CREDIT AGREEMENT
Dated as of December 29, 1997
among
AKORN, INC.
and
XXXXXX PHARMACEUTICALS, INC.
as Borrowers,
and
THE NORTHERN TRUST COMPANY,
as Lender
TABLE OF CONTENTS
Section Page
------- ----
DEFINITIONS AND OTHER TERMS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER DEFINITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . .18
1.3 INTERPRETATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . .18
2. AMOUNT AND TERMS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . .18
2.1 ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.2 LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . .19
2.3 PREPAYMENT, COMMITMENT REDUCTION . . . . . . . . . . . . . . . . . .23
2.4 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . .23
2.5 INTEREST ON LOANS. . . . . . . . . . . . . . . . . . . . . . . . . .23
2.6 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2.7 CHARGING OF ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . .25
2.8 APPLICATION AND ALLOCATION OF PAYMENTS . . . . . . . . . . . . . . .25
2.9 LOAN ACCOUNT AND ACCOUNTING. . . . . . . . . . . . . . . . . . . . .25
2.10 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
2.11 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
2.12 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
2.13 CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY. . . . . . . . . . . .29
2.14 CONVERSION AND CONTINUATION ELECTIONS. . . . . . . . . . . . . . . .30
3. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . .31
3.1 CONDITIONS TO THE INITIAL ADVANCE. . . . . . . . . . . . . . . . . .31
3.2 FURTHER CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . .32
4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . .33
4.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW . . . . . . . . . . . . . .33
4.2 EXECUTIVE OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . .33
4.3 CORPORATE POWER AUTHORIZATION, ENFORCEABLE
OBLIGATIONS33. 4.4 FINANCIAL STATEMENTS . . . . . . . . . . . . . .34
4.5 MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . . . . . . .34
4.6 TITLE AND LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . .34
4.7 RESTRICTIONS; NO DEFAULT . . . . . . . . . . . . . . . . . . . . . .34
4.8 LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
4.9 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING
STOCK35 . 4.10 GOVERNMENT REGULATION . . . . . . . . . . . . . . . .35
4.11 MARGIN REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . .36
4.12 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
4.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
4.14 NO LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
4.15 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES . . . . . . . . . . . .38
4.16 FULL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . .38
4.17 HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . .39
4.18 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . .39
4.19 DEPOSIT AND DISBURSEMENT ACCOUNTS. . . . . . . . . . . . . . . . . .39
4.20 CUSTOMER AND TRADE RELATIONS . . . . . . . . . . . . . . . . . . . .39
4.21 INDEBTEDNESS.. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
5. FINANCIAL STATEMENTS AND INFORMATION. . . . . . . . . . . . . . . . . . .40
5.1 REPORTS AND NOTICES. . . . . . . . . . . . . . . . . . . . . . . . .40
5.2 COMMUNICATION WITH ACCOUNTANTS . . . . . . . . . . . . . . . . . . .41
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . .41
6.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS . . . . . . . . . .41
6.2 PAYMENT OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . .42
6.3 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . .42
6.4 AUDITS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
6.5 LITIGATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
6.6 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
6.7 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . .44
6.8 SUPPLEMENTAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . .44
6.9 EMPLOYEE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . .44
6.10 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . .45
6.11 LANDLORDS' AGREEMENTS, BAILEE LETTERS AND MORTGAGEE
AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
6.12 LEASED LOCATIONS OF COLLATERAL . . . . . . . . . . . . . . . . . . .45
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .46
7.1 MERGERS, SUBSIDIARIES, ETC . . . . . . . . . . . . . . . . . . . . .46
7.2 INVESTMENTS; LOANS AND ADVANCES. . . . . . . . . . . . . . . . . . .46
7.3 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
7.4 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS. . . . . . . . . . . . . .47
7.5 CAPITAL STRUCTURE AND BUSINESS . . . . . . . . . . . . . . . . . . .48
7.6 GUARANTEED INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . .48
7.7 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
7.8 SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . .49
7.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
7.10 FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .49
7.11 HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . .50
7.12 SALE-LEASEBACKS. . . . . . . . . . . . . . . . . . . . . . . . . . .50
7.13 CANCELLATION OF INDEBTEDNESS . . . . . . . . . . . . . . . . . . . .50
7.14 RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . .50
7.15 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
7.16 CHANGE OF CORPORATE NAME OR LOCATION . . . . . . . . . . . . . . . .51
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . .51
8.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . .51
8.2 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
8.3 WAIVERS BY BORROWERS . . . . . . . . . . . . . . . . . . . . . . . .54
9. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . . . .55
9.1 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . .55
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
10.1 SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
10.2 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT . . . . . . . . . . .55
10.3 AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . .55
10.4 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . .56
10.5 NO WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
10.6 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
10.7 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
FINANCING AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . .57
10.8 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .58
10.9 CONFLICT OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . .58
10.10 AUTHORIZED SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . .58
10.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . .58
10.12 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
10.13 SECTION TITLES. . . . . . . . . . . . . . . . . . . . . . . . . . .60
10.14 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .60
10.15 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . .60
10.16 REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .61
11. CROSS-GUARANTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
11.1 CROSS-GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . .61
11.2 OBLIGATIONS ABSOLUTE . . . . . . . . . . . . . . . . . . . . . . . .61
11.3 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
11.4 RECOVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
11.5 LIABILITY CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . . .62
INDEX OF SCHEDULES AND EXHIBITS
Exhibit A - Form of Notice of Advance
Exhibit B - Form of Note
Exhibit C - Form of Security Agreement
Exhibit D - Form of Notice of Conversion/Continuation
Schedule 4.2 - Executive Offices
Schedule 4.8 - Labor Matters
Schedule 4.9 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 4.13 - ERISA Plans
Schedule 4.15 - Intellectual Property and Trade Names
Schedule 4.17 - Hazardous Materials
Schedule 4.18 - Insurance Policies
Schedule 4.19 - Deposit and Disbursement Accounts
Schedule 7.3 - Indebtedness
Schedule 7.4(a) - Transactions with Affiliates
Schedule 7.7 - Liens
Schedule 10.10 - Authorized Signature
Schedule A - Letters of Credit
Schedule B - Schedules of Additional Closing Documents
CREDIT AGREEMENT
This CREDIT AGREEMENT (this "AGREEMENT"), dated as of December 29,
1997, among AKORN, INC., a Louisiana corporation ("AKORN"), XXXXXX
PHARMACEUTICALS, INC., an Illinois corporation ("XXXXXX"; collectively with
Akorn, the "BORROWERS", and each a "BORROWER"), and THE NORTHERN TRUST
COMPANY, an Illinois banking corporation (the "LENDER").
RECITALS
WHEREAS, the Borrowers have requested the Lender to extend a
revolving credit facility to the Borrowers in the aggregate maximum principal
amount of $15,000,000 to provide working capital financing for the Borrowers
and funds for acquisitions and other general corporate purposes of the
Borrowers;
WHEREAS, each of the Borrowers desires to guaranty the payment of
each other Borrower's Obligations under the Loan Documents;
WHEREAS, the Borrowers desire to secure their obligations under the
Loan Documents by granting the Lender a security interest in and lien upon
certain of their respective property;
WHEREAS, the Lender is willing to extend such financial
accommodations upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Borrowers and the Lender hereby agree as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 DEFINITIONS. In addition to terms defined elsewhere in this
Agreement or any Exhibit hereto, when used herein, the following terms shall
have the following meanings (such meanings shall be equally applicable to the
singular and plural forms of the terms used, as the context requires):
"ADVANCE" shall have the meaning assigned to it in SECTION 2.1(a).
"AFFILIATE" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the Stock
having ordinary voting power in the election of directors of such Person,
(ii) each Person that controls, is controlled by or is under common control
with such
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Person or any Affiliate of such Person or (iii) each of such Person's
officers, directors, joint venturers and partners. For the purposes of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management
or policies, whether through the ownership of voting securities, by contract
or otherwise; PROVIDED, HOWEVER, that the term "AFFILIATE" shall specifically
exclude Lender.
"APPLICABLE PERCENTAGE" shall mean at any time of determination, with
respect to LIBOR Loans or Federal Funds Rate Loans, the applicable percentage
set forth below based on the ratio of Funded Debt to EBITDA on a consolidated
basis of the Borrowers at such time:
LIBOR Loan and Federal Funds
Level Funded Debt to EBITDA Ratio Rate Loan
1 Less than or equal to 1.25x 1.125%
2 GREATER THAN 1.25x but 2.00x 1.25%
3 GREATER THAN 2.00x but 2.50x 1.50%
4 GREATER THAN 2.50x 1.625%
For purposes of the foregoing, (a) from the Closing Date until March 31,
1998, the Applicable Percentages shall be determined in accordance with
Level 2, (b) from and after such date, the Applicable Percentages shall be
determined at any time by reference to the ratio of Funded Debt to EBITDA
in effect at the time, (c) any change in the Applicable Percentages based
on a change in such ratio shall be effective for all purposes five (5)
Business Days from delivery to the Lender of an officer's certificate of
Akorn with respect to the Financial Statements to be delivered pursuant to
SECTION 5.1, (i) setting forth in reasonable detail the calculation of such
ratio for such fiscal period and (ii) stating that the signer has reviewed
the terms of this Agreement and has made, or caused to be made under his or
her supervision, a review in reasonable detail of the transactions and
condition of Akorn and its Subsidiaries during the accounting period
covered by the related financial statements and that such review has not
disclosed the existence during or at the end of such accounting period, and
that the signer does not have knowledge of the existence as at the date of
such officer's certificate, of any condition or event that constitutes a
Default or an Event of Default and (d) notwithstanding the foregoing
provisions of clauses (b) and (c), no reduction in the Applicable
Percentages shall be effective if a Default or Event of Default shall have
occurred and be continuing. It is
2
understood that the foregoing officer's certificate shall be permitted
to be delivered prior to, but in no event later than, the time of the
actual delivery of the financial statements required to be delivered
pursuant to SECTION 5.1 for the applicable fiscal period. Any change
in the Applicable Percentages due to a change in the applicable Level
shall be effective on the effective date of such change in the
applicable Level and shall apply to all LIBOR Loans made on or after
the commencement of the period (and to Federal Funds Rate Loans that are
outstanding at any time during the period) commencing on the effective date
of such change in the applicable Level and ending on the date immediately
preceding the effective date of the next such change in applicable Level.
"BUSINESS DAY" shall mean any day that is (i) not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of Illinois and (ii) a Eurodollar Business Day.
"CAPITAL LEASE" shall mean, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person or
otherwise be disclosed as such in a note to such balance sheet, other than
any such lease under which such Person is the lessor.
"CAPITAL LEASE OBLIGATION" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease or otherwise be disclosed in a note to such
balance sheet.
"CHARGES" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including, without limitation,
Taxes and taxes owed to the PBGC at the time due and payable), levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i)
the Collateral, (ii) the Obligations, (iii) the employees, payroll, income or
gross receipts of any Borrower or any of its Subsidiaries, (iv) any
Borrower's or any of their Subsidiaries' ownership or use of any properties
or other assets, or (v) any other aspect of any Borrower's or any of their
Subsidiaries' businesses.
"CLOSING DATE" shall mean the date on which the conditions set
forth in SECTION 3 shall have been satisfied in a manner satisfactory to the
Lender.
"CODE" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois; PROVIDED, HOWEVER, in
the event that, by reason of mandatory
3
provisions of law, any or all of the attachment, perfection or priority of
Lender's security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
Illinois, the term "Code" shall mean the Uniform Commercial Code as in effect
in such other jurisdiction solely for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
"COLLATERAL" shall mean the property covered by the Security
Agreement and any other personal property, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject to
a security interest or Lien in favor of Lender to secure the Obligations.
"COMMITMENT" shall mean the aggregate commitment of the Lender to
make Advances and issue Letters of Credit, which aggregate commitment shall
be Fifteen Million United State Dollars ($15,000,000) on the Closing Date, as
such amount may be adjusted, if at all, from time to time in accordance with
SECTION 2.3 of the Agreement.
"CONVERSION/CONTINUATION DATE" shall mean any date on which, under
SECTION 2.14, Borrower (a) converts Loans of one type to another type, or (b)
continues as Loans of the same type, but with a new LIBOR Period, Loans
having LIBOR Periods expiring on such date.
"CURRENCY AGREEMENT" shall mean any foreign exchange contract,
currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement designed to protect the Persons entering into same
against fluctuations in currency values.
"DEA" shall mean the Drug Enforcement Agency and comparable
agencies in foreign countries.
"DEBT SERVICE" shall mean, with respect to any Person for any
period, an amount equal to the sum of (i) the Interest Charges and Letter of
Credit fees for such period, measured at the end of each Fiscal Quarter for
the four immediately preceding Fiscal Quarters then ended, and (ii) the
scheduled amortization of any outstanding current maturities on Indebtedness,
measured at the end of each Fiscal Quarter for the four immediately following
Fiscal Quarters.
"DEFAULT" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"DEFAULT RATE" shall have the meaning assigned to it in SECTION
2.5(d).
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"DOLLARS" or "$" shall mean, lawful currency of the United States
of America.
"EBITDA" means for any period of determination, Akorn's
consolidated net earnings (or loss) after provision for taxes, PLUS cash
charges against income for foreign, federal and state income taxes for such
period, PLUS depreciation and amortization expenses for such period, PLUS
Akorn's consolidated aggregate interest expense for such period, PLUS any
extraordinary losses arising outside of the ordinary course of business
during such period which have been included in the calculation of net
earnings, MINUS extraordinary gains arising outside the ordinary course of
business during such period which have been included in the calculation of
net earnings, all determined on a consolidated basis.
"EBIT" shall mean, with respect to Borrowers for any period, the
consolidated net earnings (or loss) after provision for taxes, PLUS charges
against income for foreign, federal and state income taxes for such period,
PLUS interest expense for such period of Borrowers and their consolidated
Subsidiaries determined in accordance with GAAP.
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and
foreign laws, statutes, ordinances and regulations, now or hereafter in
effect, and in each case as amended or supplemented from time to time, and
any applicable judicial or administrative interpretation thereof, including
any applicable judicial or administrative order, consent decree or judgment,
relative to the applicable real estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental
Laws include, but are not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Sections 9601 ET SEQ.); the Hazardous Material Transportation Act, as amended
(49 U.S.C. Sections 1801 ET SEQ.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Sections 136 ET SEQ.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901 ET SEQ.);
the Toxic Substance Control Act, as amended (15 U.S.C. Sections 2601 ET
SEQ.); the Clean Air Act, as amended (42 U.S.C. Sections 740 ET SEQ.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. Sections 1251 ET
SEQ.); the Occupational Safety and Health Act, as amended (29 U.S.C.
Sections 651 ET SEQ.); and the Safe Drinking Water Act, as amended (42 U.S.C.
Sections 300(f) ET SEQ.), and any and all regulations promulgated
thereunder, and all analogous state, local and foreign counterparts or
equivalents and any transfer of ownership notification or approval statutes.
"ENVIRONMENTAL LIABILITIES AND COSTS" shall mean all liabilities,
obligations, responsibilities, remedial actions, removal actions, losses,
damages, punitive damages, consequential
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damages, treble damages, costs and expenses (including all fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigation and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim, suit, action or demand by any
person or entity, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law
(including any thereof arising under any Environmental Law, permit, order or
agreement with any Governmental Authority) and which relate to any health or
safety condition regulated under any Environmental Law or in connection with
any other environmental matter or Release, threatened Release or the presence
of a Hazardous Material or threatened Release of a Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time,
and any regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean, with respect to any Borrower or any
Subsidiary thereof, any trade or business (whether or not incorporated) under
common control with such Borrower or such Subsidiary and which, together with
such Borrower or such Subsidiary, are treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the IRC.
"ERISA EVENT" shall mean, with respect to any of the Borrowers or
any Subsidiary thereof or ERISA Affiliate, (i) a Reportable Event with
respect to a Title IV Plan or a Multiemployer Plan; (ii) the withdrawal of
any Borrower or any Subsidiary thereof or ERISA Affiliate from a Title IV
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii) the
complete or partial withdrawal of any Borrower or Subsidiary thereof or ERISA
Affiliate from any Multiemployer Plan; (iv) the filing of a notice of intent
to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (v) the institution of proceedings
to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (vi) the
failure to make required contributions to a Qualified Plan; or (vii) any
other event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer
Plan or the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA.
"EURODOLLAR BUSINESS DAY" shall mean a Business Day on which banks
in the city of London are generally open for interbank or foreign exchange
transactions.
6
"EVENT OF DEFAULT" shall have the meaning assigned to it in SECTION
9.1.
"FDA" shall mean the Federal Food and Drug Administration and
comparable agencies in foreign countries.
"FEDERAL FUNDS RATE" shall mean, for any day, (a) an interest rate
per annum equal to the weighted average of the rates on overnight Federal
funds transactions, with members of the Federal Reserve System only, arranged
by Federal funds brokers. The Federal Funds Rate shall be determined by the
Lender on the basis of reports by Federal funds brokers to, and published
daily by, the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities. If such publication is
unavailable or the Federal Funds Rate is not set forth therein, the Federal
Funds Rate shall be determined on the basis of any other source reasonably
selected by the Lender. The Federal Funds Rate applicable each day shall be
the Federal Funds Rate reported as applicable to Federal Funds transactions
on that date. In the case of Saturday, Sunday or legal holiday, the Federal
Funds Rate shall be the rate applicable to Federal funds transactions on the
immediately preceding day for which the Federal Funds Rate is reported, PLUS
(b) the Applicable Percentage.
"FEDERAL FUNDS RATE LOAN" shall mean a portion of an Advance
bearing interest by reference to the Federal Funds Rate.
"FEDERAL RESERVE BOARD" shall have the meaning assigned to it in
SECTION 4.11.
"FEES" shall mean any and all fees payable to Lender pursuant to
the Agreement or any of the other Loan Documents.
"FINANCIAL STATEMENTS" shall mean the financial statements referred
to in SCHEDULE 4.4.
"FISCAL QUARTER" shall mean any of the quarterly accounting periods
of a Borrower of each Fiscal Year.
"FISCAL YEAR" shall mean any of the annual accounting periods of a
Borrower ending on December 31, of each year.
"FLOATING RATE LOANS" shall mean Prime Rate Loans and Federal Funds
Rate Loans.
"FUNDED DEBT" shall mean, with respect to Borrowers, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness, including, but not limited to, the
Obligations (including, but not limited to, Letter of Credit Obligations),
and unsecured financing by a seller of product lines to Borrowers which by
its terms matures less than
7
eighteen months from the date of determination thereof, but excluding
Indebtedness of Borrowers secured by the real estates owned by Borrowers and
their Subsidiaries.
"FUNDING ARRANGEMENTS" shall have the meaning assigned to it in
SECTION 2.10(b).
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the Closing Date, consistently
applied.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY
OBLIGOR") in any manner, including any obligation or arrangement of such
other Person (i) to purchase or repurchase any such primary obligation, (ii)
to advance or supply funds (a) for the purchase or payment of any such
primary obligation or (b) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment
of such primary obligation, or (iv) to indemnify the owner of such primary
obligation against loss in respect thereof. The amount of any Guaranteed
Indebtedness at any time shall be deemed to be an amount equal to the lesser
at such time of (y) the stated or determinable amount of the primary
obligation in respect of which such Guaranteed Indebtedness is made or (z)
the maximum amount for which such Person may be liable pursuant to the terms
of the Instrument embodying such Guaranteed Indebtedness; or, if not stated
or determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.
"HAZARDOUS MATERIAL" shall mean any substance, material or waste,
the generation, handling, storage, treatment or disposal of which is
regulated by or forms the basis of liability now or hereafter under, any
Government Authority in any jurisdiction in which any Borrower or any
Subsidiary thereof has owned, leased, or operated real property or disposed
of hazardous materials, or by any Federal government authority, including,
without limitation, any material or substance which is (i) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste" or
other similar term or phrase under any Environmental Laws, (ii)
8
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), any radioactive substance, methane, volative hydrocarbons
or any industrial solvent, (iii) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251 ET
SEQ. (33 U.S.C. Sections 1321) or listed pursuant to Section 307 of the Clean
Water Act (33 U.S.C. Section 1317), (iv) defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, ET SEQ. (42 U.S.C. Section 6903), or (v) defined as a
"hazardous substance" pursuant to Section 1012 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section
9601 ET SEQ. (42 U.S.C. Section 9601).
"INDEBTEDNESS" of any Person shall mean (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
payment for which is deferred six (6) months or more, but excluding
obligations to trade creditors incurred in the ordinary course of business
that are not overdue by more than six (6) months unless being contested in
good faith, (ii) reimbursement and all other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (iii) all obligations evidenced by notes, bonds, debentures or
similar Instruments, (iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property), (v) all Capital Lease Obligations,
(vi) all obligations of such Person under Interest Rate Agreements, Currency
Agreements, commodity purchase or option agreements or other interest or
exchange rate or commodity price hedging arrangements, (vii) all Indebtedness
referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property or
other assets (including accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Indebtedness, and (viii) with respect to any Borrower or any Subsidiary
thereto, the Obligations.
"INDEMNIFIED PERSON" shall have the meaning assigned to it in
SECTION 2.10(a).
"INTEREST CHARGES" shall mean, with respect to any Person for any
period, the amount which, in conformity with GAAP, would be set forth
opposite the caption "INTEREST EXPENSE" (or any like caption) on a
consolidated income statement of such Person and all other Persons with which
such Person's financial statements are to be consolidated in accordance with
GAAP for the relevant period ended on such date.
9
"INTEREST PAYMENT DATE" means (a) as to any Prime Rate Loan or any
Federal Funds Rate Loan, the last Business Day of each month to occur while
such Loan is outstanding, and (b) as to any LIBOR Loan, the last day of the
LIBOR Period applicable thereto; PROVIDED, HOWEVER, that, in addition to the
foregoing, each of (x) the date upon which both the Commitment has been
terminated and the Loans have been paid in full and (y) the Termination Date
shall be deemed to be an "Interest Payment Date" with respect to any interest
which is then accrued hereunder.
"INTEREST RATE AGREEMENT" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement,
interest rate futures contract, interest rate option contract or other
similar agreement or arrangement to which any Borrower or any Subsidiary
thereof is a party, designed to protect such Borrower or such Subsidiary
against fluctuations in interest rates.
"INVESTMENTS" shall have the meaning assigned to it in SECTION 7.2.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"ISSUANCE REQUEST" shall mean a request and certificate duly
executed by an authorized officer of any Borrower, in form and substance
satisfactory to the Lender, for the issuance by the Lender of a Letter of
Credit.
"LEASES" shall mean all leasehold estates in real property now
owned or hereafter acquired by any Borrower, or any of its Subsidiaries, as
lessee.
"LETTER OF CREDIT OBLIGATION" shall mean any outstanding obligation
incurred by Lender at the request of Akorn, for the account of any Borrower,
whether direct or indirect, contingent or otherwise, due or not due, in
connection with the issuance by Lender of the Letter of Credit. The amount
of such Letter of Credit Obligation shall equal the maximum amount which may
be payable by Lender thereupon or pursuant thereto.
"LETTER OF CREDIT" shall mean a standby letter of credit issued
from time to time before, on or after the Closing Date at the request of
Akorn and for the account of Borrowers in the aggregate maximum face amount
not exceeding the Commitment for which Lender has incurred any Letter of
Credit Obligation pursuant thereto.
10
"LIBOR LOAN" shall mean a portion of an Advance bearing interest by
reference to the LIBOR Rate.
"LIBOR PERIOD" shall mean, with respect to any LIBOR Loan, each
period commencing on the last day of the next preceding LIBOR Period
applicable to such LIBOR Loan and ending one (1), two (2)or three (3) months
thereafter, as selected by Akorn's irrevocable notice to Lender as set forth
in SECTION 2.6(e) hereof; PROVIDED that the foregoing provision relating to
LIBOR Periods is subject to the following:
(1) if any LIBOR Period pertaining to a LIBOR Loan would otherwise
end on a day that is not a Eurodollar Business Day, such LIBOR Period shall
be extended to the next succeeding Eurodollar Business Day unless the
result of such extension would be to carry such LIBOR Period into another
calendar month in which event such LIBOR Period shall end on the
immediately preceding Eurodollar Business Day;
(2) any LIBOR Period that would otherwise extend beyond the
Termination Date shall end two (2) Eurodollar Business Days prior to such
applicable date;
(3) any LIBOR Period pertaining to a LIBOR Loan that begins on the
last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such LIBOR Period) shall end on the last Eurodollar Business Day of a
calendar month;
(4) Akorn shall select LIBOR Periods so as not to require a payment or
prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
(5) Akorn shall select LIBOR Periods so that there shall be no more
than five (5) separate LIBOR Loans which are Advances in existence at any
one time.
"LIBOR RATE" shall mean for each LIBOR Period, a rate of interest
determined by the Lender equal to (a) that fixed rate of interest per year for
deposits with maturity periods of one (1), two (2) or three (3) months (which
maturity period Akorn shall select subject to the terms stated herein), in
United States dollars offered to the Lender in or through the London interbank
market at or about 11:00 A.M., London time, two (2) Eurodollar Business Days
before the first (1st) day of each LIBOR Period and for the London deposit
maturity requested, DIVIDED BY one minus any applicable reserve requirement
(expressed as a decimal) on Eurodollar deposits of the same amount and maturity
as determined by Lender, PLUS the Applicable Percentage.
11
"LIEN" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).
"LOAN" shall mean, as the context may require, the aggregate amount
of Advances outstanding at any time to any Borrower or to all Borrowers.
"LOAN ACCOUNT" shall have the meaning assigned to it in SECTION 2.9.
"LOAN DOCUMENTS" shall mean the Agreement, the Note, the Security
Agreement, the Letters of Credit, and all other agreements, instruments,
documents and certificates identified in the Schedule of Documents in favor
of Lender and including (without limitation) all other pledges, powers of
attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of any
Borrower or any of its Affiliates, or any employee of any Borrower or any of
its Affiliates, and delivered to Lender in connection with the Agreement or
the transactions contemplated hereby.
"MARGIN STOCK" shall have the meaning assigned to it in SECTION
4.11.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(i) the business, assets, operations, prospects or financial or other
condition of Borrowers and their Subsidiaries considered as a whole, (ii)
Borrowers' ability to pay the Loans or any of the other Obligations in
accordance with the terms thereof, (iii) the Collateral or Lender's Liens on
the Collateral or the priority of any such Lien, or (iv) Lender's rights and
remedies under the Agreement or any of the other Loan Documents.
"MAXIMUM LAWFUL RATE" shall have the meaning assigned to it in
SECTION 2.5(f).
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA, and to which any Borrower or any of the
Subsidiaries thereof or ERISA Affiliate is making, is obligated to make, has
made or been obligated to make, contributions on behalf of participants who
are or were employed by any of them.
12
"NET INCOME" shall mean, with respect to any period, the aggregate
of the net income (loss) of the Person in question for such period,
determined in accordance with GAAP on a consolidated basis, provided that (i)
the net income (loss) of any Person which is not a Subsidiary shall be
included only to the extent of the amount of cash dividends or distributions
paid to the Person in question or to a consolidated Subsidiary of such Person
and (ii) the net income (loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded. There shall be excluded in computing Net Income the
excess (but not the deficit), if any, of (i) any gain which must be treated
as an extraordinary item under GAAP or any gain realized upon the sale or
other disposition of any real property or equipment that is not sold in the
ordinary course of business or of any capital stock of the Person or a
Subsidiary of the Person over (ii) any loss which must be treated as an
extraordinary item under GAAP or any loss realized upon the sale or other
disposition of any real property or equipment that is not sold in the
ordinary course of business or of any capital stock of the Person or a
Subsidiary of the Person.
"NET WORTH" shall mean the book value of the assets of Borrowers on
a consolidated basis (inclusive of goodwill, patents, trademarks, tradenames,
copyrights, organization expenses, treasury stock, debt discount and expense,
deferred charges and other like intangibles), MINUS (i) reserves applicable
thereto, and (ii) all of Borrowers' liabilities on a consolidated basis
(including accrued and deferred income taxes).
"NON-USE FEE" shall have the meaning assigned to it in SECTION
2.6(b).
"NOTE" shall have the meaning assigned to it in SECTION 2.1(b) and
shall be substantially in the form of EXHIBIT B.
"NOTICE OF ADVANCE" shall have the meaning assigned to it in
SECTION 2.1.
"NOTICE OF CONVERSION/CONTINUATION" shall mean a notice in
substantially the form of EXHIBIT D.
"OBLIGATIONS" shall mean all loans, advances, debts, liabilities
and obligations, including, without limitation, the Loans and Letter of
Credit Obligations, for the performance of covenants, tasks or duties or for
payment of monetary amounts (whether or not such performance is then required
or contingent, or amounts are liquidated or determinable) owing by any
Borrower or any Subsidiary thereof to Lender, and all covenants and duties
regarding such amounts, of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other Instrument, arising under the
Agreement or any of the other Loan Documents. This term includes all
principal, interest (including,
13
without limitation, all interest which accrues after the commencement of any
case or proceedings in bankruptcy after the insolvency of, or for the
reorganization of, any Borrower or any Subsidiary thereof, whether or not
allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any
other sum chargeable to any Borrower or any Subsidiary thereof under the
Agreement or any of the other Loan Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENSION PLAN" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan), which is
not an individual account plan, as defined in Section 3(34) of ERISA, and
which any Borrower or any Subsidiary thereof or, if a Title IV Plan, any
ERISA Affiliate maintains, contributes to or has an obligation to contribute
to on behalf of participants who are or were employed by any of them.
"PERMITTED ENCUMBRANCES" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental Charges or levies, not
yet due and payable; (ii) pledges or deposits securing obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing
bids, tenders, contracts (other than contracts for the payment of money) or
leases to which any Borrower or any Subsidiary thereof is a party as lessee
made in the ordinary course of business; (iv) deposits securing statutory
obligations of any Borrower or any Subsidiary thereof; (v) inchoate and
unperfected workers', mechanics', suppliers' or similar liens arising in the
ordinary course of business; (vi) carriers', warehousemen's or other similar
possessory liens arising in the ordinary course of business and securing
liabilities in an outstanding aggregate amount not in excess of $100,000 at
any time; (vii) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which any Borrower or any Subsidiary thereof is a
party; (viii) any attachment or judgment lien, unless the judgment it secures
shall not, within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 30 days after the expiration of any such stay; (ix) zoning
restrictions, easements, licenses, or other restrictions on the use of real
property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the use, value, or
marketability of such real property, lease or leasehold estate; (x) Liens
existing on the Closing Date and listed on SCHEDULE 7.7 hereto; and (xi)
other Liens securing Indebtedness or the purchase price permitted pursuant to
the terms of this Agreement, including but not limited to, under SECTION 7.1
hereof.
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"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit
corporation, other entity or government (whether federal, state, county,
city, municipal, local, foreign, or otherwise, including any instrumentality,
division, agency, body or department thereof).
"PLAN" shall mean, with respect to any Borrower, any Subsidiary
thereof or any ERISA Affiliate, at any time, an employee benefit plan, as
defined in Section 3(3) of ERISA, which any Borrower or any Subsidiary
thereof maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"PRIME RATE" shall mean a rate per year equal to that rate of
interest per year announced from time to time by Lender called its prime
rate, which rate at any time may not be the lowest rate charged by Lender.
Changes in the Prime Rate shall take effect on the date set forth in each
announcement for a change in the Prime Rate.
"PRIME RATE LOAN" shall mean a portion of an Advance bearing
interest by reference to the Prime Rate.
"QUALIFIED PLAN" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which any Borrower, any Subsidiary thereof or
any ERISA Affiliate maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of
them.
"REIMBURSEMENT OBLIGATION" shall have the meaning assigned to it in
SECTION 2.2(e).
"RELEASE" shall mean, as to any Person, any material release,
spill, emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Materials in the
indoor or outdoor environment by such Person, including the movement of
Hazardous Materials through or in the air, soil, surface water, ground water
or property.
"REPORTABLE EVENT" shall mean any of the events described in
Section 4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA.
"RESTRICTED PAYMENT" shall mean (i) the declaration or payment of
any dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's
Stock, (ii) any payment on account of the purchase, redemption, defeasance or
other retirement of a Person's Stock or any other payment or distribution
made in respect thereof, either directly or indirectly, or (iii) any payment,
loan,
15
contribution, or other transfer of funds or other property to any Stockholder
of such Person, except salary and cash bonuses paid to Guarantor.
"RETIREE WELFARE PLAN" shall refer to any Welfare Plan providing
for continuing coverage or benefits for any participant or any beneficiary of
a participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at
the sole expense of the participant or the beneficiary of the participant.
"SCHEDULE OF DOCUMENTS" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as SCHEDULE B.
"SECURITY AGREEMENT" shall mean the Security Agreement of even date
herewith entered into among Lender, Borrowers and their Subsidiaries,
substantially in the form of EXHIBIT C, including all amendments,
restatements, modifications and supplements thereto, and shall refer to the
Security Agreement as the same may be in effect at the time such reference
becomes operative.
"SOLVENT" shall mean, with respect to any Person, that (i) the
fair salable value of its assets exceeds the fair present value of its
liabilities (including all liabilities whether reflected on a balance sheet
prepared in accordance with GAAP or otherwise and whether direct, indirect,
fixed, contingent, disputed or undisputed); (ii) such Person is able to pay
its debts when due; and (iii) such Person has capital sufficient to carry on
its current business and all businesses in which it is about to engage.
"STATED AMOUNT" of each Letter of Credit means the "Stated Amount"
as defined therein.
"STATED EXPIRY DATE" shall have the meaning assigned to it in
SECTION 2.2.
"STOCK" shall mean all shares, options, warrants, general or
limited partnership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including common stock, preferred stock or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended).
"SUBSIDIARY" shall mean, with respect to any Person, (i) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to
16
elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, Stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening
of any contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person,
or with respect to which any such Person has the right to vote or designate
the vote of fifty percent (50%) or more of such Stock whether by proxy,
agreement, operation of law or otherwise and (ii) any partnership in which
such Person and/or one or more Subsidiaries of such Person shall have an
interest (whether in the form of voting or participation in profits or
capital contribution) of more than fifty percent (50%) or of which any such
Person is a general partner or may exercise the powers of a general partner.
"TAXES" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes
imposed on or measured by the net income of Lender by the jurisdictions under
the laws of which Lender is organized or any political subdivision thereof.
"TERMINATION DATE" shall mean the earliest of (i) December 29,
1999, (ii) the date of termination of Lender's obligations to advance funds
or permit existing advances to remain outstanding pursuant to SECTION 8.2,
and (iii) the date of indefeasible prepayment in full by Borrowers of the
Loans, and the permanent reduction of the Commitment to zero dollars ($0), in
accordance with the provisions of SECTION 2.3.
"TITLE IV PLAN" shall mean a Pension Plan, other than a
Multiemployer Plan, which is covered by Title IV of ERISA.
"UNFUNDED PENSION LIABILITY" shall mean, at any time, the aggregate
amount, if any, of the sum of (i) the amount by which the present value of
all accrued benefits under each Title IV Plan exceeds the fair market value
of all assets of such Title IV Plan allocable to such benefits in accordance
with Title IV of ERISA, all determined as of the most recent valuation date
for each such Title IV Plan using the actuarial assumptions in effect under
such Title IV Plan, and (ii) for a period of five (5) years following a
transaction reasonably likely to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Borrower,
any Subsidiary thereof or any ERISA Affiliate as a result of such transaction.
"WELFARE PLANS" shall mean any welfare plan, as defined in Section
3(1) of ERISA, which is maintained or contributed to by any Borrower, any
Subsidiary thereof or any ERISA Affiliate.
"WITHDRAWAL LIABILITY" shall mean, at any time, the aggregate
amount of the liabilities, if any, pursuant to Section
17
4201 of ERISA, and any increase in contributions pursuant to Section 4243 of
ERISA with respect to all Multiemployer Plans.
1.2 OTHER DEFINITIONAL PROVISIONS. Unless otherwise defined or the
context otherwise requires, all financial and accounting terms used herein or
in any certificate or other document made or delivered pursuant hereto shall
be defined in accordance with GAAP. Unless otherwise defined therein, all
terms defined in this Agreement shall have the defined meanings when used in
the Note or in any certificate or other document made or delivered pursuant
hereto. Terms used in this Agreement which are defined in any Exhibit hereto
shall, unless the context otherwise indicates, have the meanings given them
in such Exhibit. Other terms used in this Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the UCC to the
extent the same are used or defined therein.
1.3 INTERPRETATION OF AGREEMENT. A SECTION, an EXHIBIT or a
SCHEDULE is, unless otherwise stated, a reference to a section hereof, an
exhibit hereto or a schedule hereto, as the case may be. Section captions
used in this Agreement are for convenience only, and shall not affect the
construction of this Agreement. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar purport when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement.
2. AMOUNT AND TERMS OF CREDIT
2.1 ADVANCES. (a) Subject to the terms and conditions of this
Agreement, the Lender agrees to make advances (the "ADVANCE(S)") to the
Borrowers, from time to time from the date of this Agreement until the
Termination Date, at such times and in such amounts as the Borrowers may
request, not to exceed in the aggregate at any one time outstanding the
difference of (i) the Commitment, MINUS (ii) the Letter of Credit Obligation.
Until all amounts outstanding in respect of the Loans shall become due and
payable on the Termination Date, Borrowers may from time to time borrow,
repay and reborrow under this SECTION 2.1(a). Each Advance to a Borrower
shall be made on notice by such Borrower to the Lender at its principal
banking office at 00 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, given no
later than 11:00 a.m. (Chicago time) on (a) the Business Day of the proposed
Advance or, (b) in the case of a request for an Advance that is a LIBOR Loan,
two (2) Business Days prior to the date of the proposed Advance; PROVIDED,
HOWEVER, that any Advance requested as a LIBOR Loan shall be in a minimum
amount of $250,000 and integral multiples of $50,000 in excess of such
amount. Each such notice (a "NOTICE OF ADVANCE") shall be substantially in
the form of EXHIBIT A hereto, specifying therein the requested date, the
amount and type of such Advance, and such other information as may be
required by Lender and shall be given in writing (by telecopy or overnight
courier) or by telephone confirmed immediately in writing if requested by the
18
Lender. Lender shall be entitled to rely upon, and shall be fully protected
under this Agreement in relying upon, any Notice of Advance believed by
Lender to be genuine and to assume that each Person executing and delivering
the same was duly authorized unless the responsible individual acting thereon
for Lender shall have, at the time of reliance thereon, actual knowledge to
the contrary.
(b) Borrowers shall execute and deliver to the Lender a note
to evidence the Loans, such note to be in the principal amount of the
Commitment, dated the date hereof and substantially in the form of EXHIBIT B
hereto (the "NOTE"). The Note shall represent the joint and several
obligation of each Borrower to pay the amount of the Commitment or, if less,
the aggregate unpaid principal amount of all Advances made by the Lender to
Borrowers and all other obligations with interest thereon as prescribed in
SECTION 2.5. The date and amount of each Advance and each payment of
principal with respect thereto shall be recorded on the books and records of
the Lender, which books and records shall constitute PRIMA FACIE evidence of
the accuracy of the information therein recorded. The entire unpaid balance
of the Loans shall be immediately due and payable on the Termination Date.
(c) Each Borrower hereby designates Akorn as its sole agent
for the purposes of issuing Notices of Advances, requesting an issuance of a
Letter of Credit, selecting interest rate options and receiving notices and
consents hereunder.
2.2 LETTERS OF CREDIT.
(a) REQUESTS. By delivering to Lender an Issuance Request
substantially in the form of SCHEDULE A hereto, on or before 3:00 p.m.,
Chicago time, Borrowers may request, from time to time prior to the
Termination Date and on not less than two Business Days' notice, that the
Lender issue a standby letter of credit, and for such purposes described in
the Issuance Request (as used herein, the term "issue" when referring to
Letters of Credit shall include any increase in the amount of or extension
of the term of any Letter of Credit). The Stated Amount of any Letter of
Credit requested to be issued pursuant to such Issuance Request shall be
denominated in U.S. dollars. Each Letter of Credit shall by its terms:
(i) be issued in a Stated Amount which, together with all Letter
of Credit Obligations and the Loans, in the aggregate does not exceed (or
would not exceed) the Commitment;
(ii) be stated to expire on a date (its "STATED EXPIRY DATE") no
later than the Termination Date; and
(iii) on or prior to its Stated Expiry Date:
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(A) terminate immediately upon notice to the Lender from
the beneficiary thereunder that all obligations covered thereby have
been terminated, paid, or otherwise satisfied in full, or
(B) reduce in part immediately and to the extent the
beneficiary thereunder has notified the Lender thereof that the
obligations covered thereby have been paid or otherwise satisfied in
part.
By delivery to the Lender of an Issuance Request at least two Business Days
prior to the Stated Expiry Date of any Letter of Credit, Borrowers may
request the Lender to extend the Stated Expiry Date of such Letter of Credit
for an additional period not to exceed the period ending on the Termination
Date.
(b) ISSUANCES AND EXTENSIONS. Subject to the terms and conditions
of this Agreement, the Lender shall issue Letters of Credit, and extend the
Stated Expiry Dates of outstanding Letters of Credit, in accordance with the
Issuance Requests made therefor. If the Issuance Request consists of, or is
supplemented by, the Lender's standard letter of credit application form, the
terms of such application shall apply with respect to such Letter of Credit,
but only to the extent such terms are not inconsistent with the provisions
hereof.
(c) FEES AND EXPENSES. Borrowers agree to pay to the Lender, (i)
in respect of each standby Letter of Credit, a fee equal to 1.00% per annum
(calculated from and including the date of issuance (or date of renewal or
extension, if any) thereto to the Stated Expiry Date thereof) on the Stated
Amount of each such Letter of Credit, payable in advance on the last Business
Day of each Fiscal Quarter and on the Termination Date, and (ii)upon demand
from time to time, Lender's standard issuance, administrative, operating and
other fees and charges in effect from time to time in connection with the
fronting, issuance, maintenance, modification (if any) and administration of
each Letter of Credit.
(d) DISBURSEMENTS. The Lender will notify Akorn promptly of the
presentment for payment of any Letter of Credit, together with notice of the
date (the "DISBURSEMENT DATE") such payment shall be made. Subject to the
terms and provisions of such Letter of Credit, the Lender shall make such
payment to the beneficiary (or its designee) of such Letter of Credit. Prior
to 12:00 noon, Chicago time, on the Disbursement Date, Borrower will
reimburse the Lender for all amounts which it has disbursed under such Letter
of Credit. To the extent the Lender is not reimbursed in full in accordance
with this subsection, Borrower's Reimbursement Obligation shall accrue
interest at a fluctuating rate determined by reference to the Prime Rate,
plus a margin of 2% per annum, payable on demand. In the event the Lender is
not
20
reimbursed by Borrower on the Disbursement Date, or if the Lender must for
any reason return or disgorge such reimbursement, the Lender shall fund the
Reimbursement Obligation therefor by making Loans as provided in SECTION 2.1
(Borrowers being deemed to have given a timely request therefor for such
amount); PROVIDED, HOWEVER, for the purpose of determining the availability
of the Advances immediately prior to giving effect to the application of the
proceeds of such Loans, such Reimbursement Obligations shall be deemed not to
be outstanding at such time.
(e) REIMBURSEMENT. Borrowers' obligation (a "REIMBURSEMENT
OBLIGATION") under subsection (d) of this SECTION 2.2 to reimburse the Lender
with respect to each Disbursement (as defined below) (including interest
thereon) shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim, or defense to payment which
Borrowers may have or have had against the Lender or any beneficiary of a
Letter of Credit, including any defense based upon the occurrence of any
Event of Default or Default, any draft, demand, or certificate, or other
document presented under a Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient, the failure of any Disbursement to conform to the
terms of the applicable Letter of Credit (if, in the Lender's good faith
opinion, such Disbursement is determined to be appropriate) or any
non-application or misapplication by the beneficiary of the proceeds of such
Disbursement, or the legality, validity, form, regularity, or enforceability
of such Letter of Credit. "DISBURSEMENT" means any payment made under a
Letter of Credit by the Lender to the beneficiary thereunder.
(f) DEEMED DISBURSEMENTS. Upon the occurrence and during the
continuation of any Event of Default, an amount equal to that portion of
Letter of Credit Obligations attributable to outstanding and undrawn Letters
of Credit shall, at the option of the Lender, and without demand upon or
notice to Akorn, be deemed to have been paid or disbursed by the Lender under
such Letters of Credit (notwithstanding that such amount may not in fact have
been so paid or disbursed), and, upon notification by the Lender to Akorn of
its obligations under this subsection, Borrowers shall be immediately
obligated to reimburse the Lender the amount deemed to have been so paid or
disbursed by the Lender. Any amounts so received by the Lender from
Borrowers pursuant to this subsection shall be held as collateral security
for the repayment of Borrowers' obligations in connection with the Letters of
Credit. At any time when such Letters of Credit shall terminate and all
Reimbursement Obligations to the Lender are either terminated or paid or
reimbursed to the Lender in full, the obligations of Borrowers under this
subsection shall be reduced accordingly (subject, however, to reinstatement
in the event any payment in respect of such Letters of Credit is recovered in
any manner from any Lender), and, if no Event of Default shall be continuing,
the Lender will return to Borrowers the excess, if any, of
21
(i) the aggregate amount deposited by Borrowers with the Lender and
not theretofore applied by the Lender to any Reimbursement Obligation; over
(ii) the aggregate amount of all Reimbursement Obligations to the
Lender pursuant to this subsection, as so adjusted.
At such time when all Events of Default shall have been cured or waived, the
Lender shall return to Borrower all amounts then on deposit with the Lender
pursuant to this subsection. All amounts on deposit pursuant to this subsection
shall, until their application to any Reimbursement Obligation or their return
to Borrowers, as the case may be, bear interest at the daily average Federal
Funds Rate (without taking into account the Applicable Percentage) from time to
time in effect (net of the costs of any reserve requirements, in respect of
amounts on deposit pursuant to this Section, pursuant to Federal Reserve Board
Regulation D), which interest shall be held by the Lender as additional
collateral security for the repayment of the Letter of Credit obligations in
connection with the Letters of Credit issued by the Lender.
(g) NATURE OF REIMBURSEMENT OBLIGATIONS. Borrowers shall assume all
risks of the acts, omissions, or misuse of any Letter of Credit by the
beneficiary thereof. The Lender (except to the extent of its own gross
negligence or wilful misconduct) shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for an issuance of a Letter of Credit, even
if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent, or forged;
(ii) the form, validity, sufficiency, accuracy, genuineness, or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or proceeds thereof in whole or in part, which may prove to be invalid or
ineffective for any reason;
(iii) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(iv) errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise; or
(v) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a
22
Disbursement under a Letter of Credit or of the proceeds thereof.
None of the foregoing shall affect, impair, or prevent the vesting of any of the
rights or powers granted the Lender hereunder.
2.3 PREPAYMENT, COMMITMENT REDUCTION. Borrowers shall have the right
at any time on three (3) days' prior written notice to the Lender to voluntarily
prepay all or part of the Loans and permanently reduce or terminate the
Commitment, and no prepayment fee, premium or penalty shall be payable in
connection with any such voluntary prepayment, except LIBOR funding breakage
costs in accordance with SECTION 2.10(b). Within three (3) days from a closing
date of a real estate financing by the Borrowers, the Loans shall be prepaid and
the Commitment shall be permanently reduced by an amount equal to 75% of the
difference of (i) the net proceeds of such financing, MINUS (ii) $1,000,000, in
accordance with the terms of this SECTION 2.3. Upon any such prepayment and
permanent reduction or termination of the Commitment, Borrowers' right to
receive Advances shall simultaneously terminate or be permanently reduced, as
the case may be.
2.4 USE OF PROCEEDS. Borrowers shall utilize the proceeds of
Advances for working capital financing for the Borrowers and funding for
acquisitions and other general corporate purposes of the Borrowers.
2.5 INTEREST ON LOANS.
(a) Borrowers shall pay interest to Lender, in arrears on each
applicable Interest Payment Date, based on the amounts outstanding from time to
time under the Loan, at a rate equal to (i) the Prime Rate, (ii) the applicable
LIBOR Rate or (iii) the Federal Funds Rate.
(b) If any payment on the Loans becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of interest shall be made by the Lender on
the basis of a three hundred and sixty (360) day year, in each case for the
actual number of days occurring in the period for which such interest is
payable. The Prime Rate and the Federal Funds Rate shall be determined each day
based upon the Prime Rate and the Federal Funds Rate, respectively, as in effect
each day. Each determination by the Lender of an interest rate hereunder shall
be conclusive and binding for all purposes, absent manifest error or bad faith.
23
(d) So long as any Event of Default shall have occurred and be
continuing, and after written notice from the Lender to Akorn, the interest
rates applicable to the Loans and any other Obligations shall be increased by
two percent (2%) per annum above the rate of interest otherwise applicable
hereunder ("DEFAULT RATE").
(e) Notwithstanding anything to the contrary set forth in
this SECTION 2.5, if, at any time until payment in full of all of the
Obligations, the rate of interest payable hereunder exceeds the highest rate
of interest permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto (the "MAXIMUM LAWFUL
RATE"), then in such event and so long as the Maximum Lawful Rate would be so
exceeded, the rate of interest payable hereunder shall be equal to the
Maximum Lawful Rate; PROVIDED, HOWEVER, that if at any time thereafter the
rate of interest payable hereunder is less than the Maximum Lawful Rate,
Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Lender from the making of
such advances hereunder is equal to the total interest which would have been
received had the interest rate payable hereunder been (but for the operation
of this paragraph) the interest rate payable since the Closing Date as
otherwise provided in this Agreement. Thereafter, the interest rate payable
hereunder shall be the rate of interest provided in SECTIONS 2.5(b) through
(d) of this Agreement, unless and until the rate of interest again exceeds
the Maximum Lawful Rate, in which event this paragraph shall again apply. In
no event shall the total interest received by Lender pursuant to the terms
hereof exceed the amount which Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the
Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made. In the event that a court of competent
jurisdiction, notwithstanding the provisions of this SECTION 2.5(e), shall
make a final determination that Lender has received interest hereunder or
under any of the other Loan Documents in excess of the Maximum Lawful Rate,
Lender shall, to the extent permitted by applicable law, promptly apply such
excess first to any interest due and not yet paid hereunder in respect of the
Loans, then to the outstanding principal of the Loans, then to Fees and any
other unpaid Obligations and thereafter shall refund any excess to Borrowers
or as a court of competent jurisdiction may otherwise order.
2.6 FEES. As compensation for Lender's costs and risks in making the
Loan available to Borrowers, Borrowers agree to pay to Lender, in arrears, on
the last Business Day of each month prior to the Termination Date and on the
Termination Date, a fee for Borrowers' non-use of available funds (the "NON-USE
FEE") in an amount equal to one quarter of one percent (0.25%) per annum
24
(calculated on the basis of a 360 day year for actual days elapsed) of the
difference between the respective daily averages of (i) the Commitment (as it
may be adjusted from time to time hereunder) and (ii) the sum of (x) the amount
of the Loan outstanding, PLUS (y) the Letter of Credit Obligations during the
period for which the Non-Use Fee is due.
2.7 CHARGING OF ACCOUNTS. The Borrowers hereby authorize the Lender,
and the Lender may, in its sole and absolute discretion charge to the Borrowers
at any time all or any portion of any of the Obligations then due and owing (and
interest, if any, thereon) including but not limited to any Fees and other costs
and expenses of the Lender for which the Borrowers are liable pursuant to the
terms of this Agreement or any other Loan Document, by charging Akorn's demand
deposit account or any other bank account with the Lender; PROVIDED, HOWEVER
that the provisions of this SECTION 2.7 shall not affect the Borrowers'
obligation to pay when due all amounts payable by the Borrowers under this
Agreement, the Note or any other Loan Document, whether or not there are
sufficient funds therefor in the demand deposit account or any other bank
account of Akorn with the Lender.
2.8 APPLICATION AND ALLOCATION OF PAYMENTS. Lender is authorized to,
and at its option may, make or cause to be made Advances on behalf of Borrowers
for payment of all Fees, expenses, Charges, costs, principal, interest, or other
Obligations owing by Borrower under this Agreement or any of the other Loan
Documents if and to the extent any such Borrower fails to promptly pay any such
amounts as and when due, even if such Advance would cause total Advances to
exceed the Loan Commitment. At Lender's option and to the extent permitted by
law, any advances so made shall be deemed Advances constituting part of the Loan
hereunder. Following the occurrence and during the continuance of an Event of
Default, Borrowers hereby irrevocably waive the right to direct the application
of any and all payments at any time or times hereafter received from or on
behalf of any such Borrower, and each Borrower hereby irrevocably agrees that
Lender shall have the continuing exclusive right to apply any and all such
payments against the then due and payable Obligations of Borrowers and in
repayment of the Loan as Lender may deem advisable notwithstanding any previous
entry by Lender upon the Loan Account or any other books and records. In the
absence of a specific determination by Lender with respect thereto, the same
shall be applied in the following order: (i) to then due and payable interest
payments on the Loans; (ii) to principal payments on the Loan; (iii) to then due
and payable Fees and expenses; (iv) to then due and payable Obligations other
than Fees, expenses and interest and principal payments; and (v) to all other
then due and payable Obligations.
2.9 LOAN ACCOUNT AND ACCOUNTING. Lender shall maintain a loan
account (the "LOAN ACCOUNT") on its books to record:(a) all Advances, (b) all
payments made by Borrowers and (c) all other
25
appropriate debits and credits as provided in this Agreement with respect to
the Loans or any other Obligations. All entries in the Loan Account shall be
made in accordance with Lender's customary accounting practices as in effect
from time to time. Borrowers shall pay all Obligations as such amounts
become due or are declared due pursuant to the terms of this Agreement.
The balance in the Loan Account shall be presumptive evidence of
the amounts due and owing to Lender by Borrower; PROVIDED, THAT, any failure
to so record or any error in so recording shall not limit or otherwise affect
Borrowers' obligations to pay the Obligations. Any accounting provided by
Lender to Akorn regarding the Loan Account shall (absent manifest error) be
deemed final, binding and conclusive upon Borrowers in all respects as to all
matters reflected therein, unless Akorn, within thirty (30) days after the
date any such accounting is rendered, shall notify Lender in writing of any
objection which Borrowers may have to any such accounting, describing the
basis for such objection with specificity. In that event, only those items
expressly objected to in such notice shall be deemed to be disputed by
Borrowers. Lender's determination, based upon the facts available, of any
item objected to by Akorn in such notice shall (absent manifest error) be
final, binding and conclusive on Borrowers.
2.10 INDEMNITY.(a) Each Borrower shall indemnify and hold each of
Lender and its Affiliates, and each of Lender's and its Affiliates'
respective officers, directors, employees, attorneys, agents and
representatives (each an "INDEMNIFIED PERSON") harmless from and against any
and all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) which may
be instituted or asserted against or incurred by any such Indemnified Person
as the result of credit having been extended under this Agreement and the
other Loan Documents or in connection with or arising out of the transactions
contemplated hereunder and thereunder or any actions or failures to act in
connection therewith, including any and all Environmental Liabilities and
Costs; PROVIDED, THAT no Borrower shall be liable for any indemnification to
such Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results solely from such
Indemnified Person's gross negligence or willful misconduct, as finally
determined by a court of competent jurisdiction after exhaustion of all
available appeals. NEITHER LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR
THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED OR TERMINATED UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
26
(b) Borrowers understand that in connection with Lender's
arranging to provide the LIBOR Rate interest option, Lender may enter into
funding arrangements with third parties ("FUNDING ARRANGEMENTS") on terms and
conditions which could result in losses to Lender if such LIBOR Rate funds do
not remain outstanding at the interest rates provided herein for the entire
LIBOR Period with respect to which the LIBOR Rate has been fixed.
Consequently, in order to induce Lender to provide such options on the terms
provided herein and in consideration of Lender entering into such Funding
Arrangements from time to time, if any LIBOR Loans are repaid in whole or in
part prior to the last day of any such LIBOR Period therefor, whether such
repayment is made pursuant to any provision of this Agreement or any other
Loan Document or is the result of acceleration, by operation of law or
otherwise, Borrowers shall indemnify and hold harmless Lender from and
against and in respect of any and all losses, costs and expenses resulting
from, or arising out of or imposed upon or incurred by Lender by reason of
the liquidation or reemployment of funds acquired or committed to be acquired
by Lender to fund such LIBOR Loans, pursuant to the Funding Arrangements.
The amount of any losses, costs or expenses resulting in an obligation of
Borrowers to make a payment pursuant to the foregoing sentence shall not
include any losses attributable to lost profit to Lender but shall represent
the excess, if any, of (A) Lender's cost of borrowing the LIBOR Rate funds,
pursuant to the Funding Arrangements over (B) the return to Lender on its
reinvestment of such funds; PROVIDED, HOWEVER, that if Lender terminates any
Funding Arrangements in respect of the LIBOR Loans, the amount of such
losses, costs and expenses shall include the cost to Lender of such
termination. In reinvesting any funds borrowed by Lender pursuant to the
Funding Arrangements, Lender shall take into consideration the remaining
maturity of such borrowings. As promptly as practicable under the
circumstances, Lender shall provide Akorn with its written calculation of all
amounts payable pursuant to the next preceding sentence, and such calculation
shall be binding on the parties hereto unless Akorn shall object thereto in
writing within ten (10) Business Days of receipt thereof.
2.11 ACCESS. (a) Each Borrower shall provide full access during
normal business hours, from time to time upon one (1) Business Day's prior
notice, to Lender and any of its officers, employees and agents, as
frequently as Lender determines, in its reasonable discretion, to be
appropriate (unless a Default or Event of Default shall have occurred and be
continuing, in which event Lender and its officers, employees, designees,
agents and representatives shall have access at any and all times and without
any advance notice), to the properties, facilities, books, and records of
Borrowers and their Subsidiaries, to the Collateral, to the accountants of
Borrowers and the Subsidiaries thereof and to the work papers of such
accountants, and in addition, (x) while any Default or Event of Default shall
have occurred and be continuing, (y) at any time for purposes of inspection,
audit or verification
27
of Accounts, or (z) upon the consent of Akorn, to such Borrower's suppliers,
customers, advisors and employees (including officers). Without limiting the
generality of the foregoing, each Borrower shall (i) permit Lender, and any
of its officers, employees, agents and representatives, to inspect, audit and
make extracts from all of such Borrower's and its Subsidiaries' records,
files and books of account and (ii) permit Lender, and any of its officers,
employees, agents and representatives, to inspect, review and evaluate the
Accounts at such Borrower's and its Subsidiaries' locations and at premises
not owned by or leased to such Borrower or any Subsidiary of such Borrower.
Each Borrower shall make available to Lender and its counsel, as quickly as
is possible under the circumstances, originals or copies of all books,
records, board minutes, contracts, insurance policies, environmental audits,
business plans, files, financial statements (actual and pro forma), filings
with federal, state and local regulatory agencies, and other instruments and
documents which Lender may request. Each Borrower shall deliver any document
or instrument necessary for Lender, as it may from time to time request, to
obtain records from any service bureau or other Person which maintains
records for such Borrower, and shall maintain duplicate records or supporting
documentation on media, including computer tapes and discs owned by such
Borrower. Borrowers shall instruct their certified public accountants to
make available to Lender such information and records as Lender may request.
(b) A fee of $500 per day per individual or Lender's then standard
rate, whichever is greater, (plus all reasonable out-of-pocket costs and
expenses) in connection with Lender's field examinations permitted under
SECTION 2.11(a) above and SECTION 5(g) of the Security Agreement shall be
paid promptly by Borrowers in connection with each field audit conducted
after the Closing Date.
2.12 TAXES. (a) Any and all payments by any Borrower hereunder or
under the Note shall be made, in accordance with this SECTION 2.12, free and
clear of and without deduction for any and all present or future Taxes. If
any Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under the Note, (i) the sum payable shall be
increased as much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this SECTION 2.12) Lender shall receive an amount equal to the sum Lender
would have received had no such deductions been made, (ii) such Borrower
shall make such deductions, and (iii) such Borrower shall pay the full amount
deducted to the relevant taxing or other authority in accordance with
applicable law.
(b) Borrowers shall indemnify and pay, within ten (10) days of
demand therefor, Lender for the full amount of Taxes (including any Taxes
imposed by any jurisdiction on amounts payable under this SECTION 2.12) paid by
Lender and any liability (including penalties, interest and expenses) arising
therefrom or
28
with respect thereto, whether or not such Taxes were correctly or legally
asserted.
2.13 CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY. (a) In the
event that Lender shall have determined that the adoption after the date
hereof of any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy, reserve
requirements or similar requirements or compliance by Lender with any request
or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) from any central bank or
governmental agency or body having jurisdiction does or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by Lender and thereby reducing the rate of return on Lender's
capital as a consequence of its obligations hereunder, then Borrowers shall
from time to time within fifteen (15) days after notice and demand on Akorn
by Lender (together with the certificate referred to in the next sentence)
pay to Lender additional amounts sufficient to compensate Lender for such
reduction. A certificate as to the amount of such cost and showing the basis
of the computation of such cost submitted by Lender to Borrowers shall,
absent manifest error, be final, conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change
in or in the interpretation of any law or regulation or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), including, without
limitation, any requirement that Lender hold reserves with respect to the
Loan, or the Loan Commitment, there shall be any increase in the cost to
Lender of agreeing to make or making, funding or maintaining of any Loan,
then Borrowers shall from time to time, upon demand by Lender, pay to Lender
for the account of Lender additional amounts sufficient to compensate Lender
for such increased cost. A certificate as to the amount of such increased
cost, submitted to Akorn by Lender, shall be conclusive and binding on
Borrowers for all purposes, absent manifest error. Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances referred
to in CLAUSE (i) or (ii) above which would result in any such increased cost
to Lender, it shall, to the extent not inconsistent with Lender's internal
policies of general application, use reasonable commercial efforts to
minimize costs and expenses incurred by it and payable to it by Borrowers
pursuant to this SECTION 2.13 (b).
(c) Notwithstanding anything to the contrary contained herein,
if the introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful, for Lender to agree to make or to
make or to
29
continue to fund or maintain any LIBOR Loan, then, unless Lender is able to
agree to make or to make or to continue to fund or to maintain such LIBOR
Loan at another branch or office of Lender without, in Lender's opinion,
adversely affecting it or its Loans or the income obtained therefrom, on
notice thereof and demand therefor by Lender to Borrowers, (i) the obligation
of Lender to agree to make or to make or to continue to fund or maintain
LIBOR Loans shall terminate and (ii) Borrowers shall forthwith prepay in full
all outstanding LIBOR Loans, together with interest accrued thereon, UNLESS
Borrowers, within five (5) Business Days after the delivery of such notice
and demand, convert all such Loans into a Loan bearing interest based on the
Prime Rate.
(d) Upon Lender obtaining actual knowledge of the occurrence
of any of the events set forth in this SECTION 2.13, Lender shall promptly
notify Akorn of the occurrence of such event. Borrowers shall have the right
within five (5) days of receipt of such notice to convert any outstanding
LIBOR Loans to Prime Rate Loans.
2.14 CONVERSION AND CONTINUATION ELECTIONS.
(a) Borrowers may, upon irrevocable written notice (or telephonic
notice promptly confirmed in writing) to Lender in accordance with SECTION
2.14(b):
(i) elect, as of any Business Day, in the case of Floating Rate
Loans, or as of the last day of the applicable LIBOR Period, in the
case of LIBOR Loans, to convert any such Loans (or any part thereof in
an aggregate minimum amount of $50,000, or integral multiples of
$10,000 in excess thereof, in the case of Floating Rate Loans, and
$250,000, or integral multiples of $50,000 in excess thereof, in the
case of LIBOR Loans) into Loans of any other type; or
(ii) elect as of the last day of the applicable LIBOR Period, to
continue any LIBOR Loans having LIBOR Periods expiring on such day (or
any part thereof in an amount not less than $250,000, or that is in an
integral multiple of $50,000 in excess thereof);
PROVIDED, that if at any time the aggregate amount of LIBOR Loans in
respect of any borrowing is reduced, by payment, prepayment, or conversion
of part thereof to be less than $250,000, such LIBOR Loans shall
automatically convert into Floating Rate Loans, and on and after such date
the right of Borrower to continue such LIBOR Loans as, and convert such
LIBOR Loans into, LIBOR Loans shall terminate.
(b) Borrower shall deliver a Notice of Conversion/Continuation to be
received by Lender not later
30
than 10:00 a.m. (Chicago time) at least (i) two Business Days in advance
of the Conversion/ Continuation Date, if the Loans are to be converted
into or continued as LIBOR Loans and (ii) on the date of the Conversion/
Continuation Date, if the Loans are to be converted into Floating Rate
Loans, specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Loans to be converted or continued;
(iii) the type of Loans resulting from the proposed conversion
or continuation; and
(iv) other than in the case of conversions into Floating Rate
Loans, the duration of the requested LIBOR Period.
(c) If upon the expiration of any LIBOR Period applicable to LIBOR
Loans, Borrowers have failed to select a new LIBOR Period to be applicable
to such LIBOR Loans by the time specified in SECTION 2.14(b), or if any
Event of Default then exists, Borrowers shall be deemed to have elected to
convert such LIBOR Loans into Federal Funds Rate Loans effective as of the
expiration date of such LIBOR Period.
3. CONDITIONS PRECEDENT
3.1 CONDITIONS TO THE INITIAL ADVANCE.
Notwithstanding any other provision of this Agreement and without
affecting in any manner the rights of Lender hereunder, Borrowers shall have no
rights under this Agreement (but shall have all applicable obligations
hereunder), and Lender shall not be obligated to make any Advance or to incur
any Letter of Credit Obligation, or to take, fulfill, or perform any other
action hereunder, until the following conditions have been satisfied, in
Lender's sole discretion, or waived in writing by Lender:
(a) CREDIT AGREEMENT. This Agreement or counterparts hereof
shall have been duly executed by, and delivered to, Borrowers and Lender.
(b) LOAN DOCUMENTS. Lender shall have received such guaranties,
documents, instruments, agreements and legal opinions as Lender shall request in
connection with the transactions contemplated by this Agreement and the other
Loan Documents, including all guaranties, documents, instruments, agreements and
legal opinions listed in the Schedule of Documents attached hereto as SCHEDULE
B, each in form and substance satisfactory to Lender.
31
(c) GOVERNMENTAL APPROVALS. Evidence satisfactory to Lender
that Borrowers have obtained consents and acknowledgments of all Persons
whose consents and acknowledgments may be required, including, but not
limited to, all requisite Governmental Authorities, to the terms, and to the
execution and delivery, of this Agreement, the other Loan Documents, and the
consummation of the transactions contemplated hereby and thereby.
(d) INSURANCE. Evidence satisfactory to Lender that the
insurance policies provided for in SECTION 5.6 are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements, as requested by Lender, in favor of Lender,
and in form and substance satisfactory to Lender.
(e) PAYMENT OF FEES. Payment by Borrowers to Lender of the
fees required to be paid on the Closing Date in the respective amounts
specified in this Agreement.
(f) OFFICER'S CERTIFICATE. Lender shall have received duly
executed originals of a certificate of the chief executive officer or chief
financial officer of Akorn, dated the date hereof, certifying, to the best of
his knowledge after diligent inquiry, to the fulfillment of all conditions
precedent to closing of this Agreement and to the truth and accuracy, as of
such date, of the representations and warranties of Borrowers contained in
this Agreement and each other Loan Document.
(g) COMPLIANCE WITH LAWS. Lender shall have received
evidence satisfactory to Lender and its counsel that each Borrower and each
of its Subsidiaries are in compliance in all material respects, with all
applicable foreign, federal, state and local laws and regulations, including
those relating to labor and environmental matters and ERISA.
3.2 FURTHER CONDITIONS. It shall be a further condition to the
initial and each subsequent Advance and to the incurrence of any Letter of
Credit Obligations that the following statements shall be true on the date of
each such advance or funding, as the case may be:
(i) All of each Borrower's representations and warranties
contained herein or in any of the other Loan Documents shall be true and
correct on and as of the Closing Date and the date on which each such Advance
is made (or such Letter of Credit Obligation is incurred) as though made on
and as of such date, except to the extent that any such representation or
warranty expressly relates to an earlier date and except for changes therein
expressly permitted or expressly contemplated by this Agreement.
(ii) No Material Adverse Effect shall have occurred since the
date hereof.
32
(iii) No event shall have occurred and be continuing, or would
result from the making of any Advance (or the incurrence of any Letter of
Credit Obligation), which constitutes or would constitute a Default or an
Event of Default.
The request and acceptance by any Borrower of the proceeds of any
Advance or the incurrence of any Letter of Credit Obligation shall be deemed
to constitute, as of the date of such request or acceptance, a representation
and warranty by Borrowers that the conditions in this SECTION 3.2 have been
satisfied.
4. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans and to incur any Letter of
Credit Obligation, Borrowers make the following representations and
warranties to Lender, each and all of which shall survive the execution and
delivery of this Agreement:
4.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Borrower and
each Subsidiary thereof (i) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and
has been duly qualified to conduct business and is in good standing in each
other jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualifications; (ii) has the requisite corporate
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease and to conduct its business as now, heretofore and proposed to be
conducted; (iii) has all licenses, permits, consents or approvals from or by,
and has made all filings with, and has given all notices to, all Governmental
Authorities, including but not limited to, FDA and DEA, having jurisdiction,
to the extent required for such ownership, operation and conduct; (iv) is in
compliance with its certificate or articles of incorporation and by-laws; and
(v) is in compliance with all applicable provisions of law, including but not
limited to, the Federal Food, Drug and Cosmetic Act, the Controlled
Substances Act and other United States federal statutes and regulations,
issued by the FDA and DEA.
4.2 EXECUTIVE OFFICES. The current location of each Borrower's
chief executive office and principal place of business is set forth in
SCHEDULE 4.2 and, as of the Closing Date, none of such locations have changed
within the past three (3) months.
4.3 CORPORATE POWER AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each Borrower of the Loan Documents
and all instruments and documents to be delivered by such Person and the
creation of all Liens provided for therein: (i) are within such Person's
corporate power; (ii) have been duly authorized by all necessary or proper
corporate and shareholder action; (iii) are not in contravention of any
provision
33
of such Person's certificate or articles or incorporation or bylaws; (iv)
will not violate any law or regulation, or any order or decree of any court
or governmental instrumentality; (v) will not conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other Instrument to which such Person is a party or by which
such Person or any of its property is bound; (vi) will not result in the
creation or imposition of any Lien upon any of the property of such Person
other than those in favor of Lender pursuant to the Loan Documents; and (vii)
do not require the consent or approval of any Governmental Authority or any
other Person. On or prior to the Closing Date, each of the Loan Documents
shall have been duly executed and delivered for the benefit of or on behalf
of each Borrower and each Loan Document shall then constitute a legal, valid
and binding obligation of such Borrower, enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting the rights of creditors generally
or by application of general principles of equity.
4.4 FINANCIAL STATEMENTS. All financial statements (the
"FINANCIAL STATEMENTS"), of the Borrowers and their respective Subsidiaries
which have been delivered to the Lender, have been prepared in accordance
with GAAP consistently applied throughout the periods involved (except as
disclosed therein and except, with respect to unaudited financial statements,
for the absence of footnotes and normal year-end audit adjustments) and do
present fairly in all material respects the financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
4.5 MATERIAL ADVERSE EFFECT. Since September 30, 1997, none of
the Borrowers and no Subsidiary thereof has incurred any obligations,
contingent liabilities, or liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the
Financial Statements of Borrowers and their Subsidiaries and which could,
alone or in the aggregate, have or result in a Material Adverse Effect. No
Material Adverse Effect has occurred between September 30, 1997 and the
Closing Date.
4.6 TITLE AND LIENS. All Collateral is and will continue to be
owned by the Borrowers. None of the Collateral or other property or assets
of the Borrowers or any Subsidiary is subject to any Lien (including but not
limited to Liens pursuant to Capitalized Leases under which any Borrower or
any Subsidiary is a lessee) except: (a) Liens in favor of the Lender and (b)
Permitted Encumbrances.
4.7 RESTRICTIONS; NO DEFAULT. No contract, lease, agreement or other
Instrument to which any Borrower is a party or by which it or any of its
properties or assets is bound or
34
affected, and no provision of applicable law or governmental regulation, has
or results in a Material Adverse Effect, or could have or result in a
Material Adverse Effect. None of the Borrowers and no Subsidiary thereof is
in default, and to such Borrower's or such Subsidiary's knowledge no third
party is in default, under or with respect to any material contract,
agreement, lease or other Instrument to which it is a party.
4.8 LABOR MATTERS. No strikes or other labor disputes against any
Borrower or any Subsidiary thereof are pending or, to any Borrower's
knowledge, threatened. Hours worked by and payment made to employees of each
Borrower and the Subsidiaries thereof have not been, to any Borrower's
knowledge, in violation of the Fair Labor Standards Act or any other
applicable federal, state, local or foreign law dealing with such matters.
All payments due from such Borrower or any Subsidiary thereof on account of
employee health and welfare insurance have been paid or accrued as a
liability on the books of Borrowers. Except as set forth in SCHEDULE 4.8,
there are no material employment, consulting or management agreements
covering any management employee or Affiliate of any Borrower or any
Subsidiary thereof. A true and complete copy of each such material agreement
has been furnished to Lender. Except as set forth in SCHEDULE 4.8, none of
the Borrowers and none of the Subsidiaries thereof have any obligation under
any collective bargaining agreement, management agreement, consulting
agreement or any employment agreement. There is no organizing activity
involving any Borrower or any Subsidiary thereof pending or, to any
Borrower's knowledge, threatened by any labor union or group of employees.
Except as set forth in SCHEDULE 4.8, there are no representation proceedings
pending or, to any Borrower's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of any
Borrower or any Subsidiary thereof has made a pending demand for recognition.
Except as set forth in SCHEDULE 4.8, there are no complaints or charges
against any Borrower or any Subsidiary thereof pending or threatened to be
filed with any federal, state, local or foreign court, governmental agency or
arbitrator based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment by any Borrower or
any Subsidiary thereof of any individual.
4.9 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK.
Except as set forth in SCHEDULE 4.9, none of the Borrowers (i) has any
Subsidiaries, (ii) is engaged in any joint venture or partnership with any
other Person and (iii) is an Affiliate of any other Person. Except as set
forth in SCHEDULE 4.9, there are no outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which any Borrower may
be required to issue or sell any Stock or other equity security of any
Subsidiary.
4.10 GOVERNMENT REGULATION. None of the Borrowers and no Subsidiary
thereof is an "investment company" or an "affiliated
35
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended. None of the Borrowers and no Subsidiary thereof is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, or any other federal or state statute that restricts or limits its
ability to incur Indebtedness or to perform its obligations hereunder, and
the making of the Advances by Lender, the incurrence of any Letter of Credit
Obligation, the application of the proceeds and repayment thereof by such
Borrower or such Subsidiary and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not violate
any provision of any such statute or any rule, regulation or order issued by
the Securities and Exchange Commission.
4.11 MARGIN REGULATIONS. None of the Borrowers and no Subsidiary
thereof is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin security" as such terms are defined in
Regulation U or G of the Board of Governors of the Federal Reserve System
(the "FEDERAL RESERVE BOARD") as now and from time to time hereafter in
effect (such securities being referred to herein as "MARGIN STOCK"). None of
the Borrowers and no Subsidiary thereof owns any Margin Stock, and the
proceeds of the Advances will not be used, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock, for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry any Margin Stock or for any other purpose which might cause
any of the loans or other extensions of credit under this Agreement to be
considered a "purpose credit" within the meaning of Regulation G, T, U or X
of the Federal Reserve Board.
4.12 TAXES. All federal, state, local and foreign tax returns,
reports and statements, including, but not limited to, information returns
required to be filed by each Borrower or any Subsidiary thereof, have been
filed with the appropriate Governmental Authority and all Charges and other
impositions shown thereon to be due and payable have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof (or any such fine, penalty, interest, late charge or
loss has been paid), and each Borrower and each Subsidiary thereof has paid
when due and payable all Charges required to be paid by it, except such
Taxes, if any, as are being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate provisions as
may be required by GAAP have been maintained. Proper and accurate amounts
have been withheld by each Borrower or each Subsidiary thereof from its
respective employees for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of applicable
federal, state, local and
36
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities.
4.13 ERISA. (a) SCHEDULE 4.13 lists all Plans maintained or
contributed to by any Borrower or any Subsidiary thereof and all Qualified
Plans maintained or contributed to by any ERISA Affiliate, and separately
identifies the Title IV Plans, Multiemployer Plans, any multiple employer
plans subject to Section 4064 of ERISA, unfunded Pension Plans, Welfare Plans
and Retiree Welfare Plans. Each Qualified Plan has been determined by the
IRS to qualify under Section 401 of the IRC, and the trusts created
thereunder have been determined to be exempt from tax under the provisions of
Section 501 of the IRC, and to the best knowledge of each Borrower nothing
has occurred which would cause the loss of such qualification or tax-exempt
status. To any Borrower's knowledge, each Plan is in compliance with the
applicable provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA, and with respect to each Plan, other than a
Qualified Plan, all required contributions and benefits have been paid in
accordance with the provisions of each such Plan. None of the Borrowers and
no Subsidiary or ERISA Affiliate thereof, with respect to any Qualified Plan,
has failed to make any contribution or pay any amount due as required by
Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan.
With respect to all Retiree Welfare Plans, the present value of future
anticipated expenses pursuant to the latest actuarial projections of
liabilities does not exceed $0; with respect to Pension Plans, other than
Qualified Plans, the present value of the liabilities for current
participants thereunder using PBGC interest assumptions does not exceed $0.
None of the Borrowers and no Subsidiary or ERISA Affiliate thereof has
engaged in a prohibited transaction, as defined in Section 4975 of the IRC or
Section 406 of ERISA, in connection with any Plan, which would subject any
Borrower or any Subsidiary thereof (after giving effect to any exemption) to
a material tax on prohibited transactions imposed by Section 4975 of the IRC
or any other material liability.
(b) Except as set forth in SCHEDULE 4.13: (i) no Title IV Plan has
any Unfunded Pension Liability; (ii) no ERISA Event or event described in
Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge
of any Borrower, threatened claims, actions or lawsuits (other than claims
for benefits in the normal course), asserted or instituted against (x) any
Plan or its assets, (y) any fiduciary with respect to any Plan or (z) any
Borrower or any Subsidiary or ERISA Affiliate thereof with respect to any
Plan; (iv) none of the Borrowers and no Subsidiary or ERISA Affiliate thereof
has incurred or reasonably expects to incur any withdrawal liability (and no
event has occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 of ERISA as a
result of a complete or partial withdrawal from a
37
Multiemployer Plan; (v) within the last five years neither any Borrower nor
any Subsidiary or ERISA Affiliate thereof has engaged in a transaction which
resulted in a Title IV Plan with Unfunded Liabilities being transferred
outside of the "controlled group" (within the meaning of Section 4001(a)(14)
of ERISA) of any such entity; (vi) no Plan which is a Retiree Welfare Plan
provides for continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant's termination of
employment (except as may be required by Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant); (vii)
each Borrower and each Subsidiary and ERISA Affiliate thereof have complied
with the notice and continuation coverage requirements of Section 4980B of
the IRC and the regulations thereunder except where the failure to comply
could not have or result in any Material Adverse Effect; and (viii) no
liability under any Plan has been funded, nor has such obligation been
satisfied, with the purchase of a contract from an insurance company that is
not rated AAA by the Standard & Poor's Corporation or the equivalent by
another nationally recognized rating agency.
4.14 NO LITIGATION. No action, claim or proceeding is now pending
or, to the knowledge of any Borrower, threatened against such Borrower or any
Subsidiary thereof, before any court, board, commission, agency or
instrumentality of any federal, state, local or foreign government or of any
agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, (i) which challenges such Borrower's or such Subsidiary's right
or power to enter into or perform any of its obligations under the Loan
Documents, or the validity or enforceability of any Loan Document or any
action taken thereunder, or (ii) which, if determined adversely, would have
or result in a Material Adverse Effect, nor to the best knowledge of any
Borrower does a state of facts exist which is reasonably likely to give rise
to such proceedings.
4.15 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Except as
otherwise set forth in SCHEDULE 4.15, each Borrower owns all material
licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications, and trade names necessary to continue to
conduct its business as heretofore conducted by it or proposed to be
conducted by it, each of which is listed, together with Copyright Office or
Patent and Trademark Office application or registration numbers, where
applicable, on SCHEDULE 4.15. SCHEDULE 4.15 also lists all tradenames or
other names under which any Borrower conducts business. To the best of
Borrower's knowledge, neither the conduct of each Borrower's business nor the
conduct of any of its Subsidiary's business infringes upon any intellectual
property right of any other Person.
4.16 FULL DISCLOSURE. No information contained in this Agreement,
any of the other Loan Documents, the Projections, the Financials, the
Collateral Reports or any written statement
38
furnished by or on behalf of any Borrowers or any Subsidiary thereof pursuant
to the terms of this Agreement, which has previously been delivered to
Lender, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not misleading in light of the circumstances under which they were made. The
Liens granted to Lender pursuant to the Collateral Documents will at the
Closing Date be fully perfected first priority Liens in and to the Collateral
described therein, subject only to Liens set forth in SCHEDULE 4.6 and
Permitted Liens.
4.17 HAZARDOUS MATERIALS. Except as set forth in SCHEDULE 4.17,
(i) the real estate (the "REAL ESTATE") owned by the Borrowers and their
Subsidiaries is free of contamination from any Hazardous Material, or (ii) to
any Borrower's knowledge, the Real Estate leased by the Borrowers or their
Subsidiaries is free of contamination from any Hazardous Material. In
addition, SCHEDULE 4.17 discloses all material environmental liabilities of
any Borrower or any Subsidiary thereof of which any Borrower has knowledge
(i) related to noncompliance with the Environmental Laws, or (ii) associated
with the Real Estate. None of the Borrowers and no Subsidiary thereof has
caused or suffered to occur any Release with respect to any Hazardous
Material at, under, above or upon any real property which it owns or leases.
None of the Borrowers and no Subsidiary thereof is involved in operations
which are likely to result in the imposition of any Lien on its assets or any
material liability on such Borrower or Subsidiary thereof under any
Environmental Law, and none of the Borrowers and no Subsidiary thereof has
permitted any tenant or occupant of such premises to engage in any such
activity. Borrowers have provided to Lender copies of all existing
environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities and Costs, in
each case relating to any of the Borrowers or any of the Subsidiaries thereof.
4.18 INSURANCE POLICIES. SCHEDULE 4.18 lists all insurance of any
nature maintained for current occurrences by any Borrower or any Subsidiary
thereof, as well as a summary of the terms of such insurance.
4.19 DEPOSIT AND DISBURSEMENT ACCOUNTS. SCHEDULE 4.19 lists all
banks and other financial institutions at which any of the Borrowers or any
Subsidiary thereof maintains deposits and/or other accounts, including any
disbursement accounts, and such Schedule correctly identifies the name,
address and telephone number of each depository, the name in which the
account is held, a description of the purpose of the account, and the
complete account number.
4.20 CUSTOMER AND TRADE RELATIONS. There exists no actual or
threatened termination or cancellation of, or any material adverse modification
or change in: (a) the business
39
relationship of Borrowers with any customer or group of customers which has
resulted in or is reasonably likely to result in a Material Adverse Effect;
or (b) the business relationship of any Borrower or any Subsidiary thereof
with any supplier material to the operations of such Borrower or such
Subsidiary which has resulted in or is reasonably likely to result in a
Material Adverse Effect.
4.21 INDEBTEDNESS. As of the Closing Date, except for the Loans
and the Letter of Credit, and as set forth in SCHEDULE 7.3, none of the
Borrowers and no Subsidiary thereof has any Indebtedness or has granted any
security interest to any Person other than Lender and First National Bank of
Commerce.
5. FINANCIAL STATEMENTS AND INFORMATION
5.1 REPORTS AND NOTICES. (a) Borrowers each hereby covenant and
agree that from and after the Closing Date and until the Termination Date,
they shall deliver to Lender Financial Statements and notices as follows:
(i) QUARTERLY REPORTS OF BORROWERS. Within 45 days after the end
of each Fiscal Quarter of Borrowers, a copy of an unaudited financial
statement of Borrower prepared on a basis consistent with the audited
financial statements of Borrowers previously furnished to Lender and, if
requested by Lender, prepared on a consolidating and consolidated basis,
signed by an authorized officer of Akorn and consisting of at least (i) a
balance sheet as at the close of such quarter, (ii) a statement of earnings
and cash flow for such quarter and for the period from the beginning of such
fiscal year to the close of such quarter and (iii) an accounts receivable
aging for each Borrower as of the close of such quarter.
(ii) AUDIT REPORT OF BORROWERS. Within 120 days after the end of
each Fiscal Year of Borrowers, a copy of an annual audit report of Borrowers
prepared in conformity with GAAP on a basis consistent with the audited
financial statements of Borrowers and any subsidiary referred to above and,
if requested by Lender, prepared on a consolidating and consolidated basis,
duly certified by independent certified public accountants of recognized
standing satisfactory to Lender, accompanied by an opinion without
significant qualification.
(iii) CERTIFICATES. Contemporaneously with the furnishing of a copy
of each annual audit report and of each quarterly statement provided herein, a
certificate dated the date of such annual audit report or such quarterly
statement and signed by either the President, the Chief Financial Officer or the
Treasurer of each Borrower, to the effect that no Default or Event of Default
has occurred and is continuing, or, if there is any such
40
event, describing it and the steps, if any, being taken to cure it, and
containing a computation of, and showing compliance with, any financial ratio
or restriction contained in the Agreement.
(iv) NOTICE OF DEFAULT, LITIGATION AND ERISA MATTERS. Immediately
upon learning of the occurrence of any of the following, written notice
describing the same and the steps being taken by Borrowers or any Subsidiary
affected in respect thereof: (i) the occurrence of a Default or an Event of
Default; or (ii) the institution of, or any adverse determination in, any
litigation, arbitration or governmental proceeding which is material to any
Borrower; (iii) receipt of any notice or communication that the operations of
the Borrowers or any Subsidiary are not in compliance in all material
respects with requirements of any applicable Governmental Authority,
including but not limited to, FDA and DEA, or (iv) the occurrence of any
ERISA Event.
(v) OTHER INFORMATION. Such other information, financial or
otherwise, as Lender may from time to time request in its reasonable
discretion.
(vi) REPORTS OF AKORN. (A) Within 45 days after the end of each
fiscal quarter of Akorn, a copy of Form 10-Q as filed by or on behalf of
Akorn with the Securities and Exchange Commission, and (B) within 120 days
after the end of each fiscal year of Akorn, a copy of Form 10-K as filed by
or on behalf of Akorn with the Securities and Exchange Commission.
5.2 COMMUNICATION WITH ACCOUNTANTS. Each Borrower authorizes Lender
to communicate directly with its independent certified public accountants
acceptable to the Lender and authorizes those accountants and advisors to
disclose to Lender any and all financial statements and other supporting
financial documents and schedules relating to any Borrower and its Subsidiaries
(including, without limitation, copies of any issued management letters) with
respect to the business, financial condition and other affairs of any Borrower
and its Subsidiaries.
6. AFFIRMATIVE COVENANTS
Each Borrower jointly and severally covenants and agrees that,
unless Lender shall otherwise consent in writing, from and after the date
hereof and until the Termination Date:
6.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Borrower
shall, and shall cause each Subsidiary thereof to,: (a)do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and its rights and franchises;(b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; (c)at all
times maintain, preserve and protect all of its Copyrights, Patents, Trademarks,
trade names and all other
41
intellectual property and rights as licensee or licensor thereof and preserve
all the remainder of its assets and properties, used or useful in the conduct
of its business, and keep the same in good repair, working order and
condition (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
(d) transact business only in such corporate and trade names as are set forth
in SCHEDULE 4.15.
6.2 PAYMENT OF OBLIGATIONS. (a) Each Borrower shall pay and
discharge or cause to be paid and discharged promptly all (A) Charges imposed
upon it, its income and profits, or any of its property (real, personal or
mixed), and (B) lawful claims for labor, materials, supplies and services or
otherwise, before any thereof shall become past due.
(b) Each Borrower may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims; PROVIDED, THAT,
at the time of commencement of any such action or proceeding, and during the
pendency thereof (i) no Default or Event of Default shall have occurred and
be continuing, (ii) adequate reserves with respect thereto are maintained on
the books of such Borrower, in accordance with GAAP, (iii) such contest is
maintained and prosecuted continuously and with diligence, (iv) none of the
Collateral becomes subject to forfeiture or loss as a result of such Charges
or claims, (v) no Lien shall be imposed to secure payment of such Charges or
claims other than inchoate tax liens, and (vi) such Borrower shall promptly
pay or discharge such contested Charges and all additional charges, interest,
penalties and expenses, if any, and shall deliver to Lender evidence
acceptable to Lender of such compliance, payment or discharge, if such
contest is terminated or discontinued adversely to such Borrower or the
conditions set forth in this SECTION 6.2(b) are no longer met.
6.3 BOOKS AND RECORDS. Borrowers shall keep adequate records and
books of account with respect to each Borrower's and each of its
Subsidiaries' business activities, in which proper entries, reflecting all
financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financial Statements.
6.4 AUDITS. Commencing with the Fiscal Year ending December 31,
1997 and in each Fiscal Year thereafter, Borrowers will engage independent
certified public accountants of recognized standing satisfactory to Lender to
perform an audit of their respective balance sheets and related statements of
operations, shareholders' equity and cash flows and to render an opinion
based upon such audit.
42
6.5 LITIGATION. Each Borrower shall notify Lender in writing,
promptly upon learning thereof, of any litigation commenced or threatened
against such Borrower or any Subsidiary thereof and of the institution
against it of any suit or administrative proceeding that (a) seeks damages in
excess of $500,000 or (b) seeks injunctive relief.
6.6 INSURANCE. (a) Borrowers shall, at their sole cost and
expense, maintain the policies of insurance described on SCHEDULE 4.18 in
form and with insurers rated AA or better by Bests. Such policies shall be
in such amounts as are set forth in SCHEDULE 4.18. Borrowers shall notify
Lender promptly of any occurrence causing a material loss or decline in value
of any real or personal property and the estimated (or actual, if available)
amount of such loss or decline. So long as any Event of Default shall have
occurred and be continuing or if the casualty loss exceeds $500,000: each
Borrower hereby directs all present and future insurers under its "All Risk"
policies of insurance to pay all proceeds payable thereunder directly to
Lender and irrevocably makes, constitutes and appoints Lender (and all
officers, employees or agents designated by Lender) as such Borrower's true
and lawful agent and attorney-in-fact for the purpose of making, settling and
adjusting claims under such "All Risk" policies of insurance and endorsing
the name of such Borrower on any check or other item of payment for the
proceeds of such "All Risk" policies of insurance. In the event any Borrower
at any time or times hereafter shall fail to obtain or maintain any of the
policies of insurance required above or to pay any premium in whole or in
part relating thereto, Lender, without waiving or releasing any Obligations
or Default or Event of Default hereunder, may at any time or times thereafter
(but shall not be obligated to) obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect
thereto which Lender deems advisable. All sums so disbursed, including
attorneys, fees, court costs and other charges related thereto, shall be
payable, on demand, by Borrowers to Lender and shall be additional
Obligations hereunder secured by the Collateral, PROVIDED, THAT, if and to
the extent Borrowers fail to promptly pay any of such sums upon demand
therefor, Lender is authorized to, and at its option may, make or cause to be
made Advances on behalf of Borrowers for payment thereof.
(b) Lender reserves the right at any time, upon any change in any
Borrower's risk profile (including, without limitation, any change in the
product mix maintained by any Borrower or any laws affecting the potential
liability of such Borrower), to require additional forms and limits of insurance
to, in Lender's reasonable opinion, adequately protect Lender's interests in all
or any portion of the Collateral and to ensure that each Borrower and each
Subsidiary thereof is protected by insurance in amounts and with coverage
customary for its industry. If requested by Lender, each Borrower shall deliver
to Lender from
43
time to time a report of a reputable insurance broker, satisfactory to
Lender, with respect to its insurance policies.
(c) Borrowers shall deliver to Lender endorsements (i) to all "All
Risk" and business interruption insurance naming Lender as loss payee, and
(ii) to all general liability and other liability policies naming Lender as
additional insured.
(d) The loss, if any, under any property insurance required to be
carried by this SECTION 6.6 shall be adjusted with the insurance companies or
otherwise collected, including the filing of appropriate proceedings by
Borrowers or their Subsidiaries, subject to the reasonable approval of the
Lender in the case of claims in excess of $500,000. If the proceeds payable
under any policy of property insurance are $500,000 or less, Borrowers or
their Subsidiaries shall have the right to use such proceeds to repair or
replace the damaged or destroyed property, provided that a Default or an
Event of Default shall not have occurred and be continuing at the time the
proceeds are paid.
6.7 COMPLIANCE WITH LAWS. Each Borrower shall, and shall cause
each Subsidiary thereof to, comply in all material respects with all federal,
state and local laws and regulations applicable to it, including but not
limited to, (i) the Federal Food, Drug and Cosmetic Act, the Controlled
Substances Act and other United States federal statutes and regulations,
issued by FDA and DEA, and (ii) those relating to licensing, ERISA and labor
matters.
6.8 SUPPLEMENTAL DISCLOSURE. On the request of Lender (in the
event that such information is not otherwise delivered by Borrowers to Lender
pursuant to this Agreement), so long as there are Obligations outstanding
hereunder, but not more frequently than quarterly absent the occurrence and
continuance of a Default or an Event of Default, Borrowers will supplement
each schedule or representation herein with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such schedule or as an
exception to such representation or which is necessary to correct any
information in such schedule or representation which has been rendered
inaccurate thereby; PROVIDED, HOWEVER, THAT such supplement to such schedule
or representation shall not be deemed an amendment thereof unless expressly
consented to in writing by Lender, and no such amendments, except as the same
may be consented to in a writing which expressly includes a waiver, shall be
or be deemed a waiver of any Default or Event of Default disclosed therein.
6.9 EMPLOYEE PLANS. Each Borrower shall, and shall cause each
Subsidiary thereof to, notify Lender of (i) any and all claims, actions, or
lawsuits asserted or instituted, and of any threatened litigation or claims,
against such Borrower or against
44
any Subsidiary or ERISA Affiliate thereof in connection with any Plan
maintained, at any time, by such Borrower or such Subsidiary or ERISA
Affiliate, or to which such Borrower or such Subsidiary or ERISA Affiliate
has or had at any time any obligation to contribute, or/and against any such
Plan itself, or against any fiduciary of or service provided to any such Plan
and (ii) the occurrence of any material "Reportable Event" with respect to
any Pension Plan of such Borrower or any Subsidiary or ERISA Affiliate
thereof.
6.10 ENVIRONMENTAL MATTERS. Each Borrower shall, and shall cause
each of its Subsidiaries to, (i) comply in all material respects with the
Environmental Laws applicable to it, (ii) notify Lender promptly after such
Borrower or such Subsidiary becomes aware of any Release upon or at any
premises owned or occupied by it, and (iii) promptly forward to Lender a copy
of any order, notice, permit, application, or any communication or report
received by such Borrower or such Subsidiary in connection with any such
Release or any other matter relating to the Environmental Laws that may
affect such premises or such Borrower or such Subsidiary. The provisions of
this SECTION 6.10 shall apply whether or not the Environmental Protection
Agency, any other federal agency or any state, local or foreign environmental
agency has taken or threatened any action in connection with any Release or
the presence of any Hazardous Materials.
6.11 LANDLORDS' AGREEMENTS, BAILEE LETTERS AND MORTGAGEE
AGREEMENTS. Upon the request of Lender, each Borrower shall use its best
efforts to obtain a landlord's agreement in form and substance acceptable to
Lender from the lessor of each leased property currently being used by such
Borrower or any Subsidiary thereof where Collateral is located. Upon the
request of Lender, each Borrower shall use its best efforts to obtain a
bailee letter in form and substance acceptable to Lender and with respect to
any warehouse where Collateral is located. Upon the request of Lender, each
Borrower shall use its best efforts to obtain a mortgagee's agreement in form
and substance satisfactory to Lender from the mortgagee (if other than
Lender) of each property owned by such Borrower or any Subsidiary thereof
where Collateral is located. No real property or warehouse space shall be
leased or acquired by any Borrower or any Subsidiary thereof after the
Closing Date, unless and until a landlord or mortgagee agreement or bailee
letter, as appropriate, shall first have been obtained with respect to such
location.
6.12 LEASED LOCATIONS OF COLLATERAL. Each Borrower shall, and
shall cause each Subsidiary thereof to, timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased
location or public warehouse where any Collateral is or may be located.
Borrowers shall, and shall cause each Subsidiary thereof to, promptly deliver
to Lender copies of (i) any and all default notices received under or with
45
respect to any such leased location or public warehouse, and (ii) such other
notices or documents as Lender may request in its reasonable discretion.
7. NEGATIVE COVENANTS
Borrowers each jointly and severally covenant and agree that,
without the prior written consent of Lender, from and after the date hereof
until the Termination Date:
7.1 MERGERS, SUBSIDIARIES, ETC. No Borrower shall, or shall permit
any Subsidiary to:
(a) be a party to any merger or consolidation;
(b) except in the normal course of its business, sell, transfer,
convey, lease or otherwise dispose of all or any substantial part of the
assets of the Borrowers and their Subsidiaries taken as a whole; or
(c) purchase or otherwise acquire any assets or capital stock of any
Person without the prior written consent of the Lender except where (i) the
purchase price of each such acquisition is not greater than $2,500,000
(including the value of any stock issued, assets exchanged or transaction
expenses incurred to consummate such acquisition) and (ii) there is no
Event of Default or Default after giving effect to such acquisition.
For purposes of this SECTION 7.1 only, a sale, transfer, conveyance,
lease or other disposition of assets shall be deemed to be a "substantial part"
of the assets of the Borrowers and its Subsidiaries only if the value of such
assets, when added to the value of all other assets sold, transferred, conveyed,
leased or otherwise disposed of by the Borrowers and their Subsidiaries (other
than in the normal course of business) during the same Fiscal Year, exceeds 10%
of the Borrowers' consolidated total assets determined as of the end of the
immediately preceding Fiscal Year. As used in the preceding sentence, the term
"value" shall mean, with respect to any asset disposed of, the greater of such
asset's book or fair market value as of the date of disposition, with "book
value" being the value of such asset as would appear immediately prior to such
disposition on a balance sheet of the owner of such asset prepared in accordance
with GAAP.
7.2 INVESTMENTS; LOANS AND ADVANCES. Except as otherwise permitted
in this Agreement, no Borrower shall, or shall cause or permit any Subsidiary
thereof to, make any investment in, or make or accrue loans or advances of money
to any Person, through the direct or indirect lending of money, holding of
securities or otherwise; PROVIDED that so long as no Default or Event of
Default shall have occurred or be continuing, Borrowers may make
46
investments in (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof maturing
within one year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one year from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., (iii) certificates of
deposit, maturing no more than one year from the date of creation thereof,
issued by commercial banks incorporated under the laws of the United States
of America, each having combined capital, surplus and undivided profits of
not less than $300,000,000 and having a senior secured rating of "A" or
better by a nationally recognized rating agency, provided that the aggregate
amount invested in such certificates of deposit shall not at any time exceed
$100,000 for any one such bank, and (iv) time deposits, maturing no more than
thirty (30) days from the date of creation thereof with commercial banks or
savings banks or savings and loan associations each having membership in the
Federal Deposit Insurance Corporation and in amounts not exceeding the
maximum amounts of insurance thereunder, except that in the case of time
deposits and certificates of deposit maintained with The Northern Trust
Company or its successors so long as such successors meet the criteria in
this SECTION 7.2, such limitations of amounts shall not apply unless notice
thereof shall be provided by Lender to Akorn.
7.3 INDEBTEDNESS. No Borrower shall, or shall cause or permit any
Subsidiary thereof to, create, incur, assume or permit to exist any
Indebtedness, except (i) Indebtedness secured by Liens permitted under
SECTION 7.7, (ii) the Loans and the other Obligations, (iii) deferred taxes,
and (iv) unfunded pension fund and other employee benefit plan obligations
and liabilities to the extent they are permitted to remain unfunded under
applicable law, (v) existing Indebtedness set forth in SCHEDULE 7.3 and
refinancings thereof on terms and conditions acceptable to Lender, in its
reasonable discretion, which shall in any event be on terms no less favorable
to any Borrower or Lender than the terms of the Indebtedness being
refinanced,(vi) any financing secured by any real estate owned by the
Borrowers and their Subsidiaries, and (vii) the unsecured financing by a
seller of product lines to Borrowers.
7.4 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS. (a) No Borrower
shall, or shall cause or permit any Subsidiary thereof to, enter into or be a
party to any transaction with an Affiliate except in the ordinary course of,
and pursuant to the reasonable requirements of, such Borrower's or such
Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to Lender in advance and are no less favorable to such Borrower or
such Subsidiary than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate of such Borrower or such
Subsidiary. All such transactions existing as of the date hereof are
described on SCHEDULE 7.4(a).
47
(b) No Borrower shall, or shall cause or permit any
Subsidiary thereof to, enter into any lending or borrowing transaction with
any of its employees, except loans to its employees on an arm's-length basis
in the ordinary course of business consistent with past practice up to a
maximum of $250,000 in the aggregate at any one time outstanding.
7.5 CAPITAL STRUCTURE AND BUSINESS. No Borrower shall, or shall
cause or permit any Subsidiary thereof to, (i) make any changes in any of its
business objectives, purposes or operations which could in any way adversely
affect the repayment of the Loans or any of the other Obligations or could
have or result in a Material Adverse Effect, (ii) make any change in its
capital structure as described on SCHEDULE 4.9, or (iii) amend its
certificate or articles of incorporation or bylaws in a manner which would
adversely affect Lender or its duty or ability to repay the Obligations.
None of the Borrowers nor any Subsidiary thereof shall engage in any business
other than the businesses currently engaged in by such Borrower or such
Subsidiary or businesses reasonably related thereto.
7.6 GUARANTEED INDEBTEDNESS. No Borrower shall, or shall cause or
permit any Subsidiary thereof to, incur any Guaranteed Indebtedness except
(i) by endorsement of instruments or items of payment for deposit to the
general account of any Borrower, and (ii) for Guaranteed Indebtedness
incurred for the benefit of any Borrower or such Subsidiary if the primary
obligation is expressly permitted by this Agreement.
7.7 LIENS. No Borrower shall, or shall cause or permit any
Subsidiary thereof to, create, incur, assume or permit to exist any Lien on
or with respect to any of its properties or assets of any Borrower or any of
their Subsidiaries, whether now owned or hereafter acquired, except (i)
Permitted Encumbrances, (ii) presently existing or hereinafter created Liens
in favor of Lender, (iii) Liens created after the date hereof by conditional
sale or other title retention agreements (including, without limitation,
Capital Leases) or in connection with purchase money indebtedness with
respect to properties acquired by any Borrower or any of its Subsidiaries in
the ordinary course of business, involving the incurrence of an aggregate
amount of purchase money indebtedness and Capital Lease Obligations of not
more than $1,000,000 outstanding at any one time for all such Liens (provided
that such Liens attach only to the assets subject to such purchase money debt
and such Indebtedness is incurred within twenty (20) days following such
purchase and does not exceed 100% of the purchase price of the subject
assets), (iv) Liens in connection with any financing secured by any real
estate owned by the Borrowers and their Subsidiaries, (v) Liens not otherwise
permitted by the foregoing clauses of this Section securing Indebtedness or
other obligations not exceeding $250,000 in the aggregate at any time
outstanding,
48
and (vi) Liens existing on the date hereof and described in SCHEDULE 7.7.
In addition, no Borrower shall, or shall cause or permit any
Subsidiary thereof to, become a party to any agreement, note, indenture or
instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of Lender, as
additional collateral for the Obligations, except operating leases, Capital
Leases or intellectual property licenses which prohibit liens upon the assets
that are subject thereto.
7.8 SALE OF ASSETS. No Borrower shall, or shall cause or permit
any Subsidiary thereof to, sell, transfer, convey, assign or otherwise
dispose of any of its properties or other assets, except in the ordinary
course of its business.
7.9 ERISA. No Borrower shall, or shall cause or permit any
Subsidiary or ERISA Affiliate thereof (without Lender's prior written
consent) to, (i) acquire any ERISA Affiliate that maintains or has an
obligation to contribute to a Pension Plan that has either an "accumulated
funding deficiency", as defined in Section 302 of ERISA, or any "unfunded
vested benefits", as defined in Section 4006(a)(3)(e)(iii) of ERISA, in the
case of any plan other than a Multiemployer Plan, and in Section 4211 of
ERISA in the case of a Multiemployer Plan, in excess of $250,000, (ii) permit
or suffer any representation set forth in SCHEDULE 4.13 to cease to be met
and satisfied at any time, (iii) terminate any Pension Plan that is subject
to Title IV of ERISA where such termination could reasonably be anticipated
to result in liability in excess of $250,000 to such Person, (iv) permit any
accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA, to
be incurred with respect to any Pension Plan, in excess of $250,000, (v) fail
to make any material contributions or fail to pay any amounts due and owing
as required by the terms of any Plan before such contributions or amounts
become delinquent, (vi) make a complete or partial withdrawal (within the
meaning of Section 4201 of ERISA) from any Multiemployer Plan, or (vii) fail
to promptly provide Lender with copies of any Plan documents or governmental
reports or filings, if requested by Lender.
7.10 FINANCIAL COVENANTS. Borrowers shall not breach or fail to
comply with any of the financial covenants set forth below:
(a) MINIMUM NET INCOME. Borrowers and their Subsidiaries on
a consolidated basis shall maintain Net Income in each Fiscal Quarter of not
less than $1.00.
(b) MINIMUM NET WORTH. Borrowers and their Subsidiaries on a
consolidated basis shall maintain at all times Net Worth equal to or greater
than the sum of (a) $17,000,000, PLUS (b) an amount equal to 50% of Net Income
earned during each of its
49
Fiscal Quarters beginning with its Fiscal Quarter commencing October 1, 1997
(without reduction for net losses, if any).
(c) CASH FLOW COVERAGE RATIO. Borrowers and their
Subsidiaries on a consolidated basis shall maintain a ratio of (a) EBIT,
measured at the end of each Fiscal Quarter for the four immediately preceding
Fiscal Quarters then ended, to (b) Debt Service, measured as of the end of
each Fiscal Quarter, of at least 1.2:1.0.
(d) RATIO OF FUNDED DEBT OF EBITDA. Borrowers and their
Subsidiaries on a consolidated basis shall maintain a ratio of (a) Funded
Debt to (b) EBITDA, measured at the end of each Fiscal Quarter for the four
immediately preceding Fiscal Quarters then ended, of not more than 3.0:1.0.
7.11 HAZARDOUS MATERIALS. No Borrower shall, or shall cause or
permit any Subsidiary thereof or any other Person within its control to,
cause or permit a Release or the presence, use, generation, manufacture,
installation, Release, discharge, storage or disposal of any Hazardous
Materials on, under, in, above or about any of its real estate or the
transportation of any Hazardous Materials to or from any real estate where
such Release or such presence, use, generation, manufacture, installation,
Release, discharge, storage or disposal would violate in any material
respect, or form the basis for any material liability under, any
Environmental Laws. If a Default or Event of Default shall have occurred and
be continuing, each Borrower, at its own expense, shall cause the performance
of such environmental audits and preparation of such environmental reports as
Lender may from time to time request as to any location at which Collateral
is then located, by reputable environmental consulting firms acceptable to
Lender, and in form and substance acceptable to Lender.
7.12 SALE-LEASEBACKS. No Borrower shall, or shall cause or permit
any Subsidiary thereof to, engage in any sale-leaseback or similar
transaction involving any of its assets.
7.13 CANCELLATION OF INDEBTEDNESS. No Borrower shall, or shall
cause or permit any Subsidiary thereof to, cancel any claim or debt owing to
it, except for reasonable consideration negotiated on an arm's-length basis
and in the ordinary course of its business consistent with past practices.
7.14 RESTRICTED PAYMENTS. No Borrower shall, or shall cause or
permit any Subsidiary thereof to, make any Restricted Payment (including, but
not limited to, dividends), other than payments necessary to enable such
Borrower (i) to satisfy its federal, state and local income tax obligations
to the extent such obligations are the result of the net consolidated income
of Borrowers and their Subsidiaries being attributed to such Borrower for tax
purposes, (ii) to pay the necessary fees and expenses to
50
maintain its corporate existence and good standing,(iii) to pay legal and
accounting fees to the extent such fees relate to legal or accounting
services provided by entities which are not Affiliates of any Borrower and
which services are directly related to any Borrowers or their Subsidiaries,
and (iv) to pay any cash dividend in respect of its common stock so long as
no Event of Default or Default exists hereunder or would result after giving
effect thereto.
7.15 FISCAL YEAR. No Borrower shall, or shall cause or permit any
Subsidiary thereof to, change its Fiscal Year.
7.16 CHANGE OF CORPORATE NAME OR LOCATION. (a) No Borrower shall,
or shall cause or permit any Subsidiary thereof to, (i) change its corporate
name or (ii) change its chief executive office, principal place of business,
corporate offices or warehouses or Collateral locations, or the location of
its records concerning the Collateral, in any case without at least fifteen
(15) Business Days prior written notice to Lender and after Lender's written
acknowledgment that any reasonable action requested by Lender in connection
therewith, including, without limitation, to continue the perfection of any
Liens in favor of Lender in any Collateral has been completed or taken, and
provided that any such new location shall be in the continental United
States; (b) in furtherance of and without limiting the scope of CLAUSE (a)
above, no Borrower shall, or shall permit any of its Subsidiaries, to change
its name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9-402(7) of the Code or any other
then applicable provision of the Code except upon prior written notice to
Lender and after Lender's written acknowledgment that any reasonable action
requested by Lender in connection therewith, including, without limitation,
to continue the perfection of any Liens in favor of Lender in any Collateral
has been completed or taken.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an
"EVENT OF DEFAULT" hereunder:
(a) Any Borrower shall fail to make any payment of principal of, or
interest on, or any other amount owing in respect of the Loans or any of the
other Obligations (other than as set forth in CLAUSE (b) below) when due and
payable or declared due and payable.
(b) Any Borrower shall fail to pay any Fees, costs or expenses
payable or reimbursable by Borrowers under this Agreement
51
or under any other Loan Document, and such failure shall have remained
unremedied for a period of ten (10) days or more.
(c) Any Borrower shall fail or neglect to perform, keep or observe
any of the provisions of this Agreement (and not constituting an Event of
Default under any of the other subsections of this SECTION 8.1) and such
failure shall have remained unremedied for a period of ten (10) days or more
after notice thereof from the Lender.
(d) Any Borrower shall fail or neglect to perform, keep or observe
any provision of any of the other Loan Documents (other than any provision
embodied in or covered by any other clause of this SECTION 8.1) and
continuance of such default after the grace period (if any) set forth therein.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Borrower or any Subsidiary thereof is a
party and such default is not cured or waived within any applicable grace
period and such default or breach (i) involves the failure to make any
payment when due in respect of any Indebtedness (other than the Obligations)
of any Borrower or any Subsidiary of any Borrower in excess of $50,000 in the
aggregate, or (ii) causes such Indebtedness or a portion thereof in excess of
$100,000 in the aggregate to become due prior to its stated maturity or prior
to its regularly scheduled dates of payment, or (iii) entitles any holder of
such Indebtedness or a trustee to cause such Indebtedness or a portion
thereof in excess of $100,000 in the aggregate to become due prior to its
stated maturity or prior to its regularly scheduled dates of payment,
regardless of whether such right is exercised or waived by such holder or
trustee.
(f) Any representation or warranty herein or in any Loan Document
or in any written statement, report, financial statement or certificate made
or delivered to Lender by any Borrower shall be untrue or incorrect in any
material respect, as of the date when made or deemed made.
(g) Assets of any Borrower or any Subsidiary thereof with a fair
market value of $500,000 or more shall be attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors of any
Borrower or any Subsidiary thereof and shall such condition shall continue
for thirty (30) days or more after any such Borrower has knowledge thereof.
(h) A case or proceeding shall have been commenced against any
Borrower or any Subsidiary thereof in a court having competent jurisdiction
seeking a decree or order in respect of any Borrower or any Subsidiary
thereof (i) under Title 11 of the United States Code, as now constituted or
hereafter amended or any other applicable federal, state or foreign
bankruptcy or other similar
52
law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for any Borrower or any Subsidiary thereof
or of any substantial part of such Person's assets, or (iii) ordering the
winding-up or liquidation of the affairs of any Borrower or any Subsidiary
thereof and such case or proceeding shall remain undismissed or unstayed for
forty-five (45) days or more or such court shall enter a decree or order
granting the relief sought in such case or proceeding.
(i) Any Borrower or any Subsidiary thereof shall (i) file a
petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, State or
foreign bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of any Borrower or
any Subsidiary thereof or of any substantial part of such Person's assets,
(iii) make an assignment for the benefit of creditors, or (iv) take any
corporate action in furtherance of any such action.
(j) A final judgment or judgments for the payment of money in
excess of $250,000 in the aggregate shall be rendered against any Borrower or
any Subsidiary thereof and the same shall not (i) be fully covered by
insurance, or (ii) within thirty (30) days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have been
paid or otherwise discharged prior to the expiration of any such stay.
(k) With respect to any Plan: (i) which is a defined contribution
plan or Welfare Plan, any Borrower or any Subsidiary or ERISA Affiliate
thereof or any other party-in-interest or disqualified Person shall engage in
any transactions which in the aggregate results in a final assessment to any
Borrower or any Subsidiary thereof in excess of $250,000 under Section 409 or
502 of ERISA or IRC Section 4975 which assessment has not been paid within 30
days of final assessment and which is not being contested pursuant to SECTION
5.2 hereof; (ii) any Borrower or any Subsidiary or ERISA Affiliate thereof
shall incur any accumulated funding deficiency, as defined in IRC Section
412, in the aggregate in excess of $100,000, or request a funding waiver from
the IRS for contributions in the aggregate in excess of $100,000; (iii) any
Borrower or any Subsidiary or ERISA Affiliate thereof shall not pay any
withdrawal liability which involves annual withdrawal liability payments
which exceed $100,000 as a result of a complete or partial withdrawal within
the meaning of Section 4203 or 4205 of ERISA, within 30 days after the date
such payment becomes due; (iv) any Borrower or any Subsidiary or ERISA
Affiliate thereof shall fail to make a required contribution by the due date
under Section 412 of the IRC or Section 302 of ERISA which would result in
the imposition of a lien under Section 412 of the IRC or Section 302 of ERISA
within 30 days after the date such payment becomes due; or
53
(v) an ERISA Event (other than an event described in 29 CFR Section 2615.23)
with respect to a Plan has occurred, and within thirty (30) days Borrowers
have not contested such ERISA Event by appropriate proceedings.
(l) Any material provision of any Loan Document shall for any
reason cease to be valid or enforceable in accordance with its terms (or any
Borrower or any Subsidiary thereof shall challenge the enforceability of any
Loan Document), or any security interest created under any Loan Document
shall cease to be a valid and perfected first priority security interest or
Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby.
(m) LIEN PRIORITY. Lender fails to have an enforceable first
priority Lien (except for any prior Liens to which Lender has consented in
writing) on, or security interest in, any property given as security for the
Obligations.
8.2 REMEDIES. If any Default or Event of Default shall have
occurred and be continuing, Lender may, without notice, terminate this
facility with respect to further Advances, whereupon any further Advances
shall be made in Lender's sole discretion. If any Event of Default shall
have occurred and be continuing, Lender may, without notice,(a) declare all
or any portion of the Obligations to be forthwith due and payable and require
that any Letter of Credit Obligation be cash collateralized, all without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrowers; (b) increase the rate of interest applicable
to the Loan to the Default Rate; and (c) exercise any rights and remedies
provided to Lender under the Loan Documents and/or at law or equity,
including all remedies provided under the Code; PROVIDED, HOWEVER, that upon
the occurrence of an Event of Default specified in SECTIONS 8.1 (h) OR (i)
or, all of the Obligations shall become immediately due and payable without
declaration, notice or demand by Lender.
8.3 WAIVERS BY BORROWERS. Except as otherwise provided for in
this Agreement or by applicable law, each of the Borrowers, jointly and
severally, waive: (i) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Lender on which any Borrower may in any way be liable, and
hereby ratifies and confirms whatever Lender may do in this regard, (ii) all
rights to notice and a hearing prior to Lender's taking possession or control
of, or to Lender's replevy, attachment or levy upon, the Collateral or any
bond or security which might be required by any court prior to allowing
Lender to exercise any of its remedies, and (iii) the benefit of all
valuation, appraisal and
54
exemption laws. Each of the Borrowers acknowledges that it has been advised
by counsel of its choice with respect to this Agreement, the other Loan
Documents and the transactions evidenced by this Agreement and the other Loan
Documents.
9. SUCCESSORS AND ASSIGNS
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of Borrowers,
Lender and their respective successors and assigns, except as otherwise
provided herein or therein. None of the Borrowers may assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Lender. Any such purported assignment, transfer,
hypothecation or other conveyance by any Borrower without the prior express
written consent of Lender shall be void. The terms and provisions of this
Agreement are for the purpose of defining the relative rights and obligations
of Borrowers and Lender with respect to the transactions contemplated hereby
and there shall be no third party beneficiaries of any of the terms and
provisions of this Agreement or any of the other Loan Documents.
10. MISCELLANEOUS
10.1 SETOFF. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon
the occurrence and during the continuance of any Event of Default, Lender and
each holder of any Term Note or Note is hereby authorized at any time or from
time to time, without notice to any Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to
apply any and all balances held by it at any of its offices for the account
of Borrowers (regardless of whether such balances are then due to Borrowers)
and any other properties or assets any time held or owing by Lender or such
holder to or for the credit or for the account of Borrowers against and on
account of any of the Obligations which are not paid when due.
10.2 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan
Documents constitute the complete agreement between the parties with respect
to the subject matter thereof and may not be modified, altered or amended
except as set forth in SECTION 10.3 below. Any letter of interest or
commitment letter and/or fee letter between Borrowers and Lender or any of
their respective affiliates, predating this Agreement and relating to a
financing of substantially similar form, purpose or effect shall be
superseded by this Agreement.
10.3 AMENDMENTS AND WAIVERS.(a) Except as otherwise provided
herein, no amendment, modification, termination or waiver of any provision of
this Agreement or any of the other Loan
55
Documents or consent to any departure by any Borrower or any of its
Subsidiaries therefrom shall in any event be effective unless the same shall
be in writing and signed by Lender and Borrowers.
(b) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for
which it was given. No amendment, modification, termination or waiver shall
be required for Lender to take additional Collateral pursuant to any Loan
Document. No notice to or demand on any Borrower in any case shall entitle
any Borrower to any other or further notice or demand in similar or other
circumstances.
10.4 FEES AND EXPENSES. Borrowers shall reimburse Lender for all
reasonable out-of-pocket expenses, incurred in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses
of all of its special loan counsel, advisors, consultants and auditors
retained in connection with the Loan Documents and the transactions
contemplated thereby and advice in connection therewith). In addition,
Borrowers shall reimburse Lender for all fees, costs and expenses, including
the fees, costs and expenses of counsel or other advisors (including
environmental and management consultants) for advice, assistance, or other
representation in connection with:
(a) any amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents or, advice in connection with the
administration of the loans made pursuant hereto or its rights hereunder or
thereunder;
(b) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Lender, any Borrower or any other Person) in
any way relating to the Collateral, any of the Loan Documents or any other
agreement to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review thereof,
in connection with a case commenced by or against any or all of Borrowers or
any other Person that may be obligated to Lender by virtue of the Loan
Documents;
(c) any attempt to enforce any rights of Lender against any
or all of Borrowers or any other Person that may be obligated to Lender by
virtue of any of the Loan Documents; and
(d) efforts to verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including, without limitation, all reasonable attorneys' and other professional
and service providers' fees arising from such services, including those in
connection with any appellate
56
proceedings; and all reasonable expenses, costs, charges and other fees
incurred by such counsel and others in any way or respect arising in
connection with or relating to any of the events or actions described in this
SECTION 10.4 shall be payable, on demand, by Borrowers to Lender. Without
limiting the generality of the foregoing, such expenses, costs, charges and
fees may include: fees, costs and expenses of accountants, environmental
advisors, appraisers, investment bankers, management and other consultants
and paralegals; court costs and expenses; photocopying and duplication
expenses; court reporter fees, costs and expenses; long distance telephone
charges; air express charges; telegram charges; secretarial overtime charges;
and reasonable expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal or other advisory services.
10.5 NO WAIVER. Lender's failure at any time or times, to require
strict performance by Borrowers of any provision of this Agreement and any of
the other Loan Documents shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver of an Event of Default under this Agreement or any of
the other Loan Documents shall not suspend, waive or affect any other Event
of Default under this Agreement and any of the other Loan Documents whether
the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants
and representations of any Borrower contained in this Agreement or any of the
other Loan Documents and no Default or Event of Default by any Borrower under
this Agreement and no defaults by any Borrower under any of the other Loan
Documents shall be deemed to have been suspended or waived by Lender unless
such waiver or suspension is by an Instrument in writing signed by an officer
of or other authorized employee of Lender and directed to Borrowers
specifying such suspension or waiver.
10.6 REMEDIES. Lender's rights and remedies under this Agreement
shall be cumulative and nonexclusive of any other rights and remedies which
Lender may have under any other agreement, including the other Loan
Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
10.7 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING
AGREEMENTS. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair
the obligations, duties and liabilities of Borrowers or the rights of Lender
relating to any unpaid portion of the Loan or any other Obligation, due or
not due, liquidated, contingent or unliquidated or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is required after the Termination Date. Except as
otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants,
57
warranties and representations of or binding upon Borrowers, and all rights
of Lender, all as contained in the Loan Documents shall not terminate or
expire, but rather shall survive such termination or cancellation and shall
continue in full force and effect until such time as all of the Obligations
have been paid in full in accordance with the terms of the agreements
creating such Obligations.
10.8 SEVERABILITY. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
10.9 CONFLICT OF TERMS. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control.
10.10 AUTHORIZED SIGNATURE. Until Lender shall be notified by
Akorn to the contrary, the signature upon any document or Instrument
delivered pursuant hereto of an officer of any Borrower listed on SCHEDULE
10.10 shall bind such Borrower and be deemed to be the act of such Borrower
affixed pursuant to and in accordance with resolutions duly adopted by such
Borrower's Board of Directors.
10.11 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE INTERNAL LAWS (WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS) OF THE
STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH BORROWER HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN XXXX COUNTY,
CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT
LENDER AND BORROWERS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO
BE HEARD BY A COURT LOCATED OUTSIDE OF XXXX COUNTY, CITY OF CHICAGO, ILLINOIS
AND, PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
58
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LENDER. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE
ADDRESS SET FORTH IN SCHEDULE D OF THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID.
10.12 NOTICES. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon
either of the parties by the other party, or whenever either of the parties
desires to give or serve upon the other party any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (i) upon the earlier of actual
receipt and three (3) Business Days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (ii) upon transmission, when sent by telecopy or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this SECTION 10.12), (iii) one (1) Business Day after deposit
with a reputable overnight courier with all charges prepaid or (iv) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number
indicated on this SECTION 10.12 or to such other address (or facsimile
number) as may be substituted by notice given as herein provided. The giving
of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrowers or Lender) designated on
this SECTION 10.12 to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
If to Lender, at
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
00
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Vice President
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx Xxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to any Borrower, at
Akorn, Inc.
000 Xxx-Xxxxx Xxxxxxxxxxxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx X. XxXxxxxxxx, Vice President/Chief Financial Officer
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
With copies to:
Xxxxx, Xxxxxx, XxxXxx & Xxxxxxxxxx
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxxx Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
10.13 SECTION TITLES. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between
the parties hereto.
10.14 COUNTERPARTS. This Agreement may be executed in any
number of separate counterparts, each of which shall collectively and
separately constitute one agreement.
10.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY
60
JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG LENDER AND BORROWERS
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
10.16 REINSTATEMENT. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Borrower for liquidation or reorganization, should any Borrower
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Borrower's assets, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment and performance
of the Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Obligations, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Obligations shall
be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
11. CROSS-GUARANTY
11.1 CROSS-GUARANTY. Each Borrower hereby acknowledges and agrees
that such Borrower is jointly and severally liable for, and hereby absolutely
and unconditionally guarantees to each other Borrower and Lender the full and
prompt payment of, all Obligations owed or hereafter owing to Lender by each
other Borrowers.
11.2 OBLIGATIONS ABSOLUTE. The liability of each Borrower to Lender
hereunder shall not be affected or impaired by any of the following acts by
Lender: (i) any acceptance of collateral security, guarantors, accommodation
parties or sureties for any or all Obligations; (ii) one or more extensions or
renewals of Obligations (whether or not for longer than the original period) or
any modification of the interest rates, fees, maturities or principal amount of,
or other contractual terms applicable to any Obligations; (iii) any waiver or
indulgence granted to a Borrower, any delay or lack of diligence in the
enforcement of Obligations, or any failure to institute proceedings, file a
claim, give any required notices or otherwise protect any Obligations; (iv) any
full or partial release of, compromise or settlement with, or agreement not to
xxx a Borrower or any guarantor or other person liable in respect of any
Obligations; (v) any release, surrender, cancellation or other discharge of any
evidence of Obligations or the acceptance of any Instrument in renewal or
substitution therefore; (vi) any failure to obtain collateral security
(including rights of setoff) for Obligations, or to obtain or
61
maintain the proper or sufficient creation and perfection thereof, or to
establish the priority thereof, or to preserve, protect, insure, care for,
exercise or enforce any collateral security; or any modification, alteration,
substitution, exchange, surrender, cancellation, termination, release or
other change, impairment, limitation, loss or discharge of any collateral
security; (vii) any collection, sale, lease or disposition of, or any other
foreclosure or enforcement of or realization on, any collateral security;
(viii) any assignment, pledge or other transfer of any Obligations or any
evidence thereof; or (ix) any manner, order or method of application of any
payments or credits upon Obligations. Each Borrower hereby waives any and
all defenses and discharges available to a surety, guarantor, or
accommodation co-obligor.
11.3 WAIVER. EACH BORROWER HEREBY WAIVES PRESENTMENT, DEMAND FOR
PAYMENT, NOTICE OF DISHONOR OR NONPAYMENT, AND PROTEST OF ANY INSTRUMENT
EVIDENCING OBLIGATIONS.
11.4 RECOVERY. If any payment is applied by Lender to the
Obligations and is thereafter set aside, recovered, rescinded or required to
be returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of a Borrower or any other obligor), the
Obligations to which such payment was applied shall for the purposes of this
SECTION 11 be deemed to have continued in existence, notwithstanding such
payment and application and this cross guaranty shall be enforceable as to
such Obligations as fully as if such payment and application had never been
made.
11.5 LIABILITY CUMULATIVE. The liability of Borrowers under this
SECTION 11 is in addition to and shall be cumulative with all liabilities of
each Borrower to Lender under this Agreement and the other Loan Documents to
which such Borrower is a party or in respect of any Obligations or obligation
of the other Borrower, without any limitation as to amount, unless the
Instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
[signature page(s) follow]
62
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
AKORN, INC.
By: /s/ Xxxx X. XxXxxxxxxx
---------------------------------------------
Title: /s/ VP, CFO
------------------------------------------
XXXXXX PHARMACEUTICALS, INC.
By: /s/ Xxxx X. XxXxxxxxxx
---------------------------------------------
Title: /s/ VP, Sec'y - Treas.
------------------------------------------
THE NORTHERN TRUST COMPANY
By: /s/ Xxxxx X. Xxxxx
---------------------------------------------
Title: /s/ Vice President
------------------------------------------
EXHIBIT A
FORM OF NOTICE OF ADVANCE
____________, _____
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxx Xxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
Re: ADVANCE
Ladies and Gentlemen:
The undersigned, Akorn, Inc., as agent for ____________ ("BORROWER"),
refers to the Credit Agreement, dated as of December 29, 1997 (as amended, the
"CREDIT AGREEMENT", the terms defined therein being used herein as therein
defined), among the undersigned, Borrower, the other "Borrowers" named therein,
and The Northern Trust Company ("LENDER"), and hereby gives you notice,
irrevocably, pursuant to SECTION 2.1 of the Credit Agreement, that the Borrower
hereby requests an Advance under the Credit Agreement, and in that connection
sets forth below the information relating to such Advance as required by SECTION
2.1(a) of the Credit Agreement:
(i) The date of the requested Advance is __________, ____.
(ii) The aggregate amount of the requested Advance is $__________
(minimum Revolving Credit Advance for a LIBOR Loan is
$250,000).
(iii) The Advance requested is [a Prime Rate Loan] [a Federal
Funds Rate Loan] [a LIBOR Loan and the LIBOR Period
applicable thereto is ________ months].
(iv) The requested Advance is to be sent to:
[Name of Bank]
[City of Bank]
Beneficiary: [______]
Account No.: [number]
ABA No.: [number]
Attn: [name]
1
The undersigned hereby certifies that all of the statements
contained in SECTION 3.2 of the Credit Agreement and in SECTION 4 of the
Security Agreement are true and correct in all material respects on the date
hereof, and will be true in all material respects on the date of the
requested Advance, before and after giving effect thereto and to the
application of the proceeds therefrom.
Very truly yours,
AKORN, INC.
By:________________________________
Name:______________________________
Title:_______________________________
2
EXHIBIT B
NOTE
$15,000,000 Chicago, Illinois
December 29, 1997
FOR VALUE RECEIVED, the undersigned, AKORN, INC., a Louisiana
corporation ("AKORN"), and XXXXXX PHARMACEUTICALS, INC., an Illinois
corporation ("XXXXXX"), jointly and severally, promise to pay to the order of
THE NORTHERN TRUST COMPANY (the "LENDER") on or before December 29, 1999, the
principal amount of FIFTEEN MILLION DOLLARS ($15,000,000), or the amount
outstanding as endorsed on the grid attached to this Note (or recorded in the
Lender's books and records, if the Lender is the holder hereof). Such
endorsement or recording by the Lender shall, absent manifest error, be
rebuttably presumptive evidence of the principal balance due on this Note.
This Note evidences indebtedness incurred under that certain Credit
Agreement, dated as of December 29, 1997 (as amended, restated, supplemented
or otherwise modified, the "CREDIT AGREEMENT"), among Akorn, Xxxxxx and the
Lender, to which agreement reference is hereby made for a statement of its
terms and provisions, including those under which this Note may be paid prior
to its due date or have its due date accelerated, and pursuant to which the
applicable interest rate herein set forth may be reduced. All capitalized
terms used but not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
Unless or until this Note shall sooner become due and payable,
whether by acceleration or otherwise, the principal amount outstanding
hereunder shall be paid in accordance with the terms and conditions of the
Credit Agreement. The unpaid principal amount of this Note from time to time
outstanding shall bear interest from the date of this Note at the rate per
annum set forth in the Credit Agreement. Accrued interest on this Note shall
be payable in accordance with the terms of the Credit Agreement. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand. Interest on this Note shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.
Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America.
Subject to the terms and conditions of the Credit Agreement, the
undersigned agree to pay all reasonable expenses, including reasonable
attorneys' fees and legal expenses, incurred by the holder of this Note in
attempting to collect any amounts payable hereunder. The undersigned
irrevocably waive presentment, protest, demand and notice of any kind in
connection herewith.
This Note is made under and governed by the internal laws of the State
of Illinois (without regard to conflict of laws provisions thereof), and shall
be deemed to have been executed in the State of Illinois.
AKORN, INC.
By:______________________________
Title:___________________________
XXXXXX PHARMACEUTICALS, INC.
By:______________________________
Title:___________________________
Schedule attached to Note dated as of December 29, 1997 of AKORN, INC. AND
XXXXXX PHARMACEUTICALS, INC., payable to the order of THE NORTHERN TRUST
COMPANY.
LOANS AND PRINCIPAL PAYMENTS
Type of Loan Amount of Unpaid
Amount of & Applicable Principal Principal Notation
Date Loan Made Interest Rate Repaid Balance Made by
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
this Note. The failure to record the date and amount of any loan on this
schedule shall not, however, limit or otherwise affect the obligations of the
Borrowers under the Credit Agreement or under this Note to repay the
principal amount of the loan together with all interest accruing thereon.
EXHIBIT C
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of December 29, 1997 (this
"Agreement"), among AKORN, INC., a Louisiana corporation ("AKORN"), XXXXXX
PHARMACEUTICALS, INC., an Illinois corporation ("XXXXXX"; collectively with
Akorn, the "BORROWERS", and each a "BORROWER"), and THE NORTHERN TRUST
COMPANY, an Illinois banking corporation (the "SECURED PARTY"), entered into
pursuant to that certain Credit Agreement of even date herewith by and among
Borrowers and Secured Party (hereinafter, as the same may from time to time
be amended, restated, supplemented or otherwise modified, the "CREDIT
AGREEMENT").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of the Credit Agreement,
it is a condition precedent to the obligations of Secured Party to extend
certain financial accommodations to Borrowers, including loans to be
evidenced by the promissory note of Borrowers (hereinafter, as the same may
from time to time be amended, restated, supplemented or otherwise modified,
the "NOTE"), that the payment of the Note and the satisfaction of any other
liabilities of Borrowers to Secured Party be secured by assets of Borrowers
as provided for in this Security Agreement;
NOW, THEREFORE, as an inducement to Secured Party to enter into the
Credit Agreement and to extend financial consideration to Borrowers, and to
secure the performance of Borrowers' obligations thereunder, the parties
agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, all terms used
but not otherwise defined herein shall have the meanings given to them in the
Credit Agreement, or if not there but in the Uniform Commercial Code, as
enacted in Illinois (the "CODE"), they shall have the same meaning herein as
in the Code.
2. SECURITY INTEREST. Borrowers each jointly and severally do hereby
pledge, assign, transfer and deliver to Secured Party and do hereby grant to
Secured Party a continuing security interest in and to the following property
or types of property of Borrowers, whether presently owned or existing or
hereafter acquired or coming into existence, and all additions and accessions
thereto and all substitutions and replacements therefor and improvements
thereto, and all proceeds (whether or not cash), products and accounts
thereof, including without limitation, all proceeds of insurance covering the
same and of any tort claim in connection therewith (the "COLLATERAL"):
(a) Accounts, accounts receivable (including without limitation all
rights to payment for services rendered or goods sold or leased, whether or
not evidenced by an instrument or chattel paper and whether or not yet
earned by performance, however arising), chattel paper, contract rights,
instruments, key-man life insurance policies, documents, and tax refunds
(the "ACCOUNTS");
(b) General intangibles (including without limitation inventions,
designs, copyrights, copyright applications, patents, patent applications,
trademarks, trademark applications, trade names, licenses, leasehold
interests, tax refund claims, guaranty claims and security interests or
other security held by Borrower to secure accounts);
(c) Inventory, including without limitation, returned and repossessed
goods (the "INVENTORY");
(d) Goods (other than Inventory), equipment, vehicles and fixtures,
together with accessions thereto and replacement parts therefor, including
all such goods described in any schedule now or hereafter attached hereto
(the "EQUIPMENT");
(e) All monies, accounts, deposits and property now or at any time
hereafter in the possession or under the control of Secured Party or its
agent;
(f) All books and records, including without limitation, customer
lists, credit files, computer programs, printouts and other materials and
records, pertaining to any of the foregoing;
(g) All documents of title evidencing or issued with respect to any
of the foregoing;
(h) All proceeds and products of all of the foregoing, including
without limitation, proceeds of insurance policies insuring the foregoing;
and
(i) Any other property of any kind which any Borrower may hereafter
at any time deliver to Secured Party to secure the obligations of Borrowers
to Secured Party and any proceeds of any such property;
but excluding therefrom (x) any general intangibles which terminate or become
terminable if a security interest is granted therein (until such time as any
required third party consent to such security interest shall have been given,
Borrowers hereby agreeing
2
to use their best efforts to obtain such consents) and (y) any other property
of any Borrower which respect to which such Borrower is prohibited from
granting a security interest by agreements existing and in effect on the date
hereof (until such time as any required third party consent to such security
interest shall have been given, Borrowers hereby agreeing to use their best
efforts to obtain such consents).
3. LIABILITIES. This Agreement secures the payment and performance of
the Obligations (as defined in the Credit Agreement) and all obligations of
Borrowers now or hereafter existing under this Agreement and the other Loan
Documents and all renewals, extensions, restructurings and refinancings of
any of the above (all such debts, obligations and liabilities of Borrowers,
now existing or hereafter arising, being individually called a "LIABILITY"
and collectively the "LIABILITIES").
4. WARRANTIES OF BORROWERS. Borrowers each jointly and severally
warrants and represents that:
(a) Except to the extent specifically permitted in the Credit
Agreement, no financing statement, mortgage, notice of judgment or any
similar instrument (other than any which may have been filed on behalf of
Secured Party) covering any of the Collateral is on file in any public
office.
(b) Except to the extent specifically permitted in the Credit
Agreement, Borrowers are and will be the lawful owner of all Collateral,
free and clear of all liens, pledges, charges, mortgages, and claims other
than the security interest hereunder or any other security interest created
in favor of Secured Party, with full power and authority to execute this
Agreement and perform Borrowers' obligations hereunder and to subject the
Collateral to the security interest hereunder.
(c) Except for goods covered by negotiable warehouse receipts which
have been delivered to Secured Party or as promptly disclosed to Secured
Party from time to time in writing, all of the Collateral is located as set
forth on SCHEDULE 4(f) attached hereto, and is not in transit, and except
as promptly disclosed to Secured Party from time to time in writing, all
Inventory shall be of good and merchantable quality, and free from any
defects which would affect the market value of such Inventory, except for
obsolete, damaged, or defective inventory, which is immaterial in amount,
or against which there exists a reserve for inventory write down set forth
on Borrowers' most recent balance sheet.
(d) (i) All accounts receivable of Borrowers are genuine, are in all
respects what they purport to be, are not
3
evidenced by a judgment and represent undisputed, bona fide transactions
completed or to be completed in accordance with the terms and conditions
of any document related thereto; (ii) none of the Accounts have been sold
or pledged to any other person or entity; and (iii) Borrowers have no
knowledge of any fact or circumstance which would impair the validity or
collectability of the Accounts in excess of a bad debt reserve account or
other contra-receivable account maintained by Borrowers.
(e) The only names by which any Borrower is known or under which any
Borrower is conducting its business are set forth on SCHEDULE 4(e).
(f) Each Borrower's chief place of business and chief executive
office and the office where it keeps its records concerning the Collateral
is as set forth on SCHEDULE 4(f).
5. COVENANTS OF BORROWERS. Borrowers each jointly and severally agree
that until payment in full of the Liabilities, they will:
(a) Provide and maintain insurance against loss and damage of the
Collateral pursuant to the requirements of the Credit Agreement, and unless
Secured Party otherwise agrees, shall cause all proceeds to be payable to
Secured Party as its interests may appear and shall name Secured Party as
an additional insured; the proceeds of such insurance shall be part of the
Collateral subject to the security interest of Secured Party hereunder, and
shall be applied as provided in the Credit Agreement. At any time at the
request of Secured Party, Borrowers shall deliver any such policies to
Secured Party.
(b) Defend the Collateral against the claims and demands of all
persons other than Secured Party and promptly pay all taxes, assessments,
and charges upon the Collateral and not sign (or permit to be signed) any
financing statements or other documents creating or perfecting a lien upon
or security interest in any of the Collateral except in favor of Secured
Party, or, except as otherwise specifically permitted in the Credit
Agreement, otherwise create, suffer, or permit to exist any liens or
security interests upon any Collateral other than in favor of Secured
Party.
(c) At the request of Secured Party, execute and deliver to Secured
Party at any time or from time to time one or more financing statements
pursuant to the Code in form sufficient to perfect a lien on all of the
Collateral, and will pay the cost of filing the same in all public offices
wherever filing is, or is deemed by Secured Party to be, reasonably
necessary or desirable. Borrowers hereby authorize Secured Party to
4
prepare and to file, or cause to be filed, financing statements signed only
by Secured Party covering the Collateral and, in jurisdictions where any
Borrower's signature is required, Borrowers hereby authorize Secured Party
to sign such Borrower's signature to such financing statements on such
Borrower's behalf, and Borrowers agree to pay Secured Party all reasonable
fees and expenses (including attorneys' fees) incurred in filing the
financing statements, which fees and expenses shall become a part of the
Liabilities. A carbon, photographic or other reproduction of this Security
Agreement or of any financing statements shall be sufficient as financing
statement.
(d) Upon Secured Party's request, deliver any such certificates or
other documents of title representing or issued with respect to any of the
Collateral, with Secured Party's security interest and lien endorsed
thereon, to Secured Party and record such certificates or documents with
all appropriate regulatory agencies.
(e) Furnish to Secured Party, immediately upon the request of Secured
Party, any evidence of ownership of the Collateral, including without
limitation bills of sale, paid invoices, certificates of title, or
applications for title.
(f) Keep at its principal place of business its records concerning
the Collateral. Borrowers shall not, unless Secured Party shall otherwise
consent in writing, which consent shall not be unreasonably withheld,
duplicate any such records at any other addresses, except for back-up
copies created in the ordinary course of business, and Borrowers will
furnish to Secured Party such information concerning Borrower, the
Collateral, and the account debtors as Secured Party may from time to time
reasonably request and Secured Party will keep such information
confidential except from state or federal regulators of Secured Party and
Secured Party's auditors or accountants, or others to whom Secured Party
has a legal obligation to disclose such information; and Borrowers shall,
subject to the terms of the Credit Agreement, permit Secured Party from
time to time to inspect the Collateral and to inspect, audit, and make
copies of, and extracts from, all records and all other papers in the
possession of any Borrower pertaining to the Collateral and the accounts
debtors. After the occurrence and during the continuance of an Event of
Default, Secured Party shall have the right at any time or times to make
direct verification with the account debtors of any and all of the
Accounts.
(g) Except for transactions in the ordinary course of Borrowers'
business or otherwise expressly permitted by this Agreement and the other
Loan Documents or by Secured Party in writing, Borrowers and their
respective agents, servants or
5
employees will not sell or assign or otherwise transfer the Collateral,
either in whole or in part, or any interest therein, nor, except for
transactions in the ordinary course of Borrowers' business, or otherwise
expressly permitted by this Agreement and the other Loan Documents or by
Secured Party in writing, will it remove or permit removal of any of the
Collateral from the locations where it now is, without the written
consent of Secured Party. Borrowers shall provide Secured Party at any
time at Secured Party's request with a reasonably complete, specific
description of all the Collateral and the locations thereof and shall,
subject to the terms of the Credit Agreement, at all reasonable times
give Secured Party, its agents and representatives full access to the
Collateral.
(h) Keep and maintain the Equipment in good operating condition and
repair (ordinary wear and tear excepted) and make all commercially and
reasonably necessary replacements and renewals to the Equipment so that the
value and operating efficiency thereof shall at all times be maintained and
preserved.
(i) Make appropriate entries upon its financial statements and its
books and records disclosing Secured Party's security interest in the
Collateral.
(j) If at any time any of the Collateral shall be or become evidenced
by any instrument, immediately notify Secured Party thereof, and, at the
request of Secured Party, deliver such instrument to Secured Party,
endorsed as requested by Secured Party.
(k) Immediately notify Secured Party of any material loss, damage,
destruction, or depreciation in the value of the Collateral.
(l) Except as permitted by SECTION 5(g) or SECTION 6 hereof or in the
Credit Agreement, not sell, transfer or otherwise dispose of any Collateral
without Secured Party's prior written consent.
(m) Immediately notify Secured Party if any Borrower (i) is known by
or conducting business under any name other than the name described in
SECTION 4(e) of this Agreement, (ii) is conducting any of its business or
operations at or out of offices or locations other than as described in
SCHEDULE 4(f) of this Agreement, or (iii) changes the location of its
principal office from the location described in SCHEDULE 4(f) of this
Agreement.
(n) Use its best efforts to obtain (i) a landlord's agreement in form
and substance acceptable to Secured Party
6
from the lessor of each leased property currently being used by any
Borrower where Collateral is located, (ii) a bailee letter in form
and substance acceptable to Secured Party and with respect to any
warehouse where Collateral is located and (iii) a mortgagee's agreement
in form and substance satisfactory to Secured Party from the mortgagee
(if other than Secured Party) of each property owned by any Borrower
where Collateral is located. No real property or warehouse space shall
be leased or acquired by any Borrower after the Closing Date,
unless and until a landlord or mortgagee agreement or bailee letter, as
appropriate, shall first have been obtained with respect to such location.
6. USE OF THE COLLATERAL. Until notice to the contrary is given by
Secured Party after the occurrence and during the continuance of an Event of
Default, Borrowers may conduct their business in the ordinary course of business
substantially in the same manner as now conducted and may use, consume, or sell
the Collateral for such purposes, but a sale in the ordinary course of business
shall not include any transfer or sale in satisfaction, partial or complete, of
a debt owed by any Borrower.
7. COLLECTIONS.
(a) At any time and from time to time, after the occurrence and
during the continuance of an Event of Default, Secured Party may, upon
notice to Akorn and at Borrowers' reasonable expense, or, upon request of
Secured Party, Borrowers shall (i) notify any account debtors of the
existence of this Agreement, and (ii) direct such account debtors to pay
directly to Secured Party the amounts due or to become due from such
account debtors. Each account debtor so notified and directed may accept
the receipt of Secured Party for any such payment as a full release of any
amounts so paid; and
(b) If an Event of Default shall have occurred and be continuing,
Secured Party may enforce collection of any or all of the Collateral by
suit or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any indebtedness thereunder; and
(c) Secured Party shall upon direction of Borrowers or may upon the
happening and during the continuance of an Event of Default, apply all
payments received from account debtors to the Liabilities when due (whether
by acceleration or otherwise) and may credit any balance after such payment
to the account of Borrowers.
7
8. EVENTS OF DEFAULT. The occurrence of an Event of Default as defined in
the Credit Agreement or the Loan Documents, shall constitute an Event of Default
hereunder.
9. REMEDIES ON DEFAULT. If an Event of Default shall have occurred and be
continuing, Secured Party, in addition to any other rights set forth in the
Credit Agreement or other Loan Documents or as set forth herein, shall have all
the rights and remedies of a secured party under the Code, as to any Collateral
located in Illinois, and under the Uniform Commercial Code of any other
jurisdiction as to any Collateral therein located (whether or not the Code or
such other Uniform Commercial Code applies to the affected Collateral) and shall
further have, in addition to all other rights and remedies provided herein or by
law, the following rights and powers:
(a) Secured Party shall have the right to take possession of the
Collateral and, for that purpose, may enter, with the aid and assistance of
any person or persons, any premises where the Collateral, or any part
thereof, is, or may be, placed and remove the same.
(b) Secured Party may require Borrowers to assemble the Collateral
and to make it available to Secured Party at a place designated by Secured
Party which is reasonably convenient to Secured Party and Borrowers.
(c) Secured Party shall have the right from time to time to sell,
resell and deliver all or any part of the Collateral, at public or private
sale or otherwise, at the option of Secured Party, for cash or on credit or
for future delivery, in such parcel or parcels and at such time or times
and at such place or places, and upon such terms and conditions as Secured
Party may deem proper, all without (except as shall be required by
applicable statute and which cannot be waived) advertisement or demand upon
or notice to Borrowers or right of redemption of Borrowers, which are
hereby expressly waived to the fullest extent permitted by law and any
purchaser of Collateral at any such sale (including Secured Party) shall
acquire the same absolutely free from any right or claim of any kind,
including without limitation any equity of redemption which, together with
all rights of redemption, stay or appraisal which Borrowers may have under
any rule or statute Borrower hereby specifically and unconditionally waives
to the fullest extent permitted by law; Secured Party shall give to Akorn
at least fifteen (15) days' prior written notice, in the manner specified
in SECTION 15(b) hereof of the time and place of any public sale or the
time after which any private sale or any other intended disposition is to
be made, and any such notice shall be deemed to satisfy any requirement of
reasonable notice. Borrowers shall at all times remain liable for any
deficiency on the Liabilities.
8
(d) Upon each such sale, Secured Party may, unless prohibited by
applicable statute which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims,
right of redemption and equities of Borrowers, which are hereby waived and
released.
(e) Secured Party may, in its discretion, apply all proceeds received
by Secured Party in respect of any sale of, collection from or other
realization upon all or any part of the Collateral (after payment of any
amounts payable to Secured Party pursuant to SECTION 11 hereof) in whole or
in part against all or any part of the Liabilities in accordance with the
terms of the Credit Agreement and any amount remaining after payment in
full of all of the Liabilities shall be paid to Borrowers or to whomsoever
may be lawfully entitled to receive such surplus.
(f) Secured Party shall have the absolute right, in its sole
discretion, to dishonor checks drawn on deposit accounts maintained by
Borrowers with Secured Party and to hold such deposit accounts as cash
collateral to secure payment of the Liabilities. Notwithstanding the
foregoing, nothing contained herein shall interfere with the right of
Secured Party under law to set off the balances of any such deposit account
against the Liabilities.
10. RIGHTS OF SECURED PARTY. Secured Party may, from time to time, at its
option (but shall have no duty to):
(a) Perform any agreement of Borrowers hereunder which Borrowers
shall, after reasonable prior notice to Akorn thereof from Secured Party,
have failed to perform; and
(b) Take any other action which Secured Party deems necessary or
desirable for the preservation of the Collateral or Secured Party's
interest therein, including, after the occurrence and during the
continuance of an Event of Default: (i) any action to collect or realize
upon the Collateral; (ii) the discharge of taxes, liens, security
interests, or other encumbrances at any time levied or placed on the
Collateral; or (iii) the discharge or keeping current of any obligation of
Borrowers having effect on the Collateral.
11. INDEMNITY AND EXPENSE. Borrowers agrees to indemnify Secured Party
from and against any and all claims, losses and liabilities growing out of or
resulting from this Security Agreement (including, without limitation,
enforcement of this Security Agreement and any actions taken pursuant to
SECTIONS 9 and 10 hereof or any failure to act thereunder), except only for
claims, losses or liabilities resulting from Secured Party's willful misconduct
or gross negligence. Borrowers will, as
9
provided in and pursuant to SECTION 10.4 of the Credit Agreement, pay to
Secured Party the amount of any and all reasonable expenses, including
reasonable fees and disbursements of its counsel and of any agents not
regularly in its employ, which Secured Party may incur in connection with (i)
the custody, preservation, use or operation of, or the sale of, collection
from or other realization upon, any of the Collateral, (ii) the exercise by
Secured Party of any of its rights or powers hereunder, or (iii) any failure
by Borrowers to perform or observe the provisions hereof. All such expenses
shall be deemed a part of the Liabilities for all purposes of this Security
Agreement and Secured Party may apply the Collateral hereunder to payment of
or reimbursement of itself for such expenses.
12. RESPONSIBILITY FOR COLLATERAL. Borrowers assume all liabilities
and responsibility in connection with all Collateral, and the obligations of
Borrowers hereunder, under the Notes and under the other Loan Documents,
shall in no way be affected or diminished by reason of the loss, destruction,
damage or theft of any of the Collateral or its unavailability for any reason.
13. POWER OF ATTORNEY. Each Borrower hereby irrevocably appoints
Secured Party, and any officer or agent of Secured Party, with full power of
substitution, its true and lawful attorney-in-fact with full, irrevocable
power and authority in such Borrower's place and stead and in such Borrower's
name and on its behalf or in Secured Party's own name, from time to time and
at any time in Secured Party's absolute discretion to do any and all things
required to be done to carry out the terms or to accomplish the purposes of
this Security Agreement as fully and effectually as such Borrower could do
but for this appointment, including without limitation the power to (i) sign
such Borrower's name to, and to file financing statements as provided in
SECTION 5(c) hereof, (ii) to execute, in connection with any sale under
SECTION 9 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral, (iii) if an Event of
Default has occurred and is continuing, to notify and direct the United
States Post Office authorities by notice given in the name of such Borrower
and signed by Secured Party on behalf of such Borrower, to change the address
for delivery of all mail addressed to such Borrower relating to the
Collateral to an address to be designated by Secured Party, and to cause such
mail to be delivered to such designated address where Secured Party may open
all such mail and remove therefrom any notes, checks, acceptances, drafts,
money orders or other instruments included in the Collateral, (iv) if an
Event of Default has occurred and is continuing, to endorse the name of such
Borrower upon any notes, checks, acceptances, drafts, money orders,
instruments or other documents relating to the Collateral and to effect the
deposit and collection thereof, and (v) if an Event of Default has occurred
and is continuing, to endorse the name of such Borrower on any other
documents relating to the Collateral. Each Borrower hereby ratifies all
actions taken
10
by or on behalf of Secured Party pursuant to this power of attorney or
otherwise as provided in this Security Agreement and neither Secured Party
nor any of its officers, employees or agents shall be liable for any acts or
omissions or for any error of judgment or mistake of fact or law except for
gross negligence or willful misconduct in its or their capacity as such
attorney-in-fact. This power of attorney is coupled with an interest and
shall be irrevocable until all of the Liabilities are paid in full and this
Security Agreement is terminated. The powers conferred upon Secured Party
hereunder are solely to protect its interests and shall not impose any duty
upon it to exercise any of such powers.
14. CONTINUING SECURITY INTEREST. This Security Agreement shall create a
continuing and, except as otherwise permitted hereunder and under the Credit
Agreement, first security interest in the Collateral and shall remain in full
force and effect until the payment in full in cash of the Liabilities and
termination of the Credit Agreement.
15. GENERAL.
(a) NONWAIVER; CUMULATIVE REMEDIES. No delay or omission on the part
of Secured Party in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by Secured Party of any
right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy. All options, powers and rights
granted to Secured Party hereunder or under the Credit Agreement, the
Notes, or any other agreements, documents or instruments or under law shall
be cumulative and shall be in addition to any other options, powers and
rights of Secured Party under other applicable law or otherwise.
(b) NOTICES. Except as otherwise permitted herein, any notices or
consents required or permitted by this Agreement shall be in writing and
delivered as provided in SECTION 10.11 of the Credit Agreement.
(c) RETURN OR RELEASE OF COLLATERAL. At such time as Borrowers shall
pay all of the Liabilities and the Credit Agreement shall be terminated,
Secured Party shall return or release its interest in all Collateral upon
Akorn's request.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall, upon execution and
delivery by Borrowers, become effective and shall be binding upon and inure
to the benefit of Borrowers and Secured Party and their respective
successors and assigns, except that no Borrower may transfer or assign any
of its rights or interest hereunder without the consent of Secured Party.
If at any time or times, by sale, assignment, negotiation, pledge or
otherwise, Secured Party transfers any Liability or Liabilities, which,
subject to the terms of the
11
Credit Agreement, Secured Party may do, such transfer shall carry with
it Secured Party's rights, powers and remedies under this Security
Agreement with respect to the Liability transferred, and the transferee
shall become vested with such rights and remedies whether or not they
are specifically referred to in the transfer, unless, and then only to
the extent, that the terms of such transfer otherwise provide. If and
to the extent Secured Party retains any other Liability and Liabilities,
Secured Party shall continue to have the rights, powers and remedies
herein set forth with respect thereto.
(e) CAPTIONS. Captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. References herein to sections and subsections without reference to
the document in which they are contained are references to this Agreement.
(f) SINGULAR AND PLURAL. Unless the context requires otherwise,
wherever used herein the singular shall include the plural and the plural
shall include the singular, and the use of one gender shall denote the
others where appropriate.
(g) COUNTERPARTS. This Agreement may be executed by the parties on
any number of separate counterparts, and by each party on separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(h) CONSTRUCTION. This Agreement and the rights and obligations of
the parties hereunder shall be governed by, and construed and interpreted
in accordance with, the internal laws of the State of Illinois (without
regard to conflict of law provisions thereof).
(i) ENFORCEMENT COSTS. Each Borrower agrees to pay or reimburse
Secured Party as provided in and pursuant to SECTION 10.4 of the Credit
Agreement for all costs, expenses and fees (including reasonable legal fees
and reasonable time charges of attorneys who may be employees of Secured
Party) incurred by Secured Party in preparing, negotiating, enforcing or
preserving its rights under, this Agreement or any note, document, or other
instrument executed in connection herewith.
(j) SUBMISSION TO JURISDICTION; VENUE; JURY WAIVER. BORROWERS
IRREVOCABLY AGREE THAT, SUBJECT TO SECURED PARTY'S SOLE AND ABSOLUTE
ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR ANY
DOCUMENT EXECUTED IN CONNECTION HEREWITH, SHALL BE SUBJECT TO LITIGATION IN
COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWERS HEREBY CONSENT AND SUBMIT TO THE JURISDICTION OF ANY
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LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWERS
HEREBY WAIVE ANY RIGHT TO TRANSFER OR CHANGE THE VENUE OF ANY SUIT, ACTION
OR OTHER PROCEEDING BROUGHT AGAINST BORROWER BY SECURED PARTY IN ACCORDANCE
WITH THIS SECTION. EACH BORROWER AND SECURED PARTY HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY WITH RESPECT TO ANY SUITS, ACTIONS OR OTHER PROCEEDINGS
IN ANY WAY, MANNER OR RESPECT ARISING OUT OF OR FROM OR RELATED TO THIS
AGREEMENT OR ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH, INCLUDING
WITHOUT LIMITATION ANY CLAIMS UNDER LAWS GOVERNING CONTRACTS OR TORTS.
[Signature page follows]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
BORROWERS:
AKORN, INC.
By:_________________________________
Title:_____________________________
XXXXXX PHARMACEUTICALS, INC.
By:_________________________________
Title:______________________________
SECURED PARTY:
THE NORTHERN TRUST COMPANY
By:_________________________________
Title: Vice President
EXHIBIT D
FORM OF NOTICE OF CONVERSION/CONTINUATION
____________, _____
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxx Xxxx
Fax: (000) 000-0000
Telephone: (000) 000-0000
Re: ADVANCE
Ladies and Gentlemen:
The undersigned, Akorn, Inc., as agent for ____________
("BORROWER"), refers to the Credit Agreement, dated as of December 29, 1997
(as amended, the "CREDIT AGREEMENT", the terms defined therein being used
herein as therein defined), among the undersigned, Borrower, the other
"Borrowers" named therein, and The Northern Trust Company ("LENDER"), and
hereby gives you notice, irrevocably, pursuant to SECTION 2.14 of the Credit
Agreement, that the Borrower hereby requests a [conversion] [continuation] of
Loans under the Credit Agreement, and in that connection sets forth below the
information relating to such [conversion] [continuation] as required by
SECTION 2.14 of the Credit Agreement:
1. The date of the proposed [conversion] [continuation] is
______________, 199__ (which shall be a Business Day).
2. The aggregate amount of the Loans proposed to be [converted]
[continued] is $______________. [Specify which part is to be
converted and which part is to be continued, if appropriate.]
3. The type of Loans to be [continued] [converted] are [Prime Rate
Loans] [Federal Funds Rate Loans] [LIBOR Loans] and the type of
Loans resulting from the proposed [conversion] [continuation] are
[Prime Rate Loans] [Federal Funds Rate Loans] [LIBOR Loans].
4. The duration of the requested LIBOR Period for each LIBOR Loan
made as part of the proposed [conversion] [continuation] is
___________ months (which shall be 1, 2 or 3 months).
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The undersigned hereby certifies that all of the statements contained
in SECTION 3.2 of the Credit Agreement and in SECTION 4 of the Security
Agreement are true and correct in all material respects on the date hereof, and
will be true in all material respects on the date of the requested Advance,
before and after giving effect thereto and to the application of the proceeds
therefrom.
Very truly yours,
AKORN, INC.
By:________________________________
Name:______________________________
Title:_______________________________
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SCHEDULE B
TO
CREDIT AGREEMENT
----------------
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
----------------------------------------
In addition to, and not in limitation of, the conditions described in SECTION
3.1 of the Agreement, pursuant to SECTION 3.1(b), the following items must be
received by Lender in form and substance satisfactory to Lender on or prior
to the Closing Date (each capitalized term used but not otherwise defined
herein shall have the meaning ascribed thereto in the Agreement):
A. EXHIBITS AND SCHEDULES. All Exhibits and Schedules to the
Agreement, in form and substance satisfactory to Lender.
B. NOTE. One (1) duly executed original of the Note in favor of
Lender, dated the date hereof.
C. SECURITY AGREEMENT. Duly executed originals of the Security
Agreement, dated as of the date hereof, and all instruments, documents and
agreements executed pursuant thereto.
D. SECURITY INTERESTS AND UCC FILINGS. (a) Evidence satisfactory to
Lender that Lender has a valid and perfected first priority security interest
in the Collateral, including (i) such documents duly executed by Borrowers
(including financing statements under the UCC and other applicable documents
under the laws of any jurisdiction with respect to the perfection of Liens)
as Lender may request in order to perfect its security interests in the
Collateral and (ii) copies of UCC search reports listing all effective
financing statements that name any Borrower, as debtor, together with copies
of such financing statements, none of which shall cover the Collateral.
(b) Evidence satisfactory to Lender, including copies of all
UCC-1 and other financing statements filed in favor of any Borrower, with
respect to each location, if any, at which Inventory may be consigned.
E. TERMINATION STATEMENTS. (a) UCC-3 or other appropriate
termination statements, in form and substance satisfactory to Lender,
manually signed and releasing all liens of any existing lienholder upon any
of the personal property of Borrowers and any Subsidiary thereof, and (b)
termination of all blocked account agreements, bank agency agreements or
other similar agreements or arrangements except such agreements or
arrangements in favor of Lender.
F. PAY-OFF LETTERS. Duly executed originals of pay-off letters from
First National Bank of Commerce ("FNBC") with respect to loans outstanding to
Borrowers and their Subsidiaries from FNBC and releases of mortgages
encumbering the real estates located at __________________, and UCC-3 or
other appropriate termination statements filed in connection therewith, in
form and substance satisfactory to the Lender.
G. INITIAL NOTICE OF ADVANCE. Duly executed originals of a Notice of
Advance, dated the Closing Date, with respect to the initial Advance to be
requested by any Borrower on the Closing Date.
H. LETTER OF DIRECTION. Duly executed originals of a letter of
direction from Akorn addressed to Lender, with respect to the disbursement of
the proceeds of the initial Advance.
I. OFFICER'S CERTIFICATE. Duly executed originals of a certificate
of the chief executive officer and chief financial officer of Akorn, dated
the date hereof, certifying, to the best of his knowledge after diligent
inquiry, to the fulfillment of all conditions precedent to closing of the
Agreement and to the truth and accuracy, as of the Closing Date, of the
representations and warranties of Borrowers contained in the Agreement and
each other Loan Document.
J. CHARTER AND GOOD STANDING. For Borrowers and each of their
Subsidiaries, such Person's (a) certificate or articles of incorporation and
all amendments thereto, (b) good standing certificates (including
verification of tax status) in its state of incorporation and (c) good
standing certificates (including verification of tax status) and certificates
of qualification of Borrower to conduct business in each jurisdiction where
its ownership or lease of property or the conduct of its business requires
such qualification, each of the foregoing dated a recent date prior to the
Closing Date and certified by the applicable Secretary of State or other
authorized governmental entity.
K. BYLAWS AND RESOLUTIONS. For Borrowers and each of their
Subsidiaries, such Person's (a) bylaws, together with all amendments thereto,
and (b) resolutions of such Person's Board of Directors, approving and
authorizing the execution, delivery and performance of the Loan Documents to
which such Person is a party and the transactions to be consummated in
connection therewith, each of the foregoing certified as of the date hereof
by such Person's corporate secretary or an assistant secretary as being in
full force and effect without any modification or amendment.
L. INCUMBENCY CERTIFICATES. For each Borrower and each of its
Subsidiaries, signature and incumbency certificates of the officers of each
such Person executing any of the Loan Documents, certified as of the date
hereof by such Person's corporate
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secretary or an assistant secretary as being true, accurate, correct and
complete.
M. OPINIONS OF COUNSEL. Duly executed originals of opinions of
Xxxxx, Xxxxxx & XxxXxx, counsel for Borrowers and their Subsidiaries,
together with any local counsel opinions requested by Lender, each in form
and substance satisfactory to Lender and its counsel, dated the Closing Date,
and each accompanied by a letter addressed to such counsel from Borrowers and
their Subsidiaries authorizing and directing such counsel to address its
opinion to Lender and to include in such opinion an express statement to the
effect that Lender is authorized to rely on such opinion.
N. INSURANCE POLICIES AND ENDORSEMENTS. Copies of policies of
insurance, required hereby together with loss payable endorsements on
Lender's standard form, duly executed, and evidence of the payment of the
first year's premium therefor.
O. ACCOUNTANTS' LETTER. A letter authorizing Borrowers' independent
certified public accountants to communicate with Lender in accordance with
SECTION 5.2 hereof and acknowledging Lender's reliance on past and future
financial statements.
P. OTHER DOCUMENTS. Such other certificates, documents and
agreements respecting Borrowers or any Subsidiary thereof as Lender may, in
its sole discretion, request.
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