LETTER AGREEMENT

EX-10.16 5 e01897a2exv10w16.txt LETTER AGREEMENT EXHIBIT 10.16 Certified translation from the German language DUPLICATE March 31, 1998 Pharmed Labs GmbH Your reference KD 189767 - - Management - Our reference zic/him P.O. Box 306 Phone 0211/8221-4785 Fax 0211/8221-2785 82027 Grunwald DM 10 MILLION IKB SUBORDINATED CAPITAL [NACHRANGKAPITAL] Ladies and Gentlemen: With reference to the discussions held we are pleased to offer you IKB subordinated capital in the total amount of DM 10 million - hereinafter "Investment" - in 2 tranches on the following terms and conditions: Tranche 1 Nominal amount of Investment: DM 5,000,000.--, payable on April 30, 1998 Purpose of Investment: The Investment serves exclusively for financing purposes pursuant to our application including Annexes dated February 25, 1998 filed with KfW, which is known to you. Payment rate: 100.0% Interest rate: 9.0% p.a. until April 30, 2003 on the nominal amount of the Investment Additional remuneration: Further, we shall receive a performance-related remuneration in the amount of 3% p.a. on the respective nominal amount of the Investment, which shall only become due if and to the extent it is covered by the profit generated by the APL Group (maximum amount). Page 2 of the letter of March 31, 1998 The profit generated shall be determined as follows: The calculation basis is the EBT (earnings before taxes) reported in the consolidated financial statements of the parent company American Pharmed Labs, Inc., Eaglewood Cliffs, New Jersey/USA prepared pursuant to GAAP and certified by an auditor; in this connection, the abovementioned performance-related additional remuneration due to us - just as any corresponding performance-related remuneration components due to tbg Technologiebeteiligungsgesellschafl mbH der Deutschen Ausgleichsbank - shall not be treated as expenses. The same shall apply to any extraordinary factors reducing profits such as special tax depreciations, expenses for profit shares paid to employed managing directors and managing shareholders as well as other expenses incurred at the shareholder level (e.g. interest on shareholder loans) as well as interest on other subordinated capital (subordinated loans, silent participations, capital represented by participation certificates, or similar). The performance-related remuneration may not exceed 50% of the EBT adjusted as specified above, if applicable. Deferred payment claim: If the remaining profit of a financial year and/or the 50% share thereof is not sufficient or not sufficient in full for the performance-related remuneration component, our claim to the unpaid remuneration component shall be deferred to the respective following financial year and/or until it has been satisfied. The satisfaction of the deferred payment claim in a subsequent year may also be effected only from an adjusted EBT determined pursuant to the above provisions (and/or 50% thereof). Page 3 of the letter of March 31, 1998 To the extent that a deferred payment claim exists or results upon termination of this Agreement, such claim shall be satisfied from profits of the three financial years following the year of termination; the deferred payment claim shall expire if and to the extent no sufficient profit is generated in these three years either. Due date of interest and The fixed interest shall be paid additional remuneration: subsequently each quarter as of March 31, June 30, September 30 and December 30. The variable additional remuneration shall be due subsequently as of March 31 each year for the respective past financial year. If the approved relevant consolidated financial statements are not available by March 31 of a year, the abovementioned maximum amount shall become due as advance payment. Such amount shall be reimbursed to the extent that an overpayment results on the basis of the approved annual financial statements. Term of Investment: until April 30, 2003; repayment in one amount Prepayment of Investment: possible cost-free in whole or in part as of April 30, 1999 at 110.0% as of April 30, 2000 at 107.5% as of April 30, 2001 at 105.0% as of April 30, 2002 at 102.5% of the nominal amount of the Investment plus any interest in arrears (fixed and/or performance-related). Tranche 2 Nominal amount of Investment: DM 5,000,000.--,payable on June 30, 1998 Purpose of Investment: cf. Tranche 1. Payment rate: 100.0% Page 4 of the letter of March 31, 1998 Interest rate: 8.0% p.a. until June 30, 1999, thereafter 8.5% p.a. until June 30, 2000 on the nominal amount of the Investment, thereafter re-determination according to market situation Additional remuneration: performance-related remuneration in the amount of 4% p.a. on the respective nominal amount of the Investment; otherwise cf. Tranche. Deferred payment claim: cf. Tranche 1. Due date of interest and additional remuneration: cf. Tranche 1. Term of Investment: until June 30, 2003; repayment in one amount Prepayment of Investment: possible cost-free as of June 30, 1999 and June 30, 2000. Apart from the abovementioned right to prepay the Investment, we will charge a premium of 2.5% on the outstanding and/or prepaid Investment amount for each year by which the contractual term is reduced. In addition, we will charge the reinvestment costs incurred by us. Common terms and conditions for Tranches 1 and 2 Damages for late payment: Interest in the amount of the respective discount rate of the German Federal Bank plus 5% p.a. will be charged on any amounts not received by us in due time, however at least the contractual interest rate. Subordination clause: In case that the assets of the investor are subjected to insolvency proceedings (settlement, bankruptcy or overall execution), our claim to repayment of the outstanding Investment amount is to be satisfied only after Page 5 of the letter of March 31, 1998 the other creditors, however prior to the claims of the investor's shareholders and their members/relatives. Guarantee: The Kreditanstalt fur Wiederaufbau (KfW) in Frankfurt am Main will assume a pro rata guarantee for the Investment within the scope of its venture capital program. The guarantee commission will be assumed by us. Requirements for the granting of the Investment: Promise of guarantee by KfW as well as your consent to the following requirements/ conditions: provisions regarding the promise of guarantee of KfW, if any; fixing of own funds at the current level; full joint liability of APL American Pharmed Labs, Inc., Eaglewood Cliffs, New Jersey/ USA, for all obligations of the investor under this Agreement; at least quarterly provision of information on the current course of business of the companies of the APL Group (e.g. sales and earnings figures/order situation, etc.) including a comparison with the previous year pursuant to the attached report form; budgeted figures for the following financial year updated until the end of December (group and group companies); Payment procedure: If and when it is ensured that the funds will be used for the project stated above as purpose of the Investment, we will provide you with the Investment amount as soon as the following is available to us: your call pursuant to the attached draft; the consent of KfW regarding this Agreement; Page 6 of the letter of March 31, 1998 current Commercial Register extracts of your company; the joint liability declaration of the parent company APL American Pharmed Labs Inc.; copies of all company agreements of your company; Reservation: The payment obligation shall expire if the payment requirements have not been fulfilled by September 30, 1998. Commitment commission: 0.5% per month on nominal amounts of the Investment not made available [nicht valutiert] as from May 15, 1998 (Tranche 1) and/or July 15, 1998 (Tranche 2); payable upon our request; Further parts of the Agreement: The "General Terms and Conditions for the Provision of Guarantees for Investments by KfW", attached in extracts, as well as our own "General Terms and Conditions". Please confirm your consent to this Agreement by means of the attached duplicate within two weeks. Page 7 of the letter of March 31, 1998 We will be pleased to assist you in the implementation of your investment by providing our IKB subordinated capital. Sincerely yours, IKB Nachrangkapital GmbH [signature] [signature] Zickenrott Christophersen Annexes Grunwald, [handwritten:] April 13, 1998 We herewith agree to the contents of this letter. [signature] ---------------------- Pharmed Labs GmbH - Management - I, Monika Kordt, in my capacity as a sworn translator for the English language, hereby certify that the above is a correct and complete translation of the German text presented to me in electronic form. Frankfurt am Main, November 8, 2004 /s/ Monika Kordt ------------------ Monika Kordt Monika Kordt Dipl. -Ubers. (FH), MSC Allgemein vereidigte Dolmetscherin und ermochtigte Ubersetzerin der englischen Sprache fur die Gerichte und Notare im Lande Hessen