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CREDIT AGREEMENT
Dated as of February 8, 2002
by and among
EON LABS MANUFACTURING, INC.,
EON PHARMA, LLC
and
JPMORGAN CHASE BANK
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS .....................................1
SECTION 1.01. DEFINITIONS...........................................1
SECTION 1.02. TERMS GENERALLY .....................................11
ARTICLE II
LOANS................................................................11
SECTION 2.01. REVOLVING CREDIT LOANS................................11
SECTION 2.02. REVOLVING CREDIT NOTE.................................12
ARTICLE III
PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT;
FEES AND PAYMENTS....................................................13
SECTION 3.01. INTEREST RATE; CONTINUATION; AND CONVERSION OF LOANS..13
SECTION 3.02. USE OF PROCEEDS..............................,........15
SECTION 3.03. PREPAYMENTS..................................,........15
SECTION 3.04. FEES.........................................,........15
SECTION 3.05. INABILITY TO DETERMINE INTEREST RATE.........,........16
SECTION 3.06. ILLEGALITY...................................,........16
SECTION 3.07. INCREASED COSTS..............................,........16
SECTION 3.08. INDEMNITY....................................,........17
SECTION 3.09. TAXES........................................,........18
SECTION 3.10. PAYMENTS.....................................,........18
SECTION 3.11. DISBURSEMENT OF LOANS........................,........18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.......................................19
SECTION 4.01. ORGANIZATION POWERS..................................19
SECTION 4.02. AUTHORIZATION OF BORROWING, ENFORCEABLE OBLIGATIONS..19
SECTION 4.03. FINANCIAL CONDITION..................................19
SECTION 4.04. TAXES................................................20
SECTION 4.05. TITLE TO PROPERTIES..................................20
SECTION 4.06. LITIGATION...........................................20
SECTION 4.07. AGREEMENTS...........................................21
SECTION 4.08. COMPLIANCE WITH ERISA................................21
SECTION 4.09. FEDERAL RESERVE REGULATIONS; USE OF PROCEEDS.........21
SECTION 4.10. APPROVAL.............................................21
SECTION 4.11. SUBSIDIARIES.........................................22
SECTION 4.12. HAZARDOUS MATERIALS..................................22
SECTION 4.13. INVESTMENT COMPANY ACT...............................22
SECTION 4.14. SECURITY AGREEMENT...................................22
SECTION 4.15. NO DEFAULT...........................................22
SECTION 4.16. MATERIAL CONTRACTS...................................22
I
SECTION 4.17. PERMITS AND LICENSES.................................22
SECTION 4.18. COMPLIANCE WITH LAW..................................23
SECTION 4.19. DISCLOSURE...........................................23
ARTICLE V
CONDITIONS OF LENDING................................................23
SECTION 5.01. CONDITIONS TO INITIAL EXTENSION OF CREDIT............23
SECTION 5.02. CONDITIONS TO ALL EXTENSIONS OF CREDIT...............26
ARTICLE VI
AFFIRMATIVE COVENANTS................................................26
SECTION 6.01. EXISTENCE, PROPERTIES, INSURANCE.....................26
SECTION 6.02. PAYMENT OF INDEBTEDNESS AND TAXES....................27
SECTION 6.03. FINANCIAL STATEMENTS, REPORTS, ETC...................27
SECTION 6.04. BOOKS AND RECORDS; ACCESS TO PREMISES................29
SECTION 6.05. NOTICE OF ADVERSE CHANGE.............................29
SECTION 6.06. NOTICE OF DEFAULT....................................29
SECTION 6.07. NOTICE OF LITIGATION.................................29
SECTION 6.08. NOTICE OF DEFAULT IN OTHER AGREEMENTS................30
SECTION 6.09. NOTICE OF ERISA EVENT................................30
SECTION 6.10. NOTICE OF ENVIRONMENTAL LAW VIOLATIONS...............30
SECTION 6.11. NOTICE REGARDING MATERIAL CONTRACTS..................30
SECTION 6.12. NOTICE OF REGULATORY MATTERS.........................31
SECTION 6.13. COMPLIANCE WITH APPLICABLE LAWS......................31
SECTION 6.14. SUBSIDIARIES.........................................31
SECTION 6.15. ENVIRONMENTAL LAWS...................................31
ARTICLE VII
NEGATIVE COVENANTS...................................................32
SECTION 7.01. LIENS .............................................32
SECTION 7.02. INDEBTEDNESS.........................................33
SECTION 7.03. GUARANTIES...........................................34
SECTION 7.04. SALE OF ASSETS.......................................34
SECTION 7.05. SALES OF RECEIVABLES.................................34
SECTION 7.06. LOANS AND INVESTMENTS................................35
SECTION 7.07. NATURE OF BUSINESS...................................35
SECTION 7.08. SALE AND LEASEBACK...................................35
SECTION 7.09. FEDERAL RESERVE REGULATIONS..........................35
SECTION 7.10. ACCOUNTING POLICIES AND PROCEDURES...................35
SECTION 7.11. HAZARDOUS MATERIALS..................................35
SECTION 7.12. LIMITATIONS ON FUNDAMENTAL CHANGES...................35
SECTION 7.13. FINANCIAL CONDITION COVENANTS........................36
SECTION 7.14. DIVIDENDS............................................36
SECTION 7.15. TRANSACTIONS WITH AFFILIATES.........................37
SECTION 7.16. IMPAIRMENT OF SECURITY INTEREST......................37
II
ARTICLE VIII
EVENTS OF DEFAULT...................................................37
SECTION 8.01. EVENTS OF DEFAULT...................................37
ARTICLE IX
MISCELLANEOUS.......................................................40
SECTION 9.01. NOTICES.............................................40
SECTION 9.02. EFFECTIVENESS; SURVIVAL.............................40
SECTION 9.03. EXPENSES............................................41
SECTION 9.04. SUCCESSORS AND ASSIGNS; PARTICIPATIONS..............41
SECTION 9.05. NO WAIVER; CUMULATIVE REMEDIES......................42
SECTION 9.06. APPLICABLE LAW......................................42
SECTION 9.07. SUBMISSION TO JURISDICTION..........................42
SECTION 9.08. SEVERABILITY........................................43
SECTION 9.09. RIGHT OF SETOFF.....................................43
SECTION 9.10. HEADINGS............................................43
SECTION 9.11. MODIFICATION OF AGREEMENT...........................43
SECTION 9.12. CONSTRUCTION........................................43
SECTION 9.13. CONFIDENTIALITY.....................................43
SECTION 9.14. JOINT AND SEVERAL OBLIGATIONS.......................44
SECTION 9.15. COUNTERPARTS........................................46
iii
SCHEDULES
Schedule I - Subsidiaries
Schedule II - Existing Liens
Schedule III - Existing Indebtedness
Schedule IV - Existing Guarantees
Schedule V - Material Contracts
Schedule VI - Litigation
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Security Agreement
Exhibit C - Form of Guaranty
Exhibit D - Form of Opinion of Counsel
Exhibit E - Form of Notice of Borrowing
iv
CREDIT AGREEMENT dated as of February 8, 2002, by and among EON LABS
MANUFACTURING, INC., a Delaware corporation and EON PHARMA, LLC, a Delaware
limited liability company (each a "Company" and, collectively, the "Companies")
and JPMORGAN CHASE BANK, a
New York banking corporation, (the "Lender").
RECITALS
The Companies have requested the Lender to extend credit from time to
time and the Lender is willing to extend such credit to the Companies, subject
to the terms and conditions hereinafter set forth.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. DEFINITIONS. As used herein, the following words and
terms shall have the following meanings:
"Affiliate" shall mean with respect to a specified Person, another
Person which, directly or indirectly, controls or is controlled by or is under
common control with such specified Person. For the purpose of this definition,
"control" of a Person shall mean the power, direct or indirect, to direct or
cause the direction of the management or policies of such Person whether through
the ownership of voting securities, by contract or otherwise; provided that, in
any event, any Person who owns directly or indirectly 20% or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or 20% or more of the partnership or other
ownership interest of any Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
"Agreement" shall mean this
Credit Agreement dated as of February 8,
2002, as it may hereafter be amended, restated, supplemented or otherwise
modified from time to time.
"Borrowing Date" shall mean, with respect to any Loan, the date on
which such Loan is disbursed to the Companies.
"Business Day" shall mean (a) any day not a Saturday, Sunday or legal
holiday, on which banks in
New York City are open for business and (b) as it
relates to any payment, determination, funding or notice to be made or given in
connection with any LIBOR Rate Loan, any day specified in clause (a) on which
trading is carried on by and between banks in Dollar deposits in the London
interbank eurodollar market.
"Capital Expenditures" shall mean additions to property and equipment
of ELM and its Subsidiaries which, in conformity with Generally Accepted
Accounting Principles, are included as "additions to property, plant or
equipment" or similar items which would be reflected in the consolidated
statement of cash flow of ELM and its Subsidiaries, including without
limitation, property and equipment which are the subject of Capital Leases.
"Capital Lease" shall mean any lease the obligations of which are
required to be capitalized on the balance sheet of a Person in accordance with
Generally Accepted Accounting Principles.
"Change of Control" shall mean the failure of Hexal AG, one or more
wholly-owned subsidiaries of Hexal AG, Permitted Holders or any combination of
the foregoing, to collectively own (a) prior to the consummation of an initial
public offering of ELM's common stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended, at least 80% of the
voting capital stock of ELM outstanding, and (b) after consummation of any such
initial public offering, at least 51% of the voting capital stock of ELM
outstanding.
"Chief Financial Officer" shall mean the Chief Financial Officer of
ELM.
"Closing Date" shall mean February 8, 2002.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" shall mean the Revolving Credit Commitment.
"Companies" shall have the meaning set forth in the preamble hereto.
"Consolidated Debt Service Coverage Ratio" shall mean, for any period,
the ratio of (a) Consolidated Net Income, plus (i) to the extent deducted in
determining Consolidated Net Income, the sum of (A) Consolidated Interest
Expense and (B) all depreciation and amortization expenses or charges, minus
(ii) the sum of (A) Unfunded Capital Expenditures, (B) dividends and/or
distributions (excluding dividends and/or distributions made pursuant to Section
7.14(a)) and (C) extraordinary or unusual gains minus (iii) the aggregate amount
paid with respect to repurchases of any Company's or Guarantor's capital stock
to (b) the sum of (i) required principal payments on all Indebtedness (including
Capital Leases) having a final maturity of one year or more from the date of
incurrence thereof plus (ii) Consolidated Interest Expense. All the foregoing
categories shall be determined on a consolidated basis for ELM and its
Subsidiaries in accordance with Generally Accepted Accounting Principles applied
on a consistent basis and shall be calculated (without duplication) over the
most recent four fiscal quarters ended on or prior to the date of calculation
thereof with the exception of the required principal payments on all
Indebtedness of ELM and its Subsidiaries with an original maturity of one year
or more, which shall each be calculated based upon the next succeeding four
fiscal quarters.
"Consolidated EBITDA" shall mean for ELM and its Subsidiaries for any
period, Consolidated Net Income (or consolidated net loss) for such period less
extraordinary or unusual gains, plus the sum, without duplication, of (a)
Consolidated Interest Expense, (b) depreciation and amortization expenses or
charges and (c) all income taxes to any government or governmental
instrumentality expensed on ELM or any of its Subsidiaries' books (whether paid
or accrued), in each case, determined on a consolidated basis for ELM and its
Subsidiaries in accordance with Generally Accepted Accounting Principles applied
on a consistent basis. All of the foregoing categories shall be calculated
(without duplication) over the then most recent four fiscal quarters ended on or
prior to the date of calculation thereof.
2
"Consolidated Funded Debt" shall mean the sum of all Indebtedness of
ELM and its Subsidiaries for borrowed money having an original maturity of one
year or more (including, without limitation, Capital Leases) and the outstanding
principal amount of the Revolving Credit Loans, in each case determined on a
consolidated basis for ELM and its Subsidiaries in accordance with Generally
Accepted Accounting Principles applied on a consistent basis.
"Consolidated Interest Expense" shall mean the consolidated gross
interest expense of ELM and its Subsidiaries determined in accordance with
Generally Accepted Accounting Principles applied on a consistent basis and
calculated over the then most recent four fiscal quarters ended on or prior to
the date of calculation thereof.
"Consolidated Net Income" shall mean, for any period, the net income
(or net loss) of ELM and its Subsidiaries on a consolidated basis for such
period determined in accordance with Generally Accepted Accounting Principles
applied on a consistent basis.
"Default" shall mean any condition or event which upon notice, lapse of
time or both would constitute an Event of Default.
"Dollar" and the symbol "$" shall mean lawful money of the United
States of America.
"Eligible Investments" shall mean (a) direct obligations of the United
States of America or any governmental agency thereof which are fully
guaranteed by the United States of America, provided that such obligations
mature within one year from the date of acquisition thereof; or (b) dollar
denominated certificates of time deposit maturing within one year issued by any
bank organized and existing under the laws of the United States or any state
thereof and having aggregate capital and surplus in excess of $1,000,000,000;
or (c) money market mutual funds having assets in excess of $2,500,000,000; or
(d) commercial paper rated not less than P-1 or A-1 or their equivalent by
▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Ratings Group,
respectively; or (e) tax exempt securities of a U.S. issuer rated A or better by
Standard and Poor's Ratings Group or ▇▇▇▇▇'▇ Investors Service, Inc.
"ELM" shall mean Eon Labs Manufacturing, Inc., a Delaware
corporation.
"Environmental Law" shall mean any law, ordinance, rule, regulation, or
policy having the force of law of any Governmental Authority relating to
pollution or protection of the environment or to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections
9601, et seq.), the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, et seq.) the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901, et seq.) and the rules and regulations
promulgated pursuant thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
3
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with ELM or any Affiliates of ELM would be deemed to be a
member of the same "controlled group" within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
"Eurocurrency Reserve Requirement" shall mean a fraction (expressed as
a decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate (without duplication) of the rates
(expressed as a decimal) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves, under any regulations of the Board of Governors of the Federal Reserve
System or any other governmental authority having jurisdiction with respect
thereto) as from time to time in effect, dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "eurocurrency
liabilities" in Regulation D) maintained by the Lender. For purposes hereof each
LIBOR Rate Loan shall be deemed to constitute a "eurocurrency liability" as
defined in Regulation D, and subject to the reserve requirements of "Regulation
D," without benefit of credit or proration, exemptions or offsets which might
otherwise be available to the Lender from time to time under Regulation D.
"Event of Default" shall have the meaning set forth in Article VIII.
"Executive Officer" shall mean any of the President, the Chief
Executive Officer, Chief Financial Officer or the Secretary of ELM or any of its
Subsidiaries, as applicable, and their respective successors, if any, designated
by the board of directors thereof.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal fund brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of
New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the Lender from
three Federal fund brokers of recognized standing selected by the Lender.
"Fixed Rate Loans" shall mean, collectively, LIBOR Rate Loans and
Quoted Rate Loans.
"Generally Accepted Accounting Principles" shall mean those generally
accepted accounting principles in the United States of America, as in effect
from time to time.
"Governmental Authority" shall mean any nation or government, any
state, province, city or municipal entity or other political subdivision
thereof, and any governmental, executive, legislative, judicial,
administrative or regulatory agency, department, authority, instrumentality,
commission, board or similar body, whether federal, state, provincial,
territorial, local or foreign.
"Guarantors" shall mean, collectively, Forte Pharma, Inc. and any other
Subsidiary of ELM existing on the Closing Date (other than Eon Pharma LLC, Eon
Technologies, Inc. and Eon Labs Manufacturing of the Virgin Islands, Inc.), and
each Person who, from time to time, is required to execute a Guaranty in
accordance with Section 6.14.
4
"Guaranty" shall mean the Guaranty in the form attached hereto as
Exhibit C to be executed and delivered by each Guarantor on the Closing Date and
thereafter by each Subsidiary of ELM (other than Eon Pharma LLC, Eon
Technologies, Inc. and Eon Labs Manufacturing of the Virgin Islands, Inc.)
pursuant to Section 6.14, as the same may hereafter be amended, restated,
supplemented or otherwise modified from time to time.
"Hazardous Materials" shall mean any explosives, radioactive materials,
or other materials, wastes, substances, or chemicals regulated as toxic
hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law.
"Hedging Agreement" shall mean any interest rate swap, collar, cap,
floor or forward rate agreement or other agreement regarding the hedging of
interest rate risk exposure executed in connection with hedging the interest
rate exposure of ELM or any of its Subsidiaries and any confirming letter
executed pursuant to such agreement, all as amended, supplemented, restated or
otherwise modified from time to time.
"Inactive Subsidiary" shall mean (i) a Subsidiary of ELM (other than
Eon Labs Manufacturing of the Virgin Islands, Inc.) which conducts no business
and has total assets (based on the higher of market value and book value) of
less than $50,000 and (ii) Eon Labs Manufacturing of the Virgin Islands, Inc.
provided it has total assets (based on the higher of market value and book
value) of less than $1,000,000 and conducts no business other than the
maintenance of its properties and those activities incidental to the winding up
of its business and the sale of its properties.
"Indebtedness" shall mean, without duplication, as to any Person or
Persons (a) indebtedness for borrowed money; (b) indebtedness for the deferred
purchase price of property or services; (c) indebtedness evidenced by bonds,
debentures, notes or other similar instruments; (d) obligations and liabilities
secured by a Lien upon property owned by such Person, whether or not owing by
such Person and even though such Person has not assumed or become liable for the
payment thereof; (e) obligations and liabilities directly or indirectly
guaranteed by such Person; (f) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person; (g) obligations of
such Person as lessee under Capital Leases; (h) net liabilities of such Person
under Hedging Agreements and foreign currency exchange agreements, as calculated
on a basis satisfactory to the Lender and in accordance with accepted practice;
(i) all obligations of such Person in respect of bankers' acceptances; (j) all
obligations, contingent or otherwise of such Person as an account party or
applicant in respect of letters of credit and (k) to the extent not covered by
clauses (a) through (j), all liabilities or obligations, direct and contingent,
which in accordance with Generally Accepted Accounting Principles would be
included in determining total liabilities on the liability side of the balance
sheet of such Person as of the date as of which Indebtedness is to be
determined.
"Interest Payment Date" shall mean (a) as to any Prime Rate Loan, the
first day of each calendar month during the term thereof; (b) as to any Fixed
Rate Loan, each one month anniversary of the funding of such Fixed Rate Loan
during the Interest Period for such Fixed Rate Loan; and (c) as to any Loan, the
date such Loan is paid in full or in part.
5
"Interest Period" shall mean with respect to any Fixed Rate Loan:
(a) initially, the period commencing on the date such Fixed Rate Loan
is made and ending one, two, three or six months thereafter, as selected by the
Companies in its Notice of Borrowing or in its notice of conversion from another
Type of loan to a Fixed Rate Loan provided, and in each case, in accordance with
the terms of Articles II and III hereof; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Fixed Rate Loan and ending one,
two, three or six months thereafter, as selected by the Companies by
irrevocable written notice to the Lender not later than 11:00 a.m.
New York,
New York time (I) with respect to a LIBOR Rate Loan, three Business Days
prior to the last day of the then current Interest Period with respect to
such LIBOR Rate Loan or (II) with respect to a Quoted Rate Loan, on the last
day of the then current Interest Period with respect to such Quoted Rate
Loan; provided, however, that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately preceding
Business Day;
(ii) if the Companies shall fail to give notice as
provided in clause (b) above, the Companies shall be deemed to have
requested conversion of the affected Fixed Rate Loan to a Prime Rate
Loan on the last day of the then current Interest Period with respect
thereto;
(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iv) no more than five (5) Interest Periods may exist at
any one time.
"Lender" shall have the meaning set forth in the preamble hereto.
"Leverage Purpose Transaction" shall mean any transaction that (a)
causes the ratio of consolidated liabilities to consolidated assets to exceed
75% or (b) causes the ratio of the consolidated liabilities to consolidated
assets to exceed 50% and increases the consolidated liabilities by 100% or
more, in each case determined in accordance with Generally Accepted
Accounting Principles, applied on a consistent basis with respect to ELM and
its consolidated Subsidiaries.
"LIBOR Rate Loans" shall mean Loans at such time as they are made
and/or being maintained at a rate of interest based upon Reserve Adjusted Libor.
6
"Lien" shall mean any lien (statutory or otherwise), security interest,
mortgage, deed of trust, pledge, charge, conditional sale, title retention
agreement, Capital Lease or other encumbrance or similar right of others, or any
agreement to give any of the foregoing.
"Loans" shall mean the Revolving Credit Loans.
"Loan Documents" shall mean, collectively, this Agreement, the Note,
the Security Documents, the Guaranties, Hedging Agreements, if any, entered into
with the Lender and each other agreement executed in connection with the
transactions contemplated hereby or thereby, as each of the same may hereafter
be amended, restated, supplemented or otherwise modified from time to time.
"Material Adverse Effect" shall mean a material adverse effect upon (a)
the business, operations, property, prospects or condition (financial or
otherwise) of ELM and its Subsidiaries taken as a whole, or (b) the ability of
ELM or any of its Subsidiaries to perform in any material respect any material
obligations under any Loan Document to which it is a party
"Material Contract" shall mean each contract, instrument or agreement
(a) to which ELM or any of its Subsidiaries is a party which is material to the
business, operations or condition (financial or otherwise), prospects, or
properties of ELM or of ELM and its Subsidiaries taken as a whole, or (b) which
requires the payment during the then remaining term thereof in excess of
$250,000 per annum excluding for purposes of this clause (b), only, purchase or
supply orders or agreements placed by or with ELM or any of its Subsidiaries in
the ordinary course of business)
"Note" shall mean the Revolving Credit Note.
"Notice of Borrowing" shall mean the Notice of Borrowing in the form
attached hereto as Exhibit E or other form of notice of borrowing acceptable to
the Lender.
"Obligations" shall mean all obligations, liabilities and indebtedness
of the Companies to the Lender, whether now existing or hereafter created,
absolute or contingent, direct or indirect, due or not, whether created directly
or acquired by assignment or otherwise, arising under this Agreement, the Note
or any other Loan Document, including, without limitation, all obligations,
liabilities and indebtedness of the Companies with respect to the principal of
and interest on the Loans, and obligations arising under Hedging Agreements with
the Lender (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, and interest that but for the filing of a petition in
bankruptcy with respect to any Company, would accrue on such obligations,
whether or not a claim is allowed against any Company for such interest in the
related bankruptcy proceeding), and all fees, costs, expenses and indemnity
obligations of the Companies hereunder, under any other Loan Document or under
any Hedging Agreement with the Lender. The Obligations shall be joint and
several obligations of the Companies.
7
"Payment Office" shall mean the Lender's office located at ▇▇▇-▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other office as the
Lender may designate from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisitions" shall mean any acquisition (whether by
merger or otherwise) by the Companies or any Guarantor of more than 50% of
the outstanding capital stock, membership interests, partnership interests or
other similar ownership interests of a Person which is engaged in a line of
business which is the same or substantially similar to the business of such
Company or such Guarantor or the purchase of all or substantially all of the
assets owned by such Person; provided (a) the Lender shall have received,
within ten (10) Business Days of the closing of such Permitted Acquisition,
to the extent not previously received, a duly executed Guaranty and Security
Agreement, to the extent such document is required to be delivered pursuant
to Section 6.14 hereof; (b) the Lender shall have received evidence
reasonably satisfactory to it that the shares or other interests in the
Person, or the assets of the Person, which is the subject of the Permitted
Acquisition are, or will be promptly following the closing of such Permitted
Acquisition, free and clear of all Liens, except Permitted Liens, including,
without limitation, with respect to the acquisition of shares or other equity
interests, free of any restrictions on transfer other than restrictions
applicable to the sale of securities under federal and state securities laws
and regulations generally; (c) the Lender shall have received not less than
three (3) Business Days preceding the closing of such Permitted Acquisition,
substantially final drafts of the documentation governing the proposed
acquisition, including, without limitation, the purchase agreement with
respect thereto, together with such other additional documentation or
information with respect to the proposed acquisition as the Lender may
reasonably require; (d) no Default or Event of Default shall have occurred
and be continuing immediately prior to or would occur after giving effect to
the acquisition on a pro forma basis; (e) the Lender shall have received
projections and pro forma financial statements showing that, after giving
effect to such acquisition, (i) no Default or Event of Default shall have
occurred and (ii) such acquisition will not be a Leveraged Purpose
Transaction; (e) the acquisition has either (i) been approved by the Board of
Directors or other governing body of the Person which is the subject of the
acquisition or (ii) been recommended for approval by the Board of Directors
or other governing body of such Person to the shareholders or other members
of such Person and subsequently approved by the shareholders or such members
if shareholder or such member approval is required under applicable law or
the by-laws, certificate of incorporation or other governing instruments of
such Person; and (f) prior to the closing of any such acquisition, the
Companies shall have delivered evidence to the Lender that, on a PRO FORMA
basis, the Companies will be in compliance with the financial condition
covenants of Section 7.13 hereof upon completion of such acquisition.
"Permitted Hexal Fundings" shall mean loans and advances and/or
dividends made by ELM to Hexal Pharmaceuticals, Inc. for the purpose of
funding payments due by Hexal Pharmaceuticals, Inc. under notes executed by
it to the seller of assets or stock acquired by it; provided, the aggregate
of all such loans, advances and dividends made on or after the Closing Date
shall not exceed $30,000,000 and no such loan, advance or dividend may be
made if a Default or Event of Default shall have occurred and be continuing
or would occur after giving effect thereto.
8
"Permitted Holders" shall mean (a) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (b) ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, (c) members of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇'▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇'▇
immediate families including, current and former spouses and the estate of
any of the foregoing, (d) trusts the sole beneficiaries of which are any of
the foregoing individuals and (e) any entity all of the outstanding capital
stock or other equity interest of which are owned by any or all of such
Persons
"Permitted Liens" shall mean the Liens specified in clauses (a) through
(j) of Section 7.01.
"Person" shall mean any natural person, corporation, limited liability
company, limited liability partnership, business trust, joint venture,
association, company, partnership or Governmental Authority.
"Plan" shall mean any multi-employer or single-employer plan defined in
Section 4001 of ERISA, which covers, or at any time during the five calendar
years preceding the date of this Agreement covered, employees of ELM, any
Subsidiary of ELM or an ERISA Affiliate on account of such employees' employment
by ELM, any Subsidiary of ELM or an ERISA Affiliate.
"Prime Rate" shall mean the rate per annum announced by the Lender from
time to time as its prime rate in effect at its principal office, each change in
the Prime Rate shall be effective on the date such change is announced to become
effective.
"Prime Rate Loans" shall mean Loans at such time as they are being made
and/or maintained at a rate of interest based on the Prime Rate.
"Quoted Rate" shall mean a rate of interest per annum quoted to the
Companies by the Lender, in its discretion, on the requested Borrowing Date
for the requested Quoted Rate Loan. Such quote rate shall be the fixed rate
which would be applicable to a Quoted Rate Loan made by the Lender on the
requested date for the proposed Quoted Rate Loan. Notwithstanding any other
provision of this Agreement, (i) the rate so quoted by the Lender shall be
determined in the sole discretion of the Lender by reference to such factors
and consideration as the Lender shall deem relevant and (ii) the Lender shall
not be required to quote any rate at all for any reason whatsoever for any
proposed Quoted Rate Loan or upon the termination of any Interest Period
relating to any existing Quoted Rate Loan.
"Quoted Rate Loans" shall mean Loans at such time as they are made
and/or maintained at a rate of interest based upon the Quoted Rate.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the 30 day notice requirement has not
been waived by the PBGC.
9
"Reserve Adjusted Libor" shall mean with respect to the Interest
Period pertaining to a LIBOR Rate Loan, the rate per annum equal to the
product (rounded upwards to the next higher 1/16 of one percent) of (a) the
annual rate of the interest at which Dollar deposits of an amount comparable
to the amount of such Loan and for a period equal to the Interest Period
applicable thereto are offered to the London office of the Lender in
immediately available funds in the London interbank market for Eurodollars by
leading banks in the eurodollar market at approximately 11:00 A.M. (London
time) on the second Business Day prior to the commencement of such Interest
Period, multiplied by (b) the Eurocurrency Reserve Requirement
"Revolving Credit Commitment" shall mean the Lender's obligation to
make Revolving Credit Loans to the Companies in an aggregate amount not to
exceed $25,000,000, as such amount may be adjusted in accordance with the
terms of this Agreement.
"Revolving Credit Commitment Period" shall mean the period from and
including the Closing Date to, but not including, the Revolving Credit
Commitment Termination Date or such earlier date as the Revolving Credit
Commitment shall terminate as provided herein.
"Revolving Credit Commitment Termination Date" shall mean December 31,
2004.
"Revolving Credit Loans" shall have the meaning set forth in Section
2.01(a).
"Revolving Credit Note" shall have the meaning set forth in Section
2.02.
"Security Agreement" shall mean the Security Agreement in the form
attached as Exhibit B, to be executed and delivered on the Closing Date by
each Company and each Guarantor, and, thereafter by any Person who may be
required to execute the same pursuant to Section 6.14, as each of the same
may hereafter be amended, restated, supplemented or otherwise modified, from
time to time.
"Security Documents" shall mean the Security Agreements and each other
collateral security document delivered to the Lender hereunder.
"Solvent" shall mean with respect to any Person as of the date of
determination thereof that (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise," as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required on its debts as such debts become absolute
and matured, (c) such Person will not have as of such date, an unreasonably
small amount of capital with which to conduct its business, and (d) such Person
will be able to pay its debts as they mature.
"Subsidiaries" shall mean with respect to any Person any corporation,
association or other business entity more than 50% of the voting stock or other
ownership interests (including, without
10
limitation, membership interests in a limited liability company) of which is at
the time owned or controlled, directly or indirectly, by such Person or one or
more of its Subsidiaries or a combination thereof.
"Taxes" shall have the meaning set forth in Section 3.09.
"Type" shall mean as to any Loan its status as a Prime Rate Loan, a
LIBOR Rate Loan or a Quoted Rate Loan.
"Unfunded Capital Expenditures" shall mean, with respect to any period,
Capital Expenditures incurred during such period which are not financed with
the proceeds from any Indebtedness.
"Unfunded Current Liability" of any Plan shall mean the amount, if any,
by which the present value of the accrued benefits under the Plan as of the
close of its most recent plan year exceeds the fair market value of the assets
allocable thereto, determined in accordance with Section 412 of the Code.
SECTION 1.02. TERMS GENERALLY. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, feminine and the neuter. Except as
otherwise herein specifically provided, each accounting term used herein shall
have the meaning given to it under Generally Accepted Accounting Principles. The
term "including" shall not be limited or exclusive, unless specifically
indicated to the contrary. The word "will" shall be construed to have the same
meaning in effect as the word "shall". The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the exhibits and schedules hereto, all of which are by this
reference incorporated into this Agreement.
ARTICLE II
LOANS
SECTION 2.01. REVOLVING CREDIT LOANS. (a) Subject to the terms
and conditions, and relying upon the representations and warranties, set forth
herein, the Lender agrees to make loans (individually a "Revolving Credit Loan"
and, collectively, the "Revolving Credit Loans") to the Companies from time to
time during the Revolving Credit Commitment Period up to but not exceeding at
any one time outstanding the amount of the Revolving Credit Commitment; PROVIDED
HOWEVER, that no Revolving Credit Loan shall be made if, after giving effect to
such Revolving Credit Loan, the aggregate outstanding principal amount of all
Revolving Credit Loans at such time would exceed the Revolving Credit Commitment
in effect at such time. During the Revolving Credit Commitment Period, the
Companies may from time to time borrow, repay and reborrow hereunder on or after
the date hereof and prior to the Revolving Credit Commitment Termination Date,
subject to the terms, provisions and limitations set forth herein. The Revolving
Credit Loans may be (i) LIBOR Rate Loans, (ii) Prime Rate Loans, (iii) Quoted
Rate Loans or (iv) a combination thereof.
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(b) The Companies shall give the Lender a duly completed Notice
of Borrowing executed by an Executive Officer not later than 11:00 a.m. (
New
York,
New York time), three Business Days prior to the date of each proposed
LIBOR Rate Loan under this Section 2.01 or prior to 11:00 a.m. (
New York,
New
York time) on the date of each proposed Prime Rate Loan or Quoted Rate Loan
under this Section 2.01. Such notice shall be irrevocable and shall specify
(i) the amount and Type of the proposed borrowing, (ii) the proposed use of
the loan proceeds, (iii) the initial Interest Period if a Fixed Rate Loan,
and (iv) the proposed Borrowing Date. Except for borrowings which utilize the
full remaining amount of the Revolving Credit Commitment, each borrowing of a
Prime Rate Loan shall be in an amount not less than $500,000 or, if greater,
whole multiples of $100,000 in excess thereof. Each borrowing of Fixed Rate
Loan shall be an amount not less than $500,000 or whole multiples of $100,000
in excess thereof. Funding of all Loans shall be made in accordance with
Section 3.12 of this Agreement.
(c) The Companies shall have the right, acting jointly, upon not
less than three Business Days' prior written notice to the Lender to
terminate the Revolving Credit Commitment or from time to time to permanently
reduce the amount of the Revolving Credit Commitment; provided, however, that
no such termination or reduction shall be permitted if, after giving effect
thereto and to any prepayments of the Revolving Credit Loans made on the
effective date thereof, the aggregate outstanding principal amount of all
Revolving Credit Loans would exceed the Revolving Credit Commitment as then
reduced; provided, further, that any such termination or reduction requiring
prepayment of any Fixed Rate Loan shall be made only on the last day of the
Interest Period with respect thereto or on the date of payment in full of all
amounts owing pursuant to Section 3.08 as a result of such termination or
reduction. Any such reduction shall be in the amount of $500,000 or whole
multiples of $100,000 in excess thereof, and shall reduce permanently the
amount of the Revolving Credit Commitment then in effect.
(d) The agreement of the Lender to make Revolving Credit Loans
pursuant to this Section 2.01 shall automatically terminate on the Revolving
Credit Commitment Termination Date. Upon such termination, the Companies
shall immediately repay in full the principal amount of the Revolving Credit
Loans then outstanding, together with all accrued interest thereon and all
other amounts due and payable hereunder.
SECTION 2.02. REVOLVING CREDIT NOTE. The Revolving Credit Loans
made by the Lender shall be evidenced by a promissory note of the Companies
(the "Revolving Credit Note"), substantially in the form attached hereto as
Exhibit A, appropriately completed, duly executed and delivered on behalf of
the Companies and payable to the order of the Lender in a principal amount
equal to the Revolving Credit Commitment. The Revolving Credit Note shall (a)
be dated the Closing Date, (b) be stated to mature on the Revolving Credit
Commitment Termination Date, and (c) bear interest from the date thereof
until paid in full on the unpaid principal amount thereof from time to time
outstanding as provided in Section 3.01. The Lender is authorized to record
the date, Type and amount of each Revolving Credit Loan and the date and
amount of each payment or prepayment of principal of each Revolving Credit
Loan in the Lender's records or on the grid schedule annexed to the Revolving
Credit Note; PROVIDED, HOWEVER THAT the failure of the Lender to set forth
each such Revolving Credit Loan, payment and other information shall not in
any manner
12
affect the obligation of the Companies to repay each Revolving Credit Loan
made by the Lender in accordance with the terms of its Revolving Credit Note
and this Agreement. The Revolving Credit Note, the grid schedule and the
books and records of the Lender shall constitute conclusive evidence of the
information so recorded absent manifest error.
ARTICLE III
PROVISIONS RELATING TO ALL EXTENSIONS OF CREDIT;
FEES AND PAYMENTS
SECTION 3.01. INTEREST RATE; CONTINUATION AND CONVERSION OF LOANS.
(a) Each Prime Rate Loan shall bear interest for the period
from the date thereof on the unpaid principal amount thereof at a fluctuating
rate per annum equal to the Prime Rate.
(b) Each LIBOR Rate Loan shall bear interest for the Interest
Period applicable thereto on the unpaid principal amount thereof at a rate
per annum equal to the Reserve Adjusted Libor determined for each Interest
Period thereof in accordance with the terms hereof plus a margin of one and
one-half percent (1.5%) per annum.
(c) Each Quoted Rate Loan shall bear interest for the Interest
Period applicable thereto on the unpaid principal amount thereof at a rate
per annum equal to the Quoted Rate determined for each Interest Period
thereof in accordance with the terms hereof.
(d) Upon the occurrence and during the continuance of an Event
of Default the outstanding principal amount of the Loans (excluding any
defaulted payment of principal accruing interest in accordance with clause
(e) below), shall, at the option of the Lender, bear interest payable on
demand at a rate of interest 3% per annum in excess of the interest rate
otherwise then in effect or, if no rate is in effect, 3% per annum in excess
of the Prime Rate.
(e) If the Companies shall default in the payment of the
principal of or interest on any portion of any Loan or any other amount
becoming due hereunder, whether with respect to interest, fees, expenses or
otherwise, the Companies shall pay interest on such defaulted amount accruing
from the date of such default (without reference to any period of grace) up
to and including the date of actual payment (after as well as before
judgment) at a rate of 3% per annum in excess of the rate otherwise in effect
or, if no rate is in effect, 3% per annum in excess of the Prime Rate.
(f) The Companies may elect from time to time to convert
outstanding Loans from Fixed Rate Loans to Prime Rate Loans or a Fixed Rate
Loan of another Type by giving the Lender at least three Business Day's prior
irrevocable written notice of such election, provided that any such
conversion of Fixed Rate Loans shall only be made on the last day of an
Interest Period with respect thereto or upon the date of payment in full of
any amounts owing pursuant to Section 3.09 as a result of such conversion.
The Companies may elect from time to time to convert outstanding Loans from
Prime Rate Loans to any Type of Fixed Rate Loan by giving the Lender
13
irrevocable written notice of such election not later than 11:00 a.m. (
New
York, New York time), (i) three Business Days prior to the date of the
proposed conversion., with respect to a LIBOR Rate Loan and (ii) on the date
of the proposed conversion, with respect to a Quoted Rate Loan All or any
part of outstanding Prime Rate Loans may be converted as provided herein,
provided that each conversion shall be in the principal amount of $500,000 or
whole multiples of $100,000 in excess thereof, and further provided that no
Default or Event of Default shall have occurred and be continuing. Any
conversion to or from any other Type of Loans hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, the aggregate principal amount of all Fixed Rate Loans having the
same Interest Period shall not be less than $500,000.
(g) Any Fixed Rate Loan in a minimum principal amount of
$500,000 may be continued as such upon the expiration of an Interest Period
with respect thereto by compliance by the Companies with the notice
provisions contained in the definition of Interest Period; provided, that no
Fixed Rate Loan may be continued as such when any Default or Event of Default
has occurred and is continuing, but shall be automatically converted to a
Prime Rate Loan on the last day of the Interest Period in effect when the
Lender is notified, or otherwise has actual knowledge, of such Default or
Event of Default.
(h) If the Companies shall fail to select the duration of any
Interest Period for any Fixed Rate Loan in accordance with the definition of
"Interest Period" set forth in Section 1.01, the Company shall be deemed to
have selected an Interest Period of one month.
(i) No Loan may be funded as a Fixed Rate Loan, or converted to
or continued as a Fixed Rate Loan, with an Interest Period that extends
beyond the Revolving Credit Commitment Termination Date.
(j) Anything in this Agreement or in any Note to the contrary
notwithstanding, the obligation of the Companies to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be paid to the Lender to the extent that the charging or receipt
thereof would not be permissible under the law or laws applicable to the
Lender limiting the rates of interest that may be charged or collected by the
Lender. In each such event payments of interest required to be paid to the
Lender shall be calculated at the highest rate permitted by applicable law
until such time as the rates of interest required hereunder may lawfully be
charged and collected by the Lender. If the provisions of this Agreement or
any Note would at any time otherwise require payment by the Companies to the
Lender of any amount of interest in excess of the maximum amount then
permitted by applicable law, the interest payments to the Lender shall be
reduced to the extent necessary so that the Lender shall not receive interest
in excess of such maximum amount.
(k) Interest on each Loan shall be payable in arrears on each
Interest Payment Date and shall be calculated on the basis year of 360 days
and shall be payable for the actual days elapsed. Any rate of interest on the
Loans or other Obligations which is computed on the basis of the Prime Rate
shall change when and as the Prime Rate changes in accordance with the
definition
14
thereof. Each determination by the Lender of an interest rate or fee
hereunder shall, absent manifest error, be conclusive and binding for all
purposes.
SECTION 3.02. USE OF PROCEEDS. The proceeds of the Revolving
Credit Loans shall be used (a) solely for the working capital needs of the
Companies and the Guarantors in the ordinary course of their business, (b) to
fund Permitted Hexal Fundings and (c) to fund Permitted Acquisitions;
provided that the aggregate principal amount of all Revolving Credit Loans
for the purpose of funding Permitted Acquisitions shall not exceed $5,000,000
during the term of this Agreement.
SECTION 3.03, PREPAYMENTS. (a) The Companies may on the last
day of an Interest Period if the Loans to be prepaid are Fixed Rate Loans, or
at any time and from time to time if the Loans to be prepaid are Prime Rate
Loans, prepay the then outstanding Loans, in whole or in part, without
premium or penalty, except as provided in Section 3.08, upon written notice
to the Lender (or telephonic notice promptly confirmed in writing) not later
than 11:00 a.m. (New York, New York time), three Business Days before the
date of prepayment with respect to prepayments of LIBOR Rate Loans, or 11:00
a.m. (New York, New York time) one Business Day before the date of prepayment
with respect to Prime Rate Loans and Quoted Rate Loans. Each notice shall be
irrevocable and shall specify the date and amount of prepayment and whether
such prepayment is of LIBOR Rate Loans, Prime Rate Loans or Quoted Rate
Loans, or a combination thereof, and if a combination thereof, the amount of
prepayment allocable to each. If such notice is given, the Companies shall
make such prepayment, and the amount specified in such notice shall be due
and payable, on the date specified therein. Each partial prepayment pursuant
to this Section 3.03 shall be in a principal amount of $500,000 or whole
multiples of $100,000 in excess thereof.
(b) Each prepayment of principal of a Loan pursuant to this
Section 3.03 shall be accompanied by accrued interest to the date prepaid on
the amount prepaid. Unless otherwise directed by the Companies pursuant to
Section 3.03 (a), partial prepayments of any Loan shall be applied first to
outstanding Prime Rate Loans and then to Fixed Rate Loans in such order as
the Lender shall determine in its sole and absolute discretion.
SECTION 3.04. FEES.
(a) The Companies agree to pay to the Lender a commitment fee
on the average daily unused portion of the Revolving Credit Commitment from
the date of this Agreement until the Revolving Credit Commitment Termination
Date at a rate per annum equal to one-quarter of one percent (.25%), based on
a year of 360 days, payable in arrears on the last day of March, June,
September, and December of each year commencing March 31, 2002, on the
Revolving Credit Commitment Termination Date and on each date the Revolving
Credit Commitment is permanently reduced in whole or in part.
(b) The Companies agree to pay to the Lender a non-refundable
facility fee of $90,000 which shall be paid in full on the Closing Date.
15
SECTION 3.05. INABILITY TO DETERMINE INTEREST RATE. In the
event that the Lender shall have determined (which determination shall be
conclusive and binding upon the Companies) that, by reason of circumstances
affecting the London interbank market, adequate and reasonable means do not
exist for ascertaining the Reserve Adjusted Libor applicable pursuant to
Section 3.01(b) for any requested Interest Period with respect to (a) the
making of a LIBOR Rate Loan, (b) a LIBOR Rate Loan that will result from the
requested conversion of a Prime Rate Loan or a Quoted Rate Loan into a LIBOR
Rate Loan, or (c) the continuation of an LIBOR Rate Loan beyond the
expiration of the then current Interest Period with respect thereto, the
Lender shall forthwith give notice by telephone of such determination,
promptly confirmed in writing, to the Companies of such determination. Until
the Lender notifies the Companies that the circumstances giving rise to the
suspension described herein no longer exist, the Companies shall not have the
right to request or continue a LIBOR Rate Loan or to convert a Prime Rate
Loan or a Quoted Rate Loan to a LIBOR Rate Loan.
SECTION 3.06. ILLEGALITY. Notwithstanding any other provisions
herein, if any introduction of or change in any law, regulation, treaty or
directive or in the interpretation or application thereof shall make it
unlawful for the Lender to make or maintain LIBOR Rate Loans as contemplated
by this Agreement, the Lender shall forthwith give notice by telephone of
such circumstances, promptly confirmed in writing, and (a) the commitment of
the Lender to make and to allow conversion to or continuations of LIBOR Rate
Loans shall forthwith be cancelled for the duration of such illegality and
(b) the Loans then outstanding as LIBOR Rate Loans, if any, shall be
converted automatically to Prime Rate Loans on the next succeeding last day
of each Interest Period applicable to such LIBOR Rate Loans or within such
earlier period as may be required by law. The Companies shall pay to the
Lender, upon demand, any additional amounts required to be paid pursuant to
Section 3.08 hereof.
SECTION 3.07. INCREASED COSTS. (a) In the event that any
introduction of or change in the interpretation or application in any
applicable law, regulation, treaty, order, directive or in the interpretation
or application thereof (including, without limitation, any request, guideline
or policy, whether or not having the force of law, of or from any central
bank or other governmental authority, agency or instrumentality and
including, without limitation, Regulation D), by any authority charged with
the administration or interpretation thereof shall occur on or after the date
hereof, which:
(i) shall subject the Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, or any Loan, or
change the basis of taxation of payments to the Lender of principal,
interest, fees or any other amount payable hereunder (except for taxes
covered by Section 3.09); or
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement (whether or not
having the force of law) against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office of
the Lender; or
16
(iii) shall impose on the Lender any other condition, or
change therein; and the result of any of the foregoing is to increase
the cost to the Lender of making, renewing or maintaining or
participating in advances or extensions of credit hereunder or to
reduce any amount receivable hereunder, in each case by an amount which
the Lender deems material, then, in any such case, the Companies shall
pay the Lender, upon demand, such additional amount or amounts as the
Lender shall have determined will compensate the Lender for such
increased costs or reduction; provided the Lender agrees to use
reasonable efforts (consistent with legal and regulatory restrictions)
to designate a different domestic lending office with respect to the
Loans if the making of such designation would avoid the need for, or
reduce the amount of, such increased costs that might thereafter
accrue; provided, however, that such efforts shall not cause the
imposition on the Lender of any additional costs or legal, regulatory
administrative burdens deemed by such Lender, in its sole discretion,
to be material.
(b) If the Lender shall have determined that the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by the Lender (or
any lending office of the Lender) or the Lender's holding company, with any
request or directive regarding capital adequacy (whether or not having the
force of the law) of any such authority, central bank or comparable agency in
each case made subsequent to the date hereof, has or would have the effect of
reducing the rate of return on the Lender's capital or on the capital of the
Lender's holding company as a consequence of its obligations hereunder to a
level below that which the Lender could have achieved but for such adoption,
change or compliance (taking into consideration the Lender's policies and the
policies of the Lender's holding company with respect to capital adequacy) by
an amount deemed by the Lender to be material, then from time to time, the
Companies shall pay to the Lender, the additional amount or amounts as the
Lender shall have determined will compensate the Lender or the Lender's
holding company for such reduction. The Lender's determination of such
amounts shall be conclusive and binding on any Companies' absent manifest
error.
(c) A certificate of the Lender setting forth the amount or
amounts payable pursuant to Sections 3.07(a) and 3.07(b) above shall be
conclusive absent manifest error. The Company shall pay the Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
SECTION 3.08. INDEMNITY. The Companies agree to indemnify the
Lender and to hold the Lender harmless from any loss, cost or expense which
the Lender may sustain or incur, including, without limitation, interest or
fees payable by the Lender to lenders of funds obtained by it in order to
maintain Fixed Rate Loans hereunder, as a consequence of (a) default by the
Companies in payment of the principal amount of or interest on any Fixed Rate
Loan, (b) default by the Companies to accept or make a borrowing of a Fixed
Rate Loan or a conversion into or continuation of a Fixed Rate Loan after the
Company has requested such borrowing, conversion or continuation, (c) default
by the Companies in making any prepayment of any Fixed Rate Loan after the
Companies give a notice in accordance with Section 3.03 of this Agreement
and/or (d) the making of any payment or
17
prepayment (whether mandatory or optional) of a Fixed Rate Loan or the making
of any conversion of a Fixed Rate Loan to a Prime Rate Loan on a day which is
not the last day of the applicable Interest Period with respect thereto. A
certificate of the Lender setting forth such amounts shall be conclusive
absent manifest error. The Companies shall pay the Lender the amount shown as
due on any certificate within ten days after receipt thereof.
SECTION 3.09. TAXES. Except as required by law, all payments
made by the Companies under this Agreement shall be made free and clear of,
and without reduction for or on account of, any present or future taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding income and franchise taxes imposed on the
Lender by (i) the United States of America or any political subdivision or
taxing authority thereof or therein, (ii) the jurisdiction under the laws of
which the Lender is organized or in which it has its principal office or is
managed and controlled or any political subdivision or taxing authority
thereof or therein, or (iii) any jurisdiction in which the Lender's lending
office with respect to the Loans is located or any political subdivision or
taxing authority thereof or therein (such non-excluded taxes being called
"TAXES"). If any Taxes are required to be withheld from any amounts payable
to the Lender hereunder, or under the Note, the amount so payable to the
Lender shall be increased to the extent necessary to yield to the Lender
(after payment of all Taxes and free and clear of all liability in respect of
such Taxes) interest or any such other amounts payable hereunder at the rates
or in the amounts specified in this Agreement and the Note. Whenever any
Taxes are payable by the Companies, as promptly as possible thereafter, the
Companies shall send to the Lender, as the case may be, a certified copy of
an original official receipt showing payment thereof. If the Companies fails
to pay Taxes when due to the appropriate taxing authority or fails to remit
to the Lender the required receipts or other required documentary evidence,
the Companies shall indemnify the Lender for any incremental taxes, interest
or penalties that may become payable by the Lender as a result of any such
failure together with any expenses payable by the Lender in connection
therewith.
SECTION 3.10. PAYMENTS. All payments (including prepayments) to be
made by the Companies on account of principal, interest, fees shall be made
without set-off or counterclaim and shall be made to the Lender, at the Payment
Office of the Lender in Dollars in immediately available funds. The Lender may,
in its sole discretion, directly charge principal and interest payments due in
respect of the Loans to any Company's accounts at the Payment Office or other
office of the Lender. Except as otherwise provided in the definition of
"Interest Period", if any payment hereunder becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
SECTION 3.11. DISBURSEMENT OF LOANS. The Lender shall make each
Loan to be made by it hereunder available to the Companies at the Payment Office
by crediting the account of the Companies with such amount and in like funds;
provided, however, that if the proceeds of any Loan or any portion thereof are
to be used to prepay outstanding Loans, then the Lender shall apply such
proceeds for such purpose to extent necessary and credit the balance, if any, to
the Companies' account.
18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
extend the credit herein provided for, the Companies jointly and severally
represent and warrant to the Lender that:
SECTION 4.01. ORGANIZATION, POWERS. Each Company and each
Guarantor (a) is a corporation or limited liability company duly organized,
or formed, as applicable, validly existing and in good standing under the
laws of the state of its incorporation or formation, (b) has the power and
authority to own its properties and to carry on its business as now being
conducted, (c) is duly qualified to do business in every jurisdiction wherein
the conduct of its business or the ownership of its properties are such as to
require such qualification except those jurisdictions in which the failure to
be so qualified could not reasonably be expected to have a Material Adverse
Effect, and (d) has the power to execute, deliver and perform each of the
Loan Documents to which it is a party, including, without limitation, with
respect to the Companies, the power to obtain extensions of credit hereunder
and to execute and deliver the Note.
SECTION 4.02. AUTHORIZATION OF BORROWING, ENFORCEABLE
OBLIGATIONS. The execution, delivery and performance by the Companies of this
Agreement, and the other Loan Documents to which it is a party, the
borrowings and the other extensions of credit to the Companies hereunder, and
the execution, delivery and performance by each of ELM's Subsidiaries of the
Loan Documents to which such Subsidiary is a party, (a) have been duly
authorized by all requisite corporate, limited partnership or limited
liability action, (b) will not violate or require any consent (other than
consents as have been made or obtained and which are in full force and
effect) under (i) any provision of law applicable to ELM or any Subsidiary of
ELM, any rule or regulation of any applicable Governmental Authority, or the
Certificate of Incorporation or By-laws of ELM or the Certificate of
Incorporation, By-Laws, or other organizational documents, as applicable, of
any Subsidiary of ELM or (ii) any order of any court or other Governmental
Authority binding on ELM or any Subsidiary of ELM and (c) will not be in
conflict with, result in a breach of or constitute (with due notice and/or
lapse of time) a default under, any such indenture, agreement or other
instrument, or result in the creation or imposition of any Lien, of any
nature whatsoever upon any of the property or assets of ELM or any Subsidiary
of ELM other than as contemplated by this Agreement or the other Loan
Documents. This Agreement and each other Loan Document to which ELM or any of
its Subsidiaries is a party constitutes a legal, valid and binding obligation
of ELM and each such Subsidiary of ELM, as the case may be, enforceable
against ELM and each such Subsidiary of ELM, as the case may be, in
accordance with its terms.
SECTION 4.03. FINANCIAL CONDITION. (a) The Companies have
heretofore furnished to the Lender (i) the audited consolidated balance sheet
of ELM and its Subsidiaries and the related consolidated statement of income,
retained earnings and cash flow of ELM and its Subsidiaries, audited by
PricewaterhouseCoopers LLP, independent certified public accountants, for the
fiscal year ended September 30, 2000, and (ii) the unaudited consolidated
balance sheet of ELM and its Subsidiaries and the related consolidated
statements of income, retained earnings and cash flow of
19
ELM and its Subsidiaries for the nine month period ended September 30, 2001.
Such financial statements were prepared in conformity with Generally Accepted
Accounting Principles, applied on a consistent basis, and fairly present the
consolidated financial condition and consolidated results of operations of
ELM and its Subsidiaries as of the date of such financial statements and for
the periods to which they relate, except in the case of interim statements
for the absence of notes thereto and for normal year-end audit adjustments,
and since September 30, 2001, no Material Adverse Effect has occurred. The
Companies shall deliver to the Lender a certificate of the Chief Financial
Officer to that effect on the Closing Date. Other than obligations and
liabilities arising in the ordinary course of business since September 30,
2001, there are no material obligations or liabilities contingent or
otherwise, of ELM or any of its Subsidiaries which are not reflected or
disclosed on such audited and unaudited statements or in the footnotes
thereto and which are required to be disclosed on such financial statements,
other than obligations of ELM and its Subsidiaries incurred in the ordinary
course of business (which shall be deemed to exclude acquisitions by ELM or
any Subsidiary of ELM of the business or assets (including, without
limitation stock) of any Person other than the purchase of inventory in the
ordinary course of business).
(b) Each Company, jointly, and together with the
Guarantors, are Solvent and immediately after giving effect to each Loan and
each other extension of credit contemplated by this Agreement and the
execution of each Loan Document, will be Solvent.
SECTION 4.04. TAXES. All assessed deficiencies resulting from
Internal Revenue Service examinations of the federal income tax returns of
ELM or any of its Subsidiaries have been discharged or reserved against in
accordance with Generally Accepted Accounting Principles. ELM and each of its
Subsidiaries has filed or caused to be filed all federal, state and local tax
returns which are required to be filed, and has paid or has caused to be paid
all taxes required to be paid by it and all assessments received by it, to
the extent that such taxes have become due, except taxes which are being
contested in good faith and which are reserved against in accordance with
Generally Accepted Accounting Principles.
SECTION 4.05. TITLE TO PROPERTIES. ELM and each of its
Subsidiaries has good title to their respective properties and assets
reflected on the September 30, 2001 financial statements as owned by it,
except for such properties and assets as have been disposed of since the date
of such financial statements as no longer used or useful in the conduct of
their respective businesses or as have been disposed of in the ordinary
course of business (including inventory), and all such properties and assets
are free and clear of all Liens other than Permitted Liens.
SECTION 4.06. LITIGATION. (a) Except as set forth on Schedule
VI annexed hereto, there are no actions, suits or proceedings (whether or not
purportedly on behalf of ELM or any of its Subsidiaries) pending or, to the
knowledge of any Company, threatened against or affecting ELM or any of its
Subsidiaries at law or in equity or before or by any Governmental Authority,
which involve any of the transactions contemplated herein or which could
reasonably be expected to result in a Material Adverse Effect; and (b)
neither ELM nor any of its Subsidiaries is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any governmental
Authority
20
applicable to it or its properties which could reasonably be expected to
result in a Material Adverse Effect.
SECTION 4.07. AGREEMENTS. Neither ELM nor any of its
Subsidiaries is a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree or regulation which could reasonably be expected to have a
Material Adverse Effect. Neither ELM nor any of its Subsidiaries is in
default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
to which it is a party, which default could reasonably be expected to have a
Material Adverse Effect.
SECTION 4.08. COMPLIANCE WITH ERISA. Each Plan is in compliance
with ERISA; no Plan is insolvent or in reorganization, no Plan or Plans have
an Unfunded Current Liability, and no Plan has an accumulated or waived
funding deficiency; neither any Company, any Guarantor nor any ERISA
Affiliate has incurred any liability to or on account of a Plan pursuant to
Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA or expects to incur any
liability under any of the foregoing sections on account of the prior
termination of participation in or contributions to any such Plan; no
proceedings have been instituted to terminate any Plan; no condition exists
which could reasonably be expected to present a risk to any Company, any
Guarantor or any ERISA Affiliate of incurring a liability to or on account of
a Plan pursuant to the foregoing provisions of ERISA and the Code; no lien
imposed under the Code or ERISA on the assets of any Company, any Guarantor
or any ERISA Affiliates exists or is likely to arise on account of any Plan
and each Company and each Guarantor, as applicable, may terminate
contributions to any other employee benefit plans maintained by it without
incurring any material liability to any Person interested therein.
SECTION 4.09. FEDERAL RESERVE REGULATIONS; USE OF PROCEEDS. (a)
Neither ELM nor any of its Subsidiaries is engaged principally in, nor has as
one of its important activities, the business of extending credit for the
purpose of purchasing or carrying any "margin stock" (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States, as amended from time to time).
(b) No part of the proceeds of any Loan and no other extension
of credit hereunder will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, (i) to purchase or to carry margin
stock or to extend credit to others for the purpose of purchasing or carrying
margin stock, or to refund indebtedness originally incurred for such
purposes, or (ii) for any purpose which violates or is inconsistent with the
provisions of Regulation T, U, or X of the Board of Governors of the Federal
Reserve System.
(c) The proceeds of each Loan, and each other extension of
credit hereunder shall be used solely for the purposes permitted under
Section 3.02.
SECTION 4.10. APPROVALS. No registration with or other action by,
any Governmental Authority or any other Person is required in connection
with the execution, delivery and performance of this Agreement by the
Companies, or with the execution and delivery of each other Loan
21
Documents to which ELM or its Subsidiaries is a party or, with respect to the
Companies, the borrowings and each other extension of credit hereunder.
SECTION 4.11. SUBSIDIARIES. Attached hereto as Schedule I is a
correct and complete list of each of ELM's Subsidiaries as of the Closing
Date showing as to each Subsidiary, its name, the jurisdiction of its
incorporation, its shareholders or other owners of an interest in each
Subsidiary and the number of outstanding shares or other ownership interest
owned by each shareholder or other owner of an interest. Eon Technologies,
Inc., a Delaware corporation and Eon Labs Manufacturing of the Virgin
Islands, Inc., a Delaware corporation are each Inactive Subsidiaries.
SECTION 4.12. HAZARDOUS MATERIALS. ELM and each of its
Subsidiaries is in compliance in all material respects with all applicable
Environmental Laws and neither ELM nor any of its Subsidiaries has used
Hazardous Materials on or affecting any property now owned or occupied or
previously owned or occupied by ELM or its Subsidiaries in any manner which
violates in any material respect any applicable Environmental Law. To ELM's
knowledge, no prior owner of any such property or any tenant, subtenant,
prior tenant or prior subtenant have used Hazardous Materials on, from, or
affecting such property in any manner which violates any applicable
Environmental Law.
SECTION 4.13. INVESTMENT COMPANY ACT. Neither ELM nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.14. SECURITY AGREEMENT. Each Security Agreement executed
by each Company and each Guarantor shall, pursuant to its terms, constitute a
valid and continuing lien on and security interest in the collateral referred
to in such Security Agreement in favor of the Lender, which shall be prior to
all other Liens, claims and rights of all other Persons in such collateral
except for Permitted Liens.
SECTION 4.15. NO DEFAULT. No Default or Event of Default has
occurred and is continuing.
SECTION 4.16. MATERIAL CONTRACTS. All Material Contracts as of the
Closing Date are disclosed on Schedule V hereto. Each such Material Contract
is in full force and effect and is binding upon and enforceable against ELM
and each of its Subsidiaries, in each case, to the extent they are a party
thereto, and, to the Companies' knowledge, all other parties thereto in
accordance with its terms, and there exists no default in any material
respect under any Material Contract by ELM or any Subsidiary of ELM or, to
the Companies' knowledge, by any other party thereto which has not been fully
cured or waived.
SECTION 4.17. PERMITS AND LICENSES. ELM and each of its
Subsidiaries each has all material permits, licenses, certifications,
authorizations and approvals required for it lawfully to own and operate
their respective businesses including, without limitation, all permits,
licenses, certifications, authorizations and approvals of the Food and Drug
Administration, Consumer Product
22
Safety Commission, Drug Enforcement Agency, Federal Trade Commission, U.S.
Department of Agriculture, Occupation, Safety and Health Administration and
all other federal and state governmental authorities having jurisdiction over
the Company's business or any of the Company Subsidiaries' businesses.
SECTION 4.18. COMPLIANCE WITH LAW. ELM and each of its
Subsidiaries are each in compliance, with all material laws, rules,
regulations, orders and decrees which are applicable to ELM or any of its
Subsidiaries, or to any of their respective properties including, without
limitation, all law, rules, regulations, order and decrees of the Food and
Drug Administration, Consumer Product Safety Commission, Drug Enforcement
Agency, Federal Trade Commission, U.S. Department of Agriculture, Occupation,
Safety and Health Administration and all other federal and state governmental
authorities having jurisdiction over the business of ELM or any of ELM's
Subsidiaries' businesses.
SECTION 4.19. DISCLOSURE. Neither this Agreement, any other Loan
Document, nor any other document, certificate or written statement furnished
to the Lender by or on behalf of ELM or any of its Subsidiaries for use in
connection with the transactions contemplated by this Agreement contains any
untrue statement of material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
any material respect when taken as a whole and in light of the circumstances
in which they were made.
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. CONDITIONS TO INITIAL EXTENSION OF CREDIT. The
obligation of the Lender to make its initial Loan hereunder is subject to the
following conditions precedent:
(a) NOTE. On or prior to the Closing Date, the Lender shall
have received the Revolving Credit Note duly executed by the Companies.
(b) GUARANTY. On or prior to the Closing Date, the Lender shall
have received a Guaranty duly executed by the Guarantor.
(c) SECURITY AGREEMENT. On or prior to the Closing Date, the
Lender shall have received the Security Agreement duly executed by each
Company and Guarantor.
(d) OPINION OF COUNSEL. On or prior to the Closing Date, the
Lender shall have received a written opinion of counsel for the Companies and
the Guarantor dated the Closing Date and addressed to the Lender,
substantially in the form of Exhibit D attached hereto.
(e) SUPPORTING DOCUMENTS. On or prior to the Closing Date, the
Lender shall have received (i) a certificate of good standing for each
Company and each Guarantor from the secretary of state of the states of their
organizational jurisdiction dated as of a recent date, (ii) certified copies
of the charter documents of each Company and each Guarantor, (iii) a
certificate of an authorized
23
officer of each Company and each Guarantor dated the Closing Date and
certifying: (x) that the charter documents of such Person have not been amended
since the date of their certification (or if there has been any such amendment,
attaching a certified copy thereof); (y) that attached thereto is a true and
complete copy of resolutions adopted by the board of directors or other
governing body or Persons of each Company and by the board of directors or other
governing body or Persons of each Guarantor authorizing the execution, delivery
and performance of each Loan Document to which it is a party and, with respect
to each Company, the borrowings and other extensions of credit hereunder; and
(z) the incumbency and specimen signature of each officer of each Company and of
each officer or other authorized Person of each Guarantor executing each Loan
Document to which any Company or Guarantor is a party and any certificates or
instruments furnished pursuant hereto or thereto, and a certification by another
officer of each Company and each Guarantor as to the incumbency and signature of
such officer of each Company and each Guarantor; and (iv) such other documents
as the Lender may reasonably request.
(f) INSURANCE. On or prior to the Closing Date, the Lender shall
have received a certificate or certificates of insurance from an independent
insurance broker or brokers confirming the insurance required to be maintained
pursuant to Section 6.01 hereof, and evidence that the Lender has been named
loss payee with respect to, and to the extent of, each such policy of insurance
insuring the Collateral (as that term is defined in the Security Agreement) and
additional insured with respect to each policy of such insurance.
(g) ASSETS FREE FROM LIENS. Prior to the Closing Date, the Lender
shall have received UCC-1 financing statement, tax and judgment lien searches
evidencing that each Company's and each Guarantor's accounts receivable,
inventory, equipment and all other assets of each Company and each Guarantor are
free and clear of all Liens except Permitted Liens.
(h) FEES AND EXPENSES. On or prior to the Closing Date, the Lender
shall have received the fees payable on the Closing Date pursuant to Section
3.04(b) and reimbursement of expenses in accordance with Section 9.03(b).
(i) NO LITIGATION. Except as set forth on Schedule VI, there shall
exist no action, suit, investigation, litigation or proceeding affecting any
Company or any Guarantor pending or, to the knowledge of the Companies,
threatened before any court, governmental agency or arbiter that could
reasonably be expected to be adversely determined against such Company or such
Guarantor and, if so adversely determined, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(j) CONSENTS AND APPROVALS. All governmental and third party
consents and approvals necessary in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall have been
obtained (without the imposition of any conditions that are not acceptable to
the Lender) and shall remain in effect, and no law or regulation shall be
applicable in the judgment of the Lender that imposes materially adverse
conditions upon the transactions contemplated hereby.
24
(k) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the business, operations, properties, prospects or
condition (financial or otherwise) of any Company or any Guarantor since
September 30, 2001.
(1) MATERIAL CONTRACTS. The Lender shall have received a copy of
each Material Contract and shall be satisfied with the form and substance of
each thereof.
(m) DUE DILIGENCE. The Lender shall have completed its due
diligence with respect to each Company and each Guarantor including, without
limitation, bank checkings, trade checkings, customer checkings and litigation
checkings and the Leader shall be satisfied with the results thereof.
(n) OFFICER'S CERTIFICATE. On the Closing Date, the Lender shall
have received a certificate dated the Closing Date, executed by an Executive
Officer confirming compliance with the conditions set forth in clauses (a) and
(b) of Section 5.02.
(o) PROJECTIONS. The Lender shall have received, with respect to
ELM and its Subsidiaries on a consolidated basis, the management-prepared
consolidated financial projections (including balance sheets, income statements
and statements of cash flows) for fiscal year 2002, which statements and
projections shall have been prepared in good faith by the management of ELM
based on reasonable assumptions, and the Lender shall have been satisfied with
the form and substance thereof.
(p) FIELD AUDIT. Prior to the Closing Date, the Lender shall have
received the results of an audit of the personal property of each Company and
all related books and records, the results of which shall be satisfactory to the
Lender in all respects, all costs of such audit shall be for the account of such
Company and shall be paid on or prior to the Closing Date.
(q) THIRD PARTY WAIVERS. The Lender shall have received on or
prior to the Closing Date evidence of the mailing of mortgagee and/or landlord
notices, if any, as required pursuant to the Security Agreement.
(r) REGULATORY COMPLIANCE. The Lender shall have received such
evidence of compliance by ELM and its Subsidiaries with respect to the rules and
regulations of the FDA and other state or federal governmental authorities
having jurisdiction over the business of ELM or any of its Subsidiaries as the
Lender may reasonably request.
(s) MANAGEMENT LETTER. The Lender shall have received the
management letter, if any, prepared by PricewaterhouseCoopers, LLP in connection
with its audit of ELM's financial statements for the fiscal year ended September
30, 2000, which letter shall be in form and substance satisfactory to the
Lender.
(t) OTHER INFORMATION, DOCUMENTATION. The Lender shall have
received such other and further information and documentation as it may
reasonably require, including, but not limited to,
25
any information or documentation relating to compliance by ELM and each of its
Subsidiaries with the requirements of all Environmental Laws.
(u) COMPLETION OF PROCEEDINGS. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by the Loan Documents, shall be
reasonably satisfactory in form and substance to the Lender, and its counsel.
SECTION 5.02. CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligation
of the Lender to make each Loan hereunder, including, without limitation, the
initial Loan, is subject to the conditions precedent set forth in Section 5.01
and the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties by each Company pursuant to this Agreement and by each Company and
each Guarantor pursuant to the other Loan Documents to which each is a party
shall be true and correct in all material respects on and as of the Borrowing
Date with the same effect as though such representations and warranties had been
made on and as of such date unless such representation is as of a specific date,
in which case, as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on the Borrowing Date or will result after giving effect to
the Loan requested.
26
(c) PERMITTED ACQUISITIONS. In the event all or a portion of the
requested Revolving Credit Loan is to be used to fund an acquisition permitted
pursuant to Section 7.12, such acquisition shall constitute a "Permitted
Acquisition" and the Lender shall have received a certificate executed by an
Executive Officer of ELM to that effect.
Each borrowing hereunder shall constitute a representation and warranty of each
Company that the statements contained in clauses (a), (b), and (c) of Section
5.02. are true and correct on and as of the Borrowing Date as though such
representation and warranty had been made on and as of such date.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Companies, jointly and severally, covenant and agree with the
Lender that so long as the Commitment remains in effect, or any of the principal
of or interest on the Note or any other Obligations hereunder shall be unpaid it
will, and will cause each of ELM's Subsidiaries to:
SECTION 6.01. EXISTENCE, PROPERTIES, INSURANCE. Except with
respect to any Inactive Subsidiary, do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate, partnership or
limited liability company existence, as applicable, rights and franchises and
comply in all material respects with all laws applicable to it; at all times
maintain, preserve and protect all franchises and trade names and preserve all
of its property, in each case, used or useful in and material to the conduct of
its business and keep the same in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, replacements, betterments and improvements thereto so that the
business carried on in connection therewith may be properly and advantageously
conducted in the ordinary course at all times; and at all times maintain
insurance covering its assets and its businesses with financially sound and
reputable insurance companies or associations in such amounts and against such
risks (including, without limitation, credit, hazard, business interruption,
public liability and product liability) as are usually carried by companies
engaged in the same or similar business; provided, however, product liability
insurance shall be in an amount not less than $80,000,000 per claim and in the
aggregate except with respect to (a) phentermine, which shall be not less than
$35,000,000 per claim and in the aggregate, and (b) phenylpropanolamine, which
shall be not less than $75,000,000 per claim and in the aggregate, and which may
be "Supplemental Extended Reporting Policies" only. Each such policy of
insurance of each Company and the Guarantors shall name the Lender as (i) loss
payee, with respect to each such property and casualty policy, and credit
policy, and (ii) additional insured, with respect to each such liability policy
thereof, and shall provide for (A) with respect to each property and casualty
policy and credit policy, not less than ten (10) days' prior written notice to
the Lender of any modification or cancellation thereof and (B) with respect to
each liability policy, that the insurance company shall endeavor to notify the
Lender of any such modification or cancellation thereof. The Companies shall
provide to the Lender promptly upon receipt thereof evidence of the annual
renewal of each such policy and a copy of any notice of termination thereof.
SECTION 6.02. PAYMENT OF INDEBTEDNESS AND TAXES. (a) Pay all
indebtedness and obligations, now existing or hereafter arising, as and when due
and payable; provided, however, neither ELM nor any Subsidiary of ELM shall be
required to pay any such indebtedness or obligations so long as the same shall
be contested in good faith by appropriate proceedings and ELM
27
or such Subsidiary, as the case may be, shall have set aside on its books
adequate reserves determined in accordance with Generally Accepted Accounting
Principles with respect to the indebtedness or obligation so contested and
(b) pay and discharge or cause to be paid and discharged promptly all taxes,
assessments and government 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 neither ELM nor any Subsidiary of ELM shall
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 proceedings, and ELM or such
Subsidiary, as the case maybe, shall have set aside on its books adequate
reserves determined in accordance with Generally Accepted Accounting
Principles with respect to any such tax, assessment, charge, levy or claim so
contested; FURTHER, PROVIDED that, subject to the foregoing proviso, ELM and
each of its Subsidiaries will pay or cause to be paid all such taxes,
assessments, charges, levies or claims upon the commencement of proceedings
to foreclose any lien which has attached as security therefor.
SECTION 6.03. FINANCIAL STATEMENTS REPORTS, ETC. Furnish to the
Lender:
(a) as soon as available, but in any event within 120 days
after the end of each fiscal year of ELM, a copy of the audited consolidated
balance sheet of ELM and its Subsidiaries as of the end of such year and the
related audited consolidated statements of income, shareholders' equity and
cash flow for such year, setting forth in each case in comparative form the
respective figures as of the end of and for the previous fiscal year, and
accompanied by a report thereon of PricewaterhouseCoopers, LLP or other
independent certified public accountants of recognized standing selected by
ELM and satisfactory to the Lender (the "Auditor"), which report shall be
unqualified, setting forth in comparative form the respective figures as of
the end of and for the previous fiscal year;
(b) as soon as available, but in any event not later than 45
days after the end of each quarterly period of each fiscal year of ELM, a
copy of the unaudited interim consolidated balance sheet of ELM and its
Subsidiaries as of the end of each such quarter and the related unaudited
interim consolidated statements of income, shareholders equity and cash flow
for such quarter and the portion of the fiscal year through such date and
setting forth in each case in comparative form the respective figures for the
corresponding date and period in the previous fiscal year, in each case
prepared by the Chief Financial Officer in accordance with Generally Accepted
Accounting Principles, applied on a consistent basis (subject to normal
year-end audit adjustments and the absence of footnotes) and certified by the
Chief Financial Officer as presenting fairly the financial condition and
results of operations of ELM and its Subsidiaries for the date and period to
which they relate;
(c) as soon as available, but in any event not later than (i)
60 days after the end of each January and December of each fiscal year of ELM
and (h) 30 days after the end of any other month of each fiscal year of ELM,
a copy of the management prepared consolidated and consolidating profit and
loss statement, cash flow statement and balance sheet of ELM and its
Subsidiaries as of the end of each such month, in each case prepared by the
Chief Financial Officer
28
in accordance with Generally Accepted Accounting Principles, applied on a
consistent basis (subject to normal year-end audit adjustments and the
absence of footnotes) and certified the Chief Financial Officer as presenting
fairly the financial condition and results of operations of ELM and its
Subsidiaries for the date and period to which they relate;
(d) a certificate prepared and signed by the Chief Financial
Officer with each delivery required by (a), (b) and (c) as to whether or not,
as of the close of such preceding period and at all times during such
preceding period, ELM and each of its Subsidiaries, as the case may be, was
in compliance with all the provisions in this Agreement, showing computation
of financial covenants and quantitative negative covenants, and a certificate
prepared and signed by the Auditor with each delivery requested by clause (a)
as to whether or not, as of the close of the preceding period, the Companies
and the Guarantors were in compliance with Section 7.13 and if the Auditor or
Chief Financial Officer, as the case may be, shall have obtained knowledge of
any default in such compliance or notice of such default, it shall disclose
in such certificate such default or defaults or notice thereof and the nature
thereof, whether or not the same shall constitute a Default or an Event of
Default hereunder;
(e) at all times indicated in clause (a) above a copy of the
management letter, if any, prepared by the Auditor;
(f) if applicable, promptly after filing thereof, copies of all
regular and periodic financial information, proxy materials and other
information and reports which any Company or any of its Subsidiaries shall
file with the Securities and Exchange Commission;
(g) promptly after submission to any government or regulatory
agency, all documents and information furnished to such government or
regulatory agency other than such documents and information prepared in the
normal course of business and which could not reasonably be expected to
result in any materially adverse action to be taken by such agency;
(h) on the tenth Business Day of each calendar quarter a
schedule of Material Contracts in effect as of the last day of the preceding
calendar quarter;
(i) promptly, from time to time, such other information
regarding the operations, business affairs and condition (financial or
otherwise) of ELM or any of its Subsidiaries as the Lender may reasonably
request.
SECTION 6.04. BOOKS AND RECORDS; ACCESS TO PREMISES. Keep adequate
records and proper books of record and account in which complete entries will
be made in a manner to enable the preparation of financial statements in
accordance with Generally Accepted Accounting Principles, and which shall
reflect all financial transactions of ELM and each of its Subsidiaries. At
any time, and from time to time permit the Lender or any agents or
representatives thereof, to examine and make copies of and abstracts from the
books and records of such information which the Lender deems is necessary or
desirable (including, without limitation, the financial records of ELM and
its Subsidiaries) and to visit the properties of ELM or any of its
Subsidiaries and to discuss the affairs, finances and accounts of ELM or any
of its Subsidiaries with any of their respective executive officers or ELM's
independent accountants; at any time and from time to time (and in any
29
event not less than once per fiscal year), upon prior notice to the
Companies; permit the Lender or any agent or representative thereof, upon not
less than one Business Day's prior notice, to conduct field audits of any
Company's and the Guarantors' respective properties, all such costs and
expenses and charges in connection thereof to be paid by the Companies;
provided, however, so long as no Default or Event of Default shall have
occurred and be continuing, the Companies shall not be required to pay for
more than one such audit in any fiscal year.
SECTION 6.05. NOTICE OF ADVERSE CHANGE. Promptly notify the Lender
in writing of (a) any change in the business or the operations of ELM or its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect, and (b) any information which indicates that any financial statements
which are the subject of any representation contained in this Agreement, or
which are furnished to the Lender pursuant to this Agreement, fail, in any
material respect, to present fairly, as of the date thereof and for the
period covered thereby, the financial condition and results of operations
purported to be presented therein, disclosing the nature thereof.
SECTION 6.06. NOTICE OF DEFAULT. Promptly notify the Lender of any
Default or Event of Default which shall have occurred, which notice shall
include a written statement as to such occurrence, specifying the nature
thereof and the action (if any) which is proposed to be taken with respect
thereto.
SECTION 6.07. NOTICE OF LITIGATION. Promptly notify the Lender of
any action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency which, if adversely determined
against ELM or any Subsidiary of ELM on the basis of the allegations and
information set forth in the complaint or other notice of such action, suit
or proceeding, or in the amendments thereof, if any, could reasonably be
expected to have a Material Adverse Effect.
SECTION 6.08. NOTICE OF DEFAULT IN OTHER AGREEMENTS. Promptly
notify the Lender of any default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in
any agreement or instrument to which ELM or any Subsidiary of ELM is a party
(including, without limitation, any Material Contract) which default could
reasonably be expected to have a Material Adverse Effect.
SECTION 6.09. NOTICE OF ERISA EVENT. Promptly deliver to the
Lender a certificate of the Chief Financial Officer setting forth details as
to such occurrence and such action, if any, which any Company, a Guarantor or
an ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by such Company, such
Guarantor, such ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator, with respect thereto: that a Reportable Event has occurred
with respect to a Plan, that an accumulated funding deficiency has been
incurred or an application may be or has been made to the Secretary of the
Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan,
that a Plan has been or may be terminated, reorganized, partitioned or
declared insolvent under Title IV of ERISA, that one or more Plans have an
Unfunded Current Liability giving rise to a Lien under ERISA, that
proceedings may be or have been instituted to terminate a Plan, that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan, or that any Company, any Guarantor or any
ERISA Affiliate will or may incur
30
any liability (including any contingent or secondary liability) to or on
account of the termination of or withdrawal from a Plan under Section 4062,
4063, 4064, 4201 or 4204 of ERISA. The Companies will deliver to the Lender a
complete copy of the annual report (Form 5500) of each plan required to be
filed with the Internal Revenue Service. In addition to any certificates or
notices delivered to the Lender pursuant to the first sentence hereof, copies
of annual reports and any other notices received by any Company required to
be delivered to the Lender hereunder shall be delivered to the Lender no
later than ten days after the later of the date such report or notice has
been filed with the Internal Revenue Service or the PBGC, given to Plan
participants or received by any Company or any Guarantor.
SECTION 6.10. NOTICE OF ENVIRONMENTAL LAW VIOLATIONS. Promptly
notify the Lender of the receipt of any notice of an action, suit, and
proceeding before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or pending against
ELM or any Subsidiary of ELM relating to any alleged violation of any
Environmental Law which could reasonably be expected to have a Material
Adverse Effect.
SECTION 6.11. NOTICE REGARDING MATERIAL CONTRACTS. Promptly notify
the Lender of any termination, material amendment, material supplement or
other material modification of any Material Contract.
SECTION 6.12. NOTICE OF REGULATORY MATTERS. Promptly notify the
Lender of the receipt of any notice of, (a) an action, suit and proceeding
before any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, pending against ELM or any Subsidiary
of ELM relating to any alleged violation of any laws, rules or regulations
pertaining to the development, testing, manufacture, safety, effectiveness,
labeling, storage, record keeping, approval, advertising, sale, distribution,
or promotion of any of ELM's products or any Subsidiary of ELM's products or
those products manufactured by ELM or its Subsidiaries for third parties (b)
the withdrawal of any approval of ELM's or its Subsidiaries' products (c) the
seeking of an injunction by any such governmental authority with respect to
the manufacture, sale or distribution of any product of ELM or any
Subsidiary, (d) voluntary recall of any products of ELM or any Subsidiary of
ELM which, in each case of the foregoing, could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 6.13. COMPLIANCE WITH APPLICABLE LAWS. Comply with the
requirements of all material applicable laws, rules, regulations and orders
of any Governmental Authority, including, without limitation, the rules and
regulations of the Food and Drug Administration, Drug Enforcement Agency,
Consumer Product Safety Commission, Federal Trade Commission, U.S. Department
of Agriculture, Occupation, Safety and Health Administration and the other
federal and state governmental authorities having jurisdiction over ELM's
business or any of ELM's Subsidiaries' business.
SECTION 6.14. SUBSIDIARIES. Give the Lender prompt written notice
of the creation, establishment or acquisition, in any manner, of any
Subsidiary of ELM not existing on the Closing Date and cause each such
Subsidiary to execute a Guaranty and such Security Documents that the Lender
shall require, including, but not limited to, a Security Agreement,
concurrently with the creation, establishment or acquisition of such
Subsidiary and concurrently with the delivery of each
31
Security Document and Guaranty pursuant to this Section 6.14 provide to the
Lender the supporting documents identified in clauses (i), (ii), and (iii) of
Section 5.01(e) in each case with respect to such Subsidiary; together with a
favorable written opinion of counsel to such Subsidiary addressed to the Lender,
in the form attached hereto as Exhibit D with respect to such Subsidiary and
with respect to the documents required to be executed by such Subsidiary
pursuant to this Section 6.14.
SECTION 6.15. ENVIRONMENTAL LAWS. Comply in all material respects with
the requirements of all Environmental Laws, provide to the Lender all
documentation in connection with such compliance that the Lender may reasonably
request, and defend, indemnify, and hold harmless the Lender and its respective
employees, agents, officers, and directors, from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, or expenses
of whatever kind or nature, known or unknown, contingent or otherwise, arising
out of, or in any way related to, (a) the presence, disposal, or release of any
Hazardous Materials on any property at any time owned or occupied by ELM or any
Subsidiary of ELM; (b) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to such Hazardous
Materials; (c) any lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Materials, and/or (d) any violation
of applicable Environmental Laws, including, without limitation, reasonable
attorney and consultant fees, investigation and laboratory fees, court costs,
and litigation expenses.
ARTICLE VII
NEGATIVE COVENANTS
The Companies, jointly and severally, covenant and agree with the
Lender that so long as the Commitment remains in effect or any of the principal
of or interest on any Note or any other Obligations hereunder shall be unpaid,
it will not, and will not cause or permit any Subsidiary of ELM, directly or
indirectly, to:
SECTION 7.01. LIENS. Incur, create, assume or suffer to exist any Lien
on any of their respective assets now or hereafter owned, other than:
(a) Liens existing on the date hereof as set forth on Schedule II
attached hereto including any renewals or extensions thereof; provided
that no such Lien is extended to cover any additional property (other than
after acquired property to the extent such extension is identified on
Schedule II) and that the amount of Indebtedness secured thereby is not
increased;
(b) Liens for taxes, assessments or other governmental charges or
levies not yet delinquent or which are being contested in good faith by
appropriate proceedings, provided, however, that adequate reserves with respect
thereto are maintained on the books of ELM or its Subsidiaries in accordance
with Generally Accepted Accounting Principles;
(c) Carriers', warehousemens', mechanics', suppliers' or other
like Liens arising in the ordinary course of business and not overdue for a
period of more than 45 days or which are being contested in good faith by
appropriate proceedings in a manner which will not jeopardize or diminish the
interest of the Lender in any of the collateral subject to the Security
Documents;
32
(d) Liens incurred or deposits to secure the performance of
tenders, bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety, performance and appeal bonds, and other
obligations of similar nature incurred in the ordinary course of business;
(e) Easements, rights of way, restrictions and other similar
charges or encumbrances which in the aggregate do not interfere in any material
respect with the occupation, use and enjoyment by ELM or any of its Subsidiaries
of the property or assets encumbered thereby in the normal course of their
respective business or materially impair the value of the property subject
thereto;
(f) Deposits under workmen's compensation, unemployment insurance
and social security laws;
(g) Liens granted to the Lender;
(h) Purchase money liens for fixed assets (i.e., machinery,
equipment, furniture, fixtures, and leasehold improvements) including
obligations with respect to Capital Leases; provided in each case (i) no
Default or Event of Default shall have occurred and be continuing or shall
occur after giving effect to such lien, (ii) such purchase money lien does
not exceed 100% of the purchase price of, and encumbers only, the property
acquired, and (iii) such purchase money Lien does not secure any
Indebtedness other than in respect of the purchase price of the asset
acquired or any refinancing of such Indebtedness permitted pursuant to
Section 7.02(f);
(i) Liens with respect to Eon Pharma LLC's real property and
improvements located in Wilson, North Carolina securing the indebtedness
described in Section 7.02(e) below;
(j) Liens granted to secure Indebtedness incurred in connection
with a Permitted Acquisition as permitted pursuant to Section 7.02(i) below
provided such Liens attach solely to real property and/or personal property
(other than accounts receivable and inventory) acquired by any Company or any
Guarantor pursuant to such Permitted Acquisition.
SECTION 7.02. INDEBTEDNESS. Incur, create, assume or suffer to exist
or otherwise become liable in respect of any Indebtedness, other than:
(a) Indebtedness incurred prior to the date hereof as described in
Schedule III attached hereto, including any renewals or extensions thereof;
provided such renewal or extension does not result in an increase in the
aggregate principal amount of such Indebtedness;
(b) Indebtedness to the Lender;
(c) Indebtedness for trade payables incurred in the ordinary
course of business and payable in accordance with customary trade practices;
(d) Indebtedness consisting of guarantees permitted pursuant to
Section 7.03;
33
(e) Indebtedness to a bank or other financial institution secured
solely by liens permitted pursuant to Section 7.01(i) above provided such
indebtedness shall (i) not exceed $20,000,000, (ii) be term indebtedness, and
(iii) shall require mortgage amortization over a period of not less than five
(5) years;
(f) Indebtedness secured by purchase money liens (including any
refinancing thereof provided the principal amount of such Indebtedness does not
exceed the principal amount of such Indebtedness immediately prior to such
refinancing) as permitted under Section 7.01(h); provided such Indebtedness
incurred in any fiscal year of ELM shall not exceed $1,000,000, and, further,
provided no Default or Event of Default shall have occurred and be continuing
or would occur after giving effect to the incurrence of such Indebtedness;
(g) Indebtedness arising under Capital Leases; provided that the
aggregate amount of such Indebtedness incurred in any fiscal year of ELM
shall not exceed $500,000;
(h) Indebtedness owing by any Company to any other Company or from
any Company to any Guarantor or from any Guarantor to any Guarantor or from the
Guarantor to any Company; provided the aggregate of such indebtedness of the
Guarantors to the Companies shall not exceed $5,000,000; and
(i) Indebtedness to any seller of assets, stock or other equity
interests in connection with a "Permitted Acquisition", provided (i)
Indebtedness evidences all or a portion of the purchase price for such assets,
stock or equity interests and (ii) the aggregate amount of all such Indebtedness
during the term of this Agreement shall not exceed $5,000,000.
SECTION 7.03. GUARANTIES. Guarantee, endorse, become surety for, or
otherwise in any way become or be responsible for the Indebtedness or
obligations of any Person, whether by agreement to maintain working capital or
equity capital or otherwise maintain the net worth or solvency of any Person or
by agreement to purchase the Indebtedness of any other Person, or agreement for
the furnishing of funds, directly or indirectly, through the purchase of goods,
supplies or services for the purpose of discharging the Indebtedness of any
other Person or otherwise, or enter into or be a party to any contract for the
purchase of merchandise, materials, supplies or other property if such contract
provides that payment for such merchandise, materials, supplies or other
property shall be made regardless of whether delivery of such merchandise,
supplies or other property is ever made or tendered except:
(a) guaranties executed prior to the date hereof as described on
Schedule IV attached hereto but not including any renewals or extension thereof;
(b) endorsements of negotiable instruments for collection or
deposit in the ordinary course of business;
(c) guaranties of any Indebtedness under this Agreement or any
other Loan Document;
34
(d) guaranties by any Company of any Indebtedness permitted
pursuant to Section 7.02 hereof of any Subsidiary of ELM or guaranties by any
Subsidiary of ELM of such Indebtedness of any Company or any other Subsidiary of
ELM.
SECTION 7.04. SALE OF ASSETS. Sell, assign, lease, transfer or
otherwise dispose of any of their now owned or hereafter acquired respective
properties and assets, whether or not pursuant to an order of a federal agency
or commission, except for (a) the sale of inventory disposed of in the ordinary
course of business and (b) so long as no Event of Default shall have occurred
and is continuing or would occur as a result thereof, the sale or other
disposition of properties or assets no longer used or useful in the conduct of
their respective businesses.
SECTION 7.05. SALES OF RECEIVABLES. Sell, transfer, discount or
otherwise dispose of notes, accounts receivable or other obligations owing to
ELM or any of its Subsidiaries, with or without recourse, except for collection
in the ordinary course of business.
SECTION 7.06. LOANS AND INVESTMENTS. Make or commit to make any
advance, loan, extension of credit, or capital contribution to, or purchase or
hold beneficially any stock or other securities, or evidence of Indebtedness of,
purchase or acquire all or a substantial part of the assets of, make or permit
to exist any interest whatsoever in, any other Person except for (a) the
ownership of stock of any Subsidiaries existing as of the Closing Date, (b)
Eligible Investments, (c) Permitted Acquisitions, (d) investments, loans or
advances by any Guarantor in any Company or in any other Guarantor (e)
investments, loans or advances by any Company in any other Company or by any
Company in any Guarantor provided the aggregate amount of all such investments,
loans and advances by the Companies outstanding in any Guarantor shall not
exceed $5,000,000 at any time, (f) promissory notes issued by employees of any
Company or any Guarantor in connection with the exercise of options to acquire
stock of any Company or any Guarantor, (g) promissory notes accepted by the
Company or any Guarantor in settlement of disputed accounts with third parties,
(h) loans to Hexal Pharmaceuticals, Inc. by ELM prior to the date hereof in the
principal amount of $10,000,000, (i) loans and advances constituting Permitted
Hexal Fundings and (j) loans to Eon Labs Manufacturing of the Virgin Islands,
Inc. in an aggregate amount not to exceed $100,000 in any fiscal year, the
proceeds of which shall be used for maintaining the real property owned by such
entity and expenses incidental to the disposition thereof
SECTION 7.07. NATURE OF BUSINESS. Change or alter, in any material
respect, the nature of its business from the nature of the business engaged in
by it on the date hereof.
SECTION 7.08. SALE AND LEASEBACK. Enter into any arrangement, directly
or indirectly, with any Person whereby it shall sell or transfer any property,
whether real or personal, used or useful in its business, whether now owned or
hereafter acquired, of it or any of its Subsidiaries, if at the time of such
sale or disposition it intends to lease or otherwise acquire the right to use or
possess (except by purchase) such property or like property for a substantially
similar purpose.
SECTION 7.09. FEDERAL RESERVE REGULATIONS. Permit any Loan or the
proceeds of any Loan to be used for any purpose which violates or is
inconsistent with the provisions of Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
35
SECTION 7.10. ACCOUNTING POLICIES AND PROCEDURES. Permit any
change in the accounting policies and procedures of the Company or any of its
Subsidiaries, including a change in fiscal year (other than a change of the
fiscal year end to December 31), provided, however, that any policy or
procedure required to be changed by the Financial Accounting Standards Board
(or other board or committee thereof) in order to comply with Generally
Accepted Accounting Principles may be so changed.
SECTION 7.11. HAZARDOUS MATERIALS. Cause or permit any of its
properties or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce or process Hazardous
Materials, except in compliance in all material respects with all applicable
federal, state and local laws or regulations, or cause or permit, as a
result of any intentional or negligent act or omission (provided it has a
duty to act) on the part of ELM or any of its Subsidiaries, a release of
Hazardous Materials onto such Property or asset or onto any other property in
violation of any such laws or regulations.
SECTION 7.12. LIMITATIONS ON FUNDAMENTAL CHANGES. Merge or
consolidate with, or sell, assign, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of
its assets (whether now or hereafter acquired) to, any Person, acquire all of
the stock or all or substantially all of the assets or the business of any
Person (other than pursuant to a Permitted Acquisition) or, except with
respect to any Inactive Subsidiary, liquidate, wind up or dissolve or suffer
any liquidation or dissolution provided, however, (a) any Guarantor may merge
or consolidate with and into any other Guarantor or any Company provided such
Company is the surviving corporation, and (b) a Company may merge with the
other Company, (c) any Inactive Subsidiary may merge with and into any
Company or any Guarantor provided such Company or Guarantor is the surviving
corporation and (d) Eon Labs Manufacturing of the Virgin Islands, Inc. may
merge into any affiliate of the Company.
SECTION 7.13. FINANCIAL CONDITION COVENANTS.
(a) LEVERAGE RATIO. Permit the ratio of Consolidated Funded
Debt to Consolidated EBITDA at the end of any fiscal quarter to be greater
than the ratio set forth opposite the applicable period:
PERIOD MAXIMUM RATIO
------ --------------
Closing Date through December 30, 2002 1.50:1.00
December 31, 2002 and thereafter 1.25:1.00
(b) CONSOLIDATED DEBT SERVICE COVERAGE RATIO. Permit the
Consolidated Debt Service Coverage Ratio at the end of any fiscal quarter to
be less than the ratio set forth opposite the applicable period:
PERIOD MINIMUM RATIO
------ --------------
Closing Date through March 30, 2002 1.00:1.00
March 31, 2002 through December 30, 2002 1.05:1.00
36
December 31, 2002 through December 30, 2003 1.75:1.00
December 31, 2003 and thereafter 2.00:1.00
(c) ASSET COVERAGE RATIO. Permit the ratio of (i) the sum of
(A) the net value of all trade accounts receivable, plus (B) the net value of
all inventory, each with respect to ELM and its Subsidiaries on a
consolidated basis determined consistent with the determination thereof on
the financial statements of ELM delivered pursuant to Sections 6.03(a) and
6.03(b), to (ii) the outstanding principal amount of the Revolving Credit
Loans, to be less than 2.15:1.00, at any time.
SECTION 7.14. DIVIDENDS. Declare any dividend on, or make any
payment on account of, or set apart assets for a sinking or other analogous
fund for the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of stock of ELM or any of its
Subsidiaries or any warrant to purchase any class of stock of ELM or any of
its Subsidiaries, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in
cash, securities or property or in obligations of ELM or any of its
Subsidiaries or in any combination thereof, or permit any Subsidiary to make
any payment on account of, or purchase or otherwise acquire, any shares of
any class of the stock of ELM or any other Subsidiary of ELM not wholly owned
directly or indirectly by ELM or any warrant to purchase any class of stock
of ELM or any other Subsidiary of ELM from any Person. Notwithstanding the
foregoing, (a) ELM may declare dividends constituting Permitted Hexal
Fundings, (b) any wholly-owned Subsidiary of ELM may declare and pay
dividends to its shareholders, and (c) provided no Default or Event of
Default shall have occurred and be continuing or would occur after giving
effect thereto, ELM may repurchase stock from its employees, consultants and
directors from time to time; provided, however, the aggregate purchase price
of all stock repurchased from employees, consultants and directors during the
term of this Agreement shall not exceed $7,500,000.
SECTION 7.15. TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, the purchase, sale, or exchange
of property or the rendering of any service, with any Affiliate, except in
the ordinary course of, and pursuant to the reasonable requirements of, ELM's
or any of its Subsidiaries' business and upon fair and reasonable terms no
less favorable to ELM or such Subsidiary than they would obtain in a
comparable arms-length transaction with a Person not an Affiliate; provided
that, so long as no Default or Event of Default shall have occurred and be
continuing, ELM and any of its Subsidiaries may pay royalties and customary
research and development costs and expenses to Hexal AG and Hexal
Pharmaceuticals, Inc. and any other Affiliate of ELM, as applicable.
SECTION 7.16. IMPAIRMENT OF SECURITY INTEREST. Take or omit to
take any action which could reasonably be expected to have the result of
impairing the security interest in any property subject to a security
interest in favor of the Lender or grant to any person any interest
whatsoever in any property which is subject to a security interest in favor
of the Lender.
SECTION 7.17. INACTIVE SUBSIDIARIES. Permit Eon Technologies, Inc.
or Eon Labs Manufacturing of the Virgin Islands, Inc. to cease to be an
Inactive Subsidiary except as a result of or dissolution thereof as permitted
hereby.
37
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. EVENTS OF DEFAULT. In the case of the happening of
any of the following events (each an "Event of Default"):
(a) failure to pay (i) the principal of any Loan, or any fee or
other amount (other than interest on any Loan) due under this Agreement, as
and when due and payable or (ii) within two days after the same becomes due
and payable any interest on any Loan;
(b) default shall be made in the due observance or performance
of (i) any covenant or agreement set forth in Article VI hereof provided if
such default is capable of cure, such default shall have continued unremedied
for a period of 15 days or (ii) any other covenant, condition or agreement of
any Company or any of Subsidiaries to be performed pursuant to this Agreement
or any other Loan Document (other than those specified in clause (a) of this
Section 8.01);
(c) any representation or warranty made or deemed made in this
Agreement or any other Loan Document shall prove to be false or misleading in
any material respect when made or given or when deemed made or given;
(d) any report, certificate, financial statement or other
instrument furnished in connection with this Agreement or any other Loan
Document or the borrowings hereunder, shall prove to be false or misleading
in any material respect when made or given or when deemed made or given;
(e) default in the performance or compliance in respect of any
agreement or condition relating to any Indebtedness of ELM or any of its
Subsidiaries in excess of $500,000 individually or in the aggregate (other
than the Note) if the effect of such default is to accelerate the maturity of
such Indebtedness or to permit the holder or obligee thereof (or a trustee,
on behalf of such holder or obligee) to cause such Indebtedness to become due
prior to the stated maturity thereof, or, any such Indebtedness shall not be
paid when due;
(f) ELM or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11 of
the United States Code or any other federal or state bankruptcy, insolvency
or similar law, (ii) consent to the institution of, or fail to controvert in
a timely and appropriate manner, any such proceeding or the filing of any
such petition, (iii) apply for or consent to the employment of a receiver,
trustee, custodian, sequestrator or similar official for ELM or any of its
Subsidiaries or for a substantial part of its property; (iv) file an answer
admitting the material allegations of a petition filed against it in such
proceeding, (v) make a general assignment for the benefit of creditors, (vi)
take corporate action for the purpose of effecting any of the foregoing; or
(vii) become unable or admit in writing its inability or fail generally to
pay its debts as they become due;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (i) relief in respect of ELM or any of its Subsidiaries or of a
substantial part of their respective property, under Title 11 of the United
States
38
Code or any other federal or state bankruptcy insolvency or similar law, (ii)
the appointment of a receiver, trustee, custodian, sequestrator or similar
official for ELM or any of its Subsidiaries or for a substantial part of
their property, or (iii) the winding-up or liquidation of ELM or any of its
Subsidiaries and such proceeding or petition shall continue undismissed for
60 days or an order or decree approving or ordering any of the foregoing
shall continue unstayed and in effect for 60 days;
(h) one or more orders, judgments or decrees for the payment of
money in excess of $500,000 in the aggregate shall be rendered against ELM or
any of its Subsidiaries and the same shall not have been paid in accordance
with such judgment, order or decree or settlement and either (i) an
enforcement proceeding shall have been commenced by any creditor upon such
judgment, order or decree, or (ii) there shall have been a period of thirty
(30) days during which a stay of enforcement of such judgment, order or
decree, by reason of pending appeal or otherwise, was not in effect;
(i) any Plan shall fail to maintain the minimum funding
standard required for any Plan year or part thereof or a waiver of such
standard or extension of any amortization period is applied for or granted
under Section 412 of the Code, any Plan is terminated by ELM, any of its
subsidiaries, or any ERISA Affiliate or the subject of termination
proceedings under ERISA any Plan shall have an Unfunded Current Liability, a
Reportable Event shall have occurred with respect to a Plan or ELM, any of
its Subsidiaries or any ERISA Affiliate shall have incurred a liability to or
on account of a Plan under Section 515, 4062, 4063, 4201 or 4204 of ERISA,
and there shall result from any such event or events the imposition of a lien
upon the assets of ELM or any of its Subsidiaries or the granting of a
security interest on such assets, or a liability to the PBGC or a Plan or a
trustee appointed under ERISA or a penalty under Section 4971 of the Code;
(j) any material provision of any Loan Document shall for any
reason cease to be in full force and effect in accordance with its terms or
ELM or any of its Subsidiaries shall so assert in writing;
(k) a Change of Control shall have occurred;
(l) any Material Adverse Effect shall have occurred;
(m) any of the Liens purported to be granted pursuant to any
Security Document shall fail or cease for any reason to be legal, valid and
enforceable liens on the collateral purported to be covered thereby or shall
fail or cease to have the priority purported to BE created thereby;
(n) one or more orders, judgments or decrees for the payment of
money in excess of $10,000,000 in the aggregate shall be rendered against ELM
or any of its Subsidiaries; or
(o) the Food and Drug Administration, Drug Enforcement Agency,
Consumer Product Safety Commission, Federal Trade Commission, U.S. Department
of Agriculture, Occupation, Safety and Health Administration, or any other
state or governmental agency having jurisdiction over the business of ELM or
any of the Subsidiaries' businesses shall take any action (including without
limitation, any recall of product, or any seizure of assets) and such action
could reasonably be expected to have a Material Adverse Effect;
39
then, at any time thereafter during the continuance of any such event, the
Lender may, in its sole discretion, by written or telephonic notice to the
Companies, take either or both of the following actions, at the same or
different times, (a) terminate the Commitment and (b) declare (i) the Note,
both as to principal and interest, and (ii) all other Obligations, to be
forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Note to the contrary notwithstanding; PROVIDED,
HOWEVER, that if an event specified in Section 8.01(f) or (g) shall have
occurred, the Commitment shall automatically terminate and interest,
principal and amounts referred to in the preceding clauses (i) and (ii) shall
be immediately due and payable without presentment, demand, protest, or other
notice of any kind, all of which are expressly waived, anything contained
herein or in the Note to the contrary notwithstanding.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including
telecopy), and unless otherwise expressly provided herein, shall be
conclusively deemed to have been received by a party hereto and to be
effective on the day on which delivered by hand to such party or one Business
Day after being sent by overnight mail to the address set forth below, or, in
the case of telecopy notice, when acknowledged as received, or if sent by
registered or certified mail, three (3) Business Days after the day on which
mailed in the United States, addressed to such party at such address:
(a) if to the Lender, at
JPMorgan Chase Bank
▇▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Relationship Manager for Eon Labs
Manufacturing, Inc.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Companies, at
Eon Labs Manufacturing, Inc.
▇▇▇-▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
40
- and -
(c) as to each such party at such other address as such party
shall have designated to the other in a written notice complying as to
delivery with the provisions of this Section 9.01.
SECTION 9.02. EFFECTIVENESS; SURVIVAL. This Agreement shall become
effective on the date on which all parties hereto shall have signed a
counterpart copy hereof and shall have delivered the same to the Lender. All
representations and warranties made herein and in the other Loan Documents
and in the certificates delivered pursuant hereto or thereto shall survive
the making by the Lender of the Loans as herein contemplated and the
execution and delivery to the Lender of the Note evidencing the Loans and
shall continue in full force and effect so long as the Obligations hereunder
are outstanding and unpaid and the Commitment is in effect. The obligations
of the Companies pursuant to Section 3.07, Section 3.08, Section 3.10 and
Section 9.03 shall survive termination of this Agreement and payment of the
Obligations.
SECTION 9.03. EXPENSES. The Companies agree, jointly and severally,
(a) to indemnify, defend and hold harmless the Lender and its officers,
directors, employees, and affiliates (each, an "indemnified person") from and
against any and all losses, claims, damages, liabilities or judgments to
which any such indemnified person may be subject and arising out of or in
connection with the Loan Documents, the financings contemplated hereby, the
use of any proceeds of such financings or any related transaction or any
claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any of such indemnified persons is a party thereto,
and to reimburse each of such indemnified persons upon demand for any
reasonable, legal or other expenses incurred in connection with the
investigation or defending any of the foregoing; provided that the foregoing
indemnity will not, as to any indemnified person, apply to losses, claims,
damages, liabilities, judgments or related expenses to the extent arising
from the wilful misconduct or gross negligence of such indemnified person,
(b) to pay or reimburse the Lender for all its out-of-pocket costs and
expenses incurred in connection with the preparation and execution of and any
amendment, supplement or modification to this Agreement, the Note any other
Loan Documents, and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including without limitation, the reasonable fees and disbursements
of ▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C., counsel to the Lender, and (c) to pay or reimburse
the Lender for all their costs and expenses incurred in connection with the
enforcement and preservation of any rights under this Agreement, the Note,
the other Loan Documents, and any other documents prepared in connection
herewith or therewith, including, without limitation, the reasonable fees and
disbursements of counsel (including, without limitation, in-house counsel) to
the Lender, including all such out-of-pocket expenses incurred during any
work-out, restructuring or negotiations in respect of the Obligations.
SECTION 9.04. SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) This Agreement shall be binding upon and inure to the
benefit of the Companies, the Lender, all future holders of the Note and
their respective successors and assigns, except that no Company may assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Lender.
41
(b) The Lender reserves the right to sell participations in or
to sell and assign its rights, duties or obligations with respect to the
Loans or the Commitment to such banks, lending institutions or other
financial institutions as it may choose and without the consent of the
Companies; provided so long as no Default or Event of Default shall have
occurred and be continuing, each assignment of the Loan and Commitment shall
be in the minimum amount of $5,000,000 per assignee. The Lender may furnish
any information concerning ELM or any of its Subsidiaries in its possession
from time to time to any assignee or participant (or proposed assignee or
participant). The Lender may at any time pledge or assign or grant a security
interest in all or any part of its rights under this Agreement and its Note
to a Federal Reserve Bank, provided that no such assignment shall release the
transferor Lender from its Commitment or its obligations hereunder or
substitute any such pledgee or assignee for the Lender as a party to this
Agreement.
SECTION 9.05. NO WAIVER; CUMULATIVE REMEDIES. Neither any failure
nor any delay on the part of the Lender in exercising any right, power or
privilege hereunder or under any Note or any other Loan Document shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of any other right, power or
privilege. The rights, remedies, powers and privileges herein provided or
provided in the other Loan Documents are cumulative and not exclusive of any
rights, remedies powers and privileges provided by law.
SECTION 9.06. APPLICABLE LAW. THIS AGREEMENT AND THE NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.
SECTION 9.07. SUBMISSION TO JURISDICTION; JURY WAIVER. EACH COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT
IN THE STATE OF NEW YORK, COUNTY OF NEW YORK OR COUNTY OF QUEENS IN ANY
ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH COMPANY HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS
A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH FEDERAL OR STATE
COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO HEREIN OR THEREIN OR THE SUBJECT MATTER HEREOF THEREOF MAY NOT
BE LITIGATED IN OR BY SUCH FEDERAL OR STATE COURTS. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH COMPANY AGREES NOT TO ASSERT ANY COUNTERCLAIM IN ANY
SUCH SUIT, ACTION OR PROCEEDING. EACH COMPANY AGREES THAT SERVICE OF PROCESS
MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR
NOTICES SET FORTH IN THIS AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF
NEW YORK. EACH PARTY HERETO WAIVES ANY RIGHT IT MAY
42
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY
OTHER LOAN DOCUMENT.
SECTION 9.08. SEVERABILITY. In case any one or more of the
provisions contained in this Agreement, any Note or any other Loan Document
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby.
SECTION 9.09. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, the Lender and, to the extent permitted by
applicable law, each of its Affiliates are hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the
Lender or any Affiliate of the Lender to or for the credit or the account of
any Company against any and all of the Obligations of the Companies,
irrespective of whether or not the Lender shall have made any demand under
this Agreement or any Note and although such obligations may be unmatured.
The rights of the Lender and each Affiliate of the Lender under this Section
9.09 are in addition to other rights and remedies (including, without
limitation, other rights of set off) which they may have.
SECTION 9.10. HEADINGS. Section headings used herein are for
convenience of reference only and are not to affect the construction of or be
taken into consideration in interpreting this Agreement.
SECTION 9.11. MODIFICATION OF AGREEMENT. No modification, amendment
or waiver of any provision of this Agreement or any Loan Document, nor
consent to any departure by any Company or Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the
Lender and 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 any
Company or Guarantor in any case shall entitle any Company or Guarantor, as
the case may be, to any other or further notice or demand in the same similar
or other circumstances.
SECTION 9.12. CONSTRUCTION. This Agreement is the result of
negotiations between, and has been reviewed by, each of the Companies, the
Lender and their respective counsel. Accordingly, this Agreement shall be
deemed to be the product of each party hereto, and no ambiguity shall be
construed in favor of or against any Company or the Lender.
SECTION 9.13. CONFIDENTIALITY. The Lender agrees that it will not
disclose without the prior consent of the Companies (other than to affiliates
of the Lender and its directors, employees, auditors, counsel or other
professional advisors and their respective counsel who are advised of the
need, and have agreed, to maintain the confidentiality thereof)
(collectively, "Representatives") any Confidential Information (as defined
below) with respect to ELM or any of its Subsidiaries which is furnished by
or on behalf of any Company; provided that the Lender may disclose any such
information (a) as may be required or appropriate (i) in any report,
statement or testimony submitted to any municipal, state of federal or other
governmental regulatory body having or claiming to have jurisdiction over the
Lender or to the Federal Reserve Board or the Federal
43
Deposit Insurance Corporation or similar organizations (whether in the United
States or elsewhere) or their successors or (ii) in connection with any
request or requirement of any such regulatory body; (b) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation; (c) to comply with any law, order, regulation or ruling
applicable to the Lender; and (d) to any prospective transferee in connection
with any contemplated transfer of any of the Notes or any interest therein by
the Lender; PROVIDED that such prospective transferee agrees to be bound by
this Section 9.13 to the same extent as the Lender. As used herein
"Confidential Information" shall mean information with respect to ELM or any
of its Subsidiaries which is not generally available to the public other than
such information which after the date hereof becomes generally available to
the public through no fault or action by the Lender or its Representatives or
becomes available to the Lender on a nonconfidential basis from a source other
than any Company which to the Lender's knowledge is not prohibited from
disclosing such information by any contractual, legal or fiduciary obligation
owed to any Company.
SECTION 9.14. JOINT AND SEVERAL OBLIGATIONS.
(A) BENEFITS. THE COMPANIES ACKNOWLEDGE AND AGREE THAT THE
LOANS WILL DIRECTLY OR INDIRECTLY BENEFIT EACH COMPANY HEREUNDER SEVERALLY,
AND ALL OF THEM JOINTLY, REGARDLESS OF THE FACT NO COMPANY RECEIVES ALL OR
PART OF THE PROCEEDS OF ANY OF THE LOANS.
(B) ACCEPTANCE OF JOINT AND SEVERAL LIABILITY. EACH OF THE
COMPANIES IS ACCEPTING JOINT AND SEVERAL LIABILITY HEREUNDER AND UNDER THE
OTHER LOAN DOCUMENTS IN CONSIDERATION OF THE FINANCIAL ACCOMMODATIONS TO BE
PROVIDED BY THE LENDER UNDER THIS AGREEMENT, FOR THE MUTUAL BENEFIT, DIRECTLY
AND INDIRECTLY, OF EACH OF THE COMPANIES AND IN CONSIDERATION OF THE
UNDERTAKINGS OF EACH OTHER COMPANY TO ACCEPT JOINT AND SEVERAL LIABILITY FOR
THE OBLIGATIONS.
(C) PAYMENT AND PERFORMANCE. EACH OF THE COMPANIES, JOINTLY AND
SEVERALLY, HEREBY IRREVOCABLY AND UNCONDITIONALLY ACCEPTS, NOT MERELY AS A
SURETY BUT ALSO AS A CO-DEBTOR, JOINT AND SEVERAL LIABILITY WITH THE OTHER
COMPANY, WITH RESPECT TO THE PAYMENT AND PERFORMANCE OF ALL OF THE
OBLIGATIONS, IT BEING THE INTENTION OF THE PARTIES HERETO THAT ALL THE
OBLIGATIONS SHALL BE THE JOINT AND SEVERAL OBLIGATIONS OF EACH OF THE
COMPANIES WITHOUT PREFERENCE OR DISTINCTION AMONG THEM.
(D) FAILURE TO PERFORM. IF AND TO THE EXTENT THAT ANY COMPANY
SHALL FAIL TO MAKE ANY PAYMENT WITH RESPECT TO ANY OF THE OBLIGATIONS AS AND
WHEN DUE OR TO PERFORM ANY OF THE OBLIGATIONS IN ACCORDANCE WITH THE TERMS
THEREOF, THEN IN EACH SUCH EVENT THE
44
OTHER COMPANY WILL MAKE SUCH PAYMENT WITH RESPECT TO, OR PERFORM, SUCH
OBLIGATION.
(E) WAIVER OF NOTICE; ASSENT TO ACTIONS; ETC. THE OBLIGATIONS
OF EACH OF THE COMPANIES UNDER THE PROVISIONS OF THIS SECTION 9.13 CONSTITUTE
FULL RECOURSE OBLIGATIONS OF EACH OF THE COMPANIES ENFORCEABLE AGAINST EACH
SUCH COMPANY, IRRESPECTIVE OF THE VALIDITY, REGULARITY OR ENFORCEABILITY OF
THIS AGREEMENT AS AGAINST ANY PARTICULAR COMPANY. EACH AND EVERY
REPRESENTATION, WARRANTY, COVENANT AND AGREEMENT MADE BY THE COMPANIES, OR
ANY OF THEM, HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS SHALL BE JOINT AND
SEVERAL, WHETHER OR NOT SO EXPRESSED, AND SUCH OBLIGATIONS OF ANY COMPANY
SHALL NOT BE SUBJECT TO ANY COUNTERCLAIM, SETOFF, RECOUPMENT OR DEFENSE BASED
UPON ANY CLAIM ANY COMPANY MAY HAVE AGAINST ANY OTHER COMPANY OR THE LENDER
(OTHER THAN THE INDEFEASIBLE PAYMENT OF THE OBLIGATIONS IN FULL), AND SHALL
REMAIN IN FULL FORCE AND EFFECT WITHOUT REGARD TO, AND SHALL NOT BE RELEASED,
DISCHARGED OR IN ANY WAY AFFECTED BY, ANY CIRCUMSTANCES OR CONDITION
AFFECTING ANY OTHER COMPANY, INCLUDING WITHOUT LIMITATION (A) ANY WAIVER,
CONSENT, EXTENSION, RENEWAL, INDULGENCE OR OTHER ACTION OR INACTION UNDER OR
IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY AGREEMENT OR
OTHER DOCUMENT RELATED THERETO WITH RESPECT TO ANY OTHER COMPANY, OR ANY
EXERCISE OR NONEXERCISE OF ANY RIGHT, REMEDY, POWER OR PRIVILEGE UNDER OR IN
RESPECT OF ANY SUCH AGREEMENT OR INSTRUMENT WITH RESPECT TO ANY OTHER
COMPANY, OR THE FAILURE TO GIVE NOTICE OF ANY OF THE FOREGOING TO ANY OTHER
COMPANY, (B) ANY INVALIDITY OR UNENFORCEABILITY, IN WHOLE OR IN PART, OF ANY
SUCH AGREEMENT OR INSTRUMENT WITH RESPECT TO ANY OTHER COMPANY; (C) ANY
FAILURE ON THE PART OF ANY OTHER COMPANY FOR ANY REASON TO PERFORM OR COMPLY
WITH ANY TERM OF ANY SUCH AGREEMENT OR INSTRUMENT; (D) ANY BANKRUPTCY,
INSOLVENCY, REORGANIZATION, ARRANGEMENT, READJUSTMENT, COMPOSITION,
LIQUIDATION OR SIMILAR PROCEEDING WITH RESPECT TO ANY OTHER COMPANY OR ITS
PROPERTIES OR CREDITORS; OR (E) ANY OTHER OCCURRENCE WHATSOEVER, WHETHER
SIMILAR OR DISSIMILAR TO THE FOREGOING, WITH RESPECT TO ANY OTHER COMPANY.
EACH COMPANY HEREBY WAIVES ANY REQUIREMENT OF DILIGENCE OR PROMPTNESS ON THE
PART OF THE LENDER IN THE ENFORCEMENT OF THEIR RIGHTS HEREUNDER OR UNDER ANY
OTHER LOAN DOCUMENT WITH RESPECT TO THE OBLIGATIONS OF ITSELF OR OF ANY
OTHER COMPANY. WITHOUT LIMITING THE FOREGOING ANY FAILURE TO MAKE ANY DEMAND
UPON, TO PURSUE OR EXHAUST ANY RIGHTS OR REMEDIES AGAINST A COMPANY, OR ANY
DELAY WITH RESPECT THERETO, SHALL NOT AFFECT THE OBLIGATIONS OF ANY OTHER
COMPANY HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT.
45
SECTION 9.15. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which, taken together, shall constitute one and the same instrument.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
46
IN WITNESS WHEREOF, the Companies and the Lender have caused this
Agreement to be duly executed by their duly authorized officers, as of the
day and year first above written.
EON LABS MANUFACTURING, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President - Finance
EON PHARMA, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President
JPMORGAN CHASE BANK
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
Vice President
47
IN WITNESS WHEREOF, the Companies and the Lender have caused this
Agreement to be duly executed by their duly authorized officers, as of the
day and year first above written.
EON LABS MANUFACTURING, INC.
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President - Finance
EON PHARMA, LLC
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President
JPMORGAN CHASE BANK
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇
Vice President
48
SCHEDULES*
SCHEDULE I - Subsidiaries
SCHEDULE II - Existing Liens
SCHEDULE III - Existing Indebtedness
SCHEDULE IV - Existing Guarantees
SCHEDULE V - Material Contracts
SCHEDULE VI - Litigation
* Matters or items listed in the Schedules are disclosed for disclosure
purposes only.
1
SCHEDULE I
SUBSIDIARIES
NAME OF ENTITY STATE OF OWNERS OF SHARES OR INTERESTS
-------------- INCORPORATION NAMES AND PERCENTAGES
OR FORMATION OF SHARES OWNED
------------- ------------------------------
Forte Pharma, Inc. Delaware Eon Labs Manufacturing, Inc. (100
shares of Common Stock, par value
of $0.01 per share)
Eon Pharma, LLC Delaware Eon Labs Manufacturing, Inc. (100
Membership Units)
Eon Technologies, Inc. Delaware Eon Labs Manufacturing, Inc. (100
shares of Common Stock)
Eon Labs Manufacturing Delaware Eon Labs Manufacturing, Inc. (100
of the Virgin Islands, Inc. shares of Common Stock, par value
of $0.01 per share)
2
SCHEDULE II
EXISTING LIENS
None.
3
SCHEDULE III
EXISTING INDEBTEDNESS
1. All obligations and liabilities guaranteed by Eon Labs Manufacturing,
Inc. listed on Schedule IV hereof.
2. As of December 31, 2001, Eon Labs Manufacturing, Inc. has an
intercompany balance with Eon Distribution, Inc. and owes $445,000 to Eon
Distribution, Inc.
3. As of December 31, 2001, Eon Labs Manufacturing, Inc. has an
intercompany balance with Hexal AG and owes $728,100.30 to Hexal AG.
4. As of December 31, 2001, Eon Pharma, LLC has an intercompany balance
with Hexal AG and owes $61,154.25 to Hexal AG.
5. From time to time, Eon Labs Manufacturing, Inc. must pay a royalty fee
to Hexal AG as a result of sales of cyclosporin. The royalty fee is equal to 20%
of sales of cyclosporin, and ranges between $200,000 - $500,000 per month.
6. Eon Labs Manufacturing, Inc. will owe income taxes on a recurring
basis. As of December 31, 2001, Eon Labs Manufacturing, Inc. owed
approximately $10,000,000 in income taxes. A $10,000,000 income tax payment
was subsequently made in January 2002.
7. Eon Labs Manufacturing, Inc. has deferred income of approximately
$700,000. Pursuant to an Exclusive Distribution and Supply Agreement, dated as
of December 13, 2000, with ▇▇▇▇▇▇-▇▇▇▇▇ Laboratories, Eon Labs Manufacturing,
Inc. gave ▇▇▇▇▇▇-▇▇▇▇▇ Laboratories exclusive rights to distribute amiodarone,
a product of Eon Labs Manufacturing, Inc. The proceeds from the Exclusive
Distribution and Supply Agreement must be amortized over the life of the
Agreement. Each month, Eon Labs Manufacturing, Inc. receives a portion of the
proceeds.
4
SCHEDULE IV
EXISTING GUARANTEES
1. Buyer Guaranty Agreement, dated as of December 8, 2000, by Eon
Labs Manufacturing, Inc. in favor of Novopharm Investments, L.L.C. in connection
with the Contract to Purchase and Sell Property, dated December 8, 2000, between
Eon Pharma, LLC and Novopharm Investments, L.L.C. Eon Labs Manufacturing, Inc.
is guaranteeing to Novopharm Investments, L.L.C. the due and punctual payment,
observance and performance, when and as due, of all of the agreements,
covenants, obligations and liabilities of Eon Pharma, LLC under the Contract to
Purchase and Sell Property.
2. Guaranty, dated December 5, 2000, by Eon Labs Manufacturing, Inc.
in favor of the holders of the Promissory Note, dated December 5, 2000, made by
Hexal Pharmaceuticals, Inc. in favor of Whitney & Co., as Sellers' Agent, in the
original principal amount of $50,000,000.
3. Many of the Material Contracts listed on Schedule V contain provisions
which provide for indemnification by Eon Labs Manufacturing, Inc. These include
items numbered 1, 6-13, 15, 19, 24-28, 31-32 and 35-38 on Schedule V.
4. Settlement and Defense Agreement, dated as of January 11, 2001, by and
between Eon Labs Manufacturing, Inc. and Ion Laboratories, Inc. Eon Labs
Manufacturing, Inc. manufactured phentermine purchased by Ion in 1996 and 1997
and Ion thereafter distributed and resold that phentermine under its own label
and trade name. Ion has asserted that Eon Labs Manufacturing, Inc. is obligated
under Texas law and by operation of law as applicable in other states to defend
and indemnify Ion in the fen-phen litigation. Eon Labs Manufacturing, Inc. is
agreeing to defend Ion in cases in which the phentermine involved in the claims
against Ion has been identified as Eon's phentermine or in which the
manufacturer or distributor of the phentermine involved in such claims is
unknown. Eon Labs Manufacturing, Inc. has also agreed to pay 100% of the total
costs of conducting Ion's defense in any case in which all phentermine involved
in the claims against Ion has been identified as Eon's phentermine, and will pay
80.2% of the total costs of conducting Ion's defense in all cases involving
unknown product. The Settlement and Defense Agreement is listed on Schedule V
and a copy of such Agreement has been provided to Lender.
5. Settlement, Defense and Indemnification Agreement, dated as of December
21, 2000, by and between Eon Labs Manufacturing, Inc. and Rugby Laboratories,
Inc. Eon Labs Manufacturing, Inc. manufactured and labeled phentermine for sale
by Rugby and Rugby distributed and resold that phentermine. Eon Labs
Manufacturing, Inc. agreed to defend, indemnify and hold Rugby harmless against
claims, losses, damages and liabilities arising in certain circumstances. Eon
Labs Manufacturing, Inc. is agreeing to defend Rugby in cases in which the
phentermine involved in the claims against Rugby has been identified as Eon's
5
phentermine, if Rugby tenders such cases to Eon. Eon Labs Manufacturing, Inc.
has also agreed to pay 100% of the total costs of conducting Rugby's defense in
any case in which all phentermine involved in the claims against Rugby has been
identified as Eon's phentermine, and will pay 40% of the total costs of
conducting Rugby's defense in all cases involving unknown product. The
Settlement, Defense and Indemnification Agreement is listed on Schedule V and a
copy of such Agreement has been provided to Lender.
6. Settlement, Defense and Indemnification Agreement, dated as of November
30, 2000, by and between Eon Labs Manufacturing, Inc. and Shire Richwood Inc.
Eon Labs Manufacturing, Inc. manufactured phentermine for sale by Shire Richwood
and Shire Richwood distributed and resold that phentermine. Eon Labs
Manufacturing, Inc. agreed to defend, indemnify and hold Shire Richwood harmless
against claims, losses, damages and liabilities arising in certain
circumstances. Eon Labs Manufacturing, Inc. is agreeing to pay 100% of judgments
and settlements as to claims against Shire Richwood that are based solely on
Eon's product or Richwood's status as a distributor of Eon's product. Eon Labs
Manufacturing, Inc. is agreeing to bear all costs of defense and defend Shire
Richwood in cases in which the phentermine involved in the claims against Shire
Richwood has been identified as Eon's phentermine or in which the manufacturer
of the phentermine is unknown. The Settlement, Defense and Indemnification
Agreement is listed on Schedule V and a copy of such Agreement has been provided
to Lender.
7. Settlement, Defense and Indemnification Agreement, dated as of December
21, 2000, by and among Eon Labs Manufacturing, Inc., Zenith Goldline
Pharmaceuticals, Inc and Goldline Laboratories, Inc. Eon Labs Manufacturing,
Inc. manufactured and labeled phentermine for sale by Zenith and Zenith
distributed and resold that phentermine. Eon Labs Manufacturing, Inc. agreed to
defend, indemnify and hold Zenith harmless against claims, losses, damages and
liabilities arising in certain circumstances. Eon Labs Manufacturing, Inc. is
agreeing to defend Zenith in cases in which the phentermine involved in the
claims against Zenith has been identified as Eon's phentermine, if Zenith
tenders such cases to Eon. Eon Labs Manufacturing, Inc. has also agreed to pay
100% of the total costs of conducting Zenith's defense in any case in which all
phentermine involved in the claims against Zenith has been identified as Eon's
phentermine and 100% of judgments and settlements, and will pay 50% of the total
costs of conducting Zenith's defense in all cases involving unknown product,
subject to a cap of $100,000 for Eon's share per calendar month, or 40% of such
costs without regard to a cap, whichever is greater. The Settlement, Defense
and Indemnification Agreement is listed on Schedule V and a copy of such
Agreement has been provided to Lender.
6
SCHEDULE V
MATERIAL CONTRACTS(1)
1. Warrant Agreement, dated as of December 5, 2000, among Eon Labs
Manufacturing, Inc., the warrantholders from time to time party thereto and
Hexal Pharmaceuticals, Inc.
2. Assignment and Transfer of Products and Technology, dated as of
September 25, 1995, from and by Hexal Pharmaceuticals, Inc. to and with Eon
Labs Manufacturing, Inc., as amended by Amendment No. 1 to Assignment and
Transfer of Products and Technology, dated as of December 5, 2000, from and
by Hexal Pharmaceuticals, Inc. to and with Eon Labs Manufacturing, Inc.
3. Eon Labs Manufacturing, Inc. 2001 Stock Option Plan.
4. Promissory Note, dated December 5, 2000, issued by Hexal
Pharmaceuticals, Inc. to Eon Labs Manufacturing, Inc. in the principal amount
of $4,892,000.
5. Eon Labs, Inc. Savings Investment Plan and Trust, as amended. While
Eon Labs, Inc. is the plan sponsor, Eon Labs Manufacturing, Inc. makes
matching contributions to the plan.
6. Contract to Purchase and Sell Property, dated as of December 8, 2000,
between Novopharm Investments, L.L.C. and Eon Pharma, LLC.
7. Assignment of Service Agreements, dated as of December 8, 2000, by
and between Novopharm Investments, LLC and Eon Pharma, LLC.
8. Generic Wholesale Service Agreement, dated as of April 1, 1998,
between Cardinal Health and Eon Labs Manufacturing, Inc. Under this
Agreement, Eon Labs Manufacturing, Inc. is appointing Cardinal Health as an
authorized distributor of all generic pharmaceutical products manufactured
and/or marketed by Eon Labs Manufacturing, Inc. (with certain exceptions)
and is agreeing to sell the products to Cardinal Health.
9. Preferred Vendor Application, dated July 2, 2001, between Eon
Labs Manufacturing, Inc. and CFI of New Jersey/Central Fill Inc. Eon Labs
Manufacturing, Inc. is agreeing to sell certain pharmaceuticals to CFI of New
Jersey/Central Fill Inc.
10. Generic Pharmaceutical Supply Agreement, dated September 7, 2001,
between Eon Labs
--------------
(1) The description of each Material Contract is provided for purposes of
convenience only, and the description is qualified by, and reference is made
to the actual contracts, all of which have been supplied to the Lender and/or
its counsel.
7
Manufacturing Inc. and H.E. Butt Grocery Company. Under this Agreement, Eon
Labs Manufacturing, Inc. is manufacturing products for purchase by H.E. Butt
Grocery Company. Under this Agreement, Eon Labs Manufacturing, Inc. is
supplying certain generic pharmaceuticals to H.E. Butt Grocery Company.
11. Supplier Agreement, dated as of September 17, 1999, by and between
McKesson HBOC, Inc. and Eon Labs Manufacturing, Inc. Under this Agreement,
Eon Labs Manufacturing, Inc. is designated by McKesson HBOC, Inc. as the
supplier of certain generic pharmaceutical products (i.e. Chlorpheniram,
Cholestyramine and Phentermine) and is providing those products for the
McKesson Select Generics Program.
12. Purchasing Agreement, dated as of March 22, 1999, by and between
Eon Labs Manufacturing, Inc. and PacifiCare Pharmacy Centers, Inc, ("PPC").
Under this Agreement, Eon Labs Manufacturing, Inc. is providing PPC with
certain pharmaceutical products to sell in PPC's pharmacies.
13. Group Purchasing Agreement, dated as of May 24, 1999, by and
between AmeriNet, Inc. and Eon Labs, Inc. (Eon Labs Manufacturing, Inc.
signed the Agreement). Under this Agreement, Eon Labs Manufacturing, Inc. is
agreeing to provide certain pharmaceuticals to participating institutions
specified in this Agreement.
14. Contract, dated August 24, 2001, between Allscripts Healthcare
Solutions and Eon Labs Manufacturing, Inc. Under this Contract, Eon Labs
Manufacturing, Inc. is a supplier of certain pharmaceuticals for Allscripts.
15. Wholesale Service Agreement, dated as of June 5, 2001, between
Anda, Inc. and Eon Labs Manufacturing, Inc. Under this Agreement, Eon Labs
Manufacturing, Inc. appointed Anda, Inc. as a non-exclusive authorized
wholesale distributor of all pharmaceutical products manufactured and/or
marketed by Eon Labs Manufacturing, Inc.
16. 2002 Care Buying Alliance Supplier Contract, dated October 12,
2001, between Care Buying Alliance and Eon Labs Manufacturing, Inc. Under
this Contract, Eon Labs Manufacturing, Inc. is agreeing to sell to Care
Buying Alliance certain pharmaceuticals.
17. Committed Provider Services Request for Price, effective as of
February 1, 2000, between Bergen ▇▇▇▇▇▇▇▇ Corporation and Eon Labs
Manufacturing, Inc. Eon Labs Manufacturing, Inc. is agreeing to sell to
Committed Provider Services participants certain pharmaceuticals.
18. Contract, dated February 5, 2001, between Eckerd Corporation and
Eon Labs Manufacturing, Inc. Under this Contract, Eckerd Corporation is
purchasing certain pharmaceutical products from Eon Labs Manufacturing, Inc,
19. Contract, dated September 6, 2001, between ▇▇▇▇▇▇ Permanente
Medical Care Group and
8
Eon Labs Manufacturing, Inc. Under this Contract, Eon Labs Manufacturing,
Inc. is selling certain pharmaceutical products (i.e. Etodolac, Lovastatin,
Naltrexone HCI, Orphenadrine, Phentermine HCl and Rifampin) to the ▇▇▇▇▇▇
Permanente Medical Care Program.
20. Terms of Agreement, effective as of July 1, 2000, between
OptiSource Wholesale Drug Association and Eon Labs Manufacturing, Inc. Under
this Agreement, Eon Labs Manufacturing, Inc. is agreeing to sell to each
health care member belonging to or participating in the programs of the
OptiSource Wholesale Drug Association the goods ordered by it from Eon Labs
Manufacturing, Inc.
21. Exclusive Distribution and Supply Agreement, dated as of December
13, 2000, by and between ▇▇▇▇▇▇-▇▇▇▇▇ Laboratories and Eon Labs
Manufacturing, Inc. Under this Agreement, Eon Labs Manufacturing Inc. is
granting ▇▇▇▇▇▇-▇▇▇▇▇ Laboratories an exclusive right to distribute
amiodarone 400 mg.
22. Capsugel Purchase Agreement, effective as of February 1, 2000,
between ▇▇▇▇▇▇-▇▇▇▇▇▇▇ Company, through its Capsugel Division, and Eon Labs
Manufacturing, Inc. Under this Agreement, ▇▇▇▇▇▇-▇▇▇▇▇▇▇ Company is agreeing
to sell to Eon Labs Manufacturing, Inc. 100% of their capsule requirements of
bulk pharmaceutical grade empty hard-shell gelatin capsules.
23. Working Agreement, dated September 25, 2000, between ChemWerth and
Eon Labs Manufacturing, Inc. Under this Agreement, Eon Labs Manufacturing,
Inc. is developing a generic solid dosage form of Anagrelide HCl and
ChemWerth is supplying the Anagrelide HCl on an exclusive basis to Eon Labs
Manufacturing, Inc.
24. Supply Agreement, dated as of November 16, 1998, among Ganes
Chemicals, Inc., UDL Laboratories, Inc. and Eon Labs Manufacturing, Inc.
Under this Agreement, Eon Labs Manufacturing, Inc. is manufacturing 5, 10 and
40 mg. tablet dosage forms of methadone from bulk methadone manufactured by
Ganes Chemicals, Inc. for distribution by UDL Laboratories, Inc. to methadone
treatment centers.
25. Amended Research and Development Agreement, dated as of April 24,
2001, by and between Eon Labs Manufacturing, Inc. and Kali Laboratories, Inc.
Under this Agreement, Kali Laboratories, Inc. is performing formulation and
other research and development work for Eon Labs Manufacturing, Inc. with
respect to Nitrofurantoin BID 100mg. Capsules.
26. Development and Licensing Agreement, dated as of January 15, 2001,
by and between Eon Labs Manufacturing, Inc. and Kali Laboratories, Inc. Under
this Agreement, Kali Laboratories, Inc. is performing formulation and other
research and development work for Eon Labs Manufacturing, Inc. with respect
to Metaxalone Tablets, 400 mg.
27. Amended Research and Development Agreement, dated as of July 6,
2000, by and between Eon Labs Manufacturing, Inc. and Kali Laboratories, Inc.
Under this Agreement, Kali Laboratories, Inc. is performing formulation and
other research and development work for Eon
9
Labs Manufacturing, Inc. with respect to Mesalamine Tablets and Mesalamine
Capsules.
28. Research and Development Agreement, dated as of March 11, 1998, by
and between Eon Labs Manufacturing, Inc. and Kali Laboratories, Inc. Under
this Agreement, Kali Laboratories, Inc. is performing formulation and other
research and development work for Eon Labs Manufacturing, Inc. with respect
to bupropion HCl tablets, 75 mg. and 100 mg.
29. Addendum No. 1 to Research and Development Agreement, dated as of
April 10, 1998, Addendum No. 3 to Research and Development Agreement, dated
as of May 27, 1999, and Amendment No. 4 to Research and Development
Agreement, dated as of November 16, 1999, by and between Eon Labs
Manufacturing, Inc. and Kali Laboratories, Inc. Under these Addenda, Kali
Laboratories, Inc. is performing formulation and other research and
development work for Eon Labs Manufacturing, Inc. with respect to gabapentin
capsules, mefloquine Hcl, 250 mg. tablets and Propranolol LA.
30. Manufacturing License and Distribution Agreement, dated February
23, 2001, between ▇▇▇▇▇▇, ▇.▇. de C.V. and Eon Labs Manufacturing, Inc. Under
this Agreement, Eon Labs Manufacturing, Inc. is granting ▇▇▇▇▇▇, ▇.▇. de C.V.
the exclusive right to manufacture, distribute and sell Cyclosporine oral
solution in Mexico, Central America, South America and the Caribbean,
excluding Argentina and Brazil.
31. Distribution Agreement, dated February 23, 2001, and Supplemental
Agreement, dated March 2, 2001, between ▇▇▇▇▇▇, ▇.▇. de C.V. and Eon Labs
Manufacturing, Inc. Under this Agreement, Eon Labs Manufacturing, Inc. is
granting ▇▇▇▇▇▇, ▇.▇. de C.V. the exclusive right to distribute and sell
Cyclosporine soft gel capsules of 25, 50 and 100 mg. in Mexico, Central
America, South America and the Caribbean, excluding Argentina and Brazil.
32. Warehouse Distribution Contract, effective May 1, 1999, and First
Amendment to the Warehouse Distribution Agreement, effective April 21, 2001,
by and between ▇▇▇▇▇▇▇▇▇▇ Healthcare Services Inc. ("LHSI") and Forte Pharma,
Inc. Under this Contract, LHSI is providing certain outsource logistics
services to Forte Pharma, Inc., i.e. storage, maintaining records, shipping
and accounts receivable management.
33. Agreement, dated as of June 14, 2000, by and between Martec
Scientific, Inc. and Eon Labs Manufacturing, Inc. Under this Agreement, Eon
Labs Manufacturing, Inc. is purchasing nifedipine extended release 30 mg., 60
mg. and 90 mg. tablets from Martec Scientific, Inc.
34. Purchase Agreement/Letter, dated July 24, 2001, between Eon Labs
Manufacturing, Inc. and Martec Pharmaceuticals, Inc. Pursuant to this Letter,
Eon Labs Manufacturing, Inc. is purchasing at least 1,000,000 tablets per
annum of sucralphate for a five year period from Martec Pharmaceuticals, Inc.
35. Marketing Agreement, dated as of July 31, 1998, between Oakwood
Laboratories, L.L.C. and Eon Labs Manufacturing, Inc. Under this Agreement,
Eon Labs Manufacturing, Inc. is
10
agreeing to sell leuprolide acetate, 5 mg. injectable. (Oakwood Laboratories,
L.L.C. has on file with the U.S. Food and Drug Administration an Abbreviated
New Drug Application to manufacture and sell leuprolide acetate, 5 mg.
injectable.)
36. Supply Agreement, effective as of April 1, 1997, by and between Eon Labs
Manufacturing, Inc. and ▇▇▇▇▇▇▇ Pharma, Inc. Under this Agreement, Eon Labs
Manufacturing, Inc. is manufacturing and packaging exclusively for ▇▇▇▇▇▇▇
Pharma, Inc., ▇▇▇▇▇▇▇'▇ requirements for sustained-release 40 mg. ISDN capsules.
37. Supply Agreement, dated as of September 13, 1996, by and between Eon
Labs Manufacturing, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. Under this Agreement, Eon
Labs Manufacturing, Inc. is supplying ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc. with cholestyramine
and cholestyramine light, both formulated with a strawberry flavor and AB rated
to Questran and Questran Light, for distribution.
38. Trademark License Agreement, dated as of April 30, 1999, between Merck &
Co., Inc. and Eon Labs Manufacturing, Inc. Under this Agreement, Eon Labs
Manufacturing, Inc. is granted the right to use the U.S. trademark of
Indocin(R) SR, owned by Merck & Co., Inc., in connection with the manufacture,
sale and distribution of a sustained-release capsule formulation of indomethacin
U.S.P.
39. Settlement and Defense Agreement, dated as of January 11, 2001, by and
between Eon Labs Manufacturing, Inc. and Ion Laboratories, Inc. (See description
in Item 4 of Schedule IV)
40. Settlement, Defense and Indemnification Agreement, dated as of December
21, 2000, by and between Eon Labs Manufacturing, Inc. and Rugby Laboratories,
Inc. (See description in Item 5 of Schedule IV)
41. Settlement, Defense and Indemnification Agreement, dated as of November
30, 2000, by and between Eon Labs Manufacturing, Inc. and Shire Richwood Inc.
(See description in Item 6 of Schedule IV)
42. Settlement, Defense and Indemnification Agreement, dated as of December
21, 2000, by and among Eon Labs Manufacturing, Inc., Zenith Goldline
Pharmaceuticals, Inc and Goldline Laboratories, Inc. (See description in Item 7
of Schedule IV)
43. Those confidential agreements disclosed to JPMorgan Chase Bank, in a
letter from ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. dated February 8, 2002.
11
SCHEDULE VI
LITIGATION(2)
1. See Note 9 of the Notes to Financial Statements, dated as of
September 30, 2000, of Eon Labs Manufacturing, Inc. and Subsidiaries, a copy of
which is attached hereto.
2. Collectively, all combination related Phentermine cases
("fen-phen").
o From May 1997 to January 24, 2002, Eon Labs Manufacturing, Inc. has
been named a party in approximately 6,310 lawsuits in connection with our
manufacture of phentermine of which 496 remained open as of January 24,
2002. The actions generally have been brought in various state and federal
jurisdictions by individuals in their own right or on behalf of putative
classes of persons who claim to have suffered injury or claim that they may
suffer injury in the future due to the use of a combination of the two
prescription diet drugs fenfluramine and phentermine, a combination
popularly known as "fen-phen". Fenfluramine, which Eon never manufactured
for sale or sold, was voluntarily withdrawn from the market in 1997. These
lawsuits typically allege that the short- and long-term use of fenfluramine
in combination with phentermine causes, among other things, primary
pulmonary hypertension, valvular heart disease and/or neurological
dysfunction. In addition, some lawsuits allege emotional distress caused by
the purported increased risk of injury in the future. Plaintiffs typically
seek relief in the form of monetary damages (including economic losses,
medical care and monitoring expenses, loss of earnings and earnings
capacity, other compensatory damages and punitive damages), generally in
unspecified amounts, on behalf of the individual or the class. In addition,
some actions seeking class certification ask for certain types of
purportedly equitable relief, including, but not limited to, declaratory
judgments and the establishment of a research program or medical
surveillance fund. To date, there has been no finding of liability against
Eon and no settlement by Eon in any combination-related phentermine
lawsuit. In addition, there has been no scientific testimony accepted by
any court that establishes a connection between the use of phentermine and
the allegations made by plaintiffs in these lawsuits.
--------------
(2) The inclusion of any information in any section of this Schedule VI shall
not be deemed to be an admission or evidence of the materiality of such item,
nor shall it establish a standard of materiality for any purpose whatsoever.
12
3. NOVARTIS PHARMACEUTICALS CORPORATION V. EON LABS MANUFACTURING,
INC., ▇▇ ▇▇▇. ▇▇▇ (▇.▇▇▇.).
o The Novartis Litigation is a patent litigation in which Novartis alleges
that Eon infringes Novartis' patent, U.S. 5,389,382, by testing and
marketing Eon's commercial cyclosporine product. This litigation was not
brought under the Hatch Waxman Act, Novartis alleges willful infringement.
Eon pleads non-infringement, invalidity and unenforceability of the suit
patent. Fact discovery has almost entirely closed. Both Eon and Novartis
have filed motions for summary judgment. The current trial date is set for
June 17, 2002 but, due to the illness of a key Novartis expert, an
extension will likely be granted. Novartis seeks trebled damages,
injunctive relief and attorneys' fees.
4. APOTEX INC. V. EON LABS MANUFACTURING, INC., 01 Civ. 0482
(E.D.N.Y.).
o The Apotex Litigation is a patent litigation in which Apotex alleges that
Eon's marketing of its cyclosporine product infringes U.S. Patent No.
5,798,333 and includes an allegation of willful infringement. Eon maintains
that the patent is invalid and non-infringed and may amend its answer
and/or add additional counterclaims in the future. Discovery is currently
ongoing. Neither side has filed dispositive motions. Expert discovery will
close March 8, 2002 and a court-ordered mediation hearing may occur
sometime after April 1, 2002. Apotex seeks trebled damages, injunctive
relief and attorneys' fees.
5. MARTINEZ V. EON LABS MANUFACTURING, INC., Case No. 001042 (Penn.
Ct. of Common Pleas., Philadelphia Cty.).
o The ▇▇▇▇▇▇▇▇ Litigation is a product liability action alleging that
plaintiff suffered a stroke proximately caused by ingesting Eon
manufactured phentermine hydrochloride, a weight loss drug. Eon denies
plaintiff's allegations. Currently, the case is in the discovery phase and
no dispositive motions have been filed. Plaintiff is seeking monetary
damages.
6. ▇▇▇▇▇▇ V. AMERICAN HOME PRODUCTS, No. 00-2-15370-8SEA (Sup. Ct.
Wash., King Cty.).
o The ▇▇▇▇▇▇ Litigation is a combination pbentermine/phenylpropanolamine
(PPA) stroke case. Plaintiff alleges that she suffered a stroke proximately
caused by ingesting phentermine manufactured by Eon in combination with PPA
manufactured by a third party. Eon denies plaintiff's allegations.
Currently the case is in the discovery phase with trial set for June 2002.
Eon expects this trial date will be extended into 2003. Plaintiff is
seeking monetary damages.
13
7. RANSOME V. EON LABS MANUFACTURING, INC., No. 99-1731-CA-01 (Fla.
Cir. Ct., Escambia Cty.).
o The ▇▇▇▇▇▇▇ Litigation is a phentermine claim which has been pending for
several years with almost no activity by plaintiff. Plaintiff asserts he
suffered a stroke as a result of ingesting Eon manufactured phentermine.
Because Eon denies plaintiff's allegations and due to plaintiff's failure
to prosecute this case, Eon plans to move for dismissal in the near future.
Plaintiff is seeking monetary damages.
8. ▇▇▇▇▇▇▇▇ V. MEDEVA PHARMACEUTICALS, INC., Milwaukee County Case No.
99-CV-005386 (Wi., Milwaukee County Circuit Court Branch 39).
o The ▇▇▇▇▇▇▇▇ Litigation is a phentermine claim alleging heart valve damage
as a result of plaintiff's ingesting Eon manufactured phentermine. Eon
denies plaintiff's allegations. The case is currently in discovery and
trial has been set for September 9, 2002. However, because of the
litigation's current discovery posture, an extension is likely. Plaintiff
is seeking monetary damages.
9. ▇▇▇▇▇▇ ▇. EON LABS MANUFACTURING, INC., No. 01-386 AHS (C.D. Cal.).
o The Farrel Litigation is a PPA claim alleging stroke as a result of
plaintiff's ingesting Eon manufactured PPA. Eon denies plaintiff's
allegations. On November 19, 2001, the court dismissed plaintiff's claim
without prejudice for failure to prosecute. Prior to dismissal, plaintiff
had been seeking monetary damages. Eon Labs Manufacturing, Inc. believes
it has adequate insurance to cover the risk of this litigation.
10. DEALS V. AMERICAN HOME PRODUCTS CORP., 488953 (La. 19th JDC, Baton
Rouge).
o The ▇▇▇▇▇ Litigation is a PPA claim alleging injuries as a result of
plaintiff's ingesting a PPA product not manufactured by Eon. Eon plans to
seek dismissal from this case. Plaintiff is seeking monetary damages. Eon
Labs Manufacturing, Inc. believes it has adequate insurance to cover the
risk of this litigation.
11. PAPADEMAS V. PACIFIC FERTILITY MEDICAL GROUP, No. C 01 0331 (N.D.
Cal.).
o The Papademas Litigation is a suit alleging that plaintiff suffered
injuries as a result of using Eon distributed Lupron (leuprolide acetate)
manufactured by Oakwood Laboratories. Eon is being indemnified in this
matter by Oakwood, and thus Eon does not believe, to the extent Oakwood's
resources are not limited, it
14
would have a Material Adverse Effect on Eon. Plaintiff is seeking monetary
damages.
12. ▇▇▇▇▇▇ ▇. GENEVA PHARMACEUTICALS INC., et al., Case No. 6:01-CV-84
(Fed. Ct., Middle District of Georgia).
o The ▇▇▇▇▇▇ litigation is a wrongful death action allegedly arising out of
the ingestion of phentermine manufactured by Eon and others. The complaint
alleges decedent ingested phentermine in 1995 and 1996, that in 1996
phentermine caused or contributed to various injuries, including
infection/inflammation of the heart and pericardial sac, and that
phentermine contributed to decedent's death in May 2000. This case was
recently filed, and discovery has not yet begun.
15
EON LABS MANUFACTURING, INC. AND SUBSIDIARIES 12
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
8. PREFERRED STOCK
The Preferred Stock is convertible, at the option of the holders of the
shares, into common stock at a conversion rate of one share of common
stock for one share of Preferred Stock. The holders of Preferred Stock
have the same voting rights and powers as common stockholders. There were
no dividends paid for the years ended September 30, 2000 and 1999,
respectively.
9. LITIGATION - AUDIT FINANCIALS AS OF SEPT. 30, 2000
PRODUCT LIABILITY LITIGATION
Since September 1997, the Company has been named as a defendant in
numerous product liability lawsuits, some of which are class actions,
filed in various state and federal courts involving phentermine
hydrochloride, one of the drugs manufactured by the Company. These
lawsuits typically name as defendants manufacturers and distributors of
phentermine and two other anti-obesity drugs, fenfluramine and
dexfenfluramine. The plaintiffs claim that taking these drugs results in
instances of valvular heart disease, primary pulmonary hypertension, and
other injuries. Fenfluramine and phentermine were prescribed in
combination in an off-label use commonly called fen-phen. The Food and
Drug Administration ("FDA") approved phentermine to be prescribed alone.
It did not approve the fen-phen combination. Dexfenfluramine was
generally prescribed alone. In September 1997, the manufacturers of
fenfluramine and dexfenfluramine agreed with the FDA to voluntarily withdraw
both products from the market. The FDA has not requested that phentermine
be withdrawn from the market. Sales of phentermine by the Company amount
to approximately $21,700,000 and $6,807,000 for the years ended September
30, 2000 and 1999, respectively. Production and sale of phentermine is
subject to the availability of raw material from one approved supplier.
Plaintiffs seek payment of unspecified damages and medical monitoring
of people who took either the fen-phen combination or fenfluramine or
dexfenfluramine alone. The Company expects additional, similar lawsuits
to be filed. The Company and its outside counsel believe that the
Company has substantial defenses to these claims.
During fiscal 2000, the United States District Court for the Eastern
District of Pennsylvania, the federal court before which all federal
cases were consolidated for discovery, found that proposed anti-
phentermine "causation" testimony by two expert witnesses was not
supported by scientific evidence and thus would be barred. These two
experts were the only "national" anti-phentermine "causation" experts
identified in the consolidated federal litigation, and were to have
been "generic" experts in hundreds of cases. The Court's decision to
substantially curb their testimony has resulted in many cases being
dismissed.
In August 2000, the United States District Court for the Eastern
District of Pennsylvania certified a nationwide mandatory settlement
class and approved a proposed settlement put forth by American Home
Products, the principal defendant in the fen-phen litigation. The
settlement excludes claims for certain serious medical conditions. The
Court's order has been appealed and is currently pending before the
United States Court of Appeals for the Third Circuit. The Company
believes that if the settlement is approved it will result in
additional cases being dismissed as to the Company, its customers and
other phentermine defendants.
EON LABS MANUFACTURING, INC. AND SUBSIDIARIES 13
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
INSURANCE/INDEMNITY LITIGATION
In January 1998, the Company's primary product liability insurer brought a
suit in state court in Delaware against the Company and several of the
Company's customers who had sought coverage under the Company's insurance
policies in connection with the phentermine, fenfluramine and
dexfenfluramine product liability lawsuits mentioned above. The insurer
was seeking a declaration of the rights and responsibilities under its
insurance program with the Company as it relates to both the Company and
its customers. The Company's excess carriers were later added to this
action. Subsequently, the court ruled that the insurer has a duty to
defend the Company's customers in these lawsuits.
In October 1998, the Company filed in the state court in Delaware various
counterclaims against the insurer including, among others, that the
Company's multi-year product liability policy was not canceled, as alleged
by the insurer, that a supplemental extended reporting period under the
policy applied to underlying claims made on or after August 22, 1998, and
claims for bad faith for the improper handling and administration of
claims under the policy.
In December 1999, the Company completed a court-approved settlement with
its excess carriers that provided, among others, for an additional $17.75
million of insurance for these lawsuits. As part of that settlement, the
Company agreed to place an additional $5 million in escrow out of its own
cash reserves to pay for defense costs that it contends should have been
paid by its primary product liability carrier. The Company expended such
funds in December 1999. In fiscal 1999, the Company recorded a $5 million
provision for these defense costs. The Company also settled outstanding
disputes with several of its customers regarding their contributions to
defense costs. In general, the settlement provides for varying
contributions based on their purchases of the Company's phentermine
versus those from other manufacturers. In addition, during fiscal 1999, a
reserve of $500,000 established in a prior year was reversed to income as
the phentermine inventory previously reserved for was sold.
Also, in December 1999, the Company agreed in principle with its primary
product liability insurer to settle all outstanding disputes. In May
2000, the court approved the terms of the settlement and provided, among
other things, that the insurer would partially reimburse the Company
based on certain conditions up to an amount of $3.75 million for legal
costs previously paid by the Company and to provide for $1.25 million of
additional insurance that could be used for defense costs. This
additional insurance would be applicable after the Company exhausted all
existing product liability insurance. In fiscal 2000, the Company received
$3.75 million from its primary product liability carrier that the Company
recorded as a reduction of legal costs. In addition, the $1.25 million of
additional insurance was exhausted during fiscal 2000.
The Company filed additional claims in the state court in Delaware
against its general commercial liability insurance carriers stating that
they also have a duty to provide a defense to the Company against these
lawsuits. The Superior Court ruled against the Company and the state
Supreme Court upheld that ruling.
The Company's product liability coverage was obtained on a claims made
basis and covers liability for judgments and settlements and legal
defense costs. On or about April 2000, the Company had exhausted all its
available product liability coverage for phentermine that aggregated
approximately $48 million.
EON LABS MANUFACTURING, INC. AND SUBSIDIARIES 14
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Beginning in May 2000, the Company began to provide for legal defense
costs based on services rendered on behalf of the Company and its
customers. In fiscal 2000, the Company expensed $9 million for legal
costs. Coinciding with the exhaustion of its insurance coverage, the
Company entered into negotiations with several of its customers to
reduce legal costs by streamlining their legal defense structure and or
by increasing their contributions to defense costs. The Company has
obtained written agreements or has reached agreements in principle with
all these customers.
In a related matter, one of the Company's customers named in these
lawsuits, also filed an action in a prior year against the Company in a
federal court in Kentucky seeking a declaration of rights and
responsibilities under a written indemnity agreement between the
Company and such customer. The customer has dismissed this lawsuit with
prejudice.
Because predicting the ultimate outcome of these lawsuits is not
possible, no provisions for any liability other than those discussed
above have been reflected in the Company's financial statements.
PATENT INFRINGEMENT LITIGATION
In 2000, Novartis Pharmaceuticals Corporation filed an action in the
United States District Court for the District of Delaware alleging
that the Company is infringing on its patent by manufacturing, using,
selling and offering to sell cyclosporine capsules, and that the
packaging and trade dress of the Company's cyclosporine capsules
infringes Novartis's rights under the ▇▇▇▇▇▇ Act and Delaware common and
statutory law in the trade dress of its NEORAL(R) cyclosporine
capsules. Novartis seeks injunctive relief and damages and has also
asserted a claim that the alleged infringement was willful, that the
case is therefore exceptional and that Novartis should therefore be
awarded the attorney fees it has incurred in the action.
The Company has denied that it has infringed any valid patent claims or
any Novartis's rights in the trade dress and packaging of its NEORAL(R)
cyclosporine capsules. The Company has also alleged affirmatively, among
other things, that the patent is invalid and that it is not infringed by
the Company's manufacture, use, sale or offer to sell its cyclosporine
capsules. In addition, the Company has counterclaimed alleging that
Novartis has made false and misleading statements regarding the nature,
characteristics and qualities of the Company's cyclosporine product in
violation of the ▇▇▇▇▇▇ Act and Delaware common and statutory law. The
Company has requested injunctive relief, damages and award of its attorney
fees.
In addition, the Company has been named in several other patent
infringement actions alleging that the Company has infringed patents by
filing an application with the Food and Drug Administration (FDA) for
approval to market products before the plaintiffs' patents expire. In
general, plaintiffs seek a judgment precluding the FDA from approving
the Company's application to market the product before their patent
expires and have asserted a claim that the alleged infringement was
willful, that the action is therefore exceptional and that plaintiffs
should therefore be awarded the attorney fees they have incurred in the
action.
The Company and its outside counsel believe that the Company has
substantial defenses and counterclaims to these above patent
infringement actions.
Because predicting the ultimate outcome of these actions is not
possible, no provision for any liability has been reflected in the
Company's financial statements.
EON LABS MANUFACTURING, INC. AND SUBSIDIARIES 15
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
OTHER LITIGATION
The Company is involved in other litigation incidental to its business
activities. The ultimate disposition of such lawsuits will not materially
affect the Company's financial statements.
10. TRANSACTIONS BETWEEN THE COMPANY AND REBATED PARTIES
As of September 30, 2000, the Company was 50% owned by Hexal
Pharmaceuticals, Inc. ("Hexal Pharma"), a subsidiary of Hexal AG based in
Germany. Subsequent to September 30, 2000, Hexal Pharma acquired 100%
ownership in the Company (see Note 12).
The Company's net sales for 2000 includes sales of approximately $60,000 to
another Hexal AG subsidiary at margins comparable to those made on sales
to non-related parties. Net sales for 1999 do not include any intercompany
sales. Additionally, the Company transferred raw materials, research
materials and supplies between Eon, Hexal AG and other Hexal AG
subsidiaries. The Company shipped Hexal AG and its affiliates materials and
supplies with a cost of $69,000 and $27,000 in 2000 and 1999, respectively.
At September 30, 2000, the Company was owed approximately $29,000. The
Company paid Hexal AG $120,000 and $15,000 in 2000 and 1999, respectively,
for research material that was received from Hexal AG.
In 2000, the Company entered into an agreement with Hexal AG. Under the
agreement, the Company pays Hexal AG an amount based on sales of a specific
product, which was developed using Hexal AG's patented technology. During
2000, the Company incurred expense of approximately $290,000, which is
included in accrued expenses at September 30, 2000.
The Company and Hexal AG have also agreed to share the expenses of
conducting independent bioequivalency studies, when the results can be used
to support drug applications in both the United States and Germany. The
Company paid Hexal AG $370,000 and $107,000 in 2000 and 1999, respectively.
In 1999, the Company also received $116,000 from Hexal AG for studies
sponsored by the Company.
11. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Included in selling, general and administrative expenses for the years
ended September 30, 2000 and September 30, 1999 were approximately $6
million (net of insurance reimbursement of $3.75 million) and approximately
$5 million, respectively, of legal defense costs accrued for phentermine
related litigation. See Note 9 for details of the phentermine litigation.
Included in selling, general and administrative expenses for the year ended
September 30, 2000 and 1999 were approximately $1,233,000 and $1,683,000,
respectively, of legal costs incurred in connection with patent challenges
involving drugs manufactured and sold by other companies. See Note 9 for
details concerning patent litigation.
Advertising costs are expensed when incurred. Advertising expenses for the
years ended September 30, 2000 and 1999 were approximately $689,000 and
$316,000, respectively.
EXHIBIT A
REVOLVING CREDIT NOTE
$25,000,000 Uniondale, New York
February 8, 2002
FOR VALUE RECEIVED, EON LABS MANUFACTURING, INC., a Delaware
corporation and EON PHARMA, LLC, a Delaware limited liability company (each a
"Company" and, collectively, the "Companies"), jointly and severally, promise
to pay to the order of JPMORGAN CHASE BANK (the "Lender"), on or before the
Revolving Credit Commitment Termination Date, the principal amount of TWENTY
FIVE MILLION DOLLARS ($25,000,000) or, if less, the unpaid principal amount
of all Revolving Credit Loans made by the Lender to the Companies under the
Credit Agreement referred to below.
The Companies also promise to pay interest on the unpaid principal
amount hereof from the date hereof until paid in full at the rates and at the
times which shall be determined, and to make principal repayments on this
Note at the times which shall be determined, in accordance with the
provisions of the
Credit Agreement referred to below.
This Note is the "Revolving Credit Note" referred to in the
Credit
Agreement dated as of February 8, 2002, by and among the Companies and the
Lender (as the same may be amended, modified or supplemented from time to
time, the "
Credit Agreement") and is issued pursuant to and entitled to the
benefits of the
Credit Agreement to which reference is hereby made for a more
complete statement of the terms and conditions under which the Revolving
Credit Loans evidenced hereby were made and are to be repaid. Capitalized
terms used herein without definition shall have the meanings set forth in the
Credit Agreement.
Each of the Lender and any subsequent holder of this Note agrees, by
its acceptance hereof, that before transferring this Note it shall record the
date, Type and amount of each Revolving Credit Loan and the date and amount
of each payment or prepayment of principal of each Revolving Credit Loan
previously made hereunder on the grid schedule annexed to this Note;
PROVIDED, HOWEVER, that the failure of the Lender or holder to set forth such
Revolving Credit Loans, payments and other information on the attached grid
schedule shall not in any manner affect the obligation of the Companies to
repay the Revolving Credit Loans made by the Lender in accordance with the
terms of this Note to the extent then unpaid.
This Note is subject to prepayments pursuant to Section 3.03 of the
Credit Agreement.
Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note together with all accrued but unpaid
interest thereon, may become, or may be declared to be, due and payable in
the manner, upon the conditions and with the effect provided in the Credit
Agreement.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in immediately
available funds at the office of JPMorgan Chase Bank, located at ▇▇▇-▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such other
place as shall be designated in writing for such purpose in accordance with
the terms of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligation of the
Companies, which is absolute and unconditional, to pay the principal of and
interest on this Note at the place, at the respective times, and in the
currency herein prescribed.
The Companies and endorsers of this Note waive presentment,
diligence, demand, protest, and notice of any kind in connection with this
Note.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, the Companies have caused this Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.
EON LABS MANUFACTURING, INC.
By:
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President
EON PHARMA, LLC
By:
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President
2
SCHEDULE
Date Principal Type Applicable Amount of Notation
of Amount of of Interest Interest Principal Made
Loan Loan Loan Rate Period Paid By
---- --------- ---- -------- ---------- --------- ---------
3
EXHIBIT B
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 8, 2002, by and among each of
the entities identified on the signature page hereto under the heading
"Grantor" (each a "Grantor" and, collectively, the "Grantors") and JPMORGAN
CHASE BANK (the "Secured Party").
RECITALS
A. Eon Labs Manufacturing, Inc. a Delaware corporation, Eon
Pharma, LLC, a Delaware limited liability company (each a "Company" and,
collectively, the "Companies") and the Secured Party have entered into a
Credit Agreement, dated as of the date hereof (as the same may be hereafter
amended, modified, restated or supplemented from time to time, the "Credit
Agreement") pursuant to which the Companies will receive loans and other
financial accommodations from the Secured Party and will incur Obligations
(as hereinafter defined).
B. To induce the Secured Party to extend credit to the
Companies on and after the date hereof as provided in the Credit Agreement,
each Grantor desires to grant the Secured Party security and assurance in
order to secure the payment and performance of all Obligations and to that
effect to grant the Secured Party a first priority perfected security
interest in its assets and, in connection therewith, to execute and deliver
this Agreement.
Accordingly, the parties hereto hereby agree as follows:
DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Uniform
Commercial Code as in effect in the State of New York (the "UCC").
(b) Capitalized terms used herein and not otherwise defined
shall have the following meanings:
"AGREEMENT": this Agreement and shall include all amendments,
modifications and supplements hereto and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative.
"BUSINESS DAY" the meaning assigned to such term in the Credit
Agreement.
"COLLATERAL": all personal property of each Grantor, wherever
located, and whether now owned or hereafter acquired or arising, including,
without limitation, all:
(i) Accounts;
(ii) Chattel paper, including Electronic Chattel Paper;
(iii) Inventory;
(iv) Instruments, including Promissory Notes;
(v) Documents;
(vi) Deposit Accounts with the Secured Party and Deposit
Accounts constituting proceeds of Collateral;
(vii) Letter-of-Credit Rights;
(viii) General Intangibles (to the extent arising from
Accounts);
(ix) Supporting Obligations; and
(x) to the extent not listed above as original
collateral, proceeds and products of the foregoing.
"DEFAULT" the meaning assigned to such term in the Credit Agreement.
"EVENT OF DEFAULT" the meaning assigned to such term in the Credit
Agreement.
"LIENS" the meaning assigned to such term in the Credit Agreement.
"LOAN DOCUMENTS" the meaning assigned to such term in the Credit
Agreement.
"LOANS" the meaning assigned to such term in the Credit Agreement.
"OBLIGATIONS" (i) all obligations, liabilities and indebtedness of each
Grantor to the Secured Party, whether now existing or hereafter created,
absolute or contingent, direct or indirect, due or not, whether created directly
or acquired by assignment or otherwise, arising under or relating to this
Agreement or any other Loan Document to which it is a party (including, without
limitation, with respect to the Companies, all obligations, liabilities and
indebtedness with respect to the principal of and interest on the Loans,
including the payment of amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, and interest
that but for the filing of a petition in bankruptcy with respect to any Grantor
would accrue on such obligations, whether or not a claim is allowed against
such Grantor for such interest in the related bankruptcy proceeding), and all
fees, costs, expenses and indemnity obligations of the Grantors to the Secured
Party hereunder, or under any other Loan Document, and (ii) all obligations of
the Companies under each interest rate swap, collar, cap, floor or forward rate
agreement or other agreement regarding the hedging of interest rate risk
exposure of the Companies, in each case, entered into with the Secured Party.
2
"PERSON" the meaning assigned to such term in the Credit Agreement.
(c) TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and the neuter. Except as otherwise herein
specifically provided, each accounting term used herein shall have the meaning
given to it under Generally Accepted Accounting Principles. The term
"including" shall not be limited or exclusive, unless specifically indicated to
the contrary. The word "will" shall be construed to have the same meaning in
effect as the word "shall". The words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole, including the
exhibits and schedules hereto, all of which are by this reference incorporated
into this Agreement.
I. SECURITY
SECTION 1.01. GRANT OF SECURITY. As security for the Obligations, each
Grantor hereby transfers, assigns and grants to the Secured Party a security
interest in the Collateral in which such Grantor has rights.
SECTION 1.02. RELEASE AND SATISFACTION. Upon the termination of this
Agreement and the indefeasible payment in full of the Obligations, the Secured
Party shall deliver to each Grantor, upon request therefor and at such Grantor's
expense, releases and satisfactions of all financing statements, notices of
assignment and other registrations of security.
II. REPRESENTATIONS AND WARRANTIES
SECTION 2.01. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SECURITY.
Each Grantor hereby represents and warrants to the Secured Party as follows:
(a) NAME. Each Grantor's exact legal name, state of incorporation
or organization and organizational number is set forth on Schedule A annexed
hereto.
(b) OWNERSHIP OF COLLATERAL. Each Grantor owns all of its
personal property and assets, including, without limitation, the Collateral,
free and clear of all Liens, other than the Liens permitted under Section 7.01
of the Credit Agreement.
(c) ACCOUNTS. Annexed hereto as Schedule A is a list identifying
the chief executive office or principal place of business of each Grantor and
all addresses at which each Grantor maintains books or records relating to its
Accounts as of the date of this Agreement.
3
(d) INVENTORY. Annexed hereto as Schedule A is a list
identifying all addresses where each Grantor maintains its Inventory as of
the date of this Agreement. No Grantor's Inventory is currently maintained or
will be maintained with any bailee that issues negotiable warehouse receipts
or other negotiable instruments therefore.
(e) TRADE NAMES. Except as set forth on Schedule A annexed
hereto, each Grantor has not done during the five years prior to this Agreement,
and does not currently do, business under fictitious business names or trade
names. No Grantor has been known under any other name during such five year
period. Each Grantor will only change its name or do business under any other
fictitious business names or trade names during the term of this Agreement after
giving not less than thirty (30) Business Days' prior written notice to the
Secured Party.
(f) ACQUIRED COLLATERAL. Except as set forth on Schedule A annexed
hereto, the Collateral has been acquired or originated by each Grantor in the
ordinary course of such Grantor's business and was not acquired pursuant to any
acquisition of all or a portion of the business of any Person whether by merger,
acquisition of assets or otherwise.
(g) THIRD PARTY LOCATIONS. Except as set forth on Schedule A
annexed hereto, no Collateral is in the possession of, or under the control of,
any Person other than a Grantor or the Secured Party.
(h) ENFORCEABILITY OF SECURITY INTERESTS. Upon the execution of
this Agreement by each Grantor and the filing of financing statements properly
describing the Collateral and identifying such Grantor and the Secured Party in
the applicable jurisdiction required pursuant to the UCC, security interests and
liens granted to the Secured Party under Section 1.01 hereof shall constitute
valid, perfected and first priority security interests and liens in and to the
Collateral of such Grantor, other than Collateral which may not be perfected by
filing under the Uniform Commercial Code, and subject to the Liens permitted
pursuant to Section 7.01 of the Credit Agreement, in each case enforceable
against all third parties and securing the payment of the Obligations.
III. COVENANTS OF GRANTORS
SECTION 3.01. RECORDS; LOCATION OF COLLATERAL. So long as a Grantor
shall have any Obligation to the Secured Party (a) such Grantor shall not change
the jurisdiction of its incorporation or organization or move its chief
executive office, principal place of business or office at which is kept its
books and records (including computer printouts and programs) from the locations
existing on the date hereof and listed on Schedule A annexed hereto; (b) a
Grantor shall not establish any offices or other places of business at any other
location; (c) a Grantor shall not move any of the Collateral to any location
other than those locations existing on the date hereof and listed on Schedule A
annexed hereto; or (d) a Grantor shall not change its corporate name in any
respect, unless, in each case of clauses (a), (b) (c) and (d) above, (i) a
Grantor shall have given the Secured Party fifteen (15) Business Days' prior
written notice of its intention to do so, identifying the new location and
providing such other information as the Secured Party deems necessary, and (ii)
a
4
Grantor shall have delivered to the Secured Party such documentation, in form
and substance satisfactory to the Secured Party and as required by the Secured
Party, to preserve the Secured Party's security interest in the Collateral.
SECTION 3.02. OTHER COLLATERAL. Each Grantor shall promptly notify the
Secured Party upon acquiring or otherwise obtaining any Collateral after the
date hereof consisting of Deposit Accounts, Letter-of-Credit Rights, Electronic
Chattel Paper, Documents or instruments.
SECTION 3.03. FURTHER ACTIONS.
(a) PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If any Grantor
shall at any time hold or acquire any Promissory Notes or Tangible Chattel
Paper, such Grantor shall forthwith endorse, assign or deliver the same to the
Secured Party accompanied by instruments of transfer or assignment duly
executed in blank as the Secured Party may from time to time specify.
(b) COLLATERAL IN THE POSSESSION OF THIRD PARTIES. If any
Collateral is at any time in the possession of any person or entity other
than a Grantor or the Secured Party (a "Third Party"), the Grantor shall
promptly notify the Secured Party thereof, and at the Secured Party's request
an option, shall promptly obtain an acknowledgment from the Third Party, in
form and substance satisfactory to the Secured Party that the Third Party
holds such collateral for the benefit of the Secured Party and such Third
Party's agreement to comply, without further consent of the Grantor, at any
time with the instructions of the Secured Party as to such Collateral. The
Secured Party agrees with the Grantor that the Secured Party shall not give
any such instructions unless an Event of Default has occurred and is
continuing. In the event that the aggregate value of the Collateral based on
the book value thereof is less than $5,000,000, then, notwithstanding the
foregoing, the Grantor shall only be required to notify a Third Party of the
Secured Party's interest in the Collateral, upon request of the Secured
Party, which request shall be made only upon the occurrence and during the
continuance of an Event of Default.
(c) ELECTRONIC CHATTEL PAPER. If any Grantor at any time holds or
acquired an interest in any Electronic Chattel Paper, such Grantor shall
promptly notify the Secured Party thereof and, at the request and option of the
Secured Party, shall take such action as the Secured Party may reasonably
request to vest in the Secured Party control under Section 9105 of the UCC of
such Electronic Chattel Paper.
(d) LETTER-OF-CREDIT RIGHTS. If any Grantor is at any time the
beneficiary under a Letter of Credit, such Grantor shall promptly notify the
Secured Party thereof and, at the request and option of the Secured Party, such
Grantor shall, pursuant to an arrangement in form and substance satisfactory to
the Secured Party, either (i) arrange for the Issuer and any confirmed or other
nominated person of such Letter of Credit to consent to an assignment to the
Secured Party the proceeds of the Letter of Credit or (ii) arrange for the
Secured Party to become the transferee beneficiary of the Letter of Credit,
with the Secured Party agreeing in each case that the proceeds of
5
the Letter of Credit are to be applied to satisfaction of the Obligations in
such order as the Secured Party may determine.
(e) GENERAL. Each Grantor further agrees, upon the request of the
Secured Party and at the Secured Party's option, to take any and all other
actions as the Secured Party may determine to be necessary or useful for the
attachment, perfection and first priority of, and the ability of the Secured
Party to enforce, the Secured Party's security interest in any and all of the
Collateral, including without limitation, executing and delivering and where
appropriate filing financing statements and amendments relating thereto under
the UCC to the extent, if any, that such Grantor's signature thereon is required
therefor, causing the Secured Party's name to be noted as Secured Party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or the ability of the Secured Party to
enforce, the Secured Party's security interest in such Collateral, (c) comply
with any provision of any statute, regulation or treaty of the United States as
to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Secured Party to
enforce the Secured Party's security interest in such Collateral, (d) obtaining
governmental and other third party waivers, consents and approvals in form and
substance satisfactory to the Secured Party, including, without limitation, any
consent of any licensor, lessor or other persons obligated on Collateral and (e)
obtaining waivers from mortgagees and landlords in form and substance
satisfactory to the Secured Party.
SECTION 3.05. INSURANCE AND ASSESSMENTS. In the event any Grantor
shall fail to purchase or maintain insurance, or pay any tax, assessment,
government charge or levy, except as the same may be otherwise permitted
hereunder or under the Credit Agreement, or in the event that any lien,
encumbrance or security interest prohibited hereby shall not be paid in full or
discharged, or in the event such Grantor shall fail to perform or comply with
any other covenant, promise or obligation to the Secured Party hereunder, or
under the Credit Agreement or any other Loan Document, the Secured Party may,
but shall not be required to, perform, pay, satisfy, discharge or bond the same
for the account of such Grantor, and all money so paid by the Secured Party,
including reasonable attorney's fees, shall be deemed to be Obligations.
SECTION 3.06. INSPECTION. Upon reasonable notice to a Grantor, the
Secured Party may, during such Grantor's normal business hours, examine and
inspect any Collateral and may examine, inspect and copy all books and records
with respect thereto or relevant to the Obligations.
SECTION 3.07. PERSONAL PROPERTY. The Collateral shall remain personal
property at all times. No Grantor shall affix any of the Collateral to real
property in any manner which would change its nature from that of personal
property to real property or to a fixture.
SECTION 3.08. INDEMNIFICATION. Each Grantor agrees to indemnify the
Secured Party and hold it harmless from and against any and all injuries,
claims, damages, judgments, liabilities, costs and expenses (including, without
limitation, reasonable fees and disbursements of counsel), charges and
encumbrances (collectively, "Losses") which may be incurred by or asserted by a
third party against the Secured Party in connection with or arising out of any
assertion, declaration or defense
6
of the Secured Party's rights or security interest under the provisions of this
Agreement or any other Loan Document, permitting it to collect, settle or adjust
Accounts or to deal with account debtors in any way or in connection with the
realization, repossession, safeguarding, insuring or other protection of the
Collateral or in connection with the collecting, perfecting or protecting the
Secured Party's liens and security interests hereunder or under any other Loan
Document except those Losses arising out of the Secured Party's gross negligence
or willful misconduct.
IV. POWER OF ATTORNEY; NOTICES
SECTION 4.01. POWER OF ATTORNEY. Upon the occurrence of and during
the continuance of an Event of Default each Grantor hereby irrevocably
constitutes and appoints the Secured Party and any officer or agent thereof,
with full power of substitution, as its true and lawful attorneys-in-fact with
full irrevocable power and authority in the place and stead of such Grantor
or in the Secured Party's own name, for the purpose of carrying out the terms
of this Agreement, to take any and all appropriate action and to execute any
and all documents and instruments that may be necessary or useful to
accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby give said attorneys the power and right,
on behalf of the Grantor, without notice to or assent by the Grantor, to (a)
endorse the names of such Grantor on any checks, notes, drafts or other
forms of payment or security that may come into the possession of the Secured
Party or any affiliate of the Secured Party, to sign the Grantor's name on
invoices or bills-of-lading, drafts against customers, notices of assignment,
verifications and schedules, (b) sell, transfer, pledge, make any arrangement
with respect to or otherwise dispose of or deal with any of the Collateral
consistent with the UCC and (c) do acts and things which the Secured Party
deems necessary or useful to protect, preserve or realize upon the Collateral
and the Secured Party's security interest therein. The powers granted herein,
being coupled with an interest, are irrevocable until all of the Obligations
are indefeasibly paid in full and this Agreement is terminated. The powers
conferred on the Secured Party hereunder are solely to protect its interests
in the Collateral and shall not impose any duty upon it to exercise any such
powers. Neither the Secured Party nor any attorney-in-fact shall be liable
for any act or omission, error in judgment or mistake of law provided the
same is not the result of gross negligence or willful misconduct.
SECTION 4.02. NOTICES. Upon the occurrence and during the
continuance of an Event of Default, the Secured Party may notify account
debtors and other persons obligated on any of the Collateral that the
Collateral have been assigned to the Secured Party or of its security
interest therein and to direct such account debtors and other persons
obligated on any of the Collateral to make payment of all amounts due or to
become due to a Grantor directly to the Secured Party and upon such
notification and at such Grantor's expense to enforce collection of any such
Collateral, and to adjust, compromise or settle for cash, credit or otherwise
upon any terms the amount of payment thereof. The Secured Party may, at any
time following the occurrence and during the continuances of an Event of
Default, notify the Postal Service authorities to change the address of
delivery of mail to an address designated by the Secured Party. After making
of such a request or the giving of any such notification, each Grantor shall
hold any proceeds of collection of accounts, Chattel Paper, general
intangibles, instruments and other Collateral received by it as trustee for
the
7
Secured Party without commingling the same with such Grantor and shall turn the
same over to the Secured Party in the identical form received, together with any
necessary endorsements or assignments. The Secured Party shall apply the
proceeds of collection of such Collateral received by the Secured Party to the
Obligations, in such order as the Secured Party, in its sole discretion, shall
determine, such proceeds to be immediately credited after final payment in cash
or other immediately available funds of the items giving rise to them.
V. REMEDIES OF SECURED PARTY
SECTION 5.01. ENFORCEMENT. Upon the occurrence and during the
continuances of an Event of Default, the Secured Party shall have, in
addition to all of its other rights under this Agreement and the other Loan
Documents by operation of law or otherwise (which rights shall be
cumulative), all of the rights and remedies of a secured party under the UCC
and shall have the right, to the extent permitted by law, without charge, to
enter any Grantor's premises, and until it completes the enforcement of its
rights in the Collateral subject to its security interest hereunder and the
sale or other disposition of any property subject thereto, take possession
of such premises without charge, rent or payment therefor (through self help
without judicial process and without having first given notice or obtained
an order of any court), or place custodians in control thereof, remain on such
premises and use the same for the purpose of completing any work in progress,
preparing any Collateral for disposition, and disposition of or collecting
any Collateral. Without limiting the foregoing, upon the occurrence of an
Event of Default, the Secured Party may, without demand, advertising or
notice, all of which such Grantor hereby waives (except as the same may be
required by law), sell, lease, license or otherwise dispose of and grant
options to a third party to purchase, lease, license or otherwise dispose of
any and all Collateral held by it or for its account at any time or times in
one or more public or private sales or other dispositions, for cash, on
credit or otherwise, at such prices and upon such terms as the Secured Party,
in its sole discretion, deems advisable. At any such sale the Collateral or
any portion thereof may be sold in one lot as an entirety or in separate
parcels as the Secured Party in its sole discretion deems advisable. Each
Grantor agrees that if notice of sale shall be required by law such
requirement shall be met if such notice is mailed, postage prepaid, to such
Grantor at its address set forth above or such other address as it may have,
in writing, provided to the Secured Party, at least five (5) Business Days
before the time of such sale or disposition. The Secured Party may postpone
or adjourn any sale of any Collateral from time to time by an announcement at
the time and place of the sale to be so postponed or adjourned, without being
required to give a new notice of sale. Notice of any public sale shall be
sufficient if it describes the security of the Collateral to be sold in
general terms, stating the amounts thereof, the nature of the business in
which such Collateral was created and the location and nature of the
properties covered by the other security interests or mortgages and the prior
liens thereof. The Secured Party may be the purchaser at any such sale if it
is public, free from any right of redemption, which such Grantor also waives,
and payment may be made, in whole or in part, in respect of such purchase
price by the application of the Obligations by the Secured Party. Each
Grantor with respect to its property constituting such Collateral, shall be
obligated for, and the proceeds of sale shall be applied first to, the costs
of taking, assembling, finishing, collecting, refurbishing, storing,
guarding, insuring, preparing for sale, and selling the Collateral, including
the fees and disbursements of
8
attorneys, auctioneers, appraisers and accountants employed by the Secured
Party. Proceeds shall then be applied to the payment, in whatever order the
Secured Party may elect, of all of the Obligations. The Secured Party shall
return any excess to such Grantor or to whomever may be fully entitled to
receive the same or as a court of competent jurisdiction may direct. In the
event that the proceeds of any sale or other disposition of the Collateral
are insufficient to pay in full the Obligations, such Grantor shall remain
liable for any deficiency.
SECTION 5.02. STANDARDS FOR EXERCISING RIGHTS AND REMEDIES. To the
extent that applicable law imposes duties on the Secured Party to exercise
remedies in a commercially reasonable manner, each Grantor acknowledges and
agrees, to the extent permitted by applicable law, that it is not
commercially unreasonable for the Secured Party (a) to fail to incur expenses
reasonably deemed significant by the Secured Party to prepare Collateral for
disposition or otherwise to fail to complete raw material or work in process
into finished goods or other finished products for disposition, (b) to fail
to obtain third party consents for access to Collateral to be disposed of, or
to obtain or, if not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of Collateral to be
collected or disposed of, (c) to fail to exercise collection remedies against
account debtors or other persons obligated on Collateral or to fail to remove
liens or encumbrances on or any adverse claims against Collateral, (d) to
exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies
and other collection specialists, (e) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (f) to contact other persons, whether
or not in the same business as each Grantor, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether
or not the collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets
of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, (k) to purchase insurance or credit enhancements to
insure the Secured Party against risk of loss, collection or disposition of
Collateral or to provide to the Secured Party a guaranteed return from the
collection or disposition of Collateral, or (l) to the extent deemed
appropriate by the Secured Party, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the Secured
Party in the collection or disposition of any of the Collateral. Each Grantor
acknowledges that the purpose of this Section 5.02 is to provide
non-exhaustive indications of what actions or omissions by the Secured Party
would fulfill the Secured Party's duties under the UCC of the State or any
other relevant jurisdiction in the Secured Party's exercise of remedies
against the Collateral and that other actions or omissions by the Secured
Party shall not be deemed to fail to fulfill such duties solely on account of
not being indicated in this Section 5.02. Without limitation upon the
foregoing, nothing contained in this Section 5.02 shall be construed to grant
any rights to each Grantor or to impose any duties on the Secured Party that
would not have been granted or imposed by this Agreement or by applicable law
in the absence of this Section 5.02.
9
SECTION 5.03. WAIVER. Each Grantor waives any right, to the extent
applicable law permits, to receive prior notice of, or a judicial or other
hearing with respect to, any action or prejudgment remedy or proceeding by
the Secured Party to take possession, exercise control over, or dispose of
any item of the Collateral in any instance (regardless of where such
Collateral may be located) where such action is permitted under the terms of
this Agreement or any other Loan Document, or by applicable law, or of the
time, place or terms of sale in connection with the exercise of the Secured
Party's rights hereunder and such Grantor also waives, to the extent
permitted by law, any bond, security or sureties required by any statute,
rule or otherwise by law as an incident to any taking of possession by the
Secured Party of property subject to the Secured Party's Lien. Each Grantor
further waives any damages (direct, consequential or otherwise) occasioned by
the enforcement of the Secured Party's rights under this Agreement and any
other Loan Document including the taking of possession of any Collateral all
to the extent that such waiver is permitted by law and to the extent that
such damages are not caused by the Secured Party's gross negligence or
willful misconduct. These waivers and all other waivers provided for in this
Agreement and any other Loan Documents have been negotiated by the parties
and each Grantor acknowledges that it has been represented by counsel of its
own choice and has consulted such counsel with respect to its rights
hereunder.
SECTION 5.04. OTHER RIGHTS. Each Grantor agrees that the Secured
Party shall not have any obligation to preserve rights to any Collateral
against prior parties or to proceed first against any Collateral or to
▇▇▇▇▇▇▇▇ any Collateral of any kind for the benefit of any other creditors of
such Grantor or any other Person. The Secured Party is hereby granted, to the
extent that such Grantor is permitted to grant a license or right of use, a
license or other right to use, without charge, labels, patents, copyrights,
rights of use, of any name, trade secrets, trade names, trademarks and
advertising matter, or any property of a similar nature of such Grantor as it
pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and such Grantor's rights under all licenses
and any franchise, sales or distribution agreements shall inure to the
Secured Party's benefit.
SECTION 5.05. EXPENSES. Each Grantor agrees that it shall pay on
demand therefor all costs and expenses incurred in amending, implementing,
perfecting, collecting, defending, declaring and enforcing the Secured
Party's rights and security interests in the Collateral hereunder or under
the Credit Agreement or any other Loan Document or other instrument or
agreement delivered in connection herewith or therewith, including, but not
limited to, searches and filings, and the Secured Party's reasonable
attorneys' fees (regardless of whether any litigation is commenced, whether a
default is declared hereunder, and regardless of tribunal or jurisdiction).
VI. GENERAL PROVISIONS
SECTION 6.01. TERMINATION. This Agreement shall remain in full force
and effect until all the Obligations shall have been indefeasibly fully paid
and satisfied and the Credit Agreement shall have expired or been terminated
and, until such time, the Secured Party shall retain all security in and
title to all existing and future Collateral held by it hereunder.
10
SECTION 6.02. REMEDIES CUMULATIVE. The Secured Party's rights and
remedies under this Agreement shall be cumulative and non-exclusive of any
other rights or remedies which it may have under the Credit Agreement, any
other Loan Document or any other agreement or instrument, by operation of law
or otherwise and may be exercised alternatively, successively or concurrently
as the Secured Party may deem expedient.
SECTION 6.03. BINDING EFFECT. This Agreement is entered into for the
benefit of the parties hereto and their successors and assigns. It shall be
binding upon and shall inure to the benefit of the said parties, their
successors and assigns. No Grantor shall assign or transfer any of its rights
or obligations hereunder without the prior written consent of the Secured
Party and any attempted assignment shall be null and void.
SECTION 6.04. NOTICES. Wherever this Agreement provides for notice
to either party (except as expressly provided to the contrary), it shall be in
writing and given in the manner specified in Section 9.01 of the Credit
Agreement. Such notices to each Grantor shall be delivered to the address for
notices set forth on Schedule A annexed hereto.
SECTION 6.05. WAIVER. No delay or failure on the part of the Secured
Party in exercising any right, privilege, remedy or option hereunder shall
operate as a waiver of such or any other right, privilege, remedy or option,
and no waiver shall be valid unless in writing and signed by an officer of
the Secured Party and only to the extent therein set forth.
SECTION 6.06. MODIFICATIONS AND AMENDMENTS. This Agreement and the
other agreements to which it refers constitute the complete agreement between
the parties with respect to the subject matter hereof and may not be changed,
modified, waived, amended or terminated orally, but only by a writing signed
by the party to be charged.
SECTION 6.07. SEVERAL AGREEMENTS. This Agreement shall constitute
the several obligations and agreements of each Grantor and may be amended,
restated, supplemented or otherwise modified from time to time, with respect
to any Grantor without the consent or approval of any other Grantor, and no
such amendment, restatement, supplement or modification shall be deemed to
amend, restate, supplement or modify the obligations of any other Grantor
hereunder.
SECTION 6.08. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each Grantor made or deemed made herein
shall survive the execution and delivery of this Agreement.
SECTION 6.09. SEVERABILITY. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, in such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision
in any other jurisdiction.
11
SECTION 6.10. APPLICABLE LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICT OR CHOICE OF LAWS. EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY FEDERAL OR STATE COURT IN THE ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇▇ OF QUEENS IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH GRANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS
A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE
SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE
VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT
OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER
THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH GRANTOR AGREES (i) NOT TO SEEK AND HEREBY WAIVES THE
RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY
OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT
OF SUCH JUDGMENT AND (ii) NOT TO ASSERT ANY COUNTERCLAIM IN ANY SUCH SUIT,
ACTION OR PROCEEDING. EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET
FORTH IN THIS AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. EACH
GRANTOR AND THE SECURED PARTY EACH IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
SECTION 6.11 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of
which taken together shall constitute one and the same agreement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day and
year first above written.
JPMORGAN CHASE BANK
By:_________________________________
▇▇▇▇▇▇▇ ▇▇▇▇
Vice President
GRANTORS:
EON LABS MANUFACTURING, INC.
By:_________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President - Finance
FORTE PHARMA, INC.
By:_________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President
EON PHARMA, LLC
By:_________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President - Finance
13
SCHEDULE A
TO SECURITY AGREEMENT
(i) Name of Grantor:
(ii) State of Incorporation:
(iii) Chief Executive Office or Principal Place of Business:
(iv) Other offices at which books or records with respect to Accounts are
maintained:
(v) Inventory Locations:
(vi) Trade Names:
(vii) Non-Ordinary Course Collateral Acquisitions:
(viii) Collateral in the possession or control of third parties:
(ix) Address for Notices:
_____________________________
_____________________________
_____________________________
Attention:
Telecopy:
14
EXHIBIT C
GUARANTY
THIS GUARANTY is entered into as of the 8th day of February 2002, by
EACH OF THE UNDERSIGNED (each a "Guarantor" and, collectively, the
"Guarantors") in favor of and for the benefit of JPMORGAN CHASE BANK.
RECITALS
A. Pursuant to a Credit Agreement, dated the date hereof, by and
among Eon Labs Manufacturing, Inc., Eon Pharma, LLC (each a "Company" and,
collectively, the "Companies") and JPMorgan Chase Bank (as the same may be
amended, restated, modified or supplemented from time to time, the "Credit
Agreement"), the Companies will receive loans and other financial
accommodations from the Lender and will incur Obligations.
B. The Guarantors, being members of a group of entities affiliated
with the Companies and being engaged in related businesses will receive
direct and indirect benefits from such loans and financial accommodations.
C. Each Guarantor wishes to grant the Lender security and assurance
in order to secure the payment and performance by the Companies of all of its
present and future Obligations, and, to that effect, to guaranty the
Obligations as set forth herein.
Accordingly, each Guarantor hereby agrees as follows:
1. GUARANTY.
(a) Each Guarantor, jointly and severally, unconditionally and
irrevocably guarantees to the Lender the full and punctual payment by the
Companies, when due, whether at the stated due date, by acceleration or
otherwise, of all Obligations of the Companies, howsoever created, arising or
evidenced, voluntary or involuntary, whether direct or indirect, absolute or
contingent now or hereafter existing or owing to the Lender (collectively,
the "Guaranteed Obligations"). This Guaranty is an absolute, unconditional,
continuing guaranty of payment and not of collection of the Guaranteed
Obligations and includes Guaranteed Obligations arising from successive
transactions which shall either continue such Guaranteed Obligations or from
time to time renew such Guaranteed Obligations after the same have been
satisfied. This Guaranty is in no way conditioned upon any attempt to
collect from the Company or upon any other event or contingency, and shall be
binding upon and enforceable against each Guarantor without regard to the
validity or enforceability of the Credit Agreement, the Note or any other
Loan Document or of any term of any thereof. If for any reason the Companies
shall fail or be unable duly and punctually to pay any of the Guaranteed
Obligations (including, without limitation amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. Section 362 (a)), each Guarantor will forthwith pay
the same, in cash, immediately upon demand.
(b) In the event the Credit Agreement, any Note or any other Loan
Document shall be terminated as a result of the rejection thereof by any
trustee, receiver or liquidating agent of
any Company or any of its properties in any bankruptcy, insolvency,
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar proceeding, each Guarantor's obligations hereunder shall continue to
the same extent as if the Credit Agreement, such Note or such other Loan
Document had not been so rejected.
(c) Each Guarantor shall pay all costs, reasonable expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
and damages incurred in connection with the enforcement of the Obligations
under the Credit Agreement or the Note or any other Loan Document to the
extent that such costs, expenses and damages are not paid by the Companies
pursuant to the respective documents.
(d) Each Guarantor further agrees that if any payment made by any
Company or any Guarantor to the Lender on any Obligation is rescinded,
recovered from or repaid by the Lender, in whole or in part, in any
bankruptcy, insolvency or similar proceeding instituted by or against any
Company or any Guarantor, this Guaranty shall continue to be fully applicable
to such Guaranteed Obligation to the same extent as though the payment so
recovered or repaid had never originally been made on such Guaranteed
Obligation.
(e) If any Event of Default shall have occurred and be continuing,
the Lender and, to the extent permitted by applicable law, any Affiliate of
the Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held
and other indebtedness at any time owing by the Lender, or any Affiliate of
the Lender to or for the credit or the account of any Guarantor against any
of and all the obligations of any Guarantor now or hereafter existing under
this Guaranty, irrespective of whether or not the Lender shall have made any
demand hereunder and although such obligations may be unmatured. The rights
under this paragraph 1(e) are in addition to other rights and remedies
(including other rights of set off) which the Lender may have.
2. GUARANTY CONTINUING, ABSOLUTE, UNLIMITED.
The obligations of each Guarantor hereunder shall be continuing,
absolute, irrevocable, unlimited and unconditional, shall not be subject to
any counterclaim, set-off, deduction or defense (other than the indefeasible
payment of the Obligations in full) based upon any claim any Guarantor may
have against the Lender or any Company or any other person, and shall remain
in full force and effect without regard to, and, to the fullest extent
permitted by applicable law, shall not be released, discharged or in any way
affected by, any circumstance or condition (whether or not any Guarantor
shall have any knowledge or notice thereof) whatsoever which might constitute
a legal or equitable discharge or defense including, but not limited to,
(a) any express or implied amendment, modification or supplement to the
Credit Agreement, any Note, or any other Loan Document or any other agreement
referred to in any thereof, or any other instrument applicable to the
Companies or to the Loans, or any part thereof; (b) any failure on the part
of the Companies to perform or comply with the Credit Agreement, any Note or
any other Loan Document or any failure of any other person to perform or
comply with any term of the Credit Agreement, any Note, or any other Loan
Document
2
or any other agreement as aforesaid; (c) any waiver, consent, change,
extension, indulgence or other action or any action or inaction under or in
respect of the Credit Agreement, any Note, or any other Loan Document or any
other agreement as aforesaid, whether or not the Lender, any Company or any
Guarantor has notice or knowledge of any of the foregoing; (d) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or similar proceeding with respect to any Company, or its properties or its
creditors, or any action taken by any trustee or receiver or by any court in any
such proceeding; (e) any furnishing or acceptance of additional security or any
release of any security; (f) any limitation on the liability or obligations of
any Company under the Credit Agreement, any Note or any other Loan Document or
any termination, cancellation, frustration, invalidity or unenforceability, in
whole or in part, of the Credit Agreement, any Note, this Guaranty or any other
Loan Document or any term of any thereof; (g) any lien, charge or encumbrance on
or affecting any Guarantor's or any of the Companies' respective assets and
properties; (h) any act, omission or breach on the part of the Lender under the
Credit Agreement, any Note or any other Loan Document or any other agreement at
any time existing between the Lender and any Company or any law, governmental
regulation or other agreement applicable to the Lender or any Loan; (i) any
claim as a result of any other dealings among the Lender, any Guarantor or any
Company; (j) the assignment of this Guaranty, the Credit Agreement, any Note or
any other Loan Document by the Lender to any other Person; or (k) any change in
the name of the Lender, any Company or any other Person referred to herein.
3. WAIVER.
Each Guarantor unconditionally waives, to the fullest extent permitted
by applicable law: (a) notice of any of the matters referred to in Section 2
hereof; (b) all notices which may be required by statute, rule of law or
otherwise to preserve any rights against any Guarantor hereunder, including,
without limitation, notice of the acceptance of this Guaranty, or the
creation, renewal, extension, modification or accrual of the Guaranteed
Obligations or notice of any other matters relating thereto, any presentment,
demand, notice of dishonor, protest, nonpayment of any damages or other
amounts payable under the Credit Agreement, any Note or any other Loan
Documents; (e) any requirement for the enforcement, assertion or exercise of
any right, remedy, power or privilege under or in respect of the Credit
Agreement, any Note or any other Loan Documents, including, without
limitation, diligence in collection or protection of or realization upon the
Guaranteed Obligations or any part thereof or any collateral thereof (d) any
requirement of diligence; (e) any requirement to mitigate the damages
resulting from a default by the Companies under the Credit Agreement, any
Note or any other Loan Documents; (f) the occurrence of every other
condition precedent to which any Guarantor or any Company may otherwise be
entitled; (g) the right to require the Lender to proceed against the
Companies or any other person liable on the Guaranteed Obligations, to
proceed against or exhaust any security held by any Company or any other
person, or to pursue any other remedy in the Lender's power whatsoever, and
(h) the right to have the property of any Company first applied to the
discharge of the Guaranteed Obligations.
The Lender may, at their election, exercise any right or remedy they may
have against the Companies without affecting or impairing in any way the
liability of any Guarantor hereunder and
3
each Guarantor waives, to the fullest extent permitted by applicable law, any
defense arising out of the absence, impairment or loss of any right of
reimbursement, contribution or subrogation or any other right or remedy of any
Guarantor against the Companies, whether resulting from such election by the
Lender or otherwise. Each Guarantor waives any defense arising by reason of any
disability or other defense of the Companies or by reason of the cessation for
any cause whatsoever of the liability, either in whole or in part, of the
Companies to the Lender for the Guaranteed Obligations.
Each Guarantor assumes the responsibility for being and keeping informed
of the financial condition of the Companies and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations and agrees
that the Lender shall not have any duty to advise any Guarantor of
information regarding any condition or circumstance or any change in such
condition or circumstance. Each Guarantor acknowledges that the Lender has
not made any representations to any Guarantor concerning the financial
condition of the Companies.
4. REPRESENTATIONS AND COVENANTS OF EACH GUARANTOR.
(a) The representations and warranties contained in Article IV of
the Credit Agreement, to the extent they relate to a Guarantor, are true and
correct as of the date hereof and the Lender is entitled to rely on such
representations and warranties to the same extent as though the same were set
forth in full herein.
(b) Each Guarantor hereby agrees to perform the covenants contained
in Article VI and Article VII of the Credit Agreement, to the extent they
relate to the Guarantor, and the Lender is entitled to rely on such agreement
to perform such covenants to the same extent as though the same were set
forth in full herein.
5. PAYMENTS.
Each payment by each Guarantor to the Lender under this Guaranty
shall be made in the time, place and manner provided for payments in the
Credit Agreement without set-off or counterclaim to the account at which such
payment is required to be paid by the Companies under the Credit Agreement.
6. PARTIES.
This Guaranty shall inure to the benefit of the Lender and their
respective successors, assigns or transferees, and shall be binding upon the
Guarantors and their respective successors and assigns. No Guarantor may
delegate any of its duties under this Guaranty without the prior written
consent of the Lender.
7. NOTICES.
4
Any notice shall be conclusively deemed to have been received by a party
hereto and to be effective on the day on which delivered to such party at the
address set forth below, or if sent by registered or certified mail, on the
third Business Day after the day on which mailed in the United States,
addressed to such party at said address:
(a) if to the Lender,
JPMorgan Chase Bank
▇▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Relationship Manager for
Eon Labs Manufacturing, Inc.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Guarantors,
c/o Eon Labs Manufacturing, Inc.
▇▇▇-▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
- and -
(c) as to each such party at such other address as such party shall
have designated to the other in a written notice complying as to delivery
with the provisions of this Section 7.
8. REMEDIES.
Each Guarantor stipulates that the remedies at law in respect of any
default or threatened default by a Guarantor in the performance of or
compliance with any of the terms of this Guaranty are not and will not be
adequate, and that any of such terms may be specifically enforced by a decree
for specific performance or by an injunction against violation of any such
terms or otherwise.
5
9. RIGHTS TO DEAL WITH THE COMPANIES.
At any time and from time to time, without terminating, affecting or
impairing the validity of this Guaranty or the obligations of any Guarantor
hereunder, the Lender may deal with any Company in the same manner and as
fully as if this Guaranty did not exist and shall be entitled, among other
things, to grant any Company, without notice or demand and without affecting
any Guarantor's liability hereunder, such extension or extensions of time to
perform, renew, compromise, accelerate or otherwise change the time for
payment of or otherwise change the terms of indebtedness or any part thereof
contained in or arising under the Credit Agreement, any Note or any other Loan
Documents, or to waive any obligation of any Company to perform, any act or
acts as the Lender may deem advisable.
10. SUBROGATION.
(a) Upon any payment made or action taken by a Guarantor pursuant to
this Guaranty, such Guarantor shall, subject to the provisions of Sections
10(b) and (c) hereof, be fully subrogated to all of the rights of the Lender
against the Companies arising out of the action or inaction of the Companies
for which such payment was made or action taken by such Guarantor.
(b) Any claims of such Guarantor against any Company arising from
payments made or actions taken by such Guarantor pursuant to the provisions
of this Guaranty shall be in all respects subordinate to the full and
complete or final and indefeasible payment or performance and discharge, as
the case may be, of all amounts, obligations and liabilities, the payments or
performance and discharge of which are guaranteed by this Guaranty, and no
payment hereunder by a Guarantor shall give rise to any claim of such
Guarantor against the Lender.
(c) Notwithstanding anything to the contrary contained in this Section
10, no Guarantor shall be subrogated to the rights of the Lender against the
Companies until all of the Obligations have been paid finally and
indefeasibly in full, and that subrogation shall be suspended upon the
occurrence of the events described in Section 1(d) until the Lender is
indefeasibly paid in full.
11. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC.
All representations, warranties, covenants and agreements made herein,
including representations and warranties deemed made herein, shall survive
any investigation or inspection made by or on behalf of the Lender and shall
continue in full force and effect until all of the obligations of the
Guarantors under this Guaranty shall be fully performed in accordance with
the terms hereof, and until the payment in full of the Guaranteed Obligations.
12. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS
GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY
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FEDERAL OR STATE COURT IN THE STATE OF NEW YORK, OR COUNTY OF QUEENS IN ANY
ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION
WITH THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT
PERMITTED BY APPLICABLE LAW, EACH GUARANTOR HEREBY WAIVES AND AGREES NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH FEDERAL OR STATE COURTS, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY OR ANY DOCUMENT OR
ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH GUARANTOR AGREES (i) NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY
REVIEW OF THE JUDGMENT OF ANY SUCH FEDERAL OR STATE COURT BY ANY FEDERAL OR
STATE COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO
GRANT AN ENFORCEMENT OF SUCH JUDGMENT AND (ii) NOT TO ASSERT ANY
COUNTERCLAIM, IN ANY SUCH SUIT, ACTION OR PROCEEDING UNLESS SUCH COUNTERCLAIM
IS A COMPULSORY COUNTERCLAIM UNDER FEDERAL LAW OR NEW YORK LAW, AS
APPLICABLE. EACH GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT
BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS
GUARANTY OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. THE LENDER AND
EACH GUARANTOR IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
13. MISCELLANEOUS.
(a) All capitalized terms used herein and not defined herein shall have
the meanings specified in the Credit Agreement.
(b) This Guaranty is the joint and several obligation of each Guarantor,
and may be enforced against each Guarantor separately, whether or not
enforcement of any right or remedy hereunder has been sought against any
other Guarantor. Each Guarantor acknowledges that its obligations hereunder
will not be released or affected by the failure of the other Guarantors to
execute the Guaranty or by a determination that all or a part of this
Guaranty with respect to any other Guarantor is invalid or unenforceable.
(c) If any term of this Guaranty or any application thereof shall be
invalid or unenforceable, the remainder of this Guaranty and any other
application of such term shall not be affected thereby.
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(d) Any term of this Guaranty may be amended, waived, discharged or
terminated only by an instrument in writing signed by each Guarantor and the
Lender.
(e) The headings in this Guaranty are for purposes of reference only and
shall not limit or define the meaning hereof.
(f) No delay or omission by the Lender in the exercise of any right
under this Guaranty shall impair any such right, nor shall it be construed to
be waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise of any other right.
[NEXT PAGE IS SIGNATURE PAGE]
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IN WITNESS WHEREOF, the undersigned have caused this Guaranty to be
executed and delivered as of the day and year first above written.
FORTE PHARMA, INC.
By:______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
President
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EXHIBIT D
[LETTERHEAD OF COUNSEL TO THE
COMPANY AND THE GUARANTOR]
February 8, 2002
JPMorgan Chase Bank
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Ladies and Gentlemen:
We have acted as counsel to Eon Labs Manufacturing, Inc., a Delaware
corporation, and Eon Pharma, LLC, a Delaware limited liability company (each a
"Company" and, collectively, the Companies") and Forte Pharma, Inc.(the
"Guarantor"), in connection with the Credit Agreement (the "Agreement") dated
the date hereof between the Company and JPMorgan Chase Bank, pursuant to which
the Lender has agreed to extend credit to the Company in an aggregate principal
amount not to exceed $25,000,000. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth in the
Agreement.
In acting as such counsel, we have examined:
(a) a counterpart of the Agreement executed by the Companies;
(b) the Revolving Credit Note executed by the Company in favor of the
Lender;
(c) a counterpart of the Security Agreement executed by the Companies
and the Guarantor; and
(d) a counterpart of the Guaranty executed by the Guarantor;
The documents referred to in items (a) through (d) above are hereinafter
referred to collectively as the "Loan Documents".
We have assumed the authenticity of all documents submitted to us as
originals, the conformity to the originals of all documents submitted to us
as certified, conformed or photostatic copies and the authenticity of the
originals of such copies. We have also examined originals, or copies
certified to our satisfaction, of such corporate records, certificates of
public officials, certificates of corporate officers of the Companies and the
Guarantor and such other instruments and documents as we have deemed
necessary as a basis for the opinions hereinafter set forth. As to questions
of fact, we have, to the extent that such facts were not independently
established by us, relied upon such certificates.
Based upon the foregoing and subject to the qualifications set forth
herein, we are of the opinion that,
1. Each Company and the Guarantor are each a corporation or limited
liability company, as indicated in the first paragraph hereof, duly organized
or formed as applicable, validly existing and in good standing under the laws
of the jurisdiction of their incorporation or formation, as applicable, and
in good standing in each jurisdiction wherein the conduct of its business or
any ownership of its properties requires it to be qualified to do business
except where the failure to be so qualified could not reasonably be expected
to have a Material Adverse Effect, and each has the corporate power and
authority to own its assets and to transact the business in which it is now
engaged and to execute and perform each of the Loan Documents to which it is
a party.
2. Each Company and the Guarantor has the requisite power and authority
to execute, deliver and perform the Loan Documents to which it is a party,
each of which has been duly authorized by all necessary and proper corporate
action.
3. The Loan Documents constitute the legal, valid and binding
obligation of each Company and the Guarantor (to the extent they are a party
thereto) enforceable against each Company and the Guarantor, as the case may
be, in accordance with their respective terms subject as to enforcement by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
the enforcement of creditors' rights generally, and by equitable principles
of general application.
4. Neither the execution and delivery by the Companies and the
Guarantor of the Loan Documents to which they are a party nor the performance
by the Companies or the Guarantor of their respective obligations under the
Loan Documents, will (a) violate any law, rule or regulation or, to our
knowledge, any order or decree of any court or governmental instrumentality
binding upon any Company or the Guarantor, (b) contravene the Certificate of
Incorporation or By-Laws or articles of organization or operating agreement,
applicable, of any Company or the Guarantor or, result in a breach of or
constitute a default (with due notice or lapse of time or both) under any
agreements to which any Company or the Guarantor is bound of which we are
aware, or, to our knowledge, result in the creation or imposition of any
lien, charge, or encumbrance upon any of the property or assets of any
Company or the Guarantor other than the liens granted pursuant to the Loan
Documents, or (c) require the consent, license, approval or authorization of
any governmental or public body or authority.
5. Neither any Company nor the Guarantor is an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940.
6. No consent or authorization of, filing with or other act by or in
respect of any governmental authority is required to be obtained by any
Company or the Guarantor for the valid execution, delivery and performance of
the Loan Documents to which they are a party.
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7. Assuming the proceeds of the Loans are used for the purposes set
forth in Section 3.02 of the Agreement, the making of the loans contemplated
therein and the application of the proceeds thereof will not violate the
provisions of Regulation U or X of the Board of Governors of the Federal
Reserve System.
8. To the best of our knowledge there are no actions, suits or
proceedings against any Company or the Guarantor, pending or threatened
against any Company or the Guarantor, before any court, governmental agency
or arbitrator which challenges the validity or enforceability of any Loan
Document or which, if adversely determined, would impair the ability of any
Company or the Guarantor to perform their respective obligations under the
Loan Documents to which they are a party.
9. The Security Agreement grants to the Lender a valid security
interest (the "Security Interest") in the Collateral (as defined in the
Security Agreement) that is owned by the Companies and the Guarantor and
purported to be covered thereby to the extent that the Uniform Commercial
Code is applicable thereto, in favor of the Lender as security for, with
respect to the Obligations (as defined in the Security Agreement). Upon the
proper filing of the appropriate Financing Statements in the appropriate
jurisdictions as required under the Uniform Commercial Code, the Security
Interest will constitute a perfected security interest in the Collateral that
is owned by each Company and the Guarantor.
Very truly yours,
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EXHIBIT E
NOTICE OF BORROWING
[Date]
JPMorgan Chase Bank
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Attention: Relationship Manager
Eon Labs Manufacturing, Inc.
RE: EON LABS MANUFACTURING, INC./EON PHARMA, LLC
Ladies and Gentlemen:
Pursuant to the Credit Agreement dated as of February 8, 2002 (as the
same may be amended, modified or supplemented the "Credit Agreement") by and
between Eon Pharma, LLC, Eon Labs Manufacturing, Inc. and JPMorgan Chase
Bank, we hereby give you irrevocable notice that we request a Loan as follows:
1. Amount of Loan: [Amount]
2. Borrowing Date: [Date]
3. Type of Loan: [Prime Rate Loan, Quoted Rate Loan or Adjusted Libor
Loan]
4. Interest Period: [1, 2, 3 or 6 months if Quoted Rate Loan or Adjusted
Libor Loan]
We hereby certify that (i) the representations and warranties contained
in the Credit Agreement and the other Loan Documents are true, correct and
complete on and as of the date hereof to the same extent as though made on
and as of the date hereof; (ii) no Default or Event of Default has occurred
and is continuing or will result after giving effect to the Loan requested
hereunder; (iii) each Company and each Guarantor has performed all agreements
and satisfied all conditions under the Loan Documents required to be
performed by it on or before the date hereof, (iv) the amount of the proposed
borrowing will not cause the aggregate outstanding principal amount of all
Revolving Credit Loans (after giving effect to the proposed borrowing) to
exceed the Revolving Credit Commitment and (v) the proceeds of the loan will
be used solely to fund [WORKING CAPITAL NEEDS] [A PERMITTED ACQUISITION].
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Capitalized terms used herein but not defined shall have the respective
meanings given to them in the Credit Agreement.
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IN WITNESS WHEREOF, the Companies have caused this document to be duly
executed and delivered by their duly authorized Executive Officers as of the
date written above.
EON LABS MANUFACTURING, INC.
By:
-------------------------
Name:
Title:
EON PHARMA, LLC
By:
-------------------------
Name:
Title:
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