses), loss, liability, or judgment now or hereafter arising as a result of
any claim for environmental cleanup costs, any resulting damage to the
environment and any other environmental claims against the Borrower, the
Lender, or the Premises; provided the Borrower shall have no obligation to
indemnify or hold harmless the Lender under this Subsection (f) with respect to
matters caused by or resulting directly from the willful misconduct or gross
negligence of the Lender; notwithstanding any other provision of this Agreement
to the contrary, the provisions of this Section 6.10(f) shall continue in
effect and shall survive (among other things) any termination of this
Agreement, payment and satisfaction of the Note, and release of any Collateral;
(g) notwithstanding the foregoing or anything to the contrary contained
in this Agreement, the mere use of fuels, lubricants and other hazardous or
toxic materials normally used in the conduct of a pharmaceutical manufacturer,
in quantities customarily used in the conduct of such business, shall not be a
violation of any covenant contained in Sections 6.10(b), (c) or (e) of this
Agreement, so long as no such substance is used in a manner which would be in
violation of, or subject the Borrower or any tenant of any of its real property
to a claim under or pursuant to, ISRA, the Spill Compensation and Control Act,
CERCLA, RCRA or any law or regulation promulgated by the New Jersey Department
of Environmental Protection or any other state or federal governmental agency;
provided, however, that nothing contained in this paragraph (g) shall in any
manner release the Borrower from its obligation to indemnify, defend and hold
harmless the Lender pursuant to Section 6.10(f).
Section 6.11. Principal Business.
------------ -------------------
Engage, directly and indirectly, principally in the business of a
manufacturer and distributor of pharmaceutical products.
VII. NEGATIVE COVENANTS
------------------
The Borrower covenants and agrees that, so long as the Lender has any
obligation to extend credit to the Borrower hereunder, or there remains
outstanding any portion of the principal of, or interest on, the Note, or there
remains outstanding any other Indebtedness to the Lender, whether now existing
or arising hereafter, under this Agreement, the Note or the Security Documents,
unless the Lender shall otherwise consent in writing, it shall not, directly or
indirectly:
Section 7.01. Indebtedness.
------------ ------------
Incur, create, assume, become or be liable in any manner with respect to,
or permit to exist, any Funded Debt, whether direct, indirect or contingent,
except:
(a) Indebtedness to the Lender;
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(b) Indebtedness under Capital Leases relating to the purchase price of
equipment to be used in the business of the Borrower or with respect to other
Capital Expenditures, to the extent such Indebtedness was permitted by Section
5.01 hereof at the time incurred;
(c) Indebtedness to any Affiliate, provided that such Indebtedness is
subject to a subordination agreement in form and substance satisfactory to
Lender;
(d) Indebtedness existing on the date hereof and described in
Schedule 7.01 attached hereto; provided, however, that the terms of
- ------------- -------- -------
such Indebtedness shall not be modified or amended, nor shall payment thereof
be extended, without the prior written consent of the Lender unless such
amendment, modification or extension would not result in any additional or
different financial burden (other than additional time to repay at
substantially the same rate and cost) on (or additional lien on any assets of)
Borrower, or in any way enhances the corresponding creditor's position in
comparison to Lender;
(e) Indebtedness in respect of reasonable automobiles used by employees
of the Borrower in furtherance of the Borrower's business.
Section 7.02. Liens.
------------ -----
Create, incur, assume, suffer or permit to exist any mortgage, pledge,
lien, charge or other encumbrance of any nature whatsoever on any of its
assets, now or hereafter, owned, including without limitation, any of its real
property owned or leased, other then:
(a) liens securing the payment of taxes, either not yet due or the
validity of which is being contested in good faith by appropriate proceedings,
and as to which it shall have set aside on its books adequate reserves;
(b) security interests and liens in favor of the Lender;
(c) liens imposed by law, such as carriers', warehousemen's or
mechanics' liens, incurred by it in good faith in the ordinary course of
business, and (subject to the provisions of Article VIII) liens arising out of
a prejudgment attachment, a judgment or award against it with respect to which
it shall currently be prosecuting an appeal, a stay of execution pending such
appeal having been secured;
(d) liens securing Indebtedness described in Section 7.01(b) provided
that each such lien shall at all times be limited solely to the item or items
of property so acquired;
(e) any other liens existing on the date hereof and described in
Schedule 7.02 attached hereto;
- -------------
(f) restrictions, easements and minor irregularities in title which do
not and will not interfere with the occupation, use and enjoyment by the
Borrower of such properties and assets in the normal course of its business as
presently conducted or materially impair the value of such properties and
assets for the purpose of such business; and
(g) liens on automobiles securing Indebtedness described in Section
7.01(g).
Section 7.03. Disposition of Assets.
------------ ---------------------
(a) Sell, lease, transfer or otherwise dispose of any of its accounts,
equipment or inventory or any material assets of Borrower to any Person, except
(i) in connection with the replacement of equipment with other equipment of at
least equal utility and value (provided that the Lender's lien upon such
newly-acquired equipment has the same priority as the Lender's lien upon the
replaced equipment) (ii) the sale of inventory in the ordinary course of
business and the retirement of other assets in the normal course of operations.
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(b) Prior to the occurrence of an Event of Default or an Unmatured
Event of Default, Borrower may, in addition to sales and dispositions permitted
under 7.03(a)(i) and (ii), sell or otherwise dispose of equipment which in the
aggregate with all other such sales or disposals during any one Fiscal Year of
the Borrower does not have a book value in excess of an amount equal to
$200,000.00 minus all insurance proceeds collected and included in the
computation under Section 6.02 (b) during such fiscal year and which in the
aggregate with all other such sales or disposals from the date hereof to the
date of such sale or disposal, do not have a book value in excess of an amount
equal to $800,000.00 minus all insurance proceeds collected and included in the
computation under Section 6.02(b) since the date of this Agreement;
-----
provided that Borrower notifies Lender in writing of such sale, the equipment
sold,the book value of such equipment, the aggregate book value of all such
sales or disposals during that Fiscal Year and the aggregate book value of all
such sales and disposals from the date hereof to the date of such sale;
provided, however, the disposition of machinery used prior to the date hereof
in the manufacture of liquid pharmaceutical products shall be excluded from the
above calculations.
Section 7.04. Dividends and Other Distributions.
------------ ---------------------------------
Declare or pay any cash dividend or make any distribution on, or redeem,
retire or repurchase or otherwise acquire directly or indirectly, any share of
its stock or make any distribution of assets to its stockholders, except to the
extent expressly permitted under Section 5.04 hereof.
Section 7.05. Sale Leaseback.
------------ --------------
Enter into or become obligated under any conditional sale, sale-leaseback
or other title retention agreement, except as may otherwise be permitted
hereunder.
Section 7.06. Acquisition. Acquire or obligate itself to acquire
------------ -----------
the stock, or assets (except in the ordinary course Borrower's business) of any
Person, except for acquisitions consummated solely for (i) cash or (ii)
------
subject to the provision of Section 8.01(m), Borrower's capital stock or (iii)
Funded Debt not in excess of $5,000,000 in any one Fiscal Year, or (iv) any
combination of (i), (ii) and (iii).
Section 7.07. Fundamental Changes.
------------ -------------------
Amend its corporate charter, articles of incorporation or by-laws in any
way that could have a material adverse effect upon its business or upon the
Lender's rights hereunder or under the Security Documents (it being expressly
agreed that the inclusion of any provision similar to those set forth in
Section 102(b)(2) of Title 8 of the Delaware Code is prohibited under this
Section); take any steps in contemplation of dissolution or liquidation; enter
into or authorize any merger, consolidation, reorganization or
recapitalization; or conduct any material part of Borrower's business through
any subsidiary, unincorporated association or other entity; provided, however,
Borrower may engage in a merger where Borrower is the surviving entity if
Borrower (i) provides Lender at least forty-five days prior written notice
(including the details) of the proposed merger and (ii) thereafter receives
Lender's prior written consent to such merger, which consent will not be
unreasonably withheld or delayed.
Section 7.08. Change in Business.
------------ ------------------
Materially change or alter the nature of or cease operations of its
business; or change the location of the chief executive office of the Borrower
or, without 45 days' prior written notice to the Lender and the execution,
delivery and filing of such documents as reasonably required by the Lender, the
name under which it conducts its business; provided, however, upon at least 45
days prior written notice and the execution,
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<PAGE>
delivery and filing of such documents as reasonably required by Lender,
Borrower may move its chief executive office within Northern New Jersey,
Fairfield County in Connecticut and Rockland, Westchester and New York Counties
in New York State.
Section 7.09. Accounts Receivable.
------------ -------------------
Sell, assign, discount or dispose in any way of any accounts receivable
or promissory notes arising out of any of the Collateral except for collection
(including endorsements) in the ordinary course of business.
Section 7.10. Transactions with Affiliates.
------------ ----------------------------
Except for the transaction described in Schedule 7.10, enter into any
-------------
transaction, including, without limitation, the purchase, sale or exchange of
property or assets or the rendering or accepting of any service with or to any
Affiliate of the Borrower except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower's business and upon
terms not less favorable to the Borrower than it could obtain in a comparable
arm's-length transaction with a third party other than such Affiliate.
Section 7.11. Illegal Activities.
------------ ------------------
Engage in any conduct or activity, including, without limitation, a
pattern of racketeering activity, that could subject any of the Borrower's
assets to forfeiture or seizure.
VIII. DEFAULTS
--------
Section 8.01 Defaults.
------------ --------
Each of the following events (each of which is herein sometimes
called an "Event of Default") shall constitute an Event of Default under this
Agreement:
(a) any representation or warranty made in this Agreement, a Security
Document, or any other Transaction Document, or in any report, certificate,
financial statement or other instrument furnished in connection with this
Agreement, or the borrowings hereunder, shall prove to be false or misleading
in any material respect when made; or
(b) default in the payment of any installment of the principal of the
Note or the principal of any other Indebtedness of the Borrower to the Lender,
whether now existing or hereafter arising, when the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment or
by acceleration or otherwise and the continuation of such default past any
applicable grace period or, if no applicable grace or cure period, for three
(3) days following the date such payment is due and payable; or
(c) default in the payment of any fee, rental, expense, or other
obligation payable by the Borrower to the Lender or any installment of any
interest on the Note or on or in respect of any other Indebtedness of the
Borrower to the Lender, whether now existing or hereafter arising, when the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment or by acceleration or otherwise, and continuation of such
default past any applicable grace period or, if no applicable grace period, for
three (3) days following the date such payment is due and payable; or
(d) default in the due observance or performance by any Person other
than the Lender of any other covenant, condition or agreement contained in this
Agreement, which default shall continue unremedied for thirty (30) days after
the earlier to occur of (i) the Borrower's discovery of such default, or (ii)
written
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notice thereof from the Lender to the Borrower; provided, however, that
-------- -------
if such default cannot be remedied, then such default shall be deemed to be an
Event of Default as of the date of the occurrence thereof; or
(e) for any reason any Security Document at any time shall not be in
full force and effect in all material respects or shall not be enforceable in
all material respects in accordance with its terms, or any security interest or
lien of Lender granted pursuant thereto shall fail to be perfected (except due
to acts or omissions of the Lender, if the Borrower has taken all acts
requested by the Lender to reperfect such security interest or lien), or fail
to be a first priority security interest or lien in favor of Lender in any
material item of the Collateral or any party thereto other than the Lender,
shall contest the validity of any security interest or lien granted under, or
shall seek to disaffirm or reduce its obligations under, any Security Document;
or
(f) any default shall occur or exist under any Security Document and
such default shall continue unremedied for more than the applicable period of
grace, if any, specified therein; or
(g) any event of default with respect to any other evidence of
Indebtedness of the Borrower or any Affiliate Company for borrowed money which
event of default permits the corresponding creditor to exercise remedies with
respect to such Indebtedness, which Indebtedness is in an amount which equals
or exceeds $500,000, whether or not such event of default results in
acceleration of such Indebtedness; or
(h) (A) the Borrower shall lose, fail to keep in force, suffer the
termination, suspension or revocation of, or terminate, forfeit or suffer an
amendment to, any License at any time held by it, which could reasonably be
expected to have a material adverse effect on the operations of the Borrower;
(B) any governmental regulatory authority shall commence an action or
proceeding seeking the termination, suspension, revocation or material adverse
amendment of any material License held by the Borrower and the Lender shall
reasonably and in good faith believe that the result thereof shall be the
termination, revocation, suspension or material adverse amendment of such
License; or
(i) the Borrower shall (A) discontinue its business, (B) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of
it or any of its property, (C) admit in writing its inability to pay its debts
as they mature, (D) make a general assignment for the benefit of creditors, (E)
be adjudicated a bankrupt or insolvent or be the subject of an order for relief
under Title 11 of the United States Code, or (F) file a volunoltary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against it in
any proceeding under any such law, or corporate action shall be taken for the
purpose of effecting any of the foregoing or (G) become unable or fail to pay
its debts generally as they become due; or
(j) there shall be filed against the Borrower an involuntary petition
seeking reorganization of such Borrower or the appointment of a receiver,
trustee, custodian or liquidator of the Borrower or any material part of its
assets, or an involuntary petition under any bankruptcy, reorganization or
insolvency law of any jurisdiction, whether now or hereafter in effect (any of
the foregoing petitions being herein referred to as an "Involuntary Petition");
or
(k) final judgment for the payment of money which, when aggregated with
all other outstanding judgments against the Borrower, exceeds $500,000, shall
be rendered against the Borrower and no insurer(s) shall have admitted in
writing its liability for such judgments to an extent which reduces the
Borrower's aggregate liability to less than $500,000, if such judgment shall
remain undischarged or not have been stayed pending appeal within thirty (30)
days after entry thereof or shall not have been discharged within five (5) days
after the expiration of any such stay; or
(l) the occurrence of any attachment of any deposits or other property
of the Borrower in the hands or possession of the Lender, or the occurrence of
any attachment of any other property of the Borrower
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<PAGE>
in an amount exceeding $500,000 in the aggregate which shall remain
undischarged thirty (30) days after the attachment thereof or no insurer shall
have admitted its liability in writing to satisfy and remove the attachment, or
the same shall not have been stayed pending appeal within thirty (30) days
after entry thereof or shall not have been discharged within five (5) days
after the expiration of any such stay; or
(m) for any reason less than one hundred percent (100%) of the issued
and outstanding capital stock of the Borrower is owned by PRI, free and clear
of any lien or encumbrance; or
(n) the Borrower or any material part of its business or assets shall be
the subject of (i) any extraordinary product recall which results in the
ceasing or other than short term shut down of any material portion of
Borrower's business, or (ii) any seizure or forfeiture proceeding or similar
action instituted or conducted by any agency, office or department of state or
federal government, except such as are being contested in good faith in an
appropriate legal proceeding and in which no judgment has been rendered adverse
to the interest of the Borrower; or
(o) there occurs or the Borrower takes any action to authorize any sale
or transfer in bulk or encumbrance on all or a major part of the Borrower's
assets; or
(p) PRI's Net Income for any Fiscal Quarter is a negative number and
when combined with the PRI's Net Income for the immediately prior Fiscal
Quarter results in an aggregate loss for the overall six month period; or
(q) With respect to any Employee Benefit Plan (as defined in Section
4.12 of this Agreement), there occurs or exists any of the events or conditions
described in the following clauses (a) through (h) and such event or condition,
together with all like events or conditions, could likely, or do subject
Borrower to any tax, penalty or other liability that likely would, or does,
singly or in the aggregate, have a material adverse effect on the financial
condition or the properties or operations of Borrower: (a) a reportable event
as defined in Section 4043 of ERISA, (b) a prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code, (c)
termination of the Employee Benefit Plan or filing of notice of intention to
terminate, (d) institution by the PBGC of proceedings to terminate, or to
appoint a trustee to administer, the Employee Benefit Plan, or circumstances
that constitute grounds for any such proceedings, (e) complete or partial
withdrawal from a multi-employer Employee Benefit Plan, or the reorganization,
insolvency or termination of a multi-employer Employee Benefit Plan, (f) an
accumulated funding deficiency within the meaning of ERISA, (g) violation of
the reporting, disclosure or fiduciary responsibility requirements of ERISA or
the Internal Revenue Code, or (h) any act or condition which could result in
direct, indirect or contingent liability to any Employee Benefit Plan or the
PBGC; or
(r) any of the Guarantees ceases to be effective, or any of the
Guarantors denies the validity of or liability under any of the Guarantees, or
any of the events described in subsections (a), (d), (g), (h), (i), (j), (k),
(l), (n), or (o) above occurs with respect to any of the Guarantors.
Upon the occurrence of any such Event of Default and at any time thereafter
during the continuance of such Event of Default, at the election of the Lender,
the Term Loan Commitment shall terminate and the Note and all other
Indebtedness of the Borrower to the Lender shall immediately become due and
payable, including all principal and interest, without presentment, demand,
protest, or further notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Note or other evidence of such
Indebtedness to the contrary notwithstanding (except in the case of an Event of
Default under paragraph (i) or (j) of this Article VIII, in which event the
Term Loan Commitment shall automatically terminate and such Indebtedness shall
automatically become due and payable) and Lender shall be entitled to forthwith
exercise (to the extent and in such order as Lender may elect, in its sole and
absolute discretion) any or all rights and remedies provided in this Agreement,
the Note or any other Transaction Document and all other rights and remedies
that may otherwise be available to Lender by agreement or at law or in equity.
In the event of an
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<PAGE>
acceleration of the Borrower's Indebtedness hereunder as a result of the filing
of an Involuntary Petition as specified in paragraph (j) of this Article VIII,
such acceleration shall be rescinded, and the Borrower's rights hereunder
reinstated, if, within ninety (90) days following the filing of such
Involuntary Petition, such Involuntary Petition shall have been dismissed and
there shall then exist no other Event of Default or Unmatured Event of Default
under this Agreement.
IX. REMEDIES ON DEFAULT, ETC.
-------------------------
Section 9.01. Remedies.
------------ --------
In case any one or more Events of Default shall occur and be continuing,
the Lender shall have the right, in addition to all other rights and remedies
provided by law or by this Agreement or any other Transaction Document, to
proceed to protect and enforce its rights by an action at law, suit in equity
or other appropriate proceeding, whether for the specific performance of any
agreement contained in this Agreement, any Transaction Document or the Note or
for an injunction against a violation of any of the terms hereof or thereof or
in and of the exercise of any power granted hereunder or thereby or by law. No
right conferred upon the Lender hereby or by any Transaction Document or the
Note shall be exclusive, but shall be cumulative and in addition to any other
right or remedy referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise; and the Lender may exercise its
remedies concurrently, independently or successively.
Section 9.02. Default Rate.
------------ ------------
Without regard to whether the Lender has exercised any other rights or
remedies hereunder, the applicable interest rate under the Note shall at the
Lender's option, but only to the extent permitted by law, be increased to a
rate per annum (the "Default Rate") equal to the interest rate specified under
Section 2.03 hereof, plus two percent (2%) per annum upon the occurrence of an
Event of Default.
Section 9.03. Cross Default.
------------ -------------
BORROWER HEREBY AGREES THAT ALL OTHER OBLIGATIONS BETWEEN BORROWER AND
LENDER OR ANY AFFILIATE OF LENDER (INCLUDING, WITHOUT LIMITATION, THE
OBLIGATIONS OF BORROWER UNDER OR IN CONNECTION WITH OR IN ANY WAY RELATED TO
(I) THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, DATED THE DATE HEREOF)
AND (II) THE AMENDED AND RESTATED AGREEMENT CONCERNING TERM LOANS, DATED THE
DATE HEREOF) AS ANY OR ALL OF THE SAME MAY, FROM TIME TO TIME, BE AMENDED,
MODIFIED, RESTATED OR OTHERWISE REVISED, ARE HEREBY AMENDED SO THAT A DEFAULT
UNDER THIS AGREEMENT IS A DEFAULT UNDER ALL SUCH OTHER AGREEMENTS AND A DEFAULT
UNDER ANY ONE OF THE OTHER AGREEMENTS IS A DEFAULT UNDER THIS AGREEMENT.
Section 9.04. Application of Proceeds.
------------ -----------------------
The Borrower hereby agrees that upon the occurrence of an Event of
Default, the Lender shall be entitled to apply the proceeds of any payment made
to the Lender by or on behalf of the Borrower, including, without limitation,
the proceeds arising from any of the collateral securing any of the obligations
of Borrower to the Lender, in a manner and against the obligation or
obligations as determined in the sole and absolute discretion of the Lender;
provided, however, if the Lender takes affirmative action to enforce any of its
remedies in order to realize against any of the Collateral, any proceeds
received by the Lender from any or all such actions shall be applied first
against secured obligations and then against any unsecured obligations.
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X. MISCELLANEOUS
-------------
Section 10.01. Survival.
------------- --------
This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto, shall
survive the making by the Lender of the Term Loan and shall continue in full
force and effect so long as the Note or any other Indebtedness to the Lender,
whether now existing or hereafter arising, under this Agreement or the Security
Documents, is outstanding and unpaid or the Lender has any obligation to make
credit extensions hereunder.
Section 10.02. Expenses.
------------- --------
The Borrower agrees to reimburse the Lender upon demand for all
out-of-pocket costs, charges, liabilities, documentary stamp taxes, intangible
taxes, any other taxes due under any applicable state law (exclusive of taxes
measured or imposed in terms of the Lender's net income) and any other expenses
of the Lender (including, without limitation, (i) reasonable fees and
disbursements of (A) counsel to the Lender and (B) agents of the Lender not
regularly in its employ and (ii) the allocated costs of services of Lender's
in-house counsel (except such that are clearly mere duplications of costs under
(i)(a)) in connection with (a) the preparation, negotiation, interpretation,
execution and delivery of this Agreement, the Note, any Security Documents and
any other agreements or documents relating thereto, (b) the making of the Term
Loan, (c) any amendments, modifications, consents or waivers in respect
thereof, (d) any enforcement of any of the Transaction Documents, (e) any
proceedings with respect to any of the Transaction Documents or with respect to
the bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation of the Borrower or any party to any Transaction Document, and
(f) any claims by third parties (except as caused by or result directly from
the willful misconduct or gross negligence of the Lender) relating to the
foregoing.
Section 10.03. Indemnification; Limitation of Liability.
------------- ----------------------------------------
(a) The Borrower agrees to protect, indemnify and hold harmless the
Lender and each of its officers, directors, employees and agents (collectively
called the "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for and
consultants of such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be
designated a party thereto), which may be imposed on, incurred by, or asserted
against such Indemnitees (whether direct, indirect, or consequential and
whether based on any federal or state laws or other statutory regulations,
including, without limitation, securities, environmental and commercial laws
and regulations, under common law or at equitable cause or on contract or
otherwise) in any manner relating to or arising out of this Loan Agreement, the
Note or any of the Security Documents, or any act, event or transaction related
or attendant thereto, the agreements of the Lender contained herein, the making
of the Term Loan, the management of the Term Loan or the Collateral (including
any liability under federal, state or local environmental laws or regulations)
or the use or intended use of the proceeds of such Term Loans hereunder
(collectively, the "Indemnified Matters"); provided that the Borrower shall
have no obligation to any Indemnitee hereunder with respect to Indemnified
Matters caused by or resulting directly from the willful misconduct or gross
negligence of such Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Matters incurred by the Indemnities.
(b) To the extent permitted by applicable law, no claim may be made by
the Borrower or any other Person against the Lender or any of its affiliates,
directors, officers, employees, agents, attorneys or consultants for any
special, indirect, consequential or punitive damages in respect of any claim
for breach of
-27-
<PAGE>
contract or any other theory of liability arising out of or related to the
transactions contemplated by the Loan Agreement, the Note or any of the
Security Documents or any act, omission or event occurring in connection
therewith; and the Borrower hereby waives, releases and agrees not to sue upon
any claim for any such damages, whether or not accrued and whether or not known
or suspected to exist in its favor. Neither the Lender nor any of its
affiliates, directors, officers, employees or agents shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
any of the above referenced documents except for its or their own gross
negligence or willful misconduct.
Section 10.04. Setoffs, Etc.
------------- -------------
The Borrower agrees that, in addition to (and without limitation of) any
right of set-off, banker's lien or counterclaim the Lender may otherwise have,
the Lender and any purchaser of a participation in the Note shall be entitled,
at any time and from time to time, at its option, without notice to Borrower
(any such notice being expressly waived by Borrower),to offset balances held by
it for the account of the Borrower at any of its offices, against any
Indebtedness or other fees or charges owed to the Lender or such purchaser
hereunder if the same are not paid when due (regardless of whether such
balances are then due to the Borrower) or if the Borrower becomes insolvent,
howsoever evidenced, or if any Event of Default occurs, and that such offset
balances may be applied toward the payment of any Indebtedness of the Borrower
to the Lender or to any such purchaser in the Note, whether or not such
Indebtedness or any part thereof shall then be due; in which case the Lender or
such purchaser shall promptly notify the Borrower thereof, provided, however,
that the Lender's or such purchaser's failure to give such notice shall not
affect the validity thereof.
Section 10.05. Governing Law.
------------- -------------
THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAW PROVISIONS) AND
DECISIONS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN SAID STATE.
Section 10.06. Amendment; Modification.
------------- -----------------------
No modification or waiver of any provision of this Agreement, or of the
Note, nor consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. No notice to, or demand on, the Borrower, in any case, shall
entitle the Borrower to any other or future notice or demand in the same,
similar or other circumstances.
Section 10.07. Waiver.
------------- ------
The Lender's failure to insist upon the strict performance of any term,
condition or other provision of this Agreement, the Note or any of the Security
Documents or other Transaction Documents, or to exercise any right or remedy
hereunder or thereunder, shall not constitute a waiver by the Lender of any
such term, condition or other provision or default or Event of Default in
connection therewith; and any waiver of any such term, condition or other
provision or of any such default or Event of Default shall not affect or alter
this Agreement, the Note or any of the Security Documents or other Transaction
Documents, and each and every term, condition and other provision of this
Agreement, the Note, the Security Documents and other Transaction Documents
shall, in such event, continue in full force and effect and shall be operative
with respect to any other then existing or subsequent default or Event of
Default in connection therewith. An Event of Default hereunder or under any of
the Security Documents shall be deemed to be continuing unless and until waived
in writing by the Lender.
-28-
<PAGE>
Section 10.08. Notice.
------------- ------
All notices, requests, demands and other communications provided for
hereunder shall be in writing (including telecopier communication) and mailed
certified, return receipt requested, or telecopied, personally served or sent
by courier service to the applicable party at the addresses indicated below.
If to the Lender:
MIDLANTIC BANK, NATIONAL ASSOCIATION
CORPORATE BANKING DEPARTMENT
P.O. Box 600
Edison, New Jersey 08818
with a copy to:
Michael J. Dunne, Esq.
Pitney, Hardin, Kipp & Szuch
(mail to) P.O. Box 1945
Morristown, New Jersey 07962-1945
(street address) 200 Campus Drive
Florham Park, New Jersey 07932
and if to Borrower:
PAR PHARMACEUTICAL, INC.
One Ram Ridge Road
Spring Valley, New York 10977
Att'n: Treasurer
with a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Att'n: Stephen A. Ollendorff, Esq.
or, as to each party, at such other address as shall be designated by such
parties in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communication shall be deemed given when delivered in person or by courier
service, upon receipt of a telecopy or 3 business days after deposit in the
United States mail (registered or certified, with postage prepaid and properly
addressed).
Section 10.09. Successors and Assigns.
------------- ----------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns, except
that the Borrower shall not have the right to assign any of its rights
hereunder or delegate any of its obligations hereunder without the prior
written consent of the Lender. Any such impermissible assignment or delegation
shall be void and of no effect.
(b) Lender shall have the right in its sole discretion to assign its
rights under any of the Transaction Documents or to sell one or more
participations in the Note and the Transaction Documents without notice to or
consent of the Borrower and in connection therewith, to provide any such
proposed
-29-
<PAGE>
assignee(s) or participant(s) with financial and other information and copies
of documents relating to the Borrower, the Affiliate Companies, the Borrower's
or the Affiliate Companies' business, and the transactions contemplated hereby,
provided that any such Person agrees in writing to keep any such information
that is not otherwise publicly available confidential. Upon receipt of written
notice from the Lender, the Borrower agrees to provide to any such assignee(s)
or participant(s) copies of all financial information required to be delivered
to the Lender pursuant to Section 6.05 hereof.
Section 10.10. Consent to Jurisdiction, Service of Process.
------------- -------------------------------------------
The Borrower, to the extent that it may lawfully do so, hereby consents
to the jurisdiction of the courts of the State of New Jersey and the United
States District Courts for the District of New Jersey, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising hereunder or under the Note, the Security Documents or
any other Transaction Documents, or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of the courts. In addition, to the extent that it may lawfully
do so, the Borrower hereby consents to the service of process by U.S. certified
or registered mail, return receipt requested, addressed to the Borrower at the
address to which notices are to be given hereunder.
Section 10.11. Waivers.
------------- -------
(A) THE BORROWER AND THE LENDER EACH HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTE, THE SECURITY
DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH. NEITHER THE
BORROWER, THE LENDER NOR ANY ASSIGNEE OF OR SUCCESSOR TO EITHER THE BORROWER OR
THE LENDER, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM,
OR ANY OTHER LITIGATION OR PROCEDURE BASED UPON, OR ARISING OUT OF, THIS
AGREEMENT, THE NOTE, THE SECURITY DOCUMENTS OR ANY OF THE OTHER DOCUMENTS,
INSTRUMENTS AND AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH OR
THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES HERETO, OR ANY OF
THEM. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL
HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS
NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION 10.11 HAVE BEEN FULLY
DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO
EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER
PARTY THAT THE PROVISIONS OF THIS SECTION 10.11 WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
Borrower waives all defenses and rights to interpose any setoff or
counterclaim of any nature except only a defense pertaining to the existence of
an Event of Default or a counterclaim to the extent that the failure to so
assert such counterclaim would permanently preclude the prosecution or recovery
upon the same.
Section 10.12. No Derogation.
------------- -------------
This Agreement and the Transaction Documents are in addition to, and not
in derogation of, other obligations of the Borrower in favor of the Lender.
None of the obligations shall be effected by the Lender's consent to any
substitution or release of any or all of the Collateral or the collateral for
any other obligation, the release of any party to an obligation or the waiver
of any provision thereof, or by any loss of or damage to any collateral or the
failure of the Lender to perfect or maintain its security interest or other
liens therein.
-30-
<PAGE>
Section 10.13. Severability.
------------- ------------
Any provision of this Agreement, the Note or any of the Security
Documents which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 10.14. Section Headings.
------------- ----------------
Any Article and Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section 10.15. Amendment of Other Agreements.
------------- -----------------------------
All references in this Agreement to other documents and agreements to
which the Lender is not a party shall be deemed to refer to such documents and
agreements as presently constituted and not as hereafter amended or modified
unless the Lender shall have expressly consented in writing to such
amendment(s) or modification(s).
Section 10.16. Accounting Principles.
------------- ---------------------
ALL REFERENCES IN THIS AGREEMENT TO ANY CALCULATIONS OR DETERMINATIONS
MADE IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES SHALL BE ON A
CONSOLIDATED BASIS (UNLESS OTHERWISE EXPRESSLY STATED) AND SHALL MEAN, FOR ANY
FISCAL PERIOD, SUCH PRINCIPLES APPLIED ON A BASIS CONSISTENT WITH (A) THE
APPLICATION OF THE SAME IN PRIOR FISCAL PERIODS, (B) THAT EMPLOYED BY THE
ACCOUNTANTS IN PREPARING THE FINANCIAL STATEMENTS REFERRED TO IN SECTION
6.05(A) HEREOF.
Section 10.17. Compliance by PRI.
------------- -----------------
Lender agrees that compliance by PRI, on a consolidated basis, with the
terms and provisions of Sections 5.01-5.06, 6.05, 6.07, 7.01, 7.02, 7.04, of
this Agreement (as though it were the Borrower) shall be deemed compliance by
Borrower with such Sections.
Section 10.18. Knowledge and Discovery.
------------- -----------------------
All references in this Agreement to "knowledge" or "awareness" of, or
"discovery" by, the Borrower shall be deemed to include any such knowledge of,
or discovery by, PRI or any of the Borrower's executive officers.
-31-
<PAGE>
Section 10.19. Integration.
------------- -----------
This Agreement supersedes the Borrower's application for the Term Loan,
the Lender's commitment and proposal letters in respect of the Term Loan, and
all other prior dealings between the parties hereto and their respective
agents, employees, or officers with respect to the credit facilities extended
hereby, and this Agreement, together with the Transaction Documents,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the Lender and the Borrower have caused this
Agreement to be duly executed as a sealed instrument by their respective duly
authorized officers, all as of the day and year first above written.
Attest: PAR PHARMACEUTICAL, INC.
/s/ Kenneth G. Mosesian By: /s/ Robert Edinger
- ------------------------- --------------------------------
Name: Kenneth G. Mosesian Name: Robert Edinger
Title: Treasurer Title: Vice President
MIDLANTIC BANK, NATIONAL ASSOCIATION
By: /s/ Peter J. Cahill
---------------------------------
Name: Peter J. Cahill
Title: Vice President
-32-
<PAGE>
INDEX OF SCHEDULES
------------------
Schedule 2.01A Secured Promissory Note of the Borrower
Schedule 2.03 Conversion Notice
Schedule 2.06 Use of Proceeds
Schedule 4.02 List of Borrower's Subsidiaries
Schedule 4.04 Governmental and Other Consents
Schedule 4.05 Pending Litigation
Schedule 4.06 Compliance with Laws and Agreements
Schedule 4.07 Liens on Collateral
Schedule 4.08 Ownership In Other Entities
Schedule 4.11 Tax Returns and Taxes
Schedule 4.12 Pension Plans, Etc.
Schedule 4.19 Environmental Matters
Schedule 5.04 Dividends
Schedule 6.05 Periodic Reporting Certificate
Schedule 7.01 Indebtedness
Schedule 7.02 Other Liens
Schedule 7.10 Transactions with Affiliates
<PAGE>
SCHEDULE 2.01A
--------------
Secured Promissory Note
-----------------------
$4,000,000.00 _____________________, 1994
FOR VALUE RECEIVED, PAR PHARMACEUTICAL, INC. (the "Borrower"),
hereby unconditionally promises to pay to the order of MIDATLANTIC BANK,
NATIONAL ASSOCIATION, a national banking association (the "Bank"), at its
offices located at Metro Park Plaza, P.O. Box 600, 499 Thornall Street, Edison,
New Jersey 08818, in lawful moneys of the United States of America, the
principal sum of Four Million Dollars ($4,000,000.00) (or if different the
aggregate unpaid principal amount of all Advances (as defined in the Loan
Agreement (as hereinafter defined)) outstanding on the Termination Date (as
defined in the Loan Agreement)) with interest thereon, as follows:
(i) Monthly payments of interest on the principal balance
outstanding from time to tome accrued to the date of payment, at
the rate hereinafter specified, on the last day of each month
commencing on December 31, 1994; and
(ii) Forty-eight (48) equal monthly installments of principal
(each installment equal to one forty-eighth (1/48) of the principal
amount outstanding on the Termination Date) commencing on January
31, 1995 and thereafter on the last day of each month until and
including December 31, 1998 when all unpaid principal, interest and
other amounts due shall be due and payable.
All advances made by Bank hereunder, and all payments made on
account of principal hereof, may be recorded by bank on the grid attached to
and made a part of this Note. Amounts recorded on such grid, or any amounts
recorded by Bank electronically, by computer or otherwise in accordance with
its customary practices, shall be conclusive absent manifest error, but failure
to make or error in any such recordation shall not affect Obligor's obligation
to repay the amounts due under this Note.
Interest on the outstanding unpaid balance of principal hereof
shall accrue from the date hereof at the rate of interest per annum as
determined in accordance with Section 2.03(a) of the Loan Agreement,
provided, that in no event shall such interest be higher than the maximum
- --------
lawful rates and provided, further, that interest shall be calculated
-------- -------
on the basis of a 360-day year for the actual number of days elapsed.
Interest on this Note shall be due and payable on the last day in
each calendar month commencing December 31, 1994, or if the last day is not a
Business Day, then on the first Business Day thereafter until the principal
balance has been paid in full. If not otherwise paid when due, the Bank may,
at its discretion, charge said interest or any schedule payment of principal to
any checking or loan account of the Borrower. The Bank will present a monthly
invoice to Borrower reflecting interest payments due, and any failure or delay
by the Bank in submitting invoices for interest payments shall not discharge or
relieve the Borrower of the obligation to make such interest payments.
This Note is evidence of the Term Loan refereed to in the Term Loan
Agreement, dated of even date herewith, between the Borrower and the Bank
(herein called the "Loan Agreement") and all other agreements, mortgages and
all other security for the payment hereof delivered to the Bank in connection
with the Loan Agreement (hereinafter the "Loan Documents") between the Bank and
the Borrower, and is subject to all of the terms and provisions of the Loan
Documents, including certain provisions for prepayment and
<PAGE>
acceleration of maturity. All terms of the Loan Agreement are incorporated
herein by reference and in the event of ambiguity or inconsistency between the
terms of the Loan Agreement and the terms hereof, the terms of the Loan
Agreement shall prevail. This Note is secured by and entitled to the benefits
of each and every security interest granted under and pursuant to the Loan
Documents.
This Note shall be subject to prepayment on such terms and
conditions and upon payment of such prepayment penalty as is provided in the
Loan Agreement.
If an Event of Default (as defined in the Loan Agreement) occurs,
the principal (and to the extent permitted by law, interest) payable hereunder
(whether before or after judgment) shall bear interest payable upon demand,
from the date of such Event of Default until paid in full, at a fluctuating
interest rate per annum equal at all times to the Default Rate (as defined in
the Loan Agreement) and may become payable in the manner, with the effect, and
subject to the conditions provided in the Loan Documents.
If this Note is mutilated, lost, stolen or destroyed, then, upon
surrender thereof (if mutilated) or receipt of evidence (if lost, stolen or
destroyed) the Borrower shall execute and deliver a new promissory note of like
tenor, which shall show all payments which shall have been made on account of
the principal hereof.
The Borrower hereby consents that from time to time, without
further notice or further consent, the performance or observance of any of the
agreements or conditions contained herein or in any of the Loan Documents may
be waived or the time of performance thereof extended by the holder hereof and
payment of any obligation hereunder or under any of the Loan Documents may be
accelerated in accordance with any agreement between the holder hereof and any
party liable with respect hereto or thereto, or may be extended, or may be
renewed in whole or in part, or any collateral securing the same may be
exchanged, surrendered, released or otherwise dealt with as the holder hereof
may determine, all without affecting the obligations hereunder of the Borrower.
In connection with any action or proceeding arising out of or
relating in any way to this Note, or any act or omission relating to any
thereof, BORROWER AND BANK WAIVE THE RIGHT TO TRIAL BY JURY, and Borrower also
waives all defenses and rights to interpose any setoff or counterclaim of any
nature except only a defense pertaining to the existence of a default or a
counterclaim to the extent that the failure to so assert such counterclaim
would permanently preclude the prosecution or recovery upon the same.
All parties hereof, whether makers, endorsers, or otherwise and all
guarantors and sureties for the payment hereof, hereby waive diligence, demand,
presentment, notice of nonpayment, notice of dishonor, protect, and all other
notices or demands whatsoever, and do hereby consent that without notice to and
without releasing the liability of any party hereto, the obligation of any
party may from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, settled or released by the Bank. The
non-exercise by the holder of any of its rights hereunder in any particular
instance or series of instances shall not constitute a waiver thereof in such
instances or any subsequent instance.
Any provision of this Note that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability, without invalidating the remaining
provisions of this Note or affecting the validity or unenforceability of such
provision in any other jurisdiction.
<PAGE>
This Note has been executed and delivered in the State of New
Jersey and shall be deemed to be a contract made under, and shall be construed
for all purposes in accordance with, New Jersey law, without regard to
principles of conflict law.
ATTEST PAR PHARMACEUTICAL, INC.
By: By:
--------------------------------- ---------------------------------
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
I CERTIFY as follows:
1. On , 1994,
----------------------------------------- -----------
personally appeared before me;
2. I was satisfied that this person is the person who executed
the attached instrument as (vice president/president) of ,
----------------------
a corporation; and
----------------------------------
3. This person stated that (he/she) was authorized to execute
the instrument on behalf of , and that
-------------------------------------
(he/she) executed the instrument as the act of such corporation.
-----------------------------
A Notary Public of New Jersey
<PAGE>
Schedule to Secured
Promissory Note dated
_______________, 1994
LOAN AND PAYMENTS OF PRINCIPAL
------------------------------
Amount Amount
------ ------
of of Principal Interest Notation
-- -- --------- -------- --------
Date Advance Principal Paid Balance Rate Made By
- ---- ------- -------------- ------- ---- -------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
- ----- --------- ---------------- ------------ ----------- ----------
<PAGE>
SCHEDULE 2.03
-------------
[Borrower's Letterhead]
Midlantic Bank, National Association
P.O. Box 600
499 Thornall Street
Edison, New Jersey 08818
Attn: Corporate Banking Department
Re: Conversion Notice
Gentlemen:
Pursuant to Section 2.03(a)(ii) of the Term Loan Agreement, dated
November 30, 1994 by and between Midlantic Bank, National Association and PAR
Pharmaceutical, Inc., we hereby elect the Treasury Rate interest rate to be
effective January 1, 1995.
Very truly yours,
PAR PHARMACEUTICAL, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
SCHEDULE 2.06
-------------
Use of Proceeds
---------------
Proceeds of the Term Loan shall be used to finance the acquisition
of equipment for use, and make leasehold improvements useful, in the ordinary
course of the Borrower's business, including, without limitation, the equipment
and improvements described as annexed hereto or substantially equivalent
thereto acquired or made by Borrower in Fiscal Year 1994.
<PAGE>
SCHEDULE 4.02
-------------
List of Borrower's Subsidiaries
-------------------------------
1. Quad Pharmaceutical, Inc.
2. Par Printing Enterprises, Inc.
3. Advanced Biopharm Inc.
4. Generic Innovations, Inc.
<PAGE>
SCHEDULE 4.04
-------------
Governmental and Other Consents
-------------------------------
1. To the extent that Collateral includes rights under Licenses,
the assignment of which is prohibited without the consent of the issuing
governmental entity, the granting of a security interest therein under the
Security Agreement may require the obtaining of such consent. No such consents
have been obtained.
2. To the extent that Collateral includes rights under
contracts, leases and other agreements (other than "Accounts" (as defined in
the Uniform Commercial Code) or "general intangibles" for money due or to
become due or with respect to Proceeds of such Collateral), the assignment of
which is prohibited without the consent of the other parties thereto, the
granting of a security interest therein under the Security Agreement may
require the obtaining of such consents. No such consents have been obtained.
3. The execution and delivery of, and performance under, the
Amended and Restated Agreement Concerning Term Loans, dated the date hereof,
between Borrower and Lender (the "ACTL") may require the consent of the
Rockland County Industrial Development Agency under the Bond. No such consent
has been obtained.
<PAGE>
SCHEDULE 4.05
-------------
Pending Litigation
------------------
The Borrower is involved in minor litigation matters, incidental to
the conduct of its business, but does not believe that the ultimate resolution
thereof will have a material adverse effect on its financial condition. Three
actions of which the Borrower is aware are:
. Penny Kay Petrie Liability Lawsuit wherein P.K. Petri, et al, have
initiated legal action against a physician, a pharmacy, Pfizer,
Inc. and Goldline Laboratories, Inc. (the firm for which the
Borrower manufactures product). This action has been referred to
the Borrower's product liability insurance carrier.
. Rubie Mae Dillon Products Liability Lawsuit wherein R.M. Dillon has
initiated legal action against a physician and the Borrower. This
action has been referred to the Borrower's product liability
insurance carrier.
. The Borrower has been named as a defendant in an action brought by
Borschow Hospital and Medical Supplies, Inc., in the United States
District Court for the District of Puerto Rico. The action seeks
to recover approximately $62,000 for amounts allegedly due under a
distributorship agreement between Borschow and Quad
Pharmaceuticals, Inc. ("Quad"), as well as $1,200,000 in damages
for alleged termination without cause of Borschow's purported
exclusive distributorship for Quad.
The Borrower received a warning letter on May 26, 1994, from the
U.S. Food & Drug Administration ("FDA") setting forth certain alleged
deviations from current good manufacturing practice regulations and alleged
violations of related provisions of the Federal Food, Drug and Cosmetic Act.
The warning letter does not limit the manufacture of the Borrower's product
line nor suspend the review and approval of applications pending at FDA. FDA
indicated that it will shortly complete its review of the Borrower's response.
<PAGE>
SCHEDULE 4.06
-------------
Compliance with Laws and Agreements
-----------------------------------
The Borrower received a warning letter on May 26, 1994, from the
U.S. Food & Drug Administration ("FDA") setting forth certain alleged
deviations from current good manufacturing practice regulations and alleged
violations of related provisions of the Federal Food, Drug and Cosmetic Act.
The warning letter does not limit the manufacture of the Borrower's product
line nor suspend the review and approval of applications pending at FDA. FDA
indicated that it will shortly complete its review of the Borrower's response.
<PAGE>
SCHEDULE 4.07
-------------
Liens on Collateral
-------------------
File
----
Secured Party Jurisdiction Number Filing Date
------------- ------------ ------ -----------
Copelco Credit New York 93-1300 4/27/93
Corporation Secretary of State Book 0603
10 Mountainview Road Page 1205
Upper Saddle River, NJ 07458
Copelco Credit Rockland County 087429 4/23/93
Corporation Clerk
10 Mountainview Road
Upper Saddle River, NJ 07458
<PAGE>
SCHEDULE 4.08
-------------
Ownership in Other Entities
---------------------------
Borrower sells inventory purchased from foreign manufacturers, at
cost, to PRX Distributors, Ltd., a wholly-owned subsidiary of PRI and an
affiliate of Borrower, and repurchases such inventory for sales to third
parties in the ordinary course at prices charged to such other third parties.
All other Affiliate Companies of Borrower are wholly-owned
subsidiaries of the Borrower and are in all material respects inactive.
Borrower was the surviving corporation of a merger with Par Merging
Corp., a wholly-owned subsidiary of PRI. The Certificate of Merger was filed
on August 8, 1991, in the New Jersey Secretary of State's Office.
<PAGE>
SCHEDULE 4.11
-------------
Tax Returns and Taxes
---------------------
Income Taxes
- ------------
1. PRI is contesting the IRS position that credits for research
activities are not permitted. In the event a determination is made that PRI
was not entitled to such credits, a charge of approximately $1,000,000 will be
incurred for income taxes. PRI believes that any such disallowance, and the
resultant charge, would not have any material adverse effect on PRI's
operations, liquidity or cash flow. Special tax counsel has been retained by
PRI to resolve this matter and is presently in negotiations with the U.S.
Treasury Department.
2. See also Schedule 4.02 regarding license fees to the State of
New York.
3. See also Schedule 4.02 regarding Quad annual reports for 93
and 94 to the State of Indiana.
<PAGE>
SCHEDULE 4.12
-------------
Pension Plans, Etc.
-------------------
The Borrower has a defined-contribution, Social Security integrated
Retirement Plan providing retirement benefits to eligible employees as defined
in the Plan. It also maintains a Retirement Savings plan whereby eligible
employees are permitted to contribute from 1% to 12% of pay to this Plan. The
Borrower contributes an amount equal to 50% of the first 6% of the pay
contributed by the employee.
The Borrower maintains a Defined Benefit Pension Plan covering
eligible employees as defined in the Plan. The benefits under this Plan are
based on the participants' length of service and compensation, subject to
Employee Retirement Income Security Act of 1974 and Internal Revenue Service
limitations. The funding policy for this Plan is to contribute amounts
actuarially determined as necessary to provide sufficient assets to meet the
benefit requirements of the Plan retirees. The plan's assets are invested in
guaranteed deposit accounts. Effective October 1, 1989, the Company "froze"
the Plan, accordingly, service costs are excluded from benefit accruals under
the Plan.
The discount rate used to measure the projected benefit obligation
for the Plan is 7%. The expected long-term rate of return on plan assets in
1993 was 9%. The Plan's funded status and the amounts recorded on the
Company's consolidated balance sheets are as follows (in thousands):
1993 1992
---- ----
Vested benefit obligations $1,888 $1,763
Accumulated benefit obligations $1,888 $1,763
Projected benefit obligations $1,888 $1,763
Market value of assets 1,565 1,438
------ ------
Projected benefit obligation in
excess of market value (323) (325)
Unrecognized net obligation at 757 808
September 30, 1987
Unrecognized net (gain) (151) (201)
Adjustment for minimum liability (606) (607)
--- ---
Net recorded pension (liability) $(323) $(325)
=== ===
<PAGE>
SCHEDULE 4.19
-------------
Environmental Matters
---------------------
Borrower uses fuels, lubricants and other possibly hazardous materials normally
used in the conduct of a pharmaceutical manufacturer, in quantities customarily
used in the conduct of such business,which use is not in violation of any
covenant contained in Section 6.10(b), (c) or (e) of this Agreement and no such
substance is used in any manner which would be in violation of, or subject
Borrower or any Affiliate Company, or any tenant of any of its real properties
to a claim under or pursuant to ISRA, the Spill Compensation and Control Act,
CERCLA, RCRH or any law or regulation promulgated by the New Jersey Department
of Environmental Protection or any other state or federal governmental agency.
See also Schedules 4.05 and 4.06.
<PAGE>
SCHEDULE 5.04
-------------
Dividends
---------
Dividends and other distributions to PRI sufficient to enable it to
pay dividends when due on the PRI Series A Convertible Preferred Stock and the
payment of such dividends by PRI, pursuant to the terms of such Series A
Convertible Preferred Stock as set forth in PRI's certificate of incorporation
as in effect on the date hereof.
<PAGE>
SCHEDULE 6.05
-------------
Periodic Reporting Certificate
------------------------------
, 19
Midlantic Bank, National Association
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Attn: Corporation Banking Department
As required by Section 6.05(c) of that certain Term Loan Agreement dated
November 30, 1994 (the "Loan Agreement") by and between you as Lender and PAR
Pharmaceutical, Inc. (the "Borrower"), a review of the activities of the
Borrower for the fiscal [year] [quarter] ending ______________, 19__ (the
"Fiscal Period") has been made under my supervision with a view to determining
whether the Borrower has kept, observed, performed and fulfilled all of its
obligations under the Loan Agreement and all other agreements or undertakings
contemplated thereby, and to the best of my knowledge, neither an Event of
Default nor an Unmatured Event of Default (as such terms are defined in the
Loan Agreement) has occurred and is continuing.
I further certify that the amounts set forth below, with abbreviated
descriptions, to the best of my knowledge accurately present amounts required
to be calculated by various covenants of the Loan Agreement as of the last day
of the Fiscal Period. Unless otherwise expressly specified herein, all terms
used herein have the identical meanings as set forth in the Loan Agreement.
1. Section 5.01 - Maximum Capital Expenditures.
-------------------------------------------
The aggregate Capital Expenditures for the _____ Fiscal Year to date was $
___________.
2. Section 5.02 - Minimum Working Capital.
--------------------------------------
The Working Capital as at the last day of the Fiscal Period was $____________.
3. Section 5.03 - Tangible Net Worth.
---------------------------------
Tangible Net Worth as of the last day of the Fiscal Year was $_________.
4. Section 5.05 - Debt to Tangible Net Worth.
-----------------------------------------
The ratio of Funded Debt to Tangible Net Worth as of the last day of the Fiscal
Period was _______:_______.
5. Section 5.06 - Minimum Interest Coverage.
----------------------------------------
The ratio of Adjusted EBIT to interest expense for the four quarters ended
___________, 199_ was ___________:_____________.
6. Section 5.07 - Minimum Percentage of PRI.
----------------------------------------
The assets of the Borrower comprised at least 80% of the consolidated assets of
Pharmaceutical Resources, Inc. as of the last day of the Fiscal Period.
Very truly yours,
<PAGE>
SCHEDULE 7.01
Indebtedness
------------
PAR PHARMACEUTICAL, INC.
Amount* Lender Maturity Date
------- ------ -------------
$1,312,083 Urban National Bank May 1, 2001
951,889 Midlantic National Bank Feb. 1, 1999
2,454,555 Midlantic National Bank Feb. 1, 1999
1,822,269 Midlantic National Bank Feb. 1, 1999
21,123 Urban National Bank Sept. 15, 1996
17,267 Urban National Bank Oct. 15, 1996
17,693 Urban National Bank Nov. 15, 1996
17,821 Urban National Bank March 15, 1997
18,511 Urban National Bank Feb. 15, 1997
15,859 Urban National Bank Oct. 15, 1996
18,309 Urban National Bank March 15, 1997
17,286 Urban National Bank Feb. 15, 1997
22,180 Urban National Bank March 15, 1997
29,844 Urban National Bank Sept. 15, 1997
* as of 10/1/94
<PAGE>
SCHEDULE 7.02
Other Liens
-----------
File
----
Secured Party Jurisdiction Number Filing Date
------------- ------------ ------ -----------
Copelco Credit New York 93-1300 4/27/93
Corporation Secretary of State Book 0603
10 Mountainview Road Page 1205
Upper Saddle River, NJ 07458
Copelco Credit Rockland County 087429 4/23/93
Corporation Clerk
10 Mountainview Road
Upper Saddle River, NJ 07458
<PAGE>
SCHEDULE 7.10
Transactions with Affiliates
----------------------------
See Schedule 4.08.
<PAGE>
EXHIBIT 10.34
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
by and between
MIDLANTIC BANK, NATIONAL ASSOCIATION
and
PAR PHARMACEUTICAL, INC.
Dated as of November 30, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE NO.
- ------- --------
I. DEFINITIONS........................................................ 1
II. GENERAL TERMS...................................................... 6
2.01. Discretionary Line of Credit................................ 6
2.02. Repayment of Principal; Prepayment.......................... 7
2.03. Applicable Interest Rate; Payment of Interest............... 7
2.04. Unused Line Fee............................................. 8
2.05. Security for the Note; Guarantees........................... 8
2.06. Use of Proceeds............................................. 8
2.07. Term........................................................ 9
III. CONDITIONS OF MAKING THE REVOLVING LOAN............................ 9
3.01. Revolving Loan.............................................. 9
3.02. Subsequent Advances......................................... 10
IV. REPRESENTATIONS AND WARRANTIES..................................... 11
4.01. Financial Statements........................................ 11
4.02. Organization, Etc........................................... 11
4.03. Authorization; Compliance, Etc.............................. 11
4.04. Governmental and Other Consents............................. 12
4.05. Proceedings................................................. 12
4.06. Compliance with Laws and Agreements......................... 12
4.07. Title to Collateral......................................... 13
4.08. Other Names or Entities..................................... 13
4.09. No Insolvency............................................... 13
4.10. Full Disclosure............................................. 14
4.11. Tax Returns; Tax Examination................................ 14
4.12. Pension Plans, Etc.......................................... 14
4.13. Licenses, Etc............................................... 16
4.14. O.S.H.A..................................................... 17
4.15. Ownership of Borrower....................................... 17
4.16. Patents, Trademarks, Etc.................................... 17
4.17. Brokers, Etc................................................ 17
4.18. [Intentionally Left Blank].................................. 17
4.19. Environmental Matters....................................... 17
4.20. Enforceability.............................................. 19
4.21. Investment Company Act; Public Utility
Holding Company Act......................................... 19
4.22. Federal Reserve Regulations............................... 19
V. FINANCIAL COVENANTS................................................ 19
5.01. Maximum Capital Expenditures................................ 19
5.02. Minimum Working Capital..................................... 20
5.03. Tangible Net Worth.......................................... 20
5.04. Restricted Payments......................................... 20
5.05. Debt to Tangible Net Worth Ratio.......................... 20
5.06. Minimum Interest Coverage................................. 20
5.07. Minimum Percentage of PRI..................................21
VI. AFFIRMATIVE COVENANTS.............................................. 21
6.01. Preservation of Assets; Compliance with Laws,
Etc....................................................... 21
6.02. Insurance................................................. 21
<PAGE>
SECTION PAGE NO.
- ------- --------
6.03. Taxes, Etc................................................ 22
6.04. Notice of Proceedings, Defaults, Adverse
Change, Etc............................................... 23
6.05. Financial Statements and Reports.......................... 23
6.06. Inspection................................................ 25
6.07. Accounting System......................................... 25
6.08. Yield Protection............................................ 25
6.09. Additional Assurances..................................... 26
6.10. Environmental Indemnification............................. 26
6.11. Principal Business........................................ 28
VII. NEGATIVE COVENANTS................................................. 28
7.01. Indebtedness.............................................. 28
7.02. Liens..................................................... 29
7.03. Disposition of Assets..................................... 29
7.04. Dividends and Other Distributions........................... 30
7.05. Sale Leaseback............................................ 30
7.06. Acquisition............................................... 30
7.07. Fundamental Changes....................................... 30
7.08. Change in Business........................................ 31
7.09. Accounts Receivable....................................... 31
7.10. Transactions with Affiliates.............................. 31
7.11. Illegal Activities........................................ 32
VIII. DEFAULTS........................................................... 32
8.01. Defaults ................................................. 32
IX. REMEDIES ON DEFAULT, ETC........................................... 36
9.01. Remedies.................................................... 36
9.02. Default Rate................................................ 36
9.03. Cross Default............................................... 36
9.04 Application of Proceeds......................................
X. MISCELLANEOUS...................................................... 37
10.01. Survival................................................... 37
10.02. Expenses................................................... 37
10.03. Indemnification; Limitation of Liability................... 37
10.04. Setoffs, Etc............................................... 38
10.05. Governing Law.............................................. 39
10.06. Amendment; Modification.................................... 39
10.07. Waiver..................................................... 39
10.08. Notice..................................................... 40
10.09. Successors and Assigns..................................... 41
10.10. Consent to Jurisdiction, Service of
Process.................................................. 41
10.11. Waivers.................................................... 41
10.12. No Derogation.............................................. 42
10.13. Severability............................................... 42
10.14. Section Headings........................................... 42
10.15. Amendment of Other Agreements.............................. 42
10.16. Accounting Principles...................................... 43
10.18. Knowledge and Discovery.................................... 43
10.19. Integration................................................ 44
-ii-
<PAGE>
SECTION PAGE NO.
- ------- --------
10.20. Termination By Lender.....................................44
10.21. Termination By Borrower.....................................44
10.22. Effect on Revolving Loan Limit............................44
-iii-
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
-----------------------------------------------
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Agreement")
is made as of the 30th day of November, 1994, by and between MIDLANTIC BANK,
NATIONAL ASSOCIATION, a national banking association (the "Lender"), and
PAR PHARMACEUTICAL, INC., a New Jersey corporation (the "Borrower"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower and the Lender are parties to a Revolving Credit
Agreement, dated February 20, 1992 (the "1992 AGREEMENT") and in connection
therewith the Borrower executed and delivered to the Lender a Secured Revolving
Loan Note, dated February 20, 1992, in the principal amount of $7,000,000.00
(the "1992 REVOLVING LOAN NOTE"); and
WHEREAS, the Borrower and the Lender are parties to an Agreement
Concerning Term Loans, dated February 20, 1992 (the "AGREEMENT CONCERNING
TERM LOANS"); and
WHEREAS, the Borrower and the Lender desire to amend and restate the
terms and provision of the 1992 Agreement; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Borrower and the Lender are entering into a Term Loan Agreement
and an Amended and Restated Agreement Concerning Term Loans;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound, hereby amend and restate the 1992 Agreement and agree as
follows:
I. DEFINITIONS
-----------
As used herein the following terms shall have the following respective
meanings:
Accountants: the meaning specified in Section 6.05.
-----------
Adjusted EBIT: as of the date of determination, earnings before
-------------
interest expense and taxes (excluding any and all extraordinary items and
settlements recorded in the fourth quarter of fiscal year 1993) plus
depreciation, amortization and other non-cash charges as determined, on a
consolidated basis, in accordance with generally accepted accounting principles
on a basis consistent with that employed by the Accountants in preparing the
financial statements referred to in Section 6.05.
Advance(s): the meaning specified in Section 2.01(a)
----------
Affiliate(s): as applied to any Person, a spouse or relative of
------------
such Person within the third degree of consanguinity, any partner, shareholder,
member, director, officer or manager of such Person, any corporation,
association, partnership, joint venture, firm or other entity of which such
Person is a partner, shareholder, venturer, member, director, officer or
manager, and any other Person directly or indirectly controlling, controlled
by, or under common control with, such Person.?
-1-
<PAGE>
Affiliate Company: any one or more of Pharmaceutical Resources,
-----------------
Inc., a New Jersey corporation, Quad Pharmaceutical, Inc., an Indiana
corporation, PRX Distributors, Ltd., a Delaware corporation, Par Printing
Enterprises, Inc., a New Jersey corporation, Advanced Biopharm Inc., a Delaware
corporation, Generic Innovations, Inc., a New Jersey corporation, and their
respective successors and assigns (with all such companies referred to
collectively as the "Affiliate Companies").
Benefit Liabilities: the meaning specified in Section 4.12.
-------------------
Borrower: the meaning specified in the Preamble.
--------
Business Day: any day on which banks in the State of New Jersey
------------
are generally open to conduct regular banking business.
Capital Expenditure: any payment made directly or indirectly for
-------------------
the purpose of acquiring or constructing fixed assets, real property or
equipment which, in accordance with generally accepted accounting principles,
would be added as a debit to the fixed asset account of the Person making such
expenditure, including, without limitation, amounts paid or payable for labor
or under any conditional sale or other title retention agreement or under any
Lease or other periodic payment arrangement which is of such a nature that
payment obligations of the lessee or obligor thereunder would be required by
generally accepted accounting principles to be capitalized on the balance sheet
of such lessee or obligor.
Capital Lease: any Lease of property (real, personal or mixed)
-------------
which, in accordance with generally accepted accounting principles, would be
capitalized on the lessee's balance sheet or for which the amount of the asset
and liability thereunder as if so capitalized should be disclosed in a note to
such balance sheet.
CERCLA: the meaning specified in Section 4.19.
------
COBRA: the meaning specified in Section 4.12.
-----
Code: the Internal Revenue Code of 1986, as amended from time to
----
time.
Commonly Controlled Entity: the meaning specified in Section 4.12.
--------------------------
Current Assets: As applied to any Person, the consolidated current
--------------
assets of the Person, determined in accordance with generally accepted
accounting principles on a basis consistent with that employed by the
Accountants in preparing the financial statements referred to in Section 6.05.
Current Liabilities: As applied to any Person, the consolidated
-------------------
current liabilities of the Person, determined in accordance with generally
accepted accounting principles on a basis consistent with that employed by the
Accountants in preparing the financial statements referred to in Section 6.05.
Default Rate: the meaning specified in Section 9.02.
------------
Disbursement Request: the meaning specified in Section 2.01(c).
--------------------
Drawdown Date: in relation to any Advance, the day on which such
-------------
Advance is made or to be made to the Borrower pursuant to the terms and
conditions of this Agreement.
ISRA: the meaning specified in Section 4.19(a).
----
-2-
<PAGE>
Employee Benefit Plans; Employee Pension Plan; and Employee Welfare
--------------------------------------------------------------------
Plan: the respective meanings specified in Section 4.12.
- ----
ERISA: the meaning specified in Section 4.12.
-----
Event of Default: the meaning specified in Article VIII.
----------------
Fiscal Quarters: the Borrower's accounting periods ending on the
---------------
Saturday nearest the end of each December, March, June and September.
Fiscal Year: shall mean the fiscal year of the Borrower ending on
-----------
the Saturday nearest September 30.
Funded Debt: in relation to any Person at any particular time, all
------------
Indebtedness of such Person at such time: (i) in respect of any money borrowed
by such Person, (ii) under or in respect of any guarantee (whether direct or
indirect) by such person of any Indebtedness for borrowed money of any other
Person, or (iii) evidenced by any loan or credit agreement, promissory note,
debenture, bond, guarantee or other substantially similar obligation to pay
money.
Guarantees: the meaning specified in Section 2.05(b).
----------
Guarantors: the Affiliate Companies.
----------
Hazardous Material: the meaning specified in Section 4.19.
------------------
Indebtedness or indebtedness: as applied to any Person, (a) all
----------------------------
items (except items of capital stock, capital or paid-in surplus or of retained
earnings) which, in accordance with generally accepted accounting principles,
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person as at the date as of which Indebtedness
is to be determined, including any Lease which in accordance with generally
accepted accounting principles consistently applied would constitute
indebtedness, (b) all indebtedness secured by any mortgage, pledge, security,
lien or conditional sale or other title retention agreement to which any
property or asset owned or held by such Person is subject, whether or not the
indebtedness secured thereby shall have been assumed, and (c) all indebtedness
of others which such Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted or otherwise sold with recourse or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire, or in respect of
which such Person has agreed to supply or advance funds (whether by way of
loan, stock or equity purchase, capital contribution or otherwise) or otherwise
to become directly or indirectly liable.
Interest Expense: As applied to any Person for any period, the
----------------
aggregate amount (determined in accordance with generally accepted accounting
principles) of interest accrued (whether or not paid) during such period by
such Person in respect of all Indebtedness for borrowed money and the interest
portion of all amounts accrued (whether or not paid) during such period by such
Person in respect of all Capital Leases.
Involuntary Petition: the meaning specified in paragraph (j) of
--------------------
Article VIII.
Lease(s): any lease of, or other periodic payment arrangement for
--------
the use or possession of, property (real, personal or mixed).
Lender: Midlantic Bank, National Association and its successors
------
and assigns.
Licenses: the meaning specified in Section 4.13.
--------
Multiemployer Plan: the meaning specified in Section 4.12.
------------------
Net Income: As applied to any Person for any fiscal period, the
----------
consolidated net income (or loss)
-3-
<PAGE>
of such Person, excluding any extraordinary income (or loss) or non-cash gains
or loss of such Person for such period (taken as a cumulative whole), after
deducting all operating expenses, provisions for all taxes and reserves
(including reserves for deferred income taxes) and all other proper deductions,
all determined in accordance with generally accepted accounting principles on a
basis consistent with that employed by the Accountants in preparing the
financial statements referred to in Section 6.05, adjusted to exclude results
from discontinued operations (to the extent not accounted for as an
extraordinary item) and the cumulative effects of any changes in accounting
principles.
Note: the Revolving Note, as the same may be amended or restated
----
or replaced from time to time.
PBGC: the meaning specified in Section 4.12.
----
Person or person: any individual, corporation, partnership, joint
----------------
venture, trust or unincorporated organization or any government or any agency
or political subdivision thereof.
Premises: the meaning specified in Section 4.19.
--------
PRI: Pharmaceutical Resources, Inc., a New Jersey corporation.
---
Prime Rate: the rate of interest announced from time to time by
----------
Lender as its "prime rate" or "prime lending rate," which rate is determined
from time to time by Lender as a means of pricing some loans to its customers
and is neither tied to any external rate of interest or index nor necessarily
reflects the lowest rate of interest actually charged by Lender to any
particular class or category of customers.
RCRA: the meaning specified in Section 4.19.
----
Rents: for any periods, the aggregate amount of payments by the
-----
Borrower which are accrued (whether or not paid by the Borrower) during such
period in respect of all Leases except Capital Leases.
Revolving Loan or Revolving Loans: the meaning specified in
---------------------------------
Section 2.01(a).
Revolving Loan Commitment: the meaning specified in Section
-------------------------
2.01(a).
Revolving Note: the meaning specified in Section 2.01(b).
--------------
Stockholder(s): with respect to any corporation all Persons who at
--------------
any time hold or acquire capital stock of such corporation.
Tangible Net Worth: As applied to any Person at any time,
------------------
stockholders' equity of such Person, minus the amount thereof attributable to
intangibles (including but not limited to goodwill, capitalized software and
excess purchaser costs), all as determined, on a consolidated basis, in
accordance with generally accepted accounting standards.
Term Loans: the Term Loan (as defined in the Term Loan Agreement,
----------
dated the date hereof, by and between the Lender and the Borrower) and the
Loans (as defined in the Amended and Restated Agreement Concerning Term Loans,
dated the date hereof, between the Lender and the Borrower).
Termination Date: the meaning specified in Section 2.01(a).
----------------
Transaction Documents: any and all documents and instruments
---------------------
delivered to the Lender pursuant or incident to this Agreement or the 1992
Agreement by (a) the Borrower or (b) any Affiliate Company.
Unmatured Event of Default: any event or condition, which, after
--------------------------
notice or lapse of time, or both, would constitute an Event of Default.
-4-
<PAGE>
Working Capital: the difference, determined in accordance with
---------------
generally accepted accounting principles on a basis consistent with that
employed by the Accountants in preparing the financial statements referred to
in Section 6.05, between Current Assets minus Current Liabilities.
All accounting terms not specifically defined herein shall be construed
in accordance with generally accepted accounting principles consistent with
those applied in the preparation of the financial statements referred to in
Section 4.01 hereof.
II. GENERAL TERMS
-------------
Section 2.01. Discretionary Line of Credit.
------------ ----------------------------
(a) Line of Credit. Subject to the terms and conditions contained
--------------
in this Agreement, and provided no Event of Default or Unmatured Event of
Default has occurred, the Lender will at its discretion and upon the written
request of Borrower, from the date hereof until March 30, 1996 (the
"Termination Date"), make loans on a revolving loan basis (the "Revolving Loan"
or "Revolving Loans") to the Borrower, in one or more advances (an "Advance" or
collectively the "Advances") not in excess of Seven Million Dollars
($7,000,000.00) (the "Revolving Loan Commitment").
(b) Restated Note. Simultaneously with the execution and delivery
-------------
of this Agreement, the 1992 Revolving Loan Note will be restated in the form
attached hereto as Exhibit A (the "Revolving Note") providing for, among
---------
other things, the changes made by this Agreement in the Revolving Loans, and
upon delivery to the Lender of the Revolving Note, the 1992 Revolving Loan Note
shall be marked "Cancelled because restated" and returned to the Borrower.
(c) Procedures for Making Advances. Whenever the Borrower desires
------------------------------
to receive an Advance, the Borrower will furnish the Lender a written request
(referred to as a "Disbursement Request"), by telecopier or otherwise, which
shall (i) be received by the Lender at the address for notices under Section
10.08 hereof, no later than 2:00 p.m. New Jersey time one (1) Business Day
prior to the Drawdown Date of such Advance and (ii) specify (A) the Drawdown
Date (which must be a Business Day) and (B) the amount of such Advance and (C)
the bank account of the Borrower with the Lender to which payment of the
proceeds of the Advance is to be made. Subject to the terms and conditions of
this Agreement, on the Drawdown Date, the Lender shall credit the proceeds of
such Advance to the account of the Borrower specified in the Disbursement
Request.
Section 2.02. Repayment of Principal; Prepayment.
------------ ----------------------------------
(a) Principal in Respect of Revolving Loan. The Revolving Loan
--------------------------------------
shall be payable without setoff, deduction or counterclaim (i) on the later of
(A) March 31, 1996 or (B) thereafter within thirty (30) days after demand by
the Lender or (ii) at such other time as is provided under Section 8.01 of this
Agreement, whichever or (i) or (ii) shall first occur (the first to occur being
referred to as the "Maturity Date"), when all remaining outstanding principal
and accrued interest thereon shall be due and payable in full without setoff,
deduction or counterclaim.
(b) Change Against Accounts. If not otherwise paid when due,
-----------------------
the Lender may, at its discretion, charge the amount of any payment of
principal or interest due on the Revolving Loan or any other amount that shall
become due from the Borrower to the Lender under this Agreement, to any
checking or loan account of the Borrower against payment of any such amount.
-5-
<PAGE>
(c) Principal Clean-ups. The Borrower agrees that, during the
-------------------
term of this Agreement, it shall reduce the outstanding principal balance of
the Revolving Loans to zero for at least thirty (30) consecutive days during
each calendar year.
Section 2.03. Applicable Interest Rate; Payment of Interest.
------------ ---------------------------------------------
(a) Revolving Loan Interest Rate. The outstanding principal
----------------------------
balance of the Revolving Loan shall bear interest from the date of Advance
until payment in full, both before and after maturity, at a fluctuating rate
per annum equal to the Prime Rate.
(b) Payment Dates. Interest on the Note shall be payable monthly
-------------
in arrears without setoff, deduction or counterclaim on the first day of each
calendar month commencing January 1, 1995 and continuing on the first day of
each calendar month thereafter and after maturity, whether by reason of
acceleration, payment, prepayment or otherwise.
(c) Interest Calculations. Interest shall be computed on the
---------------------
basis of a three hundred sixty (360) day year counting the actual number of
days elapsed.
(d) Lawful Rate. If the interest rate calculated in
-----------
accordance with the terms of any provision of this Agreement, or the aggregate
of all amounts due hereunder which are contracted for, charged or collected
shall, at any time under any circumstances, exceed the maximum permitted by any
law then applicable to the Revolving Loan, then for such period as the rate or
amount contracted for, charged or collected would exceed the maximum permitted
by such law (and no longer) the rate payable on the Revolving Loan or so
contracted for, charged or collected shall be reduced to the maximum permitted
by such law. In the event the Lender ever collects, or applies, as interest,
any amount in excess of the maximum permitted by law, such excess amount shall
be deemed a prepayment of such portion of the amounts due hereunder as are
deemed to constitute principal of a loan, and if all amounts so deemed to
constitute principal have been or are thereby paid in full, any remaining
excess shall be paid to the Borrower to the extent permitted by law.
Section 2.04. Unused Line Fee. In addition to interest and
------------ ---------------
other charges herein provided, the Borrower shall pay the Lender a fee ("Unused
Line Fee") of one-quarter of one percent (.25%) per annum of the amount equal
to the Revolving Loan Commitment minus the outstanding principal balance of the
Revolving Loans and the face amount of all outstanding standby letters of
credit issued by Lender for the account of the Borrower. The Unused Line Fee
shall be computed on a daily basis and paid by the Borrower to the Lender
quarterly in areas on the first day of each April, July, October and January.
Section 2.05. Security for the Note; Guarantees.
------------ ---------------------------------
(a) The Borrower's obligations and indebtedness to the Lender
hereunder and under the Note are unsecured.
(b) The Borrower's obligations and indebtedness to Lender hereunder
and under the Note are guaranteed by the joint and several, absolute and
unconditional guarantees of the Guarantors (the "Guarantees").
Section 2.06. Use of Proceeds.
------------ ---------------
The proceeds of the Revolving Loan shall be used by the Borrower
exclusively for working capital purposes.
Section 2.07. Term.
------------ ----
This Agreement, the Note, and all other agreements relating to the
Revolving Loan contemplated hereby shall in all respects remain in full force
and effect until final payment in full of the Note and all other Indebtedness
to the Lender under this Agreement and the Transaction Documents.
-6-
<PAGE>
III. CONDITIONS OF MAKING THE REVOLVING LOAN.
---------------------------------------
Section 3.01. Revolving Loan.
------------ --------------
The obligation of the Lender to make the initial Advance under Revolving
Loan hereunder is subject to the following conditions:
(a) The representations and warranties set forth in this Agreement and
in the Transaction Documents shall be true and correct on and as of the date
hereof and shall be true and correct in all material respects as of the date
the Revolving Loan is made, and the Borrower shall have performed all
obligations which were to have been performed by it hereunder prior to the date
the Revolving Loan is made.
(b) The Borrower shall have executed and delivered to the Lender (or
shall have caused to be executed and delivered to the Lender by the appropriate
Persons) the following:
(i) The Note;
(ii) Any other documents required or contemplated by the terms
thereof;
(iii) A certificate of the Secretary of the Borrower certifying
(A) the names and true signatures of the incumbent officers of the
Borrower authorized to sign this Agreement, the Note and the other
Transaction Documents, (B) the resolutions of the Board of Directors of
the Borrower authorizing the execution and delivery of this Agreement,
the Note and the Transaction Documents, as applicable, (C) the by-laws of
the Borrower and (D) that the Borrower's corporate charter or articles of
incorporation has not been amended since the date of the certified copy
of such document delivered pursuant to clause (iv) below;
(iv) A copy of the corporate charter or articles of
incorporation, certified by the Secretary of State of the state of
organization, of the Borrower;
(v) A completed Disbursement Request directing the Lender to
disburse funds;
(vi) Certificates of good standing (both as to corporation law
and tax matters) issued by the state in which the Borrower is organized
and any other state in which the failure to qualify would have a material
adverse effect on the Borrower.
(vii) A certificate from an officer of the Borrower reasonably
satisfactory to the Lender certifying (A) that the representations set
forth in Section 4 are true and correct, (B) that no Event of Default has
occurred and (C) to such other matters as Lender may reasonably request;
(viii) Certificates of insurance evidencing all insurance
coverage and policy provisions required in this Agreement and the
Transaction Documents together with loss payable endorsements in favor of
the Lender with respect to each casualty insurance policy of the
Borrower;
(ix) Such other supporting documents, subordinations, waivers,
consents, releases, resolutions and certificates as the Lender may
reasonably request.
(c) The Lender shall have received the favorable written opinions of
counsel for the Borrower, dated the date of the Revolving Loan, reasonably
satisfactory to the Lender in scope and substance.
(d) All legal matters incident to the transactions hereby contemplated
shall be satisfactory to counsel for the Lender.
-7-
<PAGE>
(e) Neither an Event of Default nor an Unmatured Event of Default shall
have occurred and be continuing or result or occur as a result of the entry
into any of the Transaction Documents or the making of the Revolving Loan.
Section 3.02. Subsequent Advances.
------------ -------------------
The obligation of the Lender to make any subsequent Advance of the
Revolving Loan not made at the time of closing is subject to the following
conditions precedent:
(a) All warranties and representations set forth in this
Agreement shall be true and accurate in all material respects as of the
Drawdown Date which representations and warranties shall be deemed to have been
stated in full as if set forth at length in Borrower's Disbursement Request.
(b) The Borrower shall have delivered an executed and
completed Disbursement Request to the Lender.
(c) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing as of the Drawdown Date.
IV. REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to the Lender (which
representations and warranties shall survive the delivery of the Note and the
making of the Revolving Loan) that:
Section 4.01. Financial Statements.
------------ --------------------
The Borrower has heretofore furnished to the Lender the consolidated
balance sheet of PRI as at July 2, 1994, and PRI's consolidated statement of
operations and retained earnings and statements of cash flows, for the fiscal
year or other period ending on such date. Said financial statements and
balance sheet have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of preceding
periods, and are complete and correct in all material respects and fairly
present the financial condition of the Borrower as at said dates and the
results of operations of the Borrower for the periods indicated, subject to
year end adjustments. Since July 2, 1994, there has occurred no material
adverse change in the Borrower's or (on a consolidated basis) PRI's business,
assets, properties or condition (financial or otherwise), operations, or
performance, other than as fully disclosed in said balance sheet and financial
statements. Neither the Borrower nor any of the Affiliate Companies has any
contingent obligations, liabilities for taxes or unusual forward or long-term
commitments material to the Borrower or to them taken as a whole except as
specifically mentioned in the foregoing financial statements.
Section 4.02. Organization, Etc.
------------ -----------------
The Borrower (a) is a corporation duly organized and validly existing
under the laws of the State of New Jersey and is duly qualified to transact
business in each jurisdiction where the failure to so qualify would have a
material adverse effect on the Borrower, (b) has the power and authority to own
its properties and to carry on its business as now being conducted and as
presently contemplated, (c) has the corporate power and authority to execute
and deliver, and perform its obligations under, this Agreement, the Note and
the Transaction Documents to which it is a party or signatory, and (d) except
as set forth on Schedule 4.02, has no subsidiaries as of the date hereof.
--------------
Section 4.03. Authorization; Compliance, Etc.
------------ -------------------------------
The execution and delivery of, and the performance by the Borrower of its
obligations under, the Transaction Documents have been duly authorized by all
requisite corporate action and will not violate any provision of law, any
order, judgment or decree of any court or other agency of government, the
corporate charter, articles of incorporation or by-laws of the Borrower or,
except as disclosed in Schedule 4.04, any
-8-
<PAGE>
material indenture, agreement or other instrument to which the Borrower or PRI
is a party, or by which the Borrower or PRI is bound, or, except as disclosed
in Schedule 4.04, be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or except as may be
permitted under this Agreement, result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the property
or assets of the Borrower or (on a consolidated basis) of PRI pursuant to,
--
any such indenture, agreement or instrument, except in favor of the Lender.
Section 4.04. Governmental and Other Consents.
------------ -------------------------------
Except as described in Schedule 4.04 hereto, the Borrower is not
-------------
required to obtain any consent, approval or authorization from, or to file any
declaration or statement with, any governmental instrumentality or other
agency, or any other Person, in connection with or as a condition to the
execution, delivery or performance of any of the Transaction Documents.
Section 4.05. Proceedings.
------------ -----------
Except as disclosed in Schedule 4.05 hereto, there is no claim,
-------------
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency, or any arbitration board or tribunal, now
pending or, to the knowledge of the Borrower, threatened (nor is the Borrower
aware of any facts which could likely result therein), (a) which questions the
validity of any of the Transaction Documents, or any action taken or to be
taken pursuant hereto or thereto, or (b) against or affecting the Borrower or
any Affiliate Company, or to the knowledge of Borrower any other Affiliate of
the Borrower, or any assets of any such party, which, if adversely determined,
either in any case or in the aggregate, could reasonably be expected to have a
material adverse effect on the business, operations, properties, assets or
condition, financial or otherwise, of the Borrower.
Section 4.06. Compliance with Laws and Agreements.
------------ -----------------------------------
Except as otherwise disclosed in Schedule 4.06 hereto, neither the
-------------
Borrower nor any of the Affiliate Companies is a party to any agreement or
instrument or subject to any corporate or other restriction materially and
adversely affecting the business, operations, properties assets or condition,
financial or otherwise, of Borrower or (on a consolidated basis) of PRI.
--
Neither the Borrower nor any of the Affiliate Companies is in violation of any
provision of its corporate charter, articles of incorporation or by-laws and is
not in violation in any material respect of any indenture, agreement or
instrument to which it is a party or by which it is bound or, to the best of
the Borrower's knowledge and belief, of any provision of law, the violation of
which could have a material adverse effect upon the Borrower or (on a
--
consolidated basis) upon PRI, or any order, judgment or decree of any court or
other agency of government. Without limiting the scope of the foregoing, (a)
the Borrower and each of the Affiliate Companies and each of their properties,
machinery, facilities and other business assets is in compliance in all
material respects with all federal and state laws and regulations (including,
without limitation, all regulations, rules, orders and requirements of the
United States Food and Drug Administration) the violation of which could
reasonably be expected to have a material adverse effect upon the Borrower
or (on a consolidated basis) upon PRI, neither the Borrower nor any of the
- --
Affiliate Companies is charged with, nor to the knowledge of Borrower, under
investigation with respect to any violation of any such law, rule or
regulation, and (c) neither Borrower nor any of the Affiliate Companies has nor
is now engaged in any illegal activity, including without limitation, a pattern
of racketeering activity, that could subject any of the Borrower's or (on a
--
consolidated basis) upon PRI's assets to forfeiture or seizure.
Section 4.07. Title to Collateral.
------------ -------------------
Except as specified on Schedule 4.07 hereto, the Borrower has good
-------------
title to all of the Collateral free and clear of all mortgages, security
interests, restrictions, liens and encumbrances of any kind, including, without
limitation, liens or encumbrances in respect of unpaid taxes, except liens and
encumbrances in favor of Lender or expressly permitted under this Agreement.
The Borrower enjoys quiet possession under all Leases material to its business
to which it is lessee, and all of such Leases are valid, subsisting and in full
force and effect.
-9-
<PAGE>
Section 4.08. Other Names or Entities.
------------ -----------------------
Except as disclosed on Schedule 4.08 to this Agreement, none of
-------------
Borrower's business is conducted through any corporate subsidiary,
unincorporated association or other entity and Borrower has not, within the
seven years preceding the date of this Agreement (a) changed its name, (b) used
any name other than the name stated at the beginning of this Agreement, or (c)
merged or consolidated with, or acquired the assets of, any other corporation
or business.
Section 4.09. No Insolvency.
------------ -------------
Neither the borrowings made by the Borrower under this Agreement nor the
execution, delivery and performance of the Note and the Transaction Documents
render or will render the Borrower insolvent or unable to pay its debts as they
become due; the Borrower is not contemplating either the filing of a petition
by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a substantial portion of its property, and the Borrower
has no knowledge of any person contemplating the filing of any such petition
against the Borrower.
Section 4.10. Full Disclosure.
------------ ---------------
No statement of fact made by or on behalf of any Person (other than the
Lender) in this Agreement, the Transaction Documents, or any certificate or
schedule furnished to the Lender pursuant hereto or thereto contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained therein or herein not misleading. There is no fact
presently known to the Borrower which has not been disclosed to the Lender in
writing which materially affects adversely, or, which could likely materially
affect adversely the business, operations, properties, assets or condition,
financial or otherwise, of the Borrower.
Section 4.11. Tax Returns; Tax Examination.
------------ ----------------------------
(a) Except as set forth in Schedule 4.11 hereto, the Borrower has
-------------
filed (or caused to be filed) all federal, state and local tax returns required
to be filed, and has paid or made adequate provision for the payment of all
material federal, state and local taxes, franchise fees, charges and
assessments.
(b) The federal income tax returns of the Borrower have been examined
by the Internal Revenue Service (or closed by applicable statute) for all tax
periods prior to and including the tax year ending September, 1990. All
deficiencies that have been asserted against the Borrower as a result of such
examination have been fully paid or finally settled or are being contested in
good faith, and no issue has been raised in any such examination that, by
application of similar principles reasonably can be expected to result in the
assertion of a material deficiency for any other year not so examined, except
to the extent that such deficiency has been reserved for in the financial
statements described in Section 4.01. The Borrower has not taken any
------------
reporting positions for which it does not have a reasonable basis and does not
anticipate any further material tax liability with respect to the tax years
that have not been closed. For purposes of this Section 4.11 the term
------------
"Borrower" shall include each other Person with which the Borrower files
consolidated or combined income tax returns or reports.
Section 4.12. Pension Plans, Etc.
------------ -------------------
(a) Plans. Except as set forth in Schedule 4.12 hereto,
----- -------------
neither the Borrower nor any entity with which Borrower would be aggregated (a
"Commonly Controlled Entity") under Section 414(b), (c), (m), or (o) of the
Code, maintains or contributes to any pension, profit sharing or other similar
plan providing for a program of deferred compensation to any employee or former
employee.
(b) Funding of Employee Benefit Plans. Except as set forth in
---------------------------------
Schedule 4.12 hereto, all contributions and other payments required to be
- -------------
made by the Borrower or any Commonly Controlled Entity to all employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which either the Borrower or any Commonly
Controlled Entity maintains or
-10-
<PAGE>
to which any of them contributes (the "Employee Benefit Plans") have been made
or reserves adequate for such purposes have been set aside and reflected on the
Borrower's financial statements. With respect to any such Employee Benefit
Plan which is an employee pension benefit plan, as defined in Section 3(2) of
ERISA (an "Employee Pension Plan"), there is no accumulated funding deficiency,
as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, and no
waiver of the minimum funding standard has been applied for or obtained from
the Internal Revenue Service under Section 412(d) of the Code. No lien has
arisen under Section 412(n) of the Code with respect to the assets of the
Borrower. The Borrower has no reason to believe that the level of
contributions required to be made to each multiemployer plan, as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any Commonly Controlled
Entity contributed or contributes (a "Multiemployer Plan") is not sufficient to
maintain the level of benefits under such plan now in effect or scheduled to
become effective in the future.
(c) Fiduciary Duties, Prohibited Transactions and Administration.
------------------------------------------------------------
Neither the Borrower nor any Commonly Controlled Entity has breached any
fiduciary duty imposed on it under Part 4 of Title I of ERISA with respect to
any Employee Benefit Plan and has not engaged in any nonexempt prohibited
transaction, as defined in Section 406 of ERISA and Section 4975 of the Code.
Each Employee Benefit Plan has been and is administered in all material
respects in accordance with its terms and applicable laws, rules and
regulations.
(d) Status of Funded Pension Plans. Except as set forth in
------------------------------
Schedule 4.12 hereto, each funded Employee Pension Plan has been determined
- -------------
by the Internal Revenue Service to be qualified under Section 401(a) or Section
403(a) of the Code and nothing has occurred which would cause the loss of such
qualification or the imposition of any material tax liability or penalty under
the Code or ERISA on the Borrower. With respect to each Employee Pension Plan
which is subject to Title IV of ERISA, other than Multiemployer Plans, (1)
neither the Borrower nor any Commonly Controlled Entity has failed to make
required contributions or incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC"), (2) no reportable event, as defined in Section
4043(b) of ERISA, has occurred, (3) except as set forth in Schedule 4.12 the
actuarial present value of the benefit liabilities, as defined in Section
4001(a)(16) of ERISA ("Benefit Liabilities"), does not exceed the fair market
value of the assets available to provide the Benefit Liabilities. Neither the
Borrower nor any Commonly Controlled Entity knows of any facts or circumstances
which likely will, if known by the PBGC, give rise to any liability to the PBGC
under Title IV of ERISA (other than for premium payments). With respect to
Multiemployer Plans, neither the Borrower nor any Commonly Controlled Entity
has withdrawn or partially withdrawn, as described in Subtitle E of Title IV of
ERISA from any Multiemployer Plan, and there exists no condition or set of
circumstances which could likely result in any withdrawal from or the
partition, termination, reorganization or insolvency of any Multiemployer Plan
which could result in any material liability to the Borrower or any Commonly
Controlled Entity.
(e) Status of Employee Welfare Plans. No Employee Benefit Plan
--------------------------------
which is an employee welfare benefit plan, as defined in Section 3(1) of ERISA
(an "Employee Welfare Plan"), provides for continuing benefits or coverage for
any participant (or beneficiary) after the termination of the participant's
employment except as may be required by Section 601 of ERISA and Section 4980B
of the Code ("COBRA") and regulations thereunder or by applicable state
statutory law. With respect to any Employee Welfare Plan, Borrower and each
Commonly Controlled Entity have complied with the notice and continuation
coverage requirements of COBRA and regulations thereunder such that there would
not result in any loss of any material deduction under Section 162 of the Code
or any material tax, penalty or liability to the Borrower.
(f) Claims. There are no claims (other than claims for benefits in
------
the normal course), actions or lawsuits asserted or instituted with respect to,
and neither Borrower nor any Commonly Controlled Entity has knowledge of any
threatened claims or litigation with respect to, any Employee Benefit Plan or
any fiduciary thereof, except as set forth in Schedule 4.12.
-------------
Section 4.13. Licenses, Etc.
------------ --------------
The Borrower and each Affiliate Company possess or have otherwise been
granted all material governmental approvals, authorizations, licenses and
permits required in connection with the conduct by the Borrower of its business
as presently conducted including without limitation, from the United States
Food and Drug Administration (such approvals, authorizations, licenses and
permits, together with any extensions,
-11-
<PAGE>
modifications or renewals thereof and any additional approvals, authorizations,
licenses or permits hereafter issued or granted to the Borrower and to each
Affiliate Company, being herein sometimes referred to collectively as the
"Licenses"). All existing Licenses are in full force and effect, are duly
issued or granted in the name of, or validly assigned to, the Borrower or such
Affiliate Company, and the Borrower or such Affiliate Company have full power
and authority to operate thereunder.
Section 4.14. O.S.H.A.
------------ --------
Borrower and each Affiliate Company have duly complied with, and
its facilities, business, leaseholds, equipment and other property are in
compliance, in all material respects, with the provisions of the federal
Occupational Safety and Health Act and all rules and regulations thereunder and
all similar state and local laws, rules and regulations; and there are no
outstanding citations, notices or orders of non-compliance issued to Borrower
or relating to its facilities, business, leaseholds, equipment or other
property under any such law, rule or regulation.
Section 4.15. Ownership of Borrower.
------------ ---------------------
PRI owns beneficially and of record all of the issued and outstanding
capital stock of the Borrower and such shares are held free of any assignment,
pledge, lien, security interest, charge, option or other encumbrance, except
for liens and security interests granted to Lender, and there are no warrants,
options or other rights to acquire shares of the Borrower's capital stock of
any class.
Section 4.16. Patents, Trademarks, Etc.
------------ -------------------------
The Borrower owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses, and all rights with respect to the
foregoing, necessary for the conduct of its business as now conducted, without
any known conflict with the rights of others.
Section 4.17. Brokers, Etc.
------------ -------------
The Borrower has not dealt with any broker, finder, commission agent or
other similar person in connection with the Revolving Loan or the transactions
contemplated by this Agreement, and the Borrower is not under any obligation to
pay any broker's fee, finder's fee or other similar compensation or commission
in connection with such transactions and the Borrower covenants and agrees to
indemnify and hold harmless the Lender from and against, any and all broker's
fees, finder's fees or other similar compensation or commission in connection
with such transactions.
Section 4.18. [Intentionally Left Blank]
------------
Section 4.19. Environmental Matters. (a) Except as may be
------------ ---------------------
otherwise specifically stated in Schedule 4.19, neither the Borrower nor,
-------------
to the best of the Borrower's knowledge, any other Person:
(i) has ever caused, permitted, or suffered to exist any oil,
friable asbestos, hazardous waste, hazardous substance, or other hazardous
material (as defined under applicable law including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. Sections 9601(14) and (33); the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 6903(5); the New Jersey Industrial
Site Recovery Act ("ISRA") N.J.S. 13:1K-6, et. seq., all of which is
collectively referred to herein as "Hazardous Material") to be spilled, placed,
held, located or disposed of on, nor are any now existing on, any real estate
legally or beneficially owned by the Borrower or leased by the Borrower (the
"Premises"), or into the atmosphere, any body of water, any wetlands or the
Premises;
(ii) has any knowledge that any Premises has ever been used
(whether by the Borrower or, to the best of the Borrower's knowledge and
belief, by any other Person) as a treatment, storage or disposal (whether
permanent or temporary) site for any Hazardous Material;
-12-
<PAGE>
(iii) has any knowledge of any notice of violation, lien or other
notice issued by any governmental agency with respect to the environmental
condition of the Premises, the improvements thereon, any other property owned
by the Borrower or any other property which was previously included in the
property description of the Premises or such other real property, or with
respect to the release of Hazardous Material at, upon, under or within the
Premises, the improvements or such other real property, or the past or ongoing
migration of Hazardous Material from neighboring lands or to the Premises or
the improvements; and
(iv) has any knowledge of any asbestos-containing materials,
PCBs, radon gas, or urea formaldehyde foam insulation at, upon, under or within
the Premises or any improvements thereon.
(v) is by classification subject to ISRA by virtue of its
Standard Industrial Classification number being set forth in ISRA.
(b) Except as disclosed in Schedule 4.19 to this Agreement, no
-------------
property owned or used by Borrower and located in the State of New Jersey is an
"industrial establishment" within the meaning of ISRA or is or has been used
for the generation, manufacture, refining, transportation, treatment, storage,
handling or disposal of any "hazardous substances" or "hazardous wastes" within
the meaning of ISRA. The following are all of the Standard Industrial
Classification Codes applicable to the properties and operations of Borrower:
2834
- ----
(c) Except as disclosed in Schedule 4.19 to this Agreement,
-------------
Borrower is in compliance in all material respects with all applicable federal,
state and local statutes, rules, regulations, orders and other provisions of
law relating to air emissions, water discharge, noise emissions, solid and
liquid disposal, hazard waste and substances, and other environmental, health
and safety matters.
Section 4.20. Enforceability.
------------ --------------
This Loan Agreement, the Note and the Transaction Documents constitute
the legal, valid and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity.
Section 4.21. Investment Company Act; Public Utility Holding Company Act.
------------ ----------------------------------------------------------
The Borrower is not an "investment company" as that term is defined in,
and is not otherwise subject to regulation under, the Investment Company Act of
1940. The Borrower is not a "holding company" as that term is defined in, and
is not otherwise subject to regulation under, the Public Utility Holding
Company Act of 1935.
Section 4.22. Federal Reserve Regulations.
------------ ---------------------------
The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying any margin stock (within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System of the United States), and no part
of the proceeds of the Revolving Loan will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing
or carrying any such margin stock or for any purpose that violates, or is
inconsistent with, the provisions of Regulations G, T, U or X of said Board of
Governors.
V. FINANCIAL COVENANTS.
-------------------
The Borrower covenants and agrees that, so long as the Lender has any
obligation to extend credit to the Borrower hereunder, or there remains
outstanding any portion of the principal of, or interest on, the Note, or there
remains outstanding any other Indebtedness to the Lender, whether now existing
or arising hereafter, under this Agreement, the Note or the Transaction
Documents, the Borrower will:
-13-
<PAGE>
Section 5.01. Maximum Capital Expenditures.
------------ ----------------------------
Not pay or become obligated to pay Capital Expenditures in any Fiscal
Year listed below which in the aggregate for such Fiscal Year exceed the amount
specified below opposite such Fiscal Year:
Fiscal Year Maximum Capital Expenditures
----------- ----------------------------
1994 $15,000,000
1995 $0
1996 (through March 31, 1996) $2,000,000
provided, however, the Borrower may carry forward into and use in
- -----------------
subsequent years amounts unused in any year so long as so doing would not
result in the occurrence of an Event of Default or an Unmatured Event of
Default.
Section 5.02. Minimum Working Capital.
------------ -----------------------
Maintain at all times minimum Working Capital of Borrower of Ten Million
Dollars ($10,000,000).
Section 5.03. Tangible Net Worth.
------------ ------------------
Maintain at all times a minimum Tangible Net Worth of Borrower of
Twenty-Three Million Dollars ($23,000,000.00).
Section 5.04. Restricted Payments.
------------ -------------------
Borrower may, to the extent otherwise permitted by law, pay the dividends
described in Schedule 5.04, and unless there shall have occurred and be
-------------
continuing an Event of Default or an Unmatured Event of Default, or unless such
an Event of Default or Unmatured Event of Default shall arise as a result of
the payment hereinafter described, the Borrower may, to the extent otherwise
permitted by applicable law, declare and pay dividends to its Stockholders in
cash or property, or purchase, redeem, retire or otherwise acquire any shares
of any class of its capital stock or return any capital to its Stockholders
which cumulatively do not in the aggregate exceed in any Fiscal Year an amount
equal to (i) fifty-percent (50%) of the Borrower's Net Income for the
immediately preceding Fiscal Year, minus (ii) the amount of any dividend or
distribution described under Schedule 5.04 paid in the same Fiscal Term.
-------------
Section 5.05. Debt to Tangible Net Worth Ratio.
------------ --------------------------------
Not cause, suffer or permit the ratio of the Borrower's Funded Debt to
the Borrower's Tangible Net Worth as of the end of any Fiscal Quarter or Fiscal
Year to exceed 1.0:1.0.
Section 5.06. Minimum Interest Coverage.
------------ -------------------------
Borrower shall maintain at all times (as measured on a rolling four (4)
fiscal quarter basis as evidenced by the quarterly and annual financial
statements provided pursuant to Section 6.05 hereof) a ratio of Adjusted EBIT
to total cash interest expense during such period on all Indebtedness of at
least 1.5:1.0.
Section 5.07. Minimum Percentage of PRI.
------------ -------------------------
Not cause, suffer or permit its assets to be or become less than eighty
percent (80%) of the consolidated assets of PRI.
VI. AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that, so long as the Lender has any
obligation to extend credit
-14-
<PAGE>
to the Borrower hereunder, or there remains outstanding any portion of the
principal of, or interest on, the Note, or there remains outstanding any other
Indebtedness to the Lender, whether now existing or arising hereafter, under
this Agreement, the Note, or the Transaction Documents, the Borrower will:
Section 6.01. Preservation of Assets; Compliance with Laws, Etc.
------------ --------------------------------------------------
Do or cause to be done all things necessary to preserve, renew and keep
in full force and effect its existence as a corporation, and all material
Licenses and franchises and comply in every material respect with all laws and
regulations applicable to it or the conduct of its business or ownership or use
of its properties (including without limitation, those related to food and
drugs, environmental, health and safety matters and ERISA) and all material
agreements to which it is a party the violation of which could have a material
adverse effect upon the Borrower; at all times maintain, preserve and protect
all material trade names and preserve all the remainder of its material
property used or useful in the conduct of its business and keep the same in
good repair, working order and condition (reasonable wear and tear and damage
by fire or other casualty covered by insurance excepted).
Section 6.02. Insurance.
------------ ---------
(a) Keep all of its insurable properties now or hereafter owned
adequately insured at all times against loss or damage by fire or other
casualty; provide and maintain (or cause to be provided and maintained), at its
expense, comprehensive general property, products liability, workers'
compensation and business interruption insurance protecting against such
liabilities, losses and damages and in such amounts and with such deductibles
as are reasonably acceptable to the Lender, in each case issued by financially
sound and reputable insurers, and, upon request of the Lender, furnish to the
Lender satisfactory evidence of the same; notify the Lender of any material
change in the insurance maintained on the Borrower's properties after the date
hereof and furnish the Lender satisfactory evidence of any such change;
provided that each insurance policy shall: (i) as to the Collateral, be "all
risk" "full replacement cost" insurance against loss, damage or destruction
with such deductibles as are reasonably acceptable to the Lender and name the
Lender (A) as an additional insured and the sole loss payee or (B) as the sole
loss payee pursuant to a so-called "standard mortgagee clause", (ii) provide
that no action of the Borrower, any of the Affiliate Companies or any tenant or
sub-tenant shall void such policy as to the Lender, (iii) provide that the
Lender shall be notified of any proposed cancellation of such policy at least
thirty (30) days in advance thereof and will have the opportunity to correct
any deficiencies justifying such proposed cancellation; and ensure that all
insurance payable with respect to the Collateral is payable to no party other
than the Lender and the Borrower. In the event that the Borrower shall default
in the performance of its obligations under this Section 6.02, the Lender may,
at its option, effect such insurance coverage with an insurer acceptable to the
Lender and add the premium(s) paid therefor to the principal amount of the
indebtedness incurred pursuant hereto, and the amount of such premium shall be
payable by the Borrower on demand with interest thereon at the highest rate
payable hereunder.
(b) Notwithstanding any other provision of this Agreement to the
contrary, prior to the occurrence of an Event of Default or an Unmatured Event
of Default, the Borrower may collect and deposit in any account of the Borrower
at the Lender the proceeds of insurance of Collateral which in the aggregate
with all such proceeds and the book value of all sales or dispositions under
Section 7.03(b) (other than the unused liquid pharmaceutical machinery referred
to therein) do not in the aggregate exceed $200,000 in any one Fiscal Year of
the Borrower or exceed $800,000 from the date of this Agreement; provided, that
the Borrower notifies the Lender in writing of the collection and deposit of
such insurance proceeds, the Collateral loss which resulted in such insurance
proceeds and the aggregate of all insurance proceeds then collected to date
under this paragraph; provided, further, however, to the extent any such
proceeds are used to repair or purchase replacement Collateral against which
the Lender possesses a lien of the same priority as the Lender's lien was
against the Collateral subject to the loss, then the amount of such insurance
proceeds so used will not be included in the computation under this paragraph.
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<PAGE>
Section 6.03. Taxes, Etc.
------------ -----------
Pay and discharge or cause to be paid and discharged all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income and profits or upon any of its property, real, personal or mixed, or
upon any part thereof, before the same shall become in default, as well as all
lawful claims for labor, materials and supplies or otherwise, which if unpaid,
might become a lien or charge upon such properties or any part thereof;
provided, however, that the Borrower shall not be required to pay and
- -------- -------
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate legal proceedings and it shall have set aside on its books
adequate reserves with respect to any such tax, assessment, charge, levy or
claim, so contested; and provided, further that, in any event, payment
-------- -------
of any such tax, assessment, charge, levy or claim shall be made before any of
Borrower's or (on a consolidated basis) PRI's property shall be seized or sold
in satisfaction thereof.
Section 6.04. Notice of Proceedings, Defaults, Adverse
------------ ----------------------------------------
Change, Etc.
------------
Promptly (and in any event within five days of the Borrower's
discovery thereof) give written notice to the Lender of (a) any proceedings
instituted or threatened in any federal, state or local court or before any
commission, agency or other regulatory body, whether federal, state or local,
which, if adversely determined, could reasonably be expected to have a material
adverse effect upon its business, operations, prospects, properties, assets, or
condition, financial or otherwise; (b) any notices of default received by the
Borrower (together with copies thereof, if requested by the Lender) with
respect to alleged defaults under or violations of any of its material
licenses, permits, approvals or franchises (including the Licenses), or any
material agreements to which the Borrower is a party or any alleged defaults
with respect to any evidence of Indebtedness of the Borrower, which
Indebtedness is in an amount which equals or exceeds $500,000, or any mortgage,
indenture or other agreement relating thereto; (c) any material adverse change
in the condition, financial or otherwise, or prospects of the Borrower, or (d)
the occurrence of any Event of Default or Unmatured Event of Default.
Section 6.05. Financial Statements and Reports.
------------ --------------------------------
Furnish to the Lender:
(a) (i) Within ninety (90) days after the end of each Fiscal
Year, PRI's consolidated, audited balance sheet and statements of operations
and retained earnings, and statements of cash flows, together with supporting
schedules, prepared in accordance with generally accepted auditing standards
consistently applied and certified without qualification by its independent
certified public accountants selected by the Borrower and reasonably acceptable
to the Lender (which absent any material adverse change may remain as Richard
A. Eisner & Company) (the "Accountants"), the form of such consolidated
financial statements to be satisfactory to the Lender (which consolidated
financial statements may be in the form required to be annexed to or
incorporated in PRI's Annual Report on Form 10-K), showing the consolidated
financial condition of PRI at the close of such Fiscal Year and the results of
operations during such year, together with a statement to the effect that such
Accountants have examined the provisions of this Agreement and that, to the
best of their knowledge, no Event of Default or Unmatured Event of Default has
occurred (or, if such an event has occurred, a statement explaining its nature
and extent); provided, however, that in issuing such statement, such
-------- -------
Accountants shall not be required to exceed the scope of normal auditing
procedures conducted in connection with their opinion referred to above,
and
- ---
(ii) Within ninety (90) days after the end of each Fiscal
Year, Borrower's consolidating balance sheet and statements of operations and
retained earnings and statements of cash flows, together with supporting
schedules, certified by the chief financial officer of PRI as presenting fairly
the financial condition of the Borrower at the close of such Fiscal Year and as
having been prepared in accordance with generally accepted accounting
principles, the form of such consolidating financial statements to be
satisfactory to the Lender;
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<PAGE>
(b) Within sixty (60) days after the end of each of the first
three Fiscal Quarters of each Fiscal Year, PRI's consolidated (and if the
Borrower is not in compliance with the obligations of Section 5.07 above, then
also Borrower's) balance sheet and statements of operations and retained
earnings and cash flows, together with supporting schedules, prepared by PRI or
the Borrower, as the case may be, in accordance with generally accepted
accounting principles, consistently applied (which consolidated financial
statements may be in the form required to be annexed to or incorporated in
PRI's Quarterly Report on Form 10-Q) and certified by the chief financial
officer of PRI, such balance sheet to be as of the end of such Fiscal Quarter
and such statements of income to be for the quarter then ended and the period
from the beginning of the then current Fiscal Year to the end of such quarter
(in each case subject to normal audit and year-end adjustments);
(c) Concurrently with the delivery of any annual financial statements
required by Section 6.05(a) and any quarterly financial statements required by
Section 6.05(b), a certificate in the form of Schedule 6.05 hereto signed
-------------
by the corporate treasurer or the chief financial officer of the Borrower
setting forth the calculations contemplated in Article V of this Agreement, and
certifying as to the fact that such Person has examined the provisions of this
Agreement and that no Event of Default or Unmatured Event of Default has
occurred (or, if such an event has occurred, a statement explaining its nature
and extent and setting forth the steps the Borrower proposes to take to cure or
prevent any Event of Default);
(d) Promptly upon delivery to any Person other than the Borrower or the
Affiliate Companies or their respective accountant's or legal counsel, a copy
of any report, certificate, letter or other writing which in any manner
describes, discusses or indicates the occurrence of any Event of Default or any
occurrence with which the mere passage of time or the giving of notice or both
would or will become an Event of Default with respect to any Indebtedness of
Borrower or any Affiliate Company for borrowed money.
(e) Promptly upon receipt thereof, and in any event within five (5) days
after such receipt, copies of all correspondence and notices received by the
Borrower from federal and state government regulatory agencies (including
without limitation, the United States Environmental Protection Agency, the New
Jersey Department of Environmental Protection and Energy, the United States
Food and Drug Administration, and the Internal Revenue Service) relating to any
potential or actual adverse action or determination taken or which may be taken
against Borrower or any of its Affiliates.
(f) As soon as reasonably possible and in any event within ten (10) days
after request therefor, such other information regarding the operations,
assets, business, affairs and financial condition of the Borrower as the Lender
may reasonably request from time to time;
(g) Immediately upon their becoming available, copies of each filing
made (including those items which are deemed not officially "filed") with the
Securities and Exchange Commission, including without limitation, a copy of
each registration statement, Form 10-K, Form 10-Q, Form 8-K, Form 8 and each
proxy statement and annual report, in each case with a copy of the exhibits
thereto other than exhibit copies of which were previously delivered to Lender.
Section 6.06. Inspection.
------------ ----------
Permit employees, agents and representatives of the Lender to inspect, on
prior notice during normal business hours, the Premises and the Borrower's
books and records and to make abstracts or reproductions thereof, including,
without limitation, permitting the Lender to inspect any and all equipment or
other assets and any and all maintenance records and agreements with respect to
such equipment and other assets. In no event will any Person be permitted to
photograph or videotape any portion of the Premises or any of the Borrower's
operations prior to the occurrence of an Event of Default.
Section 6.07. Accounting System.
------------ -----------------
Maintain complete and accurate books and records of all its operations
and properties and a standard system of accounting in accordance with generally
accepted accounting principles consistently applied.
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<PAGE>
Section 6.08. Yield Protection. If any change in any law,
------------ ----------------
regulation or guideline or in the interpretation thereof, or any order or
ruling by any regulatory body, court or other governmental authority, or
compliance by Lender with any request or directive (whether or not having the
force of law) of any such regulatory body, court or authority, shall impose,
modify, or deem applicable to Lender any reserve, capital, special deposit or
other requirement or condition affecting loans made or assets held by Lender or
deposits in or for the account of Lender, and the result of any such event is
increased cost or reduced benefit to Lender in maintaining the Revolving Loan
(as determined by Lender's reasonable allocation of the aggregate of such
increased costs or reduced benefits to Lender resulting from such event),
Borrower shall pay to Lender from time to time, within 10 days after demand,
additional amounts sufficient to compensate Lender for such increased cost or
reduced benefit from the date of such event, together with interest on each
such amount from a date 10 days after the date demanded at the rate then
applicable to the Revolving Loan. A certificate setting forth in reasonable
detail such increased cost or reduced benefit shall be conclusive as to the
amount thereof, absent manifest error.
Section 6.09. Additional Assurances.
------------ ---------------------
From time to time hereafter, execute and deliver or cause to be executed
and delivered, such additional instruments, certificates and documents, and
take all such actions, as the Lender shall reasonably request for the purpose
of implementing or effectuating the provisions of this Agreement, the Note or
the Transaction Documents, and upon the exercise by the Lender of any power,
right, privilege or remedy pursuant to this Agreement or the Transaction
Documents which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, execute and
deliver or cause to be executed and delivered all related applications,
certifications, instruments and other documents and papers.
Section 6.10. Environmental Indemnification.
------------ -----------------------------
In respect of all environmental matters:
(a) Without in any way limiting the generality of Section 6.01, comply
in every material respect with the requirements of all federal, state, and
local environmental laws; notify the Lender promptly in the event of any spill,
hazardous waste pollution or contamination affecting the Premises; forward to
the Lender promptly any notices relating to such matters received from any
governmental agency; and pay promptly when due any fine or assessment against
the Premises unless the same is being contested by Borrower in good faith in
appropriate legal proceedings and it shall have set aside on its books adequate
reserves with respect to any such fine or assessment, but in any event payment
of any such fine or assessment shall be made before any of the Borrower's or
(on a consolidated basis) PRI's property shall be seized or sold in
satisfaction thereof;
(b) not become involved, and not permit any tenant or subtenant of any
of the Premises to become involved, in any operations at the Premises
generating, manufacturing, storing, disposing, refining or handling Hazardous
Material or any other activity that could lead to the imposition on the Lender,
Borrower or the Premises of any liability or lien under any environmental laws;
(c) immediately contain and remove any Hazardous Material (other than
that which is generated, used and disposed of in the ordinary course of
business in compliance with applicable law) found on the Premises, which work
must be done in compliance with applicable laws and at the Borrower's expense;
and the Borrower agrees that the Lender has the right, at its sole option but
at the Borrower's expense, to have an environmental engineer or other
representative review the work being done;
(d) promptly upon the request of the Lender, based upon the Lender's
reasonable belief that a Hazardous Waste or other environmental problem exists
with respect to the Premises, provide the Lender with an environmental site
assessment report or an update of any existing report, all in scope, form and
content and performed by such company as may be reasonably satisfactory to the
Lender;
(e) not take any action or permit any tenant or subtenant of any of the
Premises to take any action, which will cause any of the Premises to be
considered an "industrial establishment" as that term is
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<PAGE>
defined under ISRA;
(f) indemnify, defend, and hold the Lender harmless from and against any
claim, cost, damage (including, without limitation, consequential damages),
expense (including, without limitation, reasonable attorneys' fees and
expenses), loss, liability, or judgment now or hereafter arising as a result of
any claim for environmental cleanup costs, any resulting damage to the
environment and any other environmental claims against the Borrower, the
Lender, or the Premises; provided the Borrower shall have no obligation to
indemnify or hold harmless the Lender under this Subsection (f) with respect to
matters caused by or resulting directly from the willful misconduct or gross
negligence of the Lender; notwithstanding any other provision of this Agreement
to the contrary, the provisions of this Section 6.10(f) shall continue in
effect and shall survive (among other things) any termination of this
Agreement, payment and satisfaction of the Note, and release of any collateral;
(g) notwithstanding the foregoing or anything to the contrary contained
in this Agreement, the mere use of fuels, lubricants and other hazardous or
toxic materials normally used in the conduct of a pharmaceutical manufacturer,
in quantities customarily used in the conduct of such business, shall not be a
violation of any covenant contained in Sections 6.10(b), (c) or (e) of this
Agreement, so long as no such substance is used in a manner which would be in
violation of, or subject the Borrower or any tenant of any of its real property
to a claim under or pursuant to, ISRA, the Spill Compensation and Control Act,
CERCLA, RCRA or any law or regulation promulgated by the New Jersey Department
of Environmental Protection or any other state or federal governmental agency;
provided, however, that nothing contained in this paragraph (g) shall in any
manner release the Borrower from its obligation to indemnify, defend and hold
harmless the Lender pursuant to Section 6.10(f).
Section 6.11. Principal Business.
------------ -------------------
Engage, directly and indirectly, principally in the business of a
manufacturer and distributor of pharmaceutical products.
VII. NEGATIVE COVENANTS
------------------
The Borrower covenants and agrees that, so long as the Lender has any
obligation to extend credit to the Borrower hereunder, or there remains
outstanding any portion of the principal of, or interest on, the Note, or there
remains outstanding any other Indebtedness to the Lender, whether now existing
or arising hereafter, under this Agreement, the Note or the Transaction
Documents, unless the Lender shall otherwise consent in writing, it shall not,
directly or indirectly:
Section 7.01. Indebtedness.
------------ ------------
Incur, create, assume, become or be liable in any manner with respect to,
or permit to exist, any Funded Debt, whether direct, indirect or contingent,
except:
(a) Indebtedness to the Lender;
(b) Indebtedness under Capital Leases relating to the purchase price of
equipment to be used in the business of the Borrower or with respect to other
Capital Expenditures, to the extent such Indebtedness was permitted by Section
5.01 hereof at the time incurred;
(c) Indebtedness to any Affiliate, provided that such Indebtedness is
subject to a subordination agreement in form and substance satisfactory to
Lender;
(d) Indebtedness existing on the date hereof and described in
Schedule 7.01 attached hereto; provided, however, that the terms of
- ------------- -------- -------
such Indebtedness shall not be modified or amended, nor shall payment thereof
be extended, without the prior written consent of the Lender unless such
amendment, modification or extension would not result in any additional or
different financial burden (other than additional time to
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repay at substantially the same rate and cost) on (or additional lien on any
assets of) Borrower, or in any way enhances the corresponding creditor's
position in comparison to Lender;
(e) Indebtedness in respect of reasonable automobiles used by employees
of the Borrower in furtherance of the Borrower's business.
Section 7.02. Liens.
------------ -----
Create, incur, assume, suffer or permit to exist any mortgage, pledge,
lien, charge or other encumbrance of any nature whatsoever on any of its
assets, now or hereafter, owned, including without limitation, any of its real
property owned or leased, other then:
(a) liens securing the payment of taxes, either not yet due or the
validity of which is being contested in good faith by appropriate proceedings,
and as to which it shall have set aside on its books adequate reserves;
(b) security interests and liens in favor of the Lender;
(c) liens imposed by law, such as carriers', warehousemen's or
mechanics' liens, incurred by it in good faith in the ordinary course of
business, and (subject to the provisions of Article VIII) liens arising out of
a prejudgment attachment, a judgment or award against it with respect to which
it shall currently be prosecuting an appeal, a stay of execution pending such
appeal having been secured;
(d) liens securing Indebtedness described in Section 7.01(b) provided
that each such lien shall at all times be limited solely to the item or items
of property so acquired;
(e) any other liens existing on the date hereof and described in
Schedule 7.02 attached hereto;
- -------------
(f) restrictions, easements and minor irregularities in title which do
not and will not interfere with the occupation, use and enjoyment by the
Borrower of such properties and assets in the normal course of its business as
presently conducted or materially impair the value of such properties and
assets for the purpose of such business; and
(g) liens on automobiles securing Indebtedness described in Section
7.01(g).
Section 7.03. Disposition of Assets.
------------ ---------------------
(a) Sell, lease, transfer or otherwise dispose of any of its accounts,
equipment or inventory or any material assets of Borrower to any Person, except
(i) in connection with the replacement of equipment with other equipment of at
least equal utility and value (provided that the Lender's lien upon such
newly-acquired equipment has the same priority as the Lender's lien upon the
replaced equipment) (ii) the sale of inventory in the ordinary course of
business and the retirement of other assets in the normal course of operations.
(b) Prior to the occurrence of an Event of Default or an Unmatured
Event of Default, Borrower may, in addition to sales and dispositions permitted
under 7.03(a)(i) and (ii), sell or otherwise dispose of equipment which in the
aggregate with all other such sales or disposals during any one Fiscal Year of
the Borrower does not have a book value in excess of an amount equal to
$200,000.00 minus all insurance proceeds collected and included in the
computation under Section 6.02 (b) during such fiscal year and which in the
aggregate with all other such sales or disposals from the date hereof to the
date of such sale or disposal, do not have a book value in excess of an amount
equal to $800,000.00 minus all insurance proceeds collected and included in the
computation under Section 6.02(b) since the date of this Agreement; provided
that Borrower notifies Lender in writing of such sale, the equipment sold,the
book value of such equipment, the aggregate book value of all such sales or
disposals during that Fiscal Year and the aggregate book value of all such
sales and disposals from the date hereof to the date of such sale; provided,
however, the disposition of machinery used prior to the date hereof in the
manufacture of liquid pharmaceutical products shall be
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<PAGE>
excluded from the above calculations.
Section 7.04. Dividends and Other Distributions.
------------ ---------------------------------
Declare or pay any cash dividend or make any distribution on, or redeem,
retire or repurchase or otherwise acquire directly or indirectly, any share of
its stock or make any distribution of assets to its stockholders, except to the
extent expressly permitted under Section 5.04 hereof.
Section 7.05. Sale Leaseback.
------------ --------------
Enter into or become obligated under any conditional sale, sale-leaseback
or other title retention agreement, except as may otherwise be permitted
hereunder.
Section 7.06. Acquisition. Acquire or obligate itself to acquire
------------ -----------
the stock, or assets (except in the ordinary course of Borrower's business) of
any Person, except for acquisitions consummated solely for (i) cash or (ii)
------
subject to the provision of Section 8.01(m), Borrower's capital stock or (iii)
Funded Debt not in excess of $5,000,000 in any one Fiscal Year, or (iv) any
combination of (i), (ii) and (iii).
Section 7.07. Fundamental Changes.
------------ -------------------
Amend its corporate charter, articles of incorporation or by-laws in any
way that could have a material adverse effect upon its business or upon the
Lender's rights hereunder or under the Transaction Documents (it being
expressly agreed that the inclusion of any provision similar to those set forth
in Section 102(b)(2) of Title 8 of the Delaware Code is prohibited under this
Section); take any steps in contemplation of dissolution or liquidation; enter
into or authorize any merger, consolidation, reorganization or
recapitalization; or conduct any material part of Borrower's business through
any subsidiary, unincorporated association or other entity; provided, however,
Borrower may engage in a merger where Borrower is the surviving entity if
Borrower (i) provides Lender at least forty-five days prior written notice
(including the details) of the proposed merger and (ii) thereafter receives
Lender's prior written consent to such merger, which consent will not be
unreasonably withheld or delayed.
Section 7.08. Change in Business.
------------ ------------------
Materially change or alter the nature of or cease operations of its
business; or change the location of the chief executive office of the Borrower
or, without 45 days' prior written notice to the Lender and the execution,
delivery and filing of such documents as reasonably required by the Lender, the
name under which it conducts its business; provided, however, upon at least 45
days prior written notice and the execution, delivery and filing of such
documents as reasonably required by Lender, Borrower may move its chief
executive office within Northern New Jersey, Fairfield County in Connecticut
and Rockland, Westchester and New York Counties in New York State.
Section 7.09. Accounts Receivable.
------------ -------------------
Sell, assign, discount or dispose in any way of any accounts receivable
or promissory notes arising out of any of the Collateral except for collection
(including endorsements) in the ordinary course of business.
Section 7.10. Transactions with Affiliates.
------------ ----------------------------
Except for the transaction described in Schedule 7.10, enter into any
-------------
transaction, including, without limitation, the purchase, sale or exchange of
property or assets or the rendering or accepting of any service with or to any
Affiliate of the Borrower except in the ordinary course of business and
pursuant to the
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reasonable requirements of the Borrower's business and upon terms not less
favorable to the Borrower than it could obtain in a comparable arm's-length
transaction with a third party other than such Affiliate.
Section 7.11. Illegal Activities.
------------ ------------------
Engage in any conduct or activity, including, without limitation, a
pattern of racketeering activity, that could subject any of the Borrower's
assets to forfeiture or seizure.
VIII. DEFAULTS
--------
Section 8.01. Defaults.
------------ --------
Each of the following events (each of which is herein sometimes
called an "Event of Default") shall constitute an Event of Default under this
Agreement:
(a) any representation or warranty made in this Agreement or any other
Transaction Document, or in any report, certificate, financial statement or
other instrument furnished in connection with this Agreement, or the borrowings
hereunder, shall prove to be false or misleading in any material respect when
made; or
(b) default in the payment of any installment of the principal of the
Note or the principal of any other Indebtedness of the Borrower to the Lender,
whether now existing or hereafter arising, when the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment or
by acceleration or otherwise and the continuation of such default past any
applicable grace period or, if no applicable grace or cure period, for three
(3) days following the date such payment is due and payable; or
(c) default in the payment of any fee, rental, expense, or other
obligation payable by the Borrower to the Lender or any installment of any
interest on the Note or on or in respect of any other Indebtedness of the
Borrower to the Lender, whether now existing or hereafter arising, when the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment or by acceleration or otherwise, and continuation of such
default past any applicable grace period or, if no applicable grace period, for
three (3) days following the date such payment is due and payable; or
(d) default in the due observance or performance by any Person other
than the Lender of any other covenant, condition or agreement contained in this
Agreement, which default shall continue unremedied for thirty (30) days after
the earlier to occur of (i) the Borrower's discovery of such default, or (ii)
written notice thereof from the Lender to the Borrower; provided,
--------
however, that if such default cannot be remedied, then such default shall
- -------
be deemed to be an Event of Default as of the date of the occurrence thereof;
or
(e) for any reason any Transaction Document at any time shall not be in
full force and effect in all material respects or shall not be enforceable in
all material respects in accordance with its terms; or
(f) [Intentionally Left Blank]; or
(g) any event of default with respect to any other evidence of
Indebtedness of the Borrower or any Affiliate Company for borrowed money which
event of default permits the corresponding creditor to exercise remedies with
respect to such Indebtedness, which Indebtedness is in an amount which equals
or exceeds $500,000, whether or not such event of default results in
acceleration of such Indebtedness; or
(h) (A) the Borrower shall lose, fail to keep in force, suffer the
termination, suspension or revocation of, or terminate, forfeit or suffer an
amendment to, any License at any time held by it, which could reasonably be
expected to have a material adverse effect on the operations of the Borrower;
(B) any
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<PAGE>
governmental regulatory authority shall commence an action or proceeding
seeking the termination, suspension, revocation or material adverse amendment
of any material License held by the Borrower and the Lender shall reasonably
and in good faith believe that the result thereof shall be the termination,
revocation, suspension or material adverse amendment of such License; or
(i) the Borrower shall (A) discontinue its business, (B) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of
it or any of its property, (C) admit in writing its inability to pay its debts
as they mature, (D) make a general assignment for the benefit of creditors, (E)
be adjudicated a bankrupt or insolvent or be the subject of an order for relief
under Title 11 of the United States Code, or (F) file a voluntary petition in
bankruptcy, or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or
an answer admitting the material allegations of a petition filed against it in
any proceeding under any such law, or corporate action shall be taken for the
purpose of effecting any of the foregoing or (G) become unable or fail to pay
its debts generally as they become due; or
(j) there shall be filed against the Borrower an involuntary petition
seeking reorganization of such Borrower or the appointment of a receiver,
trustee, custodian or liquidator of the Borrower or any material part of its
assets, or an involuntary petition under any bankruptcy, reorganization or
insolvency law of any jurisdiction, whether now or hereafter in effect (any of
the foregoing petitions being herein referred to as an "Involuntary Petition");
or
(k) final judgment for the payment of money which, when aggregated with
all other outstanding judgments against the Borrower, exceeds $500,000, shall
be rendered against the Borrower and no insurer(s) shall have admitted in
writing its liability for such judgments to an extent which reduces the
Borrower's aggregate liability to less than $500,000, if such judgment shall
remain undischarged or not have been stayed pending appeal within thirty (30)
days after entry thereof or shall not have been discharged within five (5) days
after the expiration of any such stay; or
(l) the occurrence of any attachment of any deposits or other property
of the Borrower in the hands or possession of the Lender, or the occurrence of
any attachment of any other property of the Borrower in an amount exceeding
$500,000 in the aggregate which shall remain undischarged thirty (30) days
after the attachment thereof or no insurer shall have admitted its liability in
writing to satisfy and remove the attachment, or the same shall not have been
stayed pending appeal within thirty (30) days after entry thereof or shall not
have been discharged within five (5) days after the expiration of any such
stay; or
(m) for any reason less than one hundred percent (100%) of the issued
and outstanding capital stock of the Borrower is owned by PRI, free and clear
of any lien or encumbrance; or
(n) the Borrower or any material part of its business or assets shall be
the subject of (i) any extraordinary product recall which results in the
ceasing or other than short term shut down of any material portion of
Borrower's business, or (ii) any seizure or forfeiture proceeding or similar
action instituted or conducted by any agency, office or department of state or
federal government, except such as are being contested in good faith in an
appropriate legal proceeding and in which no judgment has been rendered adverse
to the interest of the Borrower; or
(o) there occurs or the Borrower takes any action to authorize any sale
or transfer in bulk or encumbrance on all or a major part of the Borrower's
assets; or
(p) PRI's Net Income for any Fiscal Quarter is a negative number and
when combined with the PRI's Net Income for the immediately prior Fiscal
Quarter results in an aggregate loss for the overall six month period; or
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(q) With respect to any Employee Benefit Plan (as defined in Section
4.12 of this Agreement), there occurs or exists any of the events or conditions
described in the following clauses (a) through (h) and such event or condition,
together with all like events or conditions, could likely, or do subject
Borrower to any tax, penalty or other liability that likely would, or does,
singly or in the aggregate, have a material adverse effect on the financial
condition or the properties or operations of Borrower: (a) a reportable event
as defined in Section 4043 of ERISA, (b) a prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code, (c)
termination of the Employee Benefit Plan or filing of notice of intention to
terminate, (d) institution by the PBGC of proceedings to terminate, or to
appoint a trustee to administer, the Employee Benefit Plan, or circumstances
that constitute grounds for any such proceedings, (e) complete or partial
withdrawal from a multi-employer Employee Benefit Plan, or the reorganization,
insolvency or termination of a multi-employer Employee Benefit Plan, (f) an
accumulated funding deficiency within the meaning of ERISA, (g) violation of
the reporting, disclosure or fiduciary responsibility requirements of ERISA or
the Internal Revenue Code, or (h) any act or condition which could result in
direct, indirect or contingent liability to any Employee Benefit Plan or the
PBGC; or
(r) any of the Guarantees ceases to be effective, or any of the
Guarantors denies the validity of or liability under any of the Guarantees, or
any of the events described in subsections (a), (d), (g), (h), (i), (j), (k),
(l), (n), or (o) above occurs with respect to any of the Guarantors.
Upon the occurrence of any such Event of Default and at any time thereafter
during the continuance of such Event of Default, at the election of the Lender,
the Revolving Loan Commitment shall terminate and the Note and all other
Indebtedness of the Borrower to the Lender shall immediately become due and
payable, including all principal and interest, without presentment, demand,
protest, or further notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Note or other evidence of such
Indebtedness to the contrary notwithstanding (except in the case of an Event of
Default under paragraph (i) or (j) of this Article VIII, in which event the
Revolving Loan Commitment shall automatically terminate and such Indebtedness
shall automatically become due and payable) and Lender shall be entitled to
forthwith exercise (to the extent and in such order as Lender may elect, in its
sole and absolute discretion) any or all rights and remedies provided in this
Agreement, the Note or any other Transaction Document and all other rights and
remedies that may otherwise be available to Lender by agreement or at law or in
equity. In the event of an acceleration of the Borrower's Indebtedness
hereunder as a result of the filing of an Involuntary Petition as specified in
paragraph (j) of this Article VIII, such acceleration shall be rescinded, and
the Borrower's rights hereunder reinstated, if, within ninety (90) days
following the filing of such Involuntary Petition, such Involuntary Petition
shall have been dismissed and there shall then exist no other Event of Default
or Unmatured Event of Default under this Agreement.
IX. REMEDIES ON DEFAULT, ETC.
-------------------------
Section 9.01. Remedies.
------------ --------
In case any one or more Events of Default shall occur and be continuing,
the Lender shall have the right, in addition to all other rights and remedies
provided by law or by this Agreement or any other Transaction Document, to
proceed to protect and enforce its rights by an action at law, suit in equity
or other appropriate proceeding, whether for the specific performance of any
agreement contained in this Agreement, any Transaction Document or the Note or
for an injunction against a violation of any of the terms hereof or thereof or
in and of the exercise of any power granted hereunder or thereby or by law. No
right conferred upon the Lender hereby or by any Transaction Document or the
Note shall be exclusive, but shall be cumulative and in addition to any other
right or remedy referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise; and the Lender may exercise its
remedies concurrently, independently or successively.
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Section 9.02. Default Rate.
------------ ------------
Without regard to whether the Lender has exercised any other rights or
remedies hereunder, the applicable interest rate under the Note shall at the
Lender's option, but only to the extent permitted by law, be increased to a
rate per annum (the "Default Rate") equal to the interest rate specified under
Section 2.03 hereof, plus two percent (2%) per annum upon the occurrence of an
Event of Default.
Section 9.03. Cross Default.
------------ -------------
BORROWER HEREBY AGREES THAT ALL OTHER OBLIGATIONS BETWEEN BORROWER AND
LENDER OR ANY AFFILIATE OF LENDER (INCLUDING, WITHOUT LIMITATION, THE
OBLIGATIONS OF BORROWER UNDER OR IN CONNECTION WITH OR IN ANY WAY RELATED TO
(I) THE TERM LOAN AGREEMENT, DATED THE DATE HEREOF AND (II) THE AMENDED AND
RESTATED AGREEMENT CONCERNING TERM LOANS, DATED THE DATE HEREOF), AS ANY OR ALL
OF THE SAME MAY, FROM TIME TO TIME, BE AMENDED, MODIFIED, RESTATED OR OTHERWISE
REVISED, ARE HEREBY AMENDED SO THAT A DEFAULT UNDER THIS AGREEMENT IS A DEFAULT
UNDER ALL SUCH OTHER AGREEMENTS AND A DEFAULT UNDER ANY ONE OF THE OTHER
AGREEMENTS IS A DEFAULT UNDER THIS AGREEMENT.
Section 9.04. Application of Proceeds.
------------ -----------------------
The Borrower hereby agrees that upon the occurrence of an Event of
Default, the Lender shall be entitled to apply the proceeds of any payment made
to the Lender by or on behalf of the Borrower, including, without limitation,
the proceeds arising from any of the collateral securing any of the obligations
of Borrower to the Lender, in a manner and against the obligation or
obligations as determined in the sole and absolute discretion of the Lender;
provided, however, if the Lender takes affirmative action to enforce any of its
remedies in order to realize against any of the collateral, any proceeds
received by the Lender from any or all such actions shall be applied first
against secured obligations and then against any unsecured obligations.
X. MISCELLANEOUS
-------------
Section 10.01. Survival.
------------- --------
This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto, shall
survive the making by the Lender of the Revolving Loan and shall continue in
full force and effect so long as the Note or any other Indebtedness to the
Lender, whether now existing or hereafter arising, under this Agreement or the
Transaction Documents, is outstanding and unpaid or the Lender has any
obligation to make credit extensions hereunder.
Section 10.02. Expenses.
------------- --------
The Borrower agrees to reimburse the Lender upon demand for all
out-of-pocket costs, charges, liabilities, documentary stamp taxes, intangible
taxes, any other taxes due under any applicable state law (exclusive of taxes
measured or imposed in terms of the Lender's net income) and any other expenses
of the Lender (including, without limitation, (i) reasonable fees and
disbursements of (A) counsel to the Lender and (B) agents of the Lender not
regularly in its employ and (ii) the allocated costs of services of Lender's
in-house counsel (except such that are clearly mere duplications of costs under
(i)(a)) in connection with (a) the preparation, negotiation, interpretation,
execution and delivery of this Agreement, the Note, any Transaction Documents
and any other agreements or documents relating thereto, (b) the making of the
Revolving Loan, (c) any amendments, modifications, consents or waivers in
respect thereof, (d) any enforcement of any of the
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<PAGE>
Transaction Documents, (e) any proceedings with respect to any of the
Transaction Documents or with respect to the bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation of the Borrower or
any party to any Transaction Document, and (f) any claims by third parties
(except as caused by or result directly from the willful misconduct or gross
negligence of the Lender) relating to the foregoing.
Section 10.03. Indemnification; Limitation of Liability.
------------- ----------------------------------------
(a) The Borrower agrees to protect, indemnify and hold harmless the
Lender and each of its officers, directors, employees and agents (collectively
called the "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for and
consultants of such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be
designated a party thereto), which may be imposed on, incurred by, or asserted
against such Indemnitees (whether direct, indirect, or consequential and
whether based on any federal or state laws or other statutory regulations,
including, without limitation, securities, environmental and commercial laws
and regulations, under common law or at equitable cause or on contract or
otherwise) in any manner relating to or arising out of this Loan Agreement, the
Note or any of the Transaction Documents, or any act, event or transaction
related or attendant thereto, the agreements of the Lender contained herein,
the making of the Revolving Loans, the management of the Revolving Loans
(including any liability under federal, state or local environmental laws or
regulations) or the use or intended use of the proceeds of such Revolving Loans
hereunder (collectively, the "Indemnified Matters"); provided that the Borrower
shall have no obligation to any Indemnitee hereunder with respect to
Indemnified Matters caused by or resulting directly from the willful misconduct
or gross negligence of such Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Matters incurred by the Indemnities.
(b) To the extent permitted by applicable law, no claim may be made by
the Borrower or any other Person against the Lender or any of its affiliates,
directors, officers, employees, agents, attorneys or consultants for any
special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by the Loan Agreement, the Note or any
of the Transaction Documents or any act, omission or event occurring in
connection therewith; and the Borrower hereby waives, releases and agrees not
to sue upon any claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor. Neither the Lender nor any of
its affiliates, directors, officers, employees or agents shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with any of the above referenced documents except for its or their own gross
negligence or willful misconduct.
Section 10.04. Setoffs, Etc.
------------- -------------
The Borrower agrees that, in addition to (and without limitation of) any
right of set-off, banker's lien or counterclaim the Lender may otherwise have,
the Lender and any purchaser of a participation in the Note shall be entitled,
at any time and from time to time, at its option, without notice to Borrower
(any such notice being expressly waived by Borrower),to offset balances held by
it for the account of the Borrower at any of its offices, against any
Indebtedness or other fees or charges owed to the Lender or such purchaser
hereunder if the same are not paid when due (regardless of whether such
balances are then due to the Borrower) or if the Borrower becomes insolvent,
howsoever evidenced, or if any Event of Default occurs, and that such offset
balances may be applied toward the payment of any Indebtedness of the Borrower
to the Lender or to any such purchaser in the Note, whether or not such
Indebtedness or any part thereof shall then be due; in which case the Lender or
such purchaser shall promptly notify the Borrower thereof, provided, however,
that the Lender's or such purchaser's failure to give such notice shall not
affect the validity thereof.
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<PAGE>
Section 10.05. Governing Law.
------------- -------------
THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAW PROVISIONS) AND
DECISIONS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN SAID STATE.
Section 10.06. Amendment; Modification.
------------- -----------------------
No modification or waiver of any provision of this Agreement, or of the
Note, nor consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. No notice to, or demand on, the Borrower, in any case, shall
entitle the Borrower to any other or future notice or demand in the same,
similar or other circumstances.
Section 10.07. Waiver.
------------- ------
The Lender's failure to insist upon the strict performance of any term,
condition or other provision of this Agreement, the Note or any of the other
Transaction Documents, or to exercise any right or remedy hereunder or
thereunder, shall not constitute a waiver by the Lender of any such term,
condition or other provision or default or Event of Default in connection
therewith; and any waiver of any such term, condition or other provision or of
any such default or Event of Default shall not affect or alter this Agreement,
the Note or any of the other Transaction Documents, and each and every term,
condition and other provision of this Agreement, the Note, and other
Transaction Documents shall, in such event, continue in full force and effect
and shall be operative with respect to any other then existing or subsequent
default or Event of Default in connection therewith. An Event of Default
hereunder or under any of the Transaction Documents shall be deemed to be
continuing unless and until waived in writing by the Lender.
Section 10.08. Notice.
------------- ------
All notices, requests, demands and other communications provided for
hereunder shall be in writing (including telecopier communication) and mailed
certified, return receipt requested, or telecopied, personally served or sent
by courier service to the applicable party at the addresses indicated below.
If to the Lender:
MIDLANTIC BANK, NATIONAL ASSOCIATION
CORPORATE BANKING DEPARTMENT
P.O. Box 600
Edison, New Jersey 08818
with a copy to:
Michael J. Dunne, Esq.
Pitney, Hardin, Kipp & Szuch
(mail to) P.O. Box 1945
Morristown, New Jersey 07962-1945
(street address) 200 Campus Drive
Florham Park, New Jersey 07932
and if to Borrower:
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<PAGE>
PAR PHARMACEUTICAL, INC.
One Ram Ridge Road
Spring Valley, New York 10977
Att'n: Treasurer
with a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Att'n: Stephen A. Ollendorff, Esq.
or, as to each party, at such other address as shall be designated by such
parties in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communication shall be deemed given when delivered in person or by courier
service, upon receipt of a telecopy or 3 business days after deposit in the
United States mail (registered or certified, with postage prepaid and properly
addressed).
Section 10.09. Successors and Assigns.
------------- ----------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower and the Lender and their respective successors and assigns, except
that the Borrower shall not have the right to assign any of its rights
hereunder or delegate any of its obligations hereunder without the prior
written consent of the Lender. Any such impermissible assignment or delegation
shall be void and of no effect.
(b) Lender shall have the right in its sole discretion to assign its
rights under any of the Transaction Documents or to sell one or more
participations in the Note and the Transaction Documents without notice to or
consent of the Borrower and in connection therewith, to provide any such
proposed assignee(s) or participant(s) with financial and other information and
copies of documents relating to the Borrower, the Affiliate Companies, the
Borrower's or the Affiliate Companies' business, and the transactions
contemplated hereby, provided that any such Person agrees in writing to keep
any such information that is not otherwise publicly available confidential.
Upon receipt of written notice from the Lender, the Borrower agrees to provide
to any such assignee(s) or participant(s) copies of all financial information
required to be delivered to the Lender pursuant to Section 6.05 hereof.
Section 10.10. Consent to Jurisdiction, Service of Process.
------------- -------------------------------------------
The Borrower, to the extent that it may lawfully do so, hereby consents
to the jurisdiction of the courts of the State of New Jersey and the United
States District Courts for the District of New Jersey, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising hereunder or under the Note or any other Transaction
Documents, or with respect to the transactions contemplated hereby, and
expressly waives any and all objections it may have as to venue in any of the
courts. In addition, to the extent that it may lawfully do so, the Borrower
hereby consents to the service of process by U.S. certified or registered mail,
return receipt requested, addressed to the Borrower at the address to which
notices are to be given hereunder.
Section 10.11. Waivers.
------------- -------
(A) THE BORROWER AND THE LENDER EACH HEREBY WAIVES TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTE, THE TRANSACTION
DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH. NEITHER THE
BORROWER, THE LENDER NOR ANY ASSIGNEE OF OR
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<PAGE>
SUCCESSOR TO EITHER THE BORROWER OR THE LENDER, SHALL SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEDURE BASED
UPON, OR ARISING OUT OF, THIS AGREEMENT, THE NOTE, THE TRANSACTION DOCUMENTS OR
ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR
AMONG THE PARTIES HERETO, OR ANY OF THEM. NO PARTY WILL SEEK TO CONSOLIDATE
ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION
IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
SECTION 10.11 HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE
PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED
WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION
10.11 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Borrower waives all defenses and rights to interpose any setoff or
counterclaim of any nature except only a defense pertaining to the existence of
an Event of Default or a counterclaim to the extent that the failure to so
assert such counterclaim would permanently preclude the prosecution or recovery
upon the same.
Section 10.12. No Derogation.
-------------
This Agreement and the Transaction Documents are in addition to, and not
in derogation of, other obligations of the Borrower in favor of the Lender.
None of the obligations shall be effected by the Lender's consent to any
substitution or release of any or all of the collateral for any other
obligation, the release of any party to an obligation or the waiver of any
provision thereof, or by any loss of or damage to any collateral or the failure
of the Lender to perfect or maintain its security interest or other liens
therein.
Section 10.13. Severability.
------------- ------------
Any provision of this Agreement, the Note or any of the Transaction
Documents which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 10.14. Section Headings.
------------- ----------------
Any Article and Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
Section 10.15. Amendment of Other Agreements.
------------- -----------------------------
All references in this Agreement to other documents and agreements to
which the Lender is not a party shall be deemed to refer to such documents and
agreements as presently constituted and not as hereafter amended or modified
unless the Lender shall have expressly consented in writing to such
amendment(s) or modification(s).
Section 10.16. Accounting Principles.
------------- ---------------------
ALL REFERENCES IN THIS AGREEMENT TO ANY CALCULATIONS OR DETERMINATIONS
MADE IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES SHALL BE ON A
CONSOLIDATED BASIS (UNLESS OTHERWISE EXPRESSLY STATED) AND SHALL MEAN, FOR ANY
FISCAL PERIOD, SUCH PRINCIPLES APPLIED ON A BASIS CONSISTENT WITH (A) THE
APPLICATION OF THE SAME IN PRIOR FISCAL PERIODS, (B) THAT EMPLOYED BY THE
ACCOUNTANTS IN PREPARING THE FINANCIAL STATEMENTS REFERRED TO IN SECTION
6.05(A) HEREOF.
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<PAGE>
Section 10.17. Compliance by PRI.
------------- -----------------
Lender agrees that compliance by PRI, on a consolidated basis, with the
terms and provisions of Sections 5.01-5.06, 6.05, 6.07, 7.01, 7.02, 7.04, of
this Agreement (as though it were the Borrower) shall be deemed compliance by
Borrower with such Sections.
Section 10.18. Knowledge and Discovery.
------------- -----------------------
All references in this Agreement to "knowledge" or "awareness" of, or
"discovery" by, the Borrower shall be deemed to include any such knowledge of,
or discovery by, PRI or any of the Borrower's executive officers.
Section 10.19. Integration.
------------- -----------
This Agreement supersedes the Borrower's application for the Revolving
Loan, the Lender's commitment and proposal letters in respect of the Revolving
Loan, and all other prior dealings between the parties hereto and their
respective agents, employees, or officers with respect to the credit facilities
extended hereby, and this Agreement together with the Transaction Documents,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and the 1992 Agreement is hereby terminated and
superseded.
Section 10.20. Termination By Lender. Lender shall have the
------------- ---------------------
right, at any time on or after the Termination Date and in its sole and
absolute discretion, and without the necessity for an Event of Default
hereunder, to terminate this Agreement upon thirty (30) days' written notice to
Borrower. Upon the termination date stated in such notice: (a) all provisions
for additional Revolving Loans under this Agreement shall terminate, (b) the
principal and interest of the Revolving Loans and all other obligations under
this Agreement and the Transaction Documents related to the Revolving Loans
shall become and be immediately due and payable, without premium or penalty,
without presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by Borrower, and (c) Lender shall be entitled
to exercise forthwith (to the extend and in such order as Lender may elect, in
its sole and absolute discretion) any or all of the rights and remedies for the
collection of such amounts.
Section 10.21. Termination By Borrower.
------------- -----------------------
(a) Borrower may terminate this Agreement, without termination charge,
on or after February 20, 1995, by giving Lender sixty (60) days' prior written
notice, provided that on such termination date the principal and interest of
the Revolving Loans, and all other obligations under this Agreement and the
Transaction Documents related to the Revolving Loans have been paid in full.
(b) Notwithstanding any other provision of this Agreement or any other
agreement between Borrower and Lender to the contrary, if Borrower prepays the
Term Loans and establishes a borrowing or banking relationship with any third
party while this Agreement remains in effect or any other obligation to Lender
remains outstanding, then the Revolving Loans shall terminate and all
outstanding obligations of the Borrower to Lender, including without
limitation, the Revolving Loans and the IDA Loan (as defined in the Amended and
Restated Agreement Concerning Term Loans), shall be immediately due and
payable, with accrued interest.
Section 10.22. Effect on Revolving Loan Limit. Upon the giving
------------- ------------------------------
of notice of termination pursuant to Section 10.20 or 10.21, the Revolving Loan
Commitment thereafter shall not exceed the average principal balance of the
Revolving Loans outstanding during the thirty-day period preceding the notice.
All other requirements for Loans shall remain unchanged.
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<PAGE>
IN WITNESS WHEREOF, the Lender and the Borrower have caused this
Agreement to be duly executed as a sealed instrument by their respective duly
authorized officers, all as of the day and year first above written.
Attest: PAR PHARMACEUTICAL, INC.
/s/ Kenneth G. Mosesian By: /s/ Robert Edinger
- ------------------------- --------------------
Name: Kenneth G. Mosesian Name: Robert Edinger
Title: Treasurer Title: Vice President
MIDLANTIC BANK, NATIONAL ASSOCIATION
By: /s/ Peter J. Cahill
-----------------------------------
Name: Peter J. Cahill
Title: Vice President
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<PAGE>
AFFIRMATION
In order to induce the Lender to enter into this Amended and Restated
Revolving Credit Agreement, each of the undersigned hereby acknowledges and
agrees to the terms and conditions set forth above and hereby confirms to the
Lender that each guarantee and other Transaction Document to which it is a
party (as each of the same has been amended or modified from time to time)
remains in full force and effect and continues to secure all current and future
Indebtedness of Borrower to Lender, including without limitation, the
Indebtedness of Borrower under the Revolving Note issued under this Amended and
Restated Revolving Credit Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Affirmation as of
November 30, 1994.
PHARMACEUTICAL RESOURCES, INC.
By: /s/ Robert Edinger
--------------------------
Name: Robert Edinger
Title: Vice President
PAR PRINTING ENTERPRISES, INC.
By: /s/ Robert Edinger
--------------------------
Name: Robert Edinger
Title: Vice President
GENERIC INNOVATIONS, INC.
By: /s/ Robert Edinger
--------------------------
Name: Robert Edinger
Title: Vice President
ADVANCED BIOPHARM, INC.
By: /s/ Robert Edinger
--------------------------
Name: Robert Edinger
Title: Vice President
<PAGE>
INDEX OF SCHEDULES
------------------
Schedule 2.01A Revolving Note of the Borrower
Schedule 2.03 Conversion Notice
Schedule 4.02 List of Borrower's Subsidiaries
Schedule 4.04 Governmental and Other Consents
Schedule 4.05 Pending Litigation
Schedule 4.06 Compliance with Laws and Agreements
Schedule 4.07 Liens on Collateral
Schedule 4.08 Ownership In Other Entities
Schedule 4.11 Tax Returns and Taxes
Schedule 4.12 Pension Plans, Etc.
Schedule 4.19 Environmental Matters
Schedule 5.04 Dividends
Schedule 6.05 Periodic Reporting Certificate
Schedule 7.01 Indebtedness
Schedule 7.02 Other Liens
Schedule 7.10 Transactions with Affiliates
<PAGE>
SCHEDULE 2.01A
--------------
Form of Restated Revolving Loan Note
$ 7,000,000.00 Date: ________ __, 1994
FOR VALUE RECEIVED, the undersigned, PAR PHARMACEUTICAL, INC., a New
Jersey corporation ("Borrower"), hereby unconditionally promises to pay to the
order of MIDLANTIC BANK, NATIONAL ASSOCIATION ("Lender") upon the Maturity
Date, as defined in the Agreement (as hereinafter defined), the principal sum
of Seven Million Dollars ($7,000,000.00) or, if different, the aggregate unpaid
principal amount of all Revolving Loans made by Lender to Borrower pursuant to
the Amended and Restated Revolving Credit Agreement, dated the date hereof, and
any amendments, extensions or renewals thereof (the "Agreement"), and to pay
interest as hereinafter provided on all principal of Revolving Loans remaining
unpaid from time to time, from the date of each such Revolving Loan until its
payment in full. Both principal and interest hereunder shall be payable in
lawful money of the United States of America, and in immediately available
funds, at the office of Bank located at Metropark Plaza, P.O. Box 600, 499
Thornall Street, Edison, New Jersey 08818 or at such other place as the holder
hereof may from time to time designate in writing.
All of the provisions of the Agreement are incorporated herein by
reference and, in the event of ambiguity or inconsistency between any
provisions of the Agreement and this Note, the provisions of the Agreement
shall prevail. Any term in initial capitals in this Note and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement.
Interest on principal amounts hereunder shall be payable monthly on the
first Business Day in each calendar month, commencing January 1, 1995 and on
the final day when said principal amounts become due, at a fluctuating interest
rate per annum equal at all times to the prime rate of Lender in effect from
time to time; provided if an Event of Default occurs the principal (and, to the
extent permitted by law, interest) payable hereunder (whether before or after
judgment) shall bear interest payable on demand, from the day when said Event
of Default occurs until it is paid in full, at a fluctuating interest rate per
annum equal at all times to the Default Rate (as defined in the Agreement).
Each change in the fluctuating interest rate hereunder shall take effect
simultaneously with the corresponding change in the prime rate. The prime rate
applicable to this Note shall be the rate of interest announced from time to
time by Lender as its "prime rate" or "prime lending rate". This rate of
interest is determined from time to time by Lender as a means of pricing some
loans to its customers and it is neither tied to any external rate of interest
or index nor does it necessarily reflect the lowest rate of interest actually
charged by Lender to any particular class or category of customers. Lender
shall present a monthly invoice to Borrower reflecting the interest payment
due, but any failure or delay by Lender in submitting invoices for interest
payments shall not discharge or relieve Borrower of the obligation to make such
interest payments.
If not otherwise paid when due, the Borrower authorizes the Lender to
debit any loan or deposit account maintained by it with the Lender for accrued
interest, as and when due. Such authorization shall not affect the Borrower's
obligation to pay when due all amounts payable hereunder whether or not there
are sufficient funds in any such accounts. The foregoing shall be in addition
to and not in limitation of any rights of set-off which the Bank may have.
This Note has been issued under the Agreement and the Agreement contains,
among other terms, provisions for acceleration of the indebtedness hereunder
upon the happening of certain stated events. Notwithstanding any other
provision of this Note or the Agreement, the maturity hereof shall be
accelerated as provided in the Agreement upon termination of the Agreement by
Borrower.
If this Note is mutilated, lost, stolen or destroyed, then upon surrender
thereof (if mutilated) or receipt of evidence and indemnity (if lost, stolen
or destroyed) Borrower shall execute and deliver a new promissory note of like
tenor, which shall show all payments which shall have been made on account of
the
<PAGE>
principal hereof.
This Note shall be subject to prepayment on such terms and conditions and
upon payment of such prepayment penalty, if any, as is provided in the
Agreement.
Borrower and any endorser, surety or guarantor of this Note hereby each
(a) waive diligence, presentment for payment, demand, notice of dishonor,
protest, notice of protest and all other demands and notices in connection with
the delivery, performance and enforcement of this Note, except as may be
specifically otherwise provided in the Agreement, (b) consent that, without
notice to or release of the liability of any such party, the obligations of any
party may from time to time, in whole or part, be renewed, extended, modified,
accelerated, compromised, settled or released by Lender, and (c) waive all
defenses based on suretyship or impairment of collateral.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has
executed this Note as of the date first above written.
PAR PHARMACEUTICAL, INC.
By:
Name:
Title:
[CORPORATE SEAL]
Attest:
Title: Secretary
<PAGE>
SCHEDULE 2.03
-------------
Conversion Notice
-----------------
[Borrower's Letterhead]
Midlantic Bank,
National Association
Post Office Box 600
499 Thornall Street
Edison, New Jersey 08818
Attn: Corporate Banking Department
Re: Conversion Notice
-----------------
Gentlemen:
Pursuant to Section 2.03(a)(ii) of the Term Loan Agreement, dated
November ___, 1994, between Midlantic Bank, National Association and PAR
Pharmaceutical, Inc., we hereby elect the Treasury Rate interest rate to be
effective January 1, 1995.
Very truly yours,
PAR PHARMACEUTICAL, INC.
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
SCHEDULE 4.02
-------------
List of Borrower's Subsidiaries
-------------------------------
1. Quad Pharmaceutical, Inc.
2. Par Printing Enterprises, Inc.
3. Advanced Biopharm Inc.
4. Generic Innovations, Inc.
<PAGE>
SCHEDULE 4.04
-------------
Governmental and Other Consents
-------------------------------
1. To the extent that Collateral includes rights under Licenses,
the assignment of which is prohibited without the consent of the issuing
governmental entity, the granting of a security interest therein under the
Security Agreement may require the obtaining of such consent. No such consents
have been obtained.
2. To the extent that Collateral includes rights under
contracts, leases and other agreements (other than "Accounts" (as defined in
the Uniform Commercial Code) or "general intangibles" for money due or to
become due or with respect to Proceeds of such Collateral), the assignment of
which is prohibited without the consent of the other parties thereto, the
granting of a security interest therein under the Security Agreement may
require the obtaining of such consents. No such consents have been obtained.
4. The execution and delivery of, and performance under, the
Amended and Restated Agreement Concerning Term Loans, dated the date hereof,
between Borrower and Lender (the "ACTL") may require the consent of the
Rockland County Industrial Development Agency under the Bond. No such consent
has been obtained.
<PAGE>
SCHEDULE 4.05
-------------
Pending Litigation
------------------
The Borrower is involved in minor litigation matters, incidental to
the conduct of its business, but does not believe that the ultimate resolution
thereof will have a material adverse effect on its financial condition. Three
actions of which the Borrower is aware are:
. Penny Kay Petrie Liability Lawsuit wherein P.K. Petri, et al, have
initiated legal action against a physician, a pharmacy, Pfizer,
Inc. and Goldline Laboratories, Inc. (the firm for which the
Borrower manufactures product). This action has been referred to
the Borrower's product liability insurance carrier.
. Rubie Mae Dillon Products Liability Lawsuit wherein R.M. Dillon has
initiated legal action against a physician and the Borrower. This
action has been referred to the Borrower's product liability
insurance carrier.
. The Borrower has been named as a defendant in an action brought by
Borschow Hospital and Medical Supplies, Inc., in the United States
District Court for the District of Puerto Rico. The action seeks
to recover approximately $62,000 for amounts allegedly due under a
distributorship agreement between Borschow and Quad
Pharmaceuticals, Inc. ("Quad"), as well as $1,200,000 in damages
for alleged termination without cause of Borschow's purported
exclusive distributorship for Quad.
The Borrower received a warning letter on May 26, 1994, from the
U.S. Food & Drug Administration ("FDA") setting forth certain alleged
deviations from current good manufacturing practice regulations and alleged
violations of related provisions of the Federal Food, Drug and Cosmetic Act.
The warning letter does not limit the manufacture of the Borrower's product
line nor suspend the review and approval of applications pending at FDA. FDA
indicated that it will shortly complete its review of the Borrower's response.
<PAGE>
SCHEDULE 4.06
-------------
Compliance with Laws and Agreements
-----------------------------------
The Borrower received a warning letter on May 26, 1994, from the
U.S. Food & Drug Administration ("FDA") setting forth certain alleged
deviations from current good manufacturing practice regulations and alleged
violations of related provisions of the Federal Food, Drug and Cosmetic Act.
The warning letter does not limit the manufacture of the Borrower's product
line nor suspend the review and approval of applications pending at FDA. FDA
indicated that it will shortly complete its review of the Borrower's response.
<PAGE>
SCHEDULE 4.07
-------------
Liens on Collateral
-------------------
See Schedule 7.02
<PAGE>
SCHEDULE 4.08
-------------
Other Entities
--------------
Borrower sells inventory purchased from foreign manufacturers, at
cost, to PRX Distributors, Ltd., a wholly-owned subsidiary of PRI and an
affiliate of Borrower, and repurchases such inventory for sales to third
parties in the ordinary course at prices charged to such other third parties.
All other Affiliate Companies of Borrower are wholly-owned
subsidiaries of the Borrower and are in all material respects inactive.
Borrower was the surviving corporation of a merger with Par Merging
Corp., a wholly-owned subsidiary of PRI. The Certificate of Merger was filed
on August 8, 1991, in the New Jersey Secretary of State's Office.
<PAGE>
SCHEDULE 4.11
-------------
Tax Returns and Taxes
---------------------
Income Taxes
- ------------
1. PRI is contesting the IRS position that credits for research
activities are not permitted. In the event a determination is made that PRI
was not entitled to such credits, a charge of approximately $1,000,000 will be
incurred for income taxes. PRI believes that any such disallowance, and the
resultant charge, would not have any material adverse effect on PRI's
operations, liquidity or cash flow. Special tax counsel has been retained by
PRI to resolve this matter and is presently in negotiations with the U.S.
Treasury Department.
2. See also Schedule 4.02 regarding license fees to the State of
New York.
3. See also Schedule 4.02 regarding Quad annual reports for 93
and 94 to the State of Indiana.
<PAGE>
SCHEDULE 4.12
-------------
Pension Plans, Etc.
-------------------
The Borrower has a defined-contribution, Social Security integrated
Retirement Plan providing retirement benefits to eligible employees as defined
in the Plan. It also maintains a Retirement Savings plan whereby eligible
employees are permitted to contribute from 1% to 12% of pay to this Plan. The
Borrower contributes an amount equal to 50% of the first 6% of the pay
contributed by the employee.
The Borrower maintains a Defined Benefit Pension Plan covering
eligible employees as defined in the Plan. The benefits under this Plan are
based on the participants' length of service and compensation, subject to
Employee Retirement Income Security Act of 1974 and Internal Revenue Service
limitations. The funding policy for this Plan is to contribute amounts
actuarially determined as necessary to provide sufficient assets to meet the
benefit requirements of the Plan retirees. The plan's assets are invested in
guaranteed deposit accounts. Effective October 1, 1989, the Company "froze"
the Plan, accordingly, service costs are excluded from benefit accruals under
the Plan.
The discount rate used to measure the projected benefit obligation
for the Plan is 7%. The expected long-term rate of return on plan assets in
1993 was 9%. The Plan's funded status and the amounts recorded on the
Company's consolidated balance sheets are as follows (in thousands):
1993 1992
------ ------
Vested benefit obligations $1,888 $1,763
Accumulated benefit obligations $1,888 $1,763
Projected benefit obligations $1,888 $1,763
Market value of assets 1,565 1,438
------ ------
Projected benefit obligation in (323) (325)
excess of market value
Unrecognized net obligation at 757 808
September 30, 1987
Unrecognized net (gain) (151) (201)
Adjustment for minimum liability (606) (607)
--- ---
Net recorded pension (liability) $ (323) $ (325)
====== ======
<PAGE>
SCHEDULE 4.19
-------------
Environmental Matters
---------------------
Borrower uses fuels, lubricants and other possibly hazardous materials normally
used in the conduct of a pharmaceutical manufacturer, in quantities customarily
used in the conduct of such business,which use is not in violation of any
covenant contained in Section 6.10(b), (c) or (e) of this Agreement and no such
substance is used in any manner which would be in violation of, or subject
Borrower or any Affiliate Company, or any tenant of any of its real properties
to a claim under or pursuant to ISRA, the Spill Compensation and Control Act,
CERCLA, RCRH or any law or regulation promulgated by the New Jersey Department
of Environmental Protection or any other state or federal governmental agency.
See also Schedules 4.05 and 4.06.
<PAGE>
SCHEDULE 5.04
-------------
Dividends
---------
Dividends and other distributions to PRI sufficient to enable it to
pay dividends when due on the PRI Series A Convertible Preferred Stock and the
payment of such dividends by PRI, pursuant to the terms of such Series A
Convertible Preferred Stock as set forth in PRI's certificate of incorporation
as in effect on the date hereof.
<PAGE>
SCHEDULE 6.05
-------------
Periodic Reporting Certificate
------------------------------
, 19
Midlantic Bank, National Association
Metro Park Plaza
P.O. Box 600
Edison, New Jersey 08818
Attn: Corporation Banking Department
As required by Section 6.05(c) of that certain Amended and Restated
Revolving Credit Agreement dated ______________, 1994 ( the "Loan Agreement")
by and between you as Lender and PAR Pharmaceutical, Inc. (the "Borrower"), a
review of the activities of the Borrower for the fiscal [year] [quarter] ending
______________, 19__ (the "Fiscal Period") has been made under my supervision
with a view to determining whether the Borrower has kept, observed, performed
and fulfilled all of its obligations under the Loan Agreement and all other
agreements or undertakings contemplated thereby, and to the best of my
knowledge, neither an Event of Default nor an Unmatured Event of Default (as
such terms are defined in the Loan Agreement) has occurred and is continuing.
I further certify that the amounts set forth below, with abbreviated
descriptions, to the best of my knowledge accurately present amounts required
to be calculated by various covenants of the Loan Agreement as of the last day
of the Fiscal Period. Unless otherwise expressly specified herein, all terms
used herein have the identical meanings as set forth in the Loan Agreement.
1. Section 5.01 - Maximum Capital Expenditures.
-------------------------------------------
The aggregate Capital Expenditures for the _____ Fiscal Year to date was $
___________.
2. Section 5.02 - Minimum Working Capital.
--------------------------------------
The Working Capital as at the last day of the Fiscal Period was $____________.
3. Section 5.03 - Tangible Net Worth.
---------------------------------
Tangible Net Worth as of the last day of the Fiscal Year was $_________.
4. Section 5.05 - Debt to Tangible Net Worth.
-----------------------------------------
The ratio of Funded Debt to Tangible Net Worth as of the last day of the Fiscal
Period was _______:_______.
5. Section 5.06 - Minimum Interest Coverage.
----------------------------------------
The ratio of Adjusted EBIT to interest expense for the four quarters ended
___________, 199_ was ___________:_____________.
6. Section 5.07 - Minimum Percentage of PRI.
----------------------------------------
The assets of the Borrower comprised at least 80% of the consolidated assets of
Pharmaceutical Resources, Inc. as of the last day of the Fiscal Period.
Very truly yours,
<PAGE>
SCHEDULE 7.01
-------------
Indebtedness
------------
PAR PHARMACEUTICAL, INC.
Amount* Lender Maturity Date
------ -------------
$1,312,083 Urban National Bank May 1, 2001
951,889 Midlantic National Bank Feb. 1, 1999
2,454,555 Midlantic National Bank Feb. 1, 1999
1,822,269 Midlantic National Bank Feb. 1, 1999
21,123 Urban National Bank Sept. 15, 1996
17,267 Urban National Bank Oct. 15, 1996
17,693 Urban National Bank Nov. 15, 1996
17,821 Urban National Bank March 15, 1997
18,511 Urban National Bank Feb. 15, 1997
15,859 Urban National Bank Oct. 15, 1996
18,309 Urban National Bank March 15, 1997
17,286 Urban National Bank Feb. 15, 1997
22,180 Urban National Bank March 15, 1997
29,844 Urban National Bank Sept. 15, 1997
* as of 10/1/94
<PAGE>
SCHEDULE 7.02
-------------
Other Liens
-----------
File
----
Secured Party Jurisdiction Number Filing Date
------------- ------------ ------ -----------
Copelco Credit
Corporation New York 93-1300 4/27/93
10 Mountainview Road Secretary of State Book 0603
Upper Saddle River, NJ 07458 Page 1205
Copelco Credit
Corporation Rockland County 087429 4/23/93
10 Mountainview Road Clerk
Upper Saddle River, NJ 07458
<PAGE>
SCHEDULE 7.10
-------------
Transactions with Affiliates
----------------------------
See Schedule 4.08
<PAGE>
EXHIBIT 10.34.1
RESTATED
REVOLVING LOAN NOTE
-------------------
$ 7,000,000.00 Date: November 30, 1994
FOR VALUE RECEIVED, the undersigned, PAR PHARMACEUTICAL,
INC., a New Jersey corporation ("Borrower"), hereby unconditionally promises to
pay to the order of MIDLANTIC BANK, NATIONAL ASSOCIATION ("Lender") upon
the Maturity Date, as defined in the Agreement (as hereinafter defined), the
principal sum of Seven Million Dollars ($7,000,000.00) or, if different, the
aggregate unpaid principal amount of all Revolving Loans made by Lender to
Borrower pursuant to the Amended and Restated Revolving Credit Agreement, dated
the date hereof, and any amendments, extensions or renewals thereof (the
"Agreement"), and to pay interest as hereinafter provided on all principal of
Revolving Loans remaining unpaid from time to time, from the date of each such
Revolving Loan until its payment in full. Both principal and interest
hereunder shall be payable in lawful money of the United States of America, and
in immediately available funds, at the office of Bank located at Metropark
Plaza, P.O. Box 600, 499 Thornall Street, Edison, New Jersey 08818 or at such
other place as the holder hereof may from time to time designate in writing.
All of the provisions of the Agreement are incorporated herein
by reference and, in the event of ambiguity or inconsistency between any
provisions of the Agreement and this Note, the provisions of the Agreement
shall prevail. Any term in initial capitals in this Note and not otherwise
defined herein shall have the meaning ascribed thereto in the Agreement.
Interest on principal amounts hereunder shall be payable
monthly on the first Business Day in each calendar month, commencing January 1,
1995 and on the final day when said principal amounts become due, at a
fluctuating interest rate per annum equal at all times to the prime rate of
Lender in effect from time to time; provided if an Event of Default occurs the
principal (and, to the extent permitted by law, interest) payable hereunder
(whether before or after judgment) shall bear interest payable on demand, from
the day when said Event of Default occurs until it is paid in full, at a
fluctuating interest rate per annum equal at all times to the Default Rate (as
defined in the Agreement). Each change in the fluctuating interest rate
hereunder shall take effect simultaneously with the corresponding change in the
prime rate. The prime rate applicable to this Note shall be the rate of
interest announced from time to time by Lender as its "prime rate" or "prime
lending rate". This rate of interest is determined from time to time by Lender
as a means of pricing some loans to its customers and it is neither tied to any
external rate of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by Lender to any particular class or category
of customers. Lender shall present a monthly invoice to Borrower reflecting
the interest payment due, but any failure or delay by Lender in submitting
invoices for interest payments shall not discharge or relieve Borrower of the
obligation to make such interest payments.
If not otherwise paid when due, the Borrower authorizes the
Lender to debit any loan or deposit account maintained by it with the Lender
for accrued interest, as and when due. Such authorization shall not affect the
Borrower's obligation to pay when due all amounts payable hereunder whether or
not there are sufficient funds in any such accounts. The foregoing shall be in
addition to and not in limitation of any rights of set-off which the Bank may
have.
This Note has been issued under the Agreement and the Agreement
contains, among other terms, provisions for acceleration of the indebtedness
hereunder upon the happening of certain stated events. Notwithstanding any
other provision of this Note or the Agreement, the maturity hereof shall be
accelerated as provided in the Agreement upon termination of the Agreement by
Borrower.
If this Note is mutilated, lost, stolen or destroyed, then upon surrender
thereof (if mutilated) or receipt of evidence and indemnity (if lost, stolen
or destroyed) Borrower shall execute and deliver a new promissory note of like
tenor, which shall show all payments which shall have been made on account of
the principal hereof.
<PAGE>
This Note shall be subject to prepayment on such terms and conditions and upon
payment of such prepayment penalty, if any, as is provided in the Agreement.
Borrower and any endorser, surety or guarantor of this Note
hereby each (a) waive diligence, presentment for payment, demand, notice of
dishonor, protest, notice of protest and all other demands and notices in
connection with the delivery, performance and enforcement of this Note, except
as may be specifically otherwise provided in the Agreement, (b) consent that,
without notice to or release of the liability of any such party, the
obligations of any party may from time to time, in whole or part, be renewed,
extended, modified, accelerated, compromised, settled or released by Lender,
and (c) waive all defenses based on suretyship or impairment of collateral.
IN WITNESS WHEREOF, and intending to be legally bound
hereby, Borrower has executed this Note as of the date first above written.
PAR PHARMACEUTICAL, INC.
By: /s/ Robert Edinger
--------------------
Name: Robert Edinger
Title: Vice President
[CORPORATE SEAL]
Attest:
/s/ Kenneth G. Mosesian
- ---------------------------
Title: Assistant Secretary
2
<PAGE>
EXHIBIT 10.35
AMENDED AND RESTATED
AGREEMENT CONCERNING TERM LOANS
THIS AMENDED AND RESTATED AGREEMENT CONCERNING TERM LOANS (this
"Agreement"), dated November 30, 1994 between MIDLANTIC BANK, NATIONAL
ASSOCIATION, formerly known as Midlantic National Bank, a national banking
association ("Lender") having an office at Metro Park Plaza, P.O. Box 600, 499
Thornall Street, Edison, New Jersey 08818 and PAR PHARMACEUTICAL, INC., a New
Jersey corporation ("Borrower") having its chief executive office at One Ram
Ridge Road, Spring Valley (Village of Chestnut Ridge), New York 10977.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower and Lender entered into that certain Agreement
Concerning Term Loans, dated as of February 20, 1992 (the "1992 Agreement");
and
WHEREAS, Borrower and Lender are parties to that certain Revolving
Credit Agreement, dated February 20, 1992 (the "1992 Revolving Credit
Agreement"); and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Borrower and Lender are entering into that certain Amended and
Restated Revolving Credit Agreement (the "Amended and Restated Revolving Credit
Agreement") amending and restating the 1992 Revolving Credit Agreement; and
WHEREAS, among other things, for purposes of securing the Loans but
not the Revolving Loan (as such terms are hereinafter defined) Borrower and
Lender, desire to continue the grant of the security interests granted to
Lender under the 1992 Revolving Credit Agreement;
WHEREAS, the parties desire to amend and restate the 1992
Agreement;
NOW THEREFORE, in consideration of premises and the mutual
covenants and agreements set forth herein, the parties hereto, intending to be
legally bound hereby, agree that the 1992 Agreement shall be and hereby is
amended and restated in its entirety as follows:
(i) Definitions.
-----------
"1987 AGREEMENT" shall mean the Term Loan Agreement, dated
September 18, 1987, as amended and modified prior to the date hereof, between
Borrower and Lender;
"$1,900,000 MORTGAGE" shall mean the Indenture, dated September
18, 1987, between Borrower and Lender in the amount of $1,900,000 against the
Clarkstown Premises;
"$1,900,000 NOTE" shall mean Borrower's $1,900,000 Note, dated
September 18, 1987 made payable to the order of North, as amended by the
Amendment to Note ($1,900,000 Note) dated February 20, 1992;
"$1,900,000 SECURITY DOCUMENTS" shall be a collective term
meaning the Assignment of Leases, the $1,900,000 Mortgage, the No. 2 Security
Agreement and the Lease Assignment;
"$5,600,000 MORTGAGE" shall mean that certain indenture, dated
September 18, 1987, between Borrower and Lender in the amount of $5,600,000
against the Clarkstown Premises;
<PAGE>
"$5,600,000 NOTE" shall mean Borrower's $5,600,000 Term Note,
dated September 18, 1987, made payable to North, as amended by the Amendment to
Term Note ($5,600,000.00 Term Note) dated February 20, 1992;
"AMENDMENT NO. 1" - shall have the meaning ascribed to such
term in Section 2;
"AMENDMENT NO. 2" - shall have the meaning ascribed to such
term in Section 3;
"AMENDMENTS TO TERM NOTES" - shall be a collective term meaning
the Amendment No. 1 and the Amendment No. 2;
"ASSIGNMENT OF LEASES" shall mean the Assignment of Leases,
Rents and Profits, dated September 17, 1987, and recorded in the Rockland
County, New York Clerk's Office (the "Office") on September 25, 1987 in Liber
255, page 2602;
"BOND" shall mean the $4,100,000 County of Rockland Industrial
Development Agency (the "Agency") Industrial Development Bonds (Par
Pharmaceutical, Inc. Project - 1984 Series A) No. AR-1 or any modification,
amendment, substitution or replacement of such Bond.
"CLARKSTOWN PREMISES" shall mean Borrower's premises at 75
Brenner Drive, Clarkstown, New York;
"COLLATERAL" shall have the meaning ascribed to such term in
Schedule A to this Agreement;
- -------- -
"DEFAULT RATE" shall mean a rate of interest equal to two
percent (2%) per annum in excess of the rate otherwise applicable at the time
to the Term Loan;
"FISCAL YEAR" shall mean the 365 or 366 day period ending on
the Saturday closest to September 30th of each year;
"GENERAL SECURITY AGREEMENT" shall mean the General Security
Agreement, dated May 24, 1991 from Borrower to Lender;
"IDA LOAN" shall mean the outstanding principal balance under
the Bond;
"LEASE ASSIGNMENT" shall mean the Assignment of Leases-Rents,
dated September 18, 1987 recorded in the Office, on September 25, 1987 in Liber
255, page 2597;
"LEASE GUARANTY" shall mean the Loan Guaranty, dated October 1,
1984 between Borrower and Lender to secure payment of the Bond;
"LOANS" shall be a collective term which means the Term Loans
and the IDA Loan;
"NO. 1 SECURITY AGREEMENT" shall mean the Security
Agreement, dated September 18, 1987 between Borrower and Lender wherein the
$5,600,000 debt is referenced granting Lender a security interest in machinery
and equipment at the Clarkstown Premises;
"NO. 2 SECURITY AGREEMENT" shall mean the Security Agreement,
dated September 18, 1987, between Borrower and Lender wherein the $1,900,000
debt is referenced granting Lender a security interest in fixtures and personal
property located at the Clarkstown Premises;
"NO. 1 TERM LOAN" shall mean the outstanding principal balance
under the $5,600,000 Note;
-2-
<PAGE>
"NO. 2 TERM LOAN" shall mean the outstanding principal balance
under the $1,900,000 Note;
"NORTH" shall mean Midlantic National Bank/North which has
merged with and into Lender;
"NOTES" shall mean the $5,600,000 Note and the $1,900,000 Note,
and all amendments, modifications, substitutions and replacements thereof;
"RELEVANT DOCUMENTS" - shall have the meaning ascribed to said
term in Section 17;
"REVOLVING LOAN" shall be a collective term meaning the loans
advanced by Lender under the Amended and Restated Revolving Credit Agreement;
"TERM LOAN" or "TERM LOANS" shall be a collective term
referring to both the No. 1 Term Loan and the No. 2 Term Loan;
(ii) No. 1 Term Loan - Principal Payments. The $5,600,000
------------------------------------
Note has been amended by an Amendment to Term Note ($5,600,000.00 Term Note)
dated February 20, 1992 (the "Amendment No. 1") and the principal balance
remaining outstanding under the No. 1 Term Loan shall continue to be repaid as
follows:
(a) Fifty (50) consecutive equal monthly installments of
$47,202.98, each on the first day of each calendar month, continuing on
December 1, 1994 and continuing on the first day of each month thereafter until
February 1, 1999 when the unpaid balance of principal and any accrued interest
shall be due and payable.
(iii) No. 2 Term Loan - Principal Payments. The $1,900,000
------------------------------------
Note has been amended by an Amendment to Note ($1,900,000.00 Note), dated
February 20, 1992 (the "Amendment No. 2") and the principal balance outstanding
under the No. 2 Term Loan shall continue to be repaid as follows:
(b) Fifty (50) consecutive equal monthly installments of
$18,305.56, each on the first day of each calendar month, continuing on
December 1, 1994 and continuing on the first day of each month thereafter until
February 1, 1999 when the unpaid balance of principal and any accrued interest
shall be due and payable.
(iv) IDA Loan - Principal Payments. On the first day of each
-----------------------------
calendar month hereafter, Borrower shall pay Lender an amount (the "IDA
Payment") equal to the difference between $35,043.63 and the amount of the
principal payment due on that date pursuant to the terms of the principal
repayment schedule on the face of the Bond. Each IDA Payment shall be applied
by Lender against the installments of principal due under the IDA Loan in the
inverse order of their maturities.
(v) Amendments to 1987 Agreement.
----------------------------
(a) Section 4.01 of the 1987 Agreement is hereby deleted in
its entirety and is hereby replaced, mutatis mutandis, with the provisions of
Articles V and VI of the Amended and Restated Revolving Credit Agreement,
including, without limitation, Sections 5.01 through 5.07 and Sections 6.01
through 6.11.
(b) Section 4.02 of the 1987 Agreement is hereby deleted in
its entirety and replaced, mutatis mutandis, with the provisions of Article VII
of the Amended and Restated Revolving Credit Agreement, including, without
limitation, Sections 7.01 through 7.11.
(c) Without in any manner limiting the generality of the
second sentence of Paragraph 14 hereof, Section 5.01 of the 1987 Agreement and
the corresponding provisions of each of the agreements,
-3-
<PAGE>
mortgages and instruments listed on Schedule 14 attached hereto, are
-----------
hereby amended to the extent necessary to provide therein for the same grace
and cure periods and dollar thresholds as provided in Article VIII of the
Amended and Restated Revolving Credit Agreement.
(vi) Security Interest. In order to continue the grant of the
-----------------
security interest granted by Borrower to Lender as security for the due and
punctual payment and performance of the Loans, the Notes and the obligations of
Borrower under the Relevant Documents and the Borrower hereby confirms its
grant to Lender of a security interest in, and hereby pledges, transfers and
assigns to Lender, and grants to Lender a security interest in, all of the
Collateral wherever located and whether now existing or hereafter created and
whether now owned or hereafter acquired by Borrower, and all accessions and
additions thereto, replacements and substitutions therefor, and proceeds and
products thereof. The security interest granted hereby, and all remedies and
other rights stated or referred to in this Agreement or any of the Relevant
Documents, shall continue in full force and effect until full and final payment
and performance of the Loans and all other obligations of Borrower under or
referred to in the Notes or other Relevant Documents.
(vii) Remedies.
--------
(a) In case any one or more events of default as defined
under any of the Relevant Documents shall occur and be continuing, Lender shall
have the right, in addition to all other rights and remedies provided by law or
by this Agreement or any other Relevant Document, to proceed to protect and
enforce its rights by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained in
this Agreement, any Relevant Document or for an injunction against a violation
of any of the terms hereof or thereof or in and of the exercise of any power
granted hereunder or thereby or by law and, in addition, Lender may, without
being required to give any notice, except as expressly provided by a Relevant
Document or as may be required by mandatory provisions of law, (i) apply the
cash, if any, then or thereafter held by it as Collateral in the manner
specified in the Relevant Document(s), and (ii) enter upon the premises where
any of the Collateral is located and take possession of, and at Lender's option
remove or sell in place, any or all thereof, at public or private sale, for
cash, upon credit or for future delivery, and at such price or prices as Lender
may deem satisfactory. Lender may require Borrower to assemble all or any part
of the Collateral and make it available to Lender at a place to be designated
by Lender which is reasonably convenient. Any holder of an obligation under
the Relevant Document(s) may be the purchaser of any or all of the Collateral
so sold at any public sale (or, if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject of widely
distributed standard price quotations, at any private sale) and thereafter hold
the same absolutely, free from any right or claim of whatsoever kind. Upon any
such sale Lender shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption of Borrower.
Lender shall give Borrower ten (10) days' prior written notice of its intention
to make any such public or private sale. Lender and Borrower agree that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the Uniform Commercial Code. Such notice, in case of a public
sale, shall state the time and place fixed for such sale. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as Lender may fix in the notice of such sale. At any such sale
the Collateral may be sold in one lot as an entirety or in separate parcels, as
Lender may determine. Lender shall not be obligated to make such sale pursuant
to any such notice. Lender may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the same may be adjourned. In case of any
sale or all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by Lender until the selling price is paid by
the purchaser thereof, but Lender shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may again be sold upon like notice.
-4-
<PAGE>
(b) In case any one or more events of default as defined
under any of the Relevant Documents shall occur and be continuing, Lender shall
have the right and power, to the extent permitted by law, to take possession of
all or any part of the Collateral, and to exclude Borrower and all persons
claiming under Borrower wholly or partly therefrom, and thereafter to hold,
store, and/or use, operate, manage and control the same. Upon any such taking
of possession, Lender may, from time to time, at the expense of Borrower, make
all such replacements, alterations, additions and improvements to and of the
Collateral as Lender may deem proper. In such case, Lender shall have the
right to manage and control the Collateral and to carry on the business and to
exercise all rights and powers of Borrower in respect thereto as Lender shall
deem best, including the right to enter into any and all such agreements with
respect to the leasing and/or operation of the Collateral or any part thereof
as Lender may deem fit; and Lender shall be entitled to collect and receive all
rents, issues, profits, fees, revenues and other income of the same and every
part thereof. Such rents, issues, profits, fees, revenues and other income
shall be applied to pay the expenses of holding and operating the Collateral
and of conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all payments
which Lender may be required or may elect to make, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part
thereof, and all other payments which Lender may be required or authorized to
make under any provision of the Relevant Document (including legal costs and
reasonable attorney's fees). The remainder of such rents, issues, profits,
fees, revenues and other income shall be applied to the payment of the
obligations under the Relevant Document in such order or priority as Lender
shall determine (subject to the provisions of such Relevant Document) and,
unless otherwise provided by law or by a court of competent jurisdiction, any
surplus shall be paid over Borrower.
(viii) Continued Effectiveness of Certain Agreements.
---------------------------------------------
(a) the $5,600,000 Mortgage and the No. 1 Security
Agreement will, after giving effect to the transactions contemplated hereby and
the execution and delivery of this Agreement, continue to secure the repayment
of the $5,600,000 Note, as amended; and
(b) the $1,900,000 Security Documents will, after giving
effect to the transactions contemplated hereby, and the execution and delivery
of this Agreement, each continue to secure the repayment of the $1,900,000
Note, as amended; and
(c) the General Security Agreement will, after giving
effect to the transactions contemplated hereby and the execution and delivery
of this Agreement, continue to secure the repayment of all present and future
obligations (other than the Revolving Loan) of Borrower to Lender; and
(d) the Lease Guaranty will, after giving effect to the
transactions contemplated hereby and the execution and delivery of this
Agreement, continue to secure the repayment of the IDA Loan.
(ix) Charge Against Borrower. If not otherwise paid when due,
-----------------------
Lender may, at its discretion, charge the amount of any payment of principal or
interest due on any of the Loans or any other amount that shall become due from
Borrower to Lender under this Agreement or any of the Relevant Documents, to
any checking or loan account of Borrower or apply any Collateral proceeds or
other funds received by Lender against payment of any such amount.
(x) Lawful Rate. No amount due hereunder or under the Notes
-----------
which is contracted for, charged or collected shall exceed the maximum rate of
interest allowed from time to time by applicable law. If the interest rate
calculated in accordance with or under this Agreement or the Notes would at any
time exceed the maximum permitted by any law then applicable, then for such
period as such rate would exceed the maximum permitted by said law (and no
longer) such rate of interest payable shall be reduced to the maximum permitted
by such law.
-5-
<PAGE>
(xi) Termination of Term Loan. Notwithstanding any other
------------------------
provision of this Agreement or any other agreement between Lender and Borrower
or any provision of the Notes to the contrary, if Borrower terminates the
Amended and Restated Revolving Credit Agreement and establishes a borrowing or
banking relationship with any third party while any of the Loans remains
outstanding, then the Loans and all other obligations of Borrower to Lender
shall automatically terminate and be due and payable, with accrued interest.
(xii) Notices. All notices and other communications relating
-------
to this Agreement or any of the Notes (or to any of the Relevant Documents)
shall be in writing and shall be delivered in person (including by overnight
carrier) or sent by first class mail, postage prepaid, addressed as follows:
If to Lender:Midlantic Bank, National Association
Corporate Banking Department
P.O. Box 60
Edison, New Jersey 08818
If to Borrower: Par Pharmaceutical, Inc.
One Ram Ridge Road
Spring Valley, New York 10977
Attn: Chief Financial Officer
with a copy to: Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017-5582
Attn: Stephen A. Ollendorff, Esq.
or to such other address as the respective party or its successors or assigns
may subsequently designate by proper notice. All such notices and other
communications shall be deemed to have been duly given or served on the dates
(i) on which personally delivered, or (ii) the date receipt by mail is signed
for if sent by registered mail or (iii) if sent by other than registered mail
or if returned by the Postal Office because refused or undeliverable or if its
receipt is undated, then 5 calendar days after the same shall have been
deposited in the United States Mail.
(xiii) Cross Default; Cross Collateral. Borrower hereby agrees
-------------------------------
that (a) all other agreements between Borrower and Lender or any of its
affiliates are hereby amended so that a default under this Agreement (after
giving effect to all applicable grace or cure periods, if any) is a default
under all such other agreements and a default under any one of such other
agreements (after giving effect to all applicable grace or cure periods, if
any) is a default under this Agreement, and (b) the collateral securing the
Term Loans secures the obligations of Borrower now or hereafter outstanding
under all other agreements between Borrower and Lender or any of its affiliates
(other than the Amended and Restated Revolving Credit Agreement) and the
collateral pledged under any other agreement with Lender or any of its
affiliates (other than real property mortgages on real estate located in the
State of New York, which mortgages continue to secure the loans for which
granted) secures the obligations of Borrower under the Loans and under this
Agreement.
(xiv) Prior Agreements. Except, and solely to the extent that
----------------
the agreements, mortgages and instruments listed on Schedule 14
-----------
attached hereto have been specifically amended, modified or supplemented by or
pursuant to this Agreement, all of the terms and conditions of such agreements,
mortgages and instruments shall remain in full force and effect. If any term,
provision or condition of any of the agreements, mortgages or instruments
listed on Schedule 14 attached hereto is inconsistent or conflicts with
-----------
the terms, provisions or conditions of this Agreement, or of the Amendments to
Term Notes, then the terms
-6-
<PAGE>
of this Agreement or the Amendments to Term Notes, as the case may be, shall
govern to the extent of such inconsistency or conflict.
(xv) No Waiver of Default. Borrower hereby acknowledges and
--------------------
agrees that the execution, delivery and performance of this Agreement by Lender
is not intended, and shall not be deemed, to be a waiver or release of any
default or event of default as defined in the agreements and notes listed in
Schedule 14 attached hereto, as such agreements and notes are amended
- -----------
and supplemented by or pursuant to this Agreement, and that Lender reserves all
of its rights and remedies to which it may be entitled, whether such default or
event of default occurred at, before or after the date of this Agreement.
(xvi) No Defenses to Payment. Borrower waives and forever
----------------------
releases and discharges Lender, its officers, directors, agents, successors and
assigns from any and all claims, actions, causes of action, suits,
counterclaims, set-offs, rights and defenses, known and unknown, against Lender
(its officers, directors, agents, successors or assigns), Borrower its
successors or assignees have or hereafter can, shall or may, have, for, upon,
or by reason of any matter, cause or thing whatsoever up to and including the
date of this Amendment; and Borrower represents and warrants to Lender that
Borrower has no defenses to the repayment of any or all of the Indebtedness of
Borrower to Lender and has no claim, right of set-off or cause of action
against Lender.
(xvii) Expenses. Borrower hereby agrees to reimburse the Lender
--------
upon demand for all out-of-pocket costs, charges, liabilities, documentary
stamp taxes, intangible taxes, any other taxes due under any applicable state
law (exclusive of taxes measured or imposed in terms of the Lender's net
income) and any other expenses of the Lender (including, without limitation,
(i) reasonable fees and disbursements of (a) counsel to Lender and (b)
---
agents of Lender not regularly in its employ and (ii) the allocated cost of
services of Lender's in-house counsel (except such costs as are clearly mere
duplications of the costs under (i)(a)) in connection with (a) the preparation,
negotiation, interpretation, execution and delivery of this Amendment, the
Note, any of the agreements or notes listed on Schedule 14 of this
-----------
Agreement and any other agreements or documents relating thereto (collectively
the "Relevant Documents"), (b) the making of the Loans or any of the Relevant
Documents, (c) any amendments, modifications, consents or waivers in respect
thereof, (d) any enforcement of any of the Relevant Documents, (e) any
proceedings with respect to any of the Relevant Documents or with respect to
the bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation of the Borrower or any party to any Relevant Document, and
---
(f) any claims by third parties relating to the foregoing.
(xviii) Gender. Throughout this Amendment, the masculine shall
------
include the feminine and vice versa and the singular shall include the plural
and vice versa, unless the context of this Amendment indicates otherwise.
(xix) Binding Effect; Governing Law. This Amendment shall be
-----------------------------
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of Lender. This Amendment and the other documents delivered in
connection with this Amendment shall be governed by, and construed in
accordance with, the internal laws (without the applicability of the conflict
of laws) of the State of New Jersey applicable to contracts made and performed
in the State of New Jersey.
(xx) Execution in Counterparts. This Amendment may be
-------------------------
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
(xxi) Severability of Provisions. Any provision of this
--------------------------
Amendment that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition
-7-
<PAGE>
or unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision in any
other jurisdiction.
(xxii) Headings. The headings preceding the text of this
--------
Amendment are inserted solely for convenience of reference and shall not
constitute a part of this Amendment nor affect its meaning, construction or
effect.
(xxiii) Exhibits and Schedules. All of the Exhibits and
----------------------
Schedules to this Amendment are hereby incorporated by reference herein and
made a part hereof.
(xxiv) Waivers and Consents Relating to Remedies. In connection
-----------------------------------------
with any action or proceeding arising out of or relating in any way to this
Amendment or the Amended Agreement, any of the Loans, any of the other Relevant
Documents, any of the collateral securing any of the Loans, or any act or
omission relating to any of the foregoing:
(a) BORROWER AND LENDER WAIVE THE RIGHT TO TRIAL BY
JURY and neither Borrower nor Lender will seek to consolidate any action in
which the right to a jury trial has been waived with any action in which a jury
trial cannot be or has not been waived.
(b) Borrower and Lender consent to the jurisdiction of any
court of the State of New Jersey and of any federal court located in New Jersey
as well as to the jurisdiction of all courts from which an appeal may be taken
from such courts, and waive any and all objections they might have as to venue
in any such court, including, without limitation, any right to object to such
court as inconvenient forum;
(c) Borrower waives personal service of any summons,
complaint or other process in connection with any such action or proceeding and
agrees that service thereof may be made as Lender may elect, by certified mail
directed to Borrower at the location provided for notices to Borrower under the
Amended Agreement or, in the alternative, in any other form or manner permitted
by law;
(d) Borrower agrees that all of the Collateral constitutes
equal security for all of the secured obligations of Borrower to Lender, and
agrees that Lender shall be entitled to sell, retain or otherwise deal with any
or all of the Collateral, in any order or simultaneously as Lender shall
determine in its sole and absolute discretion, free of any requirement for the
marshalling of assets or other restriction upon Lender in dealing with the
Collateral;
(e) Borrower agrees that Lender may proceed directly against
Borrower for collection of any or all of the obligations of Borrower to Lender
without first selling, retaining or otherwise dealing with any of the
Collateral;
(f) Borrower waives demand, presentment, notice of dishonor
or protest of any instruments either of Borrower or others which may be
included in the Collateral; and
(g) Borrower consents to (a) any extension, postponement of
time or payment or other indulgence, (b) any substitution, exchange or release
of any collateral, (c) any addition to, or release of, any party or person
primarily or secondarily liable, and (d) any acceptance of partial payments on
any accounts or instruments and the settlement, compromising or adjustment
thereof.
(xxv) Application of Proceeds. Borrower hereby agrees that
-----------------------
upon the occurrence of a default or an event of default as defined under any of
the Relevant Documents or the Amended and Restated Revolving Credit Agreement,
Lender shall be entitled to apply the proceeds of any payment made to Lender by
or on behalf of Borrower, including, without limitation the proceeds arising
from any of the collateral securing any of the obligations of Borrower to
Lender, in a manner and against the obligation or obligations
-8-
<PAGE>
as determined in the sole and absolute discretion of Lender; provided, however,
if Lender takes affirmative action to enforce any of its remedies in order to
realize against any of the collateral, any proceeds received by Lender as a
result of any such action shall be applied first against secured obligations
and then against any unsecured obligations.
(xxvi) Agreement; Full Force and Effect. Except, and solely to
--------------------------------
the extent, that the same has been specifically modified, amended or
supplemented herein, all of the terms and conditions of the Agreement and the
Relevant Documents, shall remain in full force and effect.
(xxvii) Conflicts with Agreement. If any term, condition or
------------------------
provision of this Amendment is inconsistent or conflicts with the term,
condition or provision of the Agreement or any Relevant Document, the term,
condition or provision of this Amendment shall govern to the extent of such
inconsistency or conflict.
(xxviii) No Waiver. Borrower hereby acknowledges and agrees
---------
that the execution, delivery and performance of this Amendment by Lender is not
intended, and shall not be deemed, to be a waiver or release of any default or
event of default as defined under any of the Relevant Documents or as defined
under the Amended and Restated Revolving Loan Agreement, and that Lender
reserves all of its rights and remedies to which it may be entitled, whether
such default or event of default occurred at, before or after the date hereof.
(xxix) Entire Agreement. This Amendment amends and supplements
----------------
the Agreement and otherwise supersedes, with respect to this Amendment's
subject matter, all prior and contemporaneous agreements, understandings or
conditions between Borrower and Lender. No amendment or waiver of any
provision of this Amendment, nor consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender, and then such waiver or consent shall be effective only
in the specific instance and for this specific purpose for which given.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals or caused these presents to be signed by their proper corporate
officers and their proper corporate seals to be hereto affixed the day and year
first written above.
(SEAL) PAR PHARMACEUTICAL, INC.
ATTEST:
By: /s/ Kenneth G. Mosesian By: /s/ Robert Edinger
------------------------- --------------------
Assistant Secretary Robert Edinger, Vice President
MIDLANTIC BANK, NATIONAL
ASSOCIATION
By: /s/ Peter J. Cahill
---------------------
-9-
<PAGE>
AFFIRMATION
-----------
In order to induce Lender to enter in this Amendment, each of the
undersigned hereby acknowledges and agrees to the terms and conditions set
forth above and hereby confirms to Lender that each guarantee and other
Document to which it is a party (as each of the same has been amended or
modified from time to time) remains in full force and effect and continues to
secure all current and future obligations of Borrower to Lender (except that
security interests in collateral no longer secure the Revolving Loan),
including, without limitation, all obligations under the Notes and the other
Relevant Documents.
IN WITNESS WHEREOF, the undersigned have executed this Affirmation as of
November 30, 1994.
PHARMACEUTICAL RESOURCES, INC.
By: /s/ Robert Edinger
-------------------------------
Robert Edinger, Vice President
PAR PRINTING ENTERPRISES, INC.
By: /s/ Robert Edinger
-------------------------------
Robet Edinger, Vice President
GENERIC INNOVATIONS, INC.
By: /s/ Robert Edinger
-------------------------------
Robet Edinger, Vice President
ADVANCED BIOPHARM, INC.
By: /s/ Robert Edinger
-------------------------------
Robet Edinger, Vice President
<PAGE>
SCHEDULE A
----------
The term "Collateral" shall mean:
(1) ALL ACCOUNTS, which term shall mean all items described
in the definition thereof contained in the Uniform Commercial Code as in effect
from time to time in the State of New Jersey (referred to hereinafter in this
Schedule as the "UCC") and all of the following, whether or not so described
(in all cases whether now existing or hereafter created): all obligations of
any kind at any time due or owing to Borrower and all rights of Borrower to
receive payment or any other consideration (whether classified under the UCC or
the law of any other state as accounts, accounts receivable, contract rights,
chattel paper, general intangibles, or otherwise) including without limitation
invoices, contract rights, accounts receivable, general intangibles,
choses-in-action, notes, drafts, acceptances, instruments and all other debts,
obligations and liabilities in whatever form owing to Borrower from any person,
firm, corporation, governmental authority or other entity, together with all
security for any thereof, and all of Borrower's rights to goods sold (whether
delivered, undelivered, in transit or returned), represented by any of the
foregoing, together with all proceeds and products of any of the foregoing.
(2) ALL INVENTORY, which term shall mean all items described
in the definition thereof contained in the UCC and all of the following,
whether or not so described (in all cases whether now owned or hereafter
acquired by Borrower and wherever located): all goods, merchandise, or other
personal property held by Borrower for sale or lease or to be furnished under
labels and other devices, names or marks affixed thereto for purposes of
selling or identifying the same or the seller or manufacturer thereof, and all
right, title and interest of Borrower therein and thereto; all raw materials,
work or goods in process; and all materials and supplies of any kind or
description used or usable in connection with the manufacture, packaging,
shipping, advertisement, sale or finishing of any of the foregoing, together
with all proceeds and products of any of the foregoing.
(3) ALL EQUIPMENT, which term shall mean all items described
in the definition thereof contained in the UCC and all of the following,
whether or not so described (in all cases whether now owned or hereafter
acquired by Borrower and wherever located): all of Borrower's equipment,
machinery, furniture, fixtures, motor vehicles, parts, supplies and tools, and
all other tangible personal property similar to any of the foregoing, and all
repairs, modifications, alterations, replacements, additions, controls and
operating accessories therefor, and all accessions and additions thereto,
together with all proceeds and products of any of the foregoing.
(4) All guarantees, security and liens for payment of any
ACCOUNTS and all documents of title, policies or certificates of insurance,
insurance proceeds, proceeds of condemnation or other seizure, securities,
chattel paper, and other documents and instruments evidencing or pertaining to
any thereof; all claims of Borrower against third parties for loss of or damage
to, or otherwise relating to, any of the COLLATERAL; and all files,
correspondence customer lists, computer programs, tapes, discs, and related
data processing software, owned by Borrower or in which Borrower has an
interest, which contains information identifying any of the COLLATERAL or
identifying any account debtor or the amount owed by same, or which would
otherwise be necessary or helpful in the realization of any of the COLLATERAL.
(5) All moneys, securities, drafts, notes, items, contract
rights, leases, licenses (other than ANDA's or NDA's) and general intangibles,
and all general or special deposits, balances, sums, proceeds and credits of
Borrower.
(6) All trade names, trademarks, trademark registrations,
copyrights, patents, patent applications and licenses, and other franchises and
licenses in which Borrower has an interest, and all other intangible personal
property similar to any of the foregoing.
<PAGE>
(7) All other property of Borrower.
(8) All rights and remedies which Borrower might exercise with
respect to any of the foregoing.
(9) All accessions and additions to, replacements and
substitutions for, and proceeds and products of, the items described in the
preceding paragraphs (l) through (8).
<PAGE>
Schedule 14
List of Agreements and Notes
----------------------------
1. The 1987 Agreement
2. The $5,600,000 Note
3. The $5,600,000 Mortgage
4. The No. 1 Security Agreement
5. The $1,900,000 Note
6. The $1,900,000 Mortgage
7. The No. 2 Security Agreement
8. The Lease Assignment
9. The Assignment of Leases
10. The Lease Guaranty
11. The General Security Agreement
<PAGE>
EXHIBIT 10.36
PAR PHARMACEUTICAL, INC.
October 13, 1994
Mr. Robert M. Fisher, Jr.
74 Turtleback Lane West
New Canaan, CT 06840
Dear Bob:
I am pleased to provide you with this new offer letter which
supersedes the initial offer letter signed by you and Par Pharmaceutical on
October 3, 1993. Par and you mutually agree that all provisions of the October
3, 1993 offer letter are null and void upon signing this new offer letter.
Going forward, following are the basic terms of your employment with Par
Pharmaceutical, Inc. and/or Pharmaceutical Resources, Inc. (individually or
collectively sometimes referred to as the "Company") as Vice President -
Corporate Development, Sales and Marketing.
Department: Officers
Reporting to: Mr. Kenneth I. Sawyer
Effective Date: October 13, 1994
Initial Salary:$14,166.67 a month, $170,000 annually, to be reviewed on an
annual basis and may be considered for an adjustment by Par to reflect
performance and responsibilities.
Bonus: You will be eligible for consideration for an annual bonus,
consistent with a company program, based on both your performance and the
performance of the Company.
Benefits:
Group Insurance: Health, life and long-term disability insurance programs are
provided to employees and their dependents by the Company, upon payment of the
applicable premium amount.
Vacation: You will be entitled to up to four weeks of paid vacation annually.
Automobile: Par will provide you with the use of an automobile, including
reimbursement of all related maintenance, fuel, repair, insurance and other
costs.
Other: You will be eligible to participate in the Company's 401(K) Plan,
company sponsored retirement plan, and our Employee Stock Purchase Plan upon
meeting the Company's specified eligibility requirements for each plan.
Stock: In addition to the 10,000 stock options you were granted upon
commencing employment, I will recommend to the Board of Directors that you be
granted options to purchase 20,000 additional shares of PRI common stock at an
exercise price per share equal to the closing price of PRI common stock on the
date of the grant by the Compensation Committee based on standard terms and
conditions of the Board of Directors.
Termination/Change of Control:Your employment by Par is subject to the
following provisions:
<PAGE>
If you terminate your employment for "good reason" or are voluntarily
terminated by the Company, except for cause, the Company or as the case may be,
will provide the other party with 90 days notification prior to termination and
the Company will provide you with severance compensation amounting to twelve
(12) months continuation of your prevailing base salary, payable in 12 equal
monthly installments, from the date of your termination.
Except for "good reason" as defined in this paragraph, severance compensation
shall not be payable to you if your employment is terminated by the Company for
cause, or voluntarily by you, or if you accept employment elsewhere. "Good
reason" shall mean a termination by you of your employment (a) based on the
assignment to you of any duties materially inconsistent with your position,
duties, responsibilities and status with the Company or based on a change in
your reporting responsibilities, title or offices as in effect or any removal
(other than for cause) of you from or any failure to re-elect you to any of
such positions or a reduction in your annual compensation, except in connection
with the termination of your employment for cause, and (b) the failure of the
Company to cure the reasons, if curable, causing the termination within twenty
(20) days of receiving a written notice from you specifying such reasons.
In the event of your death or disability, you are entitled only to those
benefits described under "Benefits".
If you are eligible for severance compensation, as of your termination date,
you will be entitled to continue to participate, to the extent permissible, in
the Company's 401K Plan, the Company sponsored retirement plan, and Employee
Stock Purchase Plan until the expiration of your severance compensation or
until you commence employment elsewhere, whichever comes first.
Also, as of your termination date, you will be entitled to the extent
permissible to continue to participate in the Company's health, dental, life,
and disability plans until the expiration of your severance compensation or
until covered by a reasonably comparable program, whichever comes first.
If you are eligible for severance compensation as defined above, all your
unvested stock options, which have been awarded to you shall become immediately
vested on the Termination Date and the date by which all such options must be
exercised shall be two years from the Termination Date.
If during the first twelve months of the Employment Term you are terminated
voluntarily by Par without cause or because of a change of control, you will be
eligible for a pro rata share of an annual bonus, if any, at the discretion of
your supervisor and dependent upon your performance and the performance of the
Company.
These terms represent the entirety of any severance, employment or any other
agreement between you and "the Company".
As a condition of your employment with the Company, you will be required to
execute the Company's standard Trade Secret, Non-Disclosure and Restrictive
Covenant Agreement attached.
If you accept this offer of employment, please sign below and return the signed
copy to me as soon as convenient. Once signed by you, this letter will
constitute the complete agreement between you and the Company regarding
employment matters or oral agreements or understandings on these matters.
2
<PAGE>
We are extremely excited about the opportunity we have to build Par into a
leading generic pharmaceutical company. One of the keys to accomplishing this
is talented people.
We are looking forward to your continuing contribution to our success.
Sincerely,
/s/ Kenneth I. Sawyer
---------------------
Kenneth I. Sawyer
President
Chief Executive Officer
Agreed to and Accepted
on this 13th day of
October, 1994
/s/ Robert M. Fisher, Jr.
- -------------------------
Robert M. Fisher, Jr.
3
<PAGE>
EXHIBIT 10.37
PAR PHARMACEUTICAL, INC.
December 19, 19954 (Revised)
Mr. Stuart A. Rose
378 Gravel Hill Road
Kinnelon, NJ 07405
Dear Stuart:
I am pleased to extend this offer to you to become Executive Vice
President of Operations with Par Pharmaceutical, Inc. The following would be
the basic terms of your employment with Par Pharmaceutical, Inc. and/or
Pharmaceutical Resources, Inc. (individually or collectively sometimes referred
to as the "Company"):
Department: Officer
Reporting: Mr. Kenneth I. Sawyer
Start Date: On or before February 1, 1995
Initial Salary: $15,416.66 a month, $185,000 annually, to be reviewed on an
annual basis and may be considered for an adjustment by the Company to reflect
performance and responsibilities.
Bonus: You will be eligible for consideration for an annual bonus, consistent
with a company program, based on both your performance and the performance of
the Company. In addition, should you lose all or part of your expected 1994
bonus from American Cyanamid, Par will provide you with a commensurate "sign
on" bonus of up to $30,000, less applicable taxes, payable upon your commencing
employment with the Company.
Benefits:
Group Insurance: Health, life and long-term disability insurance programs are
provided to employees and their dependents by the Company, upon payment of the
applicable premium amount. If required, COBRA premiums on your behalf until
you are eligible to enroll in the Company's insurance programs.
Vacation: You will be entitled to up to four weeks of paid vacation annually.
Automobile: par will provide you with the use of an automobile, including
reimbursement of all related maintenance, fuel, repairs, insurance and other
costs.
Other: You will be eligible to participant in the Company's 401(K) Plan,
company sponsored retirement plan, and our Employee Stock Purchase Plan upon
meeting the Company's specified eligibility requirements for each plan.
Stock: You will be granted options to purchase 75,000 shares of PRI common
stock, at an exercise price equal to the closing price of Pharmaceutical
Resources, Inc. (PRI) common stock on the date of the grant by the Board of
Directors. The grant should be completed within thirty (30) days of your
commencement of employment. These options shall be exercisable in cumulative
installments, during the Exercise period, as follows;
(I) To the extent of 33 1/3% of the Option Shares anytime after
six months from the Date of Grant;
<PAGE>
(II) To the extent of an additional 33 1/3% of the Option Shares
anytime after one year from the Date of Grant; and
(III) To the extent of an additional 33 1/3% of the Option Shares
anytime after two years from the Date of Grant.
Termination: Your employment by the Company is subject to the following
provisions:
If you terminate your employment for "good reason" or are voluntarily
terminated by the Company, except for cause or, the Company, or you as the case
may be, will provide the other party with 90 days notification prior to
termination and the Company will provide you with severance compensation
amounting to twelve (12) months continuation of your prevailing base salary,
payable in 12 equal monthly installments, from the date of your termination.
Except for "good reason" as defined in this paragraph, severance compensation
shall not be payable to you if your employment is terminated by the Company for
cause, or voluntarily by you, or if you accept employment elsewhere. "Good
reason" shall mean a termination by you of your employment (a) based on the
assignment to you of any duties materially inconsistent with your position,
duties, responsibilities and status with the Company or based on a change in
your reporting responsibilities, title or offices as in effect or any removal
(other than for cause) of your from or any failure to re-elect you to any of
such positions or a reduction in your annual base compensation, except in
connection with the termination of your employment for cause, and (b) the
failure of the Company to cure the reasons, if curable, causing the termination
within twenty (20) days of receiving a written notice from you specifying such
reasons.
In the event of your death or disability, you are entitled only to those
benefits described under "Benefits".
If you are eligible for severance compensation, as of your termination date,
youwill be entitled, to the extent permissible, to continue to participate in
the Company's 401K Plan, Company sponsored retirement plan, and Employee Stock
Purchase Plan until the expiration of your severance compensation or until you
commence employment elsewhere whichever comes first.
Also, as of your Termination Date, you will be entitled, to the extent
permissible, to continue to participate in the company's health, dental, life,
and disability plans until the expiration of your severance compensation or
until covered by a reasonably comparable program, whichever comes first.
If you are eligible for severance compensation as defined above, all your
unvested stock options which have been awarded to you shall become immediately
vested on the Termination Date and the date by which all such options must be
exercised shall be two years from the Termination Date.
If during the first twelve months of the Employment Term you are terminated
voluntarily by the Company without cause or because of a change of control, you
will be eligible for a pro rata share of an annual bonus, if any, at the
discretion of our supervisor and dependent upon your performance and the
performance of the Company.
These terms represent the entirety of any severance, employment or any other
agreement between you and the Company.
As a condition of your employment with Par, you will be required to execute the
Company's standard Trade Secret, Non-Disclosure and Restrictive Covenant
Agreement attached.
2
<PAGE>
If you accept this offer of employment, please sign below and
return the signed copy to me as soon as convenient. Once signed by you, this
letter will constitute the compete agreement between you and the Company
regarding employment matters or oral agreements or understandings on these
matters.
We are extremely excited about the opportunity we have to build Par into a
leading generic pharmaceutical company. One of the keys to accomplishing this
is talented people. We are looking forward to having you join us and hope that
you will accept out offer to become Executive Vice President of Operations.
Sincerely,
/s/ Stephen H. Israel
---------------------
Stephen H. Israel
Vice President
Human Resources
Accepted and agreed this
21st day of December, 1994
/s/ Stuart A. Rose
- ------------------
Stuart A. Rose
3
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements
on Form S-3 (Registration No. 33-35242 and 33-74052) and Form S-8 (Registration
Nos. 2-99035, 33-15640, 33-51914, 33-45785, 33-29992, 33-79954 and 33-79956) of
our reports dated November 30, 1994 on the consolidated financial statements and
schedules included in the annual report on Form 10\KA of Pharmaceutical
Resources, Inc. as at and for the year ended October 1, 1994.
/s/ Richard A. Eisner & Company, LLP
New York, New York
January 30, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Annual
Report on Form 10-K for the fiscal year ended October 1, 1994 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-01-1994
<PERIOD-END> OCT-01-1994
<CASH> 3,130
<SECURITIES> 176
<RECEIVABLES> 12,115
<ALLOWANCES> (2,768)
<INVENTORY> 16,352
<CURRENT-ASSETS> 33,615
<PP&E> 39,105
<DEPRECIATION> (16,101)
<TOTAL-ASSETS> 69,202
<CURRENT-LIABILITIES> 13,883
<BONDS> 7,360
<COMMON> 145
0
1
<OTHER-SE> 49,130
<TOTAL-LIABILITY-AND-EQUITY> 69,202
<SALES> 69,169
<TOTAL-REVENUES> 69,594
<CGS> 45,774
<TOTAL-COSTS> 17,337
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (13)
<INTEREST-EXPENSE> 465
<INCOME-PRETAX> 6,018
<INCOME-TAX> 1,785
<INCOME-CONTINUING> 4,233
<DISCONTINUED> 466
<EXTRAORDINARY> 0
<CHANGES> 14,128
<NET-INCOME> 18,827
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
</TABLE>
