EXECUTION COPY
FIRST AMENDMENT
TO
SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECURITY AGREEMENT (this "Amendment"), dated as
of December 1, 2003, is entered into by and among aaiPHARMA INC., a Delaware
corporation (the "Borrower"), the other Obligors signatory hereto and BANK OF
AMERICA, N.A., as Administrative Agent for the Lenders (in such capacity, the
"Administrative Agent").
RECITALS
A. The Borrower, certain domestic Subsidiaries of the Borrower,
the Lenders and the Administrative Agent are party to that certain Credit
Agreement dated as of March 28, 2002 (as amended by that certain First Amendment
dated as of the date hereof (the "First Amendment to Credit Agreement") and as
otherwise amended and modified, the "Credit Agreement").
B. As a condition precedent to the original effectiveness of the
Credit Agreement and the obligations of the Lenders to make their respective
Loans and other extensions of credit under the Credit Agreement, the Obligors
executed and delivered that certain Security Agreement dated as of March 28,
2002 among the Borrower, the other Obligors and the Administrative Agent, (as
previously amended and modified, the "Existing Security Agreement"). Unless
otherwise defined herein or the context otherwise requires, terms used in this
Amendment, including its preamble and recitals, have the meanings provided in
(or by reference in) the Existing Security Agreement.
C. The Borrower has requested certain modifications to the
Existing Security Agreement.
D. Such modifications require the consent of the Administrative
Agent, which will be evidenced by its execution of this Amendment, and of the
Required Lenders, which will be evidenced by their execution of the First
Amendment to Credit Agreement.
E. The Administrative Agent and the Required Lenders have
consented to the requested modifications on the terms and conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
I. AMENDMENTS TO SECURITY AGREEMENT
Subject to the satisfaction of the conditions precedent set forth in
Section 4 in Article II hereof, the Obligors and the Administrative Agent, on
behalf of the Lenders, hereby agree as follows:
1. Amendment to Section 1(b). The following shall be added as a
new definition:
"First Amendment Effective Date": December 1, 2003.
2. Amendment to Section 4. Section 4 of the Existing Security
Agreement is hereby deleted in its entirety and replaced with the following:
"4. Representations and Warranties. Each Obligor hereby
represents and warrants to the Administrative Agent, for the benefit of
the Lenders, that until such time as the Credit Party Obligations are
Fully Satisfied:
(a) Legal Name and Location of Obligor. As of
the date hereof, each Obligor's exact legal name is as shown
in this Security Agreement and its state of formation is (and
for the prior four months have been) as set forth on Schedule
4(a) attached hereto. As of the date hereof, the principal
place of business and chief executive office of such Obligor
is set forth on Schedule 4(a) attached hereto. Each Obligor
has not in the four months prior to the date hereof changed
its name, been party to a merger, consolidation or other
change in structure or used any tradename except as set forth
on Schedule 4(a) attached hereto.
(b) Location of Collateral. As of the date
hereof all Collateral consisting of Goods is located solely in
the states identified on Schedule 4(b) hereto, except those
Goods in transit to and from such states.
(c) Ownership. Each Obligor is the legal and
beneficial owner of all material Collateral which it purports
to own, and each Obligor has the right to pledge, sell, assign
or transfer such Collateral, except in the case of Documents
and other contracts that by their terms prohibit pledge,
assignment or transfer.
(d) Security Interest/Priority. This Security
Agreement creates a valid security interest in favor of the
Administrative Agent, for the benefit of the Lenders, in the
Collateral of such Obligor and, when properly perfected by
filing, shall constitute a valid perfected security interest
in such Collateral, to the extent such security can be
perfected by filing under the UCC, free and clear of all Liens
except for Permitted Liens.
(e) Types of Collateral. No material amount of
the Collateral constitutes, consists of or is the Proceeds of,
(i) As-Extracted Collateral, (ii) Consumer Goods, (iii) Farm
Products, (iv) Manufactured Homes or (v) Standing Timber.
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(f) Accounts. Except in the case of immaterial
Accounts, (i) each Account of the Obligors and the papers and
documents relating thereto are genuine and in all material
respects what they purport to be, (ii) each Account arises out
of (A) a bona fide sale of goods sold and delivered by such
Obligor (or is in the process of being delivered) or (B)
services theretofore actually rendered or being rendered by
such Obligor to, the account debtor named therein, (iii) no
Account of an Obligor is evidenced by any Instrument or
Chattel Paper unless such Instrument or Chattel Paper has been
theretofore endorsed over and delivered to, or submitted to
the control of, the Administrative Agent and (iv) no surety
bond was required or given in connection with any Account of
an Obligor or the contracts or purchase orders out of which
they arose.
(g) Inventory. No material amount of Inventory
is held by an Obligor pursuant to consignment, sale or return,
sale on approval or similar arrangement.
(h) Copyrights, Patents and Trademarks.
(i) Schedule 1(b) hereto includes all
Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks and Trademark Licenses owned by
the Obligors in their own names as of the date
hereof.
(ii) To the best of each Obligor's
knowledge and except as set forth on Schedule 1(b)
hereto, each material Copyright, Patent and Trademark
of such Obligor is valid, subsisting, unexpired,
enforceable and has not been abandoned.
(iii) Except as set forth in Schedule
1(b) hereto, as of the date hereof, none of such
Copyrights, Patents and Trademarks is the subject of
any licensing or franchise agreement.
(iv) No holding, decision or judgment
has been rendered by any Governmental Authority which
would limit, cancel or question the validity of any
material Copyright, Patent or Trademark.
(v) Except as set forth in Schedule 6.9
of the Credit Agreement, no action or proceeding is
pending seeking to limit, cancel or question the
validity of any Copyright, Patent or Trademark, or
which, if adversely determined, would reasonably be
expected to have a material adverse effect on the
value of any material Copyright, Patent or Trademark.
(vi) All applications pertaining to the
Copyrights, Patents and Trademarks of each Obligor
have been duly and properly filed, and all
registrations or letters pertaining to such
Copyrights, Patents and Trademarks have been duly and
properly filed and issued, and all of such
Copyrights, Patents and Trademarks are valid and
enforceable.
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(vii) No Obligor has made any assignment
or agreement in conflict with the security interest
in the Copyrights, Patents or Trademarks of each
Obligor hereunder, except for the sale, lease,
license or transfer of patents in the ordinary course
of an Obligor's business and as permitted under the
Credit Agreement.
(i) Specified Assigned Agreements. True and
complete copies of each Specified Assigned Agreement, as in
effect on the First Amendment Effective Date, have been
furnished to the Administrative Agent. Each of the Specified
Assigned Agreements (i) have been duly authorized, executed
and delivered by the Obligor party thereto, (ii) as of the
date hereof, have not been amended, amended and restated,
supplemented or otherwise modified from the copies delivered
to the Administrative Agent, (iii) as of the First Amendment
Effective Date, are in full force and effect and (iv) as of
the First Amendment Effective Date, are binding upon and
enforceable against each Obligor party thereto and, to the
Obligor's knowledge, are binding upon and enforceable against
all other parties thereto in accordance with their terms, in
each case subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors'
rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or
at law. No Obligor is in default in any material respect under
any Specified Assigned Agreement to which such Obligor is a
party and, to the knowledge of any Obligor, none of the other
parties to any Specified Assignment Agreement is in default in
any material respect (except as has been disclosed to the
Administrative Agent)."
3. Amendment to Schedules. Schedule 2(l) of the Existing Security
Agreement is amended in its entirety to read in the form of such Schedule 2(l)
attached hereto as Exhibit B to this Amendment.
II. MISCELLANEOUS
1. Representations and Warranties. Each of the Obligors
represents and warrants to the Administrative Agent as follows:
(i) It has taken all necessary action to authorize the
execution, delivery and performance of this Amendment.
(ii) This Amendment has been duly executed and delivered
by such Obligor and constitutes such Obligor's legal, valid and binding
obligation, enforceable in accordance with its terms, except as such
enforceability may be limited (x) by general principles of equity and
conflicts of laws (whether enforcement is sought by proceedings in
equity or at law) or by principles of good faith and fair dealing or
(y) by bankruptcy, reorganization, insolvency, moratorium or other laws
of general application relating to or affecting the enforcement, of
creditors' rights.
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(iii) No consent, approval, authorization or order of, or
filing, registration or qualification with, any court or governmental
authority or third party is required in connection with the execution,
delivery or performance by such Obligor of this Amendment (except for
those which have been obtained on or prior to the date hereof and
filings and other actions to perfect the Liens created by the
Collateral Documents).
(iv) The execution and delivery of this Amendment does not
diminish or reduce its obligations under the Existing Security
Agreement in any manner, except as specifically set forth herein.
(v) Such Obligor has no claims, counterclaims, offsets,
or defenses to the Existing Security Agreement and the performance of
its obligations thereunder, or if such Obligor has any such claims,
counterclaims, offsets, or defenses to the Existing Security Agreement
or any transaction related to the Existing Security Agreement, the same
are hereby waived, relinquished and released in consideration of the
Lenders' execution and delivery of this Amendment.
(vi) The representations and warranties of the Obligors
set forth in Section 4 of the Existing Security Agreement, after giving
effect to the amendments described in Article I hereof, are true and
correct in all material respects as of the date hereof (except those
that expressly relate to an earlier date, in which case such
representations and warranties are true and correct in all material
respects as of such earlier date) and all of the provisions of the
Existing Security Agreement, except as amended hereby, are in full
force and effect.
(vii) Subsequent to the execution and delivery of this
Amendment and after giving effect hereto, no unwaived event has
occurred and is continuing on the date hereof which constitutes a
Default or an Event of Default.
2. Liens. Each Obligor affirms the liens and security interests
created and granted by it in the Existing Security Agreement and agrees that
this Amendment shall in no manner adversely affect or impair such liens and
security interests.
3. Effect of Amendment. Except as expressly modified and amended
in this Amendment, all of the terms, provisions and conditions of the Existing
Security Agreement shall remain unchanged and in full force and effect. The
Existing Security Agreement and any and all other documents heretofore, now or
hereafter executed and delivered pursuant to the terms of the Existing Security
Agreement are hereby amended so that any reference to the Existing Security
Agreement shall mean a reference to the Existing Security Agreement as amended
by this Amendment.
4. Condition Precedent. This Amendment shall become effective as
of the date first above written when, and only when, the following condition
shall have been satisfied (it being understood that the satisfaction of the
following condition may occur concurrently with the effectiveness of this
Amendment):
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(a) Execution of Counterparts of Amendment. The
Administrative Agent shall have received counterparts of this
Amendment, which collectively shall have been duly executed on behalf
of the Borrower and each of the other Obligors.
(b) Execution of First Amendment to Credit Agreement. The
Administrative Agent shall have received counterparts of the First
Amendment to Credit Agreement, which collectively shall have been duly
executed on behalf of the Borrower and each of the other parties
thereto, including the Required Lenders.
5. Construction. This Amendment is a Credit Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
therein) be construed, administered and applied in accordance with the terms and
provisions of the Credit Agreement.
6. Counterparts. This Amendment may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument.
7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
8. Binding Effect. This Amendment, the Existing Security
Agreement as amended hereby and the other Credit Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. These Credit
Documents represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
of the parties. Except as expressly modified and amended in this Amendment, all
the terms, provisions and conditions of the Credit Documents shall remain
unchanged and shall continue in full force and effect.
9. Severability. If any provision of this Amendment is determined
to be illegal, invalid or unenforceable, such provision shall be fully severable
and the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
BORROWER: aaiPHARMA INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and CEO
OBLIGORS: APPLIED ANALYTICAL INDUSTRIES
LEARNING CENTER, INC.
AAI TECHNOLOGIES, INC.
AAI DEVELOPMENT SERVICES, INC. (f/k/a
AAI INTERNATIONAL, INC.)
AAI PROPERTIES, INC.
KANSAS CITY ANALYTICAL SERVICES,
INC.
AAI DEVELOPMENT SERVICES, INC. (f/k/a
AAI INTERNATIONAL CLINICAL TRIALS,
INC. f/k/a MEDICAL & TECHNICAL
RESEARCH ASSOCIATES, INC.)
AAI JAPAN, INC.
aaiPHARMA LLC (f/k/a NEOSAN
PHARMACEUTICALS, INC.)
By: /s/ Xxxxxxx X. Xxxxx, Jr.
------------------------------------
Name: Xxxxxxx X. Xxxxx, Jr.
Title: Vice President
First Amendment to Security Agreement
aaiPharma Inc.
December 2003
ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A.,
in its capacity as Administrative Agent
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
First Amendment to Security Agreement
aaiPharma Inc.
December 2003
