-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VVvi4koEcGqst2K4REH3u2+Mn7LQ7cA5mN8SSxcuohFu64dF6wJLewWSMltH5ffJ CoHSnydmIm6UuzKtWbgyUQ== 0000904440-96-000017.txt : 20030213 0000904440-96-000017.hdr.sgml : 20030213 19960215085543 ACCESSION NUMBER: 0000904440-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951230 FILED AS OF DATE: 19960215 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHARMACEUTICAL RESOURCES INC CENTRAL INDEX KEY: 0000878088 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 223122182 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10827 FILM NUMBER: 96520605 BUSINESS ADDRESS: STREET 1: ONE RAM RIDGE RD CITY: SPRING VALLEY STATE: NY ZIP: 10977 BUSINESS PHONE: 9144257100 MAIL ADDRESS: STREET 1: ONE RAM RIDGE ROAD CITY: SPRING VALLEY STATE: NY ZIP: 10977 10-Q 1 Commission File Number 1-10827 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 30, 1995 PHARMACEUTICAL RESOURCES, INC. (Exact name of registrant as specified in its charter) NEW JERSEY 2-3122182 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification Number) One Ram Ridge Road, Spring Valley, New York 10977 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (914) 425-7100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ------ 18,179,810 Number of shares of Common Stock outstanding as of February 5, 1996 This is page 1 of 84 pages. The exhibit index is on page 11. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PHARMACEUTICAL RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (In Thousands)
December 30, September 30, ASSETS 1995 1995 (Unaudited) (Audited) Current assets: Cash and cash equivalents $ 15,138 $ 17,986 Temporary investments 188 271 Accounts receivable, net of allowances of $2,285,000 and $1,588,000 8,072 9,011 Inventories 16,724 15,364 Prepaid expenses and other current assets 2,071 1,866 Current deferred tax benefit 3,598 4,172 --------- --------- Total current assets 45,791 48,670 Property, plant and equipment, at cost less accumulated depreciation and amortization 24,767 24,371 Deferred charges and other assets 1,904 1,883 Investments 6,900 3,520 Investment in joint venture 1,913 2,037 Non-current deferred tax benefit 10,193 10,436 --------- --------- Total assets $ 91,468 $ 90,917 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,612 $ 1,470 Accounts payable 5,932 6,422 Accrued salaries and employee benefits 2,252 2,336 Accrued expenses and other current liabilities 689 705 Estimated current liabilities of discontinued operations 2,830 2,830 --------- --------- Total current liabilities 13,315 13,763 Long-term debt, less current portion 3,971 4,259 Accrued pension liability 941 941 Shareholders' equity: Common Stock, par value $.01 per share; authorized 60,000,000 shares; issued and outstanding 18,179,560 and 18,168,625 shares 182 182 Additional paid in capital 65,321 65,276 Retained earnings 6,585 6,783 Additional minimum liability related to defined benefit pension plan (287) (287) Unrealized gain on investment 1,440 - Total shareholders' equity 73,241 71,954 --------- --------- Total liabilities and shareholders' equity $ 91,468 $ 90,917 ========= =========
The accompanying notes are an integral part of these statements. PHARMACEUTICAL RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (In Thousands, Except Per Share Amounts) (Unaudited)
Three Months Ended December 30 December 31 1995 1994 Net sales $14,859 $17,031 Cost of goods sold 10,762 10,731 ------- ------- Gross margin 4,097 6,300 Operating expenses: Research and development 363 816 Selling, general and administrative 4,231 4,169 ------- ------- Total operating expenses 4,594 4,985 ------- ------- Operating income (loss) (497) 1,315 Settlements - 2,000 Other income 289 99 Interest expense (121) (128) ------- ------ Income (loss) before provision (credit) for income taxes (329) 3,286 Provision (credit) for income taxes (131) 1,172 ------- ------ Net income (loss) (198) 2,114 Dividend on preferred stock - (303) Retained earnings, beginning of year 6,783 6,164 ------- ------ Retained earnings, end of year $6,585 $7,975 ======= ====== Income (loss) per share of common stock: Net income (loss) $(.01) $.13 ======= ====== Weighted average number of common and common equivalent shares outstanding 18,448 16,312 ======= ======
The accompanying notes are an integral part of these statements. PHARMACEUTICAL RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Three Months Ended December 30, December 31, 1995 1994 Cash flows from operating activities: Net income (loss) $(198) $2,114 Adjustments to reconcile net income (loss) to net cash provided by (used in) by operating activities: Provision (credit) for income tax expense (131) 1,172 Joint venture research and development 153 - Depreciation and amortization 730 621 Allowances against accounts receivable (697) (450) Write-off of inventories 316 279 Other (10) 8 Changes in assets and liabilities: Decrease in accounts receivable 1,636 2,066 (Increase) in inventories (1,676) (102) (Increase) in prepaid expenses and other assets (233) (2,480) (Decrease) in accounts payable (490) (378) (Decrease) in accrued expenses and other liabilities (101) (461) ------- ------- Net cash provided by (used in) operating activities (701) 2,389 Cash flows from investing activities: Capital expenditures (1,117) (916) (Increase) in investment (1,000) - (Increase) decrease in temporary investments 83 (2) Cash (used in) discontinued operations (1) (6) ------- ------- Net cash (used in) investing activities (2,035) (924) Cash flows from financing activities: Proceeds from issuance of capital stock 39 345 Proceeds from issuance of notes payable and other debt 4,050 - Principal payments under long-term debt and other borrowings (4,196) (819) Payments due to stock conversion (5) - ------- ------- Net cash (used in) financing activities (112) (474) Net increase (decrease) in cash and cash equivalents (2,848) 991 Cash and cash equivalents at beginning of period 17,986 3,130 ------- ------- Cash and cash equivalents at end of period $15,138 $4,121 ======== =======
The accompanying notes are an integral part of these statements. PHARMACEUTICAL RESOURCES, INC. NOTES TO FINANCIAL STATEMENTS December 30, 1995 (Unaudited) Pharmaceutical Resources, Inc. ("PRI") operates in one business segment, the manufacture and distribution of generic pharmaceuticals. Marketed products are principally sold in oral solid (tablet, caplet and capsule) form, with a small number of products in the form of creams and liquids. Basis of Preparation: The accompanying financial statements at December 30, 1995 and for the three month periods ended December 30, 1995 and December 31, 1994 are unaudited; however, in the opinion of management of PRI, such statements include all adjustments (consisting of normal recurring accruals) necessary to a fair statement of the information presented therein. The balance sheet at September 30, 1995 was derived from the audited financial statements at such date. Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying financial statements and these notes do not include all disclosures required by generally accepted accounting principles for audited financial statements. Accordingly, these statements should be read in conjunction with PRI's most recent annual financial statements. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. Investments: The Company has a distribution agreement with Sano Corporation ("Sano") which gives Par the right of first refusal to exclusively distribute Sano's generic transdermal products in the United States, Canada, and several other international markets. As part of the agreement, the Company invested $3,500,000 in the preferred stock of Sano over the prior two years. In November 1995, Sano sold common stock through an initial public offering and the Company's preferred stock converted into 513,888 shares of common stock, equivalent to an ownership position in Sano of approximately 6%. The investment is classified as an "available for sale security" pursuant to Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). This standard requires that certain investments in debt and equity securities be adjusted to fair market value at the end of each accounting period and unrealized gains or losses, net of tax, recorded as a separate component of shareholders' equity. In accordance with SFAS No. 115, the investment is recorded at its fair market value on December 30, 1995 of $11 1/2 per share, or $5,900,000, and the unrealized gain on the investment of $2,400,000, recorded net of taxes of $960,000, as a separate component in shareholders' equity. Additionally, the Company advanced Sano $1,075,000 in the current period and $2,429,000 in prior fiscal years as funding for the research and develop- ment costs of the generic transdermal products. Due to the uncertainty with re- spect to the collectability of such advances, the Company has expensed them and will treat them as income if repaid. In November 1995, the Company received $1,500,000 from the proceeds of Sano's initial public offering in repayment of a portion of outstanding advances from the Company. The Company has reflected this as a reduction of research and development expense in December 1995. The Company's agreement enables the remaining advances to be recovered through gross margin by obtaining a greater share of gross profits. As of December 30, 1995, there were outstanding advances to Sano of $2,000,000. In December 1995, the Company purchased a 10% interest in Fine-Tech Ltd., an Israeli pharmaceutical research and development company in which Clal has significant ownership interest, for $1,000,000. In addition, the Company obtained the exclusive right to purchase products from Fine-Tech Ltd. not commonly sold in North America, South America and the Caribbean. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS General The operating loss for the quarter ended December 30, 1995 of $497,000, which compares to operating income of $1,315,000 in the first quarter of fiscal 1995, is principally due to a sales and gross margin decline, as described below. The Company expects a continued decline in sales of one of its significant manufactured products which, if not offset by increased sales of other currently manufactured products or sales of new distributed or manufactured products, would result in continued declines in net sales, gross margins and, accordingly, profitability. Net Sales Net sales for the three months ended December 30, 1995 decreased $2,172,000, or 13%, to $14,859,000 from the corresponding period of the prior fiscal year. Sales of manufactured products decreased due to lower pricing and decreased volumes of one of the Company's significant products, and generally lower pricing and decreased volumes of certain other manufactured products, caused principally by the introduction of competitive products by other drug manufacturers. Sales of distributed products for the quarter ended December 30, 1995 approximated the levels achieved in the corresponding period of the prior fiscal year. Levels of sales are principally dependent upon, among other things, (i) market penetration for the existing product line and competition, (ii) approval of Abbreviated New Drug Applications ("ANDAs") and introduction of new manufactured products, (iii) introduction of new distributed products, (iv) reintroduction of previously manufactured products and (v) the level of customer service. Gross Margin The Company's gross margin of $4,097,000 (28% of net sales) for the three months ended December 30, 1995 decreased $2,203,000 from $6,300,000 (37% of net sales) in the first quarter of the prior fiscal year. The gross margin for manufactured products decreased principally due to lower selling prices and decreased volumes resulting from the increased competition described above. Distributed products gross margins for the current three- month period decreased from the corresponding period of the prior fiscal year due principally to lower levels of sales allowances taken in fiscal 1995. Inventory write-offs, taken in the normal course of business, amounted to $316,000 and $279,000 for the three months ended December 30, 1995 and December 31, 1994, respectively. The inventory write-offs are related to the disposal of products due to short shelf life and inventory not meeting the Company's standards. Operating Expenses Research and Development - - ------------------------ Gross research and development expenditures for the three months ended December 30, 1995 were $1,863,000 versus $816,000 for the three months ended December 31, 1994. The increase for the quarter is primarily the result of payments made to Sano Corporation ("Sano") in the current period of $1,075,000 for the development of generic transdermal products. During the quarter, the Company received from Sano a reimbursement of $1,500,000 for advances made to them in prior fiscal years for research and development expenses. As a result of this reimbursement, net research and development expenses for the quarter equalled $363,000. The Company has a distribution agreement with Sano to distribute generic transdermal products developed by Sano (see "Notes to Financial Statements - Investments"). To further expand its product line, the Company continues to pursue alternatives to internal research and development, including joint ventures, licensing agreements and distribution agreements. In May 1995, the Company formed an alliance with Clal Pharmaceutical Industries Ltd. ("Clal") to develop, manufacture and distribute generic pharmaceuticals worldwide. A research and development Joint Venture, owned 49% by the Company and 51% by Clal, has been formed in Israel, and has identified approximately 35 products for research, which are expected to expand its product line in the future. In the current fiscal quarter, the Company recorded its share, $153,000, of the Joint Venture's research and development expenses. It is anticipated that the Company will continue to invest in internal research and development efforts in addition to pursuing other outside alternatives during future periods. Selling, General and Administrative - - ----------------------------------- Selling, general and administrative costs were $4,231,000 (28% of net sales) for the three month period ended December 30, 1995 versus $4,169,000 (24% of net sales) for the corresponding period in the prior fiscal year. The increase in the period is primarily attributable to severance costs associated with a management reorganization and increased professional fees. Last year's costs included certain nonrecurring charges incurred in connection with the Company's response to FDA inquiries with respect to current Good Manufacturing Practices, and costs associated with the termination of the broker network used by the Company to sell its products. Settlement - - ---------- In fiscal 1995, the Company resolved claims against former management members for recovery of, among other items, salaries and monies paid for indemnification. The settlement, in the form of cash and securities of the Company, was valued at $2,000,000. FINANCIAL CONDITION Liquidity and Capital Resources Working capital of $32,476,000 represents a decrease of $2,431,000 from the last fiscal year end principally due to cash used for capital expenditures and for its investment in Fine-Tech Ltd., as discussed below. The working capital ratio of 3.4x declined from 3.5x at fiscal year end. As part of the alliance formed with Clal, the Company, during fiscal 1995, invested $1,960,000 in the research and development Joint Venture. The Company is committed to invest an additional $5,390,000 in the Joint Venture during the next two years. The Company also estimates that it could spend up to$1,000,000, subject to certain contingent events, in further research and development expenses with Sano over the next nine months. In December 1995 the Company purchased 10% of the shares of Fine-Tech Ltd., an Israeli pharmaceutical research and development company in which Clal has a significant ownership interest, for $1,000,000 and obtained the exclusive right to purchase products from Fine-Tech Ltd. not commonly sold in North America, South America and the Caribbean. If the Company incurs additional funding obligations under the exist- ing, or new, distribution and product development agreements, the Company ex- pects to fund such obligations with its working capital, including cash provided by operations, and if necessary by borrowings against its line of credit (see"-Financing"). The Company also intends to fund future possible acquisitions to expand its product line out of working capital, current borrowing capacity or additional sources of funding. Financing In December 1995, the Company entered into a three-year, $16,000,000 unsecured revolving credit agreement and two three-year term loans totalling $4,000,000, replacing an existing revolving credit facility and certain outstanding term loans and outstanding industrial revenue bonds totalling approximately $4,000,000. The two term loans are secured by $4,000,000 of machinery and equipment. The interest rates charged on the revolving credit and one term loan are based on either Libor, the bank's cost of funds or the prime rate, all at the Company's option. Any borrowings at Libor or cost of funds will incur additional interest at spreads ranging from 3/4% to 1-1/4% based on certain Company financial ratios. The interest rate on the second term loan is based on Libor plus 1-3/4%. The Company also maintains a $350,000 line of credit at a second bank which is used to acquire and finance equipment. On December 30, 1995, the $209,000 outstanding under this line is also secured by certain assets of the Company. At December 30, 1995, the Company's debt of $5,583,000 is on a long- term basis to be repaid in monthly installments through 2001 and consists of the above described loans, a mortgage on one of the Company's properties, and capital leases. PART II. OTHER INFORMATION Item 1. Legal Proceedings. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 10.1 Commercial Revolving Loan and Term Loan Agreement, dated December 28, 1995, between Fleet Bank, N.A. and the Registrant 10.2 Master Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par Pharmaceutical, Inc. ("Par") 10.3 Equipment Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par 10.4 Promissory Note, dated December 28, 1995, of the Registrant 10.5 Master Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par Pharmaceutical, Inc. ("Par") 10.6 Equipment Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par 10.7 Cross Acceleration Agreement, dated December 28, 1995, between Fleet Bank, N.A. and the Registrant 11 Computation of per share data. 27 Financial Data Schedule. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PHARMACEUTICAL RESOURCES, INC. (Registrant) February 14, 1996 /s/ Kenneth I. Sawyer ------------------------------- Kenneth I. Sawyer President and Chief Executive Officer (Principal Executive Officer) February 14, 1996 /s/ Robert I. Edinger -------------------------------- Robert I. Edinger Executive Vice President - Chief Financial Officer and Secretary (Principal Financial Officer) EXHIBIT INDEX Exhibit Number Description Page Number 10.1 Commercial Revolving Loan and Term Loan Agreement, dated December 28, 1995, between Fleet Bank, N.A. and the Registrant 10.2 Master Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par Pharmaceutical, Inc. ("Par") 10.3 Equipment Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par 10.4 Promissory Note, dated December 28, 1995, of the Registrant 10.5 Master Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par Pharmaceutical, Inc. ("Par") 10.6 Equipment Security Agreement, dated December 28, 1995, between Fleet Bank, N.A. and Par 10.7 Cross Acceleration Agreement, dated December 28, 1995, between Fleet Bank, N.A. and the Registrant 11 Computation of per share data 27 Financial Data Schedule EX-10 2 EX 10.1 EXHIBIT 10.1 COMMERCIAL REVOLVING LOAN AND TERM LOAN AGREEMENT BETWEEN FLEET BANK, N.A. AND PHARMACEUTICAL RESOURCES, INC. December 28, 1995 TABLE OF CONTENTS Section Headings Page I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 1 1.01 Defined Terms . . . . . . . . . . . . . . . . . 1 1.02 Accounting Terms. . . . . . . . . . . . . . . . 7 II. LOAN FACILITIES. . . . . . . . . . . . . . . . . . . 7 2.01 Revolving Loans . . . . . . . . . . . . . . . . 7 2.02 Term Loan . . . . . . . . . . . . . . . . . . . 10 2.03 Indemnity . . . . . . . . . . . . . . . . . . . 10 III. INTEREST, TERMS AND FEES . . . . . . . . . . . . . . 11 3.01 Interest Rate . . . . . . . . . . . . . . . . . 11 3.02 Term and Termination. . . . . . . . . . . . . . 12 3.03 Repayments. . . . . . . . . . . . . . . . . . . 12 3.04 Prepayments . . . . . . . . . . . . . . . . . . 12 3.05 Fees. . . . . . . . . . . . . . . . . . . . . . 12 IV. CONDITIONS OF LENDING. . . . . . . . . . . . . . . . 13 V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 14 VI. COVENANTS. . . . . . . . . . . . . . . . . . . . . . 17 6.01 Financial Reporting . . . . . . . . . . . . . . 17 6.02 Affirmative Covenants . . . . . . . . . . . . . 18 6.03 Negative Covenants. . . . . . . . . . . . . . . 20 6.04 Financial Covenants . . . . . . . . . . . . . . 22 VII. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 23 7.01 Events of Default . . . . . . . . . . . . . . . 23 7.02 Cumulative Remedies . . . . . . . . . . . . . . 24 VIII.MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 25 8.01 Expenses. . . . . . . . . . . . . . . . . . . . 25 8.02 Set-off . . . . . . . . . . . . . . . . . . . . 25 8.03 Covenants to Survive, Binding Agreement . . . . 25 8.04 Cross-Default . . . . . . . . . . . . . . . . . 25 8.05 Amendments and Waivers. . . . . . . . . . . . . 25 8.06 Notices . . . . . . . . . . . . . . . . . . . . 26 8.07 Transfer of Lender's Interest . . . . . . . . . 26 8.08 New Laws. . . . . . . . . . . . . . . . . . . . 27 8.09 Section Headings, Severability, Entire Agreement . . . . . . . . . . . . . . . . . . . 27 8.10 Counterparts. . . . . . . . . . . . . . . . . . 28 8.11 Governing Law; Consent to Jurisdiction. . . . . 28 8.12 Uniform Commercial Code . . . . . . . . . . . . 28 8.13 Further Assurances. . . . . . . . . . . . . . . 28 8.14 Prejudgment Remedy Waiver; Waivers. . . . . . . 28 8.15 Jury Trial Waiver . . . . . . . . . . . . . . . 29 Exhibits Exhibit "A" - $16,000,000 Commercial Revolving Promissory Note Exhibit "B" - $1,500,000 Commercial Term Promissory Note Exhibit "C" - Covenant Compliance Certificate Schedules Schedule "5(d)" - Litigation Schedule "5(h)" - Liens and Encumbrances Schedule "5(k)" - Leases Schedule "5(n)" - Places of Business Schedule "5(q)" - Union Contracts and Pension Plans Schedule "5(t)" - Subsidiaries and Affiliates Schedule "6.03(b)" - Indebtedness Schedule "6.03(g)" - Sale and Lease of Assets AGREEMENT dated December 28, 1995, between PHARMACEUTICAL RESOURCES, INC., a New Jersey corporation with its principal office located at One Ram Ridge Road, Spring Valley, New York 10977 (the "Borrower") and FLEET BANK, N.A., a national banking association with an office located at One Stamford Plaza, 263 Tresser Boulevard, Stamford, Connecticut 06901 (the "Lender"). Recitals A. The Borrower has requested that the Lender extend to the Borrower the following loan facilities: (a) a $16,000,000 revolving loan facility, and (b) a $1,500,000 term loan facility. B. The proceeds of the loan facilities shall be used for the following purposes: (a) the revolving loan proceeds shall be used for working capital purposes, equipment, acquisitions and general corporate purposes; and (b) the term loan proceeds shall be used to refinance an existing term loan facility with Midlantic Bank. C. The Lender is willing to extend the loan facilities to the Borrower, subject to the terms and conditions contained herein. Agreement In consideration of the Recitals, which are incorporated by reference, the terms and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Borrower and the Lender, intending to be bound legally, agree as follows: I. DEFINITIONS. 1.01 Defined Terms. As used herein the following terms shall have the following meanings: (a) "Adjusted Libor Rate" shall mean with respect to any Eurodollar Loan Interest Period, the rate per annum at which deposits in dollars are offered by the Lender to prime commercial banks in the London interbank market at approximately 11:00 A.M. (Eastern Standard time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Eurodollar Loan to which such Interest Period is to apply and for a period of time comparable to such Interest Period divided by one minus the Eurodollar Reserve Percentage. (b) "Affiliate", as applied to any Person, shall mean any other Person directly or indirectly through one or more intermediaries controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Person, whether through the ownership of voting securities or by contract or otherwise. (c) "Agreement" shall mean this Commercial Revolving Loan and Term Loan Agreement as the same from time to time may be amended, supplemented or modified. (d) "Business Day" shall mean a day on which commercial banks in the State of Connecticut are not required or permitted by law to remain closed and on which dealings are carried on in the London interbank market. (e) "Capital Assets" shall mean assets that in accordance with GAAP are required or permitted to be depreciated or amortized on the Borrower's balance sheet. (f) "Capital Leases" shall mean capital leases, conditional sales contracts and other title retention agreements relating to the purchase or acquisition of Capital Assets. (g) "Change of Control" shall mean the transfer, sale, assignment, or pledge, in any manner whatsoever, which has the effect of transferring more than fifty percent (50%) of the voting stock of the Borrower to any Person who is not a shareholder of the Borrower as of the date of this Agreement. (h) "Commitment Letter" shall mean the letter agreement between the Borrower and the Lender dated November 16, 1995. (i) "Contractual Obligations" shall mean as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. (j) "Cost of Funds Rate" shall mean the rate determined by the Lender to be its marginal cost of funds for commonly available liabilities issued by it on the date of each advance for a period of thirty (30), sixty (60) or ninety (90) days adjusted to reflect all additional costs to be incurred in maintaining or paying any reserve or in connection with the payment by the Lender or withholding by the Borrower of any taxes existing as of such date for which the Lender is liable (other than in respect of income taxes) as a result of its making a Cost of Funds Rate Loan. (k) "Cost of Funds Rate Loans" shall mean Loans hereunder that bear interest for the Interest Period applicable thereto at the Cost of Funds Rate. (l) "Current Ratio" shall mean, for the applicable period, the ratio of Total Current Assets to Total Current Liabilities. (m) "Current Maturity of Long Term Debt ("CMLTD")" shall mean the current maturity of long term Indebtedness paid during the applicable period, including, but not limited to, amounts required to be paid during such period under Capital Leases. (n) "Default(s)" shall mean any of the events specified in Section 7.01 below, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. (o) "Dollars" and "$" shall mean lawful currency of the United States of America. (p) "Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")" shall mean, for the applicable period, income from continuing operations before the payment of interest and taxes plus depreciation, amortization and other non-cash charges (except accounting changes and one-time writeoffs) determined in accordance with GAAP. (q) "Environmental Laws" shall mean all present and future laws, statutes, ordinances, rules, regulations, orders, codes, licenses, permits, decrees, judgments, directives or the equivalent of or by any Governmental Authority relating to or addressing the protection of the environment or human health. (r) "ERISA" shall mean the Employee Retirement Income Security Act of 1974 and all rules and regulations promulgated pursuant thereto, as amended from time to time. (s) "Eurodollar Loans" shall mean Loans hereunder that bear interest for the Interest Period applicable thereto at the Adjusted Libor Rate. (t) "Eurodollar Reserve Percentage" means for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of the Lender to United States residents). The Adjusted Libor Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. (u) "Event(s) of Default" shall mean any of the events specified in Section 7.01 below, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. (v) "Facility Fee" shall mean the fee set forth in Section 3.05(a) below. (w) "Fixed Rate Loan(s)" shall mean any Eurodollar Loan(s) or Cost of Funds Loan(s). (x) "Fixed Charge Coverage Ratio" shall mean, for the applicable period, the ratio of EBITDA for the four quarters ending on the test date to CMLTD as of the beginning of such four quarters plus interest expense, income taxes and dividends for such four quarters. For purposes of the calculation of Fixed Charge Coverage Ratio, for each of the fiscal quarters in the fiscal year ending September 28, 1996, EBITDA shall exclude THREE MILLION DOLLARS and NO/100 ($3,000,000.00), (the "$3,000,000.00 Exclusion") of research and development expenditures. After the fiscal year ending September 28, 1996, and starting with the fiscal quarter ending December 28, 1996, there is no longer the above $3,000,000.00 Exclusion. (y) "Funded Debt" shall mean all debt obligations as evidenced by a note or other instrument in the public and private markets, excluding accounts payable and accrued obligations arising out of the normal course of business. (z) "Funded Debt to EBITDA Ratio" shall mean, for the applicable period, the ratio of Funded Debt to EBITDA for the rolling four (4) fiscal quarters. (aa) "GAAP" shall mean generally accepted accounting principals applied in a manner consistent with that employed in the preparation of the financial statements described in Section 6.01 below. (ab) "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing. (ac) "Guarantor(s)" shall mean Par Pharmaceutical, Inc., Generic Innovations, Inc., Quad Pharmaceuticals, Inc., Par Printing Enterprises, Inc., Advanced Biopharm, Inc., PRI Research, Inc., Par Pharma Group, Ltd., PRX Distributors, Ltd. and ParCare, Ltd. (ad) "Hazardous Materials" shall mean any material or substance that, whether by its nature or use, is now or hereafter defined as hazardous waste, hazardous substance, pollutant or contaminant under any Environmental Laws which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and which is now or hereafter regulated under any Environmental Laws, or which is or contains petroleum, gasoline, diesel fuel or another petroleum hydrocarbon product. (ae) "Indebtedness" shall mean all obligations that in accordance with GAAP should be classified as liabilities upon the Borrower's balance sheet as liabilities. (af) "Intangible Assets" shall mean assets that in accordance with GAAP are properly classifiable as intangible assets, including, but not limited to, goodwill, franchises, licenses, patents, trademarks, trade names and copyrights. (ag) "Interest Period" shall mean any thirty (30), sixty (60) or ninety (90) day period during which a Loan bears interest at the Adjusted Libor Rate or the Cost of Funds Rate as elected by the Borrower in accordance with the terms of this Agreement. (i) If any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless such Interest Period is with respect to a Eurodollar Loan and the result of such extension would be to extend such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day. (ii) Any Interest Period that would otherwise extend beyond a Maturity Date shall end on the Maturity Date or, if the Maturity Date shall not be a Business Day, on the next preceding Business Day. (ah) "Lien" shall mean any mortgage, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law or any jurisdiction). (ai) "Loan(s)" shall mean any loan made by the Lender to the Borrower hereunder, whether a Revolving Credit Loan or the Term Loan. (aj) "Loan Document(s)" shall mean this Agreement, the Notes and all other documents or agreements executed in connection herewith, together with any amendments, supplements or modifications hereto or thereto. (ak) "Maturity Date(s)" shall mean individually or collectively the Revolving Loan Maturity Date and the Term Loan Maturity Date. (al) "Net Worth" shall mean, for the applicable period, the excess of the Borrower's Total Assets minus its Total Liabilities. (am) "Note(s)" shall mean the Revolving Loan Note and the Term Note. (an) "Obligations" shall mean and include all loans, advances, interest, indebtedness, liabilities, obligations, guaranties, covenants and duties at any time owing by the Borrower to the Lender of every kind and description, whether or not evidenced by any note or other instrument, whether or not for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including but not limited to the indebtedness, liabilities and obligations arising under this Agreement, the Notes and the other Loan Documents, and all costs, expenses, fees, charges, expenses and reasonable attorneys' fees incurred in connection with any of the foregoing, or in any way connected with, involving or related to the preservation, enforcement, protection and defense of this Agreement, the Notes, the other Loan Documents, any related agreement, document or instrument and the rights and remedies hereunder or thereunder. (ao) "Person" shall mean any individual, corporation, limited liability company, limited liability partnership, partnership, joint venture, trust, business trust, unincorporated organization or any other juridical entity, or a government or state or any agency or political subdivision thereof. (ap) "Plan" shall mean any plan of a type described in Section 4021(a) of ERISA in respect of which the Borrower is an "employer" as defined in Section 3(5) of ERISA. (aq) "Post Default Rate" shall mean at any time a rate of interest equal to 1.0% per annum in excess of the rate of interest that would otherwise be in effect. (ar) "Prime Rate" shall mean the interest rate announced by the Bank from time to time as the interest rate applicable to commercial borrowers during the monthly interest period and may not be the Lender's lowest or best rate. Any change in the Prime Rate shall be effective immediately without notice on the date of the change in the Prime Rate. (as) "Prime Rate Loans" shall mean Loans hereunder that bear interest at the Prime Rate. (at) "Reportable Event" shall mean any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. (au) "Revolving Loan(s)" shall mean any Loan(s) made pursuant to Section 2.01 below. (av) "Revolving Loan Maturity Date" shall mean December 27, 1998. (aw) "Revolving Loan Note" shall mean the Note referred to in Section 2.01 below. (ax) "Revolving Loan Commitment" shall mean the obligation of the Lender to make Revolving Credit Loans to the Borrower during the Revolving Loan Commitment Period pursuant to the terms hereof as such Commitment is described in Section 2.01 below. (ay) "Revolving Loan Commitment Period" shall mean the period from the date hereof until the Revolving Loan Maturity Date. (az) "Subsidiary or Subsidiaries" of any Person shall mean any corporation or corporations of which the Person or one or more of its Subsidiaries, owns, directly or indirectly, at least a majority of the securities having ordinary voting power for the election of directors. (ba) "Tangible Net Worth" shall mean the excess of the Borrower's Total Assets minus its Intangible Assets and its Total Liabilities. (bb) "Term Loan" shall mean the Loan made pursuant to Section 2.02 below. (bc) "Term Loan Maturity Date" shall mean December 27, 1998. (bd) "Term Note" shall mean the Note referred to in Section 2.02 below. (be) "Total Assets" shall mean total assets determined in accordance with GAAP. (bf) "Total Current Assets" shall mean total current assets determined in accordance with GAAP. (bg) "Total Current Liabilities" shall mean total current liabilities determined in accordance with GAAP. (bh) "Total Liabilities" shall mean total liabilities determined in accordance with GAAP. 1.02 Accounting Terms. Except as otherwise specifically set forth in this Agreement, each accounting term used in this Agreement shall have the meaning given to it under GAAP and shall be determined on a consolidated basis. Any dispute or disagreement between the Borrower and the Lender relating to the determination of GAAP shall, in the absence of manifest error, be conclusively resolved for all purposes hereof by the written opinion with respect thereto, delivered to the Lender, of independent accountants selected by the Borrower and approved by the Lender for the purposes of auditing the periodic financial statements of the Borrower. II. LOAN FACILITIES. 2.01 Revolving Loans. Subject to the terms and conditions, and relying upon the representations and warranties set forth in this Agreement, the Lender, in its sole discretion, agrees to make revolving loans (individually a "Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower at any time until terminated as provided in Section 3.02(a) below, in the principal amount which shall not exceed $16,000,000 at any one time (the "Revolving Loan Commitment"). In addition to this Agreement, the Revolving Loans shall be evidenced by the Commercial Revolving Promissory Note of this date, a copy of which is attached hereto as Exhibit "A" (the "Revolving Loan Note"). (a) Procedure For Revolving Loan Borrowing. Provided that the Revolving Loan Commitment has not been terminated as provided in Section 3.02(a) below, during the Revolving Loan Commitment Period the Borrower may borrow under the Revolving Loan Commitment by giving the Lender irrevocable notice of a request for a Revolving Loan hereunder (i) in the case of Eurodollar Loans or Cost of Funds Rate Loans two (2) Business Days before a proposed borrowing or continuation or conversion and (ii) in the case of Prime Rate Loans on or before the date such borrowing or continuation or conversion is to be made but in no event more than five (5) Business Days before a proposed borrowing or continuation or conversion, such irrevocable notice setting forth (A) the amount of the Loan requested, which shall not be less than $100,000, (B) the requested borrowing date or Interest Period commencement date, as the case may be, (C) whether the borrowing or Interest Period is to be for a Eurodollar Loan, Cost of Funds Rate Loan or a Prime Rate Loan or a combination thereof, and (D) if entirely or partially a Eurodollar Loan or Cost of Funds Rate Loan, the length of the Interest Period therefor, which shall be thirty (30), sixty (60) or ninety (90) days. As used in this Section 2.01(a), "conversion" shall mean the conversion from one interest rate to another interest rate as more fully described in Section 2.01(b) below. Such notice must be written (including, without limitation, via facsimile transmission) and shall be sufficient if received by 11:00 a.m. (Eastern Standard Time) on the date on which such notice is to be given. Unless notification is otherwise furnished by the Borrower to the Lender (in a manner consistent with the requirements of this Section 2.01 (a), Revolving Loans will be made by credits to the Borrower's demand deposit account maintained with the Lender. If the Borrower furnishes such notice but no election is made as to the type of Revolving Loan or the Interest Period to be applicable thereto, the Revolving Loan will automatically then be made as a Prime Rate Loan until such required information is furnished pursuant to the terms hereof. (b) Continuation and Conversion of Revolving Loans. With respect to Revolving Loans only, the Borrower shall have the right at any time on prior irrevocable written or telex notice to the Lender pursuant to Section 8.06 below to (i) continue any Eurodollar Loan or Cost of Funds Rate Loan into a subsequent Interest Period, (ii) convert any Eurodollar Loan or Cost of Funds Rate Loan into a Prime Rate Loan, and (iii) convert any Prime Rate Loan into a Eurodollar Loan or a Cost of Funds Rate Loan (specifying the Interest Period to be applicable thereto), subject to the following: (A) in the case of a conversion of less than all of the outstanding Revolving Loans, the aggregate principal amount of Revolving Loans converted shall not be less than $100,000 and shall be an integral multiple thereof; (B) no Eurodollar Loan or Cost of Funds Rate Loan shall be converted at any time other than at the end of an Interest Period applicable thereto; and (C) any portion of a Revolving Loan maturing or required to be prepaid in less than thirty (30) days may not be converted into or continued as a Eurodollar Loan or a Cost of Funds Rate Loan. In the event that the Borrower shall not give notice to continue any Eurodollar Loan or Cost of Funds Rate Loan into a subsequent Interest Period or convert any such Revolving Loan into a Revolving Loan of another type, on the last day of the Interest Period thereof, such Revolving Loan (unless prepaid) shall automatically be converted into a Prime Rate Loan. The Interest Period applicable to any Eurodollar Loan or Cost of Funds Rate Loan resulting from a conversion or continuation shall be specified by the Borrower in the irrevocable notice delivered by the Borrower pursuant to this Section 2.01(b) and Section 8.06 below; provided, however, that, if such notice does not specify either the type of Revolving Loan or the Interest Period to be applicable thereto, the Revolving Loan shall automatically be converted into, or continued as, as the case may be, a Prime Rate Loan until such required information is furnished pursuant to the terms hereof. Notwithstanding anything to the contrary contained above, if an Event of Default shall have occurred and is continuing, no Eurodollar Loan or Cost of Funds Rate Loan may be continued into a subsequent Interest Period and no Prime Rate Loan may be converted into a Eurodollar Loan or a Cost of Funds Rate Loan. (c) Ability to Borrow and Reborrow. Within the limits of the Revolving Loan Commitment, so long as no Default or Event of Default has occurred and is continuing, the Borrower may borrow, repay and reborrow Revolving Loan funds. 2.02 Term Loan. (a) Subject to the terms and conditions contained in this Agreement, and relying upon the representations and warranties set forth in this Agreement, the Lender is extending to the Borrower a $1,500,000 Term Loan as evidenced by the $1,500,000 Commercial Term Promissory Note of this date, a copy of which is attached hereto as Exhibit "B" (the "Term Note"). (b) Extension of Term Loan. The Term Loan shall be made as a Prime Rate Loan unless and until the Borrower furnishes notice that the Term Loan is to be made, or converted, as the case maybe to a Eurodollar Loan or a Cost of Funds Rate Loan. Such notice must be written (including, without limitation, via facsimile transmission) and shall be sufficient if received by 11:00 a.m. (Eastern Standard Time) on which date such notice is to be given. Such notice shall be furnished at least two (2) Business Days prior to the first day such Adjusted Libor Rate or Cost of Funds Rate is to apply. (c) Continuation and Conversion of Term Loan. With respect to the Term Loan, the Borrower shall have the right at any time on prior irrevocable written or telex notice to the Lender pursuant to Section 8.06 below to (i) continue any Eurodollar Loan or Cost of Funds Rate Loan into a subsequent Interest Period, (ii) convert any Eurodollar Loan or Cost of Funds Rate Loan into a Prime Rate Loan and (iii) convert any Prime Rate Loan into a Eurodollar Loan or Cost of Funds Rate Loan (specifying the Interest Period), subject to the following: no Eurodollar Loan or Cost of Funds Rate Loan shall be converted at any time other than at the end of the Interest Period applicable thereto; and the Term Loan may not be converted into a Cost of Funds Rate Loan or Eurodollar Loan if less than thirty (30) days remain prior to the Maturity Date. In the event that the Borrower shall not give notice to continue any Eurodollar Loan or Cost of Funds Rate Loan into a subsequent Interest Period or to convert the Term Loan into a Eurodollar Loan or Cost of Funds Rate Loan, and the last day of the Interest Period thereof, the Term Loan (unless prepaid) shall be automatically converted into a Prime Rate Loan. The Interest Period applicable to any Eurodollar Loan or Cost of Funds Rate Loan resulting from a conversion or continuation shall be specified by the Borrower in the irrevocable notice delivered by the Borrower pursuant to Section 8.06 below; provided, however, that in the event each such notice does not specify either the type of interest rate elected or the Interest Period to be applicable thereto, the Term Loan shall automatically be converted into, or continued as, as the case maybe, a Prime Rate Loan until such required information is furnished pursuant to the terms hereof. Notwithstanding anything to the contrary contained above, if in an Event of Default shall have occurred and is continuing, no Eurodollar Loan or Cost of Funds Rate Loan may be continued into a subsequent Interest Period and no Prime Rate Loan may be converted into a Eurodollar Loan or a Cost of Funds Rate Loan. 2.03 Indemnity. The Borrower will indemnify the Lender against any reasonable costs or expenses, arising out of development of deposits, which the Lender may sustain or incur as a consequence of any default in payment or default in prepayment of the principal amount of any Loan or any part thereof or interest accrued thereon, as and when due and payable (at the due date thereof, by and after notice of prepayment or otherwise), or the occurrence of any Event of Default. The Lender shall provide to the Borrower a statement, signed by an officer of the Lender and supported where applicable by documentary evidence, explaining the amount of any such cost or expense. III. INTEREST, TERMS AND FEES. 3.01 Interest Rate. (a) The Loans shall bear interest as follows: (i) When the Funded Debt to EBITDA Ratio of the Borrower on a consolidated basis is less than or equal to 1.0 to 1.0, (x) all Eurodollar Loans will bear interest at the Adjusted Libor Rate plus 0.75%; (y) all Cost of Funds Rate Loans shall bear interest at the Cost of Funds Rate plus 0.75%; and (z) all Prime Rate Loans shall bear interest at the Prime Rate. (ii) When the Funded Debt to EBITDA Ratio of the Borrower on a consolidated basis is greater than 1.0 to 1.0, but less than 2.0 to 1.0, (x) all Eurodollar Loans shall bear interest at the Adjusted Libor Rate plus 1.0%; (y) all Cost of Funds Rate Loans shall bear interest at the Cost of Funds Rate plus 1.0%; and (z) all Prime Rate Loans shall bear interest at the Prime Rate. (iii) When the Funded Debt to EBITDA Ratio of the Borrower on a consolidated basis is greater than or equal to 2.0 to 1.0, (x) all Eurodollar Loans shall bear interest at the Adjusted Libor Rate plus 1.25%; (y) all Cost of Funds Rate Loans shall bear interest at the Cost of Funds Rate plus 1.25%; and (z) all Prime Rate Loans shall bear interest at the Prime Rate. (b) Post Default Rate. Upon the occurrence of an Event of Default or after the Maturity Date, the Loans shall bear interest at the Post Default Rate. (c) Lawful Interest. It is the intent of the parties that the rate of interest and all other charges to the Borrower be lawful. If for any reason the payment of a portion of interest, fees or charges as required by this Agreement would exceed the limit established by applicable law which a commercial lender such as the Lender may charge to a commercial borrower such as the Borrower, then the obligation to pay interest or charges shall automatically be reduced to such limit and, if any amounts in excess of such limits shall be paid, then such amounts shall be applied to the unpaid principal amount of the Obligations of the Borrower to Lender or refunded so that under no circumstances shall the interest or charges required hereunder exceed the maximum rate allowed by law. 3.02 Term and Termination. (a) Revolving Loan. Unless sooner terminated as a result of the occurrence of an Event of Default, the Revolving Loan Commitment shall terminate and be due and payable in full on the Revolving Loan Maturity Date. Upon termination of the Revolving Loan Commitment, the Borrower shall have no ability to receive, and the Lender shall have no obligation to make any further advances under the Revolving Loan Commitment. All of the rights, interest and remedies of the Lender and Obligations of the Borrower under this Agreement and the other Loan Documents shall survive termination of the Revolving Loan Commitment until all of the Obligations of the Borrower are fully satisfied. (b) Term Loan. Unless payment is accelerated as a result of the occurrence of an Event of Default, the Term Loan shall be repaid as set forth in the Term Note and shall be due and payable in full on the Term Loan Maturity Date. 3.03 Repayments. Any payments made by the Borrower to the Lender shall be credited first to late charges, costs and expenses, then to accrued and unpaid interest and then to the outstanding principal balance due in the inverse order of maturity. 3.04 Prepayments. (a) Prime Rate Loans. The Borrower may prepay any Prime Rate Loans without any penalty or premium. (b) Fixed Rate Loans. If any principal payment on any Fixed Rate Loan hereunder is made for any reason whatsoever on a date prior to the end of the applicable Interest Period for such Loan, the Borrower shall: (i) pay to the Lender interest accrued thereon; and (ii) on demand, indemnify the Lender against all losses including actual loss of profit and expenses suffered by it in liquidating or otherwise employing deposits acquired to fund such Fixed Rate Loan until the end of the applicable Interest Period. A certificate of the Lender as to the amount required to be paid by the Borrower under this subsection 3.04(b) shall accompany such demand and shall be final and conclusive, except in the case of manifest error or bad faith. 3.05 Fees. (a) Facility Fee. As additional consideration for the Revolving Loan Commitment, the Borrower shall pay to the Lender each quarter a non-refundable facility fee in arrears (the "Facility Fee"). In the event that the Funded Debt to EBITDA Ratio of the Borrower on a consolidated basis is less than or equal to 2.0 to 1.0, the Facility Fee will be in an amount equal to 0.0625% on the unused portion of the Revolving Loan Commitment for the preceding quarter. In the event that the Funded Debt to EBITDA Ratio of the Borrower on a consolidated basis is greater than 2.0 to 1.0, the Facility Fee equal to 0.375% on the unused portion of the Revolving Loan Commitment on an annual basis. The Funded Debt to EBITDA Ratio shall be tested and the Facility Fee paid on a quarterly basis each January 1, April 1, July 1, and October 1. (b) Commitment Fee. As additional consideration for the extension of the Revolving Loan, the Term Loan and the $2,500,000 term loan facility extended by Fleet Credit Corporation to the Borrower on this date, the Borrower has paid to the Lender a non-refundable commitment fee in the amount of $40,000, which Commitment Fee shall be deemed fully earned. IV. CONDITIONS OF LENDING. The Borrower agrees that the Loans are subject to fulfillment by the Borrower of the following conditions precedent, all in form, scope and substance satisfactory to the Lender and its counsel in their sole discretion: (a) Evidence of Corporate Action. The Lender shall have received certified copies of all corporate action taken by the Borrower to authorize the execution, delivery and performance of this Agreement, the Notes, the other Loan Documents, and the borrowings to be made hereunder, together with copies of the Borrower's Certificate of Incorporation and Bylaws, all amendments thereto, and such other papers and documents as the Lender or its counsel may require. (b) Notes. The Lender shall have received the duly executed Notes drawn to its order. (c) Guaranty. The Lender shall have received the unconditional and joint and several Guaranties of each of the Guarantors in form and content satisfactory to the Lender. (d) Master Security Agreement. The Lender shall have received from Par Pharmaceutical, Inc. the duly executed Master Security Agreement in form and content satisfactory to the Lender pursuant to which Par Pharmaceutical, Inc. shall grant to the Lender a first priority security interest in certain machinery and equipment of Par Pharmaceutical, Inc. (e) UCC-1 Financing Statements. The Lender shall have received from the Par Pharmaceutical, Inc. the duly executed UCC-1 Financing Statements covering the collateral described in the Master Security Agreement. (f) Insurance. The Lender shall have received evidence of casualty, liability and business interruption insurance in such amounts and with such companies satisfactory to the Lender, and the Lender shall be named as a loss payee on all such insurance with respect to any loss or damage to the collateral covered by the Master Security Agreement (i) after an Event of Default, or (ii) which loss or damage is in excess of $100,000 prior to an Event of Default. (g) Opinion of Counsel. The Borrower shall provide the Lender with an opinion from counsel in form and content satisfactory to the Lender opining to, among other things, the valid, binding and enforceable nature of the Loan Documents and the authority of the Borrower and the Guarantor to enter into the Loan Documents. (h) Other. The Lender shall have received such other documents as the Lender deems necessary. V. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lender that: (a) Good Standing and Qualification. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey. The Borrower has all requisite corporate power and authority to own and operate its properties and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction wherein the character of the properties owned or leased by it therein or in which the transaction of its business therein makes such qualification necessary, except where the failure to so qualify would not have a material adverse effect on the Borrower's condition, financial or otherwise. (b) Corporate Authority. The Borrower has full corporate power and authority to enter into and perform its obligations under this Agreement, to make the borrowings contemplated herein, to execute and deliver the Notes, and the other Loan Documents and to incur the obligations provided for herein and therein, all of which have been duly authorized by all necessary and proper corporate action. No other consent or approval or the taking of any other action in respect of shareholders or of any public authority is required as a condition to the validity or enforceability of this Agreement, the Notes or any of the other Loan Documents. The execution and delivery of this Agreement is for valid corporate purposes and will not violate the Borrower's certificate of incorporation or bylaws. (c) Binding Agreements. This Agreement constitutes, and the Notes and the other Loan Documents delivered in connection herewith shall constitute, valid and legally binding obligations of the Borrower, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and general principles of equity. (d) Litigation. Except as set forth in Schedule "5(d)", there are no actions, suits, proceedings or investigations pending or, to the Borrower's knowledge, threatened against the Borrower before any court or administrative agency, which either in any case or in the aggregate, if adversely determined, would materially and adversely affect the financial condition, assets or operations of the Borrower, or which question the validity of this Agreement, the Notes, or any of the other Loan Document, or any action to be taken in connection with the transaction contemplated hereby. (e) No Conflicting Law or Agreements. To the best of the Borrower's knowledge, the execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents (i) do not violate any provision of the Certificate of Incorporation or Bylaws of the Borrower, (ii) do not violate any order, decree or judgment, or any provision of any statute, rule or regulation, (iii) do not violate or conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any shareholder agreement, stock preference agreement, mortgage, indenture or contract to which the Borrower is a party, or by which any of its properties are bound, and (iv) do not result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any property or assets of the Borrower except as contemplated herein. (f) Taxes. With respect to all taxable periods of the Borrower, the Borrower has filed all tax returns required to be filed by it and has paid all federal, state, municipal, franchise and other taxes shown on such filed returns has reserved against the same, as required by GAAP, and the Borrower knows of no unpaid assessments against it. (g) Financial Statements. The Borrower has delivered to the Lender the certified consolidated balance sheet of the Borrower as of September 30, 1995, and the certified related consolidated statements of income, retained earnings and cash flows for the fiscal year then ended. Such statements fairly present the consolidated financial condition of the Borrower as of the dates and for the periods referred to therein and have been prepared in accordance with GAAP applied on a consistent basis by the Borrower throughout the periods involved. There are no liabilities, direct or indirect, fixed or contingent, of the Borrower as of the date of the balance sheet which are not reflected therein or in the notes thereto, other than liabilities or obligations not material in amount or which are not required to be reflected in corporate balance sheets prepared in accordance with GAAP. There has been no material adverse change in the financial condition, business, operations, affairs or prospects of the Borrower since the date of such financial statements. (h) Existence of Assets and Title Thereto. The Borrower has good and marketable title to its properties and assets, including the properties and assets reflected in the financial statements referred to above. These properties and assets are not subject to any mortgage, pledge, lien, lease, security interest, encumbrance, restriction or charge except those permitted under the terms of this Agreement or as set forth in Schedule "5(h)", and none of the foregoing prohibit or interfere with ownership of the Borrower's assets or the operation of its business presently conducted thereon. (i) Regulations G, T, U and X. The proceeds of the borrowings hereunder will not be used, directly or indirectly, for the purposes of purchasing or carrying any margin stock in contravention of Regulations G, T, U or X promulgated by the Board of Governors of the Federal Reserve System. (j) Compliance. The Borrower is not in default with respect to or in violation of any order, writ, injunction or decree of any court or of any federal, state, municipal or other governmental department, commission, board, bureau, agency, authority or official, or in violation of any law, statute, rule or regulation including, but not limited to, all Environmental Laws to which it or its properties is or are subject, where such default or violation would materially and adversely affect the financial condition of the Borrower. The Borrower represents that it has not received notice of any such default from any party. To the best of the Borrower's knowledge, the Borrower is not in default in the payment or performance of any of its material obligations to any third parties or in the performance of any mortgage, indenture, lease, contract or other agreement to which it is a party or by which any of its assets or properties are bound. (k) Leases. The Borrower enjoys quiet and undisturbed possession under all material leases under which it is operating, and all such leases are valid and subsisting and the Borrower is not in default under any of its leases. The leases to which the Borrower is currently a party are set forth on the attached Schedule "5(k)". (l) Pension Plans. To the best of the Borrower's knowledge, no fact, including but not limited to any "Reportable Event", as that term is defined in Section 4043 of ERISA, as the same may be amended from time to time exists in connection with any Plan of the Borrower which might constitute grounds for termination of any such Plan by the Pension Benefit Guaranty Corporation ("PBGC") or for the appointment by the appropriate United States District Court of a Trustee to administer any such Plan. No "Prohibited Transaction" as defined by ERISA exists or will exist upon the execution and delivery of this Agreement or the performance by the parties hereto of their respective duties and obligations hereunder. The Borrower agrees to do all acts including, but not limited to, making all contributions necessary to maintain compliance with ERISA and agrees not to terminate any such Plan in a manner or do or fail to do any act which could result in the imposition of a lien on any property of the Borrower pursuant to Section 4068 of ERISA. The Borrower has not incurred any withdrawal liability under the Multiemployer Pension Plan Amendment Act of 1980. The Borrower has no unfunded liability in contravention of ERISA. (m) Office. The chief executive office and principal place of business of the Borrower, and the office where its records are kept are as set forth in the first paragraph of this Agreement. (n) Places of Business. The Borrower has no other places of business at any location other than those set forth in the attached Schedule "5(n)". (o) Contingent Liabilities. The Borrower is not a party to any suretyship, guarantyship, or other similar type agreement; and it has not offered its endorsement to any individual, concern, corporation or other entity. To the best of the Borrower's knowledge, the Borrower has no material contingent liabilities except as reflected in its annual and quarterly reports on SEC Forms 10-K and 10-Q respectively. (p) Contracts. No contract, governmental or otherwise, to which the Borrower is a party, is subject to renegotiation, nor is the Borrower in default of any material contract. (q) Union Contracts and Pension Plans. The Borrower is not a party to any collective bargaining, union or pension plan agreement, except as set forth on the attached Schedule "5(q)". The union contracts set forth on Schedule "5(q)" are in full force and effect and are not currently subject to the renegotiation. The Borrower is in full compliance with the terms and conditions of all such union contracts and knows of no threatened work stoppage by any union members. (r) Licenses. To the best of the Borrower's knowledge, the Borrower has all licenses, permits, approvals and other authorizations required by any government, agency or subdivision thereof, or from any licensing entity necessary for and material to the conduct of its business, all of which the Borrower represents to be current, valid and in full force and effect. (s) Financial Information. All financial information submitted by the Borrower to the Lender, whether previously or in the future, is and will be true and correct and complete in all material respects. (t) Parent, Affiliate or Subsidiary Corporations. The Borrower has no parent corporation and, except as set forth on the attached Schedule "5(t)", has no domestic or foreign Affiliate or Subsidiary corporations. VI. COVENANTS. 6.01 Financial Reporting. The Borrower covenants and agrees that from the date hereof until payment in full of all Obligations and the termination of this Agreement, the Borrower shall furnish to the Lender the following, all to be prepared on a consolidated basis and in conformity with GAAP, applied on a basis consistent with the preceding period: (a) a copy of the Borrower's SEC Form 10-K upon filing of same with the Securities and Exchange Commission; (b) a copy of the Borrower's SEC Form 10-Q upon filing of same with the Securities and Exchange Commission; (c) Covenant Compliance Certificate in the form of the attached Exhibit "C" upon the filing of the Borrower's SEC Forms 10-Q and 10-K with the Securities and Exchange Commission; (d) promptly upon the Lender's written request from time to time, such other information about the financial condition and operations of the Borrower as the Lender may reasonably request. 6.02 Affirmative Covenants. The Borrower covenants and agrees from the date hereof until payment in full of all obligations under, and termination of, this Agreement, the Borrower shall: (a) Insurance and Endorsement. Keep its properties and business insured against fire and other hazards (so-called "All Risk" coverage) in amounts and with companies reasonably satisfactory to the Lender covering such risks as are herein set forth; maintain public liability coverage, against claims for personal injuries or death; and maintain all worker's compensation, employment or similar insurance as may be required by applicable law. All insurance shall be in amounts reasonably satisfactory to the Lender and shall contain such terms, be in such form, be for such periods, and be written by carriers reasonably satisfactory to the Lender. Without limiting the generality of the foregoing, such insurance must provide that it may not be cancelled without thirty (30) days prior written notice to the Lender. In the event of failure to provide and maintain insurance as provided herein, the Lender may, at its option, provide such insurance and charge the amount thereof to the Revolving Loans. The Borrower shall furnish to the Lender certificates or other satisfactory evidence of compliance with the foregoing insurance provisions. (b) Taxes and Other Liens. Comply with all statutes and government regulations and pay all taxes, assessments, governmental charges or levies, or claims for labor, supplies, rent and other obligations made against it or its property which, if unpaid, might become a lien or charge against the Borrower or its properties, except liabilities being contested in good faith and against which, if requested by the Lender, the Borrower shall set up reserves in amounts and in form reasonably satisfactory to the Lender. (c) Place of Business. Maintain its chief places of business and chief executive offices at the address set forth in the beginning of this Agreement, unless, the Borrower shall have given the Lender thirty (30) days prior written notice of any change in such places of business. (d) Inspections. Allow the Lender by or through any of its officers, attorneys, accountants or other agents designated by the Lender, for the purpose of ascertaining whether or not each and every provision hereof and of the other Loan Documents, is being performed, to enter the offices and plants of the Borrower on reasonable prior notice, during regular business hours to examine or inspect any of the properties, books and records or extracts therefrom, to make copies of such books and records or extracts therefrom, and to discuss the affairs, finances and accounts thereof with the Borrower all at such times and as often as the Lender or any representatives of the Lender may reasonably request, at the Lender's cost prior to an Event of Default and at the Borrower's cost after an Event of Default. (e) Litigation. Advise the Lender of the commencement or threat of litigation, including arbitration proceedings and any proceedings before any governmental agency, which is instituted against the Borrower and is reasonably likely to have a material adverse effect upon the condition, financial, operating or otherwise, of the Borrower or where the amount involved or claimed is in excess of Five Hundred Thousand and 00/100 DOLLARS ($500,000.00) or in excess of One Million and 00/100 DOLLARS ($1,000,000.00) in the aggregate in any fiscal year. (f) Maintain Existence. Maintain its corporate existence and comply with all applicable statutes, rules and regulations. (g) Maintain Assets. Maintain its properties in good repair, working order and operating condition, except for unused or obsolete equipment. The Borrower shall immediately notify the Lender of any event causing material loss in the value of its assets. (h) ERISA. (i) Promptly notify the Lender in writing of the occurrence of any Reportable Event, as defined in Section 4043 of ERISA, if a notice of such Reportable Event is required under ERISA to be delivered to the PBGC within 30 days after the occurrence thereof, together with a description of such Reportable Event and a statement of the action the Borrower intends to take with respect thereto, together with a copy of the notice thereof given to the PBGC. (ii) Promptly notify the Lender if the Borrower receives an assessment of withdrawal liability in connection with a complete or partial withdrawal with respect to any multiemployer plan to which the Borrower is a party, together with a statement of the action that the Borrower intends to take with respect thereto. (i) Notice of Certain Events. Give prompt written notice to the Lender of: (i) any dispute that arises between the Borrower and any governmental regulatory body or law enforcement agency, which if adversely determined would have a material adverse effect on the condition of the Borrower, financial or otherwise; (ii) any labor controversy resulting or likely to result in a strike or work stoppage against the Borrower; (iii) any proposal by any public authority to acquire the assets or business of the Borrower; (iv) any proposed or actual change of the name, identity or corporate structure of the Borrower; (v) any other matter which has resulted or is likely to result in a material adverse change in the financial condition or operations of the Borrower; and (j) Defaults. Give prompt written notice to the Lender upon the occurrence of any Default or Event of Default, signed by the president or chief financial officer of the Borrower describing such occurrence and the steps, if any, being taken to cure the default. (k) Account Duties. Comply with any and all federal, state and local laws affecting its business, including, but not limited to, payment of all federal and state taxes. The Borrower agrees to indemnify and hold the Lender harmless from all claims, actions and losses, including reasonable attorneys' fees and costs actually incurred by the Lender arising from any contention, that there has been a failure to comply with such laws. (l) Audit by Lender; Fees. In addition to the inspections in Section 6.02(d), permit the Lender to audit the books and records of the Borrower at such times and in such manner and detail as the Lender deems, in the Lender's reasonable discretion, are necessary. After and Event of Default, the Borrower shall promptly pay the Lender all audit fees and any reasonable out-of-pocket expenses incurred in connection with any such audit. The Lender may charge any such audit fees and out-of-pocket expenses to the Borrower's demand deposit account. Prior to an Event of Default, the Lender shall be responsible for all of its audit fees and any out-of-pocket expenses incurred in connection with any such audit. (m) Officers and Directors. Promptly notify the Lender in writing upon the occurrence of a Change of Control. 6.03 Negative Covenants. The Borrower covenants and agrees that from the date hereof until payment in full of all Obligations and termination of this Agreement, the Borrower shall not without the prior written consent of the Lender: (a) Encumbrances. Incur or permit to exist any lien, mortgage, charge or other encumbrance against any of its properties or assets, whether now owned or hereafter acquired, except: (i) pledges or deposits in connection with or to secure worker's compensation, unemployment or liability insurance; (ii) tax liens which are being contested in good faith and in compliance with this Agreement; and (iii) those listed on the attached Schedule "5(h)". (b) Limitation on Indebtedness. Except as set forth on the attached Schedule "6.03(b)", create or incur any indebtedness or obligation for trade debt or borrowed money, or issue or sell any debt obligations of the Borrower to any lender or Person other than the Lender. (c) Contingent Liabilities. Assume, guaranty, endorse or otherwise become liable upon the obligations of any person, firm or corporation (other than Guarantors), or enter into any purchase or option agreement or other arrangement having substantially the same effect as such a guarantee, except by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business. (d) Consolidation or Merger. Merge into or consolidate with or into any corporation. (e) Use of Revolving Loans for Acquisition. Use greater than NINE MILLION FIVE HUNDRED THOUSAND and 00/100 DOLLARS ($9,500,000.00) of the Revolving Loan Commitment in the aggregate for all acquisitions of stock or assets of any other Person. (f) Acquisition of Stock of the Borrower; Dividends. Purchase, acquire, redeem or retire, or make any commitment to purchase, acquire, redeem or retire (i) any of the common stock of the Borrower, whether now or hereafter outstanding in excess of the aggregate of $500,000 per year; (ii) any of the preferred stock of the Borrower, whether now or hereafter outstanding; or declare or pay any dividend, or make any distribution to any of its stockholders in excess of twenty-five percent (25%) of net income of the Borrower in any fiscal year. (g) Sale and Lease of Assets. Sell, lease or otherwise dispose of any of its assets, in excess of ONE MILLION and 00/100 Dollars ($1,000,000.00) per event or ONE MILLION and 00/100 Dollars ($1,000,000.00) per annum, except for sales of inventory and dispositions of unused or obsolete equipment in the ordinary course of business and except as set forth on the attached Schedule 6.03(g). (h) Name Changes. Change its corporate name or conduct its business under any trade name other than as set forth in this Agreement. (i) Capital Expenditures. Make any expenditure for any asset which would be a fixed asset, or any expenditures for any leases including, but without limitation, capitalized or conditional sales contracts, in excess of EIGHT MILLION and 00/100 DOLLARS ($8,000,000.00) in the aggregate per annum. For the purpose of this covenant, the entire amount paid over the life of any capitalized lease or conditional sales contract shall be deemed to be paid in the first year of such lease or sales contract. (j) Change of Control. Suffer any Change in Control of the Borrower. (k) Prohibited Transfers. Transfer, in any manner, either directly or indirectly, any cash, property, or other assets to any parent or any Affiliate or Subsidiary other than a Guarantor, and other than sales made in the ordinary course of business and for fair consideration on terms no less favorable than if such sale had been an arms-length transaction between the Borrower and an unaffiliated entity. (l) Use of Proceeds. Apply any of the proceeds from the Loans to any Affiliate or Subsidiary other than a Guarantor if such Affiliate or Subsidiary is not a party to this Agreement. (m) No Management Change. Suffer any change in the senior management of the Borrower which the Lender deems, in its reasonable discretion, to be a material adverse change. (n) Leasebacks. Lease any real estate or other capital asset from any lessor who shall have acquired such property from the Borrower. (o) Business Operations. Engage in any business other than the business in which it is currently engaged or a business reasonably related thereto. 6.04 Financial Covenants. The Borrower agrees and covenants that from the date hereof until payment in full and performance of all Obligations, the Borrower shall, at the end of each fiscal quarter on a consolidated basis, be in compliance with the following financial covenants, all determined in accordance with GAAP: (a) Net Worth. Maintain a Net Worth of not less than SIXTY-FIVE MILLION and 00/100 DOLLARS ($65,000,000) increasing at the rate of not less than seventy-five percent (75%) of quarterly net income (after tax) to the Borrower. (b) Ratio of Funded Debt to Tangible Net Worth. Maintain a ratio of Funded Debt to Tangible Net Worth not to exceed the following: Ratio Dates 0.40 to 1.0 from October 1, 1995 through and including September 28, 1996. 0.35 to 1.0 from September 29, 1996 through and including September 27, 1997 0.30 to 1.0 from September 28, 1997 through and including September 26, 1998 (c) Fixed Charge Coverage Ratio. Maintain, as of each of the dates set forth below, a Fixed Charge Coverage Ratio as follows, to be calculated on a rolling four quarter basis: Ratio Dates 1.20 to 1.0 December 28, 1995 1.20 to 1.0 June 29, 1996 1.20 to 1.0 September 28, 1996 1.25 to 1.0 December 28, 1996 and at the end of each fiscal quarter thereafter (d) Current Ratio. Maintain a Current Ratio of not less than 2.0 to 1.0. VII. DEFAULT. 7.01 Events of Default. The Obligations shall, at the option of the Lender, become immediately due and payable without notice or demand unless otherwise provided herein upon the occurrence of any of the following events (collectively, "Events of Default" and individually, an "Event of Default"): (a) failure of the Borrower to pay any installment of principal or interest or any other Obligation arising under this Agreement, the Notes or the other Loan Documents or such failure by a guarantor or surety for any of the Obligations within ten (10) days when due (unless payments are made by auto-debit from the Borrower's accounts with the Lender in which case no grace period shall apply); (b) breach of any of the Obligations by the Borrower or any guarantor or surety including, without limitation, any covenant, representation or warranty contained herein, or the Borrower's failure to perform any act, duty or obligation as required by this Agreement or any of the other Loan Documents which shall continue for a period of thirty (30) days after notice to the Borrower thereof; (c) the making by the Borrower of any material misrepresentation of a material fact to the Lender; (d) insolvency (failure of the Borrower to pay its debts as they mature or when the fair value of the Borrower's assets is less than its liabilities) of the Borrower or any guarantor or surety for the Obligations, appointment of a receiver or custodian, or assignment for the benefit of creditors or the commencement of any proceedings under any bankruptcy or insolvency law by or against the Borrower or any guarantor or surety for the Obligations; appointment of a committee of creditors or liquidating banks, or offering of a composition or extension to creditors by, for or of the Borrower; however, if an involuntary bankruptcy petition is filed, an Event of Default shall not occur unless such petition is not dismissed within sixty (60) days of filing; (e) the loss, renovation or failure to renew any governmental license and/or permit now held or hereafter acquired by the Borrower which materially and adversely affects the ability of the Borrower to continue its operations as presently conducted; (f) an Event of Default in any other Loan Document or other agreements between the Lender and the Borrower or any guarantor or surety of the Obligations; (g) except as otherwise permitted pursuant to this Agreement, the filing of any lien, voluntary or involuntary against any of the assets of the Borrower or any guarantor or surety of the Obligations which in the case of an involuntary lien is not discharged of record within sixty (60) days of filing; (h) dissolution of the Borrower or any guarantor or surety of the Obligations; (i) failure by the Borrower to pay or perform any other Indebtedness in excess of $500,000, or if any such other Indebtedness shall be accelerated, or if there shall exist any default under any instrument, document or agreement governing, evidencing or securing such other Indebtedness; (j) a material adverse change in the condition of the Borrower, financial or otherwise, as determined by the Lender in its reasonable discretion; Upon the happening of any one or more Events of Default, any requirements upon the Lender to make further Revolving Loans hereunder shall terminate. The Borrower expressly waives any presentment, demand, protest, notice of protest or other notice of any kind after the occurrence of such Event of Default. The Lender may proceed to enforce the rights of the Lender whether by suit in equity or by action at law, whether for specific performance of any covenant or agreement contained in this Agreement, the Notes or any other Loan Documents, or in aid of the exercise of any power granted in either this Agreement, the Note or the other Loan Documents, or it may proceed to obtain judgment or any other relief whatsoever appropriate to the enforcement of such rights, or proceed to enforce any legal or equitable right which the Lender may have by reason of the occurrence of any Event of Default hereunder. 7.02 Cumulative Remedies. The enumeration of the Lender's rights and remedies set forth in this Article is not intended to be exhaustive and the exercise by the Lender of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative and shall be in addition to any other right or remedy given hereunder or under any other agreement between the parties or which may now or hereafter exist in law or at equity or by suit or otherwise. No delay or failure to take action on the part of Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any event of default. No course of dealing between the Borrower and the Lender or their employees shall be effective to change, modify or discharge any provision of this Agreement or to constitute a waiver of any default. VIII. MISCELLANEOUS. 8.01 Expenses. Whether or not the transaction herein contemplated shall be consummated, the Borrower agrees to pay all out-of-pocket expenses (including the Lender's counsel of $26,500 plus disbursements) of the Lender incurred in connection with the preparation of this Agreement, the Notes and the other Loan Documents. The Borrower further agrees to pay for all reasonable expenses of the Lender including, but not limited to reasonable attorneys' fees for any amendments or supplements to this Agreement, the Notes and the other Loan Documents and all expenses (including reasonable fees and expenses of the Lender or the Lender's counsel) incidental to the collection of monies due hereunder or under the Notes or the other Loan Documents and/or the enforcement of the rights (including the protection thereof) of the Lender under any provisions of this Agreement, and the Notes and the other Loan Documents. 8.02 Set-off. The Borrower gives the Lender a lien and right of setoff for all the Obligations upon and against all its deposits, credits, collateral and property now or hereafter in the possession or control of the Lender or in transit to it. The Lender may, upon demand or the occurrence of any Event of Default, apply or set off the same, or any part thereof, to any Obligations of the Borrower to the Lender. 8.03 Covenants to Survive, Binding Agreement. All covenants, agreements, warranties and representations made herein, in the Notes, in the other Loan Documents, and in all certificates or other documents of the Borrower shall survive the advances of money made by the Lender to the Borrower hereunder and the delivery of the Notes, and the other Loan Documents. All such covenants, agreements, warranties and representations shall be binding upon and inure to the benefit of the Lender and its successors and assigns, whether or not so expressed. 8.04 Cross-Default. The Loans shall be cross-defaulted with each other, with the $2,500,000 term loan facility of this date of the Borrower with Fleet Credit Corporation and with current and future financing accommodations extended or to be extended by the Lender or Fleet Credit Corporation to the Borrower so that an Event of Default under any loan or lease to the Borrower shall be an Event of Default hereunder and under all of the other loans and leases extended by the Lender or Fleet Credit Corporation. 8.05 Amendments and Waivers. This Agreement, the Notes, the other Loan Documents, and any term, covenant or condition hereof or thereof may not be changed, waived, discharged, modified or terminated except by a writing executed by the parties hereto or thereto. Notwithstanding the foregoing and without limiting the Lender's right to exercise any of its other rights or remedies hereunder, in the event that the Lender, in its sole discretion, elects to waive compliance by the Borrower of any terms or conditions set forth in this Agreement, the Notes or any other Loan Documents, the Borrower shall pay to the Lender all costs and expenses in connection therewith including, but not limited to, reasonable attorneys' fees. The failure on the part of the Lender to exercise, or the Lender's delay in exercising, any right, remedy or power hereunder or under the Notes or the other Loan Documents shall not preclude any other or future exercise thereof, or the exercise of any other right, remedy or power. 8.06 Notices. All notices, requests, consents, demands and other communications hereunder shall be in writing and shall be deemed effective five (5) days after being of being mailed by registered or certified first class mail or within one (1) day after being delivered by an overnight courier to the respective parties to this Agreement as follows: If to the Borrower: Pharmaceutical Resources, Inc. One Ram Ridge Road Spring Valley, New York 10977 Attention: Mr. Kenneth G. Mosesian With a copy to: Hertzog, Calamari & Gleason 100 Park Avenue New York, New York 10017-5582 Attention: John D. Vaughan, Esq. If to the Lender: Fleet Bank, N.A. One Stamford Forum 263 Tresser Boulevard Stamford, Connecticut 06901 Attention: Mr. John V. Raleigh With a copy to: Diserio Martin O'Connor & Castiglioni One Atlantic Street Stamford, Connecticut 06901 Attention: Kevin T. Katske, Esq. 8.07 Transfer of Lender's Interest. The Borrower agrees that the Lender, in its sole discretion, may freely sell, assign or otherwise transfer participations, portions, co-lender interests or other interests in all or any portion of the indebtedness, liabilities or obligations arising in connection with or in any way related to the financing transactions of which this Agreement is a part. In the event of any such transfer, the transferee may, in the Lender's sole discretion, have and enforce all the rights, remedies and privileges of the Lender. The Borrower consents to the release by the Lender to any potential transferee, so long as such transferee is a financial institution, of any and all information including, without limitation, financial information pertaining to the Borrower as the Lender, in its sole discretion, may deem appropriate, provided such transferee executes a confidentiality agreement with respect to all documents and information pertaining to the Borrower. If such transferee so participates with the Lender in making loans or advances hereunder or under any other agreement between the Lender and the Borrower, the Borrower grants to such transferee and such transferee shall have an is hereby given a continuing lien and security interest in any money, securities or other property of the Borrower in the custody or possession of such transferee, including the right of set off, to the extent of such transferee's participation in the Obligations. 8.08 New Laws. In the event that any law, regulation, treaty or official directive or the interpretation or application thereof by any court or governmental authority or the compliance with any guideline or request of any governmental authority: (a) subjects the Lender to any tax with respect to any amounts payable hereunder or under the Notes by the Borrower or otherwise with respect to the transactions contemplated hereunder, except for taxes on the overall net income of the Lender; or (b) imposes, modifies or deems applicable any deposit, insurance, reserve, special deposit, capital maintenance or similar requirement against assets held by, or deposits in or for the account of, or loans or advances or commitments to make the Revolving Loans or advances by the Lender, other than such requirements the effect of which is included in the determination of the interest rates for the Revolving Loans or advances made thereunder; or (c) imposes upon the Lender any other condition with respect to the Revolving Loans or advances to be made thereunder; and the result of any of the foregoing is to increase the cost of the Lender, reduce the income receivable by or return on equity of the Lender or impose any expense upon the Lender with respect to the Revolving Loans or advances thereunder, the Lender shall so notify the Borrower. The Borrower agrees, after prompt notice is sent by the Lender to the Borrower, to pay the Lender the amount of such increases in cost, reduction in income, reduced return on equity or additional expenses as and when such cost, reduction in income, reduced return on equity or additional expense is incurred or determined, plus interest, upon presentation by the Lender of a statement in the amount and setting forth the Lender's calculation thereof, in determining such amount, the Lender may use any reasonable averaging and attribution methods; which statement shall be deemed true and correct absent manifest error. 8.09 Section Headings, Severability, Entire Agreement. Section and subsection headings have been inserted herein for convenience of the Lender only and shall not be construed as part of this Agreement. Every provision of this Agreement, the Notes and the other Loan Documents is intended to be severable; if any term or provision of this Agreement, the Notes, the other Loan Documents, or any other document delivered in connection herewith shall be invalid, illegal or unenforceable for any reason whatsoever, the validity, legality and enforceability of the remaining provisions hereof or thereof shall not in any way be affected or impaired thereby. All Exhibits and Schedules to this Agreement shall be deemed to be part of this Agreement. This Agreement, the other Loan Documents, and the Exhibits and Schedules attached hereto and thereto embody the entire agreement and understanding between the Borrower and the Lender and supersede all prior agreements and understandings relating to the subject matter hereof unless otherwise specifically reaffirmed or restated herein. 8.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered shall be an original, and it shall not be necessary when making proof of this Agreement to produce or account for more than one counterpart. 8.11 Governing Law; Consent to Jurisdiction. This Agreement and the other Loan Documents, and all transactions, assignments and transfers hereunder and thereunder, and all the rights of the parties, shall be governed as to validity, construction, enforcement and in all other respects by the laws of the state of Connecticut. The Borrower agrees that the Superior Court for the Judicial District of Stamford/Norwalk or the United States District Court for the District of Connecticut at Bridgeport shall have jurisdiction to hear and determine any claims or disputes pertaining to the financing transactions of which this Agreement is a part and/or to any matter arising or in any way related to this Agreement or any other agreement between the Lender and the Borrower expressly submits and consents in advance to such jurisdiction in any action or proceeding. 8.12 Uniform Commercial Code. The Borrower shall comply with, and Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code, as enacted in Connecticut, as amended. 8.13 Further Assurances. At the request of the Lender, the Borrower agrees that at its expense, it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Lender may reasonably request, in order to exercise and enforce its rights and remedies hereunder. 8.14 Prejudgment Remedy Waiver; Waivers. THE BORROWER ACKNOWLEDGES THAT THE LOANS EVIDENCED HEREBY ARE COMMERCIAL TRANSACTIONS AND WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE LENDER MAY DESIRE TO USE, AND FURTHER WAIVES DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR EXTENSIONS. THE BORROWER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. 8.15 Jury Trial Waiver. THE BORROWER WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A PART OR THE ENFORCEMENT OF ANY OF LENDER'S RIGHTS. THE BORROWER ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. The parties have executed this Agreement on December 28, 1995. Signed in the presence of: ____________________________ PHARMACEUTICAL RESOURCES, INC. ____________________________ By /s/Robert I. Edinger ------------------------------ Its Executive Vice President ____________________________ FLEET BANK, N.A. ____________________________ By /s/John Raleigh ----------------------------- Its Vice President STATE OF CONNECTICUT ) ) ss.: Stamford COUNTY OF FAIRFIELD ) On this the 28th day of December, 1995, before me, the undersigned officer, personally appeared Robert Edinger, who acknowledged himself to be the Executive Vice President of Pharmaceutical Resources, Inc., a New Jersey corporation, and that he, as such officer, being authorized so to do, executed the foregoing instrument for the purposes therein contained and acknowledged the same to be his free act and deed individually and as such officer, and the free act and deed of the corporation. IN WITNESS WHEREOF, I hereunto set my hand. ___________________________________ Kevin T. Katske Commissioner of the Superior Court STATE OF CONNECTICUT ) ) ss.: Stamford COUNTY OF FAIRFIELD ) On this the 28th day of December, 1995, before me, the undersigned officer, personally appeared John V. Raleigh, who acknowledged himself to be the Vice President of Fleet Bank, N.A., a national banking association, and that he, as such officer, being authorized so to do, executed the foregoing instrument for the purposes therein contained and acknowledged the same to be his free act and deed individually and as such officer, and the free act and deed of the national banking association. IN WITNESS WHEREOF, I hereunto set my hand. ___________________________________ Kevin T. Katske Commissioner of the Superior Court EX-10 3 EX 10.2 EXHIBIT 10.2 MASTER SECURITY AGREEMENT Lender: Fleet Bank, N.A. Customer: Par Pharmaceutical, a national banking association Inc., a New Jersey corporation Address: One Stamford Plaza Address: One Ram Ridge Road 263 Tresser Boulevard Spring Valley, NY Stamford, CT 06901 10977 1. GRANT OF SECURITY; INTEREST DEFINITIONS Subject to the terms and conditions set forth herein (the "Master Security Agreement") and in any Equipment Security Agreement Schedule incorporating the terms of this Master Security Agreement (each, an "Equipment Schedule"), Customer hereby grants to FLEET BANK, N.A. ("Lender") a security interest in and to all Collateral (hereinafter defined) in order to secure the payment and performance of all Obligations (hereinafter defined), including but not limited to any Obligations evidenced by the Guaranty of this date which specifically refers to an Equipment Schedule (the "Guaranty"). References to "the Security Agreement", "this Security Agreement" or "any Security Agreement" shall mean and refer to any Equipment Schedule which incorporates the terms of this Master Security Agreement, together with all exhibits, addenda, schedules, certificates, riders and other documents and instruments executed and delivered in connection with such Equipment Schedule, all as the same may be amended or modified from time to time. Each Equipment Schedule shall constitute a separate, distinct and independent security agreement and contractual obligation of Customer. "Affiliate" means, with respect to any person, firm or entity, any other person, firm or entity controlling, controlled by, or under common control with such person, firm or entity, and for this purpose, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such person, firm or entity, whether through the legal or beneficial ownership of voting securities, by contract or otherwise. "Collateral" means the Equipment and all present or future additions, attachments, accessions or accessories thereto and replacements thereof, all tools, manuals, service records, software and similar information and materials related to such Equipment, and the products, proceeds, offspring, rents and profits therefrom or thereof, including proceeds in the form of goods, accounts, chattel paper, documents, instruments and general intangibles, insurance proceeds payable in respect of loss or damage to such Collateral, and all returned or repossessed goods arising from or relating to any of the Collateral. "Equipment" means machinery and equipment now owned or hereafter acquired by Customer, wherever the same may be located, which is described in one or more Equipment Schedules entered into from time to time by the parties hereto. "Obligations" means the obligations and liabilities of the Customer pursuant to the Guaranty of this date in favor of the Lender with respect to the $1,500,000 term loan facility extended on this date by the Lender to Pharmaceutical Resources, Inc. and all interest, taxes, fees, charges, expenses and attorneys' fees chargeable to Customer or incurred by Lender under this Security Agreement, or any other document or instrument delivered in connection herewith. As used herein with respect to any Obligation or item of Equipment or collateral: (a) the following terms shall have the meanings or values defined or assigned to them in the applicable Equipment Schedule therefor: "Acceptance Date", "Advance Payment(s)", "Equipment Location(s)", "Security Deposit"; and (b) the following terms shall have the meanings or values assigned to them in the applicable Note therefor: "Payments", "Payment Dates", "Maturity Date", and "Interest Rate". To the extent not otherwise specifically defined in this Master Security Agreement, unless the context otherwise requires, all other terms contained in this Master Security Agreement shall have the meanings assigned or referred to them in the Uniform Commercial Code in force in the State of Connecticut (the "UCC") to the extent the same are used or defined therein. 2. CUSTOMER REPRESENTATIONS, WARRANTIES, COVENANTS. Customer hereby represents and warrants to and covenants with Lender that, as of the date hereof and for so long as any Obligations shall remain outstanding: (a) Customer is duly organized and is existing in good standing under the laws of its jurisdiction of organization and is duly qualified and in good standing in those jurisdictions where the conduct of its business or the ownership of its properties requires qualification and where the failure to so qualify would have a material adverse effect on the Customer's condition, financial or otherwise; (b) Customer has the power and authority to own the Collateral, to enter into and perform this Security Agreement and any other document or instrument delivered in connection herewith and to incur the Obligations; (c) Customer's chief executive office is located at the address set forth above; (d) Customer utilizes no trade names in the conduct of its business; (e) Customer has not changed its name, been the surviving entity in a merger, acquired any business; or changed the location of its chief executive office within the previous five years, except as may have been specifically disclosed to Lender in writing prior to the date hereof; (f) the execution and performance of this Security Agreement, the Guaranty and any other document or instrument delivered in connection herewith will not result in the creation or imposition of any lien or encumbrance upon any of the Collateral, except in favor of Lender pursuant hereto; (g) this Security Agreement, the Guaranty and any document or instrument delivered in connection herewith and the transactions contemplated hereby or thereby are duly authorized, executed and delivered, and this Security Agreement, the Guaranty and such other documents and instruments constitute valid and legally binding obligations of Customer and are enforceable against Customer in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and general principles of equity; (h) Customer has filed all federal, state and local tax returns and other reports it is required to file and has paid or made adequate provision for payment of all such taxes, assessments and other governmental charges; (i) there are no pending or to Customer's knowledge threatened actions or proceedings before any court or administrative agency which materially adversely affect Customer's financial condition or operations; (j) no representation, warranty or statement by Customer contained herein or in any certificate or other document furnished or to be furnished by Customer pursuant hereto contains or at the time of delivery shall contain any untrue statement of material fact, or omits, or shall omit at the time of delivery, to state a material fact necessary to make it not misleading; (k) Customer shall furnish Lender promptly upon request of Lender, in form satisfactory to Lender, such information as Lender may reasonably request from time to time; (l) Allow the Lender by or through any of its officers, attorneys, accountants or other agents designated by the Lender, for the purpose of ascertaining whether or not each and every provision hereof, is being performed, to enter the offices and plants of the Customer on reasonable prior notice, during regular business hours to examine or inspect the Collateral and any of the properties, books and records or extracts therefrom, to make copies of such books and records or extracts therefrom, and to discuss the affairs, finance, accounts and Collateral thereof with the Customer all at such times and as often as the Lender or any representatives of the Lender may reasonably request, at the Lender's cost prior to an Event of Default and at the Customer's cost after an Event of Default; (m) Customer shall promptly inform Lender of any Defaults (defined below) or any events or changes in the financial condition of Customer occurring since the date of the last financial statements of Customer delivered to Lender which, individually or cumulatively, when viewed in light of prior financial statements, may result in a material adverse change in the financial condition of Customer; (n) Customer shall pay or deposit promptly when due all sales, use, excise, personal property, income, withholding, corporate, franchise and other taxes, assessments and governmental charges upon or relating to its ownership or use of any of the Collateral and submit to Lender proof satisfactory to Lender that such payments and/or deposits have been made; (o) if Customer shall now or hereafter maintain an employee benefit plan covered by Section 4021(a) of the Employee Retirement Income Security Act of 1974 ("ERISA") relating to plan termination insurance, Customer is not aware as of the date hereof, and shall promptly notify Lender hereafter upon notice or knowledge of: (i) the filing of notice with the Pension Benefit Guaranty Corporation (the "PBGC") pursuant to Section 4041 of ERISA that such plan is to be terminated; and (ii) the institution of proceedings by the PBGC under Section 4042 of ERISA; (p) Customer shall at any time and from time to time upon request of Lender, execute and deliver to Lender, in form and substance satisfactory to Lender, such documents as Lender shall reasonably deem necessary or desirable to perfect or maintain perfected the security interest of Lender in the Collateral or which may be necessary to comply with the provisions of the law of any jurisdiction in which Customer may then be conducting business or in which any of the Collateral may be located. 3. COLLATERAL REPRESENTATIONS, WARRANTIES, COVENANTS Customer hereby further represents and warrants to and covenants with Lender that, as of the date hereof and for so long as any Obligations shall remain outstanding: (a) except as set forth on the attached Schedule "3(a)", Customer is the owner of the Collateral free and clear of all rights, title, security interests, encumbrances or liens of any other party, and Customer will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein; (b) the Equipment is personal property even though the Equipment may hereafter become attached or affixed to real property; (c) the equipment location(s), if not owned by Customer, are leased by Customer pursuant to valid leases or rental agreements which permit the possession, use and operation of the Equipment at said locations; (d) Customer shall provide Lender with disclaimers and waivers from landlords, mortgagees and other persons holding any interest or claim in and to any Equipment location or any Collateral, acceptable in all respects to Lender, which may be necessary or advisable in the sole discretion of Lender to confirm that the first priority security interest and rights of Lender in the Collateral are and will remain valid against all other parties; (e) the Equipment is in the possession of Customer at the equipment location(s) specified in the applicable Equipment Schedules therefor, and shall not be removed therefrom without the prior written consent of Lender, which consent shall in any event be conditioned upon Customer having completed all notifications, filings, recordings, and other actions in such new location as Lender may require to protect and perfect Lender's interests in the Collateral; (f) except as set forth in Section 5 below, Customer shall not, without the prior written consent of Lender, sell, offer to sell, lease, rent, hire or in any other manner dispose, transfer or surrender use and possession of any Equipment; (g) except as set forth on the attached Schedule "3(a)", Customer will not, directly or indirectly, create, incur or permit to exist any lien, encumbrance, mortgage, pledge, attachment or security interest on or with respect to the Equipment except in favor of Lender under the terms of this Security Agreement; (h) Customer shall deliver to Lender any and all evidence of ownership of, and certificates of title to, any and all of the Equipment; (i) Customer shall permit each item of Equipment to be used only within the continental United States by qualified personnel solely for business purposes and the purpose for which it was designed and, at its sole expense, shall service, repair, overhaul and maintain each item of Equipment in the same condition as when received, ordinary wear and tear excepted, in good operating order, consistent with prudent industry practice (but, in no event less than the same extent to which Customer maintains other similar equipment in the prudent management of its assets and properties) and in compliance with all applicable laws, ordinances, regulations, and conditions of all insurance policies required to be maintained by Customer under the Security Agreement and all manuals, orders, recommendations, instructions and other written requirements as to the repair and maintenance of such item of Equipment issued at any time by the vendor and/or manufacturer thereof; (j) Customer shall furnish to Lender such information concerning the condition, location, use and operation of the Equipment as Lender may request; (k) if any item of Equipment does not comply with the requirements of this Security Agreement, Customer shall, within 30 days of written notice from Lender, bring such Equipment into compliance with the provisions hereof; and (l) Customer shall not use any Equipment, nor allow the same to be used, for any unlawful purpose, nor in connection with any property or material that would subject the Lender to any liability under any state or federal statute or regulation pertaining to the production, transport, storage, disposal or discharge of hazardous or toxic waste or materials. 4. SELECTION AND USE OF EQUIPMENT; DISCLAIMER OF WARRANTIES Customer has selected each item of Equipment and the manufacturer and/or supplier thereof based on its own judgment, and expressly disclaims any reliance upon any statements or representations made by Lender. If the Equipment is not delivered, is not properly installed, does not operate as warranted by the manufacturer or supplier thereof, becomes obsolete, or is unsatisfactory for any reason whatsoever, Customer shall make all claims on account thereof solely against the manufacturer or supplier thereof and not against Lender. Customer acknowledges that neither the manufacturer or supplier of the Equipment, nor any sales representative or agent thereof, is an agent of Lender, and no agreement or representation as to the Equipment or any other matter by any such sales representative or agent of the manufacturer or supplier shall in any way affect any of the Notes or the Obligations. LENDER IS NOT THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT, NOR THE AGENT THEREOF, AND MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS DESIGN OR CONDITION, ITS CAPACITY OR DURABILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN THE MANUFACTURE OR ASSEMBLY OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING THERETO, OR PATENT INFRINGEMENTS, AND LENDER HEREBY DISCLAIMS ANY SUCH WARRANTY. LENDER IS NOT RESPONSIBLE FOR ANY REPAIRS OR SERVICE TO THE EQUIPMENT, DEFECTS THEREIN OR FAILURES IN THE OPERATION THEREOF. 5. RISK OF LOSS AND DAMAGE; INSURANCE Customer assumes all risk of loss, damage or destruction to the Equipment from whatever cause and for whatever reason. If any item of Equipment shall become lost, stolen, destroyed, damaged beyond repair or rendered permanently unfit for use for any reason, or in the event of any condemnation, confiscation, theft or seizure or requisition of title to or use of such item, Customer shall immediately pay to Lender or shall cause Pharmaceutical Resources, Inc. to immediately pay to Lender an amount equal to the fair market value of such item of Equipment as determined by Lender. Notwithstanding the foregoing, Customer may replace any item of Equipment which has been lost, stolen, destroyed, damaged beyond repair or rendered permanently unfit ("Event of Loss"), with other Equipment of like kind and having the same or greater value, utility and useful life. Notwithstanding any such Event of Loss, in the event of any substitution, immediately upon effectiveness of such substitution and without further act; such Equipment shall become Equipment for purposes of this Security Agreement. Upon substitution of relacement Equipment, the following documents shall be duly authorized, executed and delivered by the respective party or parties thereto and shall be in full force and effect when delivered to the Lender at no cost or expense to the Lender: (i) a substitution Security Agreement or modification, in form and substance satisfactory to the Lender; (ii) evidence satisfactory to the Lender that the Equipment being substituted is of like kind and has equal to or greater value, usefull life and utility than the Equipment it replaces; (iii) all documentation reasonably requested by Lender to effectuate a first priority lien and security interest in the Equipment being substituted; and (iv) all other documents that Lender reasonably deems necessary. For so long as any Obligations shall remain outstanding, Customer shall procure and maintain insurance in such amounts and with such coverages, and upon such terms and with such companies, as Lender may approve, at Customer's expense, provided, however, that in no event shall such insurance be less than the following coverages and amounts: (a) Worker's Compensation and Employer's Liability Insurance, in the full statutory amounts provided by law; (b) Comprehensive General Liability Insurance including product/completed operations and contractual liability coverage, with minimum limits of the greater of: (i) $1,000,000 each occurrence, and Combined Single Limit Bodily Injury and Property Damage, $1,000,000 aggregate, where applicable, or (ii) as otherwise specified in any Equipment Schedule hereto; and (c) All Risk Physical Damage Insurance, including earthquake and flood, on each item of Equipment, in an amount not less than its full replacement value. On each such policy Lender will be included as an additional insured and loss payee as its interest may appear. Such policies shall be endorsed to provide that the coverage afforded to Lender shall not be rescinded, impaired or invalidated by any act or neglect of Customer. Customer agrees to waive Customer's rights and its insurance carrier's rights of subrogation against Lender for any and all loss or damage. In addition to the foregoing minimum insurance coverage, Customer shall procure and maintain such other insurance coverage as Lender may reasonably require. All policies shall be endorsed or contain a clause requiring the insurer to furnish Lender with at least 30 days' prior written notice of any material change, cancellation or non-renewal of coverage. Upon execution of this Security Agreement, Customer shall furnish Lender with a certificate of insurance or other evidence satisfactory to Lender that such insurance coverages are in effect, provided, however, that Lender shall be under no duty either to ascertain the existence of or to examine such insurance coverage or to advise Customer in the event such insurance coverage should not comply with the requirements hereof. If Customer shall at any time or times hereafter fail to obtain and/or maintain any of the policies of insurance required herein, or fail to pay any premium in whole or in part relating to any such policies, Lender may, but shall not be obligated to, obtain and/or cause to be maintained insurance coverage with respect to the Collateral, including, at Lender's option, the coverage provided by all or any of the policies of Customer and pay all or any part of the premium therefor, without waiving any Event of Default by Customer, and any sums so disbursed by Lender shall be additional Obligations of Customer to Lender payable on demand. Lender shall have the right to settle and compromise any and all claims (i) after an Event of Default; and (ii) which claims are in excess of $100,000 prior to an Event of Default under any of the policies required to be maintained by Customer hereunder and Customer hereby appoints Lender as its attorney-in-fact, with power to demand, receive and receipt for all monies payable thereunder, to execute in the name of Customer or Lender or both any proof of loss, notice, draft or other instruments in connection with such policies or any loss thereunder and generally to do and perform any and all acts as Customer, but for this appointment, might or could perform. 6. EVENTS OF DEFAULT An "Event of Default" under any Security Agreement shall be deemed to have occurred upon the occurrence or existence of any one or more of the following events or conditions (each a "Default") and after the giving of any required notice or the passage of any required period of time (or both) specified below with respect to such Default: (a) Customer shall fail to make any payment due under the Guaranty; or (b) Customer shall fail to obtain or maintain any of the insurance required under any Security Agreement; or (c) Customer shall fail to perform or observe any covenant, condition or agreement under any Security Agreement; or (d) Customer or any Affiliate of Customer shall default in the payment or performance of any Obligation owing to Lender, or any indebtedness or obligation owing to any Affiliate of Lender, under any note, security agreement, equipment lease, title retention or conditional sales agreement or any instrument or agreement evidencing such indebtedness with Lender or any such Affiliate of Lender; or (e) any representation or warranty made by Customer herein or in any certificate, agreement, statement or document hereto or hereafter furnished Lender, including without limitation any financial information disclosed to Lender, shall prove to be false or incorrect in any material respect; or (f) insolvency (failure of the Customer to pay its debts as they mature or when the fair value of the Customer's assets is less than its liabilities) of the Customer or any guarantor or surety for the Obligations, appointment of a receiver or custodian, or assignment for the benefit of creditors or the commencement of any proceedings under any bankruptcy or insolvency law by or against the Customer or any other guarantor or surety for the Obligations; appointment of a committee of creditors or liquidating banks, or offering of a composition or extension to creditors by, for or of the Customer; however, if an involuntary bankruptcy petition is filed, an Event of Default shall not occur unless such petition is not dismissed within sixty (60) days of filing; or (g) the making by Customer of a general assignment or deed of trust for the benefit of creditors; or (h) Customer shall default in any payment or other obligation in excess of $500,000 to any third party and any applicable grace or cure period with respect thereto has expired; or (i) Customer shall terminate its existence by merger, consolidation, sale of substantially all of its assets or otherwise; or (j) if Customer is a privately held corporation, more than the 50% of Customer's voting capital stock, or effective control of Customer's voting capital stock, issued and outstanding from time to time, is not retained by the holders of such stock on the date of this Security Agreement; or (k) if Customer is a publicly held corporation, there shall be a change in the ownership of Customer's stock such that Customer is no longer subject to the reporting requirements of the Securities Exchange Act of 1934 or no longer has a class of equity securities registered under Section 12 of the Securities Act of 1933; or (l) Lender shall determine, in its reasonable discretion and in good faith, that there has been a material adverse change in the financial condition of the Customer since the date of this Master Security Agreement; or (m) any event or condition set forth in subsections (b) through (l) of this Section 6 shall occur with respect to any guarantor or other person liable or responsible, in whole or in part, for payment or performance of any Obligations. Customer shall promptly notify Lender of the occurrence of any Event of Default or the occurrence or existence of any event or condition which, upon the giving of notice of lapse of time, or both, would constitute an Event of Default. 7. RIGHTS AND REMEDIES Upon the occurrence of an Event of Default, Lender shall have all of the rights and remedies enumerated herein (all of which are cumulative and not exclusive of any other right or remedy available to Lender): (a) Lender may declare, at its option, all or any part of the Obligations immediately due and payable, without demand, notice of intention to accelerate, notice of acceleration, notice of nonpayment, presentment, protest, notice of dishonor, or any other notice whatsoever, all of which are hereby waived by Customer and any endorser, guarantor, surety or other party liable in any capacity for any of the Obligations; (b) Lender shall have the right to enter and/or remain upon the Equipment Location(s) without any obligation to pay rent to Customer or others, or any other place or places where any of the Collateral is located and kept and: (i) remove Collateral therefrom to the premises of Lender or any agent of Lender, for such time as Lender may desire, in order to maintain, collect, sell and/or liquidate the Collateral; (ii) use such premises, together with materials, supplies, books and records of Customer, to maintain possession and/or the condition of the Collateral, and to prepare the Collateral for selling, liquidating or collecting; or (iii) without removing the Collateral from such premises, render the Collateral unusable by the Customer or by any other party in possession thereof or with an interest therein; (c) Lender may require Customer to assemble the Collateral and make it available to Lender at a place to be designated by Lender; (d) Lender shall have the right to set-off, without notice to Customer, any and all deposits or other sums at any time or times credited by or due from Lender, to Customer, whether in a special account or other account or represented by a certificate of deposit (whether or not matured) which deposits and other sums shall at all times constitute additional security for the Obligations and may be set-off against all or any part of the Obligations; and (e) Lender shall have, in addition to any other rights and remedies contained in this Security Agreement and any other agreements, guarantees, notes, instruments and documents heretofore, now or at any time or times hereafter executed by Customer and delivered to Lender, all of the rights and remedies of a secured party under the UCC. If Lender seeks to take possession of any or all of the Collateral by court process, Customer hereby irrevocably waives any bonds and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession, and waives any demand for possession prior to the commencement of any suit or action to recover with respect thereto. Any notice required to be given by Lender of a sale or other disposition or other intended action by Lender with respect to any of the Collateral or otherwise which is made in accordance with the terms of this Security Agreement at least five (5) business days prior to such proposed action, shall constitute fair and reasonable notice to Customer of any such action. Lender shall be liable to Customer only for its gross negligence or willful misconduct in failing to comply with any applicable law imposing duties upon Lender; Lender's liability for any such failure shall be limited to the actual loss suffered by Customer directly resulting from such failure; and in no event shall Lender have any liability to Customer for incidental, consequential, punitive or exemplary damages. All expenses of retaking, holding, preparing for sale, selling or the like and any other expenses incurred by Lender in connection with the exercise of any of its rights and remedies in hereunder shall constitute additional Obligations secured by the Collateral hereunder. If Lender shall employ counsel to commence, defend or intervene, file a petition, complaint, answer, motion or other pleadings, or to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) relating to this Agreement, the Collateral or any other agreement, guaranty, note, instrument or document heretofore, now or at any time or times hereafter executed by Customer and delivered to Lender, or to protect, collect, lease, sell, take possession of or liquidate any of the Collateral, or to attempt to enforce or to enforce any security interest in any of the Collateral, or to enforce any rights of Lender hereunder, whether before or after the occurrence of any Event of Default, or to collect any of the Obligations, then in any of such events, all of the reasonable attorneys' fees arising from such services, and any expenses, costs and charges relating thereto, shall be part of the Obligations, payable on demand and secured by the Collateral. The net proceeds realized by Lender upon any sale or other disposition of Collateral hereunder shall be applied toward satisfaction of all Obligations until all such Obligations are satisfied and paid in full. Lender shall account to Customer for any surplus realized upon such sale or other disposition, and Customer shall remain liable for any deficiency. The commencement of any action, legal or equitable, shall not affect the security interest of Lender in the Collateral until all of the Obligations or any judgment with respect thereto have been fully paid. 8. ASSIGNMENT The provisions of this Agreement shall be binding upon and shall inure to the benefit of the heirs, administrators, successors and assigns of Lender and Customer, provided, however, Customer may not assign any of its rights or delegate any of its obligations hereunder without the prior written consent of Lender. Lender may, from time to time, without notice to the Customer, sell, assign, transfer, participate, pledge or otherwise dispose of all or any part of the Obligations and/or the Collateral therefor. In such event, each and every immediate and successive purchaser, assignee, transferee, participant, pledgee, or holder of all or any part of the Obligations and/or the Collateral (each, a "Holder") shall have the right to enforce this Agreement, by legal action or otherwise, for its own benefit as fully as if such Holder were herein by name specifically given such rights. Customer agrees that the rights of any such Holder hereunder or with respect to the related Obligations, shall not be subject to any defense (other than payment in full), set off or counterclaim (other than mandatory or compulsory) that Customer may assert or claim against Lender, and that any such Holder shall have all of the Lender's rights hereunder but none of the Lender's obligations. Lender shall have an unimpaired right to enforce this Agreement for its benefit with respect to that portion of the Obligations Lender has not sold, assigned, transferred, participated, pledged or otherwise disposed of. 9. GOVERNING LAW THIS SECURITY AGREEMENT AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. CUSTOMER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE TO THE VENUE OF SUCH COURTS. CUSTOMER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT. Any action by Customer against Lender for any cause of action under this Security Agreement shall be brought within one year after any such cause of action first arises. 10. MISCELLANEOUS, GENERAL PROVISIONS. Customer agrees to pay on demand all costs and expenses of Lender (including reasonable attorneys' fees) hereafter incurred in connection with the amendment or modification of any Security Agreement, or any other or additional documentation or transactions concerning the Obligations, or the care, custody, administration, perfection or protection of any of the Collateral or any of Lender's rights or interests therein, including, without limitation, any and all fees and charges for searches of lien records or other public records, and any filing, stamp and other taxes or fees payable or determined to be payable in connection with the execution, delivery, filing, and recording of any UCC financing statements or other recorded instrument. Customer shall execute and deliver to Lender upon Lender's request such further documents, instruments and assurances as Lender deems necessary for the confirmation, preservation or perfection of the security interest in the Collateral, this Security Agreement and Lender's rights hereunder, including, without limitation, such corporate resolutions and opinions of counsel as Lender may reasonably request from time to time, and all schedules, forms and other reports and information as may be required to satisfy obligations imposed by any governmental authorities. Lender may file or record this Security Agreement or a memorandum or a photocopy hereof (which for the purposes hereof shall be effective as a financing statement) so as to give notice to third parties, and Customer hereby appoints Lender as its attorney-in-fact to execute, sign, file and record UCC financing statements and other lien recordation documents with respect to the Equipment, and Customer agrees to pay or reimburse Lender for any and all filing, recording or stamp fees or taxes arising from any such filings. THIS SECURITY AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES CONCERNING LENDER'S RIGHTS AND SECURITY INTERESTS IN THE COLLATERAL AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. CUSTOMER ACKNOWLEDGES AND CERTIFIES THAT NO SUCH ORAL AGREEMENTS EXIST. The Security Agreement may not be amended, nor may any rights under the Security Agreement be waived, except by an instrument in writing signed by the party against whom such amendment or waiver is asserted. The failure of Lender at any time or times hereafter to require strict performance by Customer of any of the provisions, warranties, terms and conditions contained in this Security Agreement or in any other agreement, guaranty, note, instrument or document now or at any time or times hereafter executed by Customer and delivered to Lender shall not waive, affect or diminish any right of Lender at any time or times hereafter to demand strict performance thereof. No rights of Lender hereunder shall be deemed to have been waived by any act or knowledge of Lender, its agents, officers or employees, unless such waiver is contained in an instrument in writing signed by an officer of Lender and directed to Customer specifying such waiver. No waiver by Lender of any of its rights on one occasion shall operate as a waiver of any other of its rights or any of its rights on a future occasion. This Master Security Agreement will not be binding on Lender until accepted and executed by Lender, notice of which is hereby waived by Customer. Any demand or notice required or permitted to be given hereunder shall be deemed effective within five (5) days when deposited in the United States mail, and sent by certified mail, return receipt requested, postage prepaid, addressed to Lender or to Customer at the addresses set forth herein, or to such other address as may be hereafter provided by the party to be notified by written notice complying with the provisions hereof or within one (1) day when sent via overnight courier. Wherever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable law. Should any portion of this Security Agreement be declared invalid for any reason in any jurisdiction, such declaration shall have no effect upon the remaining portions of this Security Agreement; furthermore, the entirety of this Security Agreement shall continue in full force and effect in all other jurisdictions and said remaining portions of this Security Agreement shall continue in full force and effect in the subject jurisdiction as if this Security Agreement had been executed with the invalid portions thereof deleted. This Security Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. Time is of the essence in the payment and performance of all of the Obligations. The section headings herein are included for convenience only and shall not be deemed to be a part of this Security Agreement. Each reference herein to "Lender" shall be deemed to include its successors and assigns, and each reference to "Customer" and any pronouns referring thereto as used herein shall be construed in the masculine, feminine, neuter, singular or plural, as the context may require, and shall be deemed to include the legal representatives, successors and assigns of Customer, all of whom shall be bound by the provisions hereof. EACH REFERENCE HEREIN TO "CUSTOMER" SHALL MEAN AND INCLUDE ANY AND ALL CUSTOMERS WHO SIGN BELOW, EACH OF WHOM SHALL BE JOINTLY AND SEVERALLY LIABLE UNDER THE SECURITY AGREEMENT. Executed and delivered by duly authorized representatives of the parties hereto as of the date set forth below. Dated as of: December 28, 1995. FLEET BANK, N.A. PAR PHARMACEUTICAL, INC. By: /s/John V. Raleigh By: /s/Robert I. Edinger - - ---------------------------- -------------------------- Name: John V. Raleigh Name: Robert I. Edinger --------------------- --------------------- Title: Vice President Title: Executive Vice President --------------------- -------------------------- EX-10 4 EX 10.3 EXHIBIT 10.3 EQUIPMENT SECURITY AGREEMENT This Equipment Security Agreement dated as of December 28, 1995 (this "Equipment Schedule"), is entered into pursuant to and incorporates by this reference all of the terms and provisions of that certain Master Security Agreement dated as of December 28, 1995 (the "Master Security Agreement"), by and between the undersigned parties hereto. All capitalized terms used herein and not defined herein shall have the meanings set forth or referred to in the Master Security Agreement. By its execution and delivery of this Equipment Schedule, Customer hereby reaffirms all of the representations, warranties and covenants contained in the Master Security Agreement as of the date hereof, and further represents and warrants to Lender that no Default has occurred and is continuing as of the date hereof. 1. Grant of Security Interest; Equipment Financed. Subject to the terms and provisions of the Security Agreement and the Guaranty attached hereto as Exhibit "A" executed and delivered by Customer to Lender which specifically refer to this Equipment Schedule (the "Guaranty"), Lender has agreed to provide financing in an amount not to exceed $1,500,000.00 (unless otherwise permitted by Lender in writing) on or before December 28, 1995, to Pharmaceutical Resources, Inc., a New Jersey corporation, in connection with the equipment and property described in Schedule "A" attached hereto (the "Equipment"). Customer has agreed and does hereby grant a security interest in and to the Equipment and the Collateral related thereto, whether now owned or hereafter acquired and wherever located, in order to secure all Obligations owing to Lender, including but not limited to the Guaranty. Lender's agreement to provide the financing contemplated herein shall be subject to Lender's prior receipt of all documentation required by Lender in respect of the Security Agreement and in connection with the financing of any Equipment, in form and substance satisfactory to Lessor in its sole and absolute discretion, including but not limited to verified, completed and properly executed Guaranty, Secretary Certificates, Landlord/Mortgagee Waivers, Disclaimers of Interest and/or Intercreditor Agreements from other creditors or parties, disbursement and payment authorizations, invoices, bills of sale, proof of delivery, acceptance and ownership of the Equipment, lien, tax and judgment searches, legal opinions and UCC financing statements as Lender may reasonably request. 2. Guaranty. By its execution and delivery of the Guaranty, the Guaranty shall constitute: (a) Customer's acknowledgment that each item of Equipment has been unconditionally accepted by the Customer for all purposes under the Security Agreement; (b) Customer's reaffirmation of all of the representations, warranties and covenants as set forth in the Security Agreement as of the date of the Guaranty (the "Acceptance Date"), and Customer's certification that no Default has occurred and is continuing as of the date thereof; (c) Customer's representation, warranty and agreement that: (i) the Equipment has been delivered and is in an operating condition and performing the operation for which it is intended to the satisfaction of the Customer; and (ii) if requested by Lender, the Equipment has been marked or labeled evidencing Lender's interest therein; (d) Customer's absolute and unconditional obligation and agreement to pay Lender at the times and in the manner set forth in the Guaranty. 3. Equipment Location(s). The Equipment will be located at the location(s) set forth in Schedule A-1 attached hereto (the "Equipment Location(s)"). Dated as of: December 28, 1995. FLEET BANK, N.A. PAR PHARMACEUTICAL, INC. By: /s/John Raleigh By: /s/Robert I. Edinger --------------------- ------------------------- Name: John Raleigh Name: Robert I. Edinger ------------------ ------------------------- Title: Vice President Title: Executive Vice President ------------------ -------------------------- EX-10 5 EX 10.4 EXHIBIT 10.4 PROMISSORY NOTE Floating Rate (LIBOR)/ Scheduled Principal Payments 50 Kennedy Plaza Providence, Rhode Island 02903-2305 December 28, 1995 $2,500,000.00 1. For value received, the undersigned promises to pay to the order of Fleet Credit Corporation ("Lender") having its principal place of business in Providence, Rhode Island (together with any other holder of this Note, hereinafter referred to as the "Holder"), the principal sum of $2,500,000.00, together with interest thereon as provided herein. 2. This Note shall be payable by the undersigned to Holder in 36 consecutive installments of principal and interest (the "Payments") commencing on January 28, 1996 and continuing each month thereafter through and including December 27, 1998 (the "Maturity Date") Each succeeding Payment shall be due and payable on the same day of the month as in the initial Payment set forth above in each succeeding payment period during the term of the Note (each, a "Payment Date"). The principal amount of this Note shall be payable by the undersigned to Holder in 36 consecutive monthly installments (the "Principal Installments") in the amounts set forth in and corresponding to each of the numbered Payments listed in Schedule A attached hereto and incorporated herein by this reference. 3. Interest shall accrue on the entire principal amount of this Note outstanding from time to time as provided below, from the date hereof until the principal amount of this Note is paid in full, and shall be due and payable together with the Principal Installments on each Payment Date. The final Payment due and payable on the Maturity Date shall in any event be equal to the entire outstanding and unpaid principal amount of this Note, together with all accrued and unpaid interest, charges and other amounts owing hereunder and under the Security Agreement (as defined below). Interest shall accrue on the outstanding principal balance of this Note at a variable rate of interest, adjusted monthly, equal to the Index Rate (as hereinafter defined) plus 1.75% per annum (the "Interest Rate"). The "Index Rate" for the calculation of interest payable with any Payment shall be the one-month London Interbank Offered Rate (LIBOR) as published in the Wall Street Journal in effect as of the 15th day of the month preceding the applicable Payment Date. All interest hereunder shall be calculated on the basis of a year of 360 days composed of 12 months of 30 days each. 4. The entire unpaid principal balance of the Note may be prepaid in full (but not in part) upon thirty days written notice to Holder, provided that any such prepayment shall be made together with (a) all accrued interest and other charges owing hereunder or under the Security Agreement, and (b) if any principal payment on this Note is made for any reason whatsoever on a date other than the Payment Date, the undersigned shall: (i) pay to the Holder interest accrued thereon; and (ii) on demand, indemnify the Holder against all losses including actual loss of profit and expenses suffered by it in liquidating or otherwise employing deposits acquired to fund this Note until the end of the applicable Payment Date. A certificate of the Holder as to the amount required to be paid by the undersigned under this subsection 4(b) shall accompany such demand and shall be final and conclusive, except in the case of manifest error or bad faith. 5. Time is of the essence in the payment and performance of those Obligations which are evidenced by this Note. In the event any amount due hereunder is not paid within ten (10) days of the date when due, the undersigned agrees to pay an administrative and late charge equal to one percent (1%) on and in addition to the amount of such overdue amount. In addition, the undersigned shall pay overdue interest on any delinquent Payment or other Obligation due (by reason of acceleration or otherwise) from thirty (30) days after the due date thereof through the date of payment thereof at a rate of interest equal to one percent (1%) in excess of the Interest Rate. 6. Each payment hereunder shall be made in lawful money of the United States and shall be payable to such account or address as Holder shall from time to time direct the undersigned. Whenever any payment to be made under this Note shall be stated to be due on a Saturday, Sunday or a public holiday, or the equivalent for banks generally under the laws of the State of Connecticut, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of the payment of interest. All amounts received hereunder or in respect of this Note shall be applied first, to accrued late charges and any other costs or expenses due and owing hereunder or under the terms of the Security Agreement; second, to accrued interest; and third, to unpaid principal. It is the intention of Holder to comply with all applicable usury laws. Accordingly, it is agreed that notwithstanding anything to the contrary contained herein, in no event shall any provision contained herein require or permit interest in excess of the maximum amount permitted by applicable law to be paid by the undersigned. If necessary to give effect to these provisions, Holder will, at its option, in accordance with applicable law, either refund any amount to the undersigned to the extent that it was in excess of that allowed by applicable law or credit such excess amount against the then unpaid principal balance hereunder. 7. Failure to pay this Note or any installment hereunder promptly within ten (10) days when due (unless payments are made by auto- debit from the undersigned's accounts with Fleet Bank, N.A. in which case no grace period shall apply), or the occurrence of an "Event of Default" under the Security Agreement of this date between Par Pharmaceutical, Inc. and the Holder (the "Security Agreement"), or default or failure in the performance or due observance of any of the terms, conditions or obligations (and expiration of any applicable grace or cure period) under any other agreement or instrument between the undersigned (or any endorser, guarantor, surety or other party liable for the undersigned's obligations hereunder, or any other entity controlling, controlled by, or under common control with the undersigned) and Holder (or any other entity controlling, controlled by or under common control with Holder), shall constitute a default hereunder and entitle Holder to accelerate the maturity of this Note and to declare the entire unpaid principal balance and all accrued interest and other charges hereunder (including prepayment fees calculated as of the date of default) and under the Security Agreement to be immediately due and payable, and to proceed at once to exercise each and every one of the remedies provided in the Security Agreement or otherwise available at law or in equity. 8. The undersigned and all other parties who may be liable (whether as endorsers, guarantors, sureties or otherwise) for payment of any sum or sums due or to become due under the terms of this Note waive diligence, presentment, demand, protest, notice of dishonor and notice of any other kind whatsoever and agree to pay all costs incurred by Holder in enforcing its rights under this Note or the Security Agreement, including reasonable attorneys' fees, and they do hereby consent to any number of renewals or extensions at any time in the payment of this Note. No extension of time for payment of this Note made by any agreement with any person now or hereafter liable for payment of this Note shall operate to release, discharge, modify, change or affect the original liability of the undersigned under this Note, either in whole or in part. No delay or failure by Holder hereof in exercising any right, power, privilege or remedy shall be deemed to be a waiver of the same or any part thereof; nor shall any single or partial exercise thereof or any failure to exercise the same in any instance preclude any future exercise thereof, or exercise of any other right, power, privilege or remedy, and the rights and remedies provided for hereunder are cumulative and not exclusive of any other right or remedy available at law or in equity. The Holder of this Note may proceed against all or any of the Collateral (as defined in the Security Agreement) or against any guarantor hereof, or may proceed contemporaneously or in the first instance against the undersigned, in such order and at such times following default hereunder as Holder may determine in its sole discretion. All of the undersigned's obligations under this Note are absolute and unconditional, and shall not be subject to any offset or deduction whatsoever. The undersigned waives any right to assert, by way of counterclaim (other than mandatory or compulsory counterclaims) or affirmative defense (other than payment in full) in any action to enforce the undersigned's obligations hereunder, any claim whatsoever against the Holder of this Note. 9. The undersigned represents and warrants to the Holder that: (a) The undersigned is a corporation duly organized, validly existing and in good standing under the laws of the state of New Jersey. The undersigned has all requisite corporate power and authority to own and operate its properties and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction wherein the character of the properties owned or leased by it therein or in which the transaction of its business therein makes such qualification necessary and where failure to so qualify would not have a material adverse effect on the undersigned's condition, financial or otherwise. (b) The undersigned has full corporate power and authority to enter into and perform the obligations under this Note, to make the borrowings contemplated herein, to execute and deliver this Note and all other documents in connection herewith (collectively, the "Loan Documents") and to incur the obligations provided for herein and therein, all of which have been duly authorized by all necessary and proper corporate action. No other consent or approval or the taking of any other action in respect of shareholders or of any public authority is required as a condition to the validity or enforceability of this Note or any of the other Loan Documents. The execution and delivery of this Note is for valid corporate purposes and will not violate the undersigned's Certificate of Incorporation or Bylaws. (c) This Note constitutes and the other Loan Documents delivered in connection herewith shall constitute, valid and legally binding obligations of the undersigned, enforceable in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and general principles of equity. (d) To the best of the undersigned's knowledge, the execution, delivery and performance by the undersigned of this Note and the other Loan Documents (i) do not violate any provision of the Certificate of Incorporation or Bylaws of the undersigned, (ii) do not violate any order, decree or judgment, or any provision of any statute, rule or regulation, (iii) do not violate or conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a default under any shareholder agreement, stock preference agreement, mortgage, indenture or contract to which the undersigned is a party, or by which any of its properties are bound. 10. The undersigned shall furnish to the Holder the following to be prepared on a consolidated basis and in conformity with generally accepted accounting principles ("GAAP"), applied on a basis consistent with the preceding period: (a) a copy of the undersigned's SEC Form 10-K upon filing of same with the Securities and Exchange Commission; (b) a copy of the undersigned's SEC Form 10-Q upon filing of same with the Securities and Exchange Commission; (c) promptly upon the Holder's written request from time to time, such other information about the financial condition and operations of the undersigned as the Holder may reasonably request. 11. The undersigned agrees and covenants that from the date hereof until payment in full and performance of this Note, the undersigned shall, at the end of each fiscal quarter on a consolidated basis, be in compliance with the following financial covenants, all determined in accordance with GAAP: (a) Net Worth. (i) Maintain a Net Worth of not less than SIXTY-FIVE MILLION and 00/100 DOLLARS ($65,000,000) increasing at the rate of not less than seventy-five percent (75%) of quarterly net income (after tax) to the undersigned. (b) Ratio of Funded Debt to Tangible Net Worth. Maintain a ratio of Funded Debt to Tangible Net Worth not to exceed the following: Ratio Dates 0.40 to 1.0 from October 1, 1995 through and including September 28, 1996. 0.35 to 1.0 from September 29, 1996 through and including September 27, 1997 0.30 to 1.0 from September 28, 1997 through and including September 26, 1998 (c) Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio as follows, to be calculated on a rolling four quarter basis: Ratio Dates 1.20 to 1.0 December 28, 1995 1.20 to 1.0 June 29, 1996 1.20 to 1.0 September 28, 1996 1.25 to 1.0 December 28, 1996 and thereafter (d) Current Ratio. Maintain a Current Ratio of not less than 2.0 to 1.0. (e) For the purposes of this Section 11, the following terms shall have the following meanings: (i) "Capital Assets: shall mean assets that in accordance with GAAP are required or permitted to be depreciated or amortized on the undersigned's balance sheet. (ii) "Capital Leases" shall mean capital leases, conditional sales contracts and other title retention agreement related to the purchase or acquisition of Capital Assets. (iii) "Current Maturity of Long Term Debt ("CMLTD")" shall mean the current maturity of long term Indebtedness paid during the applicable period, including, but not limited to, amounts required to be paid under Capital Leases. (iv) "Current Ratio" shall mean, for the applicable period, the ratio of Total Current Assets to Total Current Liabilities. (v) "Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")" shall mean, for the applicable period, income from continuing operations before the payment of interest and taxes plus depreciation, amortization and other non-cash charges (except accounting changes and one-time writeoffs) determined in accordance with GAAP. (vi) "Fixed Charge Coverage Ratio" shall mean for the applicable period, the ratio of EBITDA for the four quarters ending on the test date to CMLTD as of the beginning of such four quarters plus interest expense, income taxes and dividends for such four quarters. For purposes of the calculation of Fixed Charge Coverage Ratio, for each of the fiscal quarters in the fiscal year ending September 28, 1996, EBITDA shall exclude THREE MILLION DOLLARS AND NO/100 ($3,000,000.00), (the "$3,000,000.00 Exclusion") of research and development expenditures. After the fiscal year ending September 28, 1996 and starting with the fiscal quarter ending December 28, 1996, there is no longer the above $3,000,000.00 Exclusion. (vii) "Funded Debt" shall mean all debt obligations as evidenced by a note or other instrument in the public and private markets, excluding accounts payable and accrued obligations arising out of the normal course of business. (viii) "Intangible Assets" shall mean assets that in accordance with GAAP are properly classifiable as intangible assets, including, but not limited to, goodwill, franchises, licenses, patents, trademarks, trade names and copyrights. (ix) "Net Worth" shall mean the excess of the undersigned's Total Assets minus its Total Liabilities. (x) "Tangible Net Worth" shall mean the excess of the undersigned's Total Assets minus its Intangible Assets and its Total Liabilities. (xi) "Total Assets" shall mean total assets determined in accordance with GAAP. (xii) "Total Current Assets" shall mean total current assets determined in accordance with GAAP. (xiii) "Total Current Liabilities" shall mean total current Indebtedness determined in accordance with GAAP. (xiv) "Total Liabilities" shall mean total Indebtedness determined in accordance with GAAP. 12. THIS NOTE AND THE LEGAL RELATIONS OF THE UNDERSIGNED AND HOLDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. THE UNDERSIGNED HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF RHODE ISLAND AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE TO THE VENUE OF SUCH COURTS. THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE. IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by its duly authorized representative as of the date first above written. ATTEST/WITNESS: MAKER: /s/Pura Donald PHARMACEUTICAL RESOURCES, INC. - - ------------------------------ Name: Pura Donald By: /s/ Robert I. Edinger ------------------------- ------------------------- Name: Robert I. Edinger ------------------------ Title: Executive Vice President ------------------------- EX-10 6 EX 10.5 EXHIBIT 10.5 MASTER SECURITY AGREEMENT Lender: Fleet Credit Corporation Customer: Par Pharmaceutical, a Rhode Island Corporation Inc., a New Jersey corporation Address: 50 Kennedy Plaza Address: One Ram Ridge Road Providence, RI 02903-2305 Spring Valley, NY 10977 1. GRANT OF SECURITY; INTEREST DEFINITIONS Subject to the terms and conditions set forth herein (the "Master Security Agreement") and in any Equipment Security Agreement Schedule incorporating the terms of this Master Security Agreement (each, an "Equipment Schedule"), Customer hereby grants to FLEET CREDIT CORPORATION ("Lender") a security interest in and to all Collateral (hereinafter defined) in order to secure the payment and performance of all Obligations (hereinafter defined), including but not limited to any Obligations evidenced by the Guaranty of this date which specifically refers to an Equipment Schedule (the "Guaranty"). References to "the Security Agreement", "this Security Agreement" or "any Security Agreement" shall mean and refer to any Equipment Schedule which incorporates the terms of this Master Security Agreement, together with all exhibits, addenda, schedules, certificates, riders and other documents and instruments executed and delivered in connection with such Equipment Schedule, all as the same may be amended or modified from time to time. Each Equipment Schedule shall constitute a separate, distinct and independent security agreement and contractual obligation of Customer. "Affiliate" means, with respect to any person, firm or entity, any other person, firm or entity controlling, controlled by, or under common control with such person, firm or entity, and for this purpose, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such person, firm or entity, whether through the legal or beneficial ownership of voting securities, by contract or otherwise. "Collateral" means the Equipment and all present or future additions, attachments, accessions or accessories thereto and replacements thereof, all tools, manuals, service records, software and similar information and materials related to such Equipment, and the products, proceeds, offspring, rents and profits therefrom or thereof, including proceeds in the form of goods, accounts, chattel paper, documents, instruments and general intangibles, insurance proceeds payable in respect of loss or damage to such Collateral, and all returned or repossessed goods arising from or relating to any of the Collateral. "Equipment" means machinery and equipment now owned or hereafter acquired by Customer, wherever the same may be located, which is described in one or more Equipment Schedules entered into from time to time by the parties hereto. "Obligations" means all indebtedness, obligations and liabilities of Customer or any Affiliate of Customer owing to Lender of every kind and description, direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising, regardless of how the same arise or by what instrument, agreement or book account they may be evidenced, or whether evidenced by any instrument, agreement or book account, including, without limitation, all loans (including any loan by renewal or extension of existing indebtedness or liability), all indebtedness, all obligations for the deferred purchase price or rental of any property or of any of the Collateral, all undertakings to take or refrain from taking any action, all indebtedness, liabilities or obligations owing from Customer to others which may have been obtained by purchase, negotiation, discount, transfer, assignment or otherwise, and all interest, taxes, fees, charges, expenses and attorneys fees chargeable to Customer or incurred by Lender under this Security Agreement, or any other document or instrument delivered in connection herewith. As used herein with respect to any Obligation or item of Equipment or collateral: (a) the following terms shall have the meanings or values defined or assigned to them in the applicable Equipment Schedule therefor: "Acceptance Date", "Advance Payment(s)", "Equipment Location(s)", "Security Deposit"; and (b) the following terms shall have the meanings or values assigned to them in the applicable Note therefor: "Payments", "Payment Dates", "Maturity Date", and "Interest Rate". To the extent not otherwise specifically defined in this Master Security Agreement, unless the context otherwise requires, all other terms contained in this Master Security Agreement shall have the meanings assigned or referred to them in the Uniform Commercial Code in force in the State of Connecticut (the "UCC") to the extent the same are used or defined therein. 2. CUSTOMER REPRESENTATIONS, WARRANTIES, COVENANTS. Customer hereby represents and warrants to and covenants with Lender that, as of the date hereof and for so long as any Obligations shall remain outstanding: (a) Customer is duly organized and is existing in good standing under the laws of its jurisdiction of organization and is duly qualified and in good standing in those jurisdictions where the conduct of its business or the ownership of its properties requires qualification and where the failure to so qualify would have a material adverse effect on the Customer's condition, financial or otherwise; (b) Customer has the power and authority to own the Collateral, to enter into and perform this Security Agreement and any other document or instrument delivered in connection herewith and to incur the Obligations; (c) Customer's chief executive office is located at the address set forth above; (d) Customer utilizes no trade names in the conduct of its business; (e) Customer has not changed its name, been the surviving entity in a merger, acquired any business; or changed the location of its chief executive office within the previous five years, except as may have been specifically disclosed to Lender in writing prior to the date hereof; (f) the execution and performance of this Security Agreement, the Guaranty and any other document or instrument delivered in connection herewith will not result in the creation or imposition of any lien or encumbrance upon any of the Collateral, except in favor of Lender pursuant hereto; (g) this Security Agreement, the Guaranty and any document or instrument delivered in connection herewith and the transactions contemplated hereby or thereby are duly authorized, executed and delivered, and this Security Agreement, the Guaranty and such other documents and instruments constitute valid and legally binding obligations of Customer and are enforceable against Customer in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and general principles of equity; (h) Customer has filed all federal, state and local tax returns and other reports it is required to file and has paid or made adequate provision for payment of all such taxes, assessments and other governmental charges; (i) there are no pending or to Customer's knowledge threatened actions or proceedings before any court or administrative agency which materially adversely affect Customer's financial condition or operations; (j) no representation, warranty or statement by Customer contained herein or in any certificate or other document furnished or to be furnished by Customer pursuant hereto contains or at the time of delivery shall contain any untrue statement of material fact, or omits, or shall omit at the time of delivery, to state a material fact necessary to make it not misleading; (k) Customer shall furnish Lender promptly upon request of Lender, in form satisfactory to Lender, such information as Lender may reasonably request from time to time; (l) Allow the Lender by or through any of its officers, attorneys, accountants or other agents designated by the Lender, for the purpose of ascertaining whether or not each and every provision hereof, is being performed, to enter the offices and plants of the Customer on reasonable prior notice, during regular business hours to examine or inspect the Collateral and any of the properties, books and records or extracts therefrom, to make copies of such books and records or extracts therefrom, and to discuss the affairs, finance, accounts and Collateral thereof with the Customer all at such times and as often as the Lender or any representatives of the Lender may reasonably request, at the Lender's cost prior to an Event of Default and at the Customer's cost after an Event of Default; (m) Customer shall promptly inform Lender of any Defaults (defined below) or any events or changes in the financial condition of Customer occurring since the date of the last financial statements of Customer delivered to Lender which, individually or cumulatively, when viewed in light of prior financial statements, may result in a material adverse change in the financial condition of Customer; (n) Customer shall pay or deposit promptly when due all sales, use, excise, personal property, income, withholding, corporate, franchise and other taxes, assessments and governmental charges upon or relating to its ownership or use of any of the Collateral and submit to Lender proof satisfactory to Lender that such payments and/or deposits have been made; (o) if Customer shall now or hereafter maintain an employee benefit plan covered by Section 4021(a) of the Employee Retirement Income Security Act of 1974 ("ERISA") relating to plan termination insurance, Customer is not aware as of the date hereof, and shall promptly notify Lender hereafter upon notice or knowledge of: (i) the filing of notice with the Pension Benefit Guaranty Corporation (the "PBGC") pursuant to Section 4041 of ERISA that such plan is to be terminated; and (ii) the institution of proceedings by the PBGC under Section 4042 of ERISA; (p) Customer shall at any time and from time to time upon request of Lender, execute and deliver to Lender, in form and substance satisfactory to Lender, such documents as Lender shall reasonably deem necessary or desirable to perfect or maintain perfected the security interest of Lender in the Collateral or which may be necessary to comply with the provisions of the law of any jurisdiction in which Customer may then be conducting business or in which any of the Collateral may be located. 3. COLLATERAL REPRESENTATIONS, WARRANTIES, COVENANTS Customer hereby further represents and warrants to and covenants with Lender that, as of the date hereof and for so long as any Obligations shall remain outstanding: (a) except as set forth on the attached Schedule "3(a)", Customer is the owner of the Collateral free and clear of all rights, title, security interests, encumbrances or liens of any other party, and Customer will defend the Collateral against all claims and demands of all persons at any time claiming any interest therein; (b) the Equipment is personal property even though the Equipment may hereafter become attached or affixed to real property; (c) the equipment location(s), if not owned by Customer, are leased by Customer pursuant to valid leases or rental agreements which permit the possession, use and operation of the Equipment at said locations; (d) Customer shall provide Lender with disclaimers and waivers from landlords, mortgagees and other persons holding any interest or claim in and to any Equipment location or any Collateral, acceptable in all respects to Lender, which may be necessary or advisable in the sole discretion of Lender to confirm that the first priority security interest and rights of Lender in the Collateral are and will remain valid against all other parties; (e) the Equipment is in the possession of Customer at the equipment location(s) specified in the applicable Equipment Schedules therefor, and shall not be removed therefrom without the prior written consent of Lender, which consent shall in any event be conditioned upon Customer having completed all notifications, filings, recordings, and other actions in such new location as Lender may require to protect and perfect Lender's interests in the Collateral; (f) except as set forth in Section 5 below, Customer shall not, without the prior written consent of Lender, sell, offer to sell, lease, rent, hire or in any other manner dispose, transfer or surrender use and possession of any Equipment; (g) except as set forth on the attached Schedule "3(a)", Customer will not, directly or indirectly, create, incur or permit to exist any lien, encumbrance, mortgage, pledge, attachment or security interest on or with respect to the Equipment except in favor of Lender under the terms of this Security Agreement; (h) Customer shall deliver to Lender any and all evidence of ownership of, and certificates of title to, any and all of the Equipment; (i) Customer shall permit each item of Equipment to be used only within the continental United States by qualified personnel solely for business purposes and the purpose for which it was designed and, at its sole expense, shall service, repair, overhaul and maintain each item of Equipment in the same condition as when received, ordinary wear and tear excepted, in good operating order, consistent with prudent industry practice (but, in no event less than the same extent to which Customer maintains other similar equipment in the prudent management of its assets and properties) and in compliance with all applicable laws, ordinances, regulations, and conditions of all insurance policies required to be maintained by Customer under the Security Agreement and all manuals, orders, recommendations, instructions and other written requirements as to the repair and maintenance of such item of Equipment issued at any time by the vendor and/or manufacturer thereof; (j) Customer shall furnish to Lender such information concerning the condition, location, use and operation of the Equipment as Lender may request; (k) if any item of Equipment does not comply with the requirements of this Security Agreement, Customer shall, within 30 days of written notice from Lender, bring such Equipment into compliance with the provisions hereof; and (l) Customer shall not use any Equipment, nor allow the same to be used, for any unlawful purpose, nor in connection with any property or material that would subject the Lender to any liability under any state or federal statute or regulation pertaining to the production, transport, storage, disposal or discharge of hazardous or toxic waste or materials. 4. SELECTION AND USE OF EQUIPMENT; DISCLAIMER OF WARRANTIES Customer has selected each item of Equipment and the manufacturer and/or supplier thereof based on its own judgment, and expressly disclaims any reliance upon any statements or representations made by Lender. If the Equipment is not delivered, is not properly installed, does not operate as warranted by the manufacturer or supplier thereof, becomes obsolete, or is unsatisfactory for any reason whatsoever, Customer shall make all claims on account thereof solely against the manufacturer or supplier thereof and not against Lender. Customer acknowledges that neither the manufacturer or supplier of the Equipment, nor any sales representative or agent thereof, is an agent of Lender, and no agreement or representation as to the Equipment or any other matter by any such sales representative or agent of the manufacturer or supplier shall in any way affect any of the Notes or the Obligations. LENDER IS NOT THE MANUFACTURER OR SUPPLIER OF THE EQUIPMENT, NOR THE AGENT THEREOF, AND MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS DESIGN OR CONDITION, ITS CAPACITY OR DURABILITY, THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN THE MANUFACTURE OR ASSEMBLY OF THE EQUIPMENT, OR THE CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER RELATING THERETO, OR PATENT INFRINGEMENTS, AND LENDER HEREBY DISCLAIMS ANY SUCH WARRANTY. LENDER IS NOT RESPONSIBLE FOR ANY REPAIRS OR SERVICE TO THE EQUIPMENT, DEFECTS THEREIN OR FAILURES IN THE OPERATION THEREOF. 5. RISK OF LOSS AND DAMAGE; INSURANCE Customer assumes all risk of loss, damage or destruction to the Equipment from whatever cause and for whatever reason. If any item of Equipment shall become lost, stolen, destroyed, damaged beyond repair or rendered permanently unfit for use for any reason, or in the event of any condemnation, confiscation, theft or seizure or requisition of title to or use of such item, Customer shall immediately pay to Lender or shall cause Pharmaceutical Resources, Inc. to immediately pay to Lender an amount equal to the fair market value of such item of Equipment as determined by Lender. Notwithstanding the foregoing, Customer may replace any item of Equipment which has been lost, stolen, destroyed, damaged beyond repair or rendered permanently unfit ("Event of Loss"), with other Equipment of like kind and having the same or greater value, utility and useful life. Notwithstanding any such Event of Loss, in the event of any substitution, immediately upon effectiveness of such substitution and without further act; such Equipment shall become Equipment for purposes of this Security Agreement. Upon substitution of relacement Equipment, the following documents shall be duly authorized, executed and delivered by the respective party or parties thereto and shall be in full force and effect when delivered to the Lender at no cost or expense to the Lender: (i) a substitution Security Agreement or modification, in form and substance satisfactory to the Lender; (ii) evidence satisfactory to the Lender that the Equipment being substituted is of like kind and has equal to or greater value, usefull life and utility than the Equipment it replaces; (iii) all documentation reasonably requested by Lender to effectuate a first priority lien and security interest in the Equipment being substituted; and (iv) all other documents that Lender reasonably deems necessary. For so long as any Obligations shall remain outstanding, Customer shall procure and maintain insurance in such amounts and with such coverages, and upon such terms and with such companies, as Lender may approve, at Customer's expense, provided, however, that in no event shall such insurance be less than the following coverages and amounts: (a) Worker's Compensation and Employer's Liability Insurance, in the full statutory amounts provided by law; (b) Comprehensive General Liability Insurance including product/completed operations and contractual liability coverage, with minimum limits of the greater of: (i) $1,000,000 each occurrence, and Combined Single Limit Bodily Injury and Property Damage, $1,000,000 aggregate, where applicable, or (ii) as otherwise specified in any Equipment Schedule hereto; and (c) All Risk Physical Damage Insurance, including earthquake and flood, on each item of Equipment, in an amount not less than its full replacement value. On each such policy Lender will be included as an additional insured and loss payee as its interest may appear. Such policies shall be endorsed to provide that the coverage afforded to Lender shall not be rescinded, impaired or invalidated by any act or neglect of Customer. Customer agrees to waive Customer's rights and its insurance carrier's rights of subrogation against Lender for any and all loss or damage. In addition to the foregoing minimum insurance coverage, Customer shall procure and maintain such other insurance coverage as Lender may reasonably require. All policies shall be endorsed or contain a clause requiring the insurer to furnish Lender with at least 30 days' prior written notice of any material change, cancellation or non-renewal of coverage. Upon execution of this Security Agreement, Customer shall furnish Lender with a certificate of insurance or other evidence satisfactory to Lender that such insurance coverages are in effect, provided, however, that Lender shall be under no duty either to ascertain the existence of or to examine such insurance coverage or to advise Customer in the event such insurance coverage should not comply with the requirements hereof. If Customer shall at any time or times hereafter fail to obtain and/or maintain any of the policies of insurance required herein, or fail to pay any premium in whole or in part relating to any such policies, Lender may, but shall not be obligated to, obtain and/or cause to be maintained insurance coverage with respect to the Collateral, including, at Lender's option, the coverage provided by all or any of the policies of Customer and pay all or any part of the premium therefor, without waiving any Event of Default by Customer, and any sums so disbursed by Lender shall be additional Obligations of Customer to Lender payable on demand. Lender shall have the right to settle and compromise any and all claims (i) after an Event of Default; and (ii) which claims are in excess of $100,000 prior to an Event of Default under any of the policies required to be maintained by Customer hereunder and Customer hereby appoints Lender as its attorney-in-fact, with power to demand, receive and receipt for all monies payable thereunder, to execute in the name of Customer or Lender or both any proof of loss, notice, draft or other instruments in connection with such policies or any loss thereunder and generally to do and perform any and all acts as Customer, but for this appointment, might or could perform. 6. EVENTS OF DEFAULT An "Event of Default" under any Security Agreement shall be deemed to have occurred upon the occurrence or existence of any one or more of the following events or conditions (each a "Default") and after the giving of any required notice or the passage of any required period of time (or both) specified below with respect to such Default: (a) Customer shall fail to make any payment due under the Guaranty; or (b) Customer shall fail to obtain or maintain any of the insurance required under any Security Agreement; or (c) Customer shall fail to perform or observe any covenant, condition or agreement under any Security Agreement; or (d) Customer or any Affiliate of Customer shall default in the payment or performance of any Obligation owing to Lender, or any indebtedness or obligation owing to any Affiliate of Lender, under any note, security agreement, equipment lease, title retention or conditional sales agreement or any instrument or agreement evidencing such indebtedness with Lender or any such Affiliate of Lender; or (e) any representation or warranty made by Customer herein or in any certificate, agreement, statement or document hereto or hereafter furnished Lender, including without limitation any financial information disclosed to Lender, shall prove to be false or incorrect in any material respect; or (f) insolvency (failure of the Customer to pay its debts as they mature or when the fair value of the Customer's assets is less than its liabilities) of the Customer or any guarantor or surety for the Obligations, appointment of a receiver or custodian, or assignment for the benefit of creditors or the commencement of any proceedings under any bankruptcy or insolvency law by or against the Customer or any other guarantor or surety for the Obligations; appointment of a committee of creditors or liquidating banks, or offering of a composition or extension to creditors by, for or of the Customer; however, if an involuntary bankruptcy petition is filed, an Event of Default shall not occur unless such petition is not dismissed within sixty (60) days of filing; or (g) the making by Customer of a general assignment or deed of trust for the benefit of creditors; or (h) Customer shall default in any payment or other obligation in excess of $500,000 to any third party and any applicable grace or cure period with respect thereto has expired; or (i) Customer shall terminate its existence by merger, consolidation, sale of substantially all of its assets or otherwise; or (j) if Customer is a privately held corporation, more than the 50% of Customer's voting capital stock, or effective control of Customer's voting capital stock, issued and outstanding from time to time, is not retained by the holders of such stock on the date of this Security Agreement; or (k) if Customer is a publicly held corporation, there shall be a change in the ownership of Customer's stock such that Customer is no longer subject to the reporting requirements of the Securities Exchange Act of 1934 or no longer has a class of equity securities registered under Section 12 of the Securities Act of 1933; or (l) Lender shall determine, in its reasonable discretion and in good faith, that there has been a material adverse change in the financial condition of the Customer since the date of this Master Security Agreement; or (m) any event or condition set forth in subsections (b) through (l) of this Section 6 shall occur with respect to any guarantor or other person liable or responsible, in whole or in part, for payment or performance of any Obligations. Customer shall promptly notify Lender of the occurrence of any Event of Default or the occurrence or existence of any event or condition which, upon the giving of notice of lapse of time, or both, would constitute an Event of Default. 7. RIGHTS AND REMEDIES Upon the occurrence of an Event of Default, Lender shall have all of the rights and remedies enumerated herein (all of which are cumulative and not exclusive of any other right or remedy available to Lender): (a) Lender may declare, at its option, all or any part of the Obligations immediately due and payable, without demand, notice of intention to accelerate, notice of acceleration, notice of nonpayment, presentment, protest, notice of dishonor, or any other notice whatsoever, all of which are hereby waived by Customer and any endorser, guarantor, surety or other party liable in any capacity for any of the Obligations; (b) Lender shall have the right to enter and/or remain upon the Equipment Location(s) without any obligation to pay rent to Customer or others, or any other place or places where any of the Collateral is located and kept and: (i) remove Collateral therefrom to the premises of Lender or any agent of Lender, for such time as Lender may desire, in order to maintain, collect, sell and/or liquidate the Collateral; (ii) use such premises, together with materials, supplies, books and records of Customer, to maintain possession and/or the condition of the Collateral, and to prepare the Collateral for selling, liquidating or collecting; or (iii) without removing the Collateral from such premises, render the Collateral unusable by the Customer or by any other party in possession thereof or with an interest therein; (c) Lender may require Customer to assemble the Collateral and make it available to Lender at a place to be designated by Lender; (d) Lender shall have the right to set-off, without notice to Customer, any and all deposits or other sums at any time or times credited by or due from Lender, to Customer, whether in a special account or other account or represented by a certificate of deposit (whether or not matured) which deposits and other sums shall at all times constitute additional security for the Obligations and may be set-off against all or any part of the Obligations; and (e) Lender shall have, in addition to any other rights and remedies contained in this Security Agreement and any other agreements, guarantees, notes, instruments and documents heretofore, now or at any time or times hereafter executed by Customer and delivered to Lender, all of the rights and remedies of a secured party under the UCC. If Lender seeks to take possession of any or all of the Collateral by court process, Customer hereby irrevocably waives any bonds and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession, and waives any demand for possession prior to the commencement of any suit or action to recover with respect thereto. Any notice required to be given by Lender of a sale or other disposition or other intended action by Lender with respect to any of the Collateral or otherwise which is made in accordance with the terms of this Security Agreement at least five (5) business days prior to such proposed action, shall constitute fair and reasonable notice to Customer of any such action. Lender shall be liable to Customer only for its gross negligence or willful misconduct in failing to comply with any applicable law imposing duties upon Lender; Lender's liability for any such failure shall be limited to the actual loss suffered by Customer directly resulting from such failure; and in no event shall Lender have any liability to Customer for incidental, consequential, punitive or exemplary damages. All expenses of retaking, holding, preparing for sale, selling or the like and any other expenses incurred by Lender in connection with the exercise of any of its rights and remedies in hereunder shall constitute additional Obligations secured by the Collateral hereunder. If Lender shall employ counsel to commence, defend or intervene, file a petition, complaint, answer, motion or other pleadings, or to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) relating to this Agreement, the Collateral or any other agreement, guaranty, note, instrument or document heretofore, now or at any time or times hereafter executed by Customer and delivered to Lender, or to protect, collect, lease, sell, take possession of or liquidate any of the Collateral, or to attempt to enforce or to enforce any security interest in any of the Collateral, or to enforce any rights of Lender hereunder, whether before or after the occurrence of any Event of Default, or to collect any of the Obligations, then in any of such events, all of the reasonable attorneys' fees arising from such services, and any expenses, costs and charges relating thereto, shall be part of the Obligations, payable on demand and secured by the Collateral. The net proceeds realized by Lender upon any sale or other disposition of Collateral hereunder shall be applied toward satisfaction of all Obligations until all such Obligations are satisfied and paid in full. Lender shall account to Customer for any surplus realized upon such sale or other disposition, and Customer shall remain liable for any deficiency. The commencement of any action, legal or equitable, shall not affect the security interest of Lender in the Collateral until all of the Obligations or any judgment with respect thereto have been fully paid. 8. ASSIGNMENT The provisions of this Agreement shall be binding upon and shall inure to the benefit of the heirs, administrators, successors and assigns of Lender and Customer, provided, however, Customer may not assign any of its rights or delegate any of its obligations hereunder without the prior written consent of Lender. Lender may, from time to time, without notice to the Customer, sell, assign, transfer, participate, pledge or otherwise dispose of all or any part of the Obligations and/or the Collateral therefor. In such event, each and every immediate and successive purchaser, assignee, transferee, participant, pledgee, or holder of all or any part of the Obligations and/or the Collateral (each, a "Holder") shall have the right to enforce this Agreement, by legal action or otherwise, for its own benefit as fully as if such Holder were herein by name specifically given such rights. Customer agrees that the rights of any such Holder hereunder or with respect to the related Obligations, shall not be subject to any defense (other than payment in full), set off or counterclaim (other than mandatory or compulsory) that Customer may assert or claim against Lender, and that any such Holder shall have all of the Lender's rights hereunder but none of the Lender's obligations. Lender shall have an unimpaired right to enforce this Agreement for its benefit with respect to that portion of the Obligations Lender has not sold, assigned, transferred, participated, pledged or otherwise disposed of. 9. GOVERNING LAW THIS SECURITY AGREEMENT AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. CUSTOMER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY HAVE TO THE VENUE OF SUCH COURTS. CUSTOMER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT. Any action by Customer against Lender for any cause of action under this Security Agreement shall be brought within one year after any such cause of action first arises. 10. MISCELLANEOUS, GENERAL PROVISIONS. Customer agrees to pay on demand all costs and expenses of Lender (including reasonable attorneys' fees) hereafter incurred in connection with the amendment or modification of any Security Agreement, or any other or additional documentation or transactions concerning the Obligations, or the care, custody, administration, perfection or protection of any of the Collateral or any of Lender's rights or interests therein, including, without limitation, any and all fees and charges for searches of lien records or other public records, and any filing, stamp and other taxes or fees payable or determined to be payable in connection with the execution, delivery, filing, and recording of any UCC financing statements or other recorded instrument. Customer shall execute and deliver to Lender upon Lender's request such further documents, instruments and assurances as Lender deems necessary for the confirmation, preservation or perfection of the security interest in the Collateral, this Security Agreement and Lender's rights hereunder, including, without limitation, such corporate resolutions and opinions of counsel as Lender may reasonably request from time to time, and all schedules, forms and other reports and information as may be required to satisfy obligations imposed by any governmental authorities. Lender may file or record this Security Agreement or a memorandum or a photocopy hereof (which for the purposes hereof shall be effective as a financing statement) so as to give notice to third parties, and Customer hereby appoints Lender as its attorney-in-fact to execute, sign, file and record UCC financing statements and other lien recordation documents with respect to the Equipment, and Customer agrees to pay or reimburse Lender for any and all filing, recording or stamp fees or taxes arising from any such filings. THIS SECURITY AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES CONCERNING LENDER'S RIGHTS AND SECURITY INTERESTS IN THE COLLATERAL AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. CUSTOMER ACKNOWLEDGES AND CERTIFIES THAT NO SUCH ORAL AGREEMENTS EXIST. The Security Agreement may not be amended, nor may any rights under the Security Agreement be waived, except by an instrument in writing signed by the party against whom such amendment or waiver is asserted. The failure of Lender at any time or times hereafter to require strict performance by Customer of any of the provisions, warranties, terms and conditions contained in this Security Agreement or in any other agreement, guaranty, note, instrument or document now or at any time or times hereafter executed by Customer and delivered to Lender shall not waive, affect or diminish any right of Lender at any time or times hereafter to demand strict performance thereof. No rights of Lender hereunder shall be deemed to have been waived by any act or knowledge of Lender, its agents, officers or employees, unless such waiver is contained in an instrument in writing signed by an officer of Lender and directed to Customer specifying such waiver. No waiver by Lender of any of its rights on one occasion shall operate as a waiver of any other of its rights or any of its rights on a future occasion. This Master Security Agreement will not be binding on Lender until accepted and executed by Lender, notice of which is hereby waived by Customer. Any demand or notice required or permitted to be given hereunder shall be deemed effective within five (5) days when deposited in the United States mail, and sent by certified mail, return receipt requested, postage prepaid, addressed to Lender or to Customer at the addresses set forth herein, or to such other address as may be hereafter provided by the party to be notified by written notice complying with the provisions hereof or within one (1) day when sent via overnight courier. Wherever possible, each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable law. Should any portion of this Security Agreement be declared invalid for any reason in any jurisdiction, such declaration shall have no effect upon the remaining portions of this Security Agreement; furthermore, the entirety of this Security Agreement shall continue in full force and effect in all other jurisdictions and said remaining portions of this Security Agreement shall continue in full force and effect in the subject jurisdiction as if this Security Agreement had been executed with the invalid portions thereof deleted. This Security Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. Time is of the essence in the payment and performance of all of the Obligations. The section headings herein are included for convenience only and shall not be deemed to be a part of this Security Agreement. Each reference herein to "Lender" shall be deemed to include its successors and assigns, and each reference to "Customer" and any pronouns referring thereto as used herein shall be construed in the masculine, feminine, neuter, singular or plural, as the context may require, and shall be deemed to include the legal representatives, successors and assigns of Customer, all of whom shall be bound by the provisions hereof. EACH REFERENCE HEREIN TO "CUSTOMER" SHALL MEAN AND INCLUDE ANY AND ALL CUSTOMERS WHO SIGN BELOW, EACH OF WHOM SHALL BE JOINTLY AND SEVERALLY LIABLE UNDER THE SECURITY AGREEMENT. Executed and delivered by duly authorized representatives of the parties hereto as of the date set forth below. Dated as of: December 28, 1995. FLEET CREDIT CORPORATION PAR PHARMACEUTICAL, INC. By: _____________________ By: /s/Robert I. Edinger --------------------- Name: ___________________ Name: Robert I. Edinger Title: __________________ Title: Executive Vice President EX-10 7 EX 10.6 EXHIBIT 10.6 EQUIPMENT SECURITY AGREEMENT This Equipment Security Agreement dated as of December 28, 1995 (this "Equipment Schedule"), is entered into pursuant to and incorporates by this reference all of the terms and provisions of that certain Master Security Agreement dated as of December 28, 1995 (the "Master Security Agreement"), by and between the undersigned parties hereto. All capitalized terms used herein and not defined herein shall have the meanings set forth or referred to in the Master Security Agreement. By its execution and delivery of this Equipment Schedule, Customer hereby reaffirms all of the representations, warranties and covenants contained in the Master Security Agreement as of the date hereof, and further represents and warrants to Lender that no Default has occurred and is continuing as of the date hereof. 1. Grant of Security Interest; Equipment Financed. Subject to the terms and provisions of the Security Agreement and the Guaranty attached hereto as Exhibit "A" executed and delivered by Customer to Lender which specifically refer to this Equipment Schedule (the "Guaranty"), Lender has agreed to provide financing in an amount not to exceed $2,500,000.00 (unless otherwise permitted by Lender in writing) on or before December 28, 1995, to Pharmaceutical Resources, Inc., a New Jersey corporation, in connection with the equipment and property described in Schedule "A" attached hereto (the "Equipment"). Customer has agreed and does hereby grant a security interest in and to the Equipment and the Collateral related thereto, whether now owned or hereafter acquired and wherever located, in order to secure all Obligations owing to Lender, including but not limited to the Guaranty. Lender's agreement to provide the financing contemplated herein shall be subject to Lender's prior receipt of all documentation required by Lender in respect of the Security Agreement and in connection with the financing of any Equipment, in form and substance satisfactory to Lessor in its sole and absolute discretion, including but not limited to verified, completed and properly executed Guaranty, Secretary Certificates, Landlord/Mortgagee Waivers, Disclaimers of Interest and/or Intercreditor Agreements from other creditors or parties, disbursement and payment authorizations, invoices, bills of sale, proof of delivery, acceptance and ownership of the Equipment, lien, tax and judgment searches, legal opinions and UCC financing statements as Lender may reasonably request. 2. Guaranty. By its execution and delivery of the Guaranty, the Guaranty shall constitute: (a) Customer's acknowledgment that each item of Equipment has been unconditionally accepted by the Customer for all purposes under the Security Agreement; (b) Customer's reaffirmation of all of the representations, warranties and covenants as set forth in the Security Agreement as of the date of the Guaranty (the "Acceptance Date"), and Customer's certification that no Default has occurred and is continuing as of the date thereof; (c) Customer's representation, warranty and agreement that: (i) the Equipment has been delivered and is in an operating condition and performing the operation for which it is intended to the satisfaction of the Customer; and (ii) if requested by Lender, the Equipment has been marked or labeled evidencing Lender's interest therein; (d) Customer's absolute and unconditional obligation and agreement to pay Lender at the times and in the manner set forth in the Guaranty. 3. Equipment Location(s). The Equipment will be located at the location(s) set forth in Schedule A-1 attached hereto (the "Equipment Location(s)"). Dated as of: December 28, 1995. FLEET CREDIT CORPORATION PAR PHARMACEUTICAL, INC. By:_____________________ By: /s/Robert I. Edinger ------------------------- Name:___________________ Name: Robert I. Edinger Title:__________________ Title: Executive Vice President ktk/15572.sa EX-10 8 EX 10.7 EXHIBIT 10.7 CROSS ACCELERATION AGREEMENT 50 Kennedy Plaza Providence, Rhode Island 02903-2305 December 28, 1995 This Cross Acceleration Agreement (the "Agreement") is by and between PHARMACEUTICAL RESOURCES, INC., a New Jersey corporation, having its chief executive offices at One Ram Ridge Road, Spring Valley, New York 10977 (the "Customer"), and Fleet Credit Corporation ("FCC"). Customer and FCC have entered into that certain $2,500,000 Promissory Note dated as of December 28, 1995 (the "Promissory Note"). Customer is or may become indebted under or in respect of one or more leases, loans, notes, credit agreements, reimbursement agreements, security agreements, title retention or conditional sales agreements, or other documents, instruments or agreements, whether now existing or hereafter arising, evidencing Customer's obligations for the payment of borrowed money or other financial accommodations ("Obligations") owing to FCC or to one or more affiliated persons, firms or entities controlling, controlled by or under common control with FCC ("FCC Affiliates"). Customer and FCC hereby agree as follows: 1. CROSS-ACCELERATION. If Customer pays or prepays all or substantially all of its Obligations owing to any FCC Affiliate and Fleet Bank, N.A.'s obligation to lend under the $16,000,000 revolving loan facility extended on this date to the Customer is terminated, whether or not such payment or prepayment is voluntarily or involuntarily made by Customer before or after any default or acceleration of such Obligations, then Customer shall pay, at FCC's option and immediately upon demand by FCC, all of Customer's Obligations owing to FCC, including but not limited to all Obligations owing under or in respect of the Promissory Note. 2. LEGAL ACTIONS; GOVERNING LAW. Any action by Customer against FCC for any cause of action under this Agreement shall be brought within one year after such cause of action first arises. FCC shall be liable to Customer only for its gross negligence or wilful misconduct in failing to comply with any provision of this Agreement; in no event shall FCC have any liability to Customer for incidental, consequential, punitive or exemplary damages. THIS AGREEMENT AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. THE PARTIES HERETO HEREBY CONSENT AND SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVE ANY OBJECTION THAT THEY MAY HAVE TO THE VENUE OF SUCH COURTS. THE PARTIES HERETO HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT. 3. GENERAL PROVISIONS. Time is of the essence in the payment and performance of all of Customer's obligations, liabilities and duties hereunder. This Agreement represents the final agreement between the parties concerning the subject matter hereof, and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreement between the parties. Customer acknowledges and certifies that no such oral agreements exist. This Agreement may not be amended, nor may any rights under this Agreement be waived, except by an instrument in writing signed by the party against whom such amendment or waiver is asserted. The failure of FCC at any time or times hereafter to require strict performance by Customer of any of the provisions, terms and conditions contained in this Agreement shall not waive, affect or diminish any right of FCC at any time or times hereafter to demand strict performance thereof. No rights of FCC hereunder shall be deemed to have been waived by any act or knowledge of FCC, its agents, officers or employees, unless such waiver is contained in an instrument in writing signed by an officer of FCC and directed to Customer specifying such waiver. No waiver by FCC of any of its rights on one occasion shall operate as a waiver of any other of its rights or any of its rights on a future occasion. This Agreement will not be binding on FCC until accepted and executed by FCC, notice of which is hereby waived by Customer. Any demand or notice required or permitted to be given hereunder shall be deemed effective within five (5) days when in the United States mail, and sent by certified mail, return receipt requested, postage prepaid, or within one (1) day when sent via overnight courier addressed to FCC or to Customer at the addresses set forth herein, or to such other address as may be hereafter provided by the party to be notified by written notice complying with the provision hereof. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. Should any portion of this Agreement be declared invalid for any reason in any jurisdiction, such declaration shall have no effect upon the remaining portions of this Agreement; furthermore, the entirety of this Agreement shall continue in full force and effect in all other jurisdictions and said remaining portions of this Agreement shall continue in full force and effect in the subject jurisdiction as if this Agreement has been executed with the invalid portions thereof deleted. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. The section headings herein are included for convenience only and shall not be deemed to be a part of this Agreement. Each reference herein to "FCC" shall be deemed to include its successors and assigns, and each reference to "Customer" and any pronouns referring thereto as used herein shall be construed in the masculine, feminine, neuter, singular or plural, as the context may require, and shall be deemed to include the legal representatives, successors and assigns of Customer, all of whom shall be bound by the provisions hereof. The provisions of this Agreement and the rights of FCC hereunder shall be deemed to be in addition to the provisions and rights of FCC set forth in the Promissory Note. All of the terms and provisions of the Promissory Note shall remain in full force and effect without modification or amendment and are hereby ratified and affirmed. Dated as of: December 28, 1995. FLEET CREDIT CORPORATION PHARMACEUTICAL RESOURCES, INC. By:_____________________ By: /s/Robert I. Edinger --------------------------- Name:___________________ Name: Robert I. Edinger Title:__________________ Title: Executive Vice President EX-11 9 COMPUTATION OF PER SHARE DATA EXHIBIT 11 COMPUTATION OF PER SHARE DATA (Unaudited) Three Months Ended December 30, December 31, 1995 1994 Net income (loss) $(198,000) $2,114,000 ========= ========= Primary: Weighted average number of common shares outstanding 18,174,787 14,549,749 Shares issuable upon conversion of Series A Convertible Preferred Stock - 1,033,968 Shares issuable upon exercise of dilutive stock options and warrants - net of shares assumed to be repurchased (at the average market price for the period) from exercise proceeds 273,626 728,468 ---------- ---------- Shares used for computation 18,448,413 16,312,185 ========== ========== Income (loss) per share of common stock (primary): Net income (loss) $(.01) $.13 ==== === Assuming full dilution: Weighted average number of common shares outstanding 18,174,787 14,549,749 Shares issuable upon conversion of Series A Convertible Preferred Stock - 1,033,968 Shares issuable upon exercise of dilutive stock options and warrants - net of shares assumed to be repurchased (at the higher of period-end market price or the average market price for the period) from exercise proceeds 273,626 728,468 ---------- -------- Shares used for computation 18,448,028 16,312,185 ========== ========== Income (loss) per share of common stock (assuming full dilution): Net income (loss) $(.01) $.13 ==== === EX-27 10 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS INCLUDED IN THE QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED DECEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 1-MO SEP-30-1995 DEC-30-1995 15,138 188 10,357 (2,285) 16,724 45,791 43,968 (19,201) 91,468 13,315 3,971 0 0 182 73,059 91,468 14,859 15,148 10,762 4,474 0 120 121 (329) (131) (198) 0 0 0 (198) (.01) (.01)
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