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Exhibit 10.19
FOURTH AMENDMENT TO LOAN AGREEMENT
This Fourth Amendment to Loan Agreement, dated as of June 29, 2001
(this "Agreement"), is by and among aaiPHARMA INC., formerly known as Applied
Analytical Industries, Inc., a Delaware corporation having its principal place
of business in Wilmington, North Carolina (the "U.S. Borrower"), AAI APPLIED
ANALYTICAL INDUSTRIES DEUTSCHLAND GmbH & CO., KG, a German corporation (the
"German Borrower" and, together with the U.S. Borrower, the "Borrowers"), each
of the subsidiaries of the U.S. Borrower identified on the signature pages
hereof (the "Guarantors"), and BANK OF AMERICA, N.A., a national banking
association (the "Bank").
RECITALS:
A. Pursuant to that certain Amended and Restated Loan Agreement dated
as of November 30, 1999, as amended by a First Amendment to Loan Agreement dated
May 31, 2000, a Second Amendment to Loan Agreement dated August 31, 2000 and a
Third Amendment to Loan Agreement dated as of November 30, 2000 (the "Existing
Loan Agreement"), the Bank has extended a revolving credit facility to the U.S.
Borrower in the amount of up to $25,000,000, has made a term loan to the U.S.
Borrower in the principal amount of $5,250,000 and has extended a revolving
credit facility to the German Borrower in the principal amount of up to DM
5,000,000.
B. The Borrowers have requested that the Bank amend the Existing Loan
Agreement to, among other things, provide a letter of credit to be issued for
the account of NeoSan Pharmaceuticals, Inc.
C. The Bank is willing to make such letter of credit available for the
account of NeoSan Pharmaceuticals, Inc. and to make other amendments based upon
and subject to the terms and conditions specified in this Agreement.
NOW, THEREFORE, based upon the foregoing, and for good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged, the
parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Terms defined in the recitals of this
Agreement shall have the meanings ascribed to them therein. Unless otherwise
defined herein or the context otherwise requires, the following terms used in
this Agreement have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):
"Amended Loan Agreement" means the Existing Loan Agreement as
amended hereby.
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"Effective Date" shall have the meaning ascribed to such term
in Subpart 3.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement have the meanings
provided in the Amended Loan Agreement.
PART II
AMENDMENTS TO EXISTING LOAN AGREEMENT
Subject to satisfaction of the conditions specified in Part III of this
Agreement, the Existing Loan Agreement is hereby amended in accordance with this
Part II. Except as so amended, the Existing Loan Agreement, the Notes and the
other Loan Documents shall continue in full force and effect.
SUBPART 2.1. New Definitions. Section 1.1 of the Existing Loan
Agreement is amended by adding the following definitions to read as follows:
"Letter of Credit" shall have the meaning ascribed to such
term in Section 2.08 hereof.
"LOC Documents" means the Letter of Credit, any amendments
thereto, any documents delivered in connection therewith, any
application therefor, and any agreements, instruments, guarantees or
other documents (whether general in application or applicable only to
the Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral
security for such obligations.
SUBPART 2.2. Amended Definitions. The definitions for "Borrowing Base",
"Funded Debt", "Maturity Date" and "Obligations" in Section 1.1 of the Existing
Loan Agreement are hereby amended and restated in their entirety as follows:
"Borrowing Base" means, as of any day, the sum of (a) 80% of
Eligible Receivables plus (b) the lesser of (i) 75% of Fixed Asset
Value and (ii) $26,000,000 minus (c) all indebtedness for borrowed
money, howsoever evidenced, or its equivalent (including but not
limited to leases required to be capitalized under Generally Accepted
Accounting Principles and letters of credit), other than Revolving
Loans outstanding hereunder, incurred by, or issued for the benefit of,
the Credit Parties and the Letter of Credit; provided that (A) in the
case of clauses (a) and (b)(i) above, such amounts shall be as set
forth in the most recent Borrowing Base Certificate delivered to the
Bank in accordance with the terms of Section 6.01(b)(3) and (B) the
advance rates set forth above shall be subject to appraisals conducted
from time to time by the Bank and may be increased or decreased by the
Bank at any time and from time to time in the exercise of its
reasonable credit judgment (it being understood that the U.S. Borrower
hereby consents to any such increases or decreases and acknowledges
that decreasing the
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advance rates or increasing the reserves may limit or restrict the
availability of Revolving Loans requested by the U.S. Borrower);
"Funded Debt" means, without duplication, (a) all outstanding
obligations under the tax retention operating lease (or similar
agreements) entered into with the Bank or any of its affiliates and (b)
all interest bearing obligations of the U.S. Borrower and its
consolidated Subsidiaries including, without limitation, all
obligations evidenced by promissory notes or other similar contracts
but excluding (i) such items as trade payables and accruals and (ii)
the Letter of Credit.
"Maturity Date" means (a) with respect to the Revolving Loans,
September 30, 2001 and (b) with respect to the Term Loan, June 30,
2001.
"Obligations" means a collective reference to (a) all
obligations of the U.S. Borrower to the Bank in connection with the
Revolving Loans, the Term Loan and the Letter of Credit and (b) all
German Borrower Obligations;
SUBPART 2.3. Revolving Loans. Section 2.01 of the Existing Credit
Agreement is amended in its entirety to read as follows:
2.01 REVOLVING LOANS.
Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, the Bank agrees to
make Revolving Loans to the U.S. Borrower, at any time and from time to
time until the Maturity Date, in an aggregate principal amount at any
time outstanding not to exceed the lesser of (i) TWENTY-SEVEN MILLION
TWO HUNDRED THOUSAND DOLLARS ($27,200,000) minus the face amount of the
Letter of Credit (the "Revolving Loan Committed Amount") and (ii) the
Borrowing Base plus $6,000,000, for purposes of financing the U.S.
Borrower's working capital needs. The U.S. Borrower may borrow, repay
and reborrow hereunder on or after the date hereof and prior to the
Maturity Date, subject to the terms, provisions and limitations set
forth herein. The outstanding principal balance of the Revolving Loans,
together with all accrued but unpaid interest, fees and other charges,
shall be due and payable in full on the Maturity Date.
SUBPART 2.4. Utilization Fees. Section 2.04(b) of the Existing Credit
Agreement is amended in its entirety to read as follows:
(b) The U.S. Borrower agrees to pay the bank a utilization fee (the
"Utilization Fee") in an amount equal to, for the four fiscal quarter
period ending June 30, 2001, 1.00% of the portion of Funded Debt as of
June 30, 2001 that is greater than the Target Funded Debt Level for
such period. The utilization fee for the period ending June 30, 2001
shall be deemed earned as of July 15, 2001 and due and payable on
August 31, 2001.
SUBPART 2.5. Letter of Credit. A new Section 2.08 is added to the
Existing Loan Agreement to read as follows:
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2.08 LETTER OF CREDIT.
(a) Issuance. The Bank has issued a letter of credit for the
account of NeoSan Pharmaceuticals, Inc., a Subsidiary of the
U.S. Borrower, and for the benefit of AstraZeneca AB, in the
face amount of Two Million Six Hundred Twenty-Five Thousand
Dollars ($2,625,000.00) (the "Letter of Credit").
Notwithstanding the definition of Maturity Date, the Letter of
Credit shall expire on the earlier of (i) September 30, 2001
or (ii) receipt by the Bank of notice that either (A) that
certain Asset Purchase Agreement (the "Purchase Agreement")
between AstraZeneca AB and NeoSan Pharmaceuticals, Inc. (the
"Buyer") dated as of June ___, 2001 has been terminated or (B)
Buyer has paid the Base Purchase Price pursuant to the
Purchase Agreement. The Letter of Credit shall comply with the
related LOC Documents.
(b) Reimbursement. In the event of any drawing under the Letter of
Credit, the Bank will promptly notify the U.S. Borrower. The
U.S. Borrower shall reimburse the Bank on the day the Bank
pays a drawing under the Letter of Credit in same day funds.
The U.S. Borrower may request a Revolving Loan to satisfy its
obligations under this Section 2.08(b) if such request is
otherwise in compliance with the terms hereof. If the U.S.
Borrower shall fail to reimburse the Bank as provided
hereinabove, the unreimbursed amount of such drawing shall
bear interest at a per annum rate equal to the Prime Rate plus
two percent (2%) and shall constitute an Event of Default. The
U.S. Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances
irrespective of any rights of set-off, counterclaim or defense
to payment the U.S. Borrower may claim or have against the
Bank, the beneficiary of the Letter of Credit or any other
Person, including, without limitation, any defense based on
any failure of the U.S. Borrower or NeoSan Pharmaceuticals,
Inc. to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit.
(c) Indemnification of Bank.
(i) In addition to its other obligations under this
Loan Agreement, the U.S. Borrower hereby agrees to protect,
indemnify, pay and save the Bank harmless from and against any
and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees)
that the Bank may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of the Letter of
Credit or (B) the failure of the Bank to honor the drawing
under the Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure
or de facto government or governmental authority (all such
acts or omissions, herein called "Government Acts").
(ii) As between the U.S. Borrower and the Bank, the
U.S. Borrower shall assume all risks of the acts, omissions or
misuse of the Letter of Credit by the beneficiary thereof. The
Bank shall not be responsible: (A) for the form,
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validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the
application for and issuance of the Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign the Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for failure of the beneficiary
of the Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit; (D) for
errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) for errors in
interpretation of technical terms; (F) for any loss or delay
in the transmission or otherwise of any document required in
order to make a drawing under the Letter of Credit or of the
proceeds thereof; and (G) for any consequences arising from
causes beyond the control of the Bank, including, without
limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of the Bank's rights or
powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Bank, under or in
connection with the Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put
the Bank under any resulting liability to the U.S. Borrower.
It is the intention of the parties that this Credit Agreement
shall be construed and applied to protect and indemnify the
Bank against any and all risks involved in the issuance of the
Letter of Credit, all of which risks are hereby assumed by the
U.S. Borrower, including, without limitation, any and all
risks of the acts or omissions, whether rightful or wrongful,
of any present or future Government Acts. The Bank shall not,
in any way, be liable for any failure by the Bank or anyone
else to pay any drawing under the Letter of Credit as a result
of any Government Acts or any other cause beyond the control
of the Bank.
(iv) Nothing in this Section 2.08 is intended to
limit the reimbursement obligation of the U.S. Borrower
contained herein. The obligations of the U.S. Borrower under
this Section 2.08 shall survive the termination of this Loan
Agreement. No act or omissions of any current or prior
beneficiary of the Letter of Credit shall in any way affect or
impair the rights of the Bank to enforce any right, power or
benefit under this Loan Agreement.
(v) Notwithstanding anything herein to the contrary,
the U.S. Borrower shall not be required to indemnify the Bank
for the Bank's gross negligence or willful misconduct.
(d) Fees. In consideration of the Bank issuing the Letter of
Credit, the U.S. Borrower shall pay to the Bank a fee (the
"Letter of Credit Fee") equal to 2.25% per annum for the
maximum stated duration of the Letter of Credit (i.e., 90
days). The Letter of Credit Fee for the Letter of Credit shall
be payable in advance on the date of
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the issuance of the Letter of Credit. The Letter of Credit Fee
shall be based on the face amount of the Letter of Credit. In
addition to the Letter of Credit Fee, the U.S. Borrower agrees
to pay to the Bank (i) such fronting and negotiation fees as
may be mutually agreed upon by the Bank and the U.S. Borrower
from time to time and (ii) customary charges of the Bank with
respect to the issuance, amendment, transfer, administration,
cancellation and conversion of, and drawings under, the Letter
of Credit.
(e) NeoSan Pharmaceuticals, Inc. as Account Party. The Letter of
Credit contains a statement that such Letter of Credit is
issued for the account of NeoSan Pharmaceuticals, Inc.
Notwithstanding anything else to the contrary set forth in
this Loan Agreement or the LOC Documents, the U.S. Borrower
shall be the actual account party for all purposes of this
Loan Agreement for such Letter of Credit and the statement
regarding NeoSan Pharmaceuticals, Inc. as account party shall
not affect the U.S. Borrower's reimbursement obligations
hereunder with respect to such Letter of Credit.
(f) Conflict with LOC Documents. In the event of any conflict
between this Loan Agreement and any LOC Document (including
the letter of credit application), this Loan Agreement shall
control.
SUBPART 2.6. Funded Debt to EBITDA. Section 6.01(p)(iii) of the
Existing Credit Agreement is amended in its entirety to read as follows:
(iii) the U.S. Borrower shall maintain a ratio of Funded Debt
to EBITDA computed as of the last day of each fiscal quarter
(commencing with the fiscal quarter ending June 30, 2001) of
(A) with respect to the fiscal quarter ending June 30, 2001,
not greater than 3.75 to 1.00, and (B) with respect to each
fiscal quarter thereafter, not greater than 3.15 to 1.00.; and
SUBPART 2.7. Term. Section 9.11 of the Existing Credit Agreement is
amended in its entirety to read as follows:
The term of this Loan Agreement shall be until (i) the Bank no longer
is obligated to lend under the Commitments, (ii) the Bank has received payment
in full of the unpaid principal and interest of the Notes, and (iii) the Letter
of Credit has expired and all amounts outstanding in connection therewith have
been paid in full.
PART III
CONSENT
SUBPART 3.1. Merger. The Bank hereby consents to the merger of Kansas
City Analytical Services, Inc. ("KCAS") into the U.S. Borrower, notwithstanding
anything in Sections 7.01(d) or (g) of the Existing Loan Agreement to the
contrary, provided that (i) the U.S. Borrower is the surviving corporation; (ii)
the U.S. Borrower will give the Bank notice of such
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merger prior to such merger; and (iii) the U.S. Borrower shall promptly provide
to the Bank any executed documents that the Bank may reasonably request in
connection with such merger and in connection with the continued perfection of
the Bank's security interest in KCAS's and the U.S. Borrower's property.
SUBPART 3.2. Dissolution. The Bank hereby consents to the dissolution
of Medical & Technical Research Associates, Inc. ("MTRA") and, prior to such
dissolution, the change of the legal name of MTRA, notwithstanding anything in
Articles V, VI or VII of the Existing Loan Agreement to the contrary, provided
that (i) the U.S Borrower will give the Bank notice of such dissolution or name
change prior to such dissolution or name change; and (ii) the U.S. Borrower
shall promptly provide to the Bank any executed documents that the Bank may
reasonably request in connection with such dissolution or name change and in
connection with the continued perfection of the Bank's security interest in
MTRA's and the U.S. Borrower's property.
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1 Effective Date. This Agreement shall be and become
effective as of the date hereof (the "Effective Date") when all of the
conditions set forth in this Subpart 4.1 shall have been satisfied.
4.1.1. Execution of Agreement. The Bank shall have received an
original duly executed counterpart of this Agreement from the Borrowers
and the Guarantors.
4.1.2. Closing Certificate. The Bank shall have received a
certificate from the U.S. Borrower, in form and substance satisfactory
to the Bank, certifying inter alia that (i) no Default or Event of
Default exists as of the Effective Date, and (ii) the representations
and warranties of the Credit Parties made in or pursuant to the
Existing Loan Agreement and the other Loan Documents are true in all
material respects on and as of the Effective Date.
PART V
MISCELLANEOUS
SUBPART 5.1 Cross-References. References in this Agreement to any Part
or Subpart are, unless otherwise specified, to such Part or Subpart of this
Agreement.
SUBPART 5.2 Instrument Pursuant to Existing Loan Agreement. This
Agreement is a document executed pursuant to the Existing Loan Agreement and
shall (unless otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the Existing Loan
Agreement.
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SUBPART 5.3 Loan Documents. Each Credit Party hereby confirms and
agrees that the Loan Documents are, and shall continue to be, in full force and
effect, except as amended hereby, and except that, on and after the Effective
Date references in each Loan Document to the "Loan Agreement", "thereunder",
"thereof" or words of like import referring to the Existing Loan Agreement shall
mean the Amended Loan Agreement.
SUBPART 5.4. Representations and Warranties. Each Credit Party hereby
represents and warrants that (i) it has the requisite corporate power and
authority to execute, deliver and perform this Agreement, (ii) it is duly
authorized to, and has been authorized by all necessary corporate action, to
execute, deliver and perform this Agreement, (iii) it has no claims,
counterclaims, offsets, or defenses to the Loan Documents and the performance of
its obligations thereunder, or if such Credit Party has any such claims,
counterclaims, offsets, or defenses to the Loan Documents or any transaction
related to the Loan Documents, the same are hereby waived, relinquished and
released in consideration of the Bank's execution and delivery of this
Agreement, (iv) the representations and warranties contained in the Loan
Documents are, subject to the limitations set forth therein, true and correct in
all material respects on and as of the date hereof as though made on and as of
such date (except for those which expressly relate to an earlier date), (v) no
event of default under any other agreement, document or instrument to which such
Credit Party is a party will occur as a result of the transactions contemplated
hereby, and (vi) as of the date of this Agreement, no Event of Default exists.
SUBPART 5.5. Costs and Expenses. The U.S. Borrower hereby agrees to pay
on demand all costs and expenses (including without limitation the reasonable
fees and expenses of counsel to the Bank) incurred by the Bank in connection
with the negotiation, preparation, execution, and delivery of this Agreement and
the enforcement or preservation of any rights and remedies of the Bank hereunder
(including without limitation any such fees and expenses subsequently incurred
by the Bank in any subsequent bankruptcy or insolvency proceeding involving a
Credit Party).
SUBPART 5.6. Counterparts, Effectiveness, Etc. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.
SUBPART 5.7. Captions. The captions in this Agreement are inserted only
as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Agreement or any provision hereof.
SUBPART 5.8 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NORTH
CAROLINA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART 5.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
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Signature Page to Fourth Amendment
to Loan Agreement dated as of June 29, 2001
for Applied Analytical Industries, Inc.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
U.S. BORROWER: aaiPHARMA INC., formerly known as
APPLIED ANALYTICAL INDUSTRIES, INC.,
a Delaware corporation
By:_______________________
Name:_____________________
Title:______________________
GERMAN BORROWER: AAI APPLIED ANALYTICAL INDUSTRIES
DEUTSCHLAND GmbH & CO., KG,
a German corporation
By:_______________________
Name:_____________________
Title:______________________
THE GUARANTORS: APPLIED ANALYTICAL INDUSTRIES
LEARNING CENTER, INC.
AAI TECHNOLOGIES, INC.
AAI PROPERTIES, INC.
KANSAS CITY ANALYTICAL SERVICES, INC.
MEDICAL & TECHNICAL RESEARCH
ASSOCIATES, INC.
AAI JAPAN, INC.
APPLIED ANALYTICAL INDUSTRIES
ITALY, S.r.l.
AAI UK LTD.
AAI VERMOGENSVER-
WALTUNGSGESELLSCHAFT mgH
AAI APPLIED ANALYTICAL INDUSTRIES DEUTSCHLAND
VERWALTUNGS-GESELLSCHAFT mbH
APPLIED ANALYTICAL INDUSTRIES
DEUTSCHLAND GmbH
AAI BENELUX B.V.
AAI APPLIED ANALYTICAL INDUSTRIES
FRANCE S.A.R.L.
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Signature Page to Fourth Amendment
to Loan Agreement dated as of June 29, 2001
for Applied Analytical Industries, Inc.
NEOSAN ARZNEIMITTEL-
VERTRIEBSGESELLSCHAFT mbH
NEOSAN PHARMACEUTICALS, INC.
I.P.A.- INTERNATIONALE PHARMA
AGENTUR GmbH
INPHARMCO GESELLSCHAFT zur
VERMARKTUNG VON
ARZNEIMITTELN mbH
LAB (GREAT BRITAIN) LIMITED
PROSCIENTIA HOLDING AG
TECHNOPHARM S.A.
AAI INTERNATIONAL, INC.
By:_______________________
Name:_____________________
Title:____________________
BANK: BANK OF AMERICA, N.A.
By:
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Name:
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Title:
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