-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, F20qhoQ9vyfBmtj/qzXAkziXlJuF4R639Gyt1YAU+YFSGawkKmYmEE22SqmRybkD Dv2FRATuAcSDDRoXPF2dRA== 0000950130-95-000135.txt : 19950608 0000950130-95-000135.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950130-95-000135 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19941001 FILED AS OF DATE: 19950130 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-K405/A SEC ACT: SEC FILE NUMBER: 001-10827 FILM NUMBER: 95503931 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-K405/A 1 FORM 10-K/A1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10 - K/A1 Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Fiscal Year Ended October 1, 1994 Commission File Number 1-10827 PHARMACEUTICAL RESOURCES, INC. (Exact name of registrant as specified in its charter) NEW JERSEY 22-3122182 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) ONE RAM RIDE ROAD, SPRING VALLEY, NEW YORK 10977 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (914) 425-7100 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED The New York Stock Exchange, Inc. Common Stock $.01 par value The Pacific Stock Exchange, Inc. -------------------------------- The New York Stock Exchange, Inc. Common Stock Purchase Rights The Pacific Stock Exchange, Inc. -------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Series A Convertible Preferred Stock, $.0001 par value ------------------------------------------------------ (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes [x] No -------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. [x] --------- $130,772,610 AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF DECEMBER 19, 1994 (ASSUMING SOLELY FOR PURPOSES OF THIS CALCULATION THAT ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ARE "AFFILIATES"). 14,593,395 Number of shares of common stock outstanding as of December 19, 1994 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. - ------- -------------------------------------------------- DIRECTORS The Company's Certificate of Incorporation provides that the Board shall be divided into three classes, with the term of office of one class expiring each year. The Class I and Class III directors of the Company have terms which expire in 1997 and 1996, respectively. The terms of office of the Class II directors expire in 1995. The following table sets forth certain information with respect to each of the Class I, II and III directors and the year each was first elected as a director:
Age Year (as of of First Name 1/18/95) Election ---- -------- -------- CLASS II Andrew Maguire, Ph.D. (1)(3)........................... 55 1990 Since January 1990, President and Chief Executive Officer of Appropriate Technology International, a not-for-profit development assistance corporation and, since January 1989, a Senior Vice President of Washington Financial Group, an investment banking firm. From June 1987 to January 1989, Executive Vice President of the North American Securities Administrators Association. Melvin H. Van Woert, M.D. (1)(3)....................... 65 1990 Since 1974, Physician and Professor of Neurology and Pharmacology and Doctoral Faculty, Mount Sinai Medical Center, New York. CLASS I Mark Auerbach (1)(2)................................... 56 1990 Since June 1993, the Senior Vice President and Chief Financial Officer of Central Lewmar L.P., a distributor of fine papers. From August 1992 to June 1993, a partner of Marron Capital L.P., an investment banking firm. From July 1990 to August 1992, President, Chief Executive Officer and Director of Implant Technology Inc., a manufacturer of artificial hips and knees. From February 1989 to August 1990, Managing Director-Corporate Finance of F.N. Wolf & Co., Inc., an investment banking firm. From 1978 to February 1989, President and Chief Executive Officer of Keystone Camera Products Corp., a manufacturer of camera products. Director of Oakhurst Capital, a distributor of automotive parts and accessories. H. Spencer Matthews (2)(4)............................. 73 1990 Since 1986, President and Chief Executive Officer of Dispense-All South Coast, Inc., Dispense-All Capital Area, Inc., Dispense-All Central Florida, Inc. and Dispense-All of Louisiana, Inc., four companies which are wholesalers of juice concentrates. Rear Admiral, United States Navy (Retired).
1 Diana L. Sloane (4).................................... 34 1990 Since March 1993, Vice President-Regulatory and Scientific Affairs of the Company and of Pharmaceutical, Inc. From February 1992 to March 1993, Vice President-Regulatory Affairs and Quality of the Company and of Pharmaceutical, Inc. From March 1990 to February 1992, Group Vice President- Regulatory Affairs of Pharmaceutical, Inc. From March 1988 to March 1990, Associate Director- Regulatory Affairs of Superpharm Corporation, a subsidiary of Orlove Enterprises, Inc., a company engaged in the manufacture and distribution of pharmaceutical and other products ("Superpharm"). From May 1987 to March 1988, Manager-Compliance of Superpharm. CLASS III Kenneth I. Sawyer (3)(4)............................... 49 1989 Since October 1990, Chairman of the Board of the Company. Since October 1989, President and Chief Executive Officer of the Company. From September 1989 to October 1989, Interim President and Chief Executive Officer of the Company. From August 1989 to September 1989, counsel to the Company. From May 1989 to August 1989, an attorney in private practice. From prior to 1987 to May 1989, Vice President and General Counsel of Orlove Enterprises, Inc., a company engaged in the manufacture and distribution of pharmaceutical and other products. Director of Acorn Venture Capital Corporation, a closed-end investment company. Robin O. Motz, M.D., Ph.D.(2)(3)....................... 55 1992 Since July 1978, Assistant Professor of Clinical Medicine, Columbia University College of Physicians and Surgeons. Physician engaged in a private practice of internal medicine.
- --------------------------------- (1) A member of the Audit Committee of the Board of the Company. (2) A member of the Compensation and Stock Option Committee of the Board of the Company. (3) A member of the Nominating Committee of the Board of the Company. (4) A member of the Executive Committee of the Board of the Company. EXECUTIVE OFFICERS The executive officers of the Company consist of Mr. Sawyer as President, Chief Executive Officer and Chairman of the Board, Ms. Sloane as Vice President, Regulatory and Scientific Affairs, Robert I. Edinger as Executive Vice President, Finance, Chief Financial Officer and Secretary. The executive officers of Par Pharmaceutical, Inc., the Company's principal operating subsidiary ("Par"), consist of Mr. Sawyer, Ms. Sloane and Mr. Edinger, as well as Stuart A. Rose, Executive Vice President, Operations of Par, and Robert M. Fisher, Jr., Vice President, Corporate Development, Sales and Marketing of Par. The following table sets forth certain information with respect to the executive officers of the Company and Par who are not directors or nominees for election as a director:
Age (as of Name 1/18/95) ---- ---------- Robert I. Edinger...................................... 54 Since January 1995, Executive Vice President, Finance, Chief Financing Officer and Secretary of the Company and since June 1993, Vice President, Chief Financial Officer and Secretary of
2 the Company. From 1990 to June 1993, Executive Vice President of Bonjour Group, Ltd., a licensing company. From 1986 to 1990, President and Chief Financial Officer of OCP America, a wholesale drug distribution company. Stuart A. Rose, Ph.D. ................................. 52 Since January 1995, Executive Vice President, Operations of Par. From 1990 to 1994, Vice President, Manufacturing and Materials Supply, Lederle International Division of American Cyanamid Company, a company engaged in the manufacture of generic pharmaceuticals. From 1984 to 1990, President and General Manager, Lederle Parenterals, Inc., a company engaged in the manufacture of generic pharmaceuticals. Robert M. Fisher, Jr. ................................. 47 Since October 1993, Vice President, Corporate Development, Sales and Marketing of Par. From March 1993 to October 1993, Vice President, Corporate Development of F.H. Faulding USA, a company engaged in the manufacture of pharmaceuticals. From 1992 to 1993, Vice President, Business Development, PUREPAC Pharmaceutical Company, a company engaged in the manufacture of generic pharmaceuticals, and from 1989 to 1992, Vice President and General Manager of Rondex Laboratories at PUREPAC.
3 ITEM 11. EXECUTIVE COMPENSATION. - ------- ---------------------- The following table sets forth compensation earned by or paid, during fiscal years 1992 through 1994, to the Chief Executive Officer of the Company and the three additional most highly compensated executive officers (over $100,000) serving as executive officers of the Company and/or Par during fiscal 1994 (the "Named Executives"). The Company awarded or paid such compensation to all such persons for services rendered in all capacities during the applicable fiscal years.
SUMMARY COMPENSATION TABLE Annual Compensation Long-Term Compensation ------------------- ---------------------- Restricted Securities Name and Stock Underlying All Other Principal Position Year Salary($) Bonus($) Awards($)(1) Options(#) Compensation($)(2) - ------------------ ---- --------- -------- ------------ ---------- ------------------ Kenneth I. Sawyer 1994 408,238 100,000 - - 59,159 President, Chief 1993 413,215 200,000 - 500,000 70,802 Executive Officer 1992 331,170 250,000 - 120,000 31,591 and Chairman Diana L. Sloane 1994 208,097 22,500 - - 25,493 Vice President- 1993 179,423 40,000 - 130,000 22,953 Regulatory and 1992 140,496 115,000 - 45,000 9,535 Scientific Affairs Robert I. Edinger 1994 180,000 50,000 - - 795 Executive 1993 58,846 25,000 - 40,000 76 Vice President, Chief Financial Officer & Secretary Robert M. Fisher, Jr. 1994 122,359 26,500 - 10,000 474 Vice President, Corporate Development, Sales & Marketing, Par
- ------------------------- (1) The Company believes that at the end of fiscal 1994, the Named Executives did not hold any shares of restricted stock. (2) For fiscal year 1994, includes insurance premiums paid by the Company for term life insurance for the benefit of the Named Executives as follows: Mr. Sawyer-$2,438; Ms. Sloane-$528; Mr. Edinger-$795; and Mr. Fisher-$474. Also includes $20,111 contributed by the Company for the benefit of each of Mr. Sawyer and Ms. Sloane under the Par Pharmaceutical Retirement Plan, and $4,854 contributed by the Company on behalf of Ms. Sloane to the Company 401(k) Plan. The amount for Mr. Sawyer also includes $36,610, representing the maximum potential estimated dollar value of the Company's portion of insurance premium payments from a split-dollar life insurance policy as if 1994 premiums were advanced to the executive without interest until the earliest time the premium may be refunded by Mr. Sawyer to the Company. Stuart A. Rose has been hired as Executive Vice President, Operations of Par beginning January 16, 1995. As a result, Dr. Rose received no compensation from the Company or Par during fiscal year 1994. 4 STOCK OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term ------------------------------ % of Total Shares Options Underlying Granted to Options Employees Exercise Expiration Name Granted (#) in Fiscal Year Price ($) Date 0% ($) 5% ($) 10% ($) - ---- ----------- ------------- --------- ---------- ------ ------- ------- Robert M. Fisher, Jr.(1) 10,000 13.5% 13.875 10/21/98 0 177,084 223,458
- ------------------------- (1) Represents options granted pursuant to the Company's 1990 Stock Incentive Plan on October 22, 1993, of which 5,000 became exercisable on October 22, 1994 and 5,000 will become exercisable on October 22, 1995. The following table sets forth the stock options exercised by the Named Executives during fiscal 1994 and the value, as of October 1, 1994, of unexercised stock options held by the Named Executives. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options Options at FY-End (#) at FY-End ($) ------------------------- ------------------------- Shares Acquired on Value Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable - ---- ------------ ------------ ------------------------- ------------------------- Kenneth I. Sawyer 0 0 1,000,000 0 2,445,000 0 Diana L. Sloane 20,000 309,875 162,480 27,520 191,250 0 Robert I. Edinger 0 0 26,660 13,340 0 0 Robert M. Fisher, Jr. 0 0 0 10,000 0 0
COMPENSATION OF DIRECTORS For service on the Board, directors who are not employees of the Company or any of its subsidiaries receive an annual retainer of $10,000, a fee of $1,000 for each meeting of the Board attended, and a fee of $1,000 for each committee meeting attended. Directors who are not eligible to receive options under any other plan of the Company also are granted options to purchase 6,000 shares of Common Stock per year, or 18,000 shares of Common Stock per year if the director waives the annual retainer, pursuant to the 1989 Directors' Stock Option Plan. Directors who are employees of the Company or any of its subsidiaries receive no additional remuneration for serving as directors or as members of committees of the Board. Directors are entitled to reimbursement for out-of-pocket expenses incurred in connection with their attendance at Board and committee meetings. In fiscal 1994, H. Spencer Matthews received an additional $5,497 in compensation from the Company for providing his expertise in connection with ongoing potential sales of pharmaceutical products to the Russian Republic. Dr. Melvin H. Van Woert received an additional $13,550 in compensation from the Company for providing his expertise in connection with a drug to be developed by the Company. 5 EMPLOYMENT AGREEMENTS AND TERMINATION ARRANGEMENTS The Company has entered into employment agreements with Mr. Sawyer, Ms. Sloane, Mr. Edinger, Mr. Fisher and Dr. Rose. Each of the employment agreements with Mr. Sawyer, Ms. Sloane and Mr. Edinger provides for the officer's employment in his or her current position through the dates set forth below, subject to earlier termination by the Company for Cause (as such term is defined in the respective agreements). Mr. Sawyer's term of employment expires on October 4, 1995, but will be automatically extended each year for an additional one-year period unless either party provides written notice by July 4 of such year that he or it desires to terminate the agreement. Ms. Sloane's term of employment expires on March 31, 1995. Mr. Edinger's and Mr. Fisher's terms of employment expire on October 13, 1995. Dr. Rose's term of employment expires on January 16, 1996. Each such employment agreement provides that the officer will receive specified salary, bonuses, stock options, stock awards and other employee benefits, as the case may be. Under the agreement with Mr. Sawyer, the Company is required to use its best efforts to cause him to be elected and re- elected to the Board during his term of employment. Mr. Sawyer, pursuant to the terms of his employment agreement, is and will be required to serve, if so elected, on the Board of Directors of the Company and any subsidiary, as well as any committees thereof. Each of the foregoing employment agreements provides for certain payments upon termination of the officer's employment as a result of a material breach by the Company of his or her employment agreement following a Change of Control of the Company. A material breach by the Company of the employment agreements includes, but is not limited to, termination without Cause and a change of the officer's responsibilities. In the case of Mr. Sawyer, he is entitled to receive, if such a termination occurs within two years following a Change of Control of the Company, a lump sum payment equal to the lesser of three times the sum of his annual base salary and most recent bonus or the maximum amount permitted without the imposition of an excise tax on Mr. Sawyer or the loss of a deduction to the Company under the Internal Revenue Code of 1986, as amended (the "Code"), plus reimbursement of certain legal and relocation expenses incurred by Mr. Sawyer as a result of the termination of his employment and maintenance of insurance, medical and other benefits for 24 months or until Mr. Sawyer is covered by another employer for such benefits. In the case of Ms. Sloane, she is entitled to receive a lump sum payment equal to twice her prior year's aggregate annual compensation and the cost of continuing certain benefits for up to 24 months if such a termination occurs following a Change of Control. In the case of Messrs. Edinger and Fisher and Dr. Rose, each is entitled to receive severance compensation amounting to 12 months continuation of his base salary payable in 12 monthly installments plus maintenance of medical and other benefits for 12 months or until such employee is covered by another employer for such benefits if earlier. In addition, Mr. Sawyer's employment agreement provides for the Company to purchase a residence within the vicinity of the Company's principal offices for Mr. Sawyer to occupy for the duration of his term of employment. In this connection, the Company purchased a condominium for the price of $415,000, which Mr. Sawyer leased from the Company from September 15, 1994, until April 22, 1994, when the Company sold the residence for $415,000 with the express approval of Mr. Sawyer. (See "Certain Relationships and Related Transactions.") PENSION PLAN The Company maintains a defined benefit plan (the "Pension Plan") intended to qualify under Section 401(a) of the Code. Effective October 1, 1989, the Company ceased benefit accruals under the Pension Plan with respect to service after such date. The Company intends that distributions will be made, in accordance with the terms of the Plan, to participants as of such date and/or their beneficiaries. The Company will continue to make contributions to the Pension Plan to fund its past service obligations. Generally, all employees of the Company or a participating subsidiary who completed at least one year of continuous service and attained 21 years of age were eligible to participate in the Pension Plan. For benefit and vesting purposes, the Pension Plan's "Normal Retirement Date" is the date on which a participant attains age 65 or, if later, the date of completion of 10 years of service. Service is measured from date of employment. The retirement income formula is 45% of the highest consecutive five-year average basic earnings during the last 10 years of employment, less 83/1//3% of the participant's Social Security benefit, reduced proportionately for years of service less than 10 at retirement. The normal form 6 of benefit is a life annuity, or for married persons, a joint and survivor annuity. None of the Named Executives had any years of credited service under the Pension Plan. COMPENSATION AND STOCK OPTION COMMITTEE REPORT The Compensation and Stock Option Committee of the Board of Directors (the "Committee"), consisting entirely of non-employee directors, approves all of the policies and programs pursuant to which compensation is paid or awarded to the Company's executive officers and key employees. The Committee held eight meetings in fiscal 1994. In reviewing overall compensation for fiscal 1994, the Committee focused on the Company's objectives to attract and retain executives of the highest caliber, to encourage the highest level of performance from such executives and to align the financial interests of the Company's management with that of its shareholders by offering awards that can result in the ownership of Common Stock. The Company did not utilize specific formulae or guidelines in reviewing and approving executive compensation. ELEMENTS OF EXECUTIVE COMPENSATION PROGRAM. The key elements of the Company's executive compensation program consist of base salary, annual bonus, stock options through participation in the Company's 1986 Stock Option Plan and stock options and other incentive awards through participation in the Company's 1990 Stock Incentive Plan. In awarding or approving compensation to executives in fiscal 1994, the Committee reviewed the performance and profitability of the Company, the present and potential contribution of the executive to the Company and the ability of the Company to attract and retain qualified executives in light of the Company's prior regulatory review of its operations, lawsuits asserted against it and its financial condition. Base Salary. Base salaries for executives were determined primarily by reference to individual performance, the principal job duties and responsibilities undertaken by such persons, industry norms and other relevant criteria. In order to attract and retain certain key executives, the Company has offered these executives long-term employment contracts which provide for specified base salaries. Annual Bonus. The Committee determined the annual bonus to be paid to its executives for fiscal 1994 performance. The amount of each individual bonus was determined based upon an assessment of the general financial performance of the Company during the fiscal year and the individual's contribution to such performance, as opposed to determination by reference to a formal, goal-based plan. The Committee adopted this approach owing, in part, to uncertainties caused by previous regulatory review of its operations and various lawsuits asserted against the Company arising out of the acts of its prior management. Given the lack of predictability of such regulatory review and the litigation and the effects thereof, the Committee believed it was more effective to assess performance achievements on a historical basis rather than setting benchmarks, the achievement of which was largely out of the control of the Company and may not have reflected the executives' efforts. Stock Options and Other Awards. The Company's 1986 Stock Option Plan provides for stock option awards and the Company's 1990 Stock Incentive Plan provides for stock option and other equity-based awards. Under all such Plans, the size of each award and the persons to whom such awards are granted is determined by the Committee based upon the nature of services rendered by the executive, the present and potential contribution of the grantee to the Company and the overall performance of the Company. The Committee believes that grants of stock options will enable the Company to attract and retain the best available talent and encourage the highest level of performance in order to continue to serve the best interests of the Company and its shareholders. Stock options and other equity-based awards provide executives with the opportunity to acquire equity interests in the Company and to participate in the creation of shareholder value and to benefit correspondingly with increases in the price of the Company's Common Stock. COMMITTEE'S ACTIONS FOR 1994. In determining the amount and form of executive compensation to be paid or awarded for fiscal 1994, the Committee considered both the Company's overall financial performance during the fiscal year and its future objectives and challenges. The Committee approved awards of annual bonuses for certain executives, reflecting both the Company's financial performance for fiscal 1994 and the individual's contribution to such performance. The Committee also awarded stock options (including options to one Named Executive), 7 extended the period in which such options are exercisable and accelerated the vesting dates of previously awarded options, for certain key employees. In reviewing and awarding compensation to executive officers for fiscal 1994, the Committee considered the performance and other criteria discussed earlier in this report. In addition, the Committee took into account the following specific factors: (i) the removal of the Company from the U.S. Food and Drug Administration's Application Integrity Assessment Program; (ii) the settlement of several significant litigations against the Company; and (iii) the efforts of executive officers in negotiating and implementing the distribution agreements with Genpharm, Inc. and The Generics Group B.V. The Committee will continue to consider these and other factors in reviewing and awarding compensation to the Company's executive officers in the future. CHIEF EXECUTIVE OFFICER COMPENSATION. The Committee approved an employment agreement in October 1992 for Mr. Sawyer with the Company. In approving such employment agreement, the Committee authorized a base salary of $358,238 for Mr. Sawyer in fiscal year 1994. In addition to his base salary, Mr. Sawyer was awarded by the Committee a bonus of $100,000 for fiscal year 1994 performance and a cost of living allowance of $50,000. In reviewing and setting Mr. Sawyer's compensation, the Committee recognized his substantial role in (i) settling three significant lawsuits against the Company, (ii) negotiating and implementing several joint venture agreements for the Company, (iii) improving the manufacturing capacities of the Company, (iv) working to explore strategic alternatives for the Company and (v) diversifying the Company's customer base. Recently enacted Internal Revenue Code Section 162(m) limits deductions for federal income tax purposes for certain executive compensation in excess of $1 million. Certain types of compensation are deductible only if performance criteria are specified in detail and payments are contingent upon stockholder approval of the compensation arrangement. The level of salaries and bonus to the Named Executives paid by the Company do not exceed this limit. COMPENSATION AND STOCK OPTION COMMITTEE Mark Auerbach H. Spencer Matthews Robin O. Motz COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee conducted deliberations concerning executive compensation during the last completed fiscal year. None of the Committee members are executive officers of the Company. None of the executive officers of the Company has served on the board of directors or on the compensation committee of any other entity, any of whose officers served on the Board of the Company. 8 PERFORMANCE GRAPH The graph below compares the cumulative total return of the Company's Common Stock with the cumulative total return of the New York Stock Exchange Composite Index and the S&P/ (R)/ Health Care Drugs Index for the annual periods from September 30, 1989 to September 30, 1994. The graph assumes $100 was invested on September 30, 1989 in the Company's Common Stock and $100 was invested at that time in each of the Indexes. The comparison assumes that all dividends are reinvested. [Performance Graph Appears Here]
========================================================================================== SEPT. 89 SEPT. 90 SEPT. 91 SEPT. 92 SEPT. 93 SEPT. 94 PHARMACEUTICAL RESOURCES $100 $ 83 $ 70 $113 $215 $149 NYSE COMPOSITE INDEX $100 $ 90 $119 $132 $151 $157 S&PO HEALTH CARE DRUGS INDEX $100 $108 $166 $161 $130 $157 ==========================================================================================
9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. - ------- -------------------------------------------------------------- OWNERSHIP OF VOTING SECURITIES The following table sets forth, as of the close of business on January 18, 1995, the beneficial ownership of the Common Stock by (i) each person known (based solely on a review of Schedules 13D or 13G filed) to the Company to be the beneficial owner of more than 5% of the Common Stock, (ii) each director and nominee for election as a director of the Company, (iii) the Named Executives, and (iv) all directors and current executive officers of the Company and Par, as a group (based upon information furnished by such persons). Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if such person has or shares the power to vote or direct the voting of such security or the power to dispose of or to direct the disposition of such security. In general, a person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days. Accordingly, more than one person may be deemed to be a beneficial owner of the same securities. As of January 18, 1995, an aggregate of 14,633,773 shares of Common Stock were outstanding.
Name and Address Amount of Percentage of ---------------- --------- ------------- of Common Common -- ------ ------ Beneficial Owner Stock Stock ---------------- ----- ----- Kenneth I. Sawyer(1)(2)(3)................................. 1,005,505 6.4 Diana L. Sloane(1)(2)...................................... 191,710 * Robert I. Edinger(1)....................................... 40,000 * Mark Auerbach(1)(2)........................................ 29,000 * Andrew Maguire(1)(2)....................................... 51,000 * H. Spencer Matthews(1)(2).................................. 36,000 * Melvin H. Van Woert, M.D.(1)(2)............................ 66,990 * Robin O. Motz, M.D., Ph.D.(1)(2)........................... 24,000 * Robert M. Fisher, Jr.(1)................................... 5,870 * Stuart A. Rose(1).......................................... 2,000 * All directors and executive officers (as of 1/18/95) as a group (ten persons).................................... 1,452,075 9.0
- --------------- * Less than 1%. (1) The business address of each of these individuals, for the purposes hereof, is in care of Pharmaceutical Resources, Inc., One Ram Ridge Road, Spring Valley, New York 10977. (2) A director of the Company. (3) Includes 355 shares of Common Stock as to which Mr. Sawyer shares beneficial ownership with one former shareholder of Quad Pharmaceuticals, Inc. ("Quad"), a subsidiary of the Company, pursuant to an agreement dated May 29, 1990. (See "Voting Arrangements.") VOTING ARRANGEMENTS On May 29, 1990, Mr. Sawyer was granted proxies by three former shareholders of Quad (the "Additional Proxies") to vote any shares of Common Stock owned by him (which amounted to 355 shares at January 30, 1995) on all matters that might come before a meeting of the Company's shareholders, including the election of directors. The Additional Proxies terminate upon the earlier of May 29, 2000, or the date on which the shareholder granting the proxy no longer owns any shares of voting stock of the Company. The foregoing proxies were granted to help assure certain governmental agencies that were involved in the investigation and review of the generic drug industry that the Company's shareholders are supportive of the new management established by the Company since September 1989. 10 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. - ------- ---------------------------------------------- In July 1993, the Company purchased a condominium for $415,000 (subject to certain closing adjustments). Beginning on September 15, 1993, the Company leased the condominium to Kenneth I. Sawyer, the President, Chief Executive Officer and Chairman of the Board of the Company, for a period equal to the term of his employment agreement at $2,600 per month, which represented the fair market value as determined by a disinterested third party. The Company sold the condominium on April 22, 1994, for $415,000 with the express consent of Mr. Sawyer and, as a result, the lease terminated. (See "Employment Agreements and Termination Arrangements.") 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ------- --------------------------------------------------------------- (a)(1) & (2) Financial Statements. See Index to Financial Statements after Signature Page. (a)(3) Exhibits. 3.1 Certificate of Incorporation of the Registrant. (4) 3.1.1 Certificate of Amendment to the Certificate of Incorporation of the Registrant, dated August 6, 1992--incorporated by reference to the Registrant's Registration Statement on Form 8-A (Commission File No. 0-20834), filed with the Commission November 10, 1992. 3.2 By-Laws of the Registrant, as amended and restated. (3) 4 Rights Agreement, dated August 6, 1991, between the Registrant and Midlantic National Bank, as Rights Agent. (5) 4.1 Amendment to Rights Agreement, dated as of April 27, 1992. (3) 10.1 1983 Stock Option Plan of the Registrant, as amended. (2) 10.2 1986 Stock Option Plan of the Registrant, as amended. (2) 10.3 1989 Directors' Stock Option Plan of the Registrant, as amended. (5) 10.4 1989 Employee Stock Purchase Program of the Registrant. (7) 10.5 1990 Stock Incentive Plan of the Registrant, as amended. (2) 10.6 Form of Retirement Plan of Par. (12) 10.6.1 First Amendment to Par's Retirement Plan, dated October 26, 1984. (6) 10.7 Form of Retirement Savings Plan of Par. (12) 10.7.1 Amendment to Par's Retirement Savings Plan, dated July 26, 1984. (13) 10.7.2 Amendment to Par's Retirement Savings Plan, dated November 1, 1984. (13) 10.7.3 Amendment to Par's Retirement Savings Plan, dated September 30, 1985. (13) 10.8 Par Pension Plan, effective October 1, 1984. (4) 10.9 Employment Agreement, dated as of October 4, 1992, among the Registrant, Par and Kenneth I. Sawyer. (1) 12 10.10 Lease Agreement between Par and the County of Rockland Industrial Development Agency, dated as of October 1, 1984. (6) 10.10.1 Lessee Guaranty between Par and Midlantic National Bank, dated as of October 1, 1984. (6) 10.10.2 Mortgage from County of Rockland Industrial Development Agency to Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13) 10.10.3 Security Agreement between County of Rockland Industrial Development Agency and Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13) 10.11 Term Loan Agreement, dated September 18, 1987, between Midlantic National Bank/North and Par. (11) 10.11.1 Note and Indenture, dated September 18, 1987, between Midlantic National Bank/North and Par. (11) 10.12 Revolving Credit Agreement, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.13 Agreement Concerning Term Loans, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.14 Amendments to Term Note, dated February 20, 1992. (1) 10.15 Lease for premises located at 12 Industrial Avenue, Upper Saddle River, New Jersey, between Par and Charles and Dorothy Horton, dated October 21, 1978 and extension dated September 15, 1983. (12) 10.15.1 Extension of Lease, dated November 8, 1989, between Par and Charles and Dorothy Horton relating to premises at 12 Industrial Avenue, Upper Saddle River, New Jersey. (9) 10.16 Lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as landlord, and Par as tenant. (4) 10.16.1 Amendment by letter dated March 10, 1988 to the lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as lessor and Par as lessee. (10) 10.17 Lease, dated December 15, 1987, between Ram Ridge Estates Corp. as lessor and Par as lessee. (10) 10.18 Standstill Agreements and Irrevocable Proxies, each dated May 29, 1990, between Par and each of Asrar Burney, Dulal Chatterji, and Raja Feroz. (8) 10.19 Agreement of Purchase and Sale, dated June 4, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 10.19.1 Modification of Agreement of Purchase and Sale, dated July 24, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 13 10.20 Employment Agreement, dated as of April 1, 1993, between Par and Diana L. Sloane. (14) 10.21 Employment Agreement, dated as of May 19, 1993, between the Registrant and Robert I. Edinger. (14) 10.22 Distribution Agreement, dated as of October 16, 1993, between Genpharm, Inc., the Registrant and PRX Distributors, Ltd. (14) 10.23 Agreement, dated as of September 30, 1993, between National Union Fire Insurance Company of Pittsburgh and Par. (14) 10.24 Settlement Agreement and Release, dated as of November 29, 1993, between Mylan Laboratories, Inc., the Registrant, Par and Quad. (14) 10.25 Settlement Agreement and Release, dated as of January 6, 1994, between Minnesota Mining & Manufacturing Company, Riker Laboratories, Inc., the Registrant and Par. (14) 10.26 Settlement Agreement and Release, dated as of December 22, 1993, between United States Trading Corporation, Marvin Sugarman, Liquipharm, Inc., the Registrant and Par. (14) 10.27 Letter Agreement, dated April 30, 1993, between The Generics Group B.V. and Par. (16) 10.28 Distribution Agreement, dated as of February 24, 1994, between Sano Corporation, the Registrant and Par, as amended. (16) 10.29 Mortgage and Security Agreement, dated May 4, 1994, between Urban National Bank and Par. (15) 10.29.1 Mortgage Loan Note, dated May 4, 1994. (15) 10.29.2 Corporate Guarantee, dated May 4, 1994, by the Registrant to Urban National Bank. (15) 10.30 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. (16) 10.31 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. (16) 10.32 Letter Agreement, dated as of October 13, 1994, between Par and Robert I. Edinger. (16) 10.33 Term Loan Agreement, dated as of November 29, 1994, between Midlantic Bank, NA and Par. 10.34 Amended and Restated Revolving Credit Agreement, dated as of November 29, 1994, between Midlantic Bank, NA and Par. 14 10.34.1 Revolving Loan Note, dated November 29, 1994. 10.35 Amended and Restated Agreement Concerning Term Loans, dated as of November 29, 1994, between Midlantic Bank, NA and Par. 10.36 Letter Agreement, dated as of October 13, 1994, between Par and Robert M. Fisher, Jr. 10.37 Letter Agreement, dated as of December 19, 1994, between Par and Stuart A. Rose. 11 Computation of per share data. (16) 13 1994 Annual Report to Shareholders, to be filed by amendment. 22 Subsidiaries of the Registrant. (16) 24 Consent of Richard A. Eisner & Company, LLP. 27 Financial Data Schedule - ---------------------------------- (1) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 3, 1992 and incorporated herein by reference. (2) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 10, 1992 and incorporated herein by reference. (3) Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 1 on Form 8 to the Registrant's Registration Statement on Form 8-B, filed May 15, 1992, and incorporated herein by reference. (4) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended September 28, 1991 and incorporated herein by reference. (5) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 14, 1991 and incorporated herein by reference. (6) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K (Commission File No. 1- 9449) for the year ended September 29, 1990 and incorporated herein by reference. (7) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Proxy Statement dated August 16, 1990 and incorporated herein by reference. 15 (8) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Current Report on Form 8-K dated May 29, 1990 and incorporated herein by reference. (9) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1989 and incorporated herein by reference. (10) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1988 and incorporated herein by reference. (11) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (12) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 2-86614) and incorporated herein by reference. (13) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 33-4533) and incorporated herein by reference. (14) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrants' Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 2, 1993 and incorporated herein by reference. (15) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Quarterly Report on Form 10-Q (Commission File No. 1-10827) for the quarter ended April 2, 1994 and incorporated herein by reference. (16) Previously filed the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 1, 1994 and incorporated herein by reference. 16 SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: January 27, 1995 PHARMACEUTICAL RESOURCES, INC. ------------------------------ (REGISTRANT) By: /s/ Kenneth I. Sawyer ------------------------------------ Kenneth I. Sawyer President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Kenneth I. Sawyer President, Chief Executive Officer, and Chairman of January 27, 1995 - ------------------------- the Board of Directors Kenneth I. Sawyer /s/ Robert I. Edinger Vice President, Chief Financial Officer and January 27, 1995 - ------------------------- Secretary Robert I. Edinger (Principal Accounting and Financial Officer) /s/ Diana L. Sloane Vice President--Regulatory and Scientific Affairs January 27, 1995 - ------------------------- and Director Diana L. Sloane /s/ Mark Auerbach Director January 27, 1995 - ------------------------- Mark Auerbach /s/ Andrew Maguire Director January 27, 1995 - ------------------------- Andrew Maguire /s/ H. Spencer Matthews Director January 27, 1995 - ------------------------- H. Spencer Matthews /s/ Robin O. Motz Director January 27, 1995 - ------------------------- Robin O. Motz /s/ Melvin Van Woert Director January 27, 1995 - ------------------------- Melvin Van Woert
17
EXHIBIT INDEX EXHIBIT NO. PAGE NO. 3.1 Certificate of Incorporation of the Registrant. (4) 3.1.1 Certificate of Amendment to the Certificate of Incorporation of the Registrant, dated August 6, 1992-incorporated by reference to the Registrant's Registration Statement on Form 8-A (Commission File No. 0-20834), filed with the Commission November 10, 1992. 3.2 By-Laws of the Registrant, as amended and restated. (3) 4 Rights Agreement, dated August 6, 1991, between the Registrant and Midlantic National Bank, as Rights Agent. (5) 4.1 Amendment to Rights Agreement, dated as of April 27, 1992. (3) 10.1 1983 Stock Option Plan of the Registrant, as amended. (2) 10.2 1986 Stock Option Plan of the Registrant, as amended. (2) 10.3 1989 Directors' Stock Option Plan of the Registrant, as amended. (5) 10.4 1989 Employee Stock Purchase Program of the Registrant. (7) 10.5 1990 Stock Incentive Plan of the Registrant, as amended. (2) 10.6 Form of Retirement Plan of Par. (12) 10.6.1 First Amendment to Par's Retirement Plan, dated October 26, 1984. (6) 10.7 Form of Retirement Savings Plan of Par. (12) 10.7.1 Amendment to Par's Retirement Savings Plan, dated July 26, 1984. (13) 10.7.2 Amendment to Par's Retirement Savings Plan, dated November 1, 1984. (13) 10.7.3 Amendment to Par's Retirement Savings Plan, dated September 30, 1985. (13) 10.8 Par Pension Plan, effective October 1, 1984. (4) 10.9 Employment Agreement, dated as of October 4, 1992, among the Registrant, Par and Kenneth I. Sawyer. (1) 10.10 Lease Agreement between Par and the County of Rockland Industrial Development Agency, dated as of October 1, 1984. (6) 10.10.1 Lessee Guaranty between Par and Midlantic National Bank, dated as of October 1, 1984. (6) 10.10.2 Mortgage from County of Rockland Industrial Development Agency to Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13)
EXHIBIT NO. PAGE NO. 10.10.3 Security Agreement between County of Rockland Industrial Development Agency and Midlantic National Bank, as Trustee, dated as of October 1, 1984. (13) 10.11 Term Loan Agreement, dated September 18, 1987, between Midlantic National Bank/North and Par. (11) 10.11.1 Note and Indenture, dated September 18, 1987, between Midlantic National Bank/North and Par. (11) 10.12 Revolving Credit Agreement, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.13 Agreement Concerning Term Loans, dated February 20, 1992, between Par and Midlantic National Bank. (1) 10.14 Amendments to Term Note, dated February 20, 1992. (1) 10.15 Lease for premises located at 12 Industrial Avenue, Upper Saddle River, New Jersey, between Par and Charles and Dorothy Horton, dated October 21, 1978 and extension dated September 15, 1983. (12) 10.15.1 Extension of Lease, dated November 8, 1989, between Par and Charles and Dorothy Horton relating to premises at 12 Industrial Avenue, Upper Saddle River, New Jersey. (9) 10.16 Lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as landlord, and Par as tenant. (4) 10.16.1 Amendment by letter dated March 10, 1988 to the lease, dated November 7, 1986, between Ramapo Corporate Park, Inc. as lessor and Par as lessee. (10) 10.17 Lease, dated December 15, 1987, between Ram Ridge Estates Corp. as lessor and Par as lessee. (10) 10.18 Standstill Agreements and Irrevocable Proxies, each dated May 29, 1990, between Par and each of Asrar Burney, Dulal Chatterji, and Raja Feroz. (8) 10.19 Agreement of Purchase and Sale, dated June 4, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 10.19.1 Modification of Agreement of Purchase and Sale, dated July 24, 1992, among Quad, Par, and The Liposome Company, Inc. (1) 10.20 Employment Agreement, dated as of April 1, 1993, between Par and Diana L. Sloane. (14) 10.21 Employment Agreement, dated as of May 19, 1993, between the Registrant and Robert I. Edinger. (14)
EXHIBIT NO. PAGE NO. 10.22 Distribution Agreement, dated as of October 16, 1993, between Genpharm, Inc., the Registrant and PRX Distributors, Ltd. (14) 10.23 Agreement, dated as of September 30, 1993, between National Union Fire Insurance Company of Pittsburgh and Par. (14) 10.24 Settlement Agreement and Release, dated as of November 29, 1993, between Mylan Laboratories, Inc., the Registrant, Par and Quad. (14) 10.25 Settlement Agreement and Release, dated as of January 6, 1994, between Minnesota Mining & Manufacturing Company, Riker Laboratories, Inc., the Registrant and Par. (14) 10.26 Settlement Agreement and Release, dated as of December 22, 1993, between United States Trading Corporation, Marvin Sugarman, Liquipharm, Inc., the Registrant and Par. (14) 10.27 Letter Agreement, dated April 30, 1993, between The Generics Group B.V. and Par. (16) 10.28 Distribution Agreement, dated as of February 24, 1994, between Sano Corporation, the Registrant and Par, as amended. (16) 10.29 Mortgage and Security Agreement, dated May 4, 1994, between Urban National Bank and Par. (15) 10.29.1 Mortgage Loan Note, dated May 4, 1994. (15) 10.29.2 Corporate Guarantee, dated May 4, 1994, by the Registrant to Urban National Bank. (15) 10.30 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. (16) 10.31 Non-exclusive Distribution, Exclusive Supply Agreement, dated as of September 13, 1994, between Mova Pharmaceutical Corporation and Par. (16) 10.32 Letter Agreement, dated as of October 13, 1994, between Par and Robert I. Edinger. (16) 10.33 Term Loan Agreement, dated as of November 30, 1994, between Midlantic Bank, NA and Par. 10.34 Amended and Restated Revolving Credit Agreement, dated as of November 30, 1994, between Midlantic Bank, NA and Par. 10.34.1 Revolving Loan Note, dated November 30, 1994. 10.35 Amended and Restated Agreement Concerning Term Loans, dated as of
EXHIBIT NO. PAGE NO. November 30, 1994, between Midlantic Bank, NA and Par. 10.36 Letter Agreement, dated as of October 13, 1994, between Par and Robert M. Fisher, Jr. 10.37 Letter Agreement, dated as of December 19, 1994, between Par and Stuart A. Rose. 11 Computation of per share data. (16) 13 1994 Annual Report to Shareholders, to be filed by amendment. 22 Subsidiaries of the Registrant. (16) 24 Consent of Richard A. Eisner & Company, LLP. 27 Financial Data Schedule
- ------------------------------ (1) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 3, 1992 and incorporated herein by reference. (2) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 10, 1992 and incorporated herein by reference. (3) Previously filed with the Securities and Exchange Commission as an Exhibit to Amendment No. 1 on Form 8 to the Registrant's Registration Statement on Form 8-B, filed May 15, 1992, and incorporated herein by reference. (4) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended September 28, 1991 and incorporated herein by reference. (5) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Proxy Statement dated August 14, 1991 and incorporated herein by reference. (6) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K (Commission File No. 1-9449) for the year ended September 29, 1990 and incorporated herein by reference. (7) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Proxy Statement dated August 16, 1990 and incorporated herein by reference. (8) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Current Report on Form 8-K dated May 29, 1990 and incorporated herein by reference. (9) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1989 and incorporated herein by reference. (10) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1988 and incorporated herein by reference. (11) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Annual Report on Form 10-K for 1987 and incorporated herein by reference. (12) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 2-86614) and incorporated herein by reference. (13) Previously filed with the Securities and Exchange Commission as an Exhibit to Par's Registration Statement on Form S-1 (No. 33-4533) and incorporated herein by reference. (14) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrants' Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 2, 1993 and incorporated herein by reference. (15) Previously filed with the Securities and Exchange Commission as an Exhibit to the Registrant's Quarterly Report on Form 10-Q (Commission File No. 1-10827) for the quarter ended April 2, 1994 and incorporated herein by reference. (16) Previously filed the Securities and Exchange Commission as an Exhibit to the Registrant's Annual Report on Form 10-K (Commission File No. 1-10827) for the year ended October 1, 1994, and incorporated herein by reference. EX-10.33 2 TERM LOAN AGREEMENT DTD EXHIBIT 10.33 TERM LOAN AGREEMENT by and between MIDLANTIC BANK, NATIONAL ASSOCIATION and PAR PHARMACEUTICAL, INC. Dated as of November 30, 1994 TABLE OF CONTENTS ----------------- SECTION PAGE NO. I. DEFINITIONS............................................................ 1 II. GENERAL TERMS...................................................... 6 2.01. Term Loan................................................... 6 2.02. Repayment of Principal; Prepayment.......................... 7 2.03. Applicable Interest Rate; Payment of Interest............... 7 2.04. [Intentionally Left Blank].................................. 8 2.05. Security for the Note....................................... 8 2.06. Use of Proceeds............................................. 9 2.07. Term........................................................ 9 III. CONDITIONS OF MAKING THE TERM LOAN................................. 9 3.01. Term Loan.................................................... 9 3.02. Subsequent Advances......................................... 11 IV. REPRESENTATIONS AND WARRANTIES..................................... 11 4.01. Financial Statements........................................ 12 4.02. Organization, Etc........................................... 12 4.03. Authorization; Compliance, Etc.............................. 12 4.04. Governmental and Other Consents............................. 13 4.05. Proceedings................................................. 13 4.06. Compliance with Laws and Agreements......................... 13 4.07. Title to Collateral......................................... 14 4.08. Other Names or Entities..................................... 14 4.09. No Insolvency............................................... 14 4.10. Full Disclosure............................................. 15 4.11. Tax Returns; Tax Examination................................ 15 4.12. Pension Plans, Etc.......................................... 15 4.13. Licenses, Etc............................................... 17 4.14. O.S.H.A..................................................... 18 4.15. Ownership of Borrower....................................... 18 4.16. Patents, Trademarks, Etc.................................... 18 4.17. Brokers, Etc................................................ 18 4.18. [Intentionally Left Blank].................................. 19 4.19. Environmental Matters....................................... 19 4.20. Enforceability............................................ 20 4.21. Investment Company Act; Public Utility Holding Company Act............................................. 20 4.22. Federal Reserve Regulations............................... 20 V. FINANCIAL COVENANTS................................................ 21 5.01. Maximum Capital Expenditures................................ 21 5.02. Minimum Working Capital..................................... 21 5.03. Tangible Net Worth.......................................... 21 5.04. Restricted Payments......................................... 21 5.05. Debt to Tangible Net Worth Ratio.......................... 22 5.06. Minimum Interest Coverage................................. 22 -i- SECTION PAGE NO. - ------- -------- VI. AFFIRMATIVE COVENANTS.............................................. 22 6.01. Preservation of Assets; Compliance with Laws, Etc......... 22 6.02. Insurance................................................. 23 6.03. Taxes, Etc.............................................. 24 6.04. Notice of Proceedings, Defaults, Adverse Change, Etc............................................. 24 6.05. Financial Statements and Reports.......................... 25 6.06. Inspection................................................ 27 6.07. Accounting System......................................... 27 6.08. Yield Protection............................................ 27 6.09. Additional Assurances..................................... 28 6.10. Environmental Indemnification............................. 28 6.11. Principal Business........................................ 30 VII. NEGATIVE COVENANTS................................................. 30 7.01. Indebtedness.............................................. 30 7.02. Liens..................................................... 31 7.03. Disposition of Assets..................................... 32 7.04. Dividends and Other Distributions........................... 32 7.05. Sale Leaseback............................................ 32 7.06. Acquisition............................................... 33 7.07. Fundamental Changes....................................... 33 7.08. Change in Business........................................ 33 7.09. Accounts Receivable....................................... 33 7.10. Transactions with Affiliates.............................. 34 7.11. Illegal Activities........................................ 34 VIII. DEFAULTS............................................................ 34 8.01 Defaults.................................................. 34 IX. REMEDIES ON DEFAULT, ETC........................................... 38 9.01. Remedies.................................................... 38 9.02. Default Rate................................................ 39 9.03. Cross Default............................................... 39 X. MISCELLANEOUS...................................................... 40 10.01. Survival................................................... 40 10.02. Expenses................................................... 40 10.03. Indemnification; Limitation of Liability................... 40 10.04. Setoffs, Etc............................................... 41 10.05. Governing Law.............................................. 42 10.06. Amendment; Modification.................................... 42 10.07. Waiver..................................................... 42 10.08. Notice..................................................... 43 10.09. Successors and Assigns..................................... 44 10.10. Consent to Jurisdiction, Service of Process................ 44 10.11. Waivers.................................................... 45 10.12. No Derogation.............................................. 45 10.13. Severability............................................... 45 -ii- SECTION PAGE NO. - ------- -------- 10.14. Section Headings........................................... 46 10.15. Amendment of Other Agreements.............................. 46 10.16. Accounting Principles...................................... 46 10.18. Knowledge and Discovery.................................... 46 10.19. Integration................................................ 47 -iii- TERM LOAN AGREEMENT ------------------- THIS TERM LOAN AGREEMENT is made as of the 30th day of November, 1994, by and between MIDLANTIC BANK, NATIONAL ASSOCIATION, a national banking association (the "Lender"), and PAR PHARMACEUTICAL, INC., a New Jersey corporation (the "Borrower"). I. DEFINITIONS ----------- As used herein the following terms shall have the following respective meanings: Accountants: the meaning specified in Section 6.05. ----------- Adjusted EBIT: as of the date of determination, earnings before ------------- interest expense and taxes (excluding any and all extraordinary items and settlements recorded in the fourth quarter of fiscal year 1993) plus depreciation, amortization and other non-cash charges as determined, on a consolidated basis, in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05. Advance(s): an advance of loan proceeds constituting all or a ---------- portion of the Term Loan as applicable. Affiliate(s): as applied to any Person, a spouse or relative of such ------------ Person within the third degree of consanguinity, any partner, shareholder, member, director, officer or manager of such Person, any corporation, association, partnership, joint venture, firm or other entity of which such Person is a partner, shareholder, venturer, member, director, officer or manager, and any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. Affiliate Company: any one or more of Pharmaceutical Resources, ----------------- Inc., a New Jersey corporation, Quad Pharmaceutical, Inc., an Indiana corporation, PRX Distributors, Ltd., a Delaware corporation, Par Printing Enterprises, Inc., a New Jersey corporation, Advanced Biopharm Inc., a Delaware corporation, Generic Innovations, Inc., a New Jersey corporation, and their respective successors and assigns (with all such companies referred to collectively as the "Affiliate Companies"). Benefit Liabilities: the meaning specified in Section 4.12. ------------------- Borrower: the meaning specified in the Preamble. -------- Business Day: any day on which banks in the State of New Jersey are ------------ generally open to conduct regular banking business. Capital Expenditure: any payment made directly or indirectly for the ------------------- purpose of acquiring or constructing fixed assets, real property or equipment which, in accordance with generally accepted accounting principles, would be added as a debit to the fixed asset account of the Person making such expenditure, including, without limitation, amounts paid or payable for labor or under any conditional sale or other title retention agreement or under any Lease or other periodic payment arrangement which is of such a nature that payment obligations of the lessee or obligor thereunder would be required by generally accepted accounting principles to be capitalized on the balance sheet of such lessee or obligor. Capital Lease: any Lease of property (real, personal or mixed) ------------- which, in accordance with generally accepted accounting principles, would be capitalized on the lessee's balance sheet or for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet. CERCLA: the meaning specified in Section 4.19. ------ COBRA: the meaning specified in Section 4.12. ----- Code: the Internal Revenue Code of 1986, as amended from time to ---- time. Collateral: collectively, any and all collateral referred to herein ---------- or in the Security Documents, or any of them. Commonly Controlled Entity: the meaning specified in Section 4.12. -------------------------- Current Assets: As applied to any Person, the consolidated current -------------- assets of the Person, determined in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05. Current Liabilities: As applied to any Person, the consolidated ------------------- current liabilities of the Person, determined in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05. Default Rate: the meaning specified in Section 9.02. ------------ Disbursement Request: the meaning specified in Section 2.01(b). -------------------- Drawdown Date: in relation to any Advance, the day on which such ------------- Advance is made or to be made to the Borrower pursuant to the terms and conditions of this Agreement. ISRA: the meaning specified in Section 4.19(a). ---- Employee Benefit Plans; Employee Pension Plan; and Employee Welfare -------------------------------------------------------------------- Plan: the respective meanings specified in Section 4.12. - ---- ERISA: the meaning specified in Section 4.12. ----- Event of Default: the meaning specified in Article VIII. ---------------- Fiscal Quarters: the Borrower's accounting periods ending on the --------------- Saturday nearest the end of each December, March, June and September. Fiscal Year: shall mean the fiscal year of the Borrower ending on ----------- the Saturday nearest September 30. Funded Debt: in relation to any Person at any particular time, all ------------ Indebtedness of such Person at such time: (i) in respect of any money borrowed by such Person, (ii) under or in respect of any guarantee (whether direct or indirect) by such person of any Indebtedness for borrowed money of any other Person, or (iii) evidenced by any loan or credit agreement, promissory note, debenture, bond, guarantee or other substantially similar obligation to pay money. Guarantees: the meaning specified in Section 2.05(b). ---------- Guarantors: the Affiliate Companies. ---------- Hazardous Material: the meaning specified in Section 4.19. ------------------ Indebtedness or indebtedness: as applied to any Person, (a) all ---------------------------- items (except items of capital stock, -2- capital or paid-in surplus or of retained earnings) which, in accordance with generally accepted accounting principles, would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined, including any Lease which in accordance with generally accepted accounting principles consistently applied would constitute indebtedness, (b) all indebtedness secured by any mortgage, pledge, security, lien or conditional sale or other title retention agreement to which any property or asset owned or held by such Person is subject, whether or not the indebtedness secured thereby shall have been assumed, and (c) all indebtedness of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or otherwise sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock or equity purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. Interest Expense: As applied to any Person for any period, the ---------------- aggregate amount (determined in accordance with generally accepted accounting principles) of interest accrued (whether or not paid) during such period by such Person in respect of all Indebtedness for borrowed money and the interest portion of all amounts accrued (whether or not paid) during such period by such Person in respect of all Capital Leases. Involuntary Petition: the meaning specified in paragraph (j) of -------------------- Article VIII. Lease(s): any lease of, or other periodic payment arrangement for -------- the use or possession of, property (real, personal or mixed). Lender: Midlantic Bank, National Association and its successors and ------ assigns. Licenses: the meaning specified in Section 4.13. -------- Multiemployer Plan: the meaning specified in Section 4.12. ------------------ Net Income: As applied to any Person for any fiscal period, the ---------- consolidated net income (or loss) of such Person, excluding any extraordinary income (or loss) or non-cash gains or loss of such Person for such period (taken as a cumulative whole), after deducting all operating expenses, provisions for all taxes and reserves (including reserves for deferred income taxes) and all other proper deductions, all determined in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05, adjusted to exclude results from discontinued operations (to the extent not accounted for as an extraordinary item) and the cumulative effects of any changes in accounting principles. Note: the Secured Promissory Note of the Borrower of even date ---- herewith in the form of Schedule 2.01A hereto, as the same may be amended -------------- or restated or replaced from time to time. PBGC: the meaning specified in Section 4.12. ---- Person or person: any individual, corporation, partnership, joint ---------------- venture, trust or unincorporated organization or any government or any agency or political subdivision thereof. Premises: the meaning specified in Section 4.19. -------- PRI: Pharmaceutical Resources, Inc., a New Jersey corporation. --- Prime Rate: the rate of interest announced from time to time by ---------- Lender as its "prime rate" or "prime lending rate," which rate is determined from time to time by Lender as a means of pricing some loans to its -3- customers and is neither tied to any external rate of interest or index nor necessarily reflects the lowest rate of interest actually charged by Lender to any particular class or category of customers. RCRA: the meaning specified in Section 4.19. ---- Rents: for any periods, the aggregate amount of payments by the ----- Borrower which are accrued (whether or not paid by the Borrower) during such period in respect of all Leases except Capital Leases. Security Document(s): the meaning specified in Section 2.05. -------------------- Stockholder(s): with respect to any corporation all Persons who at -------------- any time hold or acquire capital stock of such corporation. Tangible Net Worth: As applied to any Person at any time, ------------------ stockholders' equity of such Person, minus the amount thereof attributable to intangibles (including but not limited to goodwill, capitalized software and excess purchaser costs), all as determined, on a consolidated basis, in accordance with generally accepted accounting standards. Term Loan: the meaning specified in Section 2.01(a). --------- Term Loan Commitment: the meaning specified in Section 2.01(a). -------------------- Termination Date: the meaning specified in Section 2.01(a). ---------------- Transaction Documents: the meaning specified in Section 4.02. --------------------- Treasury Rate: on the date of computation, the then weekly average ------------- yield on United States Treasury Notes adjusted to a constant maturity of 4 years as made available by the Federal Reserve Bank rounded to the next-highest one-eighth of one percent (0.125%). Unmatured Event of Default: any event or condition, which, after -------------------------- notice or lapse of time, or both, would constitute an Event of Default. Working Capital: the difference, determined in accordance with --------------- generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05, between Current Assets minus Current Liabilities. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01 hereof. II. GENERAL TERMS ------------- Section 2.01. Term Loan. ------------ --------- (a) Term Loan. Subject to the terms and conditions contained in --------- this Agreement, and provided that no Event of Default or Unmatured Event of Default has occurred, the Lender agrees to make a loan (the "Term Loan") to the Borrower, in one or more advances (an "Advance" or collectively the "Advances"), upon the written request of Borrower, from the date hereof until December 31, 1994 (the "Termination Date"), in the aggregate principal amount of up to Four Million Dollars ($4,000,000.00) (the "Term Loan Commitment"). The Term Loan shall be evidenced by the Note. -4- (b) Procedures for Making Advances. Whenever the Borrower desires ------------------------------ to receive an Advance, the Borrower will furnish the Lender a written request (referred to as a "Disbursement Request"), by telecopier or otherwise, which shall (i) be received by the Lender at the address for notices under Section 10.08 hereof, no later than 2:00 p.m. New Jersey time one (1) Business Day prior to the Drawdown Date of such Advance and (ii) specify (A) the Drawdown Date (which must be a Business Day) and (B) the amount of such Advance and (C) the bank account of the Borrower with the Lender to which payment of the proceeds of the Advance is to be made and (iii) contain a representation from the Company that the proceeds of the requested Advances shall be used exclusively for the purposes provided for under Section 2.06 of this Agreement. Subject to the terms and conditions of this Agreement, the Lender will make the Advance available to the Borrower by 2:00 p.m., New Jersey time, on the Drawdown Date by crediting the proceeds of such Advance to an account of the Borrower specified in the Disbursement Request. Section 2.02. Repayment of Principal; Prepayment. ------------ ---------------------------------- (a) Principal in Respect of Term Loan. The Term Loan shall be --------------------------------- payable without setoff, deduction or counterclaim in forty-eight (48) equal consecutive monthly installments of principal, each in an amount equal to one forty-eighth (1/48) (rounded to the nearest whole dollar amount) of the principal amount outstanding on the Termination Date, commencing January 31, 1995, and continuing on the last day of each calendar month thereafter until December 31, 1998, when all remaining outstanding principal and accrued interest thereon shall be due and payable in full without setoff, deduction or counterclaim. (b) If not otherwise paid when due, the Lender may, at its discretion, charge the amount of any payment of principal or interest due on the Term Loan or any other amount that shall become due from the Borrower to the Lender under this Agreement, to any checking or loan account of the Borrower or apply any Collateral proceeds or other funds received by the Lender against payment of any such amount. (c) The Lender shall have no obligation to relend principal balances repaid. Section 2.03. Applicable Interest Rate; Payment of Interest. ------------ --------------------------------------------- (a) Term Loan Interest Rate. (i) Subject to the Borrower's ----------------------- option to convert to a fixed rate of interest pursuant to the provisions of Section 2.03(a)(ii) and subject to the provisions of Section 9.02 hereof, the outstanding principal balance of the Term Loan shall bear interest from the date of Advance until payment in full, both before and after maturity, at a fluctuating rate per annum equal to the Prime Rate. (ii) Provided no Event of Default or Unmatured Event of Default has occurred and subject to the provisions of Section 9.02 hereof, the Borrower may elect to convert to a Treasury Rate interest rate by providing the Lender notice of such election no earlier than December 1, 1994 and no later than December 27, 1994 in the form attached hereto as Schedule 2.03 (the ------------- "Conversion Notice"). If the Lender receives the Conversion Notice within the above period, and provided no Event of Default or Unmatured Event of Default has occurred prior to January 1, 1995, then from and after January 1, 1995, subject to Section 9.02 hereof, the outstanding principal balance of the Term Loan shall bear interest until payment in full, both before and after maturity, at a fixed rate equal to the Treasury Rate plus 250 basis points. (b) Payment Dates. Interest on the Note shall be payable ------------- monthly in arrears without setoff, deduction or counterclaim on the last day of each calendar month commencing December 31, 1994 and continuing on the last day of each calendar month thereafter and after maturity, whether by reason of acceleration, payment, prepayment or otherwise. (c) Interest Calculations. Interest shall be computed on the --------------------- basis of a three hundred sixty (360) day year counting the actual number of days elapsed. -5- (d) Lawful Rate. If the interest rate calculated in ----------- accordance with the terms of any provision of this Agreement, or the aggregate of all amounts due hereunder which are contracted for, charged or collected shall, at any time under any circumstances, exceed the maximum permitted by any law then applicable to the Term Loan, then for such period as the rate or amount contracted for, charged or collected would exceed the maximum permitted by such law (and no longer) the rate payable on the Term Loan or so contracted for, charged or collected shall be reduced to the maximum permitted by such law. In the event the Lender ever collects, or applies, as interest, any amount in excess of the maximum permitted by law, such excess amount shall be deemed a prepayment of such portion of the amounts due hereunder as are deemed to constitute principal of a loan, and if all amounts so deemed to constitute principal have been or are thereby paid in full, any remaining excess shall be paid to the Borrower to the extent permitted by law. Section 2.04. [Intentionally Left Blank]. ------------ Section 2.05. Security for the Note. ------------ --------------------- The Borrower's obligations and indebtedness to the Lender hereunder and under the Note shall be secured at all times by: (a) a Security Agreement of the Borrower of even date herewith granting Lender a continuing first priority security interest in all presently owned and hereafter acquired accounts, inventory, machinery, equipment and fixtures (excluding leasehold improvements located at 2 Ram Ridge Road, Spring Valley, New York), subject only to the existing liens in favor of Lender and liens, if any, expressly permitted under this Agreement; and (b) the joint and several, absolute and unconditional guarantees of the Guarantors (the "Guarantees"). All agreements and instruments described or contemplated in this Section 2.05, together with any and all other agreements and instruments heretofore or hereafter securing the Note and the Borrower's obligations hereunder or otherwise executed in connection with this Agreement, shall in all respects be acceptable to the Lender and its special counsel in form and substance and such agreements and instruments, as the same may be amended from time to time, are sometimes hereinafter referred to collectively as the "Security Documents" and individually as a "Security Document". The Borrower agrees to take such action as the Lender may reasonably request from time to time in order to cause the Lender to be secured at all times as described in this Section 2.05, and the Lender's security interests to be perfected at all times. Section 2.06. Use of Proceeds. ------------ --------------- The proceeds of the Term Loan shall be used by the Borrower exclusively to finance the expenditures set forth in Schedule 2.06 ------------- (attached hereto and made a part hereof) made by the Borrower in Fiscal Year 1994 and capital expenditures to be made by the Borrower for purchases made in the first Fiscal Quarter of 1995, as represented on an amendment to Schedule 2.06 provided to the Lender by the Borrower with the - ------------- corresponding Disbursement Request. Section 2.07. Term. ------------ ---- This Agreement, the Note, the Security Documents and all other agreements relating to the Term Loan contemplated hereby shall in all respects remain in full force and effect until final payment in full of the Note and all other Indebtedness to the Lender under this Agreement and the Security Documents. -6- III. CONDITIONS OF MAKING THE TERM LOAN. ---------------------------------- Section 3.01. Term Loan. ------------ --------- The obligation of the Lender to make the initial Advance under Term Loan hereunder is subject to the following conditions: (a) The representations and warranties set forth in this Agreement and in the Security Documents shall be true and correct on and as of the date hereof and shall be true and correct in all material respects as of the date the Term Loan is made, and the Borrower shall have performed all obligations which were to have been performed by it hereunder prior to the date the Term Loan is made. (b) The Borrower shall have executed and delivered to the Lender (or shall have caused to be executed and delivered to the Lender by the appropriate Persons) the following: (i) The Note; (ii) The Security Documents, together with any other documents required or contemplated by the terms thereof; (iii) A certificate of the Secretary of the Borrower certifying (A) the names and true signatures of the incumbent officers of the Borrower authorized to sign this Agreement, the Note and the other Security Documents, (B) the resolutions of the Board of Directors of the Borrower authorizing the execution and delivery of this Agreement, the Note and the Security Documents, as applicable, (C) the by-laws of the Borrower and (D) that the Borrower's corporate charter or articles of incorporation has not been amended since the date of the certified copy of such document delivered pursuant to clause (iv) below; (iv) A copy of the corporate charter or articles of incorporation, certified by the Secretary of State of the state of organization, of the Borrower; (v) A completed Disbursement Request directing the Lender to disburse funds; (vi) Certificates of good standing (both as to corporation law and tax matters) issued by the state in which the Borrower is organized and any other state in which the failure to qualify would have a material adverse effect on the Borrower. (vii) A certificate from an officer of the Borrower reasonably satisfactory to the Lender certifying (A) that the representations set forth in Section 4 are true and correct, (B) that no Event of Default has occurred and (C) to such other matters as Lender may reasonably request; (viii) Certificates of insurance evidencing all insurance coverage and policy provisions required in this Agreement and the Security Documents together with loss payable endorsements in favor of the Lender with respect to each casualty insurance policy of the Borrower; (ix) Such other supporting documents, subordinations, waivers, consents, releases, resolutions and certificates as the Lender may reasonably request; and (x) Proper financing statements, executed by the Borrower as debtor, -7- naming the Lender as secured party to be filed under the Uniform Commercial Code of all appropriate jurisdictions or any comparable law as may be necessary or, in the opinion of the Lender, desirable to perfect the security interests created pursuant to the Security Documents. (c) The Lender shall have received the favorable written opinions of counsel for the Borrower, dated the date of the Term Loan, reasonably satisfactory to the Lender in scope and substance. (d) All legal matters incident to the transactions hereby contemplated shall be satisfactory to counsel for the Lender. (e) Neither an Event of Default nor an Unmatured Event of Default shall have occurred and be continuing or result or occur as a result of the entry into any of the Transaction Documents or the making of the Term Loan. Section 3.02. Subsequent Advances. ------------ ------------------- The obligation of the Lender to make any subsequent Advance of the Term Loan not made at the time of closing is subject to the following conditions precedent: (a) All warranties and representations set forth in this Agreement shall be true and accurate in all material respects as of the Drawdown Date which representations and warranties shall be deemed to have been stated in full as if set forth at length in Borrower's Disbursement Request. (b) The Borrower shall have delivered an executed and completed Disbursement Request to the Lender. (c) No Event of Default or Unmatured Event of Default shall have occurred and be continuing as of the Drawdown Date. IV. REPRESENTATIONS AND WARRANTIES ------------------------------ The Borrower hereby represents and warrants to the Lender (which representations and warranties shall survive the delivery of the Note and the making of the Term Loan) that: Section 4.01. Financial Statements. ------------ -------------------- The Borrower has heretofore furnished to the Lender the consolidated balance sheet of PRI as at July 2, 1994, and PRI's consolidated statement of operations and retained earnings and statements of cash flows, for the fiscal year or other period ending on such date. Said financial statements and balance sheet have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of preceding periods, and are complete and correct in all material respects and fairly present the financial condition of the Borrower as at said dates and the results of operations of the Borrower for the periods indicated, subject to year end adjustments. Since July 2, 1994, there has occurred no material adverse change in the Borrower's or (on a consolidated basis) PRI's business, assets, properties or condition (financial or otherwise), operations, or performance, other than as fully disclosed in said balance sheet and financial statements. Neither the Borrower nor any of the Affiliate Companies has any contingent obligations, liabilities for taxes or unusual forward or long-term commitments material to the Borrower or to them taken as a whole except as specifically mentioned in the foregoing financial statements. -8- Section 4.02. Organization, Etc. ------------ ----------------- The Borrower (a) is a corporation duly organized and validly existing under the laws of the State of New Jersey and is duly qualified to transact business in each jurisdiction where the failure to so qualify would have a material adverse effect on the Borrower, (b) has the power and authority to own its properties and to carry on its business as now being conducted and as presently contemplated, (c) has the corporate power and authority to execute and deliver, and perform its obligations under, this Agreement, the Note and the Security Documents (collectively, the "Transaction Documents") to which it is a party or signatory, and (d) except as set forth on Schedule 4.02, has -------------- no subsidiaries as of the date hereof. Section 4.03. Authorization; Compliance, Etc. ------------ ------------------------------- The execution and delivery of, and the performance by the Borrower of its obligations under, the Transaction Documents have been duly authorized by all requisite corporate action and will not violate any provision of law, any order, judgment or decree of any court or other agency of government, the corporate charter, articles of incorporation or by-laws of the Borrower or, except as disclosed in Schedule 4.04, any material indenture, agreement or other instrument to which the Borrower or PRI is a party, or by which the Borrower or PRI is bound, or, except as disclosed in Schedule 4.04, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or except as may be permitted under this Agreement, result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower or (on a consolidated basis) of PRI pursuant to, any such -- indenture, agreement or instrument, except in favor of the Lender. Section 4.04. Governmental and Other Consents. ------------ ------------------------------- Except as described in Schedule 4.04 hereto, the Borrower is not ------------- required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any governmental instrumentality or other agency, or any other Person, in connection with or as a condition to the execution, delivery or performance of any of the Transaction Documents. Section 4.05. Proceedings. ------------ ----------- Except as disclosed in Schedule 4.05 hereto, there is no claim, ------------- action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency, or any arbitration board or tribunal, now pending or, to the knowledge of the Borrower, threatened (nor is the Borrower aware of any facts which could likely result therein), (a) which questions the validity of any of the Transaction Documents, or any action taken or to be taken pursuant hereto or thereto, or (b) against or affecting the Borrower or any Affiliate Company, or to the knowledge of Borrower any other Affiliate of the Borrower, or any assets of any such party, which, if adversely determined, either in any case or in the aggregate, could reasonably be expected to have a material adverse effect on the business, operations, properties, assets or condition, financial or otherwise, of the Borrower. Section 4.06. Compliance with Laws and Agreements. ------------ ----------------------------------- Except as otherwise disclosed in Schedule 4.06 hereto, neither the ------------- Borrower nor any of the Affiliate Companies is a party to any agreement or instrument or subject to any corporate or other restriction materially and adversely affecting the business, operations, properties assets or condition, financial or otherwise, of Borrower or (on a consolidated basis) of PRI. -- Neither the Borrower nor any of the Affiliate Companies is in violation of any provision of its corporate charter, articles of incorporation or by-laws and is not in violation in any material respect of any indenture, agreement or instrument to which it is a party or by which it is bound or, to the best of the Borrower's knowledge and belief, of any provision of law, the violation of which could have a material adverse effect upon the Borrower or (on a -- consolidated basis) upon PRI, or any order, -9- judgment or decree of any court or other agency of government. Without limiting the scope of the foregoing, (a) the Borrower and each of the Affiliate Companies and each of their properties, machinery, facilities and other business assets is in compliance in all material respects with all federal and state laws and regulations (including, without limitation, all regulations, rules, orders and requirements of the United States Food and Drug Administration) the violation of which could reasonably be expected to have a material adverse effect upon the Borrower or (on a consolidated basis) upon -- PRI, neither the Borrower nor any of the Affiliate Companies is charged with, nor to the knowledge of Borrower, under investigation with respect to any violation of any such law, rule or regulation, and (c) neither Borrower nor any of the Affiliate Companies has nor is now engaged in any illegal activity, including without limitation, a pattern of racketeering activity, that could subject any of the Borrower's or (on a consolidated basis) upon PRI's -- assets to forfeiture or seizure. Section 4.07. Title to Collateral. ------------ ------------------- Except as specified on Schedule 4.07 hereto, the Borrower has good ------------- title to all of the Collateral free and clear of all mortgages, security interests, restrictions, liens and encumbrances of any kind, including, without limitation, liens or encumbrances in respect of unpaid taxes, except liens and encumbrances in favor of Lender or expressly permitted under this Agreement. The Borrower enjoys quiet possession under all Leases material to its business to which it is lessee, and all of such Leases are valid, subsisting and in full force and effect. Section 4.08. Other Names or Entities. ------------ ----------------------- Except as disclosed on Schedule 4.08 to this Agreement, none of ------------- Borrower's business is conducted through any corporate subsidiary, unincorporated association or other entity and Borrower has not, within the seven years preceding the date of this Agreement (a) changed its name, (b) used any name other than the name stated at the beginning of this Agreement, or (c) merged or consolidated with, or acquired the assets of, any other corporation or business. Section 4.09. No Insolvency. ------------ ------------- Neither the borrowings made by the Borrower under this Agreement nor the execution, delivery and performance of the Note and the Security Documents render or will render the Borrower insolvent or unable to pay its debts as they become due; the Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a substantial portion of its property, and the Borrower has no knowledge of any person contemplating the filing of any such petition against the Borrower. Section 4.10. Full Disclosure. ------------ --------------- No statement of fact made by or on behalf of any Person (other than the Lender) in this Agreement, the Security Documents, or any certificate or schedule furnished to the Lender pursuant hereto or thereto contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading. There is no fact presently known to the Borrower which has not been disclosed to the Lender in writing which materially affects adversely, or, which could likely materially affect adversely the business, operations, properties, assets or condition, financial or otherwise, of the Borrower. Section 4.11. Tax Returns; Tax Examination. ------------ ---------------------------- (a) Except as set forth in Schedule 4.11 hereto, the Borrower has ------------- filed (or caused to be filed) all federal, state and local tax returns required to be filed, and has paid or made adequate provision for the payment of all material federal, state and local taxes, franchise fees, charges and assessments. -10- (b) The federal income tax returns of the Borrower have been examined by the Internal Revenue Service (or closed by applicable statute) for all tax periods prior to and including the tax year ending September, 1990. All deficiencies that have been asserted against the Borrower as a result of such examination have been fully paid or finally settled or are being contested in good faith, and no issue has been raised in any such examination that, by application of similar principles reasonably can be expected to result in the assertion of a material deficiency for any other year not so examined, except to the extent that such deficiency has been reserved for in the financial statements described in Section 4.01. The Borrower has not taken any ------------ reporting positions for which it does not have a reasonable basis and does not anticipate any further material tax liability with respect to the tax years that have not been closed. For purposes of this Section 4.11 the term ------------ "Borrower" shall include each other Person with which the Borrower files consolidated or combined income tax returns or reports. Section 4.12. Pension Plans, Etc. ------------ ------------------- (a) Plans. Except as set forth in Schedule 4.12 hereto, ----- ------------- neither the Borrower nor any entity with which Borrower would be aggregated (a "Commonly Controlled Entity") under Section 414(b), (c), (m), or (o) of the Code, maintains or contributes to any pension, profit sharing or other similar plan providing for a program of deferred compensation to any employee or former employee. (b) Funding of Employee Benefit Plans. Except as set forth in --------------------------------- Schedule 4.12 hereto, all contributions and other payment required to be - ------------- made by the Borrower or any Commonly Controlled Entity to all employee benefit plans, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which either the Borrower or any Commonly Controlled Entity maintains or to which any of them contributes (the "Employee Benefit Plans") have been made or reserves adequate for such purposes have been set aside and reflected on the Borrower's financial statements. With respect to any such Employee Benefit Plan which is an employee pension benefit plan, as defined in Section 3(2) of ERISA (an "Employee Pension Plan"), there is no accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, and no waiver of the minimum funding standard has been applied for or obtained from the Internal Revenue Service under Section 412(d) of the Code. No lien has arisen under Section 412(n) of the Code with respect to the assets of the Borrower. The Borrower has no reason to believe that the level of contributions required to be made to each multiemployer plan, as defined in Section 4001(a)(3) of ERISA to which the Borrower or any Commonly Controlled Entity contributed or contributes (a "Multiemployer Plan") is not sufficient to maintain the level of benefits under such plan now in effect or scheduled to become effective in the future. (c) Fiduciary Duties, Prohibited Transactions and Administration. ------------------------------------------------------------ Neither the Borrower nor any Commonly Controlled Entity has breached any fiduciary duty imposed on it under Part 4 of Title I of ERISA with respect to any Employee Benefit Plan and has not engaged in any nonexempt prohibited transaction, as defined in Section 406 of ERISA and Section 4975 of the Code. Each Employee Benefit Plan has been and is administered in all material respects in accordance with its terms and applicable laws, rules and regulations. (d) Status of Funded Pension Plans. Except as set forth in ------------------------------ Schedule 4.12 hereto, each funded Employee Pension Plan has been determined - ------------- by the Internal Revenue Service to be qualified under Section 401(a) or Section 403(a) of the Code and nothing has occurred which would cause the loss of such qualification or the imposition of any material tax liability or penalty under the Code or ERISA on the Borrower. With respect to each Employee Pension Plan which is subject to Title IV of ERISA, other than Multiemployer Plans, (1) neither the Borrower nor any Commonly Controlled Entity has failed to make required contributions or incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC"), (2) no reportable event, as defined in Section 4043(b) of ERISA, has occurred, (3) except as set forth in Schedule 4.12 the actuarial present value of the benefit liabilities, as defined in Section 4001(a)(16) of ERISA ("Benefit Liabilities"), does not exceed the fair market value of the assets available to provide the Benefit Liabilities. Neither the Borrower nor any Commonly Controlled Entity knows of any facts or circumstances which likely -11- will, if known by the PBGC, give rise to any liability to the PBGC under Title IV of ERISA (other than for premium payments). With respect to Multiemployer Plans, neither the Borrower nor any Commonly Controlled Entity has withdrawn or partially withdrawn, as described in Subtitle E of Title IV of ERISA from any Multiemployer Plan, and there exists no condition or set of circumstances which could likely result in any withdrawal from or the partition, termination, reorganization or insolvency of any Multiemployer Plan which could result in any material liability to the Borrower or any Commonly Controlled Entity. (e) Status of Employee Welfare Plans. No Employee Benefit Plan -------------------------------- which is an employee welfare benefit plan, as defined in Section 3(1) of ERISA (an "Employee Welfare Plan"), provides for continuing benefits or coverage for any participant (or beneficiary) after the termination of the participant's employment except as may be required by Section 601 of ERISA and Section 4980B of the Code ("COBRA") and regulations thereunder or by applicable state statutory law. With respect to any Employee Welfare Plan, Borrower and each Commonly Controlled Entity have complied with the notice and continuation coverage requirements of COBRA and regulations thereunder such that there would not result in any loss of any material deduction under Section 162 of the Code or any material tax, penalty or liability to the Borrower. (f) Claims. There are no claims (other than claims for benefits in ------ the normal course), actions or lawsuits asserted or instituted with respect to, and neither Borrower nor any Commonly Controlled Entity has knowledge of any threatened claims or litigation with respect to, any Employee Benefit Plan or any fiduciary thereof, except as set forth in Schedule 4.12. ------------- Section 4.13. Licenses, Etc. ------------ -------------- The Borrower and each Affiliate Company possess or have otherwise been granted all material governmental approvals, authorizations, licenses and permits required in connection with the conduct by the Borrower of its business as presently conducted including without limitation, from the United States Food and Drug Administration (such approvals, authorizations, licenses and permits, together with any extensions, modifications or renewals thereof and any additional approvals, authorizations, licenses or permits hereafter issued or granted to the Borrower and to each Affiliate Company, being herein sometimes referred to collectively as the "Licenses"). All existing Licenses are in full force and effect, are duly issued or granted in the name of, or validly assigned to, the Borrower or such Affiliate Company, and the Borrower or such Affiliate Company have full power and authority to operate thereunder. Section 4.14. O.S.H.A. ------------ -------- Borrower and each Affiliate Company have duly complied with, and its facilities, business, leaseholds, equipment and other property are in compliance, in all material respects, with the provisions of the federal Occupational Safety and Health Act and all rules and regulations thereunder and all similar state and local laws, rules and regulations; and there are no outstanding citations, notices or orders of non-compliance issued to Borrower or relating to its facilities, business, leaseholds, equipment or other property under any such law, rule or regulation. Section 4.15. Ownership of Borrower. ------------ --------------------- PRI owns beneficially and of record all of the issued and outstanding capital stock of the Borrower and such shares are held free of any assignment, pledge, lien, security interest, charge, option or other encumbrance, except for liens and security interests granted to Lender, and there are no warrants, options or other rights to acquire shares of the Borrower's capital stock of any class. -12- Section 4.16. Patents, Trademarks, Etc. ------------ ------------------------- The Borrower owns or possesses all the patents, trademarks, service marks, trade names, copyrights and licenses, and all rights with respect to the foregoing, necessary for the conduct of its business as now conducted, without any known conflict with the rights of others. Section 4.17. Brokers, Etc. ------------ ------------- The Borrower has not dealt with any broker, finder, commission agent or other similar person in connection with the Term Loan or the transactions contemplated by this Agreement, and the Borrower is not under any obligation to pay any broker's fee, finder's fee or other similar compensation or commission in connection with such transactions and the Borrower covenants and agrees to indemnify and hold harmless the Lender from and against, any and all broker's fees, finder's fees or other similar compensation or commission in connection with such transactions. Section 4.18. [Intentionally Left Blank] ------------ Section 4.19. Environmental Matters. (a) Except as may be ------------ --------------------- otherwise specifically stated in Schedule 4.19, neither the Borrower nor, ------------- to the best of the Borrower's knowledge, any other Person: (i) has ever caused, permitted, or suffered to exist any oil, friable asbestos, hazardous waste, hazardous substance, or other hazardous material (as defined under applicable law including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Sections 9601(14) and (33); the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6903(5); the New Jersey Industrial Site Recovery Act ("ISRA") N.J.S. 13:1K-6, et. seq., all of which is collectively referred to herein as "Hazardous Material") to be spilled, placed, held, located or disposed of on, nor are any now existing on, any real estate legally or beneficially owned by the Borrower or leased by the Borrower (the "Premises"), or into the atmosphere, any body of water, any wetlands or the Premises; (ii) has any knowledge that any Premises has ever been used (whether by the Borrower or, to the best of the Borrower's knowledge and belief, by any other Person) as a treatment, storage or disposal (whether permanent or temporary) site for any Hazardous Material; (iii) has any knowledge of any notice of violation, lien or other notice issued by any governmental agency with respect to the environmental condition of the Premises, the improvements thereon, any other property owned by the Borrower or any other property which was previously included in the property description of the Premises or such other real property, or with respect to the release of Hazardous Material at, upon, under or within the Premises, the improvements or such other real property, or the past or ongoing migration of Hazardous Material from neighboring lands or to the Premises or the improvements; and (iv) has any knowledge of any asbestos-containing materials, PCBs, radon gas, or urea formaldehyde foam insulation at, upon, under or within the Premises or any improvements thereon. (v) is by classification subject to ISRA by virtue of its Standard Industrial Classification number being set forth in ISRA. (b) Except as disclosed in Schedule 4.19 to this Agreement, no ------------- property owned or used by Borrower and located in the State of New Jersey is an "industrial establishment" within the meaning of ISRA or is or has been used for the generation, manufacture, refining, transportation, treatment, storage, handling or disposal of any "hazardous substances" or "hazardous wastes" within the meaning of ISRA. The following are all of the Standard Industrial Classification Codes applicable to the properties and operations of Borrower: -13- 2834 - ---- (c) Except as disclosed in Schedule 4.19 to this Agreement, ------------- Borrower is in compliance in all material respects with all applicable federal, state and local statutes, rules, regulations, orders and other provisions of law relating to air emissions, water discharge, noise emissions, solid and liquid disposal, hazard waste and substances, and other environmental, health and safety matters. Section 4.20. Enforceability. ------------ -------------- This Loan Agreement, the Note and the Security Documents constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general principles of equity. Section 4.21. Investment Company Act; Public Utility Holding Company Act. ------------ ---------------------------------------------------------- The Borrower is not an "investment company" as that term is defined in, and is not otherwise subject to regulation under, the Investment Company Act of 1940. The Borrower is not a "holding company" as that term is defined in, and is not otherwise subject to regulation under, the Public Utility Holding Company Act of 1935. Section 4.22. Federal Reserve Regulations. ------------ --------------------------- The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation G of the Board of Governors of the Federal Reserve System of the United States), and no part of the proceeds of the Term Loan will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the provisions of Regulations G, T, U or X of said Board of Governors. V. FINANCIAL COVENANTS. ------------------- The Borrower covenants and agrees that, so long as the Lender has any obligation to extend credit to the Borrower hereunder, or there remains outstanding any portion of the principal of, or interest on, the Note, or there remains outstanding any other Indebtedness to the Lender, whether now existing or arising hereafter, under this Agreement, the Note or the Security Documents, the Borrower will: Section 5.01. Maximum Capital Expenditures. ------------ ---------------------------- Not pay or become obligated to pay Capital Expenditures in any Fiscal Year listed below which in the aggregate for such Fiscal Year exceed the amount specified below opposite such Fiscal Year: Fiscal Year Maximum Capital Expenditures ----------- ---------------------------- 1994 $15,000,000 1995 $0 1996 (through March 31, 1996) $2,000,000 provided, however, the Borrower may carry forward into and use in - ------------------ subsequent years amounts unused in any year so long as so doing would not result in the occurrence of an Event of Default or an Unmatured Event of Default. -14- Section 5.02. Minimum Working Capital. ------------ ----------------------- Maintain at all times minimum Working Capital of Borrower of Ten Million Dollars ($10,000,000). Section 5.03. Tangible Net Worth. ------------ ------------------ Maintain at all times a minimum Tangible Net Worth of Borrower of Twenty-Three Million Dollars ($23,000,000.00). Section 5.04. Restricted Payments. ------------ ------------------- Borrower may, to the extent otherwise permitted by law, pay the dividends described in Schedule 5.04, and unless there shall have occurred and be -------- continuing an Event of Default or an Unmatured Event of Default, or unless such an Event of Default or Unmatured Event of Default shall arise as a result of the payment hereinafter described, the Borrower may, to the extent otherwise permitted by applicable law, declare and pay dividends to its Stockholders in cash or property, or purchase, redeem, retire or otherwise acquire any shares of any class of its capital stock or return any capital to its Stockholders which cumulatively do not in the aggregate exceed in any Fiscal Year an amount equal to (i) fifty-percent (50%) of the Borrower's Net Income for the immediately preceding Fiscal Year, minus (ii) the amount of any dividend or distribution described in Schedule 5.04 paid in the same Fiscal Year. -------- Section 5.05. Debt to Tangible Net Worth Ratio. ------------ -------------------------------- Not cause, suffer or permit the ratio of the Borrower's Funded Debt to the Borrower's Tangible Net Worth as of the end of any Fiscal Quarter or Fiscal Year to exceed 1.0:1.0. Section 5.06. Minimum Interest Coverage. ------------ ------------------------- Borrower shall maintain at all times (as measured on a rolling four (4) fiscal quarter basis as evidenced by the quarterly and annual financial statements provided pursuant to Section 6.05 hereof) a ratio of Adjusted EBIT to total cash interest expense during such period on all Indebtedness of at least 1.5:1.0. Section 5.07. Minimum Percentage of PRI. ------------ ------------------------- Not cause, suffer or permit its assets to be or become less than eighty percent (80%) of the consolidated assets of PRI. VI. AFFIRMATIVE COVENANTS --------------------- The Borrower covenants and agrees that, so long as the Lender has any obligation to extend credit to the Borrower hereunder, or there remains outstanding any portion of the principal of, or interest on, the Note, or there remains outstanding any other Indebtedness to the Lender, whether now existing or arising hereafter, under this Agreement, the Note, or the Security Documents, the Borrower will: Section 6.01. Preservation of Assets; Compliance with Laws, Etc. ------------ ------------------------------------------------- Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence as a corporation, and all material Licenses and franchises and comply in every material respect with all laws and regulations applicable to it or the conduct of its business or ownership or use of its properties (including without limitation, those related to food and drugs, environmental, health and safety matters and ERISA) and all material agreements to which it is a party the violation of which could have a material adverse -15- effect upon the Borrower; at all times maintain, preserve and protect all material trade names and preserve all the remainder of its material property used or useful in the conduct of its business and keep the same in good repair, working order and condition (reasonable wear and tear and damage by fire or other casualty covered by insurance excepted). Section 6.02. Insurance. ------------ --------- (a) Keep all of its insurable properties now or hereafter owned adequately insured at all times against loss or damage by fire or other casualty; provide and maintain (or cause to be provided and maintained), at its expense, comprehensive general property, products liability, workers' compensation and business interruption insurance protecting against such liabilities, losses and damages and in such amounts and with such deductibles as are reasonably acceptable to the Lender, in each case issued by financially sound and reputable insurers, and, upon request of the Lender, furnish to the Lender satisfactory evidence of the same; notify the Lender of any material change in the insurance maintained on the Borrower's properties after the date hereof and furnish the Lender satisfactory evidence of any such change; provided that each insurance policy shall: (i) as to the Collateral, be "all risk" "full replacement cost" insurance against loss, damage or destruction with such deductibles as are reasonably acceptable to the Lender and name the Lender (A) as an additional insured and the sole loss payee or (B) as the sole loss payee pursuant to a so-called "standard mortgagee clause", (ii) provide that no action of the Borrower, any of the Affiliate Companies or any tenant or sub-tenant shall void such policy as to the Lender, (iii) provide that the Lender shall be notified of any proposed cancellation of such policy at least thirty (30) days in advance thereof and will have the opportunity to correct any deficiencies justifying such proposed cancellation; and ensure that all insurance payable with respect to the Collateral is payable to no party other than the Lender and the Borrower. In the event that the Borrower shall default in the performance of its obligations under this Section 6.02, the Lender may, at its option, effect such insurance coverage with an insurer acceptable to the Lender and add the premium(s) paid therefor to the principal amount of the indebtedness incurred pursuant hereto, and the amount of such premium shall be payable by the Borrower on demand with interest thereon at the highest rate payable hereunder. (b) Notwithstanding any other provision of this Agreement to the contrary, prior to the occurrence of an Event of Default or an Unmatured Event of Default, the Borrower may collect and deposit in any account of the Borrower at the Lender the proceeds of insurance of Collateral which in the aggregate with all such proceeds and the book value of all sales or dispositions under Section 7.03(b) (other than the unused liquid pharmaceutical machinery referred to therein) do not in the aggregate exceed $200,000 in any one Fiscal Year of the Borrower or exceed $800,000 from the date of this Agreement; provided, that the Borrower notifies the Lender in writing of the collection and deposit of such insurance proceeds, the Collateral loss which resulted in such insurance proceeds and the aggregate of all insurance proceeds then collected to date under this paragraph; provided, further, however, to the extent any such proceeds are used to repair or purchase replacement Collateral against which the Lender possesses a lien of the same priority as the Lender's lien was against the Collateral subject to the loss, then the amount of such insurance proceeds so used will not be included in the computation under this paragraph. Section 6.03. Taxes, Etc. ------------ ----------- Pay and discharge or cause to be paid and discharged all taxes, assessments and governmental charges or levies imposed upon it or upon its income and profits or upon any of its property, real, personal or mixed, or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor, materials and supplies or otherwise, which if unpaid, might become a lien or charge upon such properties or any part thereof; provided, however, that the Borrower shall not be required to pay and - -------- ------- discharge or cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate legal proceedings and it shall have set aside on its books adequate reserves with respect to any such tax, assessment, charge, levy or claim, so contested; -16- and provided, further that, in any event, payment of any such tax, -------- ------- assessment, charge, levy or claim shall be made before any of Borrower's or (on a consolidated basis) PRI's property shall be seized or sold in satisfaction thereof. Section 6.04. Notice of Proceedings, Defaults, Adverse ------------ ---------------------------------------- Change, Etc. ------------ Promptly (and in any event within five days of the Borrower's discovery thereof) give written notice to the Lender of (a) any proceedings instituted or threatened in any federal, state or local court or before any commission, agency or other regulatory body, whether federal, state or local, which, if adversely determined, could reasonably be expected to have a material adverse effect upon its business, operations, prospects, properties, assets, or condition, financial or otherwise; (b) any notices of default received by the Borrower (together with copies thereof, if requested by the Lender) with respect to alleged defaults under or violations of any of its material licenses, permits, approvals or franchises (including the Licenses), or any material agreements to which the Borrower is a party or any alleged defaults with respect to any evidence of Indebtedness of the Borrower, which Indebtedness is in an amount which equals or exceeds $500,000, or any mortgage, indenture or other agreement relating thereto; (c) any material adverse change in the condition, financial or otherwise, or prospects of the Borrower, or (d) the occurrence of any Event of Default or Unmatured Event of Default. Section 6.05. Financial Statements and Reports. ------------ -------------------------------- Furnish to the Lender: (a) (i) Within ninety (90) days after the end of each Fiscal Year, PRI's consolidated, audited balance sheet and statements of operations and retained earnings, and statements of cash flows, together with supporting schedules, prepared in accordance with generally accepted auditing standards consistently applied and certified without qualification by its independent certified public accountants selected by the Borrower and reasonably acceptable to the Lender (which absent any material adverse change may remain as Richard A. Eisner & Company) (the "Accountants"), the form of such consolidated financial statements to be satisfactory to the Lender (which consolidated financial statements may be in the form required to be annexed to or incorporated in PRI's Annual Report on Form 10-K), showing the consolidated financial condition of PRI at the close of such Fiscal Year and the results of operations during such year, together with a statement to the effect that such Accountants have examined the provisions of this Agreement and that, to the best of their knowledge, no Event of Default or Unmatured Event of Default has occurred (or, if such an event has occurred, a statement explaining its nature and extent); provided, however, that in issuing such statement, such -------- ------- Accountants shall not be required to exceed the scope of normal auditing procedures conducted in connection with their opinion referred to above, and - --- (ii) Within ninety (90) days after the end of each Fiscal Year, Borrower's consolidating balance sheet and statements of operations and retained earnings and statements of cash flows, together with supporting schedules, certified by the chief financial officer of PRI as presenting fairly the financial condition of the Borrower at the close of such Fiscal Year and as having been prepared in accordance with generally accepted accounting principles, the form of such consolidating financial statements to be satisfactory to the Lender; (b) Within sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year, PRI's consolidated (and if the Borrower is not in compliance with the obligations of Section 5.07 above, then also Borrower's) balance sheet and statements of operations and retained earnings and cash flows, together with supporting schedules, prepared by PRI or the Borrower, as the case may be, in accordance with generally accepted accounting principles, consistently applied (which consolidated financial statements may be in the form required to be annexed to or incorporated in PRI's Quarterly Report on Form 10-Q) and -17- certified by the chief financial officer of PRI, such balance sheet to be as of the end of such Fiscal Quarter and such statements of income to be for the quarter then ended and the period from the beginning of the then current Fiscal Year to the end of such quarter (in each case subject to normal audit and year-end adjustments); (c) Concurrently with the delivery of any annual financial statements required by Section 6.05(a) and any quarterly financial statements required by Section 6.05(b), a certificate in the form of Schedule 6.05 hereto signed ------------- by the corporate treasurer or the chief financial officer of the Borrower setting forth the calculations contemplated in Article V of this Agreement, and certifying as to the fact that such Person has examined the provisions of this Agreement and that no Event of Default or Unmatured Event of Default has occurred (or, if such an event has occurred, a statement explaining its nature and extent and setting forth the steps the Borrower proposes to take to cure or prevent any Event of Default); (d) Promptly upon delivery to any Person other than the Borrower or the Affiliate Companies or their respective accountant's or legal counsel, a copy of any report, certificate, letter or other writing which in any manner describes, discusses or indicates the occurrence of any Event of Default or any occurrence with which the mere passage of time or the giving of notice or both would or will become an Event of Default with respect to any Indebtedness of Borrower or any Affiliate Company for borrowed money. (e) Promptly upon receipt thereof, and in any event within five (5) days after such receipt, copies of all correspondence and notices received by the Borrower from federal and state government regulatory agencies (including without limitation, the United States Environmental Protection Agency, the New Jersey Department of Environmental Protection and Energy, the United States Food and Drug Administration, and the Internal Revenue Service) relating to any potential or actual adverse action or determination taken or which may be taken against Borrower or any of its Affiliates. (f) As soon as reasonably possible and in any event within ten (10) days after request therefor, such other information regarding the operations, assets, business, affairs and financial condition of the Borrower as the Lender may reasonably request from time to time; (g) Immediately upon their becoming available, copies of each filing made (including those items which are deemed not officially "filed") with the Securities and Exchange Commission, including without limitation, a copy of each registration statement, Form 10-K, Form 10-Q, Form 8-K, Form 8 and each proxy statement and annual report, in each case with a copy of the exhibits thereto other than exhibit copies of which were previously delivered to Lender. Section 6.06. Inspection. ------------ ---------- Permit employees, agents and representatives of the Lender to inspect, on prior notice during normal business hours, the Premises and the Borrower's books and records and to make abstracts or reproductions thereof, including, without limitation, permitting the Lender to inspect any and all equipment or other assets comprising collateral security for the Term Loan and any and all maintenance records and agreements with respect to such equipment and other assets. In no event will any Person be permitted to photograph or videotape any portion of the Premises or any of the Borrower's operations prior to the occurrence of an Event of Default. Section 6.07. Accounting System. ------------ ----------------- Maintain complete and accurate books and records of all its operations and properties and a standard system of accounting in accordance with generally accepted accounting principles consistently applied. -18- Section 6.08. Yield Protection. If any change in any law, ------------ ---------------- regulation or guideline or in the interpretation thereof, or any order or ruling by any regulatory body, court or other governmental authority, or compliance by Lender with any request or directive (whether or not having the force of law) of any such regulatory body, court or authority, shall impose, modify, or deem applicable to Lender any reserve, capital, special deposit or other requirement or condition affecting loans made or assets held by Lender or deposits in or for the account of Lender, and the result of any such event is increased cost or reduced benefit to Lender in maintaining the Term Loan (as determined by Lender's reasonable allocation of the aggregate of such increased costs or reduced benefits to Lender resulting from such event), Borrower shall pay to Lender from time to time, within 10 days after demand, additional amounts sufficient to compensate Lender for such increased cost or reduced benefit from the date of such event, together with interest on each such amount from a date 10 days after the date demanded at the rate then applicable to the Term Loan. A certificate setting forth in reasonable detail such increased cost or reduced benefit shall be conclusive as to the amount thereof, absent manifest error. Lender shall not be required to accept any payment of principal of the Term Loan which bears interest at the Treasury Rate in advance of its due date unless the Borrower shall, at such time, also pay all reemployment costs incurred by the Lender as a result of such early repayment and such payment of principal shall be applied in inverse order of maturity. Section 6.09. Additional Assurances. ------------ --------------------- From time to time hereafter, execute and deliver or cause to be executed and delivered, such additional instruments, certificates and documents, and take all such actions, as the Lender shall reasonably request for the purpose of implementing or effectuating the provisions of this Agreement, the Note or the Security Documents, and upon the exercise by the Lender of any power, right, privilege or remedy pursuant to this Agreement or the Security Documents which requires any consent, approval, registration, qualification or authorization of any governmental authority or instrumentality, execute and deliver or cause to be executed and delivered all related applications, certifications, instruments and other documents and papers. Section 6.10. Environmental Indemnification. ------------ ----------------------------- In respect of all environmental matters: (a) Without in any way limiting the generality of Section 6.01, comply in every material respect with the requirements of all federal, state, and local environmental laws; notify the Lender promptly in the event of any spill, hazardous waste pollution or contamination affecting the Premises; forward to the Lender promptly any notices relating to such matters received from any governmental agency; and pay promptly when due any fine or assessment against the Premises unless the same is being contested by Borrower in good faith in appropriate legal proceedings and it shall have set aside on its books adequate reserves with respect to any such fine or assessment, but in any event payment of any such fine or assessment shall be made before any of Borrower's or (on a consolidated basis) PRI's property shall be seized or sold in satisfaction thereof; (b) not become involved, and not permit any tenant or subtenant of any of the Premises to become involved, in any operations at the Premises generating, manufacturing, storing, disposing, refining or handling Hazardous Material or any other activity that could lead to the imposition on the Lender, Borrower or the Premises of any liability or lien under any environmental laws; (c) immediately contain and remove any Hazardous Material (other than that which is generated, used and disposed of in the ordinary course of business in compliance with applicable law) found on the Premises, which work must be done in compliance with applicable laws and at the Borrower's expense; and the Borrower agrees that the Lender has the right, at its sole option but at the Borrower's expense, to have an environmental engineer or other representative review the work being done; -19- (d) promptly upon the request of the Lender, based upon the Lender's reasonable belief that a Hazardous Waste or other environmental problem exists with respect to the Premises, provide the Lender with an environmental site assessment report or an update of any existing report, all in scope, form and content and performed by such company as may be reasonably satisfactory to the Lender; (e) not take any action or permit any tenant or subtenant of any of the Premises to take any action, which will cause any of the Premises to be considered an "industrial establishment" as that term is defined under ISRA; (f) indemnify, defend, and hold the Lender harmless from and against any claim, cost, damage (including, without limitation, consequential damages), expense (including, without limitation, reasonable attorneys' fees and expenses), loss, liability, or judgment now or hereafter arising as a result of any claim for environmental cleanup costs, any resulting damage to the environment and any other environmental claims against the Borrower, the Lender, or the Premises; provided the Borrower shall have no obligation to indemnify or hold harmless the Lender under this Subsection (f) with respect to matters caused by or resulting directly from the willful misconduct or gross negligence of the Lender; notwithstanding any other provision of this Agreement to the contrary, the provisions of this Section 6.10(f) shall continue in effect and shall survive (among other things) any termination of this Agreement, payment and satisfaction of the Note, and release of any Collateral; (g) notwithstanding the foregoing or anything to the contrary contained in this Agreement, the mere use of fuels, lubricants and other hazardous or toxic materials normally used in the conduct of a pharmaceutical manufacturer, in quantities customarily used in the conduct of such business, shall not be a violation of any covenant contained in Sections 6.10(b), (c) or (e) of this Agreement, so long as no such substance is used in a manner which would be in violation of, or subject the Borrower or any tenant of any of its real property to a claim under or pursuant to, ISRA, the Spill Compensation and Control Act, CERCLA, RCRA or any law or regulation promulgated by the New Jersey Department of Environmental Protection or any other state or federal governmental agency; provided, however, that nothing contained in this paragraph (g) shall in any manner release the Borrower from its obligation to indemnify, defend and hold harmless the Lender pursuant to Section 6.10(f). Section 6.11. Principal Business. ------------ ------------------- Engage, directly and indirectly, principally in the business of a manufacturer and distributor of pharmaceutical products. VII. NEGATIVE COVENANTS ------------------ The Borrower covenants and agrees that, so long as the Lender has any obligation to extend credit to the Borrower hereunder, or there remains outstanding any portion of the principal of, or interest on, the Note, or there remains outstanding any other Indebtedness to the Lender, whether now existing or arising hereafter, under this Agreement, the Note or the Security Documents, unless the Lender shall otherwise consent in writing, it shall not, directly or indirectly: Section 7.01. Indebtedness. ------------ ------------ Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Funded Debt, whether direct, indirect or contingent, except: (a) Indebtedness to the Lender; -20- (b) Indebtedness under Capital Leases relating to the purchase price of equipment to be used in the business of the Borrower or with respect to other Capital Expenditures, to the extent such Indebtedness was permitted by Section 5.01 hereof at the time incurred; (c) Indebtedness to any Affiliate, provided that such Indebtedness is subject to a subordination agreement in form and substance satisfactory to Lender; (d) Indebtedness existing on the date hereof and described in Schedule 7.01 attached hereto; provided, however, that the terms of - ------------- -------- ------- such Indebtedness shall not be modified or amended, nor shall payment thereof be extended, without the prior written consent of the Lender unless such amendment, modification or extension would not result in any additional or different financial burden (other than additional time to repay at substantially the same rate and cost) on (or additional lien on any assets of) Borrower, or in any way enhances the corresponding creditor's position in comparison to Lender; (e) Indebtedness in respect of reasonable automobiles used by employees of the Borrower in furtherance of the Borrower's business. Section 7.02. Liens. ------------ ----- Create, incur, assume, suffer or permit to exist any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets, now or hereafter, owned, including without limitation, any of its real property owned or leased, other then: (a) liens securing the payment of taxes, either not yet due or the validity of which is being contested in good faith by appropriate proceedings, and as to which it shall have set aside on its books adequate reserves; (b) security interests and liens in favor of the Lender; (c) liens imposed by law, such as carriers', warehousemen's or mechanics' liens, incurred by it in good faith in the ordinary course of business, and (subject to the provisions of Article VIII) liens arising out of a prejudgment attachment, a judgment or award against it with respect to which it shall currently be prosecuting an appeal, a stay of execution pending such appeal having been secured; (d) liens securing Indebtedness described in Section 7.01(b) provided that each such lien shall at all times be limited solely to the item or items of property so acquired; (e) any other liens existing on the date hereof and described in Schedule 7.02 attached hereto; - ------------- (f) restrictions, easements and minor irregularities in title which do not and will not interfere with the occupation, use and enjoyment by the Borrower of such properties and assets in the normal course of its business as presently conducted or materially impair the value of such properties and assets for the purpose of such business; and (g) liens on automobiles securing Indebtedness described in Section 7.01(g). Section 7.03. Disposition of Assets. ------------ --------------------- (a) Sell, lease, transfer or otherwise dispose of any of its accounts, equipment or inventory or any material assets of Borrower to any Person, except (i) in connection with the replacement of equipment with other equipment of at least equal utility and value (provided that the Lender's lien upon such newly-acquired equipment has the same priority as the Lender's lien upon the replaced equipment) (ii) the sale of inventory in the ordinary course of business and the retirement of other assets in the normal course of operations. -21- (b) Prior to the occurrence of an Event of Default or an Unmatured Event of Default, Borrower may, in addition to sales and dispositions permitted under 7.03(a)(i) and (ii), sell or otherwise dispose of equipment which in the aggregate with all other such sales or disposals during any one Fiscal Year of the Borrower does not have a book value in excess of an amount equal to $200,000.00 minus all insurance proceeds collected and included in the computation under Section 6.02 (b) during such fiscal year and which in the aggregate with all other such sales or disposals from the date hereof to the date of such sale or disposal, do not have a book value in excess of an amount equal to $800,000.00 minus all insurance proceeds collected and included in the computation under Section 6.02(b) since the date of this Agreement; ----- provided that Borrower notifies Lender in writing of such sale, the equipment sold,the book value of such equipment, the aggregate book value of all such sales or disposals during that Fiscal Year and the aggregate book value of all such sales and disposals from the date hereof to the date of such sale; provided, however, the disposition of machinery used prior to the date hereof in the manufacture of liquid pharmaceutical products shall be excluded from the above calculations. Section 7.04. Dividends and Other Distributions. ------------ --------------------------------- Declare or pay any cash dividend or make any distribution on, or redeem, retire or repurchase or otherwise acquire directly or indirectly, any share of its stock or make any distribution of assets to its stockholders, except to the extent expressly permitted under Section 5.04 hereof. Section 7.05. Sale Leaseback. ------------ -------------- Enter into or become obligated under any conditional sale, sale-leaseback or other title retention agreement, except as may otherwise be permitted hereunder. Section 7.06. Acquisition. Acquire or obligate itself to acquire ------------ ----------- the stock, or assets (except in the ordinary course Borrower's business) of any Person, except for acquisitions consummated solely for (i) cash or (ii) ------ subject to the provision of Section 8.01(m), Borrower's capital stock or (iii) Funded Debt not in excess of $5,000,000 in any one Fiscal Year, or (iv) any combination of (i), (ii) and (iii). Section 7.07. Fundamental Changes. ------------ ------------------- Amend its corporate charter, articles of incorporation or by-laws in any way that could have a material adverse effect upon its business or upon the Lender's rights hereunder or under the Security Documents (it being expressly agreed that the inclusion of any provision similar to those set forth in Section 102(b)(2) of Title 8 of the Delaware Code is prohibited under this Section); take any steps in contemplation of dissolution or liquidation; enter into or authorize any merger, consolidation, reorganization or recapitalization; or conduct any material part of Borrower's business through any subsidiary, unincorporated association or other entity; provided, however, Borrower may engage in a merger where Borrower is the surviving entity if Borrower (i) provides Lender at least forty-five days prior written notice (including the details) of the proposed merger and (ii) thereafter receives Lender's prior written consent to such merger, which consent will not be unreasonably withheld or delayed. Section 7.08. Change in Business. ------------ ------------------ Materially change or alter the nature of or cease operations of its business; or change the location of the chief executive office of the Borrower or, without 45 days' prior written notice to the Lender and the execution, delivery and filing of such documents as reasonably required by the Lender, the name under which it conducts its business; provided, however, upon at least 45 days prior written notice and the execution, -22- delivery and filing of such documents as reasonably required by Lender, Borrower may move its chief executive office within Northern New Jersey, Fairfield County in Connecticut and Rockland, Westchester and New York Counties in New York State. Section 7.09. Accounts Receivable. ------------ ------------------- Sell, assign, discount or dispose in any way of any accounts receivable or promissory notes arising out of any of the Collateral except for collection (including endorsements) in the ordinary course of business. Section 7.10. Transactions with Affiliates. ------------ ---------------------------- Except for the transaction described in Schedule 7.10, enter into any ------------- transaction, including, without limitation, the purchase, sale or exchange of property or assets or the rendering or accepting of any service with or to any Affiliate of the Borrower except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's business and upon terms not less favorable to the Borrower than it could obtain in a comparable arm's-length transaction with a third party other than such Affiliate. Section 7.11. Illegal Activities. ------------ ------------------ Engage in any conduct or activity, including, without limitation, a pattern of racketeering activity, that could subject any of the Borrower's assets to forfeiture or seizure. VIII. DEFAULTS -------- Section 8.01 Defaults. ------------ -------- Each of the following events (each of which is herein sometimes called an "Event of Default") shall constitute an Event of Default under this Agreement: (a) any representation or warranty made in this Agreement, a Security Document, or any other Transaction Document, or in any report, certificate, financial statement or other instrument furnished in connection with this Agreement, or the borrowings hereunder, shall prove to be false or misleading in any material respect when made; or (b) default in the payment of any installment of the principal of the Note or the principal of any other Indebtedness of the Borrower to the Lender, whether now existing or hereafter arising, when the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or by acceleration or otherwise and the continuation of such default past any applicable grace period or, if no applicable grace or cure period, for three (3) days following the date such payment is due and payable; or (c) default in the payment of any fee, rental, expense, or other obligation payable by the Borrower to the Lender or any installment of any interest on the Note or on or in respect of any other Indebtedness of the Borrower to the Lender, whether now existing or hereafter arising, when the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or by acceleration or otherwise, and continuation of such default past any applicable grace period or, if no applicable grace period, for three (3) days following the date such payment is due and payable; or (d) default in the due observance or performance by any Person other than the Lender of any other covenant, condition or agreement contained in this Agreement, which default shall continue unremedied for thirty (30) days after the earlier to occur of (i) the Borrower's discovery of such default, or (ii) written -23- notice thereof from the Lender to the Borrower; provided, however, that -------- ------- if such default cannot be remedied, then such default shall be deemed to be an Event of Default as of the date of the occurrence thereof; or (e) for any reason any Security Document at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms, or any security interest or lien of Lender granted pursuant thereto shall fail to be perfected (except due to acts or omissions of the Lender, if the Borrower has taken all acts requested by the Lender to reperfect such security interest or lien), or fail to be a first priority security interest or lien in favor of Lender in any material item of the Collateral or any party thereto other than the Lender, shall contest the validity of any security interest or lien granted under, or shall seek to disaffirm or reduce its obligations under, any Security Document; or (f) any default shall occur or exist under any Security Document and such default shall continue unremedied for more than the applicable period of grace, if any, specified therein; or (g) any event of default with respect to any other evidence of Indebtedness of the Borrower or any Affiliate Company for borrowed money which event of default permits the corresponding creditor to exercise remedies with respect to such Indebtedness, which Indebtedness is in an amount which equals or exceeds $500,000, whether or not such event of default results in acceleration of such Indebtedness; or (h) (A) the Borrower shall lose, fail to keep in force, suffer the termination, suspension or revocation of, or terminate, forfeit or suffer an amendment to, any License at any time held by it, which could reasonably be expected to have a material adverse effect on the operations of the Borrower; (B) any governmental regulatory authority shall commence an action or proceeding seeking the termination, suspension, revocation or material adverse amendment of any material License held by the Borrower and the Lender shall reasonably and in good faith believe that the result thereof shall be the termination, revocation, suspension or material adverse amendment of such License; or (i) the Borrower shall (A) discontinue its business, (B) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its property, (C) admit in writing its inability to pay its debts as they mature, (D) make a general assignment for the benefit of creditors, (E) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code, or (F) file a volunoltary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or corporate action shall be taken for the purpose of effecting any of the foregoing or (G) become unable or fail to pay its debts generally as they become due; or (j) there shall be filed against the Borrower an involuntary petition seeking reorganization of such Borrower or the appointment of a receiver, trustee, custodian or liquidator of the Borrower or any material part of its assets, or an involuntary petition under any bankruptcy, reorganization or insolvency law of any jurisdiction, whether now or hereafter in effect (any of the foregoing petitions being herein referred to as an "Involuntary Petition"); or (k) final judgment for the payment of money which, when aggregated with all other outstanding judgments against the Borrower, exceeds $500,000, shall be rendered against the Borrower and no insurer(s) shall have admitted in writing its liability for such judgments to an extent which reduces the Borrower's aggregate liability to less than $500,000, if such judgment shall remain undischarged or not have been stayed pending appeal within thirty (30) days after entry thereof or shall not have been discharged within five (5) days after the expiration of any such stay; or (l) the occurrence of any attachment of any deposits or other property of the Borrower in the hands or possession of the Lender, or the occurrence of any attachment of any other property of the Borrower -24- in an amount exceeding $500,000 in the aggregate which shall remain undischarged thirty (30) days after the attachment thereof or no insurer shall have admitted its liability in writing to satisfy and remove the attachment, or the same shall not have been stayed pending appeal within thirty (30) days after entry thereof or shall not have been discharged within five (5) days after the expiration of any such stay; or (m) for any reason less than one hundred percent (100%) of the issued and outstanding capital stock of the Borrower is owned by PRI, free and clear of any lien or encumbrance; or (n) the Borrower or any material part of its business or assets shall be the subject of (i) any extraordinary product recall which results in the ceasing or other than short term shut down of any material portion of Borrower's business, or (ii) any seizure or forfeiture proceeding or similar action instituted or conducted by any agency, office or department of state or federal government, except such as are being contested in good faith in an appropriate legal proceeding and in which no judgment has been rendered adverse to the interest of the Borrower; or (o) there occurs or the Borrower takes any action to authorize any sale or transfer in bulk or encumbrance on all or a major part of the Borrower's assets; or (p) PRI's Net Income for any Fiscal Quarter is a negative number and when combined with the PRI's Net Income for the immediately prior Fiscal Quarter results in an aggregate loss for the overall six month period; or (q) With respect to any Employee Benefit Plan (as defined in Section 4.12 of this Agreement), there occurs or exists any of the events or conditions described in the following clauses (a) through (h) and such event or condition, together with all like events or conditions, could likely, or do subject Borrower to any tax, penalty or other liability that likely would, or does, singly or in the aggregate, have a material adverse effect on the financial condition or the properties or operations of Borrower: (a) a reportable event as defined in Section 4043 of ERISA, (b) a prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code, (c) termination of the Employee Benefit Plan or filing of notice of intention to terminate, (d) institution by the PBGC of proceedings to terminate, or to appoint a trustee to administer, the Employee Benefit Plan, or circumstances that constitute grounds for any such proceedings, (e) complete or partial withdrawal from a multi-employer Employee Benefit Plan, or the reorganization, insolvency or termination of a multi-employer Employee Benefit Plan, (f) an accumulated funding deficiency within the meaning of ERISA, (g) violation of the reporting, disclosure or fiduciary responsibility requirements of ERISA or the Internal Revenue Code, or (h) any act or condition which could result in direct, indirect or contingent liability to any Employee Benefit Plan or the PBGC; or (r) any of the Guarantees ceases to be effective, or any of the Guarantors denies the validity of or liability under any of the Guarantees, or any of the events described in subsections (a), (d), (g), (h), (i), (j), (k), (l), (n), or (o) above occurs with respect to any of the Guarantors. Upon the occurrence of any such Event of Default and at any time thereafter during the continuance of such Event of Default, at the election of the Lender, the Term Loan Commitment shall terminate and the Note and all other Indebtedness of the Borrower to the Lender shall immediately become due and payable, including all principal and interest, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Note or other evidence of such Indebtedness to the contrary notwithstanding (except in the case of an Event of Default under paragraph (i) or (j) of this Article VIII, in which event the Term Loan Commitment shall automatically terminate and such Indebtedness shall automatically become due and payable) and Lender shall be entitled to forthwith exercise (to the extent and in such order as Lender may elect, in its sole and absolute discretion) any or all rights and remedies provided in this Agreement, the Note or any other Transaction Document and all other rights and remedies that may otherwise be available to Lender by agreement or at law or in equity. In the event of an -25- acceleration of the Borrower's Indebtedness hereunder as a result of the filing of an Involuntary Petition as specified in paragraph (j) of this Article VIII, such acceleration shall be rescinded, and the Borrower's rights hereunder reinstated, if, within ninety (90) days following the filing of such Involuntary Petition, such Involuntary Petition shall have been dismissed and there shall then exist no other Event of Default or Unmatured Event of Default under this Agreement. IX. REMEDIES ON DEFAULT, ETC. ------------------------- Section 9.01. Remedies. ------------ -------- In case any one or more Events of Default shall occur and be continuing, the Lender shall have the right, in addition to all other rights and remedies provided by law or by this Agreement or any other Transaction Document, to proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained in this Agreement, any Transaction Document or the Note or for an injunction against a violation of any of the terms hereof or thereof or in and of the exercise of any power granted hereunder or thereby or by law. No right conferred upon the Lender hereby or by any Transaction Document or the Note shall be exclusive, but shall be cumulative and in addition to any other right or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise; and the Lender may exercise its remedies concurrently, independently or successively. Section 9.02. Default Rate. ------------ ------------ Without regard to whether the Lender has exercised any other rights or remedies hereunder, the applicable interest rate under the Note shall at the Lender's option, but only to the extent permitted by law, be increased to a rate per annum (the "Default Rate") equal to the interest rate specified under Section 2.03 hereof, plus two percent (2%) per annum upon the occurrence of an Event of Default. Section 9.03. Cross Default. ------------ ------------- BORROWER HEREBY AGREES THAT ALL OTHER OBLIGATIONS BETWEEN BORROWER AND LENDER OR ANY AFFILIATE OF LENDER (INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWER UNDER OR IN CONNECTION WITH OR IN ANY WAY RELATED TO (I) THE AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, DATED THE DATE HEREOF) AND (II) THE AMENDED AND RESTATED AGREEMENT CONCERNING TERM LOANS, DATED THE DATE HEREOF) AS ANY OR ALL OF THE SAME MAY, FROM TIME TO TIME, BE AMENDED, MODIFIED, RESTATED OR OTHERWISE REVISED, ARE HEREBY AMENDED SO THAT A DEFAULT UNDER THIS AGREEMENT IS A DEFAULT UNDER ALL SUCH OTHER AGREEMENTS AND A DEFAULT UNDER ANY ONE OF THE OTHER AGREEMENTS IS A DEFAULT UNDER THIS AGREEMENT. Section 9.04. Application of Proceeds. ------------ ----------------------- The Borrower hereby agrees that upon the occurrence of an Event of Default, the Lender shall be entitled to apply the proceeds of any payment made to the Lender by or on behalf of the Borrower, including, without limitation, the proceeds arising from any of the collateral securing any of the obligations of Borrower to the Lender, in a manner and against the obligation or obligations as determined in the sole and absolute discretion of the Lender; provided, however, if the Lender takes affirmative action to enforce any of its remedies in order to realize against any of the Collateral, any proceeds received by the Lender from any or all such actions shall be applied first against secured obligations and then against any unsecured obligations. -26- X. MISCELLANEOUS ------------- Section 10.01. Survival. ------------- -------- This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto, shall survive the making by the Lender of the Term Loan and shall continue in full force and effect so long as the Note or any other Indebtedness to the Lender, whether now existing or hereafter arising, under this Agreement or the Security Documents, is outstanding and unpaid or the Lender has any obligation to make credit extensions hereunder. Section 10.02. Expenses. ------------- -------- The Borrower agrees to reimburse the Lender upon demand for all out-of-pocket costs, charges, liabilities, documentary stamp taxes, intangible taxes, any other taxes due under any applicable state law (exclusive of taxes measured or imposed in terms of the Lender's net income) and any other expenses of the Lender (including, without limitation, (i) reasonable fees and disbursements of (A) counsel to the Lender and (B) agents of the Lender not regularly in its employ and (ii) the allocated costs of services of Lender's in-house counsel (except such that are clearly mere duplications of costs under (i)(a)) in connection with (a) the preparation, negotiation, interpretation, execution and delivery of this Agreement, the Note, any Security Documents and any other agreements or documents relating thereto, (b) the making of the Term Loan, (c) any amendments, modifications, consents or waivers in respect thereof, (d) any enforcement of any of the Transaction Documents, (e) any proceedings with respect to any of the Transaction Documents or with respect to the bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation of the Borrower or any party to any Transaction Document, and (f) any claims by third parties (except as caused by or result directly from the willful misconduct or gross negligence of the Lender) relating to the foregoing. Section 10.03. Indemnification; Limitation of Liability. ------------- ---------------------------------------- (a) The Borrower agrees to protect, indemnify and hold harmless the Lender and each of its officers, directors, employees and agents (collectively called the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for and consultants of such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), which may be imposed on, incurred by, or asserted against such Indemnitees (whether direct, indirect, or consequential and whether based on any federal or state laws or other statutory regulations, including, without limitation, securities, environmental and commercial laws and regulations, under common law or at equitable cause or on contract or otherwise) in any manner relating to or arising out of this Loan Agreement, the Note or any of the Security Documents, or any act, event or transaction related or attendant thereto, the agreements of the Lender contained herein, the making of the Term Loan, the management of the Term Loan or the Collateral (including any liability under federal, state or local environmental laws or regulations) or the use or intended use of the proceeds of such Term Loans hereunder (collectively, the "Indemnified Matters"); provided that the Borrower shall have no obligation to any Indemnitee hereunder with respect to Indemnified Matters caused by or resulting directly from the willful misconduct or gross negligence of such Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnities. (b) To the extent permitted by applicable law, no claim may be made by the Borrower or any other Person against the Lender or any of its affiliates, directors, officers, employees, agents, attorneys or consultants for any special, indirect, consequential or punitive damages in respect of any claim for breach of -27- contract or any other theory of liability arising out of or related to the transactions contemplated by the Loan Agreement, the Note or any of the Security Documents or any act, omission or event occurring in connection therewith; and the Borrower hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Neither the Lender nor any of its affiliates, directors, officers, employees or agents shall be liable for any action taken or omitted to be taken by it or them under or in connection with any of the above referenced documents except for its or their own gross negligence or willful misconduct. Section 10.04. Setoffs, Etc. ------------- ------------- The Borrower agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim the Lender may otherwise have, the Lender and any purchaser of a participation in the Note shall be entitled, at any time and from time to time, at its option, without notice to Borrower (any such notice being expressly waived by Borrower),to offset balances held by it for the account of the Borrower at any of its offices, against any Indebtedness or other fees or charges owed to the Lender or such purchaser hereunder if the same are not paid when due (regardless of whether such balances are then due to the Borrower) or if the Borrower becomes insolvent, howsoever evidenced, or if any Event of Default occurs, and that such offset balances may be applied toward the payment of any Indebtedness of the Borrower to the Lender or to any such purchaser in the Note, whether or not such Indebtedness or any part thereof shall then be due; in which case the Lender or such purchaser shall promptly notify the Borrower thereof, provided, however, that the Lender's or such purchaser's failure to give such notice shall not affect the validity thereof. Section 10.05. Governing Law. ------------- ------------- THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SAID STATE. Section 10.06. Amendment; Modification. ------------- ----------------------- No modification or waiver of any provision of this Agreement, or of the Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. No notice to, or demand on, the Borrower, in any case, shall entitle the Borrower to any other or future notice or demand in the same, similar or other circumstances. Section 10.07. Waiver. ------------- ------ The Lender's failure to insist upon the strict performance of any term, condition or other provision of this Agreement, the Note or any of the Security Documents or other Transaction Documents, or to exercise any right or remedy hereunder or thereunder, shall not constitute a waiver by the Lender of any such term, condition or other provision or default or Event of Default in connection therewith; and any waiver of any such term, condition or other provision or of any such default or Event of Default shall not affect or alter this Agreement, the Note or any of the Security Documents or other Transaction Documents, and each and every term, condition and other provision of this Agreement, the Note, the Security Documents and other Transaction Documents shall, in such event, continue in full force and effect and shall be operative with respect to any other then existing or subsequent default or Event of Default in connection therewith. An Event of Default hereunder or under any of the Security Documents shall be deemed to be continuing unless and until waived in writing by the Lender. -28- Section 10.08. Notice. ------------- ------ All notices, requests, demands and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed certified, return receipt requested, or telecopied, personally served or sent by courier service to the applicable party at the addresses indicated below. If to the Lender: MIDLANTIC BANK, NATIONAL ASSOCIATION CORPORATE BANKING DEPARTMENT P.O. Box 600 Edison, New Jersey 08818 with a copy to: Michael J. Dunne, Esq. Pitney, Hardin, Kipp & Szuch (mail to) P.O. Box 1945 Morristown, New Jersey 07962-1945 (street address) 200 Campus Drive Florham Park, New Jersey 07932 and if to Borrower: PAR PHARMACEUTICAL, INC. One Ram Ridge Road Spring Valley, New York 10977 Att'n: Treasurer with a copy to: Hertzog, Calamari & Gleason 100 Park Avenue New York, New York 10017 Att'n: Stephen A. Ollendorff, Esq. or, as to each party, at such other address as shall be designated by such parties in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests, demands and other communication shall be deemed given when delivered in person or by courier service, upon receipt of a telecopy or 3 business days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). Section 10.09. Successors and Assigns. ------------- ---------------------- (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign any of its rights hereunder or delegate any of its obligations hereunder without the prior written consent of the Lender. Any such impermissible assignment or delegation shall be void and of no effect. (b) Lender shall have the right in its sole discretion to assign its rights under any of the Transaction Documents or to sell one or more participations in the Note and the Transaction Documents without notice to or consent of the Borrower and in connection therewith, to provide any such proposed -29- assignee(s) or participant(s) with financial and other information and copies of documents relating to the Borrower, the Affiliate Companies, the Borrower's or the Affiliate Companies' business, and the transactions contemplated hereby, provided that any such Person agrees in writing to keep any such information that is not otherwise publicly available confidential. Upon receipt of written notice from the Lender, the Borrower agrees to provide to any such assignee(s) or participant(s) copies of all financial information required to be delivered to the Lender pursuant to Section 6.05 hereof. Section 10.10. Consent to Jurisdiction, Service of Process. ------------- ------------------------------------------- The Borrower, to the extent that it may lawfully do so, hereby consents to the jurisdiction of the courts of the State of New Jersey and the United States District Courts for the District of New Jersey, as well as to the jurisdiction of all courts from which an appeal may be taken from such courts, for the purpose of any suit, action or other proceeding arising out of any of its obligations arising hereunder or under the Note, the Security Documents or any other Transaction Documents, or with respect to the transactions contemplated hereby, and expressly waives any and all objections it may have as to venue in any of the courts. In addition, to the extent that it may lawfully do so, the Borrower hereby consents to the service of process by U.S. certified or registered mail, return receipt requested, addressed to the Borrower at the address to which notices are to be given hereunder. Section 10.11. Waivers. ------------- ------- (A) THE BORROWER AND THE LENDER EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTE, THE SECURITY DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH. NEITHER THE BORROWER, THE LENDER NOR ANY ASSIGNEE OF OR SUCCESSOR TO EITHER THE BORROWER OR THE LENDER, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, THE NOTE, THE SECURITY DOCUMENTS OR ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES HERETO, OR ANY OF THEM. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION 10.11 HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 10.11 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. Borrower waives all defenses and rights to interpose any setoff or counterclaim of any nature except only a defense pertaining to the existence of an Event of Default or a counterclaim to the extent that the failure to so assert such counterclaim would permanently preclude the prosecution or recovery upon the same. Section 10.12. No Derogation. ------------- ------------- This Agreement and the Transaction Documents are in addition to, and not in derogation of, other obligations of the Borrower in favor of the Lender. None of the obligations shall be effected by the Lender's consent to any substitution or release of any or all of the Collateral or the collateral for any other obligation, the release of any party to an obligation or the waiver of any provision thereof, or by any loss of or damage to any collateral or the failure of the Lender to perfect or maintain its security interest or other liens therein. -30- Section 10.13. Severability. ------------- ------------ Any provision of this Agreement, the Note or any of the Security Documents which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 10.14. Section Headings. ------------- ---------------- Any Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 10.15. Amendment of Other Agreements. ------------- ----------------------------- All references in this Agreement to other documents and agreements to which the Lender is not a party shall be deemed to refer to such documents and agreements as presently constituted and not as hereafter amended or modified unless the Lender shall have expressly consented in writing to such amendment(s) or modification(s). Section 10.16. Accounting Principles. ------------- --------------------- ALL REFERENCES IN THIS AGREEMENT TO ANY CALCULATIONS OR DETERMINATIONS MADE IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES SHALL BE ON A CONSOLIDATED BASIS (UNLESS OTHERWISE EXPRESSLY STATED) AND SHALL MEAN, FOR ANY FISCAL PERIOD, SUCH PRINCIPLES APPLIED ON A BASIS CONSISTENT WITH (A) THE APPLICATION OF THE SAME IN PRIOR FISCAL PERIODS, (B) THAT EMPLOYED BY THE ACCOUNTANTS IN PREPARING THE FINANCIAL STATEMENTS REFERRED TO IN SECTION 6.05(A) HEREOF. Section 10.17. Compliance by PRI. ------------- ----------------- Lender agrees that compliance by PRI, on a consolidated basis, with the terms and provisions of Sections 5.01-5.06, 6.05, 6.07, 7.01, 7.02, 7.04, of this Agreement (as though it were the Borrower) shall be deemed compliance by Borrower with such Sections. Section 10.18. Knowledge and Discovery. ------------- ----------------------- All references in this Agreement to "knowledge" or "awareness" of, or "discovery" by, the Borrower shall be deemed to include any such knowledge of, or discovery by, PRI or any of the Borrower's executive officers. -31- Section 10.19. Integration. ------------- ----------- This Agreement supersedes the Borrower's application for the Term Loan, the Lender's commitment and proposal letters in respect of the Term Loan, and all other prior dealings between the parties hereto and their respective agents, employees, or officers with respect to the credit facilities extended hereby, and this Agreement, together with the Transaction Documents, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof. IN WITNESS WHEREOF, the Lender and the Borrower have caused this Agreement to be duly executed as a sealed instrument by their respective duly authorized officers, all as of the day and year first above written. Attest: PAR PHARMACEUTICAL, INC. /s/ Kenneth G. Mosesian By: /s/ Robert Edinger - ------------------------- -------------------------------- Name: Kenneth G. Mosesian Name: Robert Edinger Title: Treasurer Title: Vice President MIDLANTIC BANK, NATIONAL ASSOCIATION By: /s/ Peter J. Cahill --------------------------------- Name: Peter J. Cahill Title: Vice President -32- INDEX OF SCHEDULES ------------------ Schedule 2.01A Secured Promissory Note of the Borrower Schedule 2.03 Conversion Notice Schedule 2.06 Use of Proceeds Schedule 4.02 List of Borrower's Subsidiaries Schedule 4.04 Governmental and Other Consents Schedule 4.05 Pending Litigation Schedule 4.06 Compliance with Laws and Agreements Schedule 4.07 Liens on Collateral Schedule 4.08 Ownership In Other Entities Schedule 4.11 Tax Returns and Taxes Schedule 4.12 Pension Plans, Etc. Schedule 4.19 Environmental Matters Schedule 5.04 Dividends Schedule 6.05 Periodic Reporting Certificate Schedule 7.01 Indebtedness Schedule 7.02 Other Liens Schedule 7.10 Transactions with Affiliates SCHEDULE 2.01A -------------- Secured Promissory Note ----------------------- $4,000,000.00 _____________________, 1994 FOR VALUE RECEIVED, PAR PHARMACEUTICAL, INC. (the "Borrower"), hereby unconditionally promises to pay to the order of MIDATLANTIC BANK, NATIONAL ASSOCIATION, a national banking association (the "Bank"), at its offices located at Metro Park Plaza, P.O. Box 600, 499 Thornall Street, Edison, New Jersey 08818, in lawful moneys of the United States of America, the principal sum of Four Million Dollars ($4,000,000.00) (or if different the aggregate unpaid principal amount of all Advances (as defined in the Loan Agreement (as hereinafter defined)) outstanding on the Termination Date (as defined in the Loan Agreement)) with interest thereon, as follows: (i) Monthly payments of interest on the principal balance outstanding from time to tome accrued to the date of payment, at the rate hereinafter specified, on the last day of each month commencing on December 31, 1994; and (ii) Forty-eight (48) equal monthly installments of principal (each installment equal to one forty-eighth (1/48) of the principal amount outstanding on the Termination Date) commencing on January 31, 1995 and thereafter on the last day of each month until and including December 31, 1998 when all unpaid principal, interest and other amounts due shall be due and payable. All advances made by Bank hereunder, and all payments made on account of principal hereof, may be recorded by bank on the grid attached to and made a part of this Note. Amounts recorded on such grid, or any amounts recorded by Bank electronically, by computer or otherwise in accordance with its customary practices, shall be conclusive absent manifest error, but failure to make or error in any such recordation shall not affect Obligor's obligation to repay the amounts due under this Note. Interest on the outstanding unpaid balance of principal hereof shall accrue from the date hereof at the rate of interest per annum as determined in accordance with Section 2.03(a) of the Loan Agreement, provided, that in no event shall such interest be higher than the maximum - -------- lawful rates and provided, further, that interest shall be calculated -------- ------- on the basis of a 360-day year for the actual number of days elapsed. Interest on this Note shall be due and payable on the last day in each calendar month commencing December 31, 1994, or if the last day is not a Business Day, then on the first Business Day thereafter until the principal balance has been paid in full. If not otherwise paid when due, the Bank may, at its discretion, charge said interest or any schedule payment of principal to any checking or loan account of the Borrower. The Bank will present a monthly invoice to Borrower reflecting interest payments due, and any failure or delay by the Bank in submitting invoices for interest payments shall not discharge or relieve the Borrower of the obligation to make such interest payments. This Note is evidence of the Term Loan refereed to in the Term Loan Agreement, dated of even date herewith, between the Borrower and the Bank (herein called the "Loan Agreement") and all other agreements, mortgages and all other security for the payment hereof delivered to the Bank in connection with the Loan Agreement (hereinafter the "Loan Documents") between the Bank and the Borrower, and is subject to all of the terms and provisions of the Loan Documents, including certain provisions for prepayment and acceleration of maturity. All terms of the Loan Agreement are incorporated herein by reference and in the event of ambiguity or inconsistency between the terms of the Loan Agreement and the terms hereof, the terms of the Loan Agreement shall prevail. This Note is secured by and entitled to the benefits of each and every security interest granted under and pursuant to the Loan Documents. This Note shall be subject to prepayment on such terms and conditions and upon payment of such prepayment penalty as is provided in the Loan Agreement. If an Event of Default (as defined in the Loan Agreement) occurs, the principal (and to the extent permitted by law, interest) payable hereunder (whether before or after judgment) shall bear interest payable upon demand, from the date of such Event of Default until paid in full, at a fluctuating interest rate per annum equal at all times to the Default Rate (as defined in the Loan Agreement) and may become payable in the manner, with the effect, and subject to the conditions provided in the Loan Documents. If this Note is mutilated, lost, stolen or destroyed, then, upon surrender thereof (if mutilated) or receipt of evidence (if lost, stolen or destroyed) the Borrower shall execute and deliver a new promissory note of like tenor, which shall show all payments which shall have been made on account of the principal hereof. The Borrower hereby consents that from time to time, without further notice or further consent, the performance or observance of any of the agreements or conditions contained herein or in any of the Loan Documents may be waived or the time of performance thereof extended by the holder hereof and payment of any obligation hereunder or under any of the Loan Documents may be accelerated in accordance with any agreement between the holder hereof and any party liable with respect hereto or thereto, or may be extended, or may be renewed in whole or in part, or any collateral securing the same may be exchanged, surrendered, released or otherwise dealt with as the holder hereof may determine, all without affecting the obligations hereunder of the Borrower. In connection with any action or proceeding arising out of or relating in any way to this Note, or any act or omission relating to any thereof, BORROWER AND BANK WAIVE THE RIGHT TO TRIAL BY JURY, and Borrower also waives all defenses and rights to interpose any setoff or counterclaim of any nature except only a defense pertaining to the existence of a default or a counterclaim to the extent that the failure to so assert such counterclaim would permanently preclude the prosecution or recovery upon the same. All parties hereof, whether makers, endorsers, or otherwise and all guarantors and sureties for the payment hereof, hereby waive diligence, demand, presentment, notice of nonpayment, notice of dishonor, protect, and all other notices or demands whatsoever, and do hereby consent that without notice to and without releasing the liability of any party hereto, the obligation of any party may from time to time, in whole or in part, be renewed, extended, modified, accelerated, compromised, settled or released by the Bank. The non-exercise by the holder of any of its rights hereunder in any particular instance or series of instances shall not constitute a waiver thereof in such instances or any subsequent instance. Any provision of this Note that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability, without invalidating the remaining provisions of this Note or affecting the validity or unenforceability of such provision in any other jurisdiction. This Note has been executed and delivered in the State of New Jersey and shall be deemed to be a contract made under, and shall be construed for all purposes in accordance with, New Jersey law, without regard to principles of conflict law. ATTEST PAR PHARMACEUTICAL, INC. By: By: --------------------------------- --------------------------------- STATE OF ) ) ss.: COUNTY OF ) I CERTIFY as follows: 1. On , 1994, ----------------------------------------- ----------- personally appeared before me; 2. I was satisfied that this person is the person who executed the attached instrument as (vice president/president) of , ---------------------- a corporation; and ---------------------------------- 3. This person stated that (he/she) was authorized to execute the instrument on behalf of , and that ------------------------------------- (he/she) executed the instrument as the act of such corporation. ----------------------------- A Notary Public of New Jersey Schedule to Secured Promissory Note dated _______________, 1994 LOAN AND PAYMENTS OF PRINCIPAL ------------------------------ Amount Amount ------ ------ of of Principal Interest Notation -- -- --------- -------- -------- Date Advance Principal Paid Balance Rate Made By - ---- ------- -------------- ------- ---- ------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- - ----- --------- ---------------- ------------ ----------- ---------- SCHEDULE 2.03 ------------- [Borrower's Letterhead] Midlantic Bank, National Association P.O. Box 600 499 Thornall Street Edison, New Jersey 08818 Attn: Corporate Banking Department Re: Conversion Notice Gentlemen: Pursuant to Section 2.03(a)(ii) of the Term Loan Agreement, dated November 30, 1994 by and between Midlantic Bank, National Association and PAR Pharmaceutical, Inc., we hereby elect the Treasury Rate interest rate to be effective January 1, 1995. Very truly yours, PAR PHARMACEUTICAL, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- SCHEDULE 2.06 ------------- Use of Proceeds --------------- Proceeds of the Term Loan shall be used to finance the acquisition of equipment for use, and make leasehold improvements useful, in the ordinary course of the Borrower's business, including, without limitation, the equipment and improvements described as annexed hereto or substantially equivalent thereto acquired or made by Borrower in Fiscal Year 1994. SCHEDULE 4.02 ------------- List of Borrower's Subsidiaries ------------------------------- 1. Quad Pharmaceutical, Inc. 2. Par Printing Enterprises, Inc. 3. Advanced Biopharm Inc. 4. Generic Innovations, Inc. SCHEDULE 4.04 ------------- Governmental and Other Consents ------------------------------- 1. To the extent that Collateral includes rights under Licenses, the assignment of which is prohibited without the consent of the issuing governmental entity, the granting of a security interest therein under the Security Agreement may require the obtaining of such consent. No such consents have been obtained. 2. To the extent that Collateral includes rights under contracts, leases and other agreements (other than "Accounts" (as defined in the Uniform Commercial Code) or "general intangibles" for money due or to become due or with respect to Proceeds of such Collateral), the assignment of which is prohibited without the consent of the other parties thereto, the granting of a security interest therein under the Security Agreement may require the obtaining of such consents. No such consents have been obtained. 3. The execution and delivery of, and performance under, the Amended and Restated Agreement Concerning Term Loans, dated the date hereof, between Borrower and Lender (the "ACTL") may require the consent of the Rockland County Industrial Development Agency under the Bond. No such consent has been obtained. SCHEDULE 4.05 ------------- Pending Litigation ------------------ The Borrower is involved in minor litigation matters, incidental to the conduct of its business, but does not believe that the ultimate resolution thereof will have a material adverse effect on its financial condition. Three actions of which the Borrower is aware are: . Penny Kay Petrie Liability Lawsuit wherein P.K. Petri, et al, have initiated legal action against a physician, a pharmacy, Pfizer, Inc. and Goldline Laboratories, Inc. (the firm for which the Borrower manufactures product). This action has been referred to the Borrower's product liability insurance carrier. . Rubie Mae Dillon Products Liability Lawsuit wherein R.M. Dillon has initiated legal action against a physician and the Borrower. This action has been referred to the Borrower's product liability insurance carrier. . The Borrower has been named as a defendant in an action brought by Borschow Hospital and Medical Supplies, Inc., in the United States District Court for the District of Puerto Rico. The action seeks to recover approximately $62,000 for amounts allegedly due under a distributorship agreement between Borschow and Quad Pharmaceuticals, Inc. ("Quad"), as well as $1,200,000 in damages for alleged termination without cause of Borschow's purported exclusive distributorship for Quad. The Borrower received a warning letter on May 26, 1994, from the U.S. Food & Drug Administration ("FDA") setting forth certain alleged deviations from current good manufacturing practice regulations and alleged violations of related provisions of the Federal Food, Drug and Cosmetic Act. The warning letter does not limit the manufacture of the Borrower's product line nor suspend the review and approval of applications pending at FDA. FDA indicated that it will shortly complete its review of the Borrower's response. SCHEDULE 4.06 ------------- Compliance with Laws and Agreements ----------------------------------- The Borrower received a warning letter on May 26, 1994, from the U.S. Food & Drug Administration ("FDA") setting forth certain alleged deviations from current good manufacturing practice regulations and alleged violations of related provisions of the Federal Food, Drug and Cosmetic Act. The warning letter does not limit the manufacture of the Borrower's product line nor suspend the review and approval of applications pending at FDA. FDA indicated that it will shortly complete its review of the Borrower's response. SCHEDULE 4.07 ------------- Liens on Collateral ------------------- File ---- Secured Party Jurisdiction Number Filing Date ------------- ------------ ------ ----------- Copelco Credit New York 93-1300 4/27/93 Corporation Secretary of State Book 0603 10 Mountainview Road Page 1205 Upper Saddle River, NJ 07458 Copelco Credit Rockland County 087429 4/23/93 Corporation Clerk 10 Mountainview Road Upper Saddle River, NJ 07458 SCHEDULE 4.08 ------------- Ownership in Other Entities --------------------------- Borrower sells inventory purchased from foreign manufacturers, at cost, to PRX Distributors, Ltd., a wholly-owned subsidiary of PRI and an affiliate of Borrower, and repurchases such inventory for sales to third parties in the ordinary course at prices charged to such other third parties. All other Affiliate Companies of Borrower are wholly-owned subsidiaries of the Borrower and are in all material respects inactive. Borrower was the surviving corporation of a merger with Par Merging Corp., a wholly-owned subsidiary of PRI. The Certificate of Merger was filed on August 8, 1991, in the New Jersey Secretary of State's Office. SCHEDULE 4.11 ------------- Tax Returns and Taxes --------------------- Income Taxes - ------------ 1. PRI is contesting the IRS position that credits for research activities are not permitted. In the event a determination is made that PRI was not entitled to such credits, a charge of approximately $1,000,000 will be incurred for income taxes. PRI believes that any such disallowance, and the resultant charge, would not have any material adverse effect on PRI's operations, liquidity or cash flow. Special tax counsel has been retained by PRI to resolve this matter and is presently in negotiations with the U.S. Treasury Department. 2. See also Schedule 4.02 regarding license fees to the State of New York. 3. See also Schedule 4.02 regarding Quad annual reports for 93 and 94 to the State of Indiana. SCHEDULE 4.12 ------------- Pension Plans, Etc. ------------------- The Borrower has a defined-contribution, Social Security integrated Retirement Plan providing retirement benefits to eligible employees as defined in the Plan. It also maintains a Retirement Savings plan whereby eligible employees are permitted to contribute from 1% to 12% of pay to this Plan. The Borrower contributes an amount equal to 50% of the first 6% of the pay contributed by the employee. The Borrower maintains a Defined Benefit Pension Plan covering eligible employees as defined in the Plan. The benefits under this Plan are based on the participants' length of service and compensation, subject to Employee Retirement Income Security Act of 1974 and Internal Revenue Service limitations. The funding policy for this Plan is to contribute amounts actuarially determined as necessary to provide sufficient assets to meet the benefit requirements of the Plan retirees. The plan's assets are invested in guaranteed deposit accounts. Effective October 1, 1989, the Company "froze" the Plan, accordingly, service costs are excluded from benefit accruals under the Plan. The discount rate used to measure the projected benefit obligation for the Plan is 7%. The expected long-term rate of return on plan assets in 1993 was 9%. The Plan's funded status and the amounts recorded on the Company's consolidated balance sheets are as follows (in thousands): 1993 1992 ---- ---- Vested benefit obligations $1,888 $1,763 Accumulated benefit obligations $1,888 $1,763 Projected benefit obligations $1,888 $1,763 Market value of assets 1,565 1,438 ------ ------ Projected benefit obligation in excess of market value (323) (325) Unrecognized net obligation at 757 808 September 30, 1987 Unrecognized net (gain) (151) (201) Adjustment for minimum liability (606) (607) --- --- Net recorded pension (liability) $(323) $(325) === === SCHEDULE 4.19 ------------- Environmental Matters --------------------- Borrower uses fuels, lubricants and other possibly hazardous materials normally used in the conduct of a pharmaceutical manufacturer, in quantities customarily used in the conduct of such business,which use is not in violation of any covenant contained in Section 6.10(b), (c) or (e) of this Agreement and no such substance is used in any manner which would be in violation of, or subject Borrower or any Affiliate Company, or any tenant of any of its real properties to a claim under or pursuant to ISRA, the Spill Compensation and Control Act, CERCLA, RCRH or any law or regulation promulgated by the New Jersey Department of Environmental Protection or any other state or federal governmental agency. See also Schedules 4.05 and 4.06. SCHEDULE 5.04 ------------- Dividends --------- Dividends and other distributions to PRI sufficient to enable it to pay dividends when due on the PRI Series A Convertible Preferred Stock and the payment of such dividends by PRI, pursuant to the terms of such Series A Convertible Preferred Stock as set forth in PRI's certificate of incorporation as in effect on the date hereof. SCHEDULE 6.05 ------------- Periodic Reporting Certificate ------------------------------ , 19 Midlantic Bank, National Association Metro Park Plaza P.O. Box 600 Edison, New Jersey 08818 Attn: Corporation Banking Department As required by Section 6.05(c) of that certain Term Loan Agreement dated November 30, 1994 (the "Loan Agreement") by and between you as Lender and PAR Pharmaceutical, Inc. (the "Borrower"), a review of the activities of the Borrower for the fiscal [year] [quarter] ending ______________, 19__ (the "Fiscal Period") has been made under my supervision with a view to determining whether the Borrower has kept, observed, performed and fulfilled all of its obligations under the Loan Agreement and all other agreements or undertakings contemplated thereby, and to the best of my knowledge, neither an Event of Default nor an Unmatured Event of Default (as such terms are defined in the Loan Agreement) has occurred and is continuing. I further certify that the amounts set forth below, with abbreviated descriptions, to the best of my knowledge accurately present amounts required to be calculated by various covenants of the Loan Agreement as of the last day of the Fiscal Period. Unless otherwise expressly specified herein, all terms used herein have the identical meanings as set forth in the Loan Agreement. 1. Section 5.01 - Maximum Capital Expenditures. ------------------------------------------- The aggregate Capital Expenditures for the _____ Fiscal Year to date was $ ___________. 2. Section 5.02 - Minimum Working Capital. -------------------------------------- The Working Capital as at the last day of the Fiscal Period was $____________. 3. Section 5.03 - Tangible Net Worth. --------------------------------- Tangible Net Worth as of the last day of the Fiscal Year was $_________. 4. Section 5.05 - Debt to Tangible Net Worth. ----------------------------------------- The ratio of Funded Debt to Tangible Net Worth as of the last day of the Fiscal Period was _______:_______. 5. Section 5.06 - Minimum Interest Coverage. ---------------------------------------- The ratio of Adjusted EBIT to interest expense for the four quarters ended ___________, 199_ was ___________:_____________. 6. Section 5.07 - Minimum Percentage of PRI. ---------------------------------------- The assets of the Borrower comprised at least 80% of the consolidated assets of Pharmaceutical Resources, Inc. as of the last day of the Fiscal Period. Very truly yours, SCHEDULE 7.01 Indebtedness ------------ PAR PHARMACEUTICAL, INC. Amount* Lender Maturity Date ------- ------ ------------- $1,312,083 Urban National Bank May 1, 2001 951,889 Midlantic National Bank Feb. 1, 1999 2,454,555 Midlantic National Bank Feb. 1, 1999 1,822,269 Midlantic National Bank Feb. 1, 1999 21,123 Urban National Bank Sept. 15, 1996 17,267 Urban National Bank Oct. 15, 1996 17,693 Urban National Bank Nov. 15, 1996 17,821 Urban National Bank March 15, 1997 18,511 Urban National Bank Feb. 15, 1997 15,859 Urban National Bank Oct. 15, 1996 18,309 Urban National Bank March 15, 1997 17,286 Urban National Bank Feb. 15, 1997 22,180 Urban National Bank March 15, 1997 29,844 Urban National Bank Sept. 15, 1997 * as of 10/1/94 SCHEDULE 7.02 Other Liens ----------- File ---- Secured Party Jurisdiction Number Filing Date ------------- ------------ ------ ----------- Copelco Credit New York 93-1300 4/27/93 Corporation Secretary of State Book 0603 10 Mountainview Road Page 1205 Upper Saddle River, NJ 07458 Copelco Credit Rockland County 087429 4/23/93 Corporation Clerk 10 Mountainview Road Upper Saddle River, NJ 07458 SCHEDULE 7.10 Transactions with Affiliates ---------------------------- See Schedule 4.08. EX-10.34 3 AMENDED & RESTATED REVOLVING CREDIT AGREEMENT EXHIBIT 10.34 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT by and between MIDLANTIC BANK, NATIONAL ASSOCIATION and PAR PHARMACEUTICAL, INC. Dated as of November 30, 1994 TABLE OF CONTENTS ----------------- SECTION PAGE NO. - ------- -------- I. DEFINITIONS........................................................ 1 II. GENERAL TERMS...................................................... 6 2.01. Discretionary Line of Credit................................ 6 2.02. Repayment of Principal; Prepayment.......................... 7 2.03. Applicable Interest Rate; Payment of Interest............... 7 2.04. Unused Line Fee............................................. 8 2.05. Security for the Note; Guarantees........................... 8 2.06. Use of Proceeds............................................. 8 2.07. Term........................................................ 9 III. CONDITIONS OF MAKING THE REVOLVING LOAN............................ 9 3.01. Revolving Loan.............................................. 9 3.02. Subsequent Advances......................................... 10 IV. REPRESENTATIONS AND WARRANTIES..................................... 11 4.01. Financial Statements........................................ 11 4.02. Organization, Etc........................................... 11 4.03. Authorization; Compliance, Etc.............................. 11 4.04. Governmental and Other Consents............................. 12 4.05. Proceedings................................................. 12 4.06. Compliance with Laws and Agreements......................... 12 4.07. Title to Collateral......................................... 13 4.08. Other Names or Entities..................................... 13 4.09. No Insolvency............................................... 13 4.10. Full Disclosure............................................. 14 4.11. Tax Returns; Tax Examination................................ 14 4.12. Pension Plans, Etc.......................................... 14 4.13. Licenses, Etc............................................... 16 4.14. O.S.H.A..................................................... 17 4.15. Ownership of Borrower....................................... 17 4.16. Patents, Trademarks, Etc.................................... 17 4.17. Brokers, Etc................................................ 17 4.18. [Intentionally Left Blank].................................. 17 4.19. Environmental Matters....................................... 17 4.20. Enforceability.............................................. 19 4.21. Investment Company Act; Public Utility Holding Company Act......................................... 19 4.22. Federal Reserve Regulations............................... 19 V. FINANCIAL COVENANTS................................................ 19 5.01. Maximum Capital Expenditures................................ 19 5.02. Minimum Working Capital..................................... 20 5.03. Tangible Net Worth.......................................... 20 5.04. Restricted Payments......................................... 20 5.05. Debt to Tangible Net Worth Ratio.......................... 20 5.06. Minimum Interest Coverage................................. 20 5.07. Minimum Percentage of PRI..................................21 VI. AFFIRMATIVE COVENANTS.............................................. 21 6.01. Preservation of Assets; Compliance with Laws, Etc....................................................... 21 6.02. Insurance................................................. 21 SECTION PAGE NO. - ------- -------- 6.03. Taxes, Etc................................................ 22 6.04. Notice of Proceedings, Defaults, Adverse Change, Etc............................................... 23 6.05. Financial Statements and Reports.......................... 23 6.06. Inspection................................................ 25 6.07. Accounting System......................................... 25 6.08. Yield Protection............................................ 25 6.09. Additional Assurances..................................... 26 6.10. Environmental Indemnification............................. 26 6.11. Principal Business........................................ 28 VII. NEGATIVE COVENANTS................................................. 28 7.01. Indebtedness.............................................. 28 7.02. Liens..................................................... 29 7.03. Disposition of Assets..................................... 29 7.04. Dividends and Other Distributions........................... 30 7.05. Sale Leaseback............................................ 30 7.06. Acquisition............................................... 30 7.07. Fundamental Changes....................................... 30 7.08. Change in Business........................................ 31 7.09. Accounts Receivable....................................... 31 7.10. Transactions with Affiliates.............................. 31 7.11. Illegal Activities........................................ 32 VIII. DEFAULTS........................................................... 32 8.01. Defaults ................................................. 32 IX. REMEDIES ON DEFAULT, ETC........................................... 36 9.01. Remedies.................................................... 36 9.02. Default Rate................................................ 36 9.03. Cross Default............................................... 36 9.04 Application of Proceeds...................................... X. MISCELLANEOUS...................................................... 37 10.01. Survival................................................... 37 10.02. Expenses................................................... 37 10.03. Indemnification; Limitation of Liability................... 37 10.04. Setoffs, Etc............................................... 38 10.05. Governing Law.............................................. 39 10.06. Amendment; Modification.................................... 39 10.07. Waiver..................................................... 39 10.08. Notice..................................................... 40 10.09. Successors and Assigns..................................... 41 10.10. Consent to Jurisdiction, Service of Process.................................................. 41 10.11. Waivers.................................................... 41 10.12. No Derogation.............................................. 42 10.13. Severability............................................... 42 10.14. Section Headings........................................... 42 10.15. Amendment of Other Agreements.............................. 42 10.16. Accounting Principles...................................... 43 10.18. Knowledge and Discovery.................................... 43 10.19. Integration................................................ 44 -ii- SECTION PAGE NO. - ------- -------- 10.20. Termination By Lender.....................................44 10.21. Termination By Borrower.....................................44 10.22. Effect on Revolving Loan Limit............................44 -iii- AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ----------------------------------------------- THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Agreement") is made as of the 30th day of November, 1994, by and between MIDLANTIC BANK, NATIONAL ASSOCIATION, a national banking association (the "Lender"), and PAR PHARMACEUTICAL, INC., a New Jersey corporation (the "Borrower"): W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower and the Lender are parties to a Revolving Credit Agreement, dated February 20, 1992 (the "1992 AGREEMENT") and in connection therewith the Borrower executed and delivered to the Lender a Secured Revolving Loan Note, dated February 20, 1992, in the principal amount of $7,000,000.00 (the "1992 REVOLVING LOAN NOTE"); and WHEREAS, the Borrower and the Lender are parties to an Agreement Concerning Term Loans, dated February 20, 1992 (the "AGREEMENT CONCERNING TERM LOANS"); and WHEREAS, the Borrower and the Lender desire to amend and restate the terms and provision of the 1992 Agreement; and WHEREAS, simultaneously with the execution and delivery of this Agreement, the Borrower and the Lender are entering into a Term Loan Agreement and an Amended and Restated Agreement Concerning Term Loans; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby amend and restate the 1992 Agreement and agree as follows: I. DEFINITIONS ----------- As used herein the following terms shall have the following respective meanings: Accountants: the meaning specified in Section 6.05. ----------- Adjusted EBIT: as of the date of determination, earnings before ------------- interest expense and taxes (excluding any and all extraordinary items and settlements recorded in the fourth quarter of fiscal year 1993) plus depreciation, amortization and other non-cash charges as determined, on a consolidated basis, in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05. Advance(s): the meaning specified in Section 2.01(a) ---------- Affiliate(s): as applied to any Person, a spouse or relative of ------------ such Person within the third degree of consanguinity, any partner, shareholder, member, director, officer or manager of such Person, any corporation, association, partnership, joint venture, firm or other entity of which such Person is a partner, shareholder, venturer, member, director, officer or manager, and any other Person directly or indirectly controlling, controlled by, or under common control with, such Person.? -1- Affiliate Company: any one or more of Pharmaceutical Resources, ----------------- Inc., a New Jersey corporation, Quad Pharmaceutical, Inc., an Indiana corporation, PRX Distributors, Ltd., a Delaware corporation, Par Printing Enterprises, Inc., a New Jersey corporation, Advanced Biopharm Inc., a Delaware corporation, Generic Innovations, Inc., a New Jersey corporation, and their respective successors and assigns (with all such companies referred to collectively as the "Affiliate Companies"). Benefit Liabilities: the meaning specified in Section 4.12. ------------------- Borrower: the meaning specified in the Preamble. -------- Business Day: any day on which banks in the State of New Jersey ------------ are generally open to conduct regular banking business. Capital Expenditure: any payment made directly or indirectly for ------------------- the purpose of acquiring or constructing fixed assets, real property or equipment which, in accordance with generally accepted accounting principles, would be added as a debit to the fixed asset account of the Person making such expenditure, including, without limitation, amounts paid or payable for labor or under any conditional sale or other title retention agreement or under any Lease or other periodic payment arrangement which is of such a nature that payment obligations of the lessee or obligor thereunder would be required by generally accepted accounting principles to be capitalized on the balance sheet of such lessee or obligor. Capital Lease: any Lease of property (real, personal or mixed) ------------- which, in accordance with generally accepted accounting principles, would be capitalized on the lessee's balance sheet or for which the amount of the asset and liability thereunder as if so capitalized should be disclosed in a note to such balance sheet. CERCLA: the meaning specified in Section 4.19. ------ COBRA: the meaning specified in Section 4.12. ----- Code: the Internal Revenue Code of 1986, as amended from time to ---- time. Commonly Controlled Entity: the meaning specified in Section 4.12. -------------------------- Current Assets: As applied to any Person, the consolidated current -------------- assets of the Person, determined in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05. Current Liabilities: As applied to any Person, the consolidated ------------------- current liabilities of the Person, determined in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05. Default Rate: the meaning specified in Section 9.02. ------------ Disbursement Request: the meaning specified in Section 2.01(c). -------------------- Drawdown Date: in relation to any Advance, the day on which such ------------- Advance is made or to be made to the Borrower pursuant to the terms and conditions of this Agreement. ISRA: the meaning specified in Section 4.19(a). ---- -2- Employee Benefit Plans; Employee Pension Plan; and Employee Welfare -------------------------------------------------------------------- Plan: the respective meanings specified in Section 4.12. - ---- ERISA: the meaning specified in Section 4.12. ----- Event of Default: the meaning specified in Article VIII. ---------------- Fiscal Quarters: the Borrower's accounting periods ending on the --------------- Saturday nearest the end of each December, March, June and September. Fiscal Year: shall mean the fiscal year of the Borrower ending on ----------- the Saturday nearest September 30. Funded Debt: in relation to any Person at any particular time, all ------------ Indebtedness of such Person at such time: (i) in respect of any money borrowed by such Person, (ii) under or in respect of any guarantee (whether direct or indirect) by such person of any Indebtedness for borrowed money of any other Person, or (iii) evidenced by any loan or credit agreement, promissory note, debenture, bond, guarantee or other substantially similar obligation to pay money. Guarantees: the meaning specified in Section 2.05(b). ---------- Guarantors: the Affiliate Companies. ---------- Hazardous Material: the meaning specified in Section 4.19. ------------------ Indebtedness or indebtedness: as applied to any Person, (a) all ---------------------------- items (except items of capital stock, capital or paid-in surplus or of retained earnings) which, in accordance with generally accepted accounting principles, would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined, including any Lease which in accordance with generally accepted accounting principles consistently applied would constitute indebtedness, (b) all indebtedness secured by any mortgage, pledge, security, lien or conditional sale or other title retention agreement to which any property or asset owned or held by such Person is subject, whether or not the indebtedness secured thereby shall have been assumed, and (c) all indebtedness of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted or otherwise sold with recourse or agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, stock or equity purchase, capital contribution or otherwise) or otherwise to become directly or indirectly liable. Interest Expense: As applied to any Person for any period, the ---------------- aggregate amount (determined in accordance with generally accepted accounting principles) of interest accrued (whether or not paid) during such period by such Person in respect of all Indebtedness for borrowed money and the interest portion of all amounts accrued (whether or not paid) during such period by such Person in respect of all Capital Leases. Involuntary Petition: the meaning specified in paragraph (j) of -------------------- Article VIII. Lease(s): any lease of, or other periodic payment arrangement for -------- the use or possession of, property (real, personal or mixed). Lender: Midlantic Bank, National Association and its successors ------ and assigns. Licenses: the meaning specified in Section 4.13. -------- Multiemployer Plan: the meaning specified in Section 4.12. ------------------ Net Income: As applied to any Person for any fiscal period, the ---------- consolidated net income (or loss) -3- of such Person, excluding any extraordinary income (or loss) or non-cash gains or loss of such Person for such period (taken as a cumulative whole), after deducting all operating expenses, provisions for all taxes and reserves (including reserves for deferred income taxes) and all other proper deductions, all determined in accordance with generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05, adjusted to exclude results from discontinued operations (to the extent not accounted for as an extraordinary item) and the cumulative effects of any changes in accounting principles. Note: the Revolving Note, as the same may be amended or restated ---- or replaced from time to time. PBGC: the meaning specified in Section 4.12. ---- Person or person: any individual, corporation, partnership, joint ---------------- venture, trust or unincorporated organization or any government or any agency or political subdivision thereof. Premises: the meaning specified in Section 4.19. -------- PRI: Pharmaceutical Resources, Inc., a New Jersey corporation. --- Prime Rate: the rate of interest announced from time to time by ---------- Lender as its "prime rate" or "prime lending rate," which rate is determined from time to time by Lender as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor necessarily reflects the lowest rate of interest actually charged by Lender to any particular class or category of customers. RCRA: the meaning specified in Section 4.19. ---- Rents: for any periods, the aggregate amount of payments by the ----- Borrower which are accrued (whether or not paid by the Borrower) during such period in respect of all Leases except Capital Leases. Revolving Loan or Revolving Loans: the meaning specified in --------------------------------- Section 2.01(a). Revolving Loan Commitment: the meaning specified in Section ------------------------- 2.01(a). Revolving Note: the meaning specified in Section 2.01(b). -------------- Stockholder(s): with respect to any corporation all Persons who at -------------- any time hold or acquire capital stock of such corporation. Tangible Net Worth: As applied to any Person at any time, ------------------ stockholders' equity of such Person, minus the amount thereof attributable to intangibles (including but not limited to goodwill, capitalized software and excess purchaser costs), all as determined, on a consolidated basis, in accordance with generally accepted accounting standards. Term Loans: the Term Loan (as defined in the Term Loan Agreement, ---------- dated the date hereof, by and between the Lender and the Borrower) and the Loans (as defined in the Amended and Restated Agreement Concerning Term Loans, dated the date hereof, between the Lender and the Borrower). Termination Date: the meaning specified in Section 2.01(a). ---------------- Transaction Documents: any and all documents and instruments --------------------- delivered to the Lender pursuant or incident to this Agreement or the 1992 Agreement by (a) the Borrower or (b) any Affiliate Company. Unmatured Event of Default: any event or condition, which, after -------------------------- notice or lapse of time, or both, would constitute an Event of Default. -4- Working Capital: the difference, determined in accordance with --------------- generally accepted accounting principles on a basis consistent with that employed by the Accountants in preparing the financial statements referred to in Section 6.05, between Current Assets minus Current Liabilities. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01 hereof. II. GENERAL TERMS ------------- Section 2.01. Discretionary Line of Credit. ------------ ---------------------------- (a) Line of Credit. Subject to the terms and conditions contained -------------- in this Agreement, and provided no Event of Default or Unmatured Event of Default has occurred, the Lender will at its discretion and upon the written request of Borrower, from the date hereof until March 30, 1996 (the "Termination Date"), make loans on a revolving loan basis (the "Revolving Loan" or "Revolving Loans") to the Borrower, in one or more advances (an "Advance" or collectively the "Advances") not in excess of Seven Million Dollars ($7,000,000.00) (the "Revolving Loan Commitment"). (b) Restated Note. Simultaneously with the execution and delivery ------------- of this Agreement, the 1992 Revolving Loan Note will be restated in the form attached hereto as Exhibit A (the "Revolving Note") providing for, among --------- other things, the changes made by this Agreement in the Revolving Loans, and upon delivery to the Lender of the Revolving Note, the 1992 Revolving Loan Note shall be marked "Cancelled because restated" and returned to the Borrower. (c) Procedures for Making Advances. Whenever the Borrower desires ------------------------------ to receive an Advance, the Borrower will furnish the Lender a written request (referred to as a "Disbursement Request"), by telecopier or otherwise, which shall (i) be received by the Lender at the address for notices under Section 10.08 hereof, no later than 2:00 p.m. New Jersey time one (1) Business Day prior to the Drawdown Date of such Advance and (ii) specify (A) the Drawdown Date (which must be a Business Day) and (B) the amount of such Advance and (C) the bank account of the Borrower with the Lender to which payment of the proceeds of the Advance is to be made. Subject to the terms and conditions of this Agreement, on the Drawdown Date, the Lender shall credit the proceeds of such Advance to the account of the Borrower specified in the Disbursement Request. Section 2.02. Repayment of Principal; Prepayment. ------------ ---------------------------------- (a) Principal in Respect of Revolving Loan. The Revolving Loan -------------------------------------- shall be payable without setoff, deduction or counterclaim (i) on the later of (A) March 31, 1996 or (B) thereafter within thirty (30) days after demand by the Lender or (ii) at such other time as is provided under Section 8.01 of this Agreement, whichever or (i) or (ii) shall first occur (the first to occur being referred to as the "Maturity Date"), when all remaining outstanding principal and accrued interest thereon shall be due and payable in full without setoff, deduction or counterclaim. (b) Change Against Accounts. If not otherwise paid when due, ----------------------- the Lender may, at its discretion, charge the amount of any payment of principal or interest due on the Revolving Loan or any other amount that shall become due from the Borrower to the Lender under this Agreement, to any checking or loan account of the Borrower against payment of any such amount. -5- (c) Principal Clean-ups. The Borrower agrees that, during the ------------------- term of this Agreement, it shall reduce the outstanding principal balance of the Revolving Loans to zero for at least thirty (30) consecutive days during each calendar year. Section 2.03. Applicable Interest Rate; Payment of Interest. ------------ --------------------------------------------- (a) Revolving Loan Interest Rate. The outstanding principal ---------------------------- balance of the Revolving Loan shall bear interest from the date of Advance until payment in full, both before and after maturity, at a fluctuating rate per annum equal to the Prime Rate. (b) Payment Dates. Interest on the Note shall be payable monthly ------------- in arrears without setoff, deduction or counterclaim on the first day of each calendar month commencing January 1, 1995 and continuing on the first day of each calendar month thereafter and after maturity, whether by reason of acceleration, payment, prepayment or otherwise. (c) Interest Calculations. Interest shall be computed on the --------------------- basis of a three hundred sixty (360) day year counting the actual number of days elapsed. (d) Lawful Rate. If the interest rate calculated in ----------- accordance with the terms of any provision of this Agreement, or the aggregate of all amounts due hereunder which are contracted for, charged or collected shall, at any time under any circumstances, exceed the maximum permitted by any law then applicable to the Revolving Loan, then for such period as the rate or amount contracted for, charged or collected would exceed the maximum permitted by such law (and no longer) the rate payable on the Revolving Loan or so contracted for, charged or collected shall be reduced to the maximum permitted by such law. In the event the Lender ever collects, or applies, as interest, any amount in excess of the maximum permitted by law, such excess amount shall be deemed a prepayment of such portion of the amounts due hereunder as are deemed to constitute principal of a loan, and if all amounts so deemed to constitute principal have been or are thereby paid in full, any remaining excess shall be paid to the Borrower to the extent permitted by law. Section 2.04. Unused Line Fee. In addition to interest and ------------ --------------- other charges herein provided, the Borrower shall pay the Lender a fee ("Unused Line Fee") of one-quarter of one percent (.25%) per annum of the amount equal to the Revolving Loan Commitment minus the outstanding principal balance of the Revolving Loans and the face amount of all outstanding standby letters of credit issued by Lender for the account of the Borrower. The Unused Line Fee shall be computed on a daily basis and paid by the Borrower to the Lender quarterly in areas on the first day of each April, July, October and January. Section 2.05. Security for the Note; Guarantees. ------------ --------------------------------- (a) The Borrower's obligations and indebtedness to the Lender hereunder and under the Note are unsecured. (b) The Borrower's obligations and indebtedness to Lender hereunder and under the Note are guaranteed by the joint and several, absolute and unconditional guarantees of the Guarantors (the "Guarantees"). Section 2.06. Use of Proceeds. ------------ --------------- The proceeds of the Revolving Loan shall be used by the Borrower exclusively for working capital purposes. Section 2.07. Term. ------------ ---- This Agreement, the Note, and all other agreements relating to the Revolving Loan contemplated hereby shall in all respects remain in full force and effect until final payment in full of the Note and all other Indebtedness to the Lender under this Agreement and the Transaction Documents. -6- III. CONDITIONS OF MAKING THE REVOLVING LOAN. --------------------------------------- Section 3.01. Revolving Loan. ------------ -------------- The obligation of the Lender to make the initial Advance under Revolving Loan hereunder is subject to the following conditions: (a) The representations and warranties set forth in this Agreement and in the Transaction Documents shall be true and correct on and as of the date hereof and shall be true and correct in all material respects as of the date the Revolving Loan is made, and the Borrower shall have performed all obligations which were to have been performed by it hereunder prior to the date the Revolving Loan is made. (b) The Borrower shall have executed and delivered to the Lender (or shall have caused to be executed and delivered to the Lender by the appropriate Persons) the following: (i) The Note; (ii) Any other documents required or contemplated by the terms thereof; (iii) A certificate of the Secretary of the Borrower certifying (A) the names and true signatures of the incumbent officers of the Borrower authorized to sign this Agreement, the Note and the other Transaction Documents, (B) the resolutions of the Board of Directors of the Borrower authorizing the execution and delivery of this Agreement, the Note and the Transaction Documents, as applicable, (C) the by-laws of the Borrower and (D) that the Borrower's corporate charter or articles of incorporation has not been amended since the date of the certified copy of such document delivered pursuant to clause (iv) below; (iv) A copy of the corporate charter or articles of incorporation, certified by the Secretary of State of the state of organization, of the Borrower; (v) A completed Disbursement Request directing the Lender to disburse funds; (vi) Certificates of good standing (both as to corporation law and tax matters) issued by the state in which the Borrower is organized and any other state in which the failure to qualify would have a material adverse effect on the Borrower. (vii) A certificate from an officer of the Borrower reasonably satisfactory to the Lender certifying (A) that the representations set forth in Section 4 are true and correct, (B) that no Event of Default has occurred and (C) to such other matters as Lender may reasonably request; (viii) Certificates of insurance evidencing all insurance coverage and policy provisions required in this Agreement and the Transaction Documents together with loss payable endorsements in favor of the Lender with respect to each casualty insurance policy of the Borrower; (ix) Such other supporting documents, subordinations, waivers, consents, releases, resolutions and certificates as the Lender may reasonably request. (c) The Lender shall have received the favorable written opinions of counsel for the Borrower, dated the date of the Revolving Loan, reasonably satisfactory to the Lender in scope and substance. (d) All legal matters incident to the transactions hereby contemplated shall be satisfactory to counsel for the Lender. -7- (e) Neither an Event of Default nor an Unmatured Event of Default shall have occurred and be continuing or result or occur as a result of the entry into any of the Transaction Documents or the making of the Revolving Loan. Section 3.02. Subsequent Advances. ------------ ------------------- The obligation of the Lender to make any subsequent Advance of the Revolving Loan not made at the time of closing is subject to the following conditions precedent: (a) All warranties and representations set forth in this Agreement shall be true and accurate in all material respects as of the Drawdown Date which representations and warranties shall be deemed to have been stated in full as if set forth at length in Borrower's Disbursement Request. (b) The Borrower shall have delivered an executed and completed Disbursement Request to the Lender. (c) No Event of Default or Unmatured Event of Default shall have occurred and be continuing as of the Drawdown Date. IV. REPRESENTATIONS AND WARRANTIES ------------------------------ The Borrower hereby represents and warrants to the Lender (which representations and warranties shall survive the delivery of the Note and the making of the Revolving Loan) that: Section 4.01. Financial Statements. ------------ -------------------- The Borrower has heretofore furnished to the Lender the consolidated balance sheet of PRI as at July 2, 1994, and PRI's consolidated statement of operations and retained earnings and statements of cash flows, for the fiscal year or other period ending on such date. Said financial statements and balance sheet have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of preceding periods, and are complete and correct in all material respects and fairly present the financial condition of the Borrower as at said dates and the results of operations of the Borrower for the periods indicated, subject to year end adjustments. Since July 2, 1994, there has occurred no material adverse change in the Borrower's or (on a consolidated basis) PRI's business, assets, properties or condition (financial or otherwise), operations, or performance, other than as fully disclosed in said balance sheet and financial statements. Neither the Borrower nor any of the Affiliate Companies has any contingent obligations, liabilities for taxes or unusual forward or long-term commitments material to the Borrower or to them taken as a whole except as specifically mentioned in the foregoing financial statements. Section 4.02. Organization, Etc. ------------ ----------------- The Borrower (a) is a corporation duly organized and validly existing under the laws of the State of New Jersey and is duly qualified to transact business in each jurisdiction where the failure to so qualify would have a material adverse effect on the Borrower, (b) has the power and authority to own its properties and to carry on its business as now being conducted and as presently contemplated, (c) has the corporate power and authority to execute and deliver, and perform its obligations under, this Agreement, the Note and the Transaction Documents to which it is a party or signatory, and (d) except as set forth on Schedule 4.02, has no subsidiaries as of the date hereof. -------------- Section 4.03. Authorization; Compliance, Etc. ------------ ------------------------------- The execution and delivery of, and the performance by the Borrower of its obligations under, the Transaction Documents have been duly authorized by all requisite corporate action and will not violate any provision of law, any order, judgment or decree of any court or other agency of government, the corporate charter, articles of incorporation or by-laws of the Borrower or, except as disclosed in Schedule 4.04, any -8- material indenture, agreement or other instrument to which the Borrower or PRI is a party, or by which the Borrower or PRI is bound, or, except as disclosed in Schedule 4.04, be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or except as may be permitted under this Agreement, result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower or (on a consolidated basis) of PRI pursuant to, -- any such indenture, agreement or instrument, except in favor of the Lender. Section 4.04. Governmental and Other Consents. ------------ ------------------------------- Except as described in Schedule 4.04 hereto, the Borrower is not ------------- required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any governmental instrumentality or other agency, or any other Person, in connection with or as a condition to the execution, delivery or performance of any of the Transaction Documents. Section 4.05. Proceedings. ------------ ----------- Except as disclosed in Schedule 4.05 hereto, there is no claim, ------------- action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency, or any arbitration board or tribunal, now pending or, to the knowledge of the Borrower, threatened (nor is the Borrower aware of any facts which could likely result therein), (a) which questions the validity of any of the Transaction Documents, or any action taken or to be taken pursuant hereto or thereto, or (b) against or affecting the Borrower or any Affiliate Company, or to the knowledge of Borrower any other Affiliate of the Borrower, or any assets of any such party, which, if adversely determined, either in any case or in the aggregate, could reasonably be expected to have a material adverse effect on the business, operations, properties, assets or condition, financial or otherwise, of the Borrower. Section 4.06. Compliance with Laws and Agreements. ------------ ----------------------------------- Except as otherwise disclosed in Schedule 4.06 hereto, neither the ------------- Borrower nor any of the Affiliate Companies is a party to any agreement or instrument or subject to any corporate or other restriction materially and adversely affecting the business, operations, properties assets or condition, financial or otherwise, of Borrower or (on a consolidated basis) of PRI. -- Neither the Borrower nor any of the Affiliate Companies is in violation of any provision of its corporate charter, articles of incorporation or by-laws and is not in violation in any material respect of any indenture, agreement or instrument to which it is a party or by which it is bound or, to the best of the Borrower's knowledge and belief, of any provision of law, the violation of which could have a material adverse effect upon the Borrower or (on a -- consolidated basis) upon PRI, or any order, judgment or decree of any court or other agency of government. Without limiting the scope of the foregoing, (a) the Borrower and each of the Affiliate Companies and each of their properties, machinery, facilities and other business assets is in compliance in all material respects with all federal and state laws and regulations (including, without limitation, all regulations, rules, orders and requirements of the United States Food and Drug Administration) the violation of which could reasonably be expected to have a material adverse effect upon the Borrower or (on a consolidated basis) upon PRI, neither the Borrower nor any of the - -- Affiliate Companies is charged with, nor to the knowledge of Borrower, under investigation with respect to any violation of any such law, rule or regulation, and (c) neither Borrower nor any of the Affiliate Companies has nor is now engaged in any illegal activity, including without limitation, a pattern of racketeering activity, that could subject any of the Borrower's or (on a -- consolidated basis) upon PRI's assets to forfeiture or seizure. Section 4.07. Title to Collateral. ------------ ------------------- Except as specified on Schedule 4.07 hereto, the Borrower has good ------------- title to all of the Collateral free and clear of all mortgages, security interests, restrictions, liens and encumbrances of any kind, including, without limitation, liens or encumbrances in respect of unpaid taxes, except liens and encumbrances in favor of Lender or expressly permitted under this Agreement. The Borrower enjoys quiet possession under all Leases material to its business to which it is lessee, and all of such Leases are valid, subsisting and in full force and effect. -9- Section 4.08. Other Names or Entities. ------------ ----------------------- Except as disclosed on Schedule 4.08 to this Agreement, none of ------------- Borrower's business is conducted through any corporate subsidiary, unincorporated association or other entity and Borrower has not, within the seven years preceding the date of this Agreement (a) changed its name, (b) used any name other than the name stated at the beginning of this Agreement, or (c) merged or consolidated with, or acquired the assets of, any other corporation or business. Section 4.09. No Insolvency. ------------ ------------- Neither the borrowings made by the Borrower under this Agreement nor the execution, delivery and performance of the Note and the Transaction Documents render or will render the Borrower insolvent or unable to pay its debts as they become due; the Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a substantial portion of its property, and the Borrower has no knowledge of any person contemplating the filing of any such petition against the Borrower. Section 4.10. Full Disclosure. ------------ --------------- No statement of fact made by or on behalf of any Person (other than the Lender) in this Agreement, the Transaction Documents, or any certificate or schedule furnished to the Lender pursuant hereto or thereto contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading. There is no fact presently known to the Borrower which has not been disclosed to the Lender in writing which materially affects adversely, or, which could likely materially affect adversely the business, operations, properties, assets or condition, financial or otherwise, of the Borrower. Section 4.11. Tax Returns; Tax Examination. ------------ ---------------------------- (a) Except as set forth in Schedule 4.11 hereto, the Borrower has ------------- filed (or caused to be filed) all federal, state and local tax returns required to be filed, and has paid or made adequate provision for the payment of all material federal, state and local taxes, franchise fees, charges and assessments. (b) The federal income tax returns of the Borrower have been examined by the Internal Revenue Service (or closed by applicable statute) for all tax periods prior to and including the tax year ending September, 1990. All deficiencies that have been asserted against the Borrower as a result of such examination have been fully paid or finally settled or are being contested in good faith, and no issue has been raised in any such examination that, by application of similar principles reasonably can be expected to result in the assertion of a material deficiency for any other year not so examined, except to the extent that such deficiency has been reserved for in the financial statements described in Section 4.01. The Borrower has not taken any ------------ reporting positions for which it does not have a reasonable basis and does not anticipate any further material tax liability with respect to the tax years that have not been closed. For purposes of this Section 4.11 the term ------------ "Borrower" shall include each other Person with which the Borrower files consolidated or combined income tax returns or reports. Section 4.12. Pension Plans, Etc. ------------ ------------------- (a) Plans. Except as set forth in Schedule 4.12 hereto, ----- ------------- neither the Borrower nor any entity with which Borrower would be aggregated (a "Commonly Controlled Entity") under Section 414(b), (c), (m), or (o) of the Code, maintains or contributes to any pension, profit sharing or other similar plan providing for a program of deferred compensation to any employee or former employee. (b) Funding of Employee Benefit Plans. Except as set forth in --------------------------------- Schedule 4.12 hereto, all contributions and other payments required to be - ------------- made by the Borrower or any Commonly Controlled Entity to all employee benefit plans, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which either the Borrower or any Commonly Controlled Entity maintains or -10- to which any of them contributes (the "Employee Benefit Plans") have been made or reserves adequate for such purposes have been set aside and reflected on the Borrower's financial statements. With respect to any such Employee Benefit Plan which is an employee pension benefit plan, as defined in Section 3(2) of ERISA (an "Employee Pension Plan"), there is no accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, and no waiver of the minimum funding standard has been applied for or obtained from the Internal Revenue Service under Section 412(d) of the Code. No lien has arisen under Section 412(n) of the Code with respect to the assets of the Borrower. The Borrower has no reason to believe that the level of contributions required to be made to each multiemployer plan, as defined in Section 4001(a)(3) of ERISA to which the Borrower or any Commonly Controlled Entity contributed or contributes (a "Multiemployer Plan") is not sufficient to maintain the level of benefits under such plan now in effect or scheduled to become effective in the future. (c) Fiduciary Duties, Prohibited Transactions and Administration. ------------------------------------------------------------ Neither the Borrower nor any Commonly Controlled Entity has breached any fiduciary duty imposed on it under Part 4 of Title I of ERISA with respect to any Employee Benefit Plan and has not engaged in any nonexempt prohibited transaction, as defined in Section 406 of ERISA and Section 4975 of the Code. Each Employee Benefit Plan has been and is administered in all material respects in accordance with its terms and applicable laws, rules and regulations. (d) Status of Funded Pension Plans. Except as set forth in ------------------------------ Schedule 4.12 hereto, each funded Employee Pension Plan has been determined - ------------- by the Internal Revenue Service to be qualified under Section 401(a) or Section 403(a) of the Code and nothing has occurred which would cause the loss of such qualification or the imposition of any material tax liability or penalty under the Code or ERISA on the Borrower. With respect to each Employee Pension Plan which is subject to Title IV of ERISA, other than Multiemployer Plans, (1) neither the Borrower nor any Commonly Controlled Entity has failed to make required contributions or incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC"), (2) no reportable event, as defined in Section 4043(b) of ERISA, has occurred, (3) except as set forth in Schedule 4.12 the actuarial present value of the benefit liabilities, as defined in Section 4001(a)(16) of ERISA ("Benefit Liabilities"), does not exceed the fair market value of the assets available to provide the Benefit Liabilities. Neither the Borrower nor any Commonly Controlled Entity knows of any facts or circumstances which likely will, if known by the PBGC, give rise to any liability to the PBGC under Title IV of ERISA (other than for premium payments). With respect to Multiemployer Plans, neither the Borrower nor any Commonly Controlled Entity has withdrawn or partially withdrawn, as described in Subtitle E of Title IV of ERISA from any Multiemployer Plan, and there exists no condition or set of circumstances which could likely result in any withdrawal from or the partition, termination, reorganization or insolvency of any Multiemployer Plan which could result in any material liability to the Borrower or any Commonly Controlled Entity. (e) Status of Employee Welfare Plans. No Employee Benefit Plan -------------------------------- which is an employee welfare benefit plan, as defined in Section 3(1) of ERISA (an "Employee Welfare Plan"), provides for continuing benefits or coverage for any participant (or beneficiary) after the termination of the participant's employment except as may be required by Section 601 of ERISA and Section 4980B of the Code ("COBRA") and regulations thereunder or by applicable state statutory law. With respect to any Employee Welfare Plan, Borrower and each Commonly Controlled Entity have complied with the notice and continuation coverage requirements of COBRA and regulations thereunder such that there would not result in any loss of any material deduction under Section 162 of the Code or any material tax, penalty or liability to the Borrower. (f) Claims. There are no claims (other than claims for benefits in ------ the normal course), actions or lawsuits asserted or instituted with respect to, and neither Borrower nor any Commonly Controlled Entity has knowledge of any threatened claims or litigation with respect to, any Employee Benefit Plan or any fiduciary thereof, except as set forth in Schedule 4.12. ------------- Section 4.13. Licenses, Etc. ------------ -------------- The Borrower and each Affiliate Company possess or have otherwise been granted all material governmental approvals, authorizations, licenses and permits required in connection with the conduct by the Borrower of its business as presently conducted including without limitation, from the United States Food and Drug Administration (such approvals, authorizations, licenses and permits, together with any extensions, -11- modifications or renewals thereof and any additional approvals, authorizations, licenses or permits hereafter issued or granted to the Borrower and to each Affiliate Company, being herein sometimes referred to collectively as the "Licenses"). All existing Licenses are in full force and effect, are duly issued or granted in the name of, or validly assigned to, the Borrower or such Affiliate Company, and the Borrower or such Affiliate Company have full power and authority to operate thereunder. Section 4.14. O.S.H.A. ------------ -------- Borrower and each Affiliate Company have duly complied with, and its facilities, business, leaseholds, equipment and other property are in compliance, in all material respects, with the provisions of the federal Occupational Safety and Health Act and all rules and regulations thereunder and all similar state and local laws, rules and regulations; and there are no outstanding citations, notices or orders of non-compliance issued to Borrower or relating to its facilities, business, leaseholds, equipment or other property under any such law, rule or regulation. Section 4.15. Ownership of Borrower. ------------ --------------------- PRI owns beneficially and of record all of the issued and outstanding capital stock of the Borrower and such shares are held free of any assignment, pledge, lien, security interest, charge, option or other encumbrance, except for liens and security interests granted to Lender, and there are no warrants, options or other rights to acquire shares of the Borrower's capital stock of any class. Section 4.16. Patents, Trademarks, Etc. ------------ ------------------------- The Borrower owns or possesses all the patents, trademarks, service marks, trade names, copyrights and licenses, and all rights with respect to the foregoing, necessary for the conduct of its business as now conducted, without any known conflict with the rights of others. Section 4.17. Brokers, Etc. ------------ ------------- The Borrower has not dealt with any broker, finder, commission agent or other similar person in connection with the Revolving Loan or the transactions contemplated by this Agreement, and the Borrower is not under any obligation to pay any broker's fee, finder's fee or other similar compensation or commission in connection with such transactions and the Borrower covenants and agrees to indemnify and hold harmless the Lender from and against, any and all broker's fees, finder's fees or other similar compensation or commission in connection with such transactions. Section 4.18. [Intentionally Left Blank] ------------ Section 4.19. Environmental Matters. (a) Except as may be ------------ --------------------- otherwise specifically stated in Schedule 4.19, neither the Borrower nor, ------------- to the best of the Borrower's knowledge, any other Person: (i) has ever caused, permitted, or suffered to exist any oil, friable asbestos, hazardous waste, hazardous substance, or other hazardous material (as defined under applicable law including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Sections 9601(14) and (33); the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6903(5); the New Jersey Industrial Site Recovery Act ("ISRA") N.J.S. 13:1K-6, et. seq., all of which is collectively referred to herein as "Hazardous Material") to be spilled, placed, held, located or disposed of on, nor are any now existing on, any real estate legally or beneficially owned by the Borrower or leased by the Borrower (the "Premises"), or into the atmosphere, any body of water, any wetlands or the Premises; (ii) has any knowledge that any Premises has ever been used (whether by the Borrower or, to the best of the Borrower's knowledge and belief, by any other Person) as a treatment, storage or disposal (whether permanent or temporary) site for any Hazardous Material; -12- (iii) has any knowledge of any notice of violation, lien or other notice issued by any governmental agency with respect to the environmental condition of the Premises, the improvements thereon, any other property owned by the Borrower or any other property which was previously included in the property description of the Premises or such other real property, or with respect to the release of Hazardous Material at, upon, under or within the Premises, the improvements or such other real property, or the past or ongoing migration of Hazardous Material from neighboring lands or to the Premises or the improvements; and (iv) has any knowledge of any asbestos-containing materials, PCBs, radon gas, or urea formaldehyde foam insulation at, upon, under or within the Premises or any improvements thereon. (v) is by classification subject to ISRA by virtue of its Standard Industrial Classification number being set forth in ISRA. (b) Except as disclosed in Schedule 4.19 to this Agreement, no ------------- property owned or used by Borrower and located in the State of New Jersey is an "industrial establishment" within the meaning of ISRA or is or has been used for the generation, manufacture, refining, transportation, treatment, storage, handling or disposal of any "hazardous substances" or "hazardous wastes" within the meaning of ISRA. The following are all of the Standard Industrial Classification Codes applicable to the properties and operations of Borrower: 2834 - ---- (c) Except as disclosed in Schedule 4.19 to this Agreement, ------------- Borrower is in compliance in all material respects with all applicable federal, state and local statutes, rules, regulations, orders and other provisions of law relating to air emissions, water discharge, noise emissions, solid and liquid disposal, hazard waste and substances, and other environmental, health and safety matters. Section 4.20. Enforceability. ------------ -------------- This Loan Agreement, the Note and the Transaction Documents constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general principles of equity. Section 4.21. Investment Company Act; Public Utility Holding Company Act. ------------ ---------------------------------------------------------- The Borrower is not an "investment company" as that term is defined in, and is not otherwise subject to regulation under, the Investment Company Act of 1940. The Borrower is not a "holding company" as that term is defined in, and is not otherwise subject to regulation under, the Public Utility Holding Company Act of 1935. Section 4.22. Federal Reserve Regulations. ------------ --------------------------- The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation G of the Board of Governors of the Federal Reserve System of the United States), and no part of the proceeds of the Revolving Loan will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the provisions of Regulations G, T, U or X of said Board of Governors. V. FINANCIAL COVENANTS. ------------------- The Borrower covenants and agrees that, so long as the Lender has any obligation to extend credit to the Borrower hereunder, or there remains outstanding any portion of the principal of, or interest on, the Note, or there remains outstanding any other Indebtedness to the Lender, whether now existing or arising hereafter, under this Agreement, the Note or the Transaction Documents, the Borrower will: -13- Section 5.01. Maximum Capital Expenditures. ------------ ---------------------------- Not pay or become obligated to pay Capital Expenditures in any Fiscal Year listed below which in the aggregate for such Fiscal Year exceed the amount specified below opposite such Fiscal Year: Fiscal Year Maximum Capital Expenditures ----------- ---------------------------- 1994 $15,000,000 1995 $0 1996 (through March 31, 1996) $2,000,000 provided, however, the Borrower may carry forward into and use in - ----------------- subsequent years amounts unused in any year so long as so doing would not result in the occurrence of an Event of Default or an Unmatured Event of Default. Section 5.02. Minimum Working Capital. ------------ ----------------------- Maintain at all times minimum Working Capital of Borrower of Ten Million Dollars ($10,000,000). Section 5.03. Tangible Net Worth. ------------ ------------------ Maintain at all times a minimum Tangible Net Worth of Borrower of Twenty-Three Million Dollars ($23,000,000.00). Section 5.04. Restricted Payments. ------------ ------------------- Borrower may, to the extent otherwise permitted by law, pay the dividends described in Schedule 5.04, and unless there shall have occurred and be ------------- continuing an Event of Default or an Unmatured Event of Default, or unless such an Event of Default or Unmatured Event of Default shall arise as a result of the payment hereinafter described, the Borrower may, to the extent otherwise permitted by applicable law, declare and pay dividends to its Stockholders in cash or property, or purchase, redeem, retire or otherwise acquire any shares of any class of its capital stock or return any capital to its Stockholders which cumulatively do not in the aggregate exceed in any Fiscal Year an amount equal to (i) fifty-percent (50%) of the Borrower's Net Income for the immediately preceding Fiscal Year, minus (ii) the amount of any dividend or distribution described under Schedule 5.04 paid in the same Fiscal Term. ------------- Section 5.05. Debt to Tangible Net Worth Ratio. ------------ -------------------------------- Not cause, suffer or permit the ratio of the Borrower's Funded Debt to the Borrower's Tangible Net Worth as of the end of any Fiscal Quarter or Fiscal Year to exceed 1.0:1.0. Section 5.06. Minimum Interest Coverage. ------------ ------------------------- Borrower shall maintain at all times (as measured on a rolling four (4) fiscal quarter basis as evidenced by the quarterly and annual financial statements provided pursuant to Section 6.05 hereof) a ratio of Adjusted EBIT to total cash interest expense during such period on all Indebtedness of at least 1.5:1.0. Section 5.07. Minimum Percentage of PRI. ------------ ------------------------- Not cause, suffer or permit its assets to be or become less than eighty percent (80%) of the consolidated assets of PRI. VI. AFFIRMATIVE COVENANTS --------------------- The Borrower covenants and agrees that, so long as the Lender has any obligation to extend credit -14- to the Borrower hereunder, or there remains outstanding any portion of the principal of, or interest on, the Note, or there remains outstanding any other Indebtedness to the Lender, whether now existing or arising hereafter, under this Agreement, the Note, or the Transaction Documents, the Borrower will: Section 6.01. Preservation of Assets; Compliance with Laws, Etc. ------------ -------------------------------------------------- Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence as a corporation, and all material Licenses and franchises and comply in every material respect with all laws and regulations applicable to it or the conduct of its business or ownership or use of its properties (including without limitation, those related to food and drugs, environmental, health and safety matters and ERISA) and all material agreements to which it is a party the violation of which could have a material adverse effect upon the Borrower; at all times maintain, preserve and protect all material trade names and preserve all the remainder of its material property used or useful in the conduct of its business and keep the same in good repair, working order and condition (reasonable wear and tear and damage by fire or other casualty covered by insurance excepted). Section 6.02. Insurance. ------------ --------- (a) Keep all of its insurable properties now or hereafter owned adequately insured at all times against loss or damage by fire or other casualty; provide and maintain (or cause to be provided and maintained), at its expense, comprehensive general property, products liability, workers' compensation and business interruption insurance protecting against such liabilities, losses and damages and in such amounts and with such deductibles as are reasonably acceptable to the Lender, in each case issued by financially sound and reputable insurers, and, upon request of the Lender, furnish to the Lender satisfactory evidence of the same; notify the Lender of any material change in the insurance maintained on the Borrower's properties after the date hereof and furnish the Lender satisfactory evidence of any such change; provided that each insurance policy shall: (i) as to the Collateral, be "all risk" "full replacement cost" insurance against loss, damage or destruction with such deductibles as are reasonably acceptable to the Lender and name the Lender (A) as an additional insured and the sole loss payee or (B) as the sole loss payee pursuant to a so-called "standard mortgagee clause", (ii) provide that no action of the Borrower, any of the Affiliate Companies or any tenant or sub-tenant shall void such policy as to the Lender, (iii) provide that the Lender shall be notified of any proposed cancellation of such policy at least thirty (30) days in advance thereof and will have the opportunity to correct any deficiencies justifying such proposed cancellation; and ensure that all insurance payable with respect to the Collateral is payable to no party other than the Lender and the Borrower. In the event that the Borrower shall default in the performance of its obligations under this Section 6.02, the Lender may, at its option, effect such insurance coverage with an insurer acceptable to the Lender and add the premium(s) paid therefor to the principal amount of the indebtedness incurred pursuant hereto, and the amount of such premium shall be payable by the Borrower on demand with interest thereon at the highest rate payable hereunder. (b) Notwithstanding any other provision of this Agreement to the contrary, prior to the occurrence of an Event of Default or an Unmatured Event of Default, the Borrower may collect and deposit in any account of the Borrower at the Lender the proceeds of insurance of Collateral which in the aggregate with all such proceeds and the book value of all sales or dispositions under Section 7.03(b) (other than the unused liquid pharmaceutical machinery referred to therein) do not in the aggregate exceed $200,000 in any one Fiscal Year of the Borrower or exceed $800,000 from the date of this Agreement; provided, that the Borrower notifies the Lender in writing of the collection and deposit of such insurance proceeds, the Collateral loss which resulted in such insurance proceeds and the aggregate of all insurance proceeds then collected to date under this paragraph; provided, further, however, to the extent any such proceeds are used to repair or purchase replacement Collateral against which the Lender possesses a lien of the same priority as the Lender's lien was against the Collateral subject to the loss, then the amount of such insurance proceeds so used will not be included in the computation under this paragraph. -15- Section 6.03. Taxes, Etc. ------------ ----------- Pay and discharge or cause to be paid and discharged all taxes, assessments and governmental charges or levies imposed upon it or upon its income and profits or upon any of its property, real, personal or mixed, or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor, materials and supplies or otherwise, which if unpaid, might become a lien or charge upon such properties or any part thereof; provided, however, that the Borrower shall not be required to pay and - -------- ------- discharge or cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate legal proceedings and it shall have set aside on its books adequate reserves with respect to any such tax, assessment, charge, levy or claim, so contested; and provided, further that, in any event, payment -------- ------- of any such tax, assessment, charge, levy or claim shall be made before any of Borrower's or (on a consolidated basis) PRI's property shall be seized or sold in satisfaction thereof. Section 6.04. Notice of Proceedings, Defaults, Adverse ------------ ---------------------------------------- Change, Etc. ------------ Promptly (and in any event within five days of the Borrower's discovery thereof) give written notice to the Lender of (a) any proceedings instituted or threatened in any federal, state or local court or before any commission, agency or other regulatory body, whether federal, state or local, which, if adversely determined, could reasonably be expected to have a material adverse effect upon its business, operations, prospects, properties, assets, or condition, financial or otherwise; (b) any notices of default received by the Borrower (together with copies thereof, if requested by the Lender) with respect to alleged defaults under or violations of any of its material licenses, permits, approvals or franchises (including the Licenses), or any material agreements to which the Borrower is a party or any alleged defaults with respect to any evidence of Indebtedness of the Borrower, which Indebtedness is in an amount which equals or exceeds $500,000, or any mortgage, indenture or other agreement relating thereto; (c) any material adverse change in the condition, financial or otherwise, or prospects of the Borrower, or (d) the occurrence of any Event of Default or Unmatured Event of Default. Section 6.05. Financial Statements and Reports. ------------ -------------------------------- Furnish to the Lender: (a) (i) Within ninety (90) days after the end of each Fiscal Year, PRI's consolidated, audited balance sheet and statements of operations and retained earnings, and statements of cash flows, together with supporting schedules, prepared in accordance with generally accepted auditing standards consistently applied and certified without qualification by its independent certified public accountants selected by the Borrower and reasonably acceptable to the Lender (which absent any material adverse change may remain as Richard A. Eisner & Company) (the "Accountants"), the form of such consolidated financial statements to be satisfactory to the Lender (which consolidated financial statements may be in the form required to be annexed to or incorporated in PRI's Annual Report on Form 10-K), showing the consolidated financial condition of PRI at the close of such Fiscal Year and the results of operations during such year, together with a statement to the effect that such Accountants have examined the provisions of this Agreement and that, to the best of their knowledge, no Event of Default or Unmatured Event of Default has occurred (or, if such an event has occurred, a statement explaining its nature and extent); provided, however, that in issuing such statement, such -------- ------- Accountants shall not be required to exceed the scope of normal auditing procedures conducted in connection with their opinion referred to above, and - --- (ii) Within ninety (90) days after the end of each Fiscal Year, Borrower's consolidating balance sheet and statements of operations and retained earnings and statements of cash flows, together with supporting schedules, certified by the chief financial officer of PRI as presenting fairly the financial condition of the Borrower at the close of such Fiscal Year and as having been prepared in accordance with generally accepted accounting principles, the form of such consolidating financial statements to be satisfactory to the Lender; -16- (b) Within sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year, PRI's consolidated (and if the Borrower is not in compliance with the obligations of Section 5.07 above, then also Borrower's) balance sheet and statements of operations and retained earnings and cash flows, together with supporting schedules, prepared by PRI or the Borrower, as the case may be, in accordance with generally accepted accounting principles, consistently applied (which consolidated financial statements may be in the form required to be annexed to or incorporated in PRI's Quarterly Report on Form 10-Q) and certified by the chief financial officer of PRI, such balance sheet to be as of the end of such Fiscal Quarter and such statements of income to be for the quarter then ended and the period from the beginning of the then current Fiscal Year to the end of such quarter (in each case subject to normal audit and year-end adjustments); (c) Concurrently with the delivery of any annual financial statements required by Section 6.05(a) and any quarterly financial statements required by Section 6.05(b), a certificate in the form of Schedule 6.05 hereto signed ------------- by the corporate treasurer or the chief financial officer of the Borrower setting forth the calculations contemplated in Article V of this Agreement, and certifying as to the fact that such Person has examined the provisions of this Agreement and that no Event of Default or Unmatured Event of Default has occurred (or, if such an event has occurred, a statement explaining its nature and extent and setting forth the steps the Borrower proposes to take to cure or prevent any Event of Default); (d) Promptly upon delivery to any Person other than the Borrower or the Affiliate Companies or their respective accountant's or legal counsel, a copy of any report, certificate, letter or other writing which in any manner describes, discusses or indicates the occurrence of any Event of Default or any occurrence with which the mere passage of time or the giving of notice or both would or will become an Event of Default with respect to any Indebtedness of Borrower or any Affiliate Company for borrowed money. (e) Promptly upon receipt thereof, and in any event within five (5) days after such receipt, copies of all correspondence and notices received by the Borrower from federal and state government regulatory agencies (including without limitation, the United States Environmental Protection Agency, the New Jersey Department of Environmental Protection and Energy, the United States Food and Drug Administration, and the Internal Revenue Service) relating to any potential or actual adverse action or determination taken or which may be taken against Borrower or any of its Affiliates. (f) As soon as reasonably possible and in any event within ten (10) days after request therefor, such other information regarding the operations, assets, business, affairs and financial condition of the Borrower as the Lender may reasonably request from time to time; (g) Immediately upon their becoming available, copies of each filing made (including those items which are deemed not officially "filed") with the Securities and Exchange Commission, including without limitation, a copy of each registration statement, Form 10-K, Form 10-Q, Form 8-K, Form 8 and each proxy statement and annual report, in each case with a copy of the exhibits thereto other than exhibit copies of which were previously delivered to Lender. Section 6.06. Inspection. ------------ ---------- Permit employees, agents and representatives of the Lender to inspect, on prior notice during normal business hours, the Premises and the Borrower's books and records and to make abstracts or reproductions thereof, including, without limitation, permitting the Lender to inspect any and all equipment or other assets and any and all maintenance records and agreements with respect to such equipment and other assets. In no event will any Person be permitted to photograph or videotape any portion of the Premises or any of the Borrower's operations prior to the occurrence of an Event of Default. Section 6.07. Accounting System. ------------ ----------------- Maintain complete and accurate books and records of all its operations and properties and a standard system of accounting in accordance with generally accepted accounting principles consistently applied. -17- Section 6.08. Yield Protection. If any change in any law, ------------ ---------------- regulation or guideline or in the interpretation thereof, or any order or ruling by any regulatory body, court or other governmental authority, or compliance by Lender with any request or directive (whether or not having the force of law) of any such regulatory body, court or authority, shall impose, modify, or deem applicable to Lender any reserve, capital, special deposit or other requirement or condition affecting loans made or assets held by Lender or deposits in or for the account of Lender, and the result of any such event is increased cost or reduced benefit to Lender in maintaining the Revolving Loan (as determined by Lender's reasonable allocation of the aggregate of such increased costs or reduced benefits to Lender resulting from such event), Borrower shall pay to Lender from time to time, within 10 days after demand, additional amounts sufficient to compensate Lender for such increased cost or reduced benefit from the date of such event, together with interest on each such amount from a date 10 days after the date demanded at the rate then applicable to the Revolving Loan. A certificate setting forth in reasonable detail such increased cost or reduced benefit shall be conclusive as to the amount thereof, absent manifest error. Section 6.09. Additional Assurances. ------------ --------------------- From time to time hereafter, execute and deliver or cause to be executed and delivered, such additional instruments, certificates and documents, and take all such actions, as the Lender shall reasonably request for the purpose of implementing or effectuating the provisions of this Agreement, the Note or the Transaction Documents, and upon the exercise by the Lender of any power, right, privilege or remedy pursuant to this Agreement or the Transaction Documents which requires any consent, approval, registration, qualification or authorization of any governmental authority or instrumentality, execute and deliver or cause to be executed and delivered all related applications, certifications, instruments and other documents and papers. Section 6.10. Environmental Indemnification. ------------ ----------------------------- In respect of all environmental matters: (a) Without in any way limiting the generality of Section 6.01, comply in every material respect with the requirements of all federal, state, and local environmental laws; notify the Lender promptly in the event of any spill, hazardous waste pollution or contamination affecting the Premises; forward to the Lender promptly any notices relating to such matters received from any governmental agency; and pay promptly when due any fine or assessment against the Premises unless the same is being contested by Borrower in good faith in appropriate legal proceedings and it shall have set aside on its books adequate reserves with respect to any such fine or assessment, but in any event payment of any such fine or assessment shall be made before any of the Borrower's or (on a consolidated basis) PRI's property shall be seized or sold in satisfaction thereof; (b) not become involved, and not permit any tenant or subtenant of any of the Premises to become involved, in any operations at the Premises generating, manufacturing, storing, disposing, refining or handling Hazardous Material or any other activity that could lead to the imposition on the Lender, Borrower or the Premises of any liability or lien under any environmental laws; (c) immediately contain and remove any Hazardous Material (other than that which is generated, used and disposed of in the ordinary course of business in compliance with applicable law) found on the Premises, which work must be done in compliance with applicable laws and at the Borrower's expense; and the Borrower agrees that the Lender has the right, at its sole option but at the Borrower's expense, to have an environmental engineer or other representative review the work being done; (d) promptly upon the request of the Lender, based upon the Lender's reasonable belief that a Hazardous Waste or other environmental problem exists with respect to the Premises, provide the Lender with an environmental site assessment report or an update of any existing report, all in scope, form and content and performed by such company as may be reasonably satisfactory to the Lender; (e) not take any action or permit any tenant or subtenant of any of the Premises to take any action, which will cause any of the Premises to be considered an "industrial establishment" as that term is -18- defined under ISRA; (f) indemnify, defend, and hold the Lender harmless from and against any claim, cost, damage (including, without limitation, consequential damages), expense (including, without limitation, reasonable attorneys' fees and expenses), loss, liability, or judgment now or hereafter arising as a result of any claim for environmental cleanup costs, any resulting damage to the environment and any other environmental claims against the Borrower, the Lender, or the Premises; provided the Borrower shall have no obligation to indemnify or hold harmless the Lender under this Subsection (f) with respect to matters caused by or resulting directly from the willful misconduct or gross negligence of the Lender; notwithstanding any other provision of this Agreement to the contrary, the provisions of this Section 6.10(f) shall continue in effect and shall survive (among other things) any termination of this Agreement, payment and satisfaction of the Note, and release of any collateral; (g) notwithstanding the foregoing or anything to the contrary contained in this Agreement, the mere use of fuels, lubricants and other hazardous or toxic materials normally used in the conduct of a pharmaceutical manufacturer, in quantities customarily used in the conduct of such business, shall not be a violation of any covenant contained in Sections 6.10(b), (c) or (e) of this Agreement, so long as no such substance is used in a manner which would be in violation of, or subject the Borrower or any tenant of any of its real property to a claim under or pursuant to, ISRA, the Spill Compensation and Control Act, CERCLA, RCRA or any law or regulation promulgated by the New Jersey Department of Environmental Protection or any other state or federal governmental agency; provided, however, that nothing contained in this paragraph (g) shall in any manner release the Borrower from its obligation to indemnify, defend and hold harmless the Lender pursuant to Section 6.10(f). Section 6.11. Principal Business. ------------ ------------------- Engage, directly and indirectly, principally in the business of a manufacturer and distributor of pharmaceutical products. VII. NEGATIVE COVENANTS ------------------ The Borrower covenants and agrees that, so long as the Lender has any obligation to extend credit to the Borrower hereunder, or there remains outstanding any portion of the principal of, or interest on, the Note, or there remains outstanding any other Indebtedness to the Lender, whether now existing or arising hereafter, under this Agreement, the Note or the Transaction Documents, unless the Lender shall otherwise consent in writing, it shall not, directly or indirectly: Section 7.01. Indebtedness. ------------ ------------ Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Funded Debt, whether direct, indirect or contingent, except: (a) Indebtedness to the Lender; (b) Indebtedness under Capital Leases relating to the purchase price of equipment to be used in the business of the Borrower or with respect to other Capital Expenditures, to the extent such Indebtedness was permitted by Section 5.01 hereof at the time incurred; (c) Indebtedness to any Affiliate, provided that such Indebtedness is subject to a subordination agreement in form and substance satisfactory to Lender; (d) Indebtedness existing on the date hereof and described in Schedule 7.01 attached hereto; provided, however, that the terms of - ------------- -------- ------- such Indebtedness shall not be modified or amended, nor shall payment thereof be extended, without the prior written consent of the Lender unless such amendment, modification or extension would not result in any additional or different financial burden (other than additional time to -19- repay at substantially the same rate and cost) on (or additional lien on any assets of) Borrower, or in any way enhances the corresponding creditor's position in comparison to Lender; (e) Indebtedness in respect of reasonable automobiles used by employees of the Borrower in furtherance of the Borrower's business. Section 7.02. Liens. ------------ ----- Create, incur, assume, suffer or permit to exist any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets, now or hereafter, owned, including without limitation, any of its real property owned or leased, other then: (a) liens securing the payment of taxes, either not yet due or the validity of which is being contested in good faith by appropriate proceedings, and as to which it shall have set aside on its books adequate reserves; (b) security interests and liens in favor of the Lender; (c) liens imposed by law, such as carriers', warehousemen's or mechanics' liens, incurred by it in good faith in the ordinary course of business, and (subject to the provisions of Article VIII) liens arising out of a prejudgment attachment, a judgment or award against it with respect to which it shall currently be prosecuting an appeal, a stay of execution pending such appeal having been secured; (d) liens securing Indebtedness described in Section 7.01(b) provided that each such lien shall at all times be limited solely to the item or items of property so acquired; (e) any other liens existing on the date hereof and described in Schedule 7.02 attached hereto; - ------------- (f) restrictions, easements and minor irregularities in title which do not and will not interfere with the occupation, use and enjoyment by the Borrower of such properties and assets in the normal course of its business as presently conducted or materially impair the value of such properties and assets for the purpose of such business; and (g) liens on automobiles securing Indebtedness described in Section 7.01(g). Section 7.03. Disposition of Assets. ------------ --------------------- (a) Sell, lease, transfer or otherwise dispose of any of its accounts, equipment or inventory or any material assets of Borrower to any Person, except (i) in connection with the replacement of equipment with other equipment of at least equal utility and value (provided that the Lender's lien upon such newly-acquired equipment has the same priority as the Lender's lien upon the replaced equipment) (ii) the sale of inventory in the ordinary course of business and the retirement of other assets in the normal course of operations. (b) Prior to the occurrence of an Event of Default or an Unmatured Event of Default, Borrower may, in addition to sales and dispositions permitted under 7.03(a)(i) and (ii), sell or otherwise dispose of equipment which in the aggregate with all other such sales or disposals during any one Fiscal Year of the Borrower does not have a book value in excess of an amount equal to $200,000.00 minus all insurance proceeds collected and included in the computation under Section 6.02 (b) during such fiscal year and which in the aggregate with all other such sales or disposals from the date hereof to the date of such sale or disposal, do not have a book value in excess of an amount equal to $800,000.00 minus all insurance proceeds collected and included in the computation under Section 6.02(b) since the date of this Agreement; provided that Borrower notifies Lender in writing of such sale, the equipment sold,the book value of such equipment, the aggregate book value of all such sales or disposals during that Fiscal Year and the aggregate book value of all such sales and disposals from the date hereof to the date of such sale; provided, however, the disposition of machinery used prior to the date hereof in the manufacture of liquid pharmaceutical products shall be -20- excluded from the above calculations. Section 7.04. Dividends and Other Distributions. ------------ --------------------------------- Declare or pay any cash dividend or make any distribution on, or redeem, retire or repurchase or otherwise acquire directly or indirectly, any share of its stock or make any distribution of assets to its stockholders, except to the extent expressly permitted under Section 5.04 hereof. Section 7.05. Sale Leaseback. ------------ -------------- Enter into or become obligated under any conditional sale, sale-leaseback or other title retention agreement, except as may otherwise be permitted hereunder. Section 7.06. Acquisition. Acquire or obligate itself to acquire ------------ ----------- the stock, or assets (except in the ordinary course of Borrower's business) of any Person, except for acquisitions consummated solely for (i) cash or (ii) ------ subject to the provision of Section 8.01(m), Borrower's capital stock or (iii) Funded Debt not in excess of $5,000,000 in any one Fiscal Year, or (iv) any combination of (i), (ii) and (iii). Section 7.07. Fundamental Changes. ------------ ------------------- Amend its corporate charter, articles of incorporation or by-laws in any way that could have a material adverse effect upon its business or upon the Lender's rights hereunder or under the Transaction Documents (it being expressly agreed that the inclusion of any provision similar to those set forth in Section 102(b)(2) of Title 8 of the Delaware Code is prohibited under this Section); take any steps in contemplation of dissolution or liquidation; enter into or authorize any merger, consolidation, reorganization or recapitalization; or conduct any material part of Borrower's business through any subsidiary, unincorporated association or other entity; provided, however, Borrower may engage in a merger where Borrower is the surviving entity if Borrower (i) provides Lender at least forty-five days prior written notice (including the details) of the proposed merger and (ii) thereafter receives Lender's prior written consent to such merger, which consent will not be unreasonably withheld or delayed. Section 7.08. Change in Business. ------------ ------------------ Materially change or alter the nature of or cease operations of its business; or change the location of the chief executive office of the Borrower or, without 45 days' prior written notice to the Lender and the execution, delivery and filing of such documents as reasonably required by the Lender, the name under which it conducts its business; provided, however, upon at least 45 days prior written notice and the execution, delivery and filing of such documents as reasonably required by Lender, Borrower may move its chief executive office within Northern New Jersey, Fairfield County in Connecticut and Rockland, Westchester and New York Counties in New York State. Section 7.09. Accounts Receivable. ------------ ------------------- Sell, assign, discount or dispose in any way of any accounts receivable or promissory notes arising out of any of the Collateral except for collection (including endorsements) in the ordinary course of business. Section 7.10. Transactions with Affiliates. ------------ ---------------------------- Except for the transaction described in Schedule 7.10, enter into any ------------- transaction, including, without limitation, the purchase, sale or exchange of property or assets or the rendering or accepting of any service with or to any Affiliate of the Borrower except in the ordinary course of business and pursuant to the -21- reasonable requirements of the Borrower's business and upon terms not less favorable to the Borrower than it could obtain in a comparable arm's-length transaction with a third party other than such Affiliate. Section 7.11. Illegal Activities. ------------ ------------------ Engage in any conduct or activity, including, without limitation, a pattern of racketeering activity, that could subject any of the Borrower's assets to forfeiture or seizure. VIII. DEFAULTS -------- Section 8.01. Defaults. ------------ -------- Each of the following events (each of which is herein sometimes called an "Event of Default") shall constitute an Event of Default under this Agreement: (a) any representation or warranty made in this Agreement or any other Transaction Document, or in any report, certificate, financial statement or other instrument furnished in connection with this Agreement, or the borrowings hereunder, shall prove to be false or misleading in any material respect when made; or (b) default in the payment of any installment of the principal of the Note or the principal of any other Indebtedness of the Borrower to the Lender, whether now existing or hereafter arising, when the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or by acceleration or otherwise and the continuation of such default past any applicable grace period or, if no applicable grace or cure period, for three (3) days following the date such payment is due and payable; or (c) default in the payment of any fee, rental, expense, or other obligation payable by the Borrower to the Lender or any installment of any interest on the Note or on or in respect of any other Indebtedness of the Borrower to the Lender, whether now existing or hereafter arising, when the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or by acceleration or otherwise, and continuation of such default past any applicable grace period or, if no applicable grace period, for three (3) days following the date such payment is due and payable; or (d) default in the due observance or performance by any Person other than the Lender of any other covenant, condition or agreement contained in this Agreement, which default shall continue unremedied for thirty (30) days after the earlier to occur of (i) the Borrower's discovery of such default, or (ii) written notice thereof from the Lender to the Borrower; provided, -------- however, that if such default cannot be remedied, then such default shall - ------- be deemed to be an Event of Default as of the date of the occurrence thereof; or (e) for any reason any Transaction Document at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms; or (f) [Intentionally Left Blank]; or (g) any event of default with respect to any other evidence of Indebtedness of the Borrower or any Affiliate Company for borrowed money which event of default permits the corresponding creditor to exercise remedies with respect to such Indebtedness, which Indebtedness is in an amount which equals or exceeds $500,000, whether or not such event of default results in acceleration of such Indebtedness; or (h) (A) the Borrower shall lose, fail to keep in force, suffer the termination, suspension or revocation of, or terminate, forfeit or suffer an amendment to, any License at any time held by it, which could reasonably be expected to have a material adverse effect on the operations of the Borrower; (B) any -22- governmental regulatory authority shall commence an action or proceeding seeking the termination, suspension, revocation or material adverse amendment of any material License held by the Borrower and the Lender shall reasonably and in good faith believe that the result thereof shall be the termination, revocation, suspension or material adverse amendment of such License; or (i) the Borrower shall (A) discontinue its business, (B) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its property, (C) admit in writing its inability to pay its debts as they mature, (D) make a general assignment for the benefit of creditors, (E) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code, or (F) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or corporate action shall be taken for the purpose of effecting any of the foregoing or (G) become unable or fail to pay its debts generally as they become due; or (j) there shall be filed against the Borrower an involuntary petition seeking reorganization of such Borrower or the appointment of a receiver, trustee, custodian or liquidator of the Borrower or any material part of its assets, or an involuntary petition under any bankruptcy, reorganization or insolvency law of any jurisdiction, whether now or hereafter in effect (any of the foregoing petitions being herein referred to as an "Involuntary Petition"); or (k) final judgment for the payment of money which, when aggregated with all other outstanding judgments against the Borrower, exceeds $500,000, shall be rendered against the Borrower and no insurer(s) shall have admitted in writing its liability for such judgments to an extent which reduces the Borrower's aggregate liability to less than $500,000, if such judgment shall remain undischarged or not have been stayed pending appeal within thirty (30) days after entry thereof or shall not have been discharged within five (5) days after the expiration of any such stay; or (l) the occurrence of any attachment of any deposits or other property of the Borrower in the hands or possession of the Lender, or the occurrence of any attachment of any other property of the Borrower in an amount exceeding $500,000 in the aggregate which shall remain undischarged thirty (30) days after the attachment thereof or no insurer shall have admitted its liability in writing to satisfy and remove the attachment, or the same shall not have been stayed pending appeal within thirty (30) days after entry thereof or shall not have been discharged within five (5) days after the expiration of any such stay; or (m) for any reason less than one hundred percent (100%) of the issued and outstanding capital stock of the Borrower is owned by PRI, free and clear of any lien or encumbrance; or (n) the Borrower or any material part of its business or assets shall be the subject of (i) any extraordinary product recall which results in the ceasing or other than short term shut down of any material portion of Borrower's business, or (ii) any seizure or forfeiture proceeding or similar action instituted or conducted by any agency, office or department of state or federal government, except such as are being contested in good faith in an appropriate legal proceeding and in which no judgment has been rendered adverse to the interest of the Borrower; or (o) there occurs or the Borrower takes any action to authorize any sale or transfer in bulk or encumbrance on all or a major part of the Borrower's assets; or (p) PRI's Net Income for any Fiscal Quarter is a negative number and when combined with the PRI's Net Income for the immediately prior Fiscal Quarter results in an aggregate loss for the overall six month period; or -23- (q) With respect to any Employee Benefit Plan (as defined in Section 4.12 of this Agreement), there occurs or exists any of the events or conditions described in the following clauses (a) through (h) and such event or condition, together with all like events or conditions, could likely, or do subject Borrower to any tax, penalty or other liability that likely would, or does, singly or in the aggregate, have a material adverse effect on the financial condition or the properties or operations of Borrower: (a) a reportable event as defined in Section 4043 of ERISA, (b) a prohibited transaction as defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code, (c) termination of the Employee Benefit Plan or filing of notice of intention to terminate, (d) institution by the PBGC of proceedings to terminate, or to appoint a trustee to administer, the Employee Benefit Plan, or circumstances that constitute grounds for any such proceedings, (e) complete or partial withdrawal from a multi-employer Employee Benefit Plan, or the reorganization, insolvency or termination of a multi-employer Employee Benefit Plan, (f) an accumulated funding deficiency within the meaning of ERISA, (g) violation of the reporting, disclosure or fiduciary responsibility requirements of ERISA or the Internal Revenue Code, or (h) any act or condition which could result in direct, indirect or contingent liability to any Employee Benefit Plan or the PBGC; or (r) any of the Guarantees ceases to be effective, or any of the Guarantors denies the validity of or liability under any of the Guarantees, or any of the events described in subsections (a), (d), (g), (h), (i), (j), (k), (l), (n), or (o) above occurs with respect to any of the Guarantors. Upon the occurrence of any such Event of Default and at any time thereafter during the continuance of such Event of Default, at the election of the Lender, the Revolving Loan Commitment shall terminate and the Note and all other Indebtedness of the Borrower to the Lender shall immediately become due and payable, including all principal and interest, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Note or other evidence of such Indebtedness to the contrary notwithstanding (except in the case of an Event of Default under paragraph (i) or (j) of this Article VIII, in which event the Revolving Loan Commitment shall automatically terminate and such Indebtedness shall automatically become due and payable) and Lender shall be entitled to forthwith exercise (to the extent and in such order as Lender may elect, in its sole and absolute discretion) any or all rights and remedies provided in this Agreement, the Note or any other Transaction Document and all other rights and remedies that may otherwise be available to Lender by agreement or at law or in equity. In the event of an acceleration of the Borrower's Indebtedness hereunder as a result of the filing of an Involuntary Petition as specified in paragraph (j) of this Article VIII, such acceleration shall be rescinded, and the Borrower's rights hereunder reinstated, if, within ninety (90) days following the filing of such Involuntary Petition, such Involuntary Petition shall have been dismissed and there shall then exist no other Event of Default or Unmatured Event of Default under this Agreement. IX. REMEDIES ON DEFAULT, ETC. ------------------------- Section 9.01. Remedies. ------------ -------- In case any one or more Events of Default shall occur and be continuing, the Lender shall have the right, in addition to all other rights and remedies provided by law or by this Agreement or any other Transaction Document, to proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained in this Agreement, any Transaction Document or the Note or for an injunction against a violation of any of the terms hereof or thereof or in and of the exercise of any power granted hereunder or thereby or by law. No right conferred upon the Lender hereby or by any Transaction Document or the Note shall be exclusive, but shall be cumulative and in addition to any other right or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise; and the Lender may exercise its remedies concurrently, independently or successively. -24- Section 9.02. Default Rate. ------------ ------------ Without regard to whether the Lender has exercised any other rights or remedies hereunder, the applicable interest rate under the Note shall at the Lender's option, but only to the extent permitted by law, be increased to a rate per annum (the "Default Rate") equal to the interest rate specified under Section 2.03 hereof, plus two percent (2%) per annum upon the occurrence of an Event of Default. Section 9.03. Cross Default. ------------ ------------- BORROWER HEREBY AGREES THAT ALL OTHER OBLIGATIONS BETWEEN BORROWER AND LENDER OR ANY AFFILIATE OF LENDER (INCLUDING, WITHOUT LIMITATION, THE OBLIGATIONS OF BORROWER UNDER OR IN CONNECTION WITH OR IN ANY WAY RELATED TO (I) THE TERM LOAN AGREEMENT, DATED THE DATE HEREOF AND (II) THE AMENDED AND RESTATED AGREEMENT CONCERNING TERM LOANS, DATED THE DATE HEREOF), AS ANY OR ALL OF THE SAME MAY, FROM TIME TO TIME, BE AMENDED, MODIFIED, RESTATED OR OTHERWISE REVISED, ARE HEREBY AMENDED SO THAT A DEFAULT UNDER THIS AGREEMENT IS A DEFAULT UNDER ALL SUCH OTHER AGREEMENTS AND A DEFAULT UNDER ANY ONE OF THE OTHER AGREEMENTS IS A DEFAULT UNDER THIS AGREEMENT. Section 9.04. Application of Proceeds. ------------ ----------------------- The Borrower hereby agrees that upon the occurrence of an Event of Default, the Lender shall be entitled to apply the proceeds of any payment made to the Lender by or on behalf of the Borrower, including, without limitation, the proceeds arising from any of the collateral securing any of the obligations of Borrower to the Lender, in a manner and against the obligation or obligations as determined in the sole and absolute discretion of the Lender; provided, however, if the Lender takes affirmative action to enforce any of its remedies in order to realize against any of the collateral, any proceeds received by the Lender from any or all such actions shall be applied first against secured obligations and then against any unsecured obligations. X. MISCELLANEOUS ------------- Section 10.01. Survival. ------------- -------- This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto, shall survive the making by the Lender of the Revolving Loan and shall continue in full force and effect so long as the Note or any other Indebtedness to the Lender, whether now existing or hereafter arising, under this Agreement or the Transaction Documents, is outstanding and unpaid or the Lender has any obligation to make credit extensions hereunder. Section 10.02. Expenses. ------------- -------- The Borrower agrees to reimburse the Lender upon demand for all out-of-pocket costs, charges, liabilities, documentary stamp taxes, intangible taxes, any other taxes due under any applicable state law (exclusive of taxes measured or imposed in terms of the Lender's net income) and any other expenses of the Lender (including, without limitation, (i) reasonable fees and disbursements of (A) counsel to the Lender and (B) agents of the Lender not regularly in its employ and (ii) the allocated costs of services of Lender's in-house counsel (except such that are clearly mere duplications of costs under (i)(a)) in connection with (a) the preparation, negotiation, interpretation, execution and delivery of this Agreement, the Note, any Transaction Documents and any other agreements or documents relating thereto, (b) the making of the Revolving Loan, (c) any amendments, modifications, consents or waivers in respect thereof, (d) any enforcement of any of the -25- Transaction Documents, (e) any proceedings with respect to any of the Transaction Documents or with respect to the bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation of the Borrower or any party to any Transaction Document, and (f) any claims by third parties (except as caused by or result directly from the willful misconduct or gross negligence of the Lender) relating to the foregoing. Section 10.03. Indemnification; Limitation of Liability. ------------- ---------------------------------------- (a) The Borrower agrees to protect, indemnify and hold harmless the Lender and each of its officers, directors, employees and agents (collectively called the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for and consultants of such Indemnitees in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), which may be imposed on, incurred by, or asserted against such Indemnitees (whether direct, indirect, or consequential and whether based on any federal or state laws or other statutory regulations, including, without limitation, securities, environmental and commercial laws and regulations, under common law or at equitable cause or on contract or otherwise) in any manner relating to or arising out of this Loan Agreement, the Note or any of the Transaction Documents, or any act, event or transaction related or attendant thereto, the agreements of the Lender contained herein, the making of the Revolving Loans, the management of the Revolving Loans (including any liability under federal, state or local environmental laws or regulations) or the use or intended use of the proceeds of such Revolving Loans hereunder (collectively, the "Indemnified Matters"); provided that the Borrower shall have no obligation to any Indemnitee hereunder with respect to Indemnified Matters caused by or resulting directly from the willful misconduct or gross negligence of such Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnities. (b) To the extent permitted by applicable law, no claim may be made by the Borrower or any other Person against the Lender or any of its affiliates, directors, officers, employees, agents, attorneys or consultants for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by the Loan Agreement, the Note or any of the Transaction Documents or any act, omission or event occurring in connection therewith; and the Borrower hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Neither the Lender nor any of its affiliates, directors, officers, employees or agents shall be liable for any action taken or omitted to be taken by it or them under or in connection with any of the above referenced documents except for its or their own gross negligence or willful misconduct. Section 10.04. Setoffs, Etc. ------------- ------------- The Borrower agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim the Lender may otherwise have, the Lender and any purchaser of a participation in the Note shall be entitled, at any time and from time to time, at its option, without notice to Borrower (any such notice being expressly waived by Borrower),to offset balances held by it for the account of the Borrower at any of its offices, against any Indebtedness or other fees or charges owed to the Lender or such purchaser hereunder if the same are not paid when due (regardless of whether such balances are then due to the Borrower) or if the Borrower becomes insolvent, howsoever evidenced, or if any Event of Default occurs, and that such offset balances may be applied toward the payment of any Indebtedness of the Borrower to the Lender or to any such purchaser in the Note, whether or not such Indebtedness or any part thereof shall then be due; in which case the Lender or such purchaser shall promptly notify the Borrower thereof, provided, however, that the Lender's or such purchaser's failure to give such notice shall not affect the validity thereof. -26- Section 10.05. Governing Law. ------------- ------------- THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW JERSEY APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SAID STATE. Section 10.06. Amendment; Modification. ------------- ----------------------- No modification or waiver of any provision of this Agreement, or of the Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. No notice to, or demand on, the Borrower, in any case, shall entitle the Borrower to any other or future notice or demand in the same, similar or other circumstances. Section 10.07. Waiver. ------------- ------ The Lender's failure to insist upon the strict performance of any term, condition or other provision of this Agreement, the Note or any of the other Transaction Documents, or to exercise any right or remedy hereunder or thereunder, shall not constitute a waiver by the Lender of any such term, condition or other provision or default or Event of Default in connection therewith; and any waiver of any such term, condition or other provision or of any such default or Event of Default shall not affect or alter this Agreement, the Note or any of the other Transaction Documents, and each and every term, condition and other provision of this Agreement, the Note, and other Transaction Documents shall, in such event, continue in full force and effect and shall be operative with respect to any other then existing or subsequent default or Event of Default in connection therewith. An Event of Default hereunder or under any of the Transaction Documents shall be deemed to be continuing unless and until waived in writing by the Lender. Section 10.08. Notice. ------------- ------ All notices, requests, demands and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed certified, return receipt requested, or telecopied, personally served or sent by courier service to the applicable party at the addresses indicated below. If to the Lender: MIDLANTIC BANK, NATIONAL ASSOCIATION CORPORATE BANKING DEPARTMENT P.O. Box 600 Edison, New Jersey 08818 with a copy to: Michael J. Dunne, Esq. Pitney, Hardin, Kipp & Szuch (mail to) P.O. Box 1945 Morristown, New Jersey 07962-1945 (street address) 200 Campus Drive Florham Park, New Jersey 07932 and if to Borrower: -27- PAR PHARMACEUTICAL, INC. One Ram Ridge Road Spring Valley, New York 10977 Att'n: Treasurer with a copy to: Hertzog, Calamari & Gleason 100 Park Avenue New York, New York 10017 Att'n: Stephen A. Ollendorff, Esq. or, as to each party, at such other address as shall be designated by such parties in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests, demands and other communication shall be deemed given when delivered in person or by courier service, upon receipt of a telecopy or 3 business days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). Section 10.09. Successors and Assigns. ------------- ---------------------- (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign any of its rights hereunder or delegate any of its obligations hereunder without the prior written consent of the Lender. Any such impermissible assignment or delegation shall be void and of no effect. (b) Lender shall have the right in its sole discretion to assign its rights under any of the Transaction Documents or to sell one or more participations in the Note and the Transaction Documents without notice to or consent of the Borrower and in connection therewith, to provide any such proposed assignee(s) or participant(s) with financial and other information and copies of documents relating to the Borrower, the Affiliate Companies, the Borrower's or the Affiliate Companies' business, and the transactions contemplated hereby, provided that any such Person agrees in writing to keep any such information that is not otherwise publicly available confidential. Upon receipt of written notice from the Lender, the Borrower agrees to provide to any such assignee(s) or participant(s) copies of all financial information required to be delivered to the Lender pursuant to Section 6.05 hereof. Section 10.10. Consent to Jurisdiction, Service of Process. ------------- ------------------------------------------- The Borrower, to the extent that it may lawfully do so, hereby consents to the jurisdiction of the courts of the State of New Jersey and the United States District Courts for the District of New Jersey, as well as to the jurisdiction of all courts from which an appeal may be taken from such courts, for the purpose of any suit, action or other proceeding arising out of any of its obligations arising hereunder or under the Note or any other Transaction Documents, or with respect to the transactions contemplated hereby, and expressly waives any and all objections it may have as to venue in any of the courts. In addition, to the extent that it may lawfully do so, the Borrower hereby consents to the service of process by U.S. certified or registered mail, return receipt requested, addressed to the Borrower at the address to which notices are to be given hereunder. Section 10.11. Waivers. ------------- ------- (A) THE BORROWER AND THE LENDER EACH HEREBY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTE, THE TRANSACTION DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH. NEITHER THE BORROWER, THE LENDER NOR ANY ASSIGNEE OF OR -28- SUCCESSOR TO EITHER THE BORROWER OR THE LENDER, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, THE NOTE, THE TRANSACTION DOCUMENTS OR ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES HERETO, OR ANY OF THEM. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION 10.11 HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 10.11 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. Borrower waives all defenses and rights to interpose any setoff or counterclaim of any nature except only a defense pertaining to the existence of an Event of Default or a counterclaim to the extent that the failure to so assert such counterclaim would permanently preclude the prosecution or recovery upon the same. Section 10.12. No Derogation. ------------- This Agreement and the Transaction Documents are in addition to, and not in derogation of, other obligations of the Borrower in favor of the Lender. None of the obligations shall be effected by the Lender's consent to any substitution or release of any or all of the collateral for any other obligation, the release of any party to an obligation or the waiver of any provision thereof, or by any loss of or damage to any collateral or the failure of the Lender to perfect or maintain its security interest or other liens therein. Section 10.13. Severability. ------------- ------------ Any provision of this Agreement, the Note or any of the Transaction Documents which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. Section 10.14. Section Headings. ------------- ---------------- Any Article and Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 10.15. Amendment of Other Agreements. ------------- ----------------------------- All references in this Agreement to other documents and agreements to which the Lender is not a party shall be deemed to refer to such documents and agreements as presently constituted and not as hereafter amended or modified unless the Lender shall have expressly consented in writing to such amendment(s) or modification(s). Section 10.16. Accounting Principles. ------------- --------------------- ALL REFERENCES IN THIS AGREEMENT TO ANY CALCULATIONS OR DETERMINATIONS MADE IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES SHALL BE ON A CONSOLIDATED BASIS (UNLESS OTHERWISE EXPRESSLY STATED) AND SHALL MEAN, FOR ANY FISCAL PERIOD, SUCH PRINCIPLES APPLIED ON A BASIS CONSISTENT WITH (A) THE APPLICATION OF THE SAME IN PRIOR FISCAL PERIODS, (B) THAT EMPLOYED BY THE ACCOUNTANTS IN PREPARING THE FINANCIAL STATEMENTS REFERRED TO IN SECTION 6.05(A) HEREOF. -29- Section 10.17. Compliance by PRI. ------------- ----------------- Lender agrees that compliance by PRI, on a consolidated basis, with the terms and provisions of Sections 5.01-5.06, 6.05, 6.07, 7.01, 7.02, 7.04, of this Agreement (as though it were the Borrower) shall be deemed compliance by Borrower with such Sections. Section 10.18. Knowledge and Discovery. ------------- ----------------------- All references in this Agreement to "knowledge" or "awareness" of, or "discovery" by, the Borrower shall be deemed to include any such knowledge of, or discovery by, PRI or any of the Borrower's executive officers. Section 10.19. Integration. ------------- ----------- This Agreement supersedes the Borrower's application for the Revolving Loan, the Lender's commitment and proposal letters in respect of the Revolving Loan, and all other prior dealings between the parties hereto and their respective agents, employees, or officers with respect to the credit facilities extended hereby, and this Agreement together with the Transaction Documents, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and the 1992 Agreement is hereby terminated and superseded. Section 10.20. Termination By Lender. Lender shall have the ------------- --------------------- right, at any time on or after the Termination Date and in its sole and absolute discretion, and without the necessity for an Event of Default hereunder, to terminate this Agreement upon thirty (30) days' written notice to Borrower. Upon the termination date stated in such notice: (a) all provisions for additional Revolving Loans under this Agreement shall terminate, (b) the principal and interest of the Revolving Loans and all other obligations under this Agreement and the Transaction Documents related to the Revolving Loans shall become and be immediately due and payable, without premium or penalty, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by Borrower, and (c) Lender shall be entitled to exercise forthwith (to the extend and in such order as Lender may elect, in its sole and absolute discretion) any or all of the rights and remedies for the collection of such amounts. Section 10.21. Termination By Borrower. ------------- ----------------------- (a) Borrower may terminate this Agreement, without termination charge, on or after February 20, 1995, by giving Lender sixty (60) days' prior written notice, provided that on such termination date the principal and interest of the Revolving Loans, and all other obligations under this Agreement and the Transaction Documents related to the Revolving Loans have been paid in full. (b) Notwithstanding any other provision of this Agreement or any other agreement between Borrower and Lender to the contrary, if Borrower prepays the Term Loans and establishes a borrowing or banking relationship with any third party while this Agreement remains in effect or any other obligation to Lender remains outstanding, then the Revolving Loans shall terminate and all outstanding obligations of the Borrower to Lender, including without limitation, the Revolving Loans and the IDA Loan (as defined in the Amended and Restated Agreement Concerning Term Loans), shall be immediately due and payable, with accrued interest. Section 10.22. Effect on Revolving Loan Limit. Upon the giving ------------- ------------------------------ of notice of termination pursuant to Section 10.20 or 10.21, the Revolving Loan Commitment thereafter shall not exceed the average principal balance of the Revolving Loans outstanding during the thirty-day period preceding the notice. All other requirements for Loans shall remain unchanged. -30- IN WITNESS WHEREOF, the Lender and the Borrower have caused this Agreement to be duly executed as a sealed instrument by their respective duly authorized officers, all as of the day and year first above written. Attest: PAR PHARMACEUTICAL, INC. /s/ Kenneth G. Mosesian By: /s/ Robert Edinger - ------------------------- -------------------- Name: Kenneth G. Mosesian Name: Robert Edinger Title: Treasurer Title: Vice President MIDLANTIC BANK, NATIONAL ASSOCIATION By: /s/ Peter J. Cahill ----------------------------------- Name: Peter J. Cahill Title: Vice President -31- AFFIRMATION In order to induce the Lender to enter into this Amended and Restated Revolving Credit Agreement, each of the undersigned hereby acknowledges and agrees to the terms and conditions set forth above and hereby confirms to the Lender that each guarantee and other Transaction Document to which it is a party (as each of the same has been amended or modified from time to time) remains in full force and effect and continues to secure all current and future Indebtedness of Borrower to Lender, including without limitation, the Indebtedness of Borrower under the Revolving Note issued under this Amended and Restated Revolving Credit Agreement. IN WITNESS WHEREOF, the undersigned have executed this Affirmation as of November 30, 1994. PHARMACEUTICAL RESOURCES, INC. By: /s/ Robert Edinger -------------------------- Name: Robert Edinger Title: Vice President PAR PRINTING ENTERPRISES, INC. By: /s/ Robert Edinger -------------------------- Name: Robert Edinger Title: Vice President GENERIC INNOVATIONS, INC. By: /s/ Robert Edinger -------------------------- Name: Robert Edinger Title: Vice President ADVANCED BIOPHARM, INC. By: /s/ Robert Edinger -------------------------- Name: Robert Edinger Title: Vice President INDEX OF SCHEDULES ------------------ Schedule 2.01A Revolving Note of the Borrower Schedule 2.03 Conversion Notice Schedule 4.02 List of Borrower's Subsidiaries Schedule 4.04 Governmental and Other Consents Schedule 4.05 Pending Litigation Schedule 4.06 Compliance with Laws and Agreements Schedule 4.07 Liens on Collateral Schedule 4.08 Ownership In Other Entities Schedule 4.11 Tax Returns and Taxes Schedule 4.12 Pension Plans, Etc. Schedule 4.19 Environmental Matters Schedule 5.04 Dividends Schedule 6.05 Periodic Reporting Certificate Schedule 7.01 Indebtedness Schedule 7.02 Other Liens Schedule 7.10 Transactions with Affiliates SCHEDULE 2.01A -------------- Form of Restated Revolving Loan Note $ 7,000,000.00 Date: ________ __, 1994 FOR VALUE RECEIVED, the undersigned, PAR PHARMACEUTICAL, INC., a New Jersey corporation ("Borrower"), hereby unconditionally promises to pay to the order of MIDLANTIC BANK, NATIONAL ASSOCIATION ("Lender") upon the Maturity Date, as defined in the Agreement (as hereinafter defined), the principal sum of Seven Million Dollars ($7,000,000.00) or, if different, the aggregate unpaid principal amount of all Revolving Loans made by Lender to Borrower pursuant to the Amended and Restated Revolving Credit Agreement, dated the date hereof, and any amendments, extensions or renewals thereof (the "Agreement"), and to pay interest as hereinafter provided on all principal of Revolving Loans remaining unpaid from time to time, from the date of each such Revolving Loan until its payment in full. Both principal and interest hereunder shall be payable in lawful money of the United States of America, and in immediately available funds, at the office of Bank located at Metropark Plaza, P.O. Box 600, 499 Thornall Street, Edison, New Jersey 08818 or at such other place as the holder hereof may from time to time designate in writing. All of the provisions of the Agreement are incorporated herein by reference and, in the event of ambiguity or inconsistency between any provisions of the Agreement and this Note, the provisions of the Agreement shall prevail. Any term in initial capitals in this Note and not otherwise defined herein shall have the meaning ascribed thereto in the Agreement. Interest on principal amounts hereunder shall be payable monthly on the first Business Day in each calendar month, commencing January 1, 1995 and on the final day when said principal amounts become due, at a fluctuating interest rate per annum equal at all times to the prime rate of Lender in effect from time to time; provided if an Event of Default occurs the principal (and, to the extent permitted by law, interest) payable hereunder (whether before or after judgment) shall bear interest payable on demand, from the day when said Event of Default occurs until it is paid in full, at a fluctuating interest rate per annum equal at all times to the Default Rate (as defined in the Agreement). Each change in the fluctuating interest rate hereunder shall take effect simultaneously with the corresponding change in the prime rate. The prime rate applicable to this Note shall be the rate of interest announced from time to time by Lender as its "prime rate" or "prime lending rate". This rate of interest is determined from time to time by Lender as a means of pricing some loans to its customers and it is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by Lender to any particular class or category of customers. Lender shall present a monthly invoice to Borrower reflecting the interest payment due, but any failure or delay by Lender in submitting invoices for interest payments shall not discharge or relieve Borrower of the obligation to make such interest payments. If not otherwise paid when due, the Borrower authorizes the Lender to debit any loan or deposit account maintained by it with the Lender for accrued interest, as and when due. Such authorization shall not affect the Borrower's obligation to pay when due all amounts payable hereunder whether or not there are sufficient funds in any such accounts. The foregoing shall be in addition to and not in limitation of any rights of set-off which the Bank may have. This Note has been issued under the Agreement and the Agreement contains, among other terms, provisions for acceleration of the indebtedness hereunder upon the happening of certain stated events. Notwithstanding any other provision of this Note or the Agreement, the maturity hereof shall be accelerated as provided in the Agreement upon termination of the Agreement by Borrower. If this Note is mutilated, lost, stolen or destroyed, then upon surrender thereof (if mutilated) or receipt of evidence and indemnity (if lost, stolen or destroyed) Borrower shall execute and deliver a new promissory note of like tenor, which shall show all payments which shall have been made on account of the principal hereof. This Note shall be subject to prepayment on such terms and conditions and upon payment of such prepayment penalty, if any, as is provided in the Agreement. Borrower and any endorser, surety or guarantor of this Note hereby each (a) waive diligence, presentment for payment, demand, notice of dishonor, protest, notice of protest and all other demands and notices in connection with the delivery, performance and enforcement of this Note, except as may be specifically otherwise provided in the Agreement, (b) consent that, without notice to or release of the liability of any such party, the obligations of any party may from time to time, in whole or part, be renewed, extended, modified, accelerated, compromised, settled or released by Lender, and (c) waive all defenses based on suretyship or impairment of collateral. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has executed this Note as of the date first above written. PAR PHARMACEUTICAL, INC. By: Name: Title: [CORPORATE SEAL] Attest: Title: Secretary SCHEDULE 2.03 ------------- Conversion Notice ----------------- [Borrower's Letterhead] Midlantic Bank, National Association Post Office Box 600 499 Thornall Street Edison, New Jersey 08818 Attn: Corporate Banking Department Re: Conversion Notice ----------------- Gentlemen: Pursuant to Section 2.03(a)(ii) of the Term Loan Agreement, dated November ___, 1994, between Midlantic Bank, National Association and PAR Pharmaceutical, Inc., we hereby elect the Treasury Rate interest rate to be effective January 1, 1995. Very truly yours, PAR PHARMACEUTICAL, INC. By:_________________________ Name:_______________________ Title:______________________ SCHEDULE 4.02 ------------- List of Borrower's Subsidiaries ------------------------------- 1. Quad Pharmaceutical, Inc. 2. Par Printing Enterprises, Inc. 3. Advanced Biopharm Inc. 4. Generic Innovations, Inc. SCHEDULE 4.04 ------------- Governmental and Other Consents ------------------------------- 1. To the extent that Collateral includes rights under Licenses, the assignment of which is prohibited without the consent of the issuing governmental entity, the granting of a security interest therein under the Security Agreement may require the obtaining of such consent. No such consents have been obtained. 2. To the extent that Collateral includes rights under contracts, leases and other agreements (other than "Accounts" (as defined in the Uniform Commercial Code) or "general intangibles" for money due or to become due or with respect to Proceeds of such Collateral), the assignment of which is prohibited without the consent of the other parties thereto, the granting of a security interest therein under the Security Agreement may require the obtaining of such consents. No such consents have been obtained. 4. The execution and delivery of, and performance under, the Amended and Restated Agreement Concerning Term Loans, dated the date hereof, between Borrower and Lender (the "ACTL") may require the consent of the Rockland County Industrial Development Agency under the Bond. No such consent has been obtained. SCHEDULE 4.05 ------------- Pending Litigation ------------------ The Borrower is involved in minor litigation matters, incidental to the conduct of its business, but does not believe that the ultimate resolution thereof will have a material adverse effect on its financial condition. Three actions of which the Borrower is aware are: . Penny Kay Petrie Liability Lawsuit wherein P.K. Petri, et al, have initiated legal action against a physician, a pharmacy, Pfizer, Inc. and Goldline Laboratories, Inc. (the firm for which the Borrower manufactures product). This action has been referred to the Borrower's product liability insurance carrier. . Rubie Mae Dillon Products Liability Lawsuit wherein R.M. Dillon has initiated legal action against a physician and the Borrower. This action has been referred to the Borrower's product liability insurance carrier. . The Borrower has been named as a defendant in an action brought by Borschow Hospital and Medical Supplies, Inc., in the United States District Court for the District of Puerto Rico. The action seeks to recover approximately $62,000 for amounts allegedly due under a distributorship agreement between Borschow and Quad Pharmaceuticals, Inc. ("Quad"), as well as $1,200,000 in damages for alleged termination without cause of Borschow's purported exclusive distributorship for Quad. The Borrower received a warning letter on May 26, 1994, from the U.S. Food & Drug Administration ("FDA") setting forth certain alleged deviations from current good manufacturing practice regulations and alleged violations of related provisions of the Federal Food, Drug and Cosmetic Act. The warning letter does not limit the manufacture of the Borrower's product line nor suspend the review and approval of applications pending at FDA. FDA indicated that it will shortly complete its review of the Borrower's response. SCHEDULE 4.06 ------------- Compliance with Laws and Agreements ----------------------------------- The Borrower received a warning letter on May 26, 1994, from the U.S. Food & Drug Administration ("FDA") setting forth certain alleged deviations from current good manufacturing practice regulations and alleged violations of related provisions of the Federal Food, Drug and Cosmetic Act. The warning letter does not limit the manufacture of the Borrower's product line nor suspend the review and approval of applications pending at FDA. FDA indicated that it will shortly complete its review of the Borrower's response. SCHEDULE 4.07 ------------- Liens on Collateral ------------------- See Schedule 7.02 SCHEDULE 4.08 ------------- Other Entities -------------- Borrower sells inventory purchased from foreign manufacturers, at cost, to PRX Distributors, Ltd., a wholly-owned subsidiary of PRI and an affiliate of Borrower, and repurchases such inventory for sales to third parties in the ordinary course at prices charged to such other third parties. All other Affiliate Companies of Borrower are wholly-owned subsidiaries of the Borrower and are in all material respects inactive. Borrower was the surviving corporation of a merger with Par Merging Corp., a wholly-owned subsidiary of PRI. The Certificate of Merger was filed on August 8, 1991, in the New Jersey Secretary of State's Office. SCHEDULE 4.11 ------------- Tax Returns and Taxes --------------------- Income Taxes - ------------ 1. PRI is contesting the IRS position that credits for research activities are not permitted. In the event a determination is made that PRI was not entitled to such credits, a charge of approximately $1,000,000 will be incurred for income taxes. PRI believes that any such disallowance, and the resultant charge, would not have any material adverse effect on PRI's operations, liquidity or cash flow. Special tax counsel has been retained by PRI to resolve this matter and is presently in negotiations with the U.S. Treasury Department. 2. See also Schedule 4.02 regarding license fees to the State of New York. 3. See also Schedule 4.02 regarding Quad annual reports for 93 and 94 to the State of Indiana. SCHEDULE 4.12 ------------- Pension Plans, Etc. ------------------- The Borrower has a defined-contribution, Social Security integrated Retirement Plan providing retirement benefits to eligible employees as defined in the Plan. It also maintains a Retirement Savings plan whereby eligible employees are permitted to contribute from 1% to 12% of pay to this Plan. The Borrower contributes an amount equal to 50% of the first 6% of the pay contributed by the employee. The Borrower maintains a Defined Benefit Pension Plan covering eligible employees as defined in the Plan. The benefits under this Plan are based on the participants' length of service and compensation, subject to Employee Retirement Income Security Act of 1974 and Internal Revenue Service limitations. The funding policy for this Plan is to contribute amounts actuarially determined as necessary to provide sufficient assets to meet the benefit requirements of the Plan retirees. The plan's assets are invested in guaranteed deposit accounts. Effective October 1, 1989, the Company "froze" the Plan, accordingly, service costs are excluded from benefit accruals under the Plan. The discount rate used to measure the projected benefit obligation for the Plan is 7%. The expected long-term rate of return on plan assets in 1993 was 9%. The Plan's funded status and the amounts recorded on the Company's consolidated balance sheets are as follows (in thousands): 1993 1992 ------ ------ Vested benefit obligations $1,888 $1,763 Accumulated benefit obligations $1,888 $1,763 Projected benefit obligations $1,888 $1,763 Market value of assets 1,565 1,438 ------ ------ Projected benefit obligation in (323) (325) excess of market value Unrecognized net obligation at 757 808 September 30, 1987 Unrecognized net (gain) (151) (201) Adjustment for minimum liability (606) (607) --- --- Net recorded pension (liability) $ (323) $ (325) ====== ====== SCHEDULE 4.19 ------------- Environmental Matters --------------------- Borrower uses fuels, lubricants and other possibly hazardous materials normally used in the conduct of a pharmaceutical manufacturer, in quantities customarily used in the conduct of such business,which use is not in violation of any covenant contained in Section 6.10(b), (c) or (e) of this Agreement and no such substance is used in any manner which would be in violation of, or subject Borrower or any Affiliate Company, or any tenant of any of its real properties to a claim under or pursuant to ISRA, the Spill Compensation and Control Act, CERCLA, RCRH or any law or regulation promulgated by the New Jersey Department of Environmental Protection or any other state or federal governmental agency. See also Schedules 4.05 and 4.06. SCHEDULE 5.04 ------------- Dividends --------- Dividends and other distributions to PRI sufficient to enable it to pay dividends when due on the PRI Series A Convertible Preferred Stock and the payment of such dividends by PRI, pursuant to the terms of such Series A Convertible Preferred Stock as set forth in PRI's certificate of incorporation as in effect on the date hereof. SCHEDULE 6.05 ------------- Periodic Reporting Certificate ------------------------------ , 19 Midlantic Bank, National Association Metro Park Plaza P.O. Box 600 Edison, New Jersey 08818 Attn: Corporation Banking Department As required by Section 6.05(c) of that certain Amended and Restated Revolving Credit Agreement dated ______________, 1994 ( the "Loan Agreement") by and between you as Lender and PAR Pharmaceutical, Inc. (the "Borrower"), a review of the activities of the Borrower for the fiscal [year] [quarter] ending ______________, 19__ (the "Fiscal Period") has been made under my supervision with a view to determining whether the Borrower has kept, observed, performed and fulfilled all of its obligations under the Loan Agreement and all other agreements or undertakings contemplated thereby, and to the best of my knowledge, neither an Event of Default nor an Unmatured Event of Default (as such terms are defined in the Loan Agreement) has occurred and is continuing. I further certify that the amounts set forth below, with abbreviated descriptions, to the best of my knowledge accurately present amounts required to be calculated by various covenants of the Loan Agreement as of the last day of the Fiscal Period. Unless otherwise expressly specified herein, all terms used herein have the identical meanings as set forth in the Loan Agreement. 1. Section 5.01 - Maximum Capital Expenditures. ------------------------------------------- The aggregate Capital Expenditures for the _____ Fiscal Year to date was $ ___________. 2. Section 5.02 - Minimum Working Capital. -------------------------------------- The Working Capital as at the last day of the Fiscal Period was $____________. 3. Section 5.03 - Tangible Net Worth. --------------------------------- Tangible Net Worth as of the last day of the Fiscal Year was $_________. 4. Section 5.05 - Debt to Tangible Net Worth. ----------------------------------------- The ratio of Funded Debt to Tangible Net Worth as of the last day of the Fiscal Period was _______:_______. 5. Section 5.06 - Minimum Interest Coverage. ---------------------------------------- The ratio of Adjusted EBIT to interest expense for the four quarters ended ___________, 199_ was ___________:_____________. 6. Section 5.07 - Minimum Percentage of PRI. ---------------------------------------- The assets of the Borrower comprised at least 80% of the consolidated assets of Pharmaceutical Resources, Inc. as of the last day of the Fiscal Period. Very truly yours, SCHEDULE 7.01 ------------- Indebtedness ------------ PAR PHARMACEUTICAL, INC. Amount* Lender Maturity Date ------ ------------- $1,312,083 Urban National Bank May 1, 2001 951,889 Midlantic National Bank Feb. 1, 1999 2,454,555 Midlantic National Bank Feb. 1, 1999 1,822,269 Midlantic National Bank Feb. 1, 1999 21,123 Urban National Bank Sept. 15, 1996 17,267 Urban National Bank Oct. 15, 1996 17,693 Urban National Bank Nov. 15, 1996 17,821 Urban National Bank March 15, 1997 18,511 Urban National Bank Feb. 15, 1997 15,859 Urban National Bank Oct. 15, 1996 18,309 Urban National Bank March 15, 1997 17,286 Urban National Bank Feb. 15, 1997 22,180 Urban National Bank March 15, 1997 29,844 Urban National Bank Sept. 15, 1997 * as of 10/1/94 SCHEDULE 7.02 ------------- Other Liens ----------- File ---- Secured Party Jurisdiction Number Filing Date ------------- ------------ ------ ----------- Copelco Credit Corporation New York 93-1300 4/27/93 10 Mountainview Road Secretary of State Book 0603 Upper Saddle River, NJ 07458 Page 1205 Copelco Credit Corporation Rockland County 087429 4/23/93 10 Mountainview Road Clerk Upper Saddle River, NJ 07458 SCHEDULE 7.10 ------------- Transactions with Affiliates ---------------------------- See Schedule 4.08 EX-10.34.1 4 RESTATED REVOLVING LOAN NOTE EXHIBIT 10.34.1 RESTATED REVOLVING LOAN NOTE ------------------- $ 7,000,000.00 Date: November 30, 1994 FOR VALUE RECEIVED, the undersigned, PAR PHARMACEUTICAL, INC., a New Jersey corporation ("Borrower"), hereby unconditionally promises to pay to the order of MIDLANTIC BANK, NATIONAL ASSOCIATION ("Lender") upon the Maturity Date, as defined in the Agreement (as hereinafter defined), the principal sum of Seven Million Dollars ($7,000,000.00) or, if different, the aggregate unpaid principal amount of all Revolving Loans made by Lender to Borrower pursuant to the Amended and Restated Revolving Credit Agreement, dated the date hereof, and any amendments, extensions or renewals thereof (the "Agreement"), and to pay interest as hereinafter provided on all principal of Revolving Loans remaining unpaid from time to time, from the date of each such Revolving Loan until its payment in full. Both principal and interest hereunder shall be payable in lawful money of the United States of America, and in immediately available funds, at the office of Bank located at Metropark Plaza, P.O. Box 600, 499 Thornall Street, Edison, New Jersey 08818 or at such other place as the holder hereof may from time to time designate in writing. All of the provisions of the Agreement are incorporated herein by reference and, in the event of ambiguity or inconsistency between any provisions of the Agreement and this Note, the provisions of the Agreement shall prevail. Any term in initial capitals in this Note and not otherwise defined herein shall have the meaning ascribed thereto in the Agreement. Interest on principal amounts hereunder shall be payable monthly on the first Business Day in each calendar month, commencing January 1, 1995 and on the final day when said principal amounts become due, at a fluctuating interest rate per annum equal at all times to the prime rate of Lender in effect from time to time; provided if an Event of Default occurs the principal (and, to the extent permitted by law, interest) payable hereunder (whether before or after judgment) shall bear interest payable on demand, from the day when said Event of Default occurs until it is paid in full, at a fluctuating interest rate per annum equal at all times to the Default Rate (as defined in the Agreement). Each change in the fluctuating interest rate hereunder shall take effect simultaneously with the corresponding change in the prime rate. The prime rate applicable to this Note shall be the rate of interest announced from time to time by Lender as its "prime rate" or "prime lending rate". This rate of interest is determined from time to time by Lender as a means of pricing some loans to its customers and it is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by Lender to any particular class or category of customers. Lender shall present a monthly invoice to Borrower reflecting the interest payment due, but any failure or delay by Lender in submitting invoices for interest payments shall not discharge or relieve Borrower of the obligation to make such interest payments. If not otherwise paid when due, the Borrower authorizes the Lender to debit any loan or deposit account maintained by it with the Lender for accrued interest, as and when due. Such authorization shall not affect the Borrower's obligation to pay when due all amounts payable hereunder whether or not there are sufficient funds in any such accounts. The foregoing shall be in addition to and not in limitation of any rights of set-off which the Bank may have. This Note has been issued under the Agreement and the Agreement contains, among other terms, provisions for acceleration of the indebtedness hereunder upon the happening of certain stated events. Notwithstanding any other provision of this Note or the Agreement, the maturity hereof shall be accelerated as provided in the Agreement upon termination of the Agreement by Borrower. If this Note is mutilated, lost, stolen or destroyed, then upon surrender thereof (if mutilated) or receipt of evidence and indemnity (if lost, stolen or destroyed) Borrower shall execute and deliver a new promissory note of like tenor, which shall show all payments which shall have been made on account of the principal hereof. This Note shall be subject to prepayment on such terms and conditions and upon payment of such prepayment penalty, if any, as is provided in the Agreement. Borrower and any endorser, surety or guarantor of this Note hereby each (a) waive diligence, presentment for payment, demand, notice of dishonor, protest, notice of protest and all other demands and notices in connection with the delivery, performance and enforcement of this Note, except as may be specifically otherwise provided in the Agreement, (b) consent that, without notice to or release of the liability of any such party, the obligations of any party may from time to time, in whole or part, be renewed, extended, modified, accelerated, compromised, settled or released by Lender, and (c) waive all defenses based on suretyship or impairment of collateral. IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower has executed this Note as of the date first above written. PAR PHARMACEUTICAL, INC. By: /s/ Robert Edinger -------------------- Name: Robert Edinger Title: Vice President [CORPORATE SEAL] Attest: /s/ Kenneth G. Mosesian - --------------------------- Title: Assistant Secretary 2 EX-10.35 5 AMENDED & RESTATED AGRMT. CONCERNING TERM LOANS EXHIBIT 10.35 AMENDED AND RESTATED AGREEMENT CONCERNING TERM LOANS THIS AMENDED AND RESTATED AGREEMENT CONCERNING TERM LOANS (this "Agreement"), dated November 30, 1994 between MIDLANTIC BANK, NATIONAL ASSOCIATION, formerly known as Midlantic National Bank, a national banking association ("Lender") having an office at Metro Park Plaza, P.O. Box 600, 499 Thornall Street, Edison, New Jersey 08818 and PAR PHARMACEUTICAL, INC., a New Jersey corporation ("Borrower") having its chief executive office at One Ram Ridge Road, Spring Valley (Village of Chestnut Ridge), New York 10977. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Borrower and Lender entered into that certain Agreement Concerning Term Loans, dated as of February 20, 1992 (the "1992 Agreement"); and WHEREAS, Borrower and Lender are parties to that certain Revolving Credit Agreement, dated February 20, 1992 (the "1992 Revolving Credit Agreement"); and WHEREAS, simultaneously with the execution and delivery of this Agreement, Borrower and Lender are entering into that certain Amended and Restated Revolving Credit Agreement (the "Amended and Restated Revolving Credit Agreement") amending and restating the 1992 Revolving Credit Agreement; and WHEREAS, among other things, for purposes of securing the Loans but not the Revolving Loan (as such terms are hereinafter defined) Borrower and Lender, desire to continue the grant of the security interests granted to Lender under the 1992 Revolving Credit Agreement; WHEREAS, the parties desire to amend and restate the 1992 Agreement; NOW THEREFORE, in consideration of premises and the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound hereby, agree that the 1992 Agreement shall be and hereby is amended and restated in its entirety as follows: (i) Definitions. ----------- "1987 AGREEMENT" shall mean the Term Loan Agreement, dated September 18, 1987, as amended and modified prior to the date hereof, between Borrower and Lender; "$1,900,000 MORTGAGE" shall mean the Indenture, dated September 18, 1987, between Borrower and Lender in the amount of $1,900,000 against the Clarkstown Premises; "$1,900,000 NOTE" shall mean Borrower's $1,900,000 Note, dated September 18, 1987 made payable to the order of North, as amended by the Amendment to Note ($1,900,000 Note) dated February 20, 1992; "$1,900,000 SECURITY DOCUMENTS" shall be a collective term meaning the Assignment of Leases, the $1,900,000 Mortgage, the No. 2 Security Agreement and the Lease Assignment; "$5,600,000 MORTGAGE" shall mean that certain indenture, dated September 18, 1987, between Borrower and Lender in the amount of $5,600,000 against the Clarkstown Premises; "$5,600,000 NOTE" shall mean Borrower's $5,600,000 Term Note, dated September 18, 1987, made payable to North, as amended by the Amendment to Term Note ($5,600,000.00 Term Note) dated February 20, 1992; "AMENDMENT NO. 1" - shall have the meaning ascribed to such term in Section 2; "AMENDMENT NO. 2" - shall have the meaning ascribed to such term in Section 3; "AMENDMENTS TO TERM NOTES" - shall be a collective term meaning the Amendment No. 1 and the Amendment No. 2; "ASSIGNMENT OF LEASES" shall mean the Assignment of Leases, Rents and Profits, dated September 17, 1987, and recorded in the Rockland County, New York Clerk's Office (the "Office") on September 25, 1987 in Liber 255, page 2602; "BOND" shall mean the $4,100,000 County of Rockland Industrial Development Agency (the "Agency") Industrial Development Bonds (Par Pharmaceutical, Inc. Project - 1984 Series A) No. AR-1 or any modification, amendment, substitution or replacement of such Bond. "CLARKSTOWN PREMISES" shall mean Borrower's premises at 75 Brenner Drive, Clarkstown, New York; "COLLATERAL" shall have the meaning ascribed to such term in Schedule A to this Agreement; - -------- - "DEFAULT RATE" shall mean a rate of interest equal to two percent (2%) per annum in excess of the rate otherwise applicable at the time to the Term Loan; "FISCAL YEAR" shall mean the 365 or 366 day period ending on the Saturday closest to September 30th of each year; "GENERAL SECURITY AGREEMENT" shall mean the General Security Agreement, dated May 24, 1991 from Borrower to Lender; "IDA LOAN" shall mean the outstanding principal balance under the Bond; "LEASE ASSIGNMENT" shall mean the Assignment of Leases-Rents, dated September 18, 1987 recorded in the Office, on September 25, 1987 in Liber 255, page 2597; "LEASE GUARANTY" shall mean the Loan Guaranty, dated October 1, 1984 between Borrower and Lender to secure payment of the Bond; "LOANS" shall be a collective term which means the Term Loans and the IDA Loan; "NO. 1 SECURITY AGREEMENT" shall mean the Security Agreement, dated September 18, 1987 between Borrower and Lender wherein the $5,600,000 debt is referenced granting Lender a security interest in machinery and equipment at the Clarkstown Premises; "NO. 2 SECURITY AGREEMENT" shall mean the Security Agreement, dated September 18, 1987, between Borrower and Lender wherein the $1,900,000 debt is referenced granting Lender a security interest in fixtures and personal property located at the Clarkstown Premises; "NO. 1 TERM LOAN" shall mean the outstanding principal balance under the $5,600,000 Note; -2- "NO. 2 TERM LOAN" shall mean the outstanding principal balance under the $1,900,000 Note; "NORTH" shall mean Midlantic National Bank/North which has merged with and into Lender; "NOTES" shall mean the $5,600,000 Note and the $1,900,000 Note, and all amendments, modifications, substitutions and replacements thereof; "RELEVANT DOCUMENTS" - shall have the meaning ascribed to said term in Section 17; "REVOLVING LOAN" shall be a collective term meaning the loans advanced by Lender under the Amended and Restated Revolving Credit Agreement; "TERM LOAN" or "TERM LOANS" shall be a collective term referring to both the No. 1 Term Loan and the No. 2 Term Loan; (ii) No. 1 Term Loan - Principal Payments. The $5,600,000 ------------------------------------ Note has been amended by an Amendment to Term Note ($5,600,000.00 Term Note) dated February 20, 1992 (the "Amendment No. 1") and the principal balance remaining outstanding under the No. 1 Term Loan shall continue to be repaid as follows: (a) Fifty (50) consecutive equal monthly installments of $47,202.98, each on the first day of each calendar month, continuing on December 1, 1994 and continuing on the first day of each month thereafter until February 1, 1999 when the unpaid balance of principal and any accrued interest shall be due and payable. (iii) No. 2 Term Loan - Principal Payments. The $1,900,000 ------------------------------------ Note has been amended by an Amendment to Note ($1,900,000.00 Note), dated February 20, 1992 (the "Amendment No. 2") and the principal balance outstanding under the No. 2 Term Loan shall continue to be repaid as follows: (b) Fifty (50) consecutive equal monthly installments of $18,305.56, each on the first day of each calendar month, continuing on December 1, 1994 and continuing on the first day of each month thereafter until February 1, 1999 when the unpaid balance of principal and any accrued interest shall be due and payable. (iv) IDA Loan - Principal Payments. On the first day of each ----------------------------- calendar month hereafter, Borrower shall pay Lender an amount (the "IDA Payment") equal to the difference between $35,043.63 and the amount of the principal payment due on that date pursuant to the terms of the principal repayment schedule on the face of the Bond. Each IDA Payment shall be applied by Lender against the installments of principal due under the IDA Loan in the inverse order of their maturities. (v) Amendments to 1987 Agreement. ---------------------------- (a) Section 4.01 of the 1987 Agreement is hereby deleted in its entirety and is hereby replaced, mutatis mutandis, with the provisions of Articles V and VI of the Amended and Restated Revolving Credit Agreement, including, without limitation, Sections 5.01 through 5.07 and Sections 6.01 through 6.11. (b) Section 4.02 of the 1987 Agreement is hereby deleted in its entirety and replaced, mutatis mutandis, with the provisions of Article VII of the Amended and Restated Revolving Credit Agreement, including, without limitation, Sections 7.01 through 7.11. (c) Without in any manner limiting the generality of the second sentence of Paragraph 14 hereof, Section 5.01 of the 1987 Agreement and the corresponding provisions of each of the agreements, -3- mortgages and instruments listed on Schedule 14 attached hereto, are ----------- hereby amended to the extent necessary to provide therein for the same grace and cure periods and dollar thresholds as provided in Article VIII of the Amended and Restated Revolving Credit Agreement. (vi) Security Interest. In order to continue the grant of the ----------------- security interest granted by Borrower to Lender as security for the due and punctual payment and performance of the Loans, the Notes and the obligations of Borrower under the Relevant Documents and the Borrower hereby confirms its grant to Lender of a security interest in, and hereby pledges, transfers and assigns to Lender, and grants to Lender a security interest in, all of the Collateral wherever located and whether now existing or hereafter created and whether now owned or hereafter acquired by Borrower, and all accessions and additions thereto, replacements and substitutions therefor, and proceeds and products thereof. The security interest granted hereby, and all remedies and other rights stated or referred to in this Agreement or any of the Relevant Documents, shall continue in full force and effect until full and final payment and performance of the Loans and all other obligations of Borrower under or referred to in the Notes or other Relevant Documents. (vii) Remedies. -------- (a) In case any one or more events of default as defined under any of the Relevant Documents shall occur and be continuing, Lender shall have the right, in addition to all other rights and remedies provided by law or by this Agreement or any other Relevant Document, to proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained in this Agreement, any Relevant Document or for an injunction against a violation of any of the terms hereof or thereof or in and of the exercise of any power granted hereunder or thereby or by law and, in addition, Lender may, without being required to give any notice, except as expressly provided by a Relevant Document or as may be required by mandatory provisions of law, (i) apply the cash, if any, then or thereafter held by it as Collateral in the manner specified in the Relevant Document(s), and (ii) enter upon the premises where any of the Collateral is located and take possession of, and at Lender's option remove or sell in place, any or all thereof, at public or private sale, for cash, upon credit or for future delivery, and at such price or prices as Lender may deem satisfactory. Lender may require Borrower to assemble all or any part of the Collateral and make it available to Lender at a place to be designated by Lender which is reasonably convenient. Any holder of an obligation under the Relevant Document(s) may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale) and thereafter hold the same absolutely, free from any right or claim of whatsoever kind. Upon any such sale Lender shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely free from any claim or right of whatsoever kind, including any equity or right of redemption of Borrower. Lender shall give Borrower ten (10) days' prior written notice of its intention to make any such public or private sale. Lender and Borrower agree that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the Uniform Commercial Code. Such notice, in case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as Lender may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as Lender may determine. Lender shall not be obligated to make such sale pursuant to any such notice. Lender may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be adjourned. In case of any sale or all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by Lender until the selling price is paid by the purchaser thereof, but Lender shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. -4- (b) In case any one or more events of default as defined under any of the Relevant Documents shall occur and be continuing, Lender shall have the right and power, to the extent permitted by law, to take possession of all or any part of the Collateral, and to exclude Borrower and all persons claiming under Borrower wholly or partly therefrom, and thereafter to hold, store, and/or use, operate, manage and control the same. Upon any such taking of possession, Lender may, from time to time, at the expense of Borrower, make all such replacements, alterations, additions and improvements to and of the Collateral as Lender may deem proper. In such case, Lender shall have the right to manage and control the Collateral and to carry on the business and to exercise all rights and powers of Borrower in respect thereto as Lender shall deem best, including the right to enter into any and all such agreements with respect to the leasing and/or operation of the Collateral or any part thereof as Lender may deem fit; and Lender shall be entitled to collect and receive all rents, issues, profits, fees, revenues and other income of the same and every part thereof. Such rents, issues, profits, fees, revenues and other income shall be applied to pay the expenses of holding and operating the Collateral and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which Lender may be required or may elect to make, if any, for taxes, assessments, insurance and other charges upon the Collateral or any part thereof, and all other payments which Lender may be required or authorized to make under any provision of the Relevant Document (including legal costs and reasonable attorney's fees). The remainder of such rents, issues, profits, fees, revenues and other income shall be applied to the payment of the obligations under the Relevant Document in such order or priority as Lender shall determine (subject to the provisions of such Relevant Document) and, unless otherwise provided by law or by a court of competent jurisdiction, any surplus shall be paid over Borrower. (viii) Continued Effectiveness of Certain Agreements. --------------------------------------------- (a) the $5,600,000 Mortgage and the No. 1 Security Agreement will, after giving effect to the transactions contemplated hereby and the execution and delivery of this Agreement, continue to secure the repayment of the $5,600,000 Note, as amended; and (b) the $1,900,000 Security Documents will, after giving effect to the transactions contemplated hereby, and the execution and delivery of this Agreement, each continue to secure the repayment of the $1,900,000 Note, as amended; and (c) the General Security Agreement will, after giving effect to the transactions contemplated hereby and the execution and delivery of this Agreement, continue to secure the repayment of all present and future obligations (other than the Revolving Loan) of Borrower to Lender; and (d) the Lease Guaranty will, after giving effect to the transactions contemplated hereby and the execution and delivery of this Agreement, continue to secure the repayment of the IDA Loan. (ix) Charge Against Borrower. If not otherwise paid when due, ----------------------- Lender may, at its discretion, charge the amount of any payment of principal or interest due on any of the Loans or any other amount that shall become due from Borrower to Lender under this Agreement or any of the Relevant Documents, to any checking or loan account of Borrower or apply any Collateral proceeds or other funds received by Lender against payment of any such amount. (x) Lawful Rate. No amount due hereunder or under the Notes ----------- which is contracted for, charged or collected shall exceed the maximum rate of interest allowed from time to time by applicable law. If the interest rate calculated in accordance with or under this Agreement or the Notes would at any time exceed the maximum permitted by any law then applicable, then for such period as such rate would exceed the maximum permitted by said law (and no longer) such rate of interest payable shall be reduced to the maximum permitted by such law. -5- (xi) Termination of Term Loan. Notwithstanding any other ------------------------ provision of this Agreement or any other agreement between Lender and Borrower or any provision of the Notes to the contrary, if Borrower terminates the Amended and Restated Revolving Credit Agreement and establishes a borrowing or banking relationship with any third party while any of the Loans remains outstanding, then the Loans and all other obligations of Borrower to Lender shall automatically terminate and be due and payable, with accrued interest. (xii) Notices. All notices and other communications relating ------- to this Agreement or any of the Notes (or to any of the Relevant Documents) shall be in writing and shall be delivered in person (including by overnight carrier) or sent by first class mail, postage prepaid, addressed as follows: If to Lender:Midlantic Bank, National Association Corporate Banking Department P.O. Box 60 Edison, New Jersey 08818 If to Borrower: Par Pharmaceutical, Inc. One Ram Ridge Road Spring Valley, New York 10977 Attn: Chief Financial Officer with a copy to: Hertzog, Calamari & Gleason 100 Park Avenue New York, New York 10017-5582 Attn: Stephen A. Ollendorff, Esq. or to such other address as the respective party or its successors or assigns may subsequently designate by proper notice. All such notices and other communications shall be deemed to have been duly given or served on the dates (i) on which personally delivered, or (ii) the date receipt by mail is signed for if sent by registered mail or (iii) if sent by other than registered mail or if returned by the Postal Office because refused or undeliverable or if its receipt is undated, then 5 calendar days after the same shall have been deposited in the United States Mail. (xiii) Cross Default; Cross Collateral. Borrower hereby agrees ------------------------------- that (a) all other agreements between Borrower and Lender or any of its affiliates are hereby amended so that a default under this Agreement (after giving effect to all applicable grace or cure periods, if any) is a default under all such other agreements and a default under any one of such other agreements (after giving effect to all applicable grace or cure periods, if any) is a default under this Agreement, and (b) the collateral securing the Term Loans secures the obligations of Borrower now or hereafter outstanding under all other agreements between Borrower and Lender or any of its affiliates (other than the Amended and Restated Revolving Credit Agreement) and the collateral pledged under any other agreement with Lender or any of its affiliates (other than real property mortgages on real estate located in the State of New York, which mortgages continue to secure the loans for which granted) secures the obligations of Borrower under the Loans and under this Agreement. (xiv) Prior Agreements. Except, and solely to the extent that ---------------- the agreements, mortgages and instruments listed on Schedule 14 ----------- attached hereto have been specifically amended, modified or supplemented by or pursuant to this Agreement, all of the terms and conditions of such agreements, mortgages and instruments shall remain in full force and effect. If any term, provision or condition of any of the agreements, mortgages or instruments listed on Schedule 14 attached hereto is inconsistent or conflicts with ----------- the terms, provisions or conditions of this Agreement, or of the Amendments to Term Notes, then the terms -6- of this Agreement or the Amendments to Term Notes, as the case may be, shall govern to the extent of such inconsistency or conflict. (xv) No Waiver of Default. Borrower hereby acknowledges and -------------------- agrees that the execution, delivery and performance of this Agreement by Lender is not intended, and shall not be deemed, to be a waiver or release of any default or event of default as defined in the agreements and notes listed in Schedule 14 attached hereto, as such agreements and notes are amended - ----------- and supplemented by or pursuant to this Agreement, and that Lender reserves all of its rights and remedies to which it may be entitled, whether such default or event of default occurred at, before or after the date of this Agreement. (xvi) No Defenses to Payment. Borrower waives and forever ---------------------- releases and discharges Lender, its officers, directors, agents, successors and assigns from any and all claims, actions, causes of action, suits, counterclaims, set-offs, rights and defenses, known and unknown, against Lender (its officers, directors, agents, successors or assigns), Borrower its successors or assignees have or hereafter can, shall or may, have, for, upon, or by reason of any matter, cause or thing whatsoever up to and including the date of this Amendment; and Borrower represents and warrants to Lender that Borrower has no defenses to the repayment of any or all of the Indebtedness of Borrower to Lender and has no claim, right of set-off or cause of action against Lender. (xvii) Expenses. Borrower hereby agrees to reimburse the Lender -------- upon demand for all out-of-pocket costs, charges, liabilities, documentary stamp taxes, intangible taxes, any other taxes due under any applicable state law (exclusive of taxes measured or imposed in terms of the Lender's net income) and any other expenses of the Lender (including, without limitation, (i) reasonable fees and disbursements of (a) counsel to Lender and (b) --- agents of Lender not regularly in its employ and (ii) the allocated cost of services of Lender's in-house counsel (except such costs as are clearly mere duplications of the costs under (i)(a)) in connection with (a) the preparation, negotiation, interpretation, execution and delivery of this Amendment, the Note, any of the agreements or notes listed on Schedule 14 of this ----------- Agreement and any other agreements or documents relating thereto (collectively the "Relevant Documents"), (b) the making of the Loans or any of the Relevant Documents, (c) any amendments, modifications, consents or waivers in respect thereof, (d) any enforcement of any of the Relevant Documents, (e) any proceedings with respect to any of the Relevant Documents or with respect to the bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation of the Borrower or any party to any Relevant Document, and --- (f) any claims by third parties relating to the foregoing. (xviii) Gender. Throughout this Amendment, the masculine shall ------ include the feminine and vice versa and the singular shall include the plural and vice versa, unless the context of this Amendment indicates otherwise. (xix) Binding Effect; Governing Law. This Amendment shall be ----------------------------- binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Lender. This Amendment and the other documents delivered in connection with this Amendment shall be governed by, and construed in accordance with, the internal laws (without the applicability of the conflict of laws) of the State of New Jersey applicable to contracts made and performed in the State of New Jersey. (xx) Execution in Counterparts. This Amendment may be ------------------------- executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. (xxi) Severability of Provisions. Any provision of this -------------------------- Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition -7- or unenforceability without invalidating the remaining provisions of this Amendment or affecting the validity or enforceability of such provision in any other jurisdiction. (xxii) Headings. The headings preceding the text of this -------- Amendment are inserted solely for convenience of reference and shall not constitute a part of this Amendment nor affect its meaning, construction or effect. (xxiii) Exhibits and Schedules. All of the Exhibits and ---------------------- Schedules to this Amendment are hereby incorporated by reference herein and made a part hereof. (xxiv) Waivers and Consents Relating to Remedies. In connection ----------------------------------------- with any action or proceeding arising out of or relating in any way to this Amendment or the Amended Agreement, any of the Loans, any of the other Relevant Documents, any of the collateral securing any of the Loans, or any act or omission relating to any of the foregoing: (a) BORROWER AND LENDER WAIVE THE RIGHT TO TRIAL BY JURY and neither Borrower nor Lender will seek to consolidate any action in which the right to a jury trial has been waived with any action in which a jury trial cannot be or has not been waived. (b) Borrower and Lender consent to the jurisdiction of any court of the State of New Jersey and of any federal court located in New Jersey as well as to the jurisdiction of all courts from which an appeal may be taken from such courts, and waive any and all objections they might have as to venue in any such court, including, without limitation, any right to object to such court as inconvenient forum; (c) Borrower waives personal service of any summons, complaint or other process in connection with any such action or proceeding and agrees that service thereof may be made as Lender may elect, by certified mail directed to Borrower at the location provided for notices to Borrower under the Amended Agreement or, in the alternative, in any other form or manner permitted by law; (d) Borrower agrees that all of the Collateral constitutes equal security for all of the secured obligations of Borrower to Lender, and agrees that Lender shall be entitled to sell, retain or otherwise deal with any or all of the Collateral, in any order or simultaneously as Lender shall determine in its sole and absolute discretion, free of any requirement for the marshalling of assets or other restriction upon Lender in dealing with the Collateral; (e) Borrower agrees that Lender may proceed directly against Borrower for collection of any or all of the obligations of Borrower to Lender without first selling, retaining or otherwise dealing with any of the Collateral; (f) Borrower waives demand, presentment, notice of dishonor or protest of any instruments either of Borrower or others which may be included in the Collateral; and (g) Borrower consents to (a) any extension, postponement of time or payment or other indulgence, (b) any substitution, exchange or release of any collateral, (c) any addition to, or release of, any party or person primarily or secondarily liable, and (d) any acceptance of partial payments on any accounts or instruments and the settlement, compromising or adjustment thereof. (xxv) Application of Proceeds. Borrower hereby agrees that ----------------------- upon the occurrence of a default or an event of default as defined under any of the Relevant Documents or the Amended and Restated Revolving Credit Agreement, Lender shall be entitled to apply the proceeds of any payment made to Lender by or on behalf of Borrower, including, without limitation the proceeds arising from any of the collateral securing any of the obligations of Borrower to Lender, in a manner and against the obligation or obligations -8- as determined in the sole and absolute discretion of Lender; provided, however, if Lender takes affirmative action to enforce any of its remedies in order to realize against any of the collateral, any proceeds received by Lender as a result of any such action shall be applied first against secured obligations and then against any unsecured obligations. (xxvi) Agreement; Full Force and Effect. Except, and solely to -------------------------------- the extent, that the same has been specifically modified, amended or supplemented herein, all of the terms and conditions of the Agreement and the Relevant Documents, shall remain in full force and effect. (xxvii) Conflicts with Agreement. If any term, condition or ------------------------ provision of this Amendment is inconsistent or conflicts with the term, condition or provision of the Agreement or any Relevant Document, the term, condition or provision of this Amendment shall govern to the extent of such inconsistency or conflict. (xxviii) No Waiver. Borrower hereby acknowledges and agrees --------- that the execution, delivery and performance of this Amendment by Lender is not intended, and shall not be deemed, to be a waiver or release of any default or event of default as defined under any of the Relevant Documents or as defined under the Amended and Restated Revolving Loan Agreement, and that Lender reserves all of its rights and remedies to which it may be entitled, whether such default or event of default occurred at, before or after the date hereof. (xxix) Entire Agreement. This Amendment amends and supplements ---------------- the Agreement and otherwise supersedes, with respect to this Amendment's subject matter, all prior and contemporaneous agreements, understandings or conditions between Borrower and Lender. No amendment or waiver of any provision of this Amendment, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender, and then such waiver or consent shall be effective only in the specific instance and for this specific purpose for which given. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals or caused these presents to be signed by their proper corporate officers and their proper corporate seals to be hereto affixed the day and year first written above. (SEAL) PAR PHARMACEUTICAL, INC. ATTEST: By: /s/ Kenneth G. Mosesian By: /s/ Robert Edinger ------------------------- -------------------- Assistant Secretary Robert Edinger, Vice President MIDLANTIC BANK, NATIONAL ASSOCIATION By: /s/ Peter J. Cahill --------------------- -9- AFFIRMATION ----------- In order to induce Lender to enter in this Amendment, each of the undersigned hereby acknowledges and agrees to the terms and conditions set forth above and hereby confirms to Lender that each guarantee and other Document to which it is a party (as each of the same has been amended or modified from time to time) remains in full force and effect and continues to secure all current and future obligations of Borrower to Lender (except that security interests in collateral no longer secure the Revolving Loan), including, without limitation, all obligations under the Notes and the other Relevant Documents. IN WITNESS WHEREOF, the undersigned have executed this Affirmation as of November 30, 1994. PHARMACEUTICAL RESOURCES, INC. By: /s/ Robert Edinger ------------------------------- Robert Edinger, Vice President PAR PRINTING ENTERPRISES, INC. By: /s/ Robert Edinger ------------------------------- Robet Edinger, Vice President GENERIC INNOVATIONS, INC. By: /s/ Robert Edinger ------------------------------- Robet Edinger, Vice President ADVANCED BIOPHARM, INC. By: /s/ Robert Edinger ------------------------------- Robet Edinger, Vice President SCHEDULE A ---------- The term "Collateral" shall mean: (1) ALL ACCOUNTS, which term shall mean all items described in the definition thereof contained in the Uniform Commercial Code as in effect from time to time in the State of New Jersey (referred to hereinafter in this Schedule as the "UCC") and all of the following, whether or not so described (in all cases whether now existing or hereafter created): all obligations of any kind at any time due or owing to Borrower and all rights of Borrower to receive payment or any other consideration (whether classified under the UCC or the law of any other state as accounts, accounts receivable, contract rights, chattel paper, general intangibles, or otherwise) including without limitation invoices, contract rights, accounts receivable, general intangibles, choses-in-action, notes, drafts, acceptances, instruments and all other debts, obligations and liabilities in whatever form owing to Borrower from any person, firm, corporation, governmental authority or other entity, together with all security for any thereof, and all of Borrower's rights to goods sold (whether delivered, undelivered, in transit or returned), represented by any of the foregoing, together with all proceeds and products of any of the foregoing. (2) ALL INVENTORY, which term shall mean all items described in the definition thereof contained in the UCC and all of the following, whether or not so described (in all cases whether now owned or hereafter acquired by Borrower and wherever located): all goods, merchandise, or other personal property held by Borrower for sale or lease or to be furnished under labels and other devices, names or marks affixed thereto for purposes of selling or identifying the same or the seller or manufacturer thereof, and all right, title and interest of Borrower therein and thereto; all raw materials, work or goods in process; and all materials and supplies of any kind or description used or usable in connection with the manufacture, packaging, shipping, advertisement, sale or finishing of any of the foregoing, together with all proceeds and products of any of the foregoing. (3) ALL EQUIPMENT, which term shall mean all items described in the definition thereof contained in the UCC and all of the following, whether or not so described (in all cases whether now owned or hereafter acquired by Borrower and wherever located): all of Borrower's equipment, machinery, furniture, fixtures, motor vehicles, parts, supplies and tools, and all other tangible personal property similar to any of the foregoing, and all repairs, modifications, alterations, replacements, additions, controls and operating accessories therefor, and all accessions and additions thereto, together with all proceeds and products of any of the foregoing. (4) All guarantees, security and liens for payment of any ACCOUNTS and all documents of title, policies or certificates of insurance, insurance proceeds, proceeds of condemnation or other seizure, securities, chattel paper, and other documents and instruments evidencing or pertaining to any thereof; all claims of Borrower against third parties for loss of or damage to, or otherwise relating to, any of the COLLATERAL; and all files, correspondence customer lists, computer programs, tapes, discs, and related data processing software, owned by Borrower or in which Borrower has an interest, which contains information identifying any of the COLLATERAL or identifying any account debtor or the amount owed by same, or which would otherwise be necessary or helpful in the realization of any of the COLLATERAL. (5) All moneys, securities, drafts, notes, items, contract rights, leases, licenses (other than ANDA's or NDA's) and general intangibles, and all general or special deposits, balances, sums, proceeds and credits of Borrower. (6) All trade names, trademarks, trademark registrations, copyrights, patents, patent applications and licenses, and other franchises and licenses in which Borrower has an interest, and all other intangible personal property similar to any of the foregoing. (7) All other property of Borrower. (8) All rights and remedies which Borrower might exercise with respect to any of the foregoing. (9) All accessions and additions to, replacements and substitutions for, and proceeds and products of, the items described in the preceding paragraphs (l) through (8). Schedule 14 List of Agreements and Notes ---------------------------- 1. The 1987 Agreement 2. The $5,600,000 Note 3. The $5,600,000 Mortgage 4. The No. 1 Security Agreement 5. The $1,900,000 Note 6. The $1,900,000 Mortgage 7. The No. 2 Security Agreement 8. The Lease Assignment 9. The Assignment of Leases 10. The Lease Guaranty 11. The General Security Agreement EX-10.36 6 LETTER AGREEMENT DTD EXHIBIT 10.36 PAR PHARMACEUTICAL, INC. October 13, 1994 Mr. Robert M. Fisher, Jr. 74 Turtleback Lane West New Canaan, CT 06840 Dear Bob: I am pleased to provide you with this new offer letter which supersedes the initial offer letter signed by you and Par Pharmaceutical on October 3, 1993. Par and you mutually agree that all provisions of the October 3, 1993 offer letter are null and void upon signing this new offer letter. Going forward, following are the basic terms of your employment with Par Pharmaceutical, Inc. and/or Pharmaceutical Resources, Inc. (individually or collectively sometimes referred to as the "Company") as Vice President - Corporate Development, Sales and Marketing. Department: Officers Reporting to: Mr. Kenneth I. Sawyer Effective Date: October 13, 1994 Initial Salary:$14,166.67 a month, $170,000 annually, to be reviewed on an annual basis and may be considered for an adjustment by Par to reflect performance and responsibilities. Bonus: You will be eligible for consideration for an annual bonus, consistent with a company program, based on both your performance and the performance of the Company. Benefits: Group Insurance: Health, life and long-term disability insurance programs are provided to employees and their dependents by the Company, upon payment of the applicable premium amount. Vacation: You will be entitled to up to four weeks of paid vacation annually. Automobile: Par will provide you with the use of an automobile, including reimbursement of all related maintenance, fuel, repair, insurance and other costs. Other: You will be eligible to participate in the Company's 401(K) Plan, company sponsored retirement plan, and our Employee Stock Purchase Plan upon meeting the Company's specified eligibility requirements for each plan. Stock: In addition to the 10,000 stock options you were granted upon commencing employment, I will recommend to the Board of Directors that you be granted options to purchase 20,000 additional shares of PRI common stock at an exercise price per share equal to the closing price of PRI common stock on the date of the grant by the Compensation Committee based on standard terms and conditions of the Board of Directors. Termination/Change of Control:Your employment by Par is subject to the following provisions: If you terminate your employment for "good reason" or are voluntarily terminated by the Company, except for cause, the Company or as the case may be, will provide the other party with 90 days notification prior to termination and the Company will provide you with severance compensation amounting to twelve (12) months continuation of your prevailing base salary, payable in 12 equal monthly installments, from the date of your termination. Except for "good reason" as defined in this paragraph, severance compensation shall not be payable to you if your employment is terminated by the Company for cause, or voluntarily by you, or if you accept employment elsewhere. "Good reason" shall mean a termination by you of your employment (a) based on the assignment to you of any duties materially inconsistent with your position, duties, responsibilities and status with the Company or based on a change in your reporting responsibilities, title or offices as in effect or any removal (other than for cause) of you from or any failure to re-elect you to any of such positions or a reduction in your annual compensation, except in connection with the termination of your employment for cause, and (b) the failure of the Company to cure the reasons, if curable, causing the termination within twenty (20) days of receiving a written notice from you specifying such reasons. In the event of your death or disability, you are entitled only to those benefits described under "Benefits". If you are eligible for severance compensation, as of your termination date, you will be entitled to continue to participate, to the extent permissible, in the Company's 401K Plan, the Company sponsored retirement plan, and Employee Stock Purchase Plan until the expiration of your severance compensation or until you commence employment elsewhere, whichever comes first. Also, as of your termination date, you will be entitled to the extent permissible to continue to participate in the Company's health, dental, life, and disability plans until the expiration of your severance compensation or until covered by a reasonably comparable program, whichever comes first. If you are eligible for severance compensation as defined above, all your unvested stock options, which have been awarded to you shall become immediately vested on the Termination Date and the date by which all such options must be exercised shall be two years from the Termination Date. If during the first twelve months of the Employment Term you are terminated voluntarily by Par without cause or because of a change of control, you will be eligible for a pro rata share of an annual bonus, if any, at the discretion of your supervisor and dependent upon your performance and the performance of the Company. These terms represent the entirety of any severance, employment or any other agreement between you and "the Company". As a condition of your employment with the Company, you will be required to execute the Company's standard Trade Secret, Non-Disclosure and Restrictive Covenant Agreement attached. If you accept this offer of employment, please sign below and return the signed copy to me as soon as convenient. Once signed by you, this letter will constitute the complete agreement between you and the Company regarding employment matters or oral agreements or understandings on these matters. 2 We are extremely excited about the opportunity we have to build Par into a leading generic pharmaceutical company. One of the keys to accomplishing this is talented people. We are looking forward to your continuing contribution to our success. Sincerely, /s/ Kenneth I. Sawyer --------------------- Kenneth I. Sawyer President Chief Executive Officer Agreed to and Accepted on this 13th day of October, 1994 /s/ Robert M. Fisher, Jr. - ------------------------- Robert M. Fisher, Jr. 3 EX-10.37 7 LETTER AGREEMENT DTD EXHIBIT 10.37 PAR PHARMACEUTICAL, INC. December 19, 19954 (Revised) Mr. Stuart A. Rose 378 Gravel Hill Road Kinnelon, NJ 07405 Dear Stuart: I am pleased to extend this offer to you to become Executive Vice President of Operations with Par Pharmaceutical, Inc. The following would be the basic terms of your employment with Par Pharmaceutical, Inc. and/or Pharmaceutical Resources, Inc. (individually or collectively sometimes referred to as the "Company"): Department: Officer Reporting: Mr. Kenneth I. Sawyer Start Date: On or before February 1, 1995 Initial Salary: $15,416.66 a month, $185,000 annually, to be reviewed on an annual basis and may be considered for an adjustment by the Company to reflect performance and responsibilities. Bonus: You will be eligible for consideration for an annual bonus, consistent with a company program, based on both your performance and the performance of the Company. In addition, should you lose all or part of your expected 1994 bonus from American Cyanamid, Par will provide you with a commensurate "sign on" bonus of up to $30,000, less applicable taxes, payable upon your commencing employment with the Company. Benefits: Group Insurance: Health, life and long-term disability insurance programs are provided to employees and their dependents by the Company, upon payment of the applicable premium amount. If required, COBRA premiums on your behalf until you are eligible to enroll in the Company's insurance programs. Vacation: You will be entitled to up to four weeks of paid vacation annually. Automobile: par will provide you with the use of an automobile, including reimbursement of all related maintenance, fuel, repairs, insurance and other costs. Other: You will be eligible to participant in the Company's 401(K) Plan, company sponsored retirement plan, and our Employee Stock Purchase Plan upon meeting the Company's specified eligibility requirements for each plan. Stock: You will be granted options to purchase 75,000 shares of PRI common stock, at an exercise price equal to the closing price of Pharmaceutical Resources, Inc. (PRI) common stock on the date of the grant by the Board of Directors. The grant should be completed within thirty (30) days of your commencement of employment. These options shall be exercisable in cumulative installments, during the Exercise period, as follows; (I) To the extent of 33 1/3% of the Option Shares anytime after six months from the Date of Grant; (II) To the extent of an additional 33 1/3% of the Option Shares anytime after one year from the Date of Grant; and (III) To the extent of an additional 33 1/3% of the Option Shares anytime after two years from the Date of Grant. Termination: Your employment by the Company is subject to the following provisions: If you terminate your employment for "good reason" or are voluntarily terminated by the Company, except for cause or, the Company, or you as the case may be, will provide the other party with 90 days notification prior to termination and the Company will provide you with severance compensation amounting to twelve (12) months continuation of your prevailing base salary, payable in 12 equal monthly installments, from the date of your termination. Except for "good reason" as defined in this paragraph, severance compensation shall not be payable to you if your employment is terminated by the Company for cause, or voluntarily by you, or if you accept employment elsewhere. "Good reason" shall mean a termination by you of your employment (a) based on the assignment to you of any duties materially inconsistent with your position, duties, responsibilities and status with the Company or based on a change in your reporting responsibilities, title or offices as in effect or any removal (other than for cause) of your from or any failure to re-elect you to any of such positions or a reduction in your annual base compensation, except in connection with the termination of your employment for cause, and (b) the failure of the Company to cure the reasons, if curable, causing the termination within twenty (20) days of receiving a written notice from you specifying such reasons. In the event of your death or disability, you are entitled only to those benefits described under "Benefits". If you are eligible for severance compensation, as of your termination date, youwill be entitled, to the extent permissible, to continue to participate in the Company's 401K Plan, Company sponsored retirement plan, and Employee Stock Purchase Plan until the expiration of your severance compensation or until you commence employment elsewhere whichever comes first. Also, as of your Termination Date, you will be entitled, to the extent permissible, to continue to participate in the company's health, dental, life, and disability plans until the expiration of your severance compensation or until covered by a reasonably comparable program, whichever comes first. If you are eligible for severance compensation as defined above, all your unvested stock options which have been awarded to you shall become immediately vested on the Termination Date and the date by which all such options must be exercised shall be two years from the Termination Date. If during the first twelve months of the Employment Term you are terminated voluntarily by the Company without cause or because of a change of control, you will be eligible for a pro rata share of an annual bonus, if any, at the discretion of our supervisor and dependent upon your performance and the performance of the Company. These terms represent the entirety of any severance, employment or any other agreement between you and the Company. As a condition of your employment with Par, you will be required to execute the Company's standard Trade Secret, Non-Disclosure and Restrictive Covenant Agreement attached. 2 If you accept this offer of employment, please sign below and return the signed copy to me as soon as convenient. Once signed by you, this letter will constitute the compete agreement between you and the Company regarding employment matters or oral agreements or understandings on these matters. We are extremely excited about the opportunity we have to build Par into a leading generic pharmaceutical company. One of the keys to accomplishing this is talented people. We are looking forward to having you join us and hope that you will accept out offer to become Executive Vice President of Operations. Sincerely, /s/ Stephen H. Israel --------------------- Stephen H. Israel Vice President Human Resources Accepted and agreed this 21st day of December, 1994 /s/ Stuart A. Rose - ------------------ Stuart A. Rose 3 EX-24 8 CONSENT OF R. EISNER EXHIBIT 24 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statements on Form S-3 (Registration No. 33-35242 and 33-74052) and Form S-8 (Registration Nos. 2-99035, 33-15640, 33-51914, 33-45785, 33-29992, 33-79954 and 33-79956) of our reports dated November 30, 1994 on the consolidated financial statements and schedules included in the annual report on Form 10\KA of Pharmaceutical Resources, Inc. as at and for the year ended October 1, 1994. /s/ Richard A. Eisner & Company, LLP New York, New York January 30, 1995 EX-27 9 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from the Annual Report on Form 10-K for the fiscal year ended October 1, 1994 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS OCT-01-1994 OCT-01-1994 3,130 176 12,115 (2,768) 16,352 33,615 39,105 (16,101) 69,202 13,883 7,360 145 0 1 49,130 69,202 69,169 69,594 45,774 17,337 0 (13) 465 6,018 1,785 4,233 466 0 14,128 18,827 1.14 1.14
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