Exhibit 10.24
FOURTH AMENDMENT
THIS FOURTH AMENDMENT dated as of January 1, 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; and
(xv) Second Amendment to Forbearance Agreement dated as of February
21, 2002, 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 following new defined terms are hereby 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 being added to the Credit
Agreement by this Agreement. Unless otherwise defined or the context otherwise,
all financial and accounting terms used in this Agreement shall be defined in
accordance with GAAP.
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
"January 2, 2002". The definition of the term "Termination Date" in Section 1.1
of the Credit Agreement, as previously modified and
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amended, is hereby further modified and amended by changing the date appearing
therein from "January 1, 2002" to "June 30, 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 Loan 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 $44,800,000.
(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) In addition to the other payments required by this
clause (b), within three Business Days after the date on which
Borrowers receive a refund of federal income taxes in respect
of the tax year ended December 31, 2001, Borrowers shall make
a payment on the principal of the Loans in the amount of
$5,580,000; provided, however, that if Borrowers fail to file
their federal income tax return for such tax year on or before
April 15, 2002, such principal payment shall be due and
payable on or before the earlier of June 15, 2002, and the
date on which Borrowers receive a refund of federal income
taxes in respect of such tax year.
(ii) In addition to the other payments required by this
clause (b), within three Business Days after the date on the
date on which Borrowers receive a refund of federal income
taxes in respect of the tax year ended December 31 2001,
Borrowers shall make a payment on the principal of the Loans
in an amount equal to the positive difference, if any, between
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the amount of such tax refund and the amount of any payment on
the principal of the Loans made pursuant to the provisions of
subparagraph (i) of this clause (b).
(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 Borrowers or under
any contract under which either of Borrowers
manufactures product for any third party.
(B) As of June 1, 2002, Borrowers have not issued
a written request to the FDA, with a copy to the Lender,
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, there is a
cessation in the public trading of the stock of Akorn,
other than as a result of a cessation of trading
generally in the United States securities markets.
(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) As of June 15, 2002, Borrowers have not
entered into an engagement letter in a form acceptable
to the Lender in its reasonable judgment, with an
investment banker acceptable to the Lender in its
reasonable judgment, for the underwriting of an offering
of equity securities (a "Qualifying Underwriting
Engagement") (it being understood that if the Lender
does not object to a proposed engagement letter with a
proposed underwriter within 10 Business Days after
receipt of such proposed engagement letter, including
the name of the proposed
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underwriter, the Lender shall be deemed to have approved
such proposed engagement letter and underwriter).
(H) At any time after June 15, 2002, Borrowers do
not have a Qualifying Underwriting Engagement in effect.
(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
the Termination Date or the earlier occurrence of any Event of Default.
(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.
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.
Section 8. Lender's Consultant and Personnel. The Borrowers
understand that the Lender may from time to time engage consultants to review
the accounting and business practices of the Borrowers and that the Lender's
collateral evaluation personnel will from time to time, and not less often than
monthly, 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
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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 Credit Agreement is hereby modified and
amended to incorporate the 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.
(b) Section 7.3 of the Credit Agreement is hereby 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.
Section 10. Amendments to Section 7.10 of Credit Agreement. Section
7.10 of the Credit Agreement, as previously modified and amended, is hereby
modified and amended by deleting clauses (a) through (f) thereof. New clauses
(g) and (h) are added to Section 7.10 of the Credit Agreement by Sections 11 and
12 of this Agreement, respectively.
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.
(b) The following new clause (g) is hereby 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 following new defined terms are hereby
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 following new clause (h) is hereby added to Section 7.10 of
the Credit Agreement:
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(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 Receipts For
Period Period
January 1, 2002, January 1, 2002,
through Last through Last Day
Day of Month Not of Month Not
Month, 2002 Less Than Less Than
March $11,500,000 $0
April $15,500,000 $430,000
May $19,400,000 $525,000
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.
Section 14. Capital Expenditures. The Borrowers together in the
aggregate shall not make capital expenditures of more than $4,735,000 during the
first six months of the calendar year 2002, which capital expenditures shall
consist only of the following:
(i) Capital expenditures in an aggregate amount not exceeding
$1,129,000 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
$182,000 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 $2,600,000, 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
$149,000 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
$75,000.
Section 7.18 of the Credit Agreement is hereby modified and amended to include
the foregoing provisions of this Section.
Section 15. Regulatory Matters. Section 6.14 of the Credit Agreement
is hereby modified and amended by adding the following provision at the end
thereof:
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Borrowers shall provide the Lender with copies of 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, in each
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
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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.
(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 Day 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 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, which reports shall be prepared in
such detail and form, and shall contain such information, as the Lender
shall from time to time require.
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Section 17. Security Interests. The Credit Agreement is hereby
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. Financing Fees. On or before the date of the execution
and delivery of this Agreement, and as a condition to the agreements of the
Lender contained herein, the Borrowers shall pay to the Lender (i) the financing
fee in the amount of $168,750 payable under Section 17 of the Forbearance
Agreement, and (ii) an additional non-refundable financing fee in the amount of
$84,375.
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.
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(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.
(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
- 11 -
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 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.
- 12 -
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]
- 13 -
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
- 14 -
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 Monthly 15th
progress in NDA and ANDA pipelines, to
include minutes from the New Product
Committee
EXHIBIT C
LITIGATION AND ADMINISTRATIVE PROCEEDINGS
1. Apex Communications, Inc. v. Akorn Ophthalmics, Inc., Docket No.
BER-L-506-00, Superior Court of New Jersey
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 Xxxx Xxxx, President, COO Executed
May 11, 2001 Terms of Employment
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. X. Xxxxx Human Rights Age
Discrimination Case #1998SA0338.
This matter has no material dollar
exposure.
Xxxxxx Xxxxxx City of Decatur Human
Relations Commission, Race
Discrimination Charge # 01-0118. This
matter has no material dollar exposure.
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 19,470,815
2. Change 687,032 to 618,159
3. Change 3,703,581 to 1,660,251
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 March 22, 2002 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 Federal Insurance Company Liability
Policy #8153-14-68
General aggregate $5,000,000
Retention $150,000
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 December 31, 2001, $1,916,601.55,
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.
Xxxxxxx Xxxx, President and Chief Operating Officer
Xxxx X. Xxxxxx, Chief Executive Officer
Xxxxxxx X. Xxxxxxx, Vice President, Chief Financial Officer, Secretary and
Treasurer
Akron (New Jersey), Inc.
Xxxxxxx Xxxx, President
Xxxxxxx X. Xxxxxxx, Vice President, Secretary and Treasurer
