Exhibit 10.27
EXECUTION COPY
PRE-NEGOTIATION AGREEMENT
THIS PRE-NEGOTIATION AGREEMENT, dated as of September 20, 2002 (as
modified, supplemented or amended from time to time, the "Agreement"), among
AKORN, INC., a corporation organized and existing under the laws of Louisiana
("Akorn"), and AKORN (NEW JERSEY), INC., a corporation organized and existing
under the laws of Illinois ("Akorn NJ" and, together with Akorn, each, a
"Borrower" and collectively, the "Borrowers"), and THE NORTHERN TRUST COMPANY, a
corporation organized and existing under the laws of Illinois (the "Lender");
W I T N E S S E T H:
WHEREAS, the obligations of the Borrowers, including, without
limitation, the obligation to pay principal, interest and other fees, costs and
expenses, are set forth in the Credit Agreement (as defined below) and the
agreements, documents and instruments executed in connection therewith
(collectively, together with this Agreement, the "Loan Documents"), including,
without limitation,
(i) Amended and Restated Credit Agreement, dated as of September
15, 1999, among the Borrowers and the Lender, as amended by
the First Amendment, dated as of December 28, 1999, among the
Borrowers and the Lender, the Second Amendment and Waiver,
dated as of February 15, 2001, among the Borrowers and the
Lender, the Third Amendment and Waiver, dated as of April 16,
2001, among the Borrowers and the Lender, the Fourth
Amendment, dated as of January 1, 2002, among the Borrowers
and the Lender, the Fifth Amendment, dated as of June 30,
2002, among the Borrowers and the Lender, and the Sixth
Amendment, dated as of July 31, 2002, among the Borrowers and
the Lender (collectively, the "Credit Agreement");
(ii) Security Agreement, dated as of December 29, 1997, among the
Borrowers and the Lender, as amended by the First Amendment to
Security Agreement, dated as of March 27, 1998, among the
Borrowers and the Lender (the "Security Agreement");
(iii) Intellectual Property Security Agreement, dated as of
September 15, 1999, by and between Akorn and the Lender (the
"Intellectual Property Security Agreement"); and
(iv) Junior Mortgage, dated as of March 21, 2001, by and between
Akorn and the Lender, recorded in the Office of the Recorder
of Deeds of Macon County, Illinois, on May 7, 2001, in Book
3056, Page 544 (the "Junior Mortgage").
WHEREAS, the Termination Date under and as defined in the Credit
Agreement having occurred and the Borrowers having failed to repay in full all
Obligations (as defined below) (the "Payment Default"), the Lender may exercise
unconditionally any or all of its rights and remedies under the Loan Documents
and applicable law to collect the Obligations, including, without limitation,
exercising its rights in and to the assets and property rights that secure
payment of the Obligations (collectively, as defined in the Loan Documents, the
"Collateral");
WHEREAS, the Borrowers have determined to consider, develop,
investigate, evaluate, analyze, negotiate and/or pursue one or more
restructuring proposals to address the Borrowers' current financial difficulties
(collectively, the "Proposed Restructuring") and, in connection therewith, (i)
the Borrowers desire to enter into discussions with the Lender regarding such
Proposed Restructuring and to make available to the Lender and its advisors
certain information concerning the Borrowers pursuant to this Agreement and (ii)
in order to provide the Borrowers with a reasonable period of time within which
to develop a plan to restructure the Obligations, the Borrowers have requested
that the Lender forbear for a time from exercising its rights and remedies under
the Loan Documents and applicable law;
WHEREAS, the Lender has agreed to the Borrowers' request, but only on
the terms set forth herein;
NOW THEREFORE, in consideration of the covenants, agreements and
acknowledgments contained herein, and for other good and valuable consideration,
the receipt and legal sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, each of the Borrowers and the Lender agree
as of the date the conditions specified in Section 5.1 are first satisfied (the
"Agreement Closing Date") as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. All capitalized terms used but not specifically
defined herein shall have the meaning ascribed thereto in the Credit Agreement.
As used in this Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to the singular and plural forms of the
terms defined):
"Advisors" shall have the meaning provided in Section 3.1(a).
"Agreement" shall have the meaning provided in the first
paragraph of this Agreement.
"Agreement Closing Date" shall have the meaning provided in
the recitals to this Agreement.
"Akorn" shall have the meaning provided in the first paragraph
of this Agreement.
"Akorn NJ" shall have the meaning provided in the first
paragraph of this Agreement.
"Balance Sheet" shall mean, for purposes of Section 6.7 and
for Borrowing Base calculations, the Borrowers' consolidated balance sheet as of
the end of the calendar month referred to therein.
"Bank Accounts" shall have the meaning provided in Section
10.3(b).
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
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"Borrowing Base" shall mean, for any date, the product of (a)
0.50 and (b) Net Trade Accounts Receivable on such date.
"Borrowing Condition Failure" shall occur when the Lender
gives the Borrowers written notice on any day on or after the Agreement Closing
Date (whether or not the Borrowers seek to incur a Tranche B Loan on such date)
that any condition specified in Sections 8.7(a), (b) or (c) cannot be or is not
satisfied on such date (provided that a Borrowing Condition Failure shall exist
on any date on which any bankruptcy proceeding in respect of either Borrower is
commenced).
"Borrowers" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrower Parties" shall have the meaning provided in Section
3.2.
"Budget" shall have the meaning provided in Section 6.6.
"Collateral" shall have the meaning provided in the second
recital to this Agreement.
"Communications" shall have the meaning provided in Section
3.2.
"Concentration Account" shall mean the Borrowers' bank
account, Account No. 86746, maintained at the offices of the Lender.
"Constituent Documents" shall mean, with respect to a
Borrower, such Borrower's articles of incorporation and bylaws, in each case as
in effect on the Agreement Closing Date and attached to the officer's
certificate of such Borrower delivered pursuant to Section 5.1(a)(ii).
"Consultant" shall have the meaning provided in Section 6.4.
"Consultant Agreement" shall have the meaning provided in
Section 6.4.
"Credit Agreement" shall have the meaning provided in the
first recital to this Agreement.
"Cumulative Gross Receipts" shall mean, as of the last day of
any month, the cumulative amount of Gross Receipts from September 1, 2002
through and including the last day of such month.
"Cumulative Net Receipts" shall mean, as of the last day of
any month, an amount equal to the cumulative amount of Net Receipts from
September 1, 2002 through and including the last day of such month.
"Current Outstanding Obligations" shall have the meaning
provided in Section 2.3.
"Existing Events" shall mean the Payment Default and all other
Events of Default that are listed on Schedule 1.1.
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"Forbearance Period" shall mean the period commencing on the
Agreement Closing Date and ending on the Forbearance Termination Date.
"Forbearance Termination Date" shall have the meaning provided
in Section 4.1.
"Gross Trade Accounts Receivable" shall mean, for any date,
the total amount of trade accounts receivable generated in the ordinary course
of business, net of payments in transit, as shown in the accounts receivable
aging report for such date generated by the Borrowers' XX Xxxxxxx accounting
system.
"Intellectual Property Security Agreement" shall have the
meaning provided in the first recital to this Agreement.
"Junior Mortgage" shall have the meaning provided in the first
recital to this Agreement.
"Lender" shall have the meaning provided in the first
paragraph of this Agreement.
"Lender Parties" shall have the meaning provided in Section
3.2.
"Loan Documents" shall have the meaning provided in the first
recital to this Agreement.
"Lock-Box Account" shall have the meaning provided in Section
10.3(d).
"Loans" shall mean the Tranche A Loans and the Tranche B
Loans. This definition amends and restates the definition contained in the
Credit Agreement for all purposes.
"Maximum Lawful Rate" shall have the meaning provided in
Section 8.5(d).
"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 6.10 of this
Agreement all determined on a cash basis. This definition amends and restates
the definition contained in the Credit Agreement for all purposes.
"Net Trade Accounts Receivable" shall, for any date, mean (a)
Gross Trade Accounts Receivable on such date less (b) the Reserves applicable to
such date.
"Notice of Tranche B Borrowing" shall have the meaning
provided in Section 8.1.
"Obligations" shall mean any and all obligations and
liabilities of the Borrowers to the Lender, of every kind and description,
direct and indirect, absolute and contingent, sole, joint, several, or joint and
several, primary or secondary, due or to become due, now existing or hereafter
arising, regardless of how they arise or by what agreement or instrument they
may be evidenced or whether evidenced by any agreement or instrument and
includes obligations to perform acts and refrain from taking actions as well as
obligations to pay money.
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"Participant" shall mean any Person from time to time having a
participation interest in the Obligations granted by the Lender.
"Payment Default" shall have the meaning provided in the
second recital to this Agreement.
"Proposed Restructuring" shall have the meaning provided in
the third recital to this Agreement.
"Related Parties" shall have the meaning provided in Section
11.6.
"Reserves" shall mean, for any day, an amount equal to the sum
of (a) allowance for doubtful accounts, (b) returns reserve, (c) discounts and
allowances, (d) chargeback reserve and (e) rebates reserve, all as determined
based on the corresponding amounts shown on the monthly Balance Sheet generated
by the Borrowers' XX Xxxxxxx accounting system for the last day of the month
most recently ended for which such report has been provided to the Lender;
provided, however, that if no financial statements have been provided for any
month by the close of business on the 15th day of the next succeeding month,
"Reserves" shall be set as 110% of the amount as determined for the last day of
the month most recently ended for which such financial statements have been
provided until such financial statements (or the next month's) are subsequently
provided.
"Security Agreement" shall have the meaning provided in the
first recital to this Agreement.
"SG&A" shall mean, for any period, sales, general and
administrative expense for Akorn and its subsidiaries during such period, as
determined on a consolidated basis in accordance with GAAP.
"Tranche A Loans" shall mean the aggregate amount of advances
made by the Lender under the Credit Agreement prior to the Agreement Closing
Date that are outstanding on such date. As of the opening of business on the
Agreement Closing Date, the outstanding principal amount of Tranche A Loans is
$39,200,000.00 (the "Existing Tranche A Amount").
"Tranche B Commitment" shall mean, at any time, the commitment
of the Lender to make Tranche B Loans during the Forbearance Period, which
commitment shall be equal to the lower of (a) the difference between (i) the
Existing Tranche A Amount and (ii) the aggregate amount of Tranche A Loans
outstanding at such time, (b) $1,750,000 and (c) the Borrowing Base at such
time.
"Tranche B Loans" shall have the meaning provided in Section
8.1.
"Tranche B Note" shall have the meaning provided in Section
8.2.
1.2 Principles of Construction.
(a) All references to sections, schedules and exhibits
are to sections, schedules and exhibits in or to this Agreement unless otherwise
specified. The words "hereof," "herein" and
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"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.
(b) All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
in the United States in effect on the Agreement Closing Date.
ARTICLE II
ACKNOWLEDGMENTS
2.1 Acknowledgment of Existing Events; Existing Loan Documents.
Each Borrower agrees and acknowledges that:
(a) the Obligations are valid and enforceable against
such Borrower in every respect and not subject to any offset, counterclaim,
cause of action, reduction or defense under any theory at law or in equity, and
all of the terms and conditions of the Loan Documents are binding and
enforceable upon such Borrower on their terms;
(b) the Existing Events have occurred and are continuing;
(c) the Existing Events are material in nature; and
(d) as a result of the Existing Events, the Lender is
entitled immediately and without further notice or declaration to any Borrower
to exercise all rights and remedies under the Loan Documents and applicable law.
2.2 Waiver of Notice. With respect to the Existing Events, to the
extent that any of the Loan Documents require notification to any Borrower of
(a) the existence of a default and an opportunity to cure such a default or (b)
the acceleration and maturity of the Obligations, such notices have been
properly given by the Lender or hereby are waived by each Borrower, and such
cure periods have lapsed or hereby are waived by each Borrower.
2.3 Acknowledgment of Current Outstanding Obligations. Each
Borrower agrees and acknowledges that, as of the Agreement Closing Date, the
Borrowers are jointly and severally indebted to the Lender under the Loan
Documents in an aggregate amount equal to the principal sum of $39,200,000.00,
plus accrued and unpaid interest thereon, plus the costs and expenses incurred
by the Lender, including, without limitation, reasonable attorneys' fees
incurred by the Lender in the negotiation and preparation of the Loan Documents,
this Agreement and the documents related hereto or in connection with the
Existing Events through the Agreement Closing Date (the foregoing amounts are
hereafter collectively referred to as the "Current Outstanding Obligations"),
which amounts are due and payable in full as of the Agreement Closing Date and
are not subject to any offset, reduction, counterclaim, cause of action or
defense of any kind. Nothing contained herein shall alter, amend, modify or
extinguish the joint and several obligation of each Borrower to repay the
Current Outstanding Obligations, and neither this Agreement nor any of the other
documents related hereto constitutes a novation or modification of any of the
Loan Documents.
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2.4 Acknowledgment of Liens and Priority. Each Borrower agrees and
acknowledges that pursuant to the Loan Documents and except as specifically set
forth therein, the Lender holds (a) first priority, perfected security interests
in and liens upon all of each Borrower's assets and property rights (other than
those specified in clause (b) below), wherever located, including assets now
owned or hereafter acquired, as more specifically described in the Security
Agreements and (b) second priority, perfected security interests in and liens
upon all of Akorn's right, title and interest in and to the real property
located in Macon County, State of Illinois, all improvements located thereon,
and all rents, profits and income generated thereby, as more specifically
described in the Junior Mortgage. Such security interests and liens secure all
of the Obligations now or hereafter incurred, including, without limitation, the
Current Outstanding Obligations and all other amounts now or hereafter owed by
the Borrowers to the Lender under any of the Loan Documents.
2.5 Reaffirmation of Security Interests. Each Borrower agrees and
acknowledges that all of the assets of the Borrowers pledged, assigned,
conveyed, mortgaged, hypothecated or transferred to the Lender pursuant to the
Loan Documents, including without limitation, the Collateral, constitute
collateral security for all of the Obligations. Each Borrower hereby reaffirms
its prior conveyance to the Lender of a continuing security interest in and lien
on the Collateral, including, without limitation, a security interest in and
lien upon any and all funds and/or monies of each Borrower.
ARTICLE III
COMMUNICATIONS
3.1 Professional Advisors. Each Borrower acknowledges that the
Lender has retained legal counsel and a financial advisor and may from time to
time retain Collateral review personnel and other consultants (collectively, the
"Advisors"). Each Borrower consents and agrees to (a) the payment of all
reasonable fees and expenses of the Advisors within five (5) Business Days of
receipt from the Lender of invoices in respect thereof which may be submitted at
any time after the Agreement Closing Date and (b) direct communication between
the Lender and the Advisors and any consultants engaged by either of the
Borrowers, including, without limitation, the Consultant. Each Borrower further
acknowledges and agrees that (i) the Advisors 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 Collateral, review the books and records of
the Borrowers and confer with the Borrowers personnel and any consultants
engaged by either of the Borrowers, including, without limitation the
Consultant, (ii) it shall cooperate with the Advisors and allow them to have
access to such Borrower's books and records, personnel and consultants
(including, without limitation the Consultant) and the Collateral, (iii) it
shall cause its officers and consultants to participate from time to time, and
with such frequency as the Lender deems appropriate, in personal and telephone
conferences with the Lender and the Advisors concerning the business and affairs
of the Borrowers.
3.2 Communications. Each Borrower has informed the Lender of its
desire to restructure the Obligations. In connection with any such
restructuring, all oral, telephonic, electronic, and written communications
between or among the Borrowers and their respective employees, officers,
directors, members, partners, shareholders, agents, representatives, advisors
and attorneys (collectively, the "Borrower Parties") and the Lender, the
Participants, the Advisors and their respective employees, officers, directors,
members, partner, shareholders, agents,
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representatives, advisors and attorneys (collectively, the "Lender Parties"),
including, without limitation, all conversations, discussions, meetings,
correspondence, memoranda or writings of any nature whatsoever related to or
arising in connection with the subject matter hereof (collectively, the
"Communications"), unless specifically agreed to in writing by the Borrowers and
the Lender, shall be considered to be for settlement purposes only and shall not
constitute or be used as an admission of any fact, circumstance, event or
condition, or the absence thereof, and shall not be material, relevant or
admissible in any proceedings at law or otherwise, or for any other purpose
whatsoever. The Communications will not effect or be deemed to effect or act as
a waiver, release, amendment or modification of any of the rights and
obligations of the Borrower Parties or the Lender Parties, or their respective
Affiliates, predecessors, successors or assigns, except as may be expressly
provided in an agreement recorded on all points of discussion, which agreement
is reduced to a writing satisfactory to and executed and delivered by all
required parties thereto. In connection therewith, each Borrower, on behalf of
all of the Borrower Parties and their Affiliates, predecessors, successors and
assigns, acknowledge that (a) the Communications do not evidence an agreement on
the part of Lender to modify or revise in any way the Obligations; (b) any
discussions, statements, questions or comments posed or made by the Lender
Parties or their Affiliates, during, related to, or in connection with any
Communications shall not be considered by the Borrower Parties to be a binding
commitment by the Lender or any of the Lender Parties to accede to any request
or proposals made by any of the Borrower Parties during any such discussions or
meetings; (c) even if any understanding in principle is reached, none of the
parties shall be legally bound until all required parties have duly executed and
delivered definitive documents evidencing such terms; and (d) the Communications
shall in no way invalidate, nullify or waive the rights and remedies of any of
the Lender Parties or signify their agreement to postpone the exercise of any of
their respective rights or remedies. These discussions may be lengthy and
complex and while the parties may reach agreement on one or more preliminary
matters that are part of the disputes and issues that the parties are trying to
resolve, none of the parties shall be bound by any agreement until said
agreement has been reduced to a written agreement and signed by each of the
required parties. Thus, no party can rely upon any understanding or agreement
which is not reduced to a written agreement and signed by the party against whom
enforcement is sought.
3.3 Third Party Communications and Discussions. Each Borrower
hereby (a) acknowledges and agrees that in the course of and in connection with
the development, negotiation and consummation of a restructuring of the
Obligations, it may be necessary for the Lender Parties to initiate, conduct and
maintain discussions and meetings with third parties involved with or having a
relationship with the Borrowers, including, without limitation, NASDAQ and any
Governmental Authority, and (b) waives any right of objection to such
discussions and meetings and any claim, counterclaim, defense, offset or cause
of action against any of the Lender Parties arising from, or in connection with,
those discussions and meetings.
ARTICLE IV
FORBEARANCE
4.1 Forbearance Period. Subject to compliance by each Borrower
with each of the terms and conditions of this Agreement, and without waiving the
Existing Events, the Lender hereby agrees to forbear from enforcing its rights
or remedies pursuant to the Loan Documents and applicable law (including,
without limitation, to make a demand for payment as a result of the
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Payment Default) as a result of the Existing Events from the Agreement Closing
Date until the earlier to occur of the following (as the case may be, the
"Forbearance Termination Date"): (i) January 3, 2003 and (ii) the date on which
a Borrowing Condition Failure occurs.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to Closing. The obligations of the Lender under
this Agreement are subject to:
(a) the receipt by the Lender of the following:
(i) this Agreement duly executed by each
Borrower and the Lender, together with a consent thereto duly executed
and delivered by each Participant;
(ii) Secretary Certificates certifying the
incumbency and signature of the officers of each Borrower executing
this Agreement and all other documents to be delivered by such Borrower
pursuant hereto, together with (x) evidence of the incumbency of such
Secretary, (y) the Constituent Documents of such Borrower and (z) a
Good Standing Certificate from such Borrower from its state of
incorporation, each in form and substance satisfactory to the Lender
and its counsel;
(iii) an opinion of special Illinois counsel to
the Borrowers, in form and substance satisfactory to counsel to the
Lender, as to non-contravention, required consents, approvals, and the
due authorization, execution, delivery and enforceability against each
Borrower of this Agreement;
(iv) evidence of the maintenance of insurance
coverage with respect to the Collateral, as required under the Loan
Documents, in form and substance satisfactory to the Lender;
(v) the Tranche B Note, duly executed and
delivered by each Borrower; and
(vi) any and all documents and instruments that
the Lender reasonably deems necessary to carry out the terms and
provisions of this Agreement;
(b) on the Agreement Closing Date, all representations
and warranties contained herein and in all other Loan Documents (and any
documents executed and delivered in connection therewith) shall be true and
correct in all material respects; and
(c) on the Agreement Closing Date, the Borrowers shall
deposit with the Lender an amount equal to $200,000.00, which shall be applied
against the Lender's expenses and costs (including, without limitation, fees and
expenses of the Advisors) incurred (i) through the Agreement Closing Date in
connection with the Existing Events, the Loan Documents, this Agreement, and all
documents executed and negotiations undertaken in connection with any of the
foregoing and (ii) thereafter in connection with the Loan Documents and the
Obligations.
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ARTICLE VI
COVENANTS
Each Borrower covenants and agrees that from the date hereof and until
the indefeasible satisfaction in full in cash of all Obligations and the
termination of the Loan Documents, unless the Lender shall otherwise consent in
writing:
6.1 Costs and Expenses. Each Borrower hereby reaffirms, to the
extent provided in the Loan Documents, its obligation under the Loan Documents
to reimburse the Lender in cash for, inter alia, all costs and expenses incurred
by the Lender in connection with the Obligations pursuant to the Loan Documents,
this Agreement, or the protection, perfection or insurance of the Lender's liens
upon and security interests on the Collateral, including, but not limited to,
(a) legal fees and expenses and (b) fees and expenses of the Advisors and/or
other professionals retained by or on behalf of the Lender or the Agent.
6.2 Existing Obligations.
(a) Unless otherwise specifically provided herein, each
Borrower shall fully comply with each of its respective obligations, conditions
and covenants set forth in the Loan Documents, it being understood that the
Borrowers' failure to remedy the Existing Events shall not constitute a default
of this covenant.
(b) Each Borrower shall fully comply with each of its
respective obligations and agreements under the Subordinated Loan Agreement and
each of its respective obligations and agreements under the Subordination and
Standby Agreement.
6.3 Cooperation with Lenders. Each Borrower's management, upon
reasonable advance notice, will be available to meet generally with, and answer
the questions of, the Lender Parties and each Borrower shall use its best
efforts to cause professionals employed by such Borrower to meet generally with
the Lender Parties, answer questions and provide such written materials as
reasonably may be requested, and in each case, other than documents, materials
or other information subject to a privilege under applicable law.
6.4 Consultant. The Borrowers shall, no later than September 27,
2002, retain a single crisis manager with experience in turnaround management
consulting from the list set forth on Schedule 6.4 (the "Consultant"), pursuant
to an agreement (the "Consultant Agreement") acceptable to the Lender in its
sole discretion setting forth the basis on which the Consultant will be
retained. Following the execution thereof, the Borrowers shall not amend,
modify, supplement or terminate the Consultant Agreement.
6.5 Restructuring Proposal. The Borrowers shall submit a
comprehensive proposal regarding the Proposed Restructuring to the Lender on or
before December 1, 2002.
6.6 Budget. The Borrowers shall submit to the Lender a proposed
weekly cash operating budget, in form and content satisfactory to the Lender and
approved by the Consultant, on or before October 18, 2002 (the "Budget").
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6.7 Additional Reporting Requirements. In addition to their
existing reporting requirements under the Credit Agreement, the Borrowers shall
deliver or cause to be delivered to the Lender the following information:
(a) Monthly Sales Pipeline Report. Within 15 calendar
days following the end of each calendar month, a report detailing the sales
activity by major customer type (sales channel) and salesperson, key accounts
summary of booked orders, top sales prospects with dollar values and estimated
probability of closing, in such form and content as acceptable to the Lender.
(b) Annual and Quarterly Sales and Marketing Plan. Within
15 calendar days following the end of each calendar quarter and year, a detailed
sales and marketing plan indicating key sales and marketing expectations by
customer type (sales channel) and product for such quarter or year, as the case
may be, in such form and content as acceptable to the Lender.
(c) Sales by Channel Report. Within 15 calendar days
following the end of each calendar month and quarter, a report detailing by
channel all sales, showing both unit volume and dollar amount thereof, during
such period and during the elapsed portion of the year ended with the last day
of such period, in such form and content as acceptable to the Lender.
(d) Key Product Analysis. Within 15 calendar days
following the end of each calendar month and quarter, a report detailing by
product all sales and gross margins during such period and during the elapsed
portion of the year ended with the last day of such period, in such form and
content as acceptable to the Lender.
(e) Accounts Receivable Reconciliation. Within 15
calendar days following the end of each calendar month, a statement which
reconciles the accounts receivable balance per the Balance Sheet with the
balance per the accounts receivable aging report generated by the Borrowers' XX
Xxxxxxx accounting system, which shall set forth in detail all Reserves and
showing the basis of calculation thereof, prepared for such month in such form
and content as acceptable to the Lender.
(f) Accounts Payable Reconciliation. Within 15 calendar
days following the end of each calendar month, a statement which reconciles the
accounts payable balance per the Balance Sheet with the accounts payable balance
shown in the accounts payable aging report generated by the Borrowers' XX
Xxxxxxx accounting system, prepared for such month in such form and content as
acceptable to the Lender.
(g) Inventory Reconciliation. Within 15 calendar days
following the end of each calendar month, a statement which reconciles inventory
balance per the Balance Sheet with the balance per the inventory detail
generated by the Borrowers' XX Xxxxxxx accounting system, prepared for such
month in such form and content as acceptable to the Lender.
(h) Priced Out Inventory Report. Within 15 calendar days
following the end of each calendar quarter, a detailed priced physical inventory
report by each individual product, which report shall (i) set forth unit volume,
product aging indication, prices and extended dollar value, (ii) be reconciled
to the general ledger and (iii) be prepared in such form and content as
acceptable to the Lender.
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(i) SG&A Variance Analysis. Within 15 calendar days
following the end of each calendar month, quarter and year, a report showing and
explaining the variance between actual SG&A expense during such period and the
amount of SG&A projected in the Budget for such period, in such form and content
as acceptable to the Lender.
(j) Manufacturing Variance Analysis. Within 15 calendar
days following the end of each calendar month, quarter and year, a report
detailing variances between actual results during such period and the
corresponding amounts projected in the Budget for such period, in such form and
content as acceptable to the Lender. Such report shall (i) detail volume
variances, price variances and unexplained variances (any variance not detected
in volume or price variances will require more in depth analysis) and (ii) also
include a "fixed cost variance analysis," which is an allocation analysis of
fixed costs that are uncontrollable by production floor operations.
(k) Daily Borrowing Base Computation. No later than 10:00
a.m. (Chicago time) on each Business Day on which the Borrowers incur no Tranche
B Loan, a computation of the Borrowing Base as in effect on such day (in the
form of Annex I to Exhibit A).
6.8 Dividends.
(a) Neither of the Borrowers will declare or pay any
dividends, or return any capital, to its stockholders or authorize or make any
other distribution, payment or delivery of property or cash to its stockholders
as such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any shares of any class of its capital stock
now or hereafter outstanding (or any options or warrants issued by such Borrower
with respect to its capital stock), or set aside any funds for any of the
foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise
acquire for a consideration any shares of any class of the capital stock of such
Borrower now or hereafter outstanding (or any options or warrants issued by such
Borrower with respect to its capital stock).
(b) Neither of the Borrowers will permit any of its
Subsidiaries to declare or pay any dividends, or return any capital, to its
stockholders or authorize or make any other distribution, payment or delivery of
property or cash to its stockholders as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for a consideration, any shares of
any class of its capital stock now or hereafter outstanding (or any options or
warrants issued by such Subsidiary with respect to its capital stock), or set
aside any funds for any of the foregoing purposes, or permit any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock of such Subsidiary now or hereafter outstanding
(or any options or warrants issued by such Subsidiary with respect to its
capital stock), except that any Subsidiary of any Borrower may pay dividends to
such Borrower or any Wholly-Owned Subsidiary of such Borrower.
6.9 Minimum Receipts. For the periods commencing on September 1,
2002, and ending on the last day of each of the months set forth below, the
Gross Receipts, Cumulative Gross Receipts, Net Receipts and Cumulative Net
Receipts of the Borrowers shall be not less than the amount set forth for such
month:
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--------------------------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
MONTH GROSS RECEIPTS GROSS RECEIPTS NET RECEIPTS NET RECEIPTS
--------------------------------------------------------------------------------------------
September, 2002 $3,800,000 $3,800,000 ($320,000) ($320,000)
October, 2002 $3,955,000 $7,750,000 ($180,000) ($253,000)
November, 2002 $3,895,000 $11,650,000 ($380,000) ($383,000)
December, 2002 $3,895,000 $15,550,000 $225,000 $91,000
The Borrowers acknowledge and agree that the amounts provided for in this clause
have been established at levels that are substantially lower than the 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.
6.10 Capital Expenditures. The Borrowers will not, and will not
permit any of their Subsidiaries to, make any expenditure for fixed or capital
assets without the prior written consent of the Lender at any time after the
Agreement Closing Date; provided, however, that after the Budget has been
received and approved by the Lender, the Lender's consent shall not be required
with respect to any such expenditures approved by the Consultant as provided for
in the Budget.
6.11 Accounting Practices. The Borrowers will not, and will not
permit their Subsidiaries, to make any changes in their accounting policies or
practices (including, without limitation, estimations used in calculating
reserves) after the Agreement Closing Date without the prior written consent of
the Lender.
6.12 Tax Refunds. Upon receipt of any amounts from any Governmental
Authority as a credit or refund for any Charges previously withheld or otherwise
paid, the Borrowers will hold all such amounts in trust for the benefit of the
Lender as collateral securing the Obligations and shall as promptly as possible,
but in any event within two Business Days, deliver all such amounts to the
Lender as repayment of Tranche A Loans.
ARTICLE VII
PAYMENTS
7.1 Payments. The Lender shall, and the Borrowers hereby
irrevocably authorize the Lender to, (a) on the Agreement Closing Date withdraw
all cash amounts on deposit (including arising from the liquidation of any cash
equivalent then on deposit and from the transfer on such date of cash from the
Lock-Box Account to the Concentration Account) and apply same to (i) the payment
of the $200,000 fee referred to in Section 5.1(c) and (ii) thereafter repay
outstanding Tranche A Loans and (b) on each Business Day thereafter, withdraw
all cash amounts on deposit in the Concentration Account (including any cash
transferred thereto on such date from the Lock-Box Account) and apply same to
(i) first, to all Obligations (other than principal of the Loans) then due and
payable, (ii) second, to the outstanding principal amount of all Tranche B Loans
and (iii) thereafter, to the outstanding principal amount of all Tranche A
Loans.
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ARTICLE VIII
TRANCHE B FACILITY
8.1 Tranche B Loans. Subject to the terms and conditions of this
Agreement and the Loan Documents, the Lender agrees to make advances (each, a
"Tranche B Loan" and, collectively, the "Tranche B Loans") to the Borrowers,
from time to time during the Forbearance Period, at such times and in such
amounts as the Borrowers may request, not to exceed in the aggregate at any one
time outstanding the Tranche B Commitment at such time. During such time, the
Borrowers may from time to time borrow, repay and reborrow under this Section
8.1. Each Tranche B Loan 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 10:00 a.m. (Chicago time) on the
Business Day of the proposed Tranche B Loan; provided, however, that any Tranche
B Loan requested shall be in a minimum amount of $100,000. Each such notice (a
"Notice of Tranche B Borrowing") shall be substantially in the form of Exhibit
A, co-signed by the Consultant, specifying therein the requested date and the
amount of such Tranche B Loan, and such other information as may be required by
Lender and shall be given in writing (by telecopy or overnight courier) or by
telephone (to the extent the Consultant is part of such telephonic notice)
confirmed immediately in writing if requested by the Lender. Lender shall be
entitled to rely upon, and shall be fully protected under this Agreement and the
Loan Documents in relying upon, any Notice of Tranche B Borrowing believed by
Lender to be genuine and to assume that each Person executing and delivering the
same was duly authorized.
8.2 Tranche B Note. Borrowers shall execute and deliver to the
Lender a note to evidence the Tranche B Loans, such note to be in the maximum
amount of the Tranche B Commitment, dated the date hereof and in form and
content acceptable to the Lender (the "Tranche B Note"). The Tranche B Note
shall represent the joint and several obligation of each Borrower to pay the
amount of the Tranche B Commitment or, if less, the aggregate unpaid principal
amount of all Tranche B Loans made by the Lender to the Borrowers with interest
thereon as prescribed in Section 8.5. The date and amount of each Tranche B Loan
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 Tranche B Loans shall be immediately due and payable on
the Forbearance Termination Date.
8.3 Designated Borrower. Each Borrower hereby irrevocably
designates Akorn as its sole agent for the purposes of issuing Notices of
Tranche B Borrowings and receiving notices and consents in respect of Tranche B
Loans.
8.4 Payments; Prepayment, Commitment Reduction.
(a) The Borrowers shall repay all outstanding principal
of the Tranche B Loans on the Forbearance Termination Date.
(b) On any date on which the sum of the aggregate
outstanding principal amount of the Tranche B Loans exceeds the Tranche B Loan
Commitment then in effect, the Borrowers shall repay Tranche B Loans in an
amount equal to such excess.
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(c) Borrowers shall have the right at any time to
voluntarily prepay all or part of the Tranche B Loans and permanently reduce or
terminate the Tranche B Commitment, and no prepayment fee, premium or penalty
shall be payable in connection with any such voluntary prepayment. Upon any such
prepayment and permanent reduction or termination of the Tranche B Commitment,
Borrowers' right to receive Tranche B Loans shall simultaneously terminate or be
permanently reduced, as the case may be.
8.5 Interest on Tranche B Loans.
(a) Borrowers shall pay interest to Lender, in arrears on
the last Business Day of each calendar month, based on the amounts outstanding
from time to time under the Tranche B Loans, at a rate equal to the sum of the
Prime Rate and 3.0% per annum.
(b) If any payment on the Tranche B 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 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 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 shall be determined each day based upon the Prime Rate
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.
(d) Notwithstanding anything to the contrary set forth in
this Section 8.5, if, at any time until payment in full of all of the
Obligations, the rate of interest payable in respect of the Trache B Loans
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 in
respect of the Tranche B Loans 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 Tranche B Loans 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 Agreement Closing Date as otherwise provided in
this Agreement. Thereafter, the interest rate payable hereunder shall be the
rate of interest provided in Sections 8.5(a) through (c) 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 8.5(d), 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
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applicable law, promptly apply such excess first to any interest due and not yet
paid hereunder in respect of the Tranche B Loans, then to the outstanding
principal of the Tranche B 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.
8.6 Application and Allocation of Payments. Lender is authorized
to, and at its option may, make or cause to be made Tranche B Loans on behalf of
the Borrowers for payment of all Fees, expenses, Charges, costs, principal,
interest, or other Obligations owing by any 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. At Lender's option and to the
extent permitted by applicable law, any advances so made shall be deemed Tranche
B Loans constituting part of the Tranche B Loans hereunder. 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 Loans as Lender may
deem advisable notwithstanding any previous entry by Lender upon the Loan
Account or any other books and records.
8.7 Conditions Precedent to Tranche B Borrowings. 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 Tranche B Loan, 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) Accuracy of Representations and Warranties. All of
each Borrowers' representations and warranties contained herein or in any of the
other Loan Documents shall be true and correct on and as of the Agreement
Closing Date and the date on which each such Tranche B Loan is made 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.
(b) No Material Adverse Change. Except for the Existing
Events, no Material Adverse Effect shall have occurred since the Agreement
Closing Date (including, without limitation, in respect of events or
circumstances that commenced prior to the Agreement Closing Date).
(c) No Default. Except for the Existing Events, no event
shall have occurred and be continuing, or would result from the making of any
Tranche B Loan, which constitutes or would constitute a Default or an Event of
Default.
The request and acceptance by any Borrower of the proceeds of any Tranche B Loan
shall be deemed to constitute, as of the date of such request or acceptance, a
representation and warranty by the Borrowers to the Lender that the conditions
in this Section 8.7 have been satisfied.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and as partial
consideration for the terms and conditions contained herein, each Borrower makes
the following representations and warranties to the Lender, each and all of
which shall survive the execution and delivery of this Agreement and all of the
other documents executed in connection herewith:
9.1 Organization and Location.
(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 Sate 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.
9.2 Corporate Power and Authority. This Agreement has been duly
authorized, executed and delivered by the Borrowers and constitutes the valid
and legally binding obligation 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 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.
9.3 Litigation.
(a) There is no litigation or administrative proceeding
pending or threatened to restrain or enjoin the transactions contemplated by
this Agreement or any of the other Loan 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 any of the
other Loan Documents.
(b) Except as disclosed in Schedule 9.3, there is no
litigation or administrative proceeding pending or threatened against either of
the Borrowers.
9.4 Identification and Location of Assets. Except as set forth on
Schedule 9.4, all of each Borrower's assets are the same and remain in the same
location(s) as reflected in the Loan Documents heretofore delivered to the
Lender.
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9.5 Financial Statements; Reporting.
(a) All balance sheets, reports, budgets,
reconciliations, accounts receivable reports, and other financial information
prepared for and supplied to the Lender with respect to any Borrower will be
prepared, if applicable, in conformity with GAAP, and will present fairly the
financial condition and results of operations for the period covered thereby.
Other financial information maintained in the ordinary course of any Borrower's
business that shall be requested by the Lender or the Advisors shall conform to
and be reflective of such Borrower's normal accounting procedures.
(b) Neither Borrower has any knowledge of any facts,
other than those already disclosed in writing to the Lender that materially
adversely affect or, in so far as can be foreseen, will materially adversely
affect any Borrower's ability to perform its obligations under this Agreement
and the Loan Documents. After the Agreement Closing Date, each Borrower will
notify the Lender of any facts which became known to such Borrower on or after
the Agreement Closing Date which may materially adversely affect any Borrower's
ability to perform its obligations under this Agreement and the Loan Documents.
9.6 No Untrue or Misleading Statements. Neither this Agreement nor
any other document executed or delivered by any Borrower in connection herewith
contains any untrue statement of a material fact or omits any material fact
necessary in order to make the statement made, in light of the circumstances
under which it was made, accurate.
9.7 No Events of Default. Each Borrower hereby reaffirms that
other than the Existing Events, no Default or Event of Default has occurred as
of the date hereof under any of the Loan Documents that would produce a Material
Adverse Effect.
9.8 Other Representations and Warranties. Each Borrower hereby
reaffirms all of its representations and warranties to the Lender contained in
the Loan Documents, and warrants that such representations and warranties, not
otherwise rendered untrue by the Existing Events as disclosed by the Borrowers
herein, are true and correct as of the date of this Agreement, provided however,
that to the extent any such representations and warranties refer to a Schedule,
Schedule 9.8 attached to this Agreement contains accurate and complete current
updates of the information contained in the corresponding Schedules attached to
the Credit Agreement.
ARTICLE X
DEFAULTS AND REMEDIES
10.1 Events of Default. It shall constitute an Event of Default
under the Credit Agreement, if either Borrower (i) fails to perform or observe
any covenant, term, agreement or condition in this Agreement or (ii) is in
violation of or non-compliance with any provision of this Agreement after the
expiry of any cure period specified thereto. Each Borrower specifically agrees
that, upon and at any time after the Forbearance Termination Date, all
Obligations shall be due in full and payable, and the Lender may, in its sole
discretion, without any prior notice to any Borrower, exercise or enforce any or
all of its rights and remedies under this Agreement, the other Loan Documents,
and/or applicable law, against any one or more of the Borrowers.
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10.2 Reservation of Rights. The Borrowers acknowledge and agree
that the Lender has made no agreement, and has given no assurances of any sort,
as to any forbearance by the Lender after the Forbearance Termination Date, and
the Borrowers understand, acknowledge and agree that the Lender will be entitled
to exercise any and all remedies under the Loan Documents after the Forbearance
Termination Date, if and to the extent that all of the Obligations under the
Loan Documents have not been fully and indefeasibly paid in cash and performed
as of the Forbearance Termination Date.
10.3 Collection and Deposit of Cash Receipts.
(a) The Lender hereby grants to the Borrowers the
authority to collect their accounts receivable during the Forbearance Period,
and will not, during the Forbearance Period, exercise its right under Section 7
of the Security Agreement to make direct collections from the Borrowers' account
debtors, but such grant of authority by the Lender to the Borrowers to collect
their accounts receivable shall be subject to the terms and conditions
hereinafter set forth in this Section 10.3. The authority granted to the
Borrowers by the Lender in this Section 10.3(a) to collect their accounts
receivable shall terminate at the end of the Forbearance Period.
(b) Except as provided in paragraph (e) of this Section
10.3, at all times on and after the date of this Agreement, (i) all cash
receipts received by either of the Borrowers, including, without limitation,
payments of accounts receivable, amounts previously deposited in the Lock-Box
Account, and proceeds of the loans under the Subordinated Loan Agreement,
whether by check or in any other form, shall be deposited by the Borrowers not
later than the first Business Day after the date or receipt, in the
Concentration Account; and (ii) the Borrowers shall have all of their cash and
investments (whether derived from collections of accounts receivable or other
sources) on deposit in accounts maintained with the Lender (all such accounts
with the Lender, including the Lock-Box Account, are hereinafter referred to as
the "Bank Accounts"). The Borrowers hereby acknowledge and reaffirm the grant to
the Lender of a security interest in the Bank Accounts as provided in the
Security Agreement.
(c) The Borrowers agree that they shall have no right to
receive, or be paid, any amounts deposited in the Concentration Account or the
Lock-Box Account. All amounts on deposit in the Lock-Box Account on the
Agreement Closing Date will be transferred to the Concentration Account on such
date and all amounts thereafter deposited in the Lock-Box Account will be
transferred to the Concentration Account on the date received. All cash in the
Concentration Account will be withdrawn by the Lender on each Business Day on
and after the Agreement Closing Date and applied as provided in Section 7.1. The
rights of the Lender to withdraw amounts from the Bank Accounts as specified in
Section 7.1 and/or in this Section 10.3 shall continue until all Obligations
have been repaid in full notwithstanding any termination or expiration of the
Forbearance Period.
(d) The Borrowers currently maintain a lockbox account
arrangement with the Lender for the purpose of receiving payment of accounts
receivable. From and after the date of this Agreement, such lockbox account
arrangement shall be mandatory and shall be used by the Borrowers for the
collection of all of their accounts receivable, except as otherwise permitted by
paragraph (e) below. The Borrowers shall instruct their account debtors to make
payment of their accounts directly to such lockbox account (the "Lock-Box
Account"), except as otherwise
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permitted by paragraph (e) below. The Borrowers hereby irrevocably designate,
make, constitute and appoint the Lender, and all persons designated by the
Lender, as the Borrowers' true and lawful attorney and agent-in-fact, and the
Lender, or the Lender's agent may, without notice to the Borrowers, endorse any
Borrower's name on any checks, notes, drafts or any other items of payment which
come into the possession of the Lender or under the Lender's control and at any
time and from time to time (including, without limitation, during the
Forbearance Period), apply such payment or proceeds to the Obligations of the
Borrowers under the Loan Documents as provided in Sections 7.1 and/or 10.3(c).
(e) Notwithstanding the foregoing provisions of this
Section 10.3, during the Forbearance Period, the Borrowers may maintain a bank
account at American National Bank and Trust Company of Chicago for the purpose
of processing credit card payments, provided that the balance on deposit in such
account shall not at any time be in excess of $150,000.
ARTICLE XI
MISCELLANEOUS
11.1 Continuing Effect. Except as amended hereby, all of the Loan
Documents shall remain in full force and effect and bind and inure to the
benefit of the parties thereto and are hereby ratified and confirmed.
11.2 Governing Law; Jurisdiction. This Agreement shall be governed
by and be construed and enforced in accordance with the laws of the State of
Illinois. Each Borrower hereby irrevocably submits to the jurisdiction of any
Illinois State or United States Federal Court sitting in Chicago over any action
or proceeding arising out of or relating to this Agreement, and each Borrower
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard or determined in such Illinois State or Federal Court.
As an alternative method of service, each Borrower also irrevocably consents to
the service of any and all process in any such action or proceeding by the
mailing of copies of such process to such Borrower at its address specified on
the signature page hereof. Each Borrower agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each Borrower further waives any objection to venue in any court referred to in
the first sentence of this Section 11.2 and any objection to an action or
proceeding in such court on the basis of forum non conveniens. Each Borrower
further agrees that any action or proceeding brought against the Lender shall be
brought only in a Illinois State or United States Federal Court sitting in
Chicago.
11.3 Cooperation; Other Documents. At all times following the
execution of this Agreement, each Borrower shall execute and deliver to the
Lender, or shall cause to be executed and delivered to the Lender, and shall do
or cause to be done all such other acts and things as the Lender may reasonably
deem to be necessary or desirable to assure the Lender of the benefit of this
Agreement and the documents comprising or relating to this Agreement. Each
Borrower will execute, deliver and file, within five (5) Business Days of
submission to such Borrower by the Lender or the Agent, any and all documents
reasonably necessary or convenient to maintain continuously perfected the first
priority liens and security interests of the Lender in the Collateral.
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11.4 Remedies Cumulative; No Waiver. The respective rights, powers
and remedies of the Lender under this Agreement are cumulative and not exclusive
of any right, power or remedy provided in the Loan Documents, by law or equity
and no failure or delay on the part of the Lender in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof, or the exercise of any other right, power or
remedy. Nothing contained in this Agreement or in any prior communications
between or among any of the Borrowers and/or the Lender shall constitute a
waiver or modification of any rights or remedies that the Lender may have under
the Loan Documents and applicable law, and the Lender expressly reserves and
preserves all of its rights and remedies under each of the Loan Documents.
11.5 Notices. Any notice given pursuant to this Agreement or
pursuant to any document comprising or relating to this Agreement or any of the
other Loan Documents shall be in writing, including telecopies. Notice given (i)
by telecopy shall be deemed to have been given and received when sent, (ii) by
overnight mail courier shall be deemed to have been given and received one (1)
Business Day after the date delivered to such overnight courier by the party
sending such notice, (iii) by mail shall be deemed to have been given and
received three (3) Business Days after the date deposited, when sent by first
class certified mail, postage prepaid, in each case addressed to the respective
address specified on the signature page hereof; provided that any notice given
to Akorn shall be deemed to be given to both Borrowers. A party may change its
address by giving written notice of the changed address to the other parties, as
specified herein.
11.6 Indemnification. Each Borrower jointly and severally agrees to
indemnify the Lender Parties and their respective Affiliates, successors and
assigns (collectively, the "Related Parties") and to hold them harmless from and
against any and all claims, losses and liabilities growing out of or resulting
from a breach of its obligations under this Agreement, except to the extent
determined by the final and nonappealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Related Party seeking indemnification.
11.7 RELEASE. EACH BORROWER ON BEHALF OF ITSELF AND ITS AFFILIATES,
SUBSIDIARIES, SUCCESSORS, ASSIGNS, PRINCIPALS, SHAREHOLDERS, BENEFICIARIES,
OFFICERS, MANAGERS, DIRECTORS, AGENTS, REPRESENTATIVES, ADVISORS, EMPLOYEES AND
ATTORNEYS, HEREBY JOINTLY AND SEVERALLY RELEASES, WAIVES AND FOREVER DISCHARGES
EACH OF THE LENDER, THE ADVISORS, AND THEIR RESPECTIVE AFFILIATES, SUBSIDIARIES,
SUCCESSORS, ASSIGNS, PRINCIPALS, SHAREHOLDERS, BENEFICIARIES, OFFICERS,
MANAGERS, DIRECTORS, AGENTS, REPRESENTATIVES, ADVISORS, EMPLOYEES AND ATTORNEYS
OF, FROM, AND WITH RESPECT TO ANY AND ALL MANNER OF ACTIONS, CAUSES OF ACTIONS,
SUITS, DISPUTES, CLAIMS, COUNTERCLAIMS AND/OR LIABILITIES, CROSS CLAIMS,
DEFENSES THAT ARE KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, PAST OR PRESENT,
ASSERTED OR UNASSERTED, CONTINGENT OR LIQUIDATED, WHETHER OR NOT WELL FOUNDED IN
FACT OR LAW, WHETHER IN CONTRACT, IN TORT OR OTHERWISE, AT LAW OR IN EQUITY,
BASED UPON, RELATING TO OR ARISING OUT OF ANY AND ALL TRANSACTIONS,
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RELATIONSHIPS OR DEALINGS WITH OR LOANS MADE TO THE BORROWERS PURSUANT TO THE
LOAN DOCUMENTS PRIOR TO THE DATE HEREOF.
11.8 Survival of Representations and Warranties. All
representations and warranties of each Borrower contained in this Agreement and
in all other documents and instruments executed in connection herewith or
otherwise relating to this Agreement shall survive the execution of this
Agreement and are material and have been or will be relied upon by the Lender,
notwithstanding any investigation made by any person, entity or organization on
the Lender's behalf. No implied representations or warranties are created or
arise as a result of this Agreement or the documents comprising or relating to
this Agreement.
11.9 Headings. The headings and underscoring of articles, sections
and clauses have been included herein for convenience only and shall not be
considered in interpreting this Agreement.
11.10 Integration. This Agreement and all documents and instruments
executed in connection herewith or otherwise relating to this Agreement,
including, without limitation, the Loan Documents, constitute the sole agreement
of the parties with respect to the subject matter hereof and thereof and
supersede all oral negotiations and prior writings with respect to the subject
matter hereof and thereof.
11.11 Amendment and Waiver. No amendment of this Agreement, and no
waiver, discharge or termination of any one or more of the provisions thereof,
shall be effective unless set forth in writing and signed by all of the parties
hereto.
11.12 Successors and Assigns. This Agreement (a) shall be binding
upon each of the Borrowers and the Lender and upon their respective successors
and assigns and (b) shall inure to the benefit of each of the Borrowers and the
Lender; provided, however, that neither Borrower may assign any rights hereunder
or any interest herein without obtaining the prior written consent of the
Lender, and any such assignment or attempted assignment shall be void and of no
effect with respect to the Lender.
11.13 Severability of Provisions. Any provision of this Agreement
that is held to be inoperative, unenforceable, void or invalid in any
jurisdiction shall, as to that jurisdiction, be ineffective, unenforceable, void
or invalid without affecting the remaining provisions in that jurisdiction or
the operation, enforceability or validity of that provision in any other
jurisdiction, and to this end the provisions of this Agreement are declared to
be severable.
11.14 Conflicting Provisions. To the extent that any of the terms in
this Agreement contradict any of the terms contained in any of the Loan
Documents including, but not limited to, the Credit Agreement, the terms of this
Agreement shall control.
11.15 Joint and Several Liability. The obligations and liabilities
of the Borrowers hereunder are joint and several.
11.16 Counterparts; Effectiveness. This Agreement may be executed in
any number of counterparts and by the different parties on separate
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute one and the same
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Agreement. This Agreement shall be deemed to have been executed and delivered
when the Lender has received counterparts hereof executed by all parties listed
on the signature pages hereto.
11.17 Time of Essence. Time is of the essence of this Agreement and
each of the provisions hereof.
11.18 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE LENDER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
DOCUMENTS OR INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH
(INCLUDING WITHOUT LIMITATION, THE TRANCHE B NOTE), OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY
RELATING HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
LENDER TO ENTER INTO THIS AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
Address for Notices: AKORN, INC.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Chief Financial Officer By__________________________________
Telecopier No.: (000) 000-0000 Name:_____________________________
Telephone No.: (000) 000-0000 Title:____________________________
AKORN (NEW JERSEY), INC.
By__________________________________
Name:_____________________________
Title:____________________________
00 Xxxxx XxXxxxx Xxxxxx THE NORTHERN TRUST COMPANY
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000 By__________________________________
Name:_____________________________
With a copy to Title:____________________________
White & Case LLP
000 X. Xxxxxxxx Xxxx., Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
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Schedule 1.1
Existing Events (other than the Payment Default)
None.
Schedule 6.4
Consultants
Xxxxx Xxxxxxx
AEG Restructuring Services
0000 Xxxxx Xxx Xxxx
Xxxxx 000
Xxxxxxxx Xxxx XX 00000
Telephone: 000-000-0000 (direct line: 847-579-5007)
Xxxxxx X. Rock
Principal
AlixPartners LLC
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Telephone: 000-000-0000
Xxxxxx Xxxxx
Xxxxxx Xxxxxxxx
Xxxxx, Xxxxxxxx & White LLC
0000 Xxx Xxxxxxx Xx
Xxxxx 000
Xxxxxx XX 00000
Telephone: 000-000-0000
Schedule 9.3
Litigation
1. Matters relating to 483 Warning Letter issued to Akorn, Inc. by the
United States Food and Drug Administration.
2. Investigation by the United States Securities and Exchange Commission
described in the letter dated March 27, 2003.
3. Investigation by the United States Drug Enforcement Administration
described in the letter dated March 6, 2002 from the United States
Attorney for the Central District of Illinois.
Schedule 9.4
Location of Assets
No change.
Schedule 9.8
Update of Existing Schedules
No change.
EXHIBIT A
NOTICE OF TRANCHE B BORROWING
[Date]
The Northern Trust Company
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Ladies and Gentlemen:
The undersigned, Akorn, Inc. (the "Designated Borrower"), refers to the
Pre-Negotiation Agreement, dated as of September 13, 2002 (as modified,
supplemented or amended from time to time, the "Agreement," the terms defined
therein being used herein as therein defined), among the Designated Borrower,
Akorn (New Jersey), Inc., a corporation organized and existing under the laws of
Illinois, and The Northern Trust Company, and hereby gives notice, irrevocably,
pursuant to Section 8.1 of the Agreement, that the undersigned requests a
Tranche B Loan under the Agreement, and in that connection sets forth below the
information relating to such borrowing (the "Proposed Borrowing"):
(a) The Business Day of the Proposed Borrowing is _____ ___, 20__;
and
(b) The aggregate principal amount of the Proposed Borrowing is
$________.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in
Section 9 of the Agreement are true and correct in all material
respects, before and after giving effect to the Proposed Borrowing and
to the application of the proceeds thereof, as though made on and as of
such date;
(B) no Default or Event of Default has occurred and is
continuing, or would result from such Proposed Borrowing or from the
application of the proceeds thereof; and
(C) the Borrowing Base on and as of the date of the
Proposed Borrowing is $_______, and attached hereto as Annex I are true
and correct calculations showing in reasonable detail the basis of
calculation thereof.
Very truly yours,
AKORN, INC.
By___________________________
Name:
Title:
Exhibit A
Annex I
Borrowing Base Calculations
Gross Trade Accounts Receivables
Less Payments in transit
Less Reserves:
Allowance for doubtful accounts
Returns Reserve
Discounts & Allowances
Chargeback Reserve
Rebates Reserve
Equals Net Trade Accounts Receivable
Multiplied by 0.50%
Equals Borrowing Base
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