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Item
2.04
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Triggering
Events that Accelerate or Increase a Direct Financial Obligation
or an
Obligation under an Off-Balance Sheet Arrangement
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As
disclosed in Interpharm Holdings, Inc.’s (“Holdings”) Current Report on Form 8-K
filed with the SEC on February 15, 2006 (the “February 8-K”), Interpharm, Inc.
(the "Company"), a wholly owned subsidiary of 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. Copies of the Wells Fargo Credit
Agreement and related documents are annexed to the February 8-K.
On
October 26, 2007, the Company, Holdings and Wells Fargo Business Credit entered
into a Forbearance Agreement, which was subsequently amended on November 12,
2007. As of June 30, 2007, the Company had defaulted under the Senior Credit
Agreement with respect to (i) financial reporting obligations, including the
submission of its annual audited financial statements for the fiscal year ending
June 30, 2007, and (ii) financial covenants related to minimum net cash flow,
maximum allowable leverage ratio, maximum allowable total capital expenditures
and unfinanced capital expenditures for the fiscal year ended June 30, 2007
(collectively, the “Existing Defaults”). Pursuant to the Forbearance Agreement,
WFBC agreed to waive the Existing Defaults based upon the Borrower’s
consummation and receipt of $8,000,000. On November 7 and 14, 2007, Holdings
and
the Company received a total of $8,000,000 in gross proceeds from the issuance
and sale of subordinated debt. In addition, the Forbearance Agreement served
as
an amendment to the Wells Fargo Credit Agreement with respect to certain
financial covenants, including, but not limited to, the Company’s required Net
Income Before Tax and Net Cash Flow.
On
January 10, 2007, Holdings and the Company received notice (the “Notice”) from
Wells Fargo that they had defaulted under the Forbearance Agreement with respect
to: (i) financial covenants relating to required Income Before Tax for the
months ending October 31, 2007 and November 30, 2007, (ii) financial covenants
relating to required Net Cash Flow for the months ending October 31, 2007 and
November 30, 2007 and (iii) an obligation to have a designated financial advisor
provide an opinion as to Holdings and the Company’s ability to meet their fiscal
year 2008 projections.
As
of the
date of this Current Report, the Company is obligated to Wells Fargo under
the
Wells Fargo Agreement in the amount of $31,256,804 (the
“Outstanding
Amount”). The Notice states that Wells Fargo is not demanding repayment of the
Outstanding Amount at this time, but that Wells Fargo reserves the right to
do
so.