Exhibit 10.25
20115386.3
07-08-02
FIFTH AMENDMENT
THIS FIFTH AMENDMENT dated as of June 30, 2002, by and among AKORN,
INC., a Louisiana corporation ("Akorn"), AKORN (NEW JERSEY), INC., an Illinois
corporation "Akorn NJ") (Akorn and Akorn NJ being sometimes referred to herein
individually as a "Borrower" and collectively as the "Borrowers"), and THE
NORTHERN TRUST COMPANY, an Illinois banking corporation (the "Lender");
WITNESSETH:
WHEREAS, the following documents (collectively, the
"Documents") were heretofore entered into by the parties indicated:
(i) Amended and Restated Credit Agreement dated as of
September 15, 1999, among the Borrowers and the Lender (which, as
amended by the documents referred to below, is referred to herein as
the "Credit Agreement");
(ii) Amended and Restated Security Agreement dated as of
December 29, 1997, from the Borrowers to the Lender;
(iii) Intellectual Property Security Agreement dated as of
September 15, 1999, from Akorn to the Lender;
(iv) Junior Mortgage dated as of March 21, 2001, from Akorn to
the Lender recorded in the Office of the Recorder of Deeds of Macon
County, Illinois, on May 7, 2001, in Book 3056, Page 544;
(v) First Amendment dated as of December 28, 1999, among the
Borrowers and the Lender;
(vi) Second Amendment and Waiver dated as of February 15,
2001, among the Borrowers and the Lender;
(vii) Third Amendment and Waiver dated as of April 16, 2001
(the "Third Amendment"), among the Borrowers and the Lender;
(viii) Note dated April 16, 2001, from the Borrowers to the
Lender in the principal amount of $45,000,000;
(ix) Forbearance Agreement dated as of July 12, 2001 (the
"Forbearance Agreement"), by and among the Borrowers and the Lender;
(x) Subordination and Standby Agreement dated as of July 12,
2001, by The Xxxx X. Xxxxxx Trust dated September 20, 1989, in favor of
the Lender and containing the Acknowledgment of the Borrowers;
(xi) Waiver letter from the Lender to the Borrowers dated
December 10, 2001, and accepted and agreed to by the Borrowers,
relating to a loan to Akorn by NeoPharm, Inc., a Delaware corporation
("NeoPharm");
(xii) Subordination, Standby and Intercreditor Agreement dated
as of December 20, 2001, between NeoPharm and the Lender and containing
the Acknowledgment of Subordination by the Borrowers;
(xiii) Amendment to Forbearance Agreement dated as of December
20, 2001, by and among the Borrowers and the Lender;
(xiv) Notice dated January 30, 2002, from the Lender to the
Borrowers, given pursuant to the Amendment to Forbearance Agreement
referred to in (xiii) above;
(xv) Second Amendment to Forbearance Agreement dated as of
February 21, 2002, by and among the Borrowers and the Lender; and
(xvi) Fourth Amendment dated as of January 1, 2002 (the
"Fourth Amendment"), by and among the Borrowers and the Lender; and
WHEREAS, the parties desire to make certain modifications and
amendments to the Documents, as previously modified and amended, as provided for
herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
Section 1. Recitals Part of Agreement; References to Documents
Defined Terms. (a) The foregoing recitals are hereby incorporated into and made
a part of this Agreement.
(b) Except as otherwise stated herein, all references in this
Agreement to any one or more of the Documents shall be deemed to include the
previous modifications and amendments to the Documents provided for in the
Documents described above, whether or not express reference is made to such
previous modifications and amendments.
(c) The parties acknowledge that, by Section 1(c) of the
Fourth Amendment, the following new defined terms were added in alphabetical
order in Section 1.1 of the Credit Agreement:
"DEA" means the Drug Enforcement Administration of
the United States Department of Justice.
"SEC" means the United States Securities and Exchange
Commission.
(d) All capitalized terms used and not otherwise defined in
this Agreement shall have the same meanings as the defined terms contained in
the Credit Agreement, including the defined terms that were added to the Credit
Agreement by the Fourth Amendment. Unless otherwise defined or the context
otherwise, all financial and accounting terms used in this Agreement shall be
defined in accordance with GAAP.
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Section 2. Extension of Termination Date. The parties
acknowledge that the date appearing in the definition of the term "Termination
Date" in Section 1.1 of the Credit Agreement, as previously modified and
amended, is "June 30, 2002". The definition of the term "Termination Date" in
Section 1.1 of the Credit Agreement, as previously modified and amended, is
hereby further modified and amended by changing the date appearing therein from
"June 30, 2002" to "July 31, 2002". The Lender agrees that such extension of the
Termination Date supersedes the requirement in Section 5(c) of the Forbearance
Agreement that the Borrowers pay all principal, interest and other amounts due
under the Documents on the last day of the Forbearance Period under the
Forbearance Agreement.
Section 3. Commitment Terminated. The parties acknowledge that
pursuant to the terms of Section 4 of the Forbearance Agreement, the Commitment
of the Lender to make Advances and to issue Letters of Credit under the Credit
Agreement is not in effect and shall not be in effect from and after the date of
this Agreement, and that the Lender is not and shall not be obligated to make,
and that the Borrowers do not and shall not have the right to receive, any
additional Advances or Letters of Credit under the Credit Agreement from and
after the date of this Agreement.
Section 4. Interest Rate. The parties acknowledge that
pursuant to the terms of the Credit Agreement as modified and amended by the
Third Amendment, absent the occurrence and continuance of an Event of Default
under the Documents and notice, the interest rate on the Loans is the Prime
Rate, which is defined as that rate per year announced from time to time by the
Lender called its prime rate, which rate at any time may not be the lowest rate
charged by the Lender, plus 3% per annum.
Section 5. Mandatory Principal Payments. (a) The parties
acknowledge that the principal amount of the Loans outstanding on the date of
this Agreement is $39,200,000.
(b) Section 2.3 of the Credit Agreement, as previously
modified and amended, is hereby amended and restated in its entirety to read as
follows:
2.3 Voluntary and Mandatory Prepayments.
(a) Voluntary Prepayments. 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
no prepayment fee, premium or penalty shall be payable in
connection with any such voluntary prepayment.
(b) Mandatory Prepayments.
(i) [Intentionally Omitted]
(ii) [Intentionally Omitted]
(iii) Borrowers shall immediately pay all of
the principal of and interest on the Loans if any of
the following shall occur:
(A) At any time after January 1,
2002, the FDA shall file any judicial or
administrative proceeding or take any
administrative action that results in a
partial or total suspension of production or
shipment of products for the account of
either of
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Borrowers or under any contract under which
either of Borrowers manufactures product for
any third party.
(B) Borrowers at any time rescind
any written request to the FDA to make a
re-inspection relating to the 483 M Warning
Letter issued by the FDA.
(C) At any time after January 1,
2002, Borrowers fail to make a written
response, within 10 Business Days, to the
FDA, with a copy to the Lender, to any
written communication received from the FDA
after January 1, 2002, that raises any
deficiencies.
(D) At any time after January 1,
2002, one or more fines, penalties or other
monetary obligation due and payable to any
Governmental Authority is assessed against
Borrowers, or either of them, and the
aggregate amount thereof is more than
$250,000.
(E) At any time after January 1,
2002, the stock of Akorn is neither listed
on any securities exchange or the Nasdaq
National Market nor traded on the Pink
Sheets.
(F) At any time after January 1,
2002, there is any restatement of or
adjustment to the operating results of
Borrowers for any one or more Fiscal Years
ended on or prior to December 31, 2001, and
the aggregate amount of all such
restatements and adjustments is more than
$27,000,000.
(G) [Intentionally Omitted]
(H) [Intentionally Omitted]
(I) At any time after April 12,
2002, any materially adverse action is taken
by the FDA, the SEC, the DEA, or any other
Governmental Authority, or any state or
federal court, with respect to either of
Borrowers, based on an alleged failure to
comply with laws or regulations, including,
without limitation, any ban on sale, recall
or seizure of products, any total or partial
suspension of production, or the entry of
any restraining order or injunction against
violations of the law, or the filing of any
judicial or administrative proceeding
seeking any of the foregoing; provided,
however, that the foregoing provisions of
this subparagraph (I) shall not apply to a
consent decree relating to SEC or DEA
matters, or the judicial proceeding in which
it is entered, if such consent decree does
not result in the occurrence of any of the
events described in subparagraphs (A)
through (H) above.
Section 6. Collection and Deposit of Cash Receipts. (a)
Notwithstanding the provisions of Section 6(a) of the Forbearance Agreement, the
authority granted to the Borrowers by the Lender in Section 6(a) of the
Forbearance Agreement to collect their accounts receivable shall not terminate
at the end of the Forbearance Period, and such authority shall continue until
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the Termination Date or the earlier occurrence of any Event of Default. This
paragraph (a) restates the provisions of Section 6(a) of the Fourth Amendment.
(b) The provisions of Sections 6(b), (c), (d) and (e) of the
Forbearance Agreement (which relate to, among other things, the requirement that
the Borrowers deposit cash receipts in an account at the Lender and have their
cash and investments on deposit in accounts maintained with the Lender) shall
continue to apply from and after the date of this Agreement, and without
limitation on the generality of such provisions, those provision shall apply
with respect to the proceeds of any offering of securities by either of the
Borrowers; provided, however, that unless and until an Event of Default has
occurred and is continuing, the Lender shall not exercise the rights referred to
in Section 6(c) of the Credit Agreement or the right to apply payments or
proceeds on deposit in the lockbox account referred to in Section 6(d) of the
Credit Agreement to the Obligations of the Borrowers under the Documents. The
Credit Agreement is hereby modified and amended to incorporate the provisions of
this paragraph. This paragraph (b) restates the provisions of Section 6(b) of
the Fourth Amendment.
Section 7. Fees and Expenses. The provisions of Section 8 of
the Forbearance Agreement shall continue to apply from and after the date of
this Agreement and the Credit Agreement is hereby modified and amended to
incorporate the provisions of this Section. This Section restates the provisions
of Section 7 of the Fourth Amendment.
Section 8. Lender's Consultant and Personnel. The Borrowers
understand that the Lender or its counsel may from time to time engage
consultants in connection with the Loans and that the Lender's collateral
evaluation personnel will from time to time, and with such frequency as the
Lender deems appropriate, make visits to the Borrowers' places of business to
inspect the tangible collateral for the Loan, review the books and records of
the Borrowers and confer with the Borrowers' personnel. The Borrowers shall
cooperate with such consultants and collateral evaluation personnel and allow
them to have access to the Borrowers' books and records and personnel and to the
collateral for the Loan. The Borrowers acknowledge that the fees of such
consultant shall be reimbursable to the Lender by the Borrowers in accordance
with Section 10.4 of the Credit Agreement. The provisions of this Section are
without limitation on the provisions of Section 2.11 of the Credit Agreement.
The foregoing provisions of this Section supersede and replace the provisions of
Section 8 of the Fourth Amendment and the Credit Agreement is hereby modified
and amended to incorporate the foregoing provisions of this Section.
Section 9. Indebtedness. (a) The provisions of Sections 7(b),
(c) and (d) of the Forbearance Agreement (which relate to matters concerning
subordinated loan transactions) shall continue to apply from and after the date
of this Agreement. This paragraph (a) restates the provisions of Section 9(a) of
the Fourth Amendment.
(b) The parties acknowledge that, by Section 9(b) of the
Fourth Amendment, Section 7.3 of the Credit Agreement was modified and amended
by adding the following sentence at the end thereof:
In addition to the foregoing restrictions contained in this
Section, from and after January 1, 2002, Borrowers shall not
incur any additional Indebtedness other than (i) obligations
to trade creditors incurred in the ordinary course of
business, and (ii) obligations to vendors in connection with
capital expenditures that do not violate the conditions
provided for in Section 7.18 of this Agreement.
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Section 10. Amendments to Section 7.10 of Credit Agreement.
The parties acknowledge that, by Section 10 of the Fourth Amendment, Section
7.10 of the Credit Agreement, as previously modified and amended, was modified
and amended by deleting clauses (a) through (f) thereof. The parties acknowledge
that, by Sections 11 and 12 of the Fourth Amendment, new clauses (g) and (h)
were added to Section 7.10 of the Credit Agreement, which new clauses (g) is
restated in Sections 11 of this Agreement, and which new clause (h) is modified
and amended in Section 12 of this Agreement.
Section 11. Inventory Matters. (a) The provisions of Section
10 of the Forbearance Agreement shall no longer apply from and after the date of
this Agreement. This paragraph (a) restates the provisions of Section 11(a) of
the Fourth Amendment.
(b) The parties acknowledge that, by Section 11(b) of the
Fourth Amendment, the following new clause (g) was added to Section 7.10 of the
Credit Agreement:
(g) Commencing with the three-month period ended
January 31, 2002, for each period of three calendar months,
Borrowers' returns of inventory for credit shall not exceed
$750,000.
Section 12. Receipts. (a) The parties acknowledge that, by
Section 12(a) of the Fourth Amendment, the following new defined terms were
added in alphabetical order in Section 1.1 of the Credit Agreement:
"Gross Receipts" shall mean, for any period, the
amount of the gross proceeds received by Borrowers during such
period from sales of merchandise, including collections of
accounts receivable, all determined on a cash basis.
"Net Receipts" shall mean, for any period, an amount
equal to (i) the amount of Gross Receipts for such period,
minus (ii) the amount of all of the cash expenditures of
Borrowers during such period, excluding only capital
expenditures that are permitted under the provisions of
Section 7.18 of this Agreement; all determined on a cash
basis.
(b) The parties acknowledge that, by Section 12(b) of the
Fourth Amendment, a new clause (h) was added to Section 7.10 of the Credit
Agreement:, which new clause (h) is hereby modified and amended in its entirety
to read as follows:
(h) For the periods commencing on January 1, 2002,
and ending on the last day of each of the months set forth in
Column A below, the cumulative Gross Receipts and cumulative
Net Receipts of Borrowers shall be not less than the amount
set forth beside such month in Column B and Column C below,
respectively:
Column A Column B Column C
-------- -------- --------
Cumulative Gross Cumulative Net
Receipts For Period Receipts For Period
January 1, 2002, January 1, 2002,
through Last Day of through Last Day of
Month, 2002 Month Not Less Than Month Not Less Than
----------- ------------------- -------------------
March $11,500,000 $0
April $15,500,000 $430,000
May $19,400,000 $525,000
June $23,300,000 $1,115,000
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Borrowers acknowledge and agree that the amounts provided for
in this clause have been established at levels that are
substantially lower than Borrowers' actual expectations, and
that any failure to satisfy the foregoing condition of this
clause shall be deemed to be material, regardless of the
amount of such failure.
Section 13. Dividends. From and after the date of this
Agreement, the Borrowers shall not pay any cash dividend on any of their capital
stock, and Section 7.14 of the Credit Agreement is hereby modified and amended
accordingly. This Section restates the provisions of Section 13 of the Fourth
Amendment.
Section 14. Capital Expenditures. The Borrowers together in
the aggregate shall not make capital expenditures of more than $4,976,000 during
the first seven months of the calendar year 2002, which capital expenditures
shall consist only of the following:
(i) Capital expenditures in an aggregate amount not exceeding
$1,160,000 made at Akorn's Decatur, Illinois, place of business for the
purpose of complying with requirements of the FDA.
(ii) Other capital expenditures in an aggregate amount not
exceeding $215,000 made at Akorn's Decatur, Illinois, place of business
(iii) Capital expenditures in connection with Akorn's
lyophilization project, in an aggregate amount not exceeding
$2,773,000, paid from the proceeds of the loan to Akorn from NeoPharm.
(iv) Up to $600,000 for interest required to be capitalized
under GAAP on borrowings to finance Akorn's lyophilization project.
(v) Other capital expenditures in an aggregate amount not
exceeding $180,000 made in accordance with the capital expenditures
budget previously furnished to the Lender by the Borrowers.
(vi) Other capital expenditures in an aggregate amount not
exceeding $87,000.
The foregoing provisions of this Section supersede and replace the provisions of
Section 14 of the Fourth Amendment and Section 7.18 of the Credit Agreement is
hereby modified and amended to include the foregoing provisions of this Section.
Section 15. Regulatory and Stock Listing Matters. The
provision that was added at the end of Section 6.14 of the Credit Agreement by
the Fourth Amendment is hereby modified and amended in its entirety to read as
follows:
Borrowers shall provide the Lender with copies of (i) any
communications to or from the FDA (whether relating to the 483
M Warning Letter received by Akorn from the FDA, or relating
to any other matters), the SEC, the DEA or any other
Governmental Authority, or any United States attorney,
concerning any investigation or inquiry, and shall inform the
Lender of the substance of any oral communication with the
FDA, the SEC, the DEA or any other Governmental Authority, or
any United States attorney, concerning any of such matters,
and (ii) any communications to or from the The Nasdaq Stock
Market, Inc., or any other securities exchange concerning the
de-listing or listing of Akorn's stock; in each
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case not later than the first Business Day after the date of
any such communication.
Section 16. Reports and Notices. From and after the date of
this Agreement, the Borrowers shall provide the Lender with the Financial
Statements, reports and notices provided for in the following paragraphs of this
Section, and Section 5.1 of the Credit Agreement, as previously modified and
amended, is hereby modified and amended accordingly:
(a) Quarterly Reports of Borrowers. Within forty-five (45)
days after the end of each Fiscal Quarter of Borrowers, Borrowers shall
deliver to Lender a copy of an unaudited financial statement of
Borrowers 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 and (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.
(b) Audit Report of Borrowers. Within one hundred twenty (120)
days after the end of each Fiscal Year of Borrowers, Borrowers shall
deliver to Lender 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 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; provided, however, that in the case of
Fiscal Year 2001, if the annual audit report has not been issued within
such time period, Borrowers shall deliver unaudited financial
statements within such time period and shall deliver the annual audit
report within five days after it is issued.
(c) Certificates. Contemporaneously with the furnishing of a
copy of each annual audit report and of each quarterly statement
provided herein, Borrowers shall deliver to Lender 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 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 Credit Agreement.
(d) Notice of Default, Litigation and ERISA Matters.
Immediately upon learning of the occurrence of any of the following,
Borrowers shall deliver to Lender 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.
(e) Other Information. Borrowers shall deliver to Lender such
other information and documents, financial or otherwise, in the
addition to the information and documents specifically referred to
herein as Lender may from time to time request.
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(f) Reports of Akorn. (i) Within forty-five (45) days after
the end of each fiscal quarter of Akorn, Borrowers shall deliver to
Lender a copy of Form 10-Q as filed by or on behalf of Akorn with the
Securities and Exchange Commission, and (ii) within one hundred twenty
(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.
(g) Monthly Reports. Within fifteen (15) Business Days after
the end of each month, beginning with the month ending December 31,
2001, Borrowers shall deliver to Lender a copy of an unaudited
financial statement of the Borrowers for such month, in form and
substance satisfactory to the Lender, prepared on a basis consistent
with the audited financial statements of the Borrowers previously
furnished to the Lender and, if required by the Lender, prepared on a
consolidating and consolidated basis, signed by an authorized officer
of Akorn and consisting of at least a balance sheet as at the end of
such month and a statement of earnings and cash flow for such month.
(h) Reports Relating to Receipts. The Borrowers shall deliver
the following reports to the Lender relating to Gross Receipts and Net
Receipts:
(i) On or before Wednesday of each week, the
Borrowers shall deliver to the Lender a report of actual Gross
Receipts and Net Receipts for the one-week period ending on
the immediately preceding Friday, and forecast Gross Receipts
and Net Receipts for the next 12 weeks, prepared in the format
of Exhibit A attached to this Agreement and signed by officers
of the Borrowers.
(ii) Within two Business Days after the end of each
calendar month commencing with the month of March, 2002, the
Borrowers shall deliver to the Lender a report of Gross
Receipts and Net Receipts for such month and for the period
commencing January 1, 2002, and ending on the last day of such
month, which reports shall be prepared in reasonable detail
and in a format acceptable to the Lender and shall be signed
by officers of the Borrowers.
(i) Monitoring Reports. The Borrowers shall deliver to the
Lender each of the monitoring reports specified in Exhibit B attached
to this Agreement, with the frequency and by the dates specified in
Exhibit B, each of which reports shall be prepared in reasonable detail
and in a format acceptable to the Lender and shall be signed by
officers of the Borrowers.
(j) Status Reports. On or before the 15th and the last day of
each month commencing April 30,2002, the Borrowers shall deliver to the
Lenders (i) a status report concerning any investigation or inquiry
then in progress by the FDA, the SEC, the DEA or any other Governmental
Authority, describing the current status of such investigation or
inquiry, the schedule for future action and any significant events that
have occurred since the date of the last such report and (ii) a status
report concerning the listing of Akorn's stock on the Nasdaq National
Market or any other securities exchange. All such reports shall be
prepared in such detail and form, and shall contain such information,
as the Lender shall from time to time require.
The foregoing provisions of this Section supersede and replace the provisions of
Section 16 of the Fourth Amendment.
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Section 17. Security Interests. The parties acknowledge that,
by Section 17 of the Fourth Amendment, the Credit Agreement was modified and
amended by adding the following new Section 6.17 thereto:
6.17. Security Interests. Without limitation on any other
provisions of the Loan Documents, Borrowers shall cooperate with Lender
by executing and delivering from time to time such documents as Lender
shall deem necessary or advisable in order to conform to the provisions
of Revised Article 9 of the Uniform Commercial Code and to perfect
Lender's security interest in any intellectual property of Borrowers in
addition to that described in the Security Agreement.
Section 18. [Intentionally Omitted]
Section 19. Representations and Warranties. The Borrowers
hereby represent and warrant to the Lender as follows:
(a) Akorn is a corporation duly organized, validly existing
and in good standing under the laws of the State of Louisiana and duly
qualified to do business and in good standing in the States of Illinois
and California, has all necessary power to carry on its present
business, and has full right, power and authority to enter into and
execute and deliver this Agreement and to otherwise perform and
consummate the transactions contemplated thereby.
(b) Akorn NJ is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois and duly
qualified to do business and in good standing in the State of New
Jersey, has all necessary power to carry on its present business, and
has full right, power and authority to enter into and execute and
deliver this Agreement and to otherwise perform and consummate the
transactions contemplated thereby.
(c) This Agreement and the Documents have been duly
authorized, executed and delivered by the Borrowers and constitute
valid and legally binding obligations enforceable against the Borrowers
in accordance with their terms, subject to bankruptcy, insolvency and
other laws of general application relating to the enforcement of
creditors rights. The execution and delivery of this Agreement and the
Documents and compliance with the provisions thereof under the
circumstances contemplated therein do not and will not conflict with or
constitute a breach or violation of or default under the articles of
incorporation or bylaws of either of the Borrowers, or any agreement or
other instrument to which either of the Borrowers are party, or by
which either of them are bound, or to which their properties are
subject, or any existing law, administrative regulation, court order or
consent decree to which either of them are subject.
(d) There is no litigation or administrative proceeding
pending or threatened to restrain or enjoin the transactions
contemplated by this Agreement or the Documents, or questioning the
validity thereof, or in any way contesting the existence or powers of
either of the Borrowers, or in which an unfavorable decision, ruling or
finding would adversely affect the transactions contemplated by this
Agreement or the Documents.
(e) Except as disclosed in Exhibit C attached to this
Agreement, there is no litigation or administrative proceeding pending
or threatened against either of the Borrowers.
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(f) Schedules 4.2, 4.8, 4.9, 4.13, 4.15, 4.17, 4.18, 4.19,
7.3, 7.4(a), 7.7 and 10.10 attached to this Agreement contain accurate
and complete current updates of the information contained in the
corresponding Schedules attached to the Credit Agreement.
Section 20. Time of Essence. Time is of the essence of this
Agreement and each of the provisions hereof.
Section 21. Joint and Several Obligation. The obligations of
the Borrowers under this Agreement shall be joint and several.
Section 22. Release of Lender. To the extent permitted by
applicable law, each of the Borrowers hereby releases and forever discharges the
Lender and its past, present and future parent corporations, subsidiaries,
affiliates and divisions, and their respective past, present and future
shareholders, directors, officers, employees, attorneys, agents, investigators
and insurers, and the heirs, administrators, executors, legal representatives,
trustees, successors and assigns of each of the foregoing, of and from any and
all claims of any kind or character whatsoever, whether now known or hereafter
discovered, absolute or contingent, direct or indirect, arising out of any act,
event or occurrence of any sort whatsoever occurring on or prior to the date of
this Agreement; provided, however, that the Borrowers do not hereby release the
right to performance by the Lender of its obligations under the Documents and
this Agreement arising on and after the date of this Agreement. The Borrowers
shall forever refrain and forbear from commencing or prosecuting any lawsuit or
other proceeding against the Lender based upon, arising out of or connected with
any of the claims released in this Agreement.
Section 23. Documents to Remain In Effect; Confirmation of
Obligations; References. Each of the Documents shall remain in full force and
effect as originally executed and delivered by the parties, as previously
modified and amended by one or more of the other Documents and as modified and
amended by this Agreement. In order to induce the Lender to enter into this
Agreement, the Borrowers hereby (i) confirm and reaffirm all of their
obligations under each of the Documents, as previously modified and amended by
one or more of the other Documents and modified and amended by this Agreement;
(ii) acknowledge and agree that the Lender, by entering into this Agreement,
does not waive any existing or future default or event of default under any of
the Documents, or any rights or remedies under any of the Documents, except as
expressly provided herein; (iii) acknowledge and agree that the Lender has not
heretofore waived any default or event of default under any of the Documents, or
any rights or remedies under any of the Documents, other than as expressly
provided in the Documents; and (iv) acknowledge that they do not have any
defense, set-off or counterclaim to the payment or performance of any of their
obligations under the Documents, as previously modified and amended by one or
more of the other Documents and modified and amended by this Agreement.
Section 24. Confirmation of Certifications, Representations
and Warranties. In order to induce the Lender to enter into this Agreement, the
Borrowers hereby certify, represent and warrant to the Lender that, except as
otherwise disclosed to the Lender in writing on or prior to the date hereof,
including in this Agreement and in the Exhibits and Schedules attached hereto
and/or in documents submitted to the Lender prior to the date hereof (including,
but not limited to, any and all financial statements and reports, budgets,
statements of cash flow and governmental reports and filings) (collectively
referred to herein as "Disclosures"), all certifications, representations and
warranties contained in the Documents and in all certificates heretofore
delivered to the Lender are true and correct as of the date hereof in all
material
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respects, and, subject to such Disclosures, all such certifications,
representations and warranties are hereby remade and made to speak as of the
date of this Agreement.
Section 25. Entire Agreement. This Agreement sets forth all of
the covenants, promises, agreements, conditions and understandings of the
parties relating to the subject matter of this Agreement, and there are no
covenants, promises, agreements, conditions or understandings, either oral or
written, between them relating to the subject matter of this Agreement other
than as are herein set forth.
Section 26. Successors. This Agreement shall inure to the
benefit of and shall be binding upon the parties and their respective
successors, assigns and legal representatives.
Section 27. Severability. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 28. Amendments, Changes and Modifications. This
Agreement may be amended, changed, modified, altered or terminated only by a
written instrument executed by all of the parties hereto.
Section 29. Construction. (a) The words "hereof," "herein,"
and "hereunder," and other words of a similar import refer to this Agreement as
a whole and not to the individual Sections in which such terms are used.
(b) References to Sections and other subdivisions of this
Agreement are to the designated Sections and other subdivisions of this
Agreement as originally executed.
(c) The headings of this Agreement are for convenience only
and shall not define or limit the provisions hereof.
(d) Where the context so requires, words used in singular
shall include the plural and vice versa, and words of one gender shall include
all other genders.
(e) Each party to this Agreement and legal counsel for each
party have participated in the drafting of this Agreement, and accordingly the
general rule of construction to the effect that any ambiguities in a contract
are to be resolved against the party drafting the contract shall not be employed
in the construction and interpretation of this Agreement.
Section 30. Execution of Counterparts. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
Section 31. Governing Law. This Agreement is prepared and
entered into with the intention that the law of the State of Illinois shall
govern its construction and enforcement.
[SIGNATURE PAGE(S) AND EXHIBIT(S),
IF ANY, FOLLOW THIS PAGE]
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IN WITNESS WHEREOF, the parties have executed this instrument
as of the date first above written.
AKORN, INC.
By____________________________________________
Title:
AKORN (NEW JERSEY), INC.
By____________________________________________
Title:
THE NORTHERN TRUST COMPANY
By____________________________________________
Vice President
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EXHIBIT A
FORMAT OF GROSS RECEIPTS AND NET RECEIPTS REPORT
EXHIBIT B
MONITORING REPORTS
Report Frequency Due By
1. Accounts Receivable Roll Forward Weekly Following Wednesday
2. Accounts Payable Roll Forward Weekly Following Wednesday
3. Income Statement, Balance Sheet, Cash Flow Monthly 15th following month
4. Summary Accounts Receivable Aging Monthly 15th following month
5. Summary Accounts Payable Aging Monthly 15th
6. Wholesaler Inventory Days on Hand, to include
description of sale above 90 days stock level Monthly 15th following month
7. FDA Warning Letter update detailing key issues,
action plan update, key tasks accomplished,
tasks past due and copies of all FDA
communications Monthly 15th following month
8. Lyophilization project update detailing progress
on completion of project, comparison of
expenditures and sales to budget Monthly 15th following month
9. Sales analysis by wholesaler, monthly, quarterly
and annual Monthly 15th following month
10. Inventory item turn and margin analysis Quarterly 15th following month
11. New product development report detailing
progress in NDA and ANDA pipelines, to include
minutes from the New Product Committee Monthly 15th
EXHIBIT C
LITIGATION AND ADMINISTRATIVE PROCEEDINGS
1. [Intentionally Omitted]
2. Matters relating to 483 M Warning Letter issued to Akorn, Inc., by the
Food and Drug Administration
3. Additional matters disclosed in Schedule 4.8
4. SEC investigation described in SEC letter dated March 27, 2002
5. DEA investigation described in United States Attorney, Central District of
Illinois, letter dated Xxxxx 0, 0000
XXXXXXXX 4.2
EXECUTIVE OFFICES
Same as Schedule 4.2 attached to the Credit Agreement
SCHEDULE 4.8
LABOR MATTERS
EMPLOYMENT AGREEMENTS
Akorn Inc None
Akorn (New Jersey), Inc. None
CONSULTING AGREEMENTS
Akorn Inc EJ Financial Enterprises, Inc. (affiliate)
Akorn (New Jersey), Inc. None
MANAGEMENT AGREEMENTS
Akorn Inc None
Akorn (New Jersey), Inc. None
COLLECTIVE BARGAINING AGREEMENTS
Akorn Inc None
Akorn (New Jersey), Inc. None
ORGANIZING ACTIVITY PENDING OR THREATENED
Akorn Inc None
Akorn (New Jersey), Inc. None
NLRB REPRESENTATION PROCEEDINGS PENDING OR THREATENED
Akorn Inc None
Akorn (New Jersey), Inc. None
EMPLOYMENT RELATED COMPLAINTS OR CHARGES PENDING OR THREATENED
Akorn, Inc. None
Akorn (New Jersey), Inc. None
SCHEDULE 4.9
VENTURES, SUBSIDIARIES AND AFFILIATES
OUTSTANDING STOCK
Same as Schedule 4.9 attached to the Credit Agreement with the following changes
in the number of shares of outstanding stock:
1. Change 18,241,246 to 19,578,573
2. Change 687,032 to 606,901
3. Change 3,703,581 to 1,093,477
SCHEDULE 4.13
ERISA PLANS
Same as Schedule 4.13 attached to the Credit Agreement
SCHEDULE 4.15
INTELLECTUAL PROPERTY AND TRADE NAMES
Akorn, Inc., and Akorn (New Jersey), Inc., conduct business under the names
Akorn Ophthalmics and Akorn, Inc.
Akorn, Inc. See Exhibit A attached hereto
Exclusive, royalty-free license to make and have
made Piroxicam (patents held by Pfizer) anywhere
in the world for use and sale in prescription
ophthalmic applications to be sold by
prescription
License Agreement from Xxxxx Xxxxxxx for methods
and instrumentation related to two patents for
treating macular degeneration.
Akron (New Jersey), Inc. See Exhibit A attached hereto
SCHEDULE 4.17
HAZARDOUS MATERIALS
Same as Schedule 4.17 attached to the Credit Agreement
SCHEDULE 4.18
INSURANCE POLICIES
Akorn, Inc. and Subsidiaries
Policy periods run to April 24, 2003 for Directors and Officers and to January
29, 2003 for all other policies. Premiums for the current policy periods have
been paid in full.
Commercial General Liability Hartford Fire Insurance Company
Policy #42UUVUA559
General aggregate $2,000,000
Each occurrence $1,000,000
Excess Liability Hartford Fire Insurance Company
Policy #42RHVUA8534
General aggregate $10,000,000
Each occurrence $10,000,000
Commercial Package Hartford Fire Insurance Company
Policy #42UUVUA559
Property limits $61,767,471
Business interruption limits $10,000,000
Retention $5,000 per occurrence
Commercial Automobile Hartford Fire Insurance Company
Policy #42UUVUA559
Combined single limit $1,000,000
Deductible $250 comprehensive
$500 collision
Workers Compensation Hartford Casualty Insurance Company
Policy #42WEVGU2114
Limits each accident $500,000
Directors and Officers Greenwich Insurance Company Liability
Policy #ELU-83244-02
General aggregate $5,000,000
Retention $350,000
Product/Clinical Trial North American Capacity Insurance
Company Liability
Policy #BLG-0000-113-00
General aggregate $10,000,000
Each occurrence $10,000,000
Retention $50,000/claim; $250,000
aggregate
Executive Protection Federal Insurance Company
Policy #8153-14-29
Limit $1,000,000
Retention $2,500
SCHEDULE 4.19
DEPOSIT AND DISBURSEMENT ACCOUNTS
Akorn, Inc.
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000 Akorn operating account #86746 Controlled disbursements (A/P)
30286746 Payroll disbursements 30386746 Akorn lockbox 30186746 and 30486746
Health Insurance 30786746 Flexible Spending 31286746 401(k) 00000000 Blocked
Account 0000000
Akorn, Inc.
American National Bank
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000
Akorn Merchant Account #5300107421
(Credit Card Account)
Akorn (New Jersey), Inc.
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Controlled disbursements 30986746
Payroll 31186746
SCHEDULE 7.3
INDEBTEDNESS
The Borrowers have the following outstanding Indebtedness:
Akron, Inc.
Mortgage loans #98021904 and 98021903 to Standard Mortgage Investors, secured by
Decatur real properties; principal balance at June 1, 2002, $1,796,960.64, final
payment due June 2008
Indebtedness of $5,000,000 to The Xxxx X. Xxxxxx Trust dated September 20, 1989
under Convertible Bridge Loan and Warrant Agreement dated July 12, 2001
Indebtedness of $3,250,000 to NeoPharm, Inc., under Promissory Note dated
December 20, 2001
Akorn (New Jersey), Inc.
None
SCHEDULE 7.4(a)
TRANSACTIONS WITH AFFILIATES
Same as Schedule 7.4(a) attached to the Credit Agreement
SCHEDULE 7.7
LIENS
Akorn, Inc.
1. Operating lease #8197-001 with National City Leasing Corporation
financing production equipment. Total acquisition cost of $3,811,028.93. Monthly
rent of $52,577.71 through December 26, 2007.
2. See Schedule 7.3.
Akron (New Jersey), Inc.
None
SCHEDULE 10.10
AUTHORIZED SIGNATURES
Akorn, Inc.
Xxxx X. Xxxxxx, Chief Executive Officer
Xxxxxxx X. Xxxxxxx, Vice President, Chief Financial Officer, Secretary and
Treasurer
Akron (New Jersey), Inc.
Xxxx X. Xxxxxx, Chief Executive Officer
Xxxxxxx X. Xxxxxxx, Vice President, Secretary and Treasurer
