--------------------------------------------------------------------------------

EXHIBIT 10.32

 
SECOND AMENDMENT TO LOAN AGREEMENT
 
THIS SECOND AMENDMENT TO LOAN AGREEMENT, dated as of October 9, 2009 (“Second
Amendment”), is made by and among CARACO PHARMACEUTICAL LABORATORIES, LTD., a
Michigan corporation, with an address at 1150 Elijah McCoy Drive, Detroit,
Michigan 48202 (“Borrower”), and RBS CITIZENS, N.A., a national association,
d/b/a Charter One, with an address of 27777 Franklin Road, Suite 1900,
Southfield, Michigan 48034 (together with its affiliates, successors and
assigns, “Bank”).
 
W I T N E S S E T H :
 
WHEREAS, Borrower and Bank are parties to that certain Loan Agreement dated
February 27, 2009, as amended by First Amendment to Loan Agreement dated August
11, 2009 (collectively, the “Loan Agreement”), together with other Loan
Documents related thereto as described in the Loan Agreement; and
 
WHEREAS, Borrower and Bank desire to extend a revolving line of credit loan,
increase the minimum deposit account requirement to cash-collateralize the
amount of available credit to Borrower, and modify other provisions of the Loan
Agreement as provided herein.
 
NOW, THEREFORE,  in consideration of the amended provisions herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
 
1.           Section 1.1 shall be amended to delete the definition of Loan and
Note, and replace with the following:
 
“Loan” means the Equipment Term Loan, and the Revolving Line of Credit Loan,
individually or collectively, as appropriate.
 
“Note” means the Equipment Term Note, and the Revolving Line of Credit Note,
individually or collectively, as appropriate.
 
2.           Section 2 shall be amended to delete said Sections in its entirety
and replaced with the following:
 
SECTION 2.
LOAN FACILITIES
 
 
2.1
Equipment Term Loan.

 
(a)           Equipment Term Loan.  Bank hereby grants an “Equipment Term Loan”
pursuant to which Bank agrees to make on the Funding Date, a non-revolving
advance to Borrower, for the purposes of financing new machinery and equipment
and building improvements (the “Assets”), in the amount of Eighteen Million
Dollars ($18,000,000).  Funding of the loan shall be in accordance with the
conditions set forth in Section 4 below.
 
 
1

--------------------------------------------------------------------------------

 

(b)           Equipment Term Note.  The advance of the Equipment Term Loan shall
be evidenced by and be repayable to Bank in accordance with the terms of the
Equipment Term Note, which Borrower shall execute and deliver to Bank
simultaneously herewith.  All provisions of the Equipment Term Note are
incorporated herein by this reference as terms and conditions of this Loan
Agreement.
 
 
2.2
Revolving Line of Credit Loan.

 
           (a) Revolving Line of Credit Loan.  Bank hereby establishes a
“Revolving Line of Credit Loan” pursuant to which, until October ___, 2010 or
such earlier termination as provided herein, and subject to the terms and
conditions hereof, Bank agrees to make, from time to time, revolving credit loan
advances in the form of letters of credit issued to the United States Food and
Drug Administration, or cash demands thereon, as may be requested by Borrower or
beneficiaries of the letters of credit (“Revolving Line of Credit Loan
Advances”), in accordance with the borrowing procedures below.  The sum of the
aggregate amount of outstanding Revolving Line of Credit Loan Advances shall not
at any one time exceed Fifteen Million Dollars ($15,000,000) (the “Revolving
Line of Credit Loan Amount”).  Amounts borrowed hereunder and repaid may be
reborrowed as provided herein, it being agreed and understood this is a
revolving credit facility.
 
           (b) Borrowing Procedure.  Borrower may request Revolving Line of
Credit Loan Advances in the form of a letter of credit by submitting to Bank a
fully completed Revolving Line of Credit Loan Advance request in the form
acceptable to Bank and other reasonable requirements for the issuance of the
letter of credit.  Bank shall make the requested Revolving Line of Credit Loan
Advances available to Borrower as directed in the Revolving Line of Credit Loan
Advance request, in the amount requested, unless:
 
(i) The requested Revolving Line of Credit Loan Advance, when aggregated with
all of Borrower's previously unpaid Revolving Line of Credit Loan Advances under
the Revolving Line of Credit Loan, would cause the unpaid principal balance of
the Revolving Line of Credit Loan Note to exceed the Revolving Line of Credit
Loan Amount; or

(ii) Bank has not been furnished with sufficient reports or other information to
determine eligibility for such Revolving Line of Credit Loan Advance; or

(iii) An Event of Default has occurred and is continuing.

Such Revolving Line of Credit Loan Advances will then be made available to
Borrower by Bank issuing its letter of credit within ten (10) days of said
request, or by crediting the account of Borrower on the books of Bank if demand
for payment is made on such letters of credit, by the close of Bank's business
on such date.

(c)           Revolving Line of Credit Note.  The Revolving Line of Credit Loan
Advances shall be evidenced by and be repayable to Bank upon demand in
accordance with the terms of a Revolving Line of Credit Note, which Borrower
shall execute and deliver to Bank simultaneously herewith.  All of the
provisions of the Revolving Line of Credit Note are incorporated herein by this
reference as terms and conditions of this Loan Agreement.
 
(d)           Letters of Credit; Fees.  Borrower may request an Advance only in
the form of a letter of credit from time to time until thirty (30) days prior to
the expiry of the Revolving Line of Credit Loan, in an amount, when aggregated
with all other outstanding letters of credit, not to exceed the available
Revolving Line of Credit Loan Amount, and provided such letters of credit expire
on the earlier of one hundred eighty (180) day after issuance, or the expiry of
the Revolving Line of Credit Loan and Maturity Date of the Revolving Line of
Credit Note.  Borrower shall provide Bank any reasonable information requested
in order to confirm the use of the letter of credit meets the requirements of
this Loan Agreement.  Borrower agrees to pay Bank a letter of credit fee equal
to seventy basis points (70 bps) of the face value of each letter of credit when
issued by Bank.  Borrower shall also reimburse Bank for its standard
documentation, administration and cancellation charges based on its standard
rates.  Notwithstanding anything herein to the contrary, if demand for payment
pursuant to a letter of credit is presented to Bank by the benefiting party,
notice shall be provided to Borrower and such funds shall be paid to the
benefiting party from the Revolving Line of Credit Loan as if a cash Advance
request had been made to Borrower, and such amount shall be reflected on the
Revolving Line of Credit Loan Note as of such day.
 
 
2

--------------------------------------------------------------------------------

 

 
2.3
Security.

 
(a)           Borrower hereby grants to Bank as security for any Note, a
security interest in: (i) all fixed assets of Borrower; (ii) cash deposits in
possession and control of Bank in accounts numbered 4512225217 and 4514958602 or
successor accounts; (iii) other cash deposits not in possession or control of
Bank, provided such cash are proceeds of subsection (i) hereof,, all as
described in the Security Agreement, as amended; and (iv) a mortgage on the real
estate and improvements constituting real property located at 1150 Elijah McCoy
Drive, Detroit, Michigan, as more particularly described in the Mortgage
executed simultaneously hereto.
 
All of the specified property in this subsection (a) above shall be collectively
referred to as the “Collateral”.  Notwithstanding the foregoing, if Borrower
pays off the Equipment Term Loan and all charges related thereto, including any
Hedging Obligations, and is not otherwise in default hereof, upon request from
Borrower, Bank shall release its security and mortgage interests and liens in
that certain portion of the Collateral described in (a) (i), (iii) and
(iv).  All remaining Collateral described in (a) (ii) shall continue to be
secured by Bank until all remaining obligations relating to the Revolving Line
of Credit Loan and Revolving Line of Credit Note have been paid in full and
cancelled, and not further obligations or liabilities remain outstanding on
behalf of Borrower or Bank thereunder.
 
(b)           Borrower shall execute and deliver to Bank such documents in
addition to those documents specified in this Loan Agreement, on the Closing
Date, Funding Date, and thereafter from time to time, as Bank shall request, for
the purpose of perfecting and continuing the perfection of Bank’s security
interest and mortgage in the Collateral.
 
(c)           It is further agreed that any security agreement, mortgage, or
other document hereafter executed by Borrower in favor of Bank shall secure
repayment of all of the Obligations, whether or not presently contemplated by
the parties, including that created under the Loan Agreement of the same date
relating to any Note; and, that an Event of Default under any note, security
agreement, mortgage or other agreement from Borrower to Bank after any
applicable grace period shall constitute an Event of Default under all notes,
security agreements and other agreements, and that Bank may, at its option,
proceed in exercising its rights thereunder in any order or manner it may
choose, the purpose of this Loan Agreement being to cross-collateralize and
cross-default all of the Obligations.
 
 
3

--------------------------------------------------------------------------------

 

3.           Section 5.11 shall be amended to delete said section in its
entirety and replace with the following:
 
5.11           Use of Proceeds. The advance of either Loan hereunder shall be
used only for purposes stated in Section 2.1 and 2.2 respectively.
 
4.           Borrower acknowledges that the continuance of regulatory
enforcement efforts by the Food and Drug Administration or other restrictions on
Borrower’s operations, voluntarily imposed by Borrower or otherwise, on or after
February 26, 2010, shall constitute a violation of the covenants described in
Section 6.7 (b) of the Loan Agreement and shall be deemed an “Event of Default”
without further notice or an opportunity to cure, notwithstanding any other
provision of the Loan Agreement or other document to the contrary.
 
5.           Bank agrees to suspend testing of Minimum Fixed Charge Coverage
Ratio and Minimum EBITDA described in Sections 6.8 and 6.9 respectively, until
February 26, 2010.

6.           Section 6.10 of the Loan Agreement is hereby amended to increase
the minimum balance of the deposit account to be not less than the outstanding
balance of the Indebtedness of Borrower to Bank from time to time, which is
approximately $32,400,000 as of the date hereof, which shall be reduced by the
amount of principal repaid toward the Equipment Term Loan.  The required balance
shall increase by the amount of accrued and unpaid interest as of the date of
any required interest payment if such payment is not made on or before the date
the failure to make such payment would become an Event of Default.

7.           Nothing herein shall be deemed or implied as a waiver of any
rights, interests or remedies available to Bank pursuant to the Loan Agreement
or any other Loan Document, whether previously occurring, now existing, or
arising in the future.  Bank reserves all such rights, interests and remedies,
including those existing but temporarily suspended pursuant to any other
documents executed in connection with this Second Amendment.  No failure by Bank
to take any action in respect of a default  of any covenant or obligation under
the Loan Agreement or other Loan Documents by Borrower shall be deemed a waiver
of any subsequent or future default of Borrower, and any partial action or
exercise of rights remedies will not prohibit further action or exercise of
rights and remedies by Bank.  No course of dealing will be deemed to amend any
terms of the Loan Agreement or other Loan Documents or preclude Bank from
exercising its rights or remedies notwithstanding such course of dealing.

8.           Except as hereby amended, the Loan Agreement shall remain in full
force and effect.  If any conflict exists between the terms and provisions of
the Loan Agreement, and the terms and provisions of this Second Amendment, the
terms and provisions of this Second Amendment shall govern and control.

9.           Each party covenants, warrants and represents that it has the
authority to execute and bind each respective party to this Second
Amendment.  Borrower further reconfirms all of its obligations under the Loan
Documents, along with all of its representations and warranties to Bank as set
forth in the Loan Documents as being true in all respect, and that there are no
existing Events of Default under any provision of the Loan Agreement or any of
the related Loan Documents or other Indebtedness to Bank other than as noted
herein that have not otherwise been suspended by Bank.  The Loan Agreement and
Loan Documents executed in connection therewith, whether prior to, or
simultaneously herewith, are hereby ratified and certified as being in full
force and effect.

10.           Borrower acknowledges and agrees that Bank has fully performed all
of its obligations under all documents executed in connection with the Loan
Documents and all actions taken by Bank have been reasonable and appropriate
under the circumstances and within their rights under the Loan Agreement and the
Loan Documents.  Borrower represents and warrants that it is aware of no claims
or causes of action against Bank or its officers, directors, employees or
agents.  Notwithstanding such representation and warranty, and as further
consideration for the agreements set forth in this Second Amendment, Borrower,
for itself and its successors and assigns, releases Bank and it officers,
directors, employees, agents, attorneys, affiliates, subsidiaries, and
successors and assigns, from any liability, claim, right or cause of action
which now exists or hereafter arises, whether known or unknown, arising from or
in any way related to facts in existence as of the date hereof.  Borrower also
acknowledges and agrees to pay or otherwise reimburse Bank, upon the execution
of this Second Amendment, for all reasonable out-of-pocket costs incurred by
Bank in the enforcement of the Loan Agreement, and the negotiations and drafting
of this Second Amendment and related Loan Documents.

 
4

--------------------------------------------------------------------------------

 

11.           This Second Amendment constitutes the entire agreement between the
parties and supersedes all prior and contemporaneous agreements or
understandings, whether written or oral, between the parties with respect to the
subject matter hereof.  This Second Amendment shall be binding on the parties
hereto, and their respective successor and assigns, and shall not be further
amended, altered, modified, or changed in any way except in writing signed by
all the parties to this Second Amendment, or their successors or assigns.

12.           The submission of this Second Amendment for examination or its
negotiation of the terms described herein does not constitute an offer to amend
the Loan Agreement, and this Second Amendment does not constitute a binding
agreement until such time as the Second Amendment has been fully and finally
executed by all parties to this Second Amendment.

THE UNDERSIGNED individuals have executed this Second Amendment on behalf of the
respective parties hereto, effective as of the day and year first above written.
 

 
BANK:
 
RBS CITIZENS, N.A.
 
(d/b/a CHARTER ONE)
             
By:
/s/ John Sherman
 
Name:
John Sherman
 
Its:
Senior Vice President
             
BORROWER:
 
CARACO PHARMACEUTICAL
 
LABORATORIES, LTD.
             
By:
/s/ Jitendra Doshi
 
Name:
Jitendra Doshi
 
Its:
Chief Executive Officer
       
and
 
 
By:
/s/ Mukul Rathi
 
Name:
Mukul Rathi
 
Its:
Interim Chief Financial Officer

 
 
5

--------------------------------------------------------------------------------