SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 9, 2006
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INTERPHARM HOLDINGS, INC.
(Exact name of Registrant as specified in charter)
Delaware 0-22710 13-3673965
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
75 Adams Avenue, Hauppauge, New York 11769
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 952-0214
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NOT APPLICABLE
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement
On February 9, 2006, Interpharm Inc. (the "Company"), a wholly owned
subsidiary of Interpharm Holdings, Inc. ("Holdings") entered into a credit
agreement (the "Wells Fargo Credit Agreement") with Wells Fargo Bank, National
Association, acting through its Wells Fargo Business Credit operating division
("Wells Fargo"). Under the Wells Fargo Credit Agreement, the Company obtained a
$41,500,000 credit facility from Wells Fargo, which replaces its existing credit
facility with the Hongkong Shanghai Bank Corporation ("HSBC").
The Wells Fargo credit facility consists of:
(i) a revolving line of credit (the "Revolving Line of Credit") of up to
$22.5 million, evidenced by a revolving promissory note. Advances
can be made from the amount available under the Revolving Line of
Credit from time to time until February 10, 2010. The amount
actually available to the Company under the Revolving Line of Credit
may be less and may vary from time to time, depending on, among
other factors, the amount of its eligible accounts, eligible
inventory and the value of the pledged securities. After one year
and upon the Company's request, Wells Fargo may, in its sole
discretion, increase the aggregate maximum amount available under
the Revolving Line of Credit based on the net forced liquidation
valuation of the Company's abbreviated new drug applications
obtained after entry into the Wells Fargo Credit Agreement.
(ii) a single advance in the amount of up to $3.5 million evidenced by a
machinery and equipment term loan (the "M&E Note"). The outstanding
principal balance of the M&E Note cannot exceed 85% of the
liquidation value of the Company's eligible equipment. The M&E Note
is to be repaid with 60 equal monthly installments, including
principal and accrued interest, beginning on March 1, 2006.
(iii) a capital expenditure secured credit line (the "Cap Ex Advance") of
up to $3.5 million evidenced by a capital expenditure promissory
note (the "Cap Ex Note"). Each Cap Ex Advance is to be amortized
over a 60 month period. The aggregate amount of the Cap Ex Advance
cannot exceed 90% of the invoiced cost of eligible equipment to be
purchased by the Company or previously purchased by the Company with
the proceeds of the Revolving Line of Credit. The Cap Ex Note is to
be repaid in 60 equal monthly installments, together with accrued
interest, beginning on the first day of the month after the initial
Cap Ex Advance is funded.
(iv) a single advance in the amount of up to $12 million evidenced by
certain real estate notes (the "Real Estate Notes"). The aggregate
outstanding principle together with accrued interest under the Real
Estate Notes is to be repaid in 180 equal monthly installments based
on an amortization schedule beginning on March 1, 2006. The Real
Estate Notes replace the Company's previously existing mortgage with
HSBC on its facility at 50 Horseblock Road in Yaphank, New York.
The Wells Fargo credit facility is collateralized by substantially all
assets (including accounts receivables, rights to payment, general intangible,
inventory, equipment) of the Company and the Real Estate Notes are additionally
secured by a mortgage on the Company's Yaphank facility. The Wells Fargo credit
facility is further guaranteed by Holdings and collateralized by substantially
all assets of Holdings. In addition, three individual shareholders of Holdings
have pledged up to $7.5 million worth of New York Stock Exchange listed
securities to guarantee the repayment of the borrowings under the Revolving Line
of Credit that are in excess of certain inventory and receivable amounts.
Each component of the Wells Fargo Credit Facility bears interest at either
(i) a rate of 0.5% below Wells Fargo's prime rate or, at the Company's option,
(ii) a rate of 2.5% above LIBOR. To limit its exposure to fluctuating interest
rates, the Company entered into an interest rate swap agreement with Wells Fargo
to lock in the interest rate at 7.56% for the Real Estate Notes.
The Wells Fargo Credit Agreement contains affirmative covenants including
financial covenants and a commitment to raise at least $7 million in net
proceeds through an equity or subordinated debt offering by June 30, 2006. It
also contains negative covenants that prohibit a variety of actions without
Wells Fargo's consent, including covenants that limit the Company's ability to
(a) create liens, (b) incur or guarantee non-permitted debts, (c) make
investments, (d) declare or pay dividends, (e) increase salaries by more than
20% in the aggregate, (f) sell assets, (g) enter into any merger or similar
transactions or purchase all or substantially all of the assets of another
person, (h) change its line of business or (i) change its method of accounting.
The Credit and Security Agreement and the related loan and security
documents are filed as Exhibits 10.1 through 10.11 to this Current Report on
Form 8-K, and all references to these documents in this Current Report are
qualified, in their entirety, by the text of these documents.
Item 1.02. Termination of a Material Definitive Agreement.
On February 10, 2006, the Company used part of the loan proceeds from the
Wells Fargo credit facility to pay off its existing credit facility with HSBC
and terminated its credit facility agreement with HSBC dated March 29, 2004.
Item 9.01. Financial Statements and Exhibits
Exhibits:
10.1 Credit and Security Agreement, dated February 9, 2006, between Interpharm,
Inc. and Wells Fargo Bank, National Association, acting through its Wells
Fargo Business Credit operating division ("Wells Fargo").
10.2 Revolving Note, dated February 9, 2006, from Interpharm, Inc. to Wells
Fargo.
10.3 M& E Note, dated February 9, 2006, from Interpharm, Inc. to Wells Fargo.
10.4 Cap Ex Note, dated February 9, 2006, from Interpharm, Inc. to Wells Fargo.
10.5 Consolidated Real Estate Note, dated February 9, 2006, from Interpharm,
Inc. to Wells Fargo.
10.6 Real Estate Demand Note, dated February 9, 2006, from Interpharm, Inc. to
Wells Fargo.
10.7 Guaranty Agreement, dated February 9, 2006, from Interpharm Holdings, Inc.
to Wells Fargo.
10.8 Security Agreement, dated February 9, 2006, from Interpharm Holdings, Inc.
to Wells Fargo.
10.9 ANDA Security Agreement, dated February 9, 2006, between Interpharm, Inc.
and Wells Fargo.
10.10 Demand Mortgage and Security Agreement, dated February 9, 2006, from
Interpharm, Inc. to Wells Fargo.
10.11 Assignment of Rents and Leases, dated February 9, 2006, between
Interpharm, Inc. and Wells Fargo.
10.12 Mortgage Consolidation, Modification and Extension Agreement, dated
February 9, 2006, from Interpharm, Inc. to Wells Fargo.
10.13 ADA and Environmental Indemnity Agreement, dated February 9, 2006, by
Interpharm, Inc. in favor of Wells Fargo.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERPHARM HOLDINGS, INC.
February 14, 2006
By: /s/ George Aronson
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George Aronson
Chief Financial Officer