Bank of America Business Loan Agreement
[LOGO] National Trust and Savings Association
This Agreement dated as of April 14, 1997, is between Bank of America National
Trust and Savings Association (the "Bank") and Dura Pharmaceuticals, Inc. (the
"Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrower. The amount of the line of credit (the
"Commitment") is Fifty Million Dollars ($50,000,000).
(b) This is a revolving line of credit with a within line facility for
letters of credit. During the availability period, the Borrower may
repay principal amounts and reborrow them.
(c) Each advance must be for at least Twenty-Five Thousand Dollars ($25,000),
or for the amount of the remaining available line of credit, if less.
(d) The Borrower agrees not to permit the outstanding principal balance of
the line of credit plus the outstanding amounts of any letters of credit,
including amounts drawn on letters of credit and not yet reimbursed, to
exceed the Commitment.
1.2 Availability Period. The line of credit is available between the date of
this Agreement and May 1, 1999 (the "Expiration Date") unless the Borrower
is in default.
1.3 Interest Rate.
(a) Unless the Borrower elects an optional interest rate as described below,
the interest rate is the Bank's Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from time
to time by the Bank in San Francisco, California, as its Reference
Rate. The Reference Rate is set by the Bank based on various factors,
including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its customers at,
above, or below the Reference Rate. Any change in the Reference Rate
shall take effect at the opening of business on the day specified in the
public announcement of a change in the Bank's Reference Rate.
1.4 Repayment Terms.
(a) The Borrower will pay interest on May 1, 1997, and then monthly
thereafter until payment in full of any principal outstanding under this
line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest or
other charges outstanding under this line of credit no later than the
Expiration Date.
(c) Any amount bearing interest at an optional interest rate (as described
below) may be repaid at the end of the applicable interest period, which
shall be no later than the Expiration Date.
1.5 Optional Interest Rates. Instead of the interest rate based on the
Bank's Reference Rate, the Borrower may elect to have all or portions
of the line of credit (during the availability period) bear interest at
the rate(s) described below during an interest period agreed to by the
Bank and the Borrower. Each interest rate is a rate per year.
Interest will be paid on the last day of each interest period, and, if
the interest period is longer than a month, then on the first day each
month during the interest period. At the end of any interest period,
the interest rate will revert to the rate based on the Reference Rate,
unless the Borrower has designated another optional interest rate for
the portion.
1.6 Offshore Rate. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the Offshore
Rate plus 1.50 percentage points.
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect will
be one year or less. The last day of the interest period will be
determined by the Bank using the practices of the offshore dollar
inter-bank market.
(b) Each Offshore Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000) for interest periods of 30 days
or longer. For shorter maturities, each Offshore Rate portion will be
for an amount which, when multiplied by the number of days in the
applicable interest period, is not less than fifteen million
(15,000,000) dollar-days.
(c) The "Offshore Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
Offshore Rate = GRAND CAYMAN RATE
-----------------
(1.0 - Reserve Percentage)
-2-
Where,
(i) "Grand Cayman Rate" means the interest rate (rounded upward to the
nearest 1/16th of one percent) at which the Bank's Grand Cayman
Branch, Grand Cayman, British West Indies, would offer U.S. dollar
deposits for the applicable interest period to other major banks in
the offshore dollar inter-bank markets.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities,
as defined in the Federal Reserve Board Regulation D, rounded
upward to the nearest 1/100 of one percent. The percentage will
be expressed as a decimal, and will include, but not be limited to,
marginal, emergency, supplemental, special, and other reserve
percentages.
(d) The Borrower may not elect an Offshore Rate with respect to any portion
of the principal balance of the line of credit which is scheduled to
be repaid before the last day of the applicable interest period.
(e) Any portion of the principal balance of the line of credit already
bearing interest at the Offshore Rate will not be converted to a
different rate during its interest period.
(f) Each prepayment of an Offshore Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the
amount of accrued interest on the amount prepaid, and a prepayment fee
equal to the amount (if any) by which
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the
interest period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the offshore dollar market
for a period starting on the date on which it was prepaid and
ending on the last day of the interest period for such portion.
(g) The Bank will have no obligation to accept an election for an Offshore
Rate portion if any of the following described events has occurred and
is continuing:
(i) Dollar deposits in the principal amount, and for periods equal to
the interest period, of an Offshore Rate portion are not available
in the offshore dollar inter-bank markets; or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
-3-
1.7 Letters of Credit. This line of credit may be used for financing:
(i) commercial letters of credit with a maximum maturity of 365 days but
not to extend beyond the Expiration Date. Each commercial letter of
credit will require drafts payable at sight.
(ii) standby letters of credit with a maximum maturity of 365 days but
not to extend beyond the Expiration Date.
(iii) The amount of letters of credit outstanding at any one time,
(including amounts drawn on letters of credit and not yet
reimbursed), may not exceed Ten Million Dollars ($10,000,000).
The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the Bank,
be added to the principal amount outstanding under this Agreement. The
amount will bear interest and be due as described elsewhere in this
Agreement.
(b) if there is a default under this Agreement, to immediately prepay and
make the Bank whole for any outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form and
content satisfactory to the Bank and in favor of a beneficiary acceptable
to the Bank.
(d) to sign the Bank's form Application and Agreement for Commercial Letter
of Credit or Application and Agreement for Standby Letter of Credit.
(e) to pay any issuance and/or other fees that the Bank notifies the Borrower
will be charged for issuing and processing letters of credit for the
Borrower.
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
2. FEES AND EXPENSES
2.1 Unused Commitment Fee. The Borrower agrees to pay a fee on any
difference between the Commitment and the amount of credit it actually
uses (including the undrawn and the drawn but unreimbursed amounts of
letters of credit), determined by the weighted average loan balance
maintained during the specified period. The fee will be calculated at
0.125% per year, pro rated for any portion of a year. This fee will be
due 10 days from the Bank's billing date for each calendar quarter,
commencing with the quarter ending June 30, 1997.
-4-
2.2 Expenses.
(a) The Borrower agrees to immediately repay the Bank for expenses that
include, but are not limited to, filing, recording and search fees,
and documentation fees.
(b) The Borrower agrees to reimburse the Bank for any expenses it incurs in
the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the
Bank's in-house counsel.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 Requests for Credit. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank, or by another means
acceptable to the Bank.
3.2 Disbursements and Payments. Each disbursement by the Bank and each
payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank from
time to time;
(b) made for the account of the Bank's branch selected by the Bank from time
to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory
notes.
3.3 Telephone Authorization.
(a) The Bank may honor telephone instructions for advances or repayments or
for the designation of optional interest rates given by any one of
the individuals authorized to sign loan agreements on behalf of the
Borrower, or any other individual designated by any one of such
authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's account number 1450707440, or such other of the
Borrower's accounts with the Bank as designated in writing by the
Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone instructions it
reasonably believes are made by any individual authorized by the
Borrower to give such instructions. This indemnity and excuse will
survive this Agreement.
-5-
3.4 Direct Debit (Pre-Billing).
(a) The Borrower agrees that the Bank will debit the Borrower's deposit
account number 14507-07440, or such other of the Borrower's accounts
with the Bank as designated in writing by the Borrower (the "Designated
Account") on the date each payment of interest and any fees from the
Borrower becomes due (the "Due Date"). If the Due Date is not a banking
day, the Designated Account will be debited on the next banking day.
(b) Approximately 10 days prior to each Due Date, the Bank will mail to the
Borrower a statement of the amounts that will be due on that Due
Date (the "Billed Amount"). The calculation will be made on the
assumption that no new extensions of credit or payments will be made
between the date of the billing statement and the Due Date, and that
there will be no changes in the applicable interest rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued
Amount").
If the Billed Amount debited to the Designated Account differs from the
Accrued Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than the Accrued Amount, the Billed
Amount for the following Due Date will be increased by the
amount of the discrepancy. The Borrower will not be in default by
reason of any such discrepancy.
(ii) If the Billed Amount is more than the Accrued Amount, the Billed
Amount for the following Due Date will be decreased by the amount
of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. The Bank will not pay the Borrower interest on any
overpayment.
(d) The Borrower will maintain sufficient funds in the Designated Account to
cover each debit. If there are insufficient funds in the Designated
Account on the date the Bank enters any debit authorized by this
Agreement, the debit will be reversed.
3.5 Banking Days. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday or a Sunday on which the Bank is open
for business in California. For amounts bearing interest at an offshore
rate (if any), a banking day is a day other than a Saturday or a Sunday
on which the Bank is open for business in California and dealing in
offshore dollars. All payments and disbursements which would be due on
a day which is not a banking day will be due on the next banking day.
All payments received on a day which is not a banking day will be
applied to the credit on the next banking day.
-6-
3.6 Taxes. The Borrower will not deduct any taxes from any payments it
makes to the Bank. If any government authority imposes any taxes on any
payments made by the Borrower, the Borrower will pay the taxes and will also
pay to the Bank, at the time interest is paid, any additional amount which
the Bank specifies as necessary to preserve the after-tax yield the Bank
would have received if such taxes had not been imposed. Upon request by the
Bank, the Borrower will confirm that it has paid the taxes by giving the Bank
official tax receipts (or notarized copies) within 30 days after the due
date. However, the Borrower will not pay the Bank's net income taxes.
3.7 Additional Costs. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses arising from any statute or regulation, or any request
or requirement of a regulatory agency which is applicable to all national
banks or a class of all national banks. The costs and losses will be
allocated to the loan in a manner determined by the Bank, using any
reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments
for credit.
3.8 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year
and the actual number of days elapsed. This results in more interest or a
higher fee than if a 365-day year is used.
3.9 Interest on Late Payments. At the Bank's sole option in each instance,
any amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at the Bank's Reference Rate plus 2.00
percentage points. This may result in compounding of interest.
3.10 Default Rate. Upon the occurrence and during the continuation of any
default under this Agreement, advances under this Agreement will at the
option of the Bank bear interest at a rate per annum which is 2.00 percentage
points higher than the rate of interest otherwise provided under this
Agreement. This will not constitute a waiver of any default.
4. CONDITIONS
The Bank must receive the following items, in form and content acceptable to
the Bank, before it is required to extend any credit to the Borrower under
this Agreement:
4.1 Authorizations. Evidence that the execution, delivery and performance
by the Borrower (and any guarantor) of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.
-7-
4.2 Good Standing. Certificates of good standing for the Borrower from its
state of incorporation and from any other state in which the Borrower is
required to qualify to conduct its business.
4.3 Silicon Valley Bank Termination. Evidence that the Borrower's credit
facility with Silicon Valley Bank has been terminated and that any and all
security interests and liens securing such facilities have been fully
released.
4.4 Other Items. Any other items that the Bank reasonably requires.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a renewed representation.
5.1 Organization of Borrower. The Borrower is a corporation duly formed and
existing under the laws of the state where organized.
5.2 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and
do not conflict with any of its organizational papers.
5.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance
with its terms, and any instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and
enforceable.
5.4 Good Standing. In each state in which the Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
5.5 No Conflicts. This Agreement does not conflict with any law, agreement,
or obligation by which the Borrower is bound.
5.6 Financial Information. All financial and other information that has
been or will be supplied to the Bank, including the Borrower's financial
statement dated as December 31, 1996, is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's (and any guarantor's) financial condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
-8-
Since the date of the financial statement specified above, there has been no
material adverse change in the assets or the financial condition of the
Borrower (or any guarantor).
5.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower, which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been
disclosed in writing to the Bank.
5.8 Permits, Franchises. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade
name rights, patent rights and fictitious name rights necessary to enable it
to conduct the business in which it is now engaged.
5.9 Other Obligations. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
5.10 Income Tax Returns. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
5.11 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, a default under this Agreement.
5.12 ERISA Plans.
(a) The Borrower has fulfilled its obligations, if any, under the minimum
funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of ERISA for
which the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any Plan has
been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under Section
4042 of ERISA, and no event has occurred or condition exists which might
constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes of this
Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
-9-
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as
amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA.
5.13 Location of Borrower. The Borrower's place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this
Agreement.
6. COVENANTS
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
6.1 Use of Proceeds. To use the proceeds of the credit only for funding
acquisitions of product lines or companies and for general corporate purposes.
6.2 Financial Information. To provide the following financial information
and statements and such additional information as requested by the Bank from
time to time:
(a) Within 90 days of the Borrower's fiscal year end, the Borrower's annual
financial statements. These financial statements must be audited by a
Certified Public Accountant ("CPA") acceptable to the Bank. The
statements shall be prepared on a consolidated basis.
(b) Within 45 days of the period's end, the Borrower's quarterly financial
statements including the fourth quarter. These financial statements are
to include year-to-date financial reporting and may be Borrower prepared.
The statements shall be prepared on a consolidated and consolidating
basis by division including without limitation the Healthscript division,
the HealthCo division, and any other division of the Borrower.
(c) Copies of the Borrower's Form 10-K Annual Report and Form 10-Q Quarterly
Report within 10 days after the date of filing with the Securities and
Exchange Commission.
(d) Within the periods provided in (a) and (b) above, a compliance certificate
of the Borrower signed by the Borrower's Chief Financial Officer or Vice
President-Finance setting forth (i) the information and computations (in
sufficient detail) to establish that the Borrower is in compliance with
all financial covenants at the end of the period covered by the financial
statements then being furnished, (ii) whether there exists as of the date
of such financial
-10-
statements and whether there exists as of the date of the certificate,
any default under this Agreement and, if such a default exists, specifying
the nature thereof and the action the Borrower is taking and proposes to
take with respect to such default, and (iii) the Borrower's representation
and warranty as of the date of the certificate that there are no
Significant Subsidiaries except those that have executed and delivered to
the Bank a guaranty as required under Paragraph 6.6 of this Agreement.
(e) Within 60 days of the Borrower's fiscal year end, the Borrower's
projections by product line (balance sheet, income statement, statement of
cash flows, and assumptions) for the forthcoming year.
(f) Upon the request of the Bank, copies of the Borrower's federal tax
return with all supporting schedules.
6.3 Tangible Net Worth. To maintain on a consolidated basis Tangible Net
Worth equal to at least the greater of:
(a) Two Hundred Million Dollars ($200,000,000) or
(b) the difference between:
(i) The sum of:
(A) Two Hundred Fifty Million Dollars ($250,000,000); plus
(B) the sum of 50% of net income after income taxes (without
subtracting losses) earned in each quarterly accounting
period commencing after December 31, 1996; plus
(C) the net proceeds from any equity securities issued after the
date of this Agreement (including shares issued upon the
exercise of stock options); plus
(D) any increase in stockholders' equity resulting from the
conversion of debt securities to equity securities after
the date of this Agreement; and
(ii) The sum of (without duplication):
(A) Cash and noncash charges for in-process technology purchased
from ▇▇▇▇▇▇ Development Corporation (the "▇▇▇▇▇▇ Charges") up
to a maximum of Twenty Million Dollars ($20,000,000); plus
(B) The amount of purchases of intangible assets up to a maximum of
Fifty Million Dollars ($50,000,000).
-11-
"Tangible Net Worth" means the gross book value of the Borrower's assets
(excluding license agreements, product rights, goodwill, patents, trademarks,
trade names, organization expense, treasury stock, unamortized debt discount
and expense, capitalized or deferred research and development costs, deferred
marketing expenses, deferred receivables, and other like intangibles, and
monies due from affiliates, officers, directors, employees, or shareholders
of the Borrower) less total liabilities, including but not limited to accrued
and deferred income taxes, and any reserves against assets.
6.4 Adjusted Funded Debt to Adjusted EBITDA. To maintain a ratio of funded
debt, including all interest bearing obligations but excluding obligations
owing to Procter & ▇▇▇▇▇▇ Pharmaceuticals, Inc. for the Entex Products up to
a maximum of Twenty Million Dollars ($20,000,000), TO the sum of EBITDA plus
the ▇▇▇▇▇▇ Charges up to a maximum of Twenty Million Dollars ($20,000,000) of
not greater than the ratio indicated for each period specified below:
PERIOD RATIO
------ -----
From and including the date of this Agreement
to and including August 31, 1997 2.00 to 1.00
From and including September 1, 1997
and thereafter 1.75 to 1.00
For purposes of this Agreement, "EBITDA" means earnings before interest
income and taxes, plus interest expense, plus depreciation and amortization.
EBITDA will be calculated at the end of each fiscal quarter, using the
results of that quarter and each of the 3 immediately preceding quarters.
6.5 Minimum EBIT. To maintain on a consolidated basis a sum of (i) net
income before taxes and interest expense plus (ii) the ▇▇▇▇▇▇ Charges up to a
maximum of Twenty Million Dollars ($20,000,000) at least Zero Dollars ($0)
for each quarterly accounting period.
6.6 Additional Guaranties. If at any time after the date of this Agreement
a subsidiary of the Borrower or any guarantor becomes a Significant
Subsidiary, to cause such Significant Subsidiary to execute and deliver to
the Bank, as soon as reasonably practicable but not later than thirty (30)
days after the Bank's request therefor, a continuing guaranty in the
principal amount of at least Fifty Million Dollars ($50,000,000) and
otherwise in form and substance acceptable to the Bank, together with
satisfactory evidence of such Significant Subsidiary's authority to execute
and deliver such guaranty. For purposes of this Agreement, "Significant
Subsidiary" means a corporation (i) that is wholly-owned by the Borrower or
any guarantor and (ii) that owns ten percent (10%) or more of the Borrower's
total consolidated assets or ten percent (10%) or more of the Borrower's
total consolidated sales for any fiscal quarter.
-12-
6.7 Other Debts. Not to have outstanding or incur any direct or contingent
debts (other than those to the Bank), or become liable for the debts of
others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts in existence on the date of this Agreement disclosed in writing
to the Bank.
(e) Additional debts for the acquisition of fixed or capital assets which
do not exceed a total principal amount of Five Million Dollars
($5,000,000) in any single fiscal year.
6.8 Other Liens. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.
(d) Additional purchase money security interests in personal property
acquired after the date of this Agreement if the total principal amount
of debts secured by such liens does not exceed Five Million Dollars
($5,000,000) in any single fiscal year.
6.9 Capital Expenditures. Not to spend more than Thirty Million Dollars
($30,000,000) during 1997 fiscal year and Fifteen Million Dollars
($15,000,000) during 1998 fiscal year to acquire fixed or capital assets.
6.10 Leases. Not to permit the aggregate payments due in any fiscal year
under all leases (including capital and operating leases for real or personal
property) to exceed Two Million Dollars ($2,000,000).
6.11 Dividends. Not to declare or pay any dividends on any of its shares
except dividends payable in capital stock of the Borrower, and not to
purchase, redeem or otherwise acquire for value any of its shares, or create
any sinking fund in relation thereto.
6.12 Loans to Affiliated Companies. Not to make any loans, advances or
other extensions of credit to any of the Borrower's affiliated companies in
excess of an aggregate of Ten Million Dollars ($10,000,000).
-13-
6.13 Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit over Two Million Dollars ($2,000,000) against the Borrower
(or any guarantor).
(b) any substantial dispute between the Borrower (or any guarantor) and any
government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's (or any guarantor's)
financial condition or operations.
(e) any change in the Borrower's name, legal structure, place of business,
or chief executive office if the Borrower has more than one place of
business.
6.14 Books and Records. To maintain adequate books and records.
6.15 Audits. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are
in the possession of a third party, the Borrower authorizes that third party
to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.
6.16 Compliance with Laws. To comply with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's business.
6.17 Preservation of Rights. To maintain and preserve all rights,
privileges, and franchises the Borrower now has.
6.18 Maintenance of Properties. To make any repairs, renewals, or
replacements to keep the Borrower's properties in good working condition.
6.19 Cooperation. To take any action requested by the Bank to carry out the
intent of this Agreement.
6.20 General Business Insurance. To maintain insurance as is usual for the
business it is in.
6.21 Additional Negative Covenants. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
present business of the Borrower or any of its subsidiaries.
(b) liquidate or dissolve the Borrower's business.
-14-
(c) enter into any consolidation, merger, pool, joint venture, syndicate,
or other combination; provided, however, that the Borrower may enter into
any joint venture if the amount of the Borrower's capital contribution
thereto, when added to the total, cumulative amount of capital
contributions to other joint ventures entered into by the Borrower after
the date of this Agreement, would not exceed Ten Million Dollars
($10,000,000).
(d) lease, or dispose of all or a substantial part of the Borrower's
business or the Borrower's assets except in the ordinary course of the
Borrower's business.
(e) acquire a business through the purchase of its stock.
(f) sell or otherwise dispose of any assets for less than fair market
value, or enter into any sale and leaseback agreement covering any of
its fixed or capital assets.
(g) cancel or terminate those existing licensing or co-branding agreements
that generated revenues in excess of ten percent 10% of the Borrower's
consolidated total revenues for the immediately preceding four (4)
quarters.
6.22 ERISA Plans. To give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or withdraw from a Plan or the
filing of any notice of intent to terminate under Section 4041 of ERISA.
(c) Any notice of noncompliance made with respect to a Plan under Section
4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan under Section
4042 of ERISA.
7. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply
whether the hazardous substance is on, under or about the Borrower's property
or operations or property leased to the Borrower. The indemnity includes but
is not limited to attorneys' fees (including the reasonable estimate of the
allocated cost of in-house counsel and staff). The indemnity extends to the
Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns. "Hazardous substances"
means any substance, material or waste that is or becomes designated or
regulated as "toxic," "hazardous,"
-15-
"pollutant," or "contaminant" or a similar designation or regulation under
any federal, state or local law (whether under common law, statute,
regulation or otherwise) or judicial or administrative interpretation of
such, including without limitation petroleum or natural gas. This indemnity
will survive repayment of the Borrower's obligations to the Bank.
8. DEFAULT
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then
the entire debt outstanding under this Agreement will automatically be due
immediately.
8.1 Failure to Pay. The Borrower fails to make a payment under this
Agreement when due.
8.2 False Information. The Borrower has given the Bank false or misleading
information or representations.
8.3 Bankruptcy. The Borrower (or any guarantor) files a bankruptcy
petition, a bankruptcy petition is filed against the Borrower (or any
guarantor), or the Borrower (or any guarantor) makes a general assignment for
the benefit of creditors. The default will be deemed cured if any bankruptcy
petition filed against the Borrower (or any guarantor) is dismissed within a
period of 60 days after the filing; provided, however, that the Bank will not
be obligated to extend any additional credit to the Borrower during that
period.
8.4 Receivers. A receiver or similar official is appointed for the
Borrower's (or any guarantor's) business, or the business is terminated.
8.5 Judgments. One or more judgments or arbitration awards are entered
against the Borrower (or any guarantor) on a claim or claims not fully
covered by insurance (excluding reasonable deductibles) and remain
undischarged, unvacated, unbonded, or unstayed for a period of 30 days or in
any event later than 5 days prior to any proposed sale under any such
judgment or award, or the Borrower (or any guarantor) enters into any
settlement agreements with respect to any litigation or arbitration in the
aggregate amount One Million Dollars ($1,000,000) or more on a claim or
claims not fully cover by insurance (excluding reasonable deductibles).
8.6 Government Action. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's (or any guarantor's)
financial condition or ability to repay.
8.7 Material Adverse Change. A material adverse change occurs in the
Borrower's (or any guarantor's) financial condition, properties or prospects,
or ability to repay the loan.
-16-
8.8 Cross-default. Any default occurs under any agreement in connection
with any credit the Borrower (or any guarantor) has obtained from anyone else
or which the Borrower (or any guarantor) has guaranteed in the amount of One
Hundred Thousand Dollars ($100,000) or more in the aggregate if the default
consists of failing to make a payment when due or gives the other lender the
right to accelerate the obligation.
8.9 Default Under Related Documents. Any guaranty, security agreement, or
other document required by this Agreement is violated or no longer in effect.
8.10 Other Bank Agreements. The Borrower (or any guarantor) fails to meet
the conditions of, or fails to perform any obligation under any other
agreement the Borrower (or any guarantor) has with the Bank or any affiliate
of the Bank.
8.11 ERISA Plans. The occurrence of any one or more of the following events
with respect to the Borrower, provided such event or events could reasonably
be expected, in the judgment of the Bank, to subject the Borrower to any tax,
penalty or liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial condition of
the Borrower with respect to a Plan:
(a) A reportable event shall occur with respect to a Plan which is, in the
reasonable judgment of the Bank likely to result in the termination of
such Plan for purposes of Title IV of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate a
Plan) or the Borrower's full or partial withdrawal from a Plan.
8.12 Other Breach Under Agreement. The Borrower fails to meet the
conditions of, or fails to perform any obligation under, any term of this
Agreement not specifically referred to in this Article. If, in the Bank's
opinion, the breach is capable of being remedied, the breach will not be
considered an event of default under this Agreement for a period of thirty
(30) days after the date on which the Bank gives written notice of the breach
to the Borrower; provided, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during that period.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made
under generally accepted accounting principles, consistently applied.
9.2 California Law. This Agreement is governed by California law.
9.3 Successors and Assigns. This Agreement is binding on the Borrower's
and the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. Subject to the
Borrower's prior written consent in each case, the Bank
-17-
may sell participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser
will have the right of set-off against the Borrower.
9.4 Arbitration.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those
that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered in
connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for injury to
persons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United
States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by California
law.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of
the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations
and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or
claim, at the time of the proposed submission to arbitration, arises from
or relates to an obligation to the Bank
-18-
secured by real property located in California. In this case, both the
Borrower and the Bank must consent to submission of the claim or
controversy to arbitration. If both parties do not consent to
arbitration, the controversy or claim will be settled as follows:
(i) The Borrower and the Bank will designate a referee (or a panel of
referees) selected under the auspices of the American Arbitration
Association in the same manner as arbitrators are selected in
Association-sponsored proceedings;
(ii) The designated referee (or the panel of referees) will be
appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the panel) will be an
active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or the
panel) will be entered as a judgment in the court that appointed
the referee, in accordance with the provisions of California Code
of Civil Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the arbitration
proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if
the other party contests the lawsuit. However, if the controversy or
claim arises from or relates to an obligation to the Bank which is
secured by real property located in California at the time of the
proposed submission to arbitration, this right is limited according to
the provision above requiring the consent of both the Borrower and the
Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property securing this Agreement,
the Bank has the option to exercise the power of sale under the deed of
trust or mortgage, or to proceed by judicial foreclosure.
-19-
9.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank retains all
rights, even if it makes a loan after default. If the Bank waives a default,
it may enforce a later default. Any consent or waiver under this Agreement
must be in writing.
9.6 Administration Costs. The Borrower shall pay the Bank for all
reasonable costs incurred by the Bank in connection with administering this
Agreement.
9.7 Attorneys' Fees. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with
the enforcement or preservation of any rights or remedies under this
Agreement and any other documents executed in connection with this Agreement,
and including any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the
prevailing party is entitled to recover costs and reasonable attorneys' fees
incurred in connection with the lawsuit or arbitration proceeding, as
determined by the court or arbitrator. As used in this paragraph,
"attorneys' fees" includes the allocated costs of in-house counsel.
9.8 One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
9.9 Notices. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on
the signature page of this Agreement, or to such other addresses as the Bank
and the Borrower may specify from time to time in writing.
9.10 Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
9.11 Counterparts. This Agreement may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
-20-
This Agreement is executed as of the date stated at the top of the first page.
[LOGO]
Bank of America
National Trust and Savings Association Dura Pharmaceuticals, Inc.
X /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ X /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------- -------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: ▇▇▇ ▇▇▇▇▇▇
Title: Vice President Title: Sr. Vice President,
Finance and Administration
Address where notices to the Bank Address where notices to the
are to be sent: Borrower are to be sent:
San Diego RCBO #1450 ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇