FOURTH AMENDMENT TO CREDIT AGREEMENT
EXHIBIT 10.1
FOURTH AMENDMENT TO CREDIT AGREEMENT
This Fourth Amendment to Credit Agreement, dated as of September 30, 2005 (this “Amendment
Agreement”), is entered into among AKORN, INC., a Louisiana corporation (“Akorn”),
AKORN (NEW JERSEY), INC., an Illinois corporation and wholly-owned subsidiary of Akorn (“Akorn
New Jersey”, and together with Akorn, the “Companies”, each being a “Company”),
the financial institutions that are or may from time to time become parties to the Credit Agreement
as lenders (together with their respective successors and assigns, the “Lenders”) and
LASALLE BANK NATIONAL ASSOCIATION (in its individual capacity, “LaSalle”), as
administrative agent for the Lenders.
W I T N E S S E T H :
WHEREAS, the Companies, the Loan Parties, the Lenders and the Agent entered into that certain
Credit Agreement dated as of October 7, 2003 (as amended by that certain First Amendment to Credit
Agreement, dated as of August 12, 2004, that certain Second Amendment to Credit Agreement, dated as
of August 26, 2004, and that certain Third Amendment to Credit Agreement, dated as of October 8,
2004, and as may be further amended, restated, modified, and supplemented, as amended, restated,
modified, and supplemented, the “Credit Agreement”);
WHEREAS, the Companies have requested that the Revolving Commitment Amount be increased from
$5,000,000 to $10,000,000;
WHEREAS, the Companies, the Lenders and the Administrative Agent desire to amend the Credit
Agreement to reflect such increase in the Revolving Commitment Amount and to make certain other
modifications to the Credit Agreement as set forth herein; and
WHEREAS, this Amendment Agreement shall constitute a Loan Document and these Recitals shall be
construed as part of this Amendment Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined herein
shall have the meanings attributed to such terms in the Credit Agreement, as amended hereby.
2. Amendments to Credit Agreement.
2.1 Increase of Revolving Commitment Amount. The Companies, the Administrative
Agent and the Lenders hereby agree that the Revolving Commitment Amount shall be increased
from $5,000,000 to $10,000,000. The definition of Revolving Commitment Amount found in
Section 1.1 of the Credit Agreement is hereby deleted in its entirety and replaced
by the following definition:
“Revolving Commitment Amount” means $10,000,000, as reduced from time to
time pursuant to Section 6.1.
2.2 Borrowing Base. The definition of Borrowing Base found in Section
1.1 of the Credit Agreement is hereby amended by deleting “30%” where it appears in such
definition and inserting “50%” in its place.
2.3 Computation Period. The definition of Computation Period found in
Section 1.1 of the Credit Agreement is hereby deleted in its entirety and replaced
by the following definition:
Computation Period means (a) at any time on or before August 31, 2005, each
period of twelve consecutive calendar months ending on the last day of a calendar
month, and (b) at any time after August 31, 2005, each period of twelve consecutive
calendar months ending on the last day of a Fiscal Quarter; provided that for the
purpose of determining compliance with (i) Section 11.14.1, for any
Computation Period ending in the 2004 calendar year, such Computation Period shall
be the period beginning January 1, 2004 and ending on the last day of the applicable
calendar month and (ii) Section 11.14.2, the Computation Period used in (X)
determining EBITDA in the 2004 calendar year, shall be calculated by annualizing the
period beginning January 1, 2004 and ending on the last day of the applicable
calendar month and (Y) determining Interest Expense, for any Computation Period
ending prior to July 1, 2005, shall be calculated by annualizing the period
beginning on July 1, 2004 and ending on the last day of the applicable calendar
month, with respect to Interest Expense.
2.4 Termination Date. The definition of Termination Date found in Section
1.1 of the Credit Agreement is hereby deleted in its entirety and replaced by the
following definition:
Termination Date” means the earlier of (a) September 30, 2008, or (b) such
other date on which the Commitments terminate pursuant to Section 6 or
13.
2.5 Base Rate Margin. The definition of Base Rate Margin found in Section
1.1 of the Credit Agreement is hereby deleted in its entirety and replaced by the
following definition:
Base Rate Margin” — see the definition of Applicable Margin.
2.6 The following definitions are added alphabetically to Section 1.1 of the
Credit Agreement:
Applicable Margin means, for any day, the rate per annum set forth below
opposite the level (the “Level”) then in effect, it being understood that
the Applicable Margin for (a) Revolving Loans that bear interest at the Base Rate
shall be the percentage set forth under the columns “Applicable Margins — Base Rate
Loans”, (b) Revolving Loans that bear interest at the LIBOR Rate shall be the
percentage set forth under the column “Applicable Margins — LIBOR Loans”, (c) the
Non-Use Fee Rate shall be the percentage set forth under the column
2
“Non-Use Fee
Rate” and(d) the L/C Fee Rate shall be the percentage set forth under the column
“L/C Fee Rate”:
| Applicable Margins | ||||||||||||||||||
| Senior Debt to | ||||||||||||||||||
| EBITDA | Base Rate | LIBOR | Non-Use | L/C Fee | ||||||||||||||
| Level | Ratio | Loans | Loans | Fee Rate | Rate | |||||||||||||
I |
>= 1.75 | 1.25 | % | 3.25 | % | 0.50 | % | 1.50 | % | |||||||||
II
|
<1.75 >= 1.50 | 1.00 | % | 3.00 | % | 0.50 | % | 1.50 | % | |||||||||
III
|
<1.50 >= 1.25 | 0.75 | % | 2.75 | % | 0.375 | % | 1.50 | % | |||||||||
IV
|
<1.25 | 0.50 | % | 2.50 | % | 0.375 | % | 1.50 | % | |||||||||
The Applicable Margins shall be adjusted based on the Level corresponding to the
Senior Debt to EBITDA Ratio reported for each Fiscal Quarter, to the extent
applicable, on the fifth (5th) Business Day after the Companies provide or are
required to provide a Compliance Certificate pursuant to Section 10.1.3.
Notwithstanding anything contained in this paragraph to the contrary, (a) if the
Companies fail to deliver such Compliance Certificate in accordance with the
provisions of Section 10.1.3, the Applicable Margins shall be based upon
Level I above beginning on the date such Compliance Certificate was required to be
delivered until the fifth (5th) Business Day after such Compliance Certificate is
actually delivered, whereupon the Applicable Margins shall be determined by the then
current Level; (b) no reduction to any Applicable Margin shall become effective at
any time when an Event of Default or Unmatured Event of Default has occurred and is
continuing; and (c) the initial Applicable Margins on the Fourth Amendment Date
shall be based on Level IV until the date on which the Compliance Certificate is
required to be delivered for the Fiscal Quarter ending September 30, 2005, and on
such date the Applicable Margins shall be adjusted, if necessary, as set forth
above.
Consolidated Tangible Net Worth means at any date the consolidated
stockholders’ equity of the Companies and their Subsidiaries plus debt outstanding
under the documents described in clauses (a) and (b) of the
definition of Kapoor Trust Subordinated Debt Documents, determined in accordance
with GAAP, less their consolidated Intangible Assets, all determined as of such
date, provided that any cumulative effect adjustment resulting from adoption of an
accounting principle shall be excluded from such calculation. For purposes of this
definition, “Intangible Assets” means the amount (to the extent reflected in
determining such consolidated stockholders’ equity) of all unamortized debt discount
and expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, organizational or developmental expenses and other
intangible items, all determined in accordance with GAAP.
3
Fourth Amendment means that certain Fourth Amendment to Credit Agreement,
dated the Fourth Amendment Date, by and among the Companies, the Administrative
Agent and the Lenders.
Fourth Amendment Date means September 30, 2005.
LIBOR Rate Margin — see the definition of Applicable Margin.
2.7 L/C Commitment. Section 2.1.3 of the Credit Agreement is hereby
amended by deleting the amount “$1,000,000” where it appears in such section and replacing
it with “$2,000,000”.
2.8 LIBOR Option. Section 2.2.4 of the Credit Agreement is hereby
deleted in its entirety.
2.9 L/C Applications. Section 2.3.1 of the Credit Agreement is hereby
amended by inserting the clause “, in which case such Cash Collateralized Letter of Credit
shall have an expiration date no later than 180 days after the Termination Date” immediately
following the clause “unless such Letter of Credit is Cash Collateralized”.
2.10 Interest Rates. Section 4.1 of the Credit Agreement is hereby
amended by deleting the clause “Each Company promises to pay interest on the unpaid
principal amount of each Loan for the period commencing on the date of such Loan until such
Loan is paid in full at a rate per annum equal to the sum of the Base Rate from time to time
in effect plus the Base Rate Margin from time to time in effect;” and replacing such clause
with the following:
“Each Company promises to pay interest on the unpaid principal amount of each Loan
for the period commencing on the date of such Loan until such Loan is paid in full
as follows:
(a) at all times while such Loan is a Base Rate Loan, at a rate per annum equal to
the sum of the Base Rate from time to time in effect plus the Base Rate Margin from
time to time in effect;
(b) at all times while such Loan is a LIBOR Loan, at a rate per annum equal to the
sum of the LIBOR Rate applicable to each Interest Period for such Loan plus the
LIBOR Margin from time to time in effect;”
2.11 Compliance Certificates. Section 10.1.3 of the Credit Agreement
is hereby amended by deleting the words “each calendar month with respect to interim reports
pursuant to Section 10.1.2” and inserting in their place the following clause:
“each Fiscal Quarter of the Companies”.
2.12 Borrowing Base Certificates. Section 10.1.6 of the Credit
Agreement is hereby amended by deleting the words “Within 3 Business Days of the end of each
calendar week” and inserting in their place the following clause:
4
“Concurrently with the delivery of the interim reports pursuant to Section
10.1.2”.
2.13 Senior Debt to EBITDA Ratio. Section 11.14.1 of the Credit
Agreement is hereby amended by deleting such section in its entirety and replacing it with
the following:
11.14.1 Senior Debt to EBITDA Ratio. Not permit the Senior Debt to EBITDA
Ratio as of the last day of any Computation Period to exceed the applicable ratio
set forth below for such Computation Period:
| Computation | Senior Debt to | |||
| Period Ending | EBITDA Ratio | |||
June 30, 2004; July 31, 2004; and August 31, 2004 |
2.00 | |||
September 30, 2004; October 31, 2004; and November 30, 2004 |
1.75 | |||
December 31, 2004 and the last day of each Computation
Period thereafter ending on or before May 31, 2005 |
1.50 | |||
June 30, 2005, July 31, 2005 and August 31, 2005 |
1.25 | |||
September 30, 2005 and the last day of each Computation
Period thereafter |
2.25 | |||
2.14 Consolidated Tangible Net Worth. The following is added as Section
11.14.3 of the Credit Agreement:
11.14.3 Consolidated Tangible Net Worth. Not permit Consolidated Tangible
Net Worth of the Companies and their Subsidiaries as of the last day of any
Computation Period to be less than the sum of (a) $30,000,000 plus (b) the cash
proceeds from the issuance and sale of any Capital Securities of the Companies and
their Subsidiaries, net of any brokerage commissions and any other reasonable costs
or expenses directly attributable to such issuance.
3. Conditions to Effectiveness. The effectiveness of this Amendment Agreement is
expressly conditioned upon the satisfaction of the following conditions, all in form and substance
satisfactory to the Administrative Agent and its counsel:
3.1 Charter and Good Standing. Each Loan Party shall provide (i) copies of its
certificate of incorporation or formation or other constitutive document, together with all
amendments thereto, (ii) good standing certificates in its state of incorporation, (iii)
good standing certificates and certificates of qualification to do business in each
jurisdiction where its ownership or lease of property or the conduct of its business
requires such qualification, each dated a recent date prior to the date hereof and certified
by the applicable Secretary of State or other authorized governmental authority.
5
3.2 Bylaws and Resolutions. Each Loan Party shall provide (a) its bylaws,
operating agreement or similar governing document together with all amendments thereto and
(b) resolutions or unanimous written consent of each Loan Party’s board of directors,
managers or other similar governing body approving and authorizing the execution, delivery
and performance of this Amendment Agreement and the transactions to be consummated in
connection therewith, each certified as of the date hereof by such Loan Party’s corporate
secretary or an assistant secretary as being in full force and effect without any
modification or amendment.
3.3 Incumbency Certificates. Each Loan Party shall provide signature and
incumbency certificates of the officers of each such Person executing this Amendment
Agreement, certified as of the date hereof by such Person’s corporate secretary or an
assistant secretary as being true, accurate, correct and complete.
3.4 Increased Commitment Fee. The Companies shall pay (a) to the
Administrative Agent, for the ratable benefit of the Lenders, a closing fee in the amount of
$75,000, which fee shall be fully earned and non-refundable when paid.
3.5 Other Documents. The Companies shall provide such other documents,
instruments and agreements as the Administrative Agent may reasonably request.
4. Opinions of Counsel. Each Loan Party covenants that within seven days of the
Fourth Amendment Date, it shall deliver duly executed originals of opinions of Xxxx, Forward,
Xxxxxxxx & Scripps LLP and Jones, Walker, Waechter, Poitevent, Carrère & Xxxxxxx L.L.P., counsel
for each Loan Party, in form and substance satisfactory to the Administrative Agent and its
counsel, dated the Fourth Amendment Date, and accompanied by a letter addressed to such counsel
from the Loan Parties, authorizing and directing such counsel to address its opinion to the
Administrative Agent, on behalf of Lenders, and to include in such opinion an express statement to
the effect that the Administrative Agent and Lenders are authorized to rely on such opinion.
5. Acknowledgements of the Loan Parties.
5.1 Each Loan Party hereby acknowledges, confirms and agrees that the Administrative
Agent has and shall continue to have valid, enforceable and perfected liens upon and
security interests in the Collateral (as defined in the Guaranty and Collateral Agreement)
heretofore granted to the Administrative Agent pursuant to the Loan Documents or otherwise
granted to or held by the Administrative Agent.
5.2 Each Loan Party hereby acknowledges, confirms and agrees that its status as a Loan
Party under the Loan Documents shall be unaffected by this Amendment Agreement, except as
set forth herein, and affirms its obligations under the Credit Agreement.
6
6. Representations and Warranties of the Loan Parties.
6.1 Each Loan Party represents and warrants that the execution, delivery and
performance by such Loan Party of this Amendment Agreement have been duly authorized by all
necessary corporate, limited liability company or partnership action, as applicable, and
that this Amendment Agreement is a legal, valid and binding obligation of such Loan Party,
enforceable against such Loan Party in accordance with its terms, except as the enforcement
thereof may be subject to (a) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors’ rights generally and (b)
general principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
6.2 Each Loan Party hereby certifies that (x) each of the representations and
warranties contained in the Credit Agreement is true and correct in all material respects on
and as of the date hereof as if made on the date hereof, except to the extent that any such
representation or warranty is stated to relate solely to an earlier date, in which case such
representation or warranty shall be true and correct on and as of such earlier date and (y)
no Unmatured Event of Default or Event of Default has occurred and is continuing.
6.3 Since July 31, 2003, (a) no event or Event of Default or Unmatured Event of Default
has occurred or is existing which could reasonably be expected to have a Material Adverse
Effect; (b) no litigation has been commenced which, if successful, would have a Material
Adverse Effect or could challenge any of the transactions contemplated by the Credit
Agreement, as amended by this Amendment Agreement, and the other Loan Documents; (c) no Loan
Party has made any payments that are prohibited by Section 11.4 of the Credit
Agreement; and (d) there has been no material increase in liabilities, liquidated or
contingent, other than the Obligations, and no material decrease in assets of the Loan
Parties.
7. Reference to and Effect on the Credit Agreement.
7.1 Upon the effectiveness of this Amendment Agreement, each reference in the Credit
Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import and
each reference to the Credit Agreement in each Loan Document shall mean and be a reference
to the Credit Agreement as amended hereby.
7.2 Except as specifically amended above, all of the terms, conditions and covenants of
the Credit Agreement and the other Loan Documents shall remain unaltered and in full force
and effect and shall be binding upon the Companies in all respects and are hereby ratified
and confirmed.
7.3 The execution, delivery and effectiveness of this Amendment Agreement shall not
operate as a waiver of (a) any right, power or remedy of any Lender or the Administrative
Agent under the Credit Agreement or any of the Loan Documents, or (b) any Event of Default
or Unmatured Event of Default under the Credit Agreement.
7
8. Costs and Expenses. The Companies agree to pay on demand all costs and expenses of
the Administrative Agent in connection with the preparation, execution and delivery of this
Amendment Agreement, including the reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto.
9. CHOICE OF LAW. THIS AMENDMENT AGREEMENT AND EACH NOTE ISSUED PURSUANT TO THIS
AMENDMENT AGREEMENT AND THE CREDIT AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
10. Execution in Counterparts. This Amendment Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement.
11. Headings. Section headings in this Amendment Agreement are included herein for
convenience of reference only and shall not constitute a part of this Amendment Agreement for any
other purposes.
[signature page to follow]
8
IN WITNESS WHEREOF, the Companies, the Lenders and the Administrative Agent have
executed this Amendment Agreement as of the date first above written.
| AKORN, INC., a Louisiana corporation |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Title: | CFO | |||
| AKORN (NEW JERSEY), INC., an Illinois corporation |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Title: | CFO | |||
| LASALLE BANK NATIONAL
ASSOCIATION, as a Lender and as Administrative Agent |
||||
| By: | /s/ Xxxxxxx X. X’Xxxxx | |||
| Title: | First Vice President | |||
REAFFIRMATION OF COLLATERAL DOCUMENTS
Notwithstanding anything to the contrary contained in the Collateral Documents, each of the
undersigned hereby: (a) consents to and approves all of the terms of that certain Fourth Amendment
to Credit Agreement, dated as of the date hereof, by and among Akorn, Inc., Akorn (New Jersey),
Inc., the financial institutions party thereto as Lenders, and LaSalle Bank National Association,
as administrative agent (the “Amendment”), in connection with which this Reaffirmation of
Collateral Documents has been executed; (b) ratifies and confirms all of its indebtedness,
liabilities and obligations under the Collateral Documents to which it is a party; (c) reaffirms
that, after giving effect to the Amendment, all of its representations and warranties made in the
Collateral Documents to which it is a party remain true and correct as of the date of this
Amendment (except to the extent that such representations or warranties are expressly made only as
of another specific date, in which case they shall be true and correct as of such date); (d)
reaffirms all of its covenants, agreements, indebtedness, liabilities and obligations under the
Collateral Documents to which it is a party, which include, without limitation, the grant of Liens
in all of such party’s interests in the Collateral (as defined in the Guaranty and Collateral
Agreement) owned by it as security for the payment and performance of the Obligations; (e) agrees
that the Collateral Documents to which it is a party shall and do remain in full force and effect;
(f) agrees that the Collateral Documents to which it is a party shall and do continue to constitute
the legal, valid and binding obligations of such party, enforceable against it in accordance with
the terms of the Collateral Documents to which it is a party and that such obligations shall not be
discharged or affected by any modification, extension, renewal or amendment of the terms of the
Credit Agreement or the other Loan Documents; and (g) agrees and acknowledges that there are no
defenses, counterclaims or set-offs to the Collateral Documents to which it is a party or its
covenants, agreements, indebtedness, liabilities and obligations under the Collateral Documents,
and agrees that any (if any) such defenses, counterclaims or set-offs are hereby expressly waived.
Dated as
of this 30th day of September 2005.
| AKORN, INC. |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Title: | CFO | |||
| AKORN (NEW JERSEY), INC. |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Title: | CFO | |||
