EXHIBIT 10.05
SUBORDINATION, STANDBY AND INTERCREDITOR AGREEMENT
WHEREAS, AKORN, INC., a Louisiana corporation (hereinafter, together
with its successors and assigns, called "AKORN"), and AKORN (NEW JERSEY),
INC., an Illinois corporation ("AKORN NJ"; together with Akorn, the
"BORROWERS" and each individually a "BORROWER") may from time to time
hereafter become indebted to the undersigned NEOPHARM, INC., a Delaware
corporation (the "JUNIOR LENDER"), including, without limitation,
indebtedness under the Promissory Note referred to below, and the Borrowers
have requested, and may from time to time hereafter request, THE NORTHERN
TRUST COMPANY, an Illinois banking corporation (hereinafter, together with
its successors and assigns, called the "BANK"), 00 Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, to make or agree to make loans, advances or other
financial accommodations to the Borrowers pursuant to the terms of the Credit
Agreement (as hereinafter defined); and
WHEREAS, the Borrowers and the Bank are party to that certain Amended and
Restated Credit Agreement dated as of September 15, 1999 (as amended, restated
or supplemented from time to time, the "CREDIT AGREEMENT"; capitalized terms not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement); and
WHEREAS, Akorn intends to incur an indebtedness to the Junior Lender in
the principal amount of $3,250,000 pursuant to a Promissory Note (the
"SUBORDINATED NOTE"), in the form attached hereto as SCHEDULE A; and
WHEREAS, the Junior Lender is a customer of Akorn and as such will benefit
from the continued making of loans, advances and other financial accommodations
from the Bank to the Borrowers;
NOW, THEREFORE, to induce the Bank, from time to time, at its option, to
make or agree to make loans, advances or other financial accommodations
(including, without limitation, renewals or extensions of, or forbearances with
respect to, any loans or advances heretofore or hereafter made) to Borrowers,
and for other valuable consideration, receipt whereof is hereby acknowledged,
the Junior Lender agrees as follows:
1. All obligations of each of the Borrowers, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent or now or
hereafter existing, or due or to become due, are hereinafter called
"LIABILITIES". All Liabilities to the Bank (other than any arising solely by
reason of any pledge or assignment made to the Bank pursuant to paragraph 2(c)
hereof) are hereinafter called "SENIOR LIABILITIES"; and all Liabilities to the
Junior Lender, including under the Subordinated Note (including any that may be
pledged or assigned to the Bank pursuant to paragraph 2(c) hereof), other than
trade payables arising in the usual and ordinary course of business between the
Borrowers and the Junior Lender, are hereinafter called "JUNIOR LIABILITIES"; it
being expressly understood and agreed that
the term "Senior Liabilities", as used herein, shall include, without
limitation, any and all interest accruing on any of the Senior Liabilities after
the commencement of any proceedings referred to in paragraph 4 hereof,
notwithstanding any provision or rule of law which might restrict the rights of
the Bank, as against the Borrowers or anyone else, to collect such interest.
2. The Junior Lender will, from time to time, (a) promptly notify the Bank
of the creation of any Junior Liabilities, and of the issuance of any promissory
note or other instrument to evidence any Junior Liabilities, (b) upon request by
the Bank, cause any Junior Liabilities which are not evidenced by a promissory
note or other instrument of either of the Borrowers to be so evidenced, and (c)
if an event of default on any of the Senior Liabilities has occurred and is
continuing beyond any applicable grace period, and if there is no written
forbearance agreement in effect between Akorn and the Bank relating to such
event of default, upon request by the Bank, and as collateral security for all
Senior Liabilities, indorse without recourse, deliver and pledge to the Bank any
or all promissory notes or other instruments evidencing Junior Liabilities, and
otherwise assign to the Bank any or all Junior Liabilities and any or all
security therefor and guaranties thereof, all in a manner satisfactory to the
Bank.
3. Except as the Bank may hereafter otherwise expressly consent in
writing, which consent may be given or withheld by the Bank in its sole and
absolute discretion, the payment of all Junior Liabilities shall be postponed
and subordinated to the payment in full of all Senior Liabilities, and no
payments or other distributions whatsoever in respect of any Junior Liabilities
shall be made by either of the Borrowers, or accepted by the Junior Lender, nor
shall any property or assets of either of the Borrowers be applied by them, or
accepted by the Junior Lender, to or for the purchase or other acquisition or
retirement of any Junior Liabilities.
4. In the event of any dissolution, winding up, liquidation, readjustment,
reorganization or other similar proceedings relating to any Borrower or its
creditors, as such, or to their property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of the
assets and liabilities of any Borrower, or any sale of all or substantially all
of the assets of any Borrower, or otherwise), the Senior Liabilities shall first
be paid in full before the Junior Lender shall be entitled to receive and to
retain any payment or distribution in respect of the Junior Liabilities, and, in
order to implement the foregoing, (a) all payments and distributions of any kind
or character in respect of the Junior Liabilities to which the Junior Lender
would be entitled if the Junior Liabilities were not subordinated, or
subordinated and pledged or assigned, pursuant to this Agreement shall be made
directly to the Bank, (b) the Junior Lender shall promptly file a claim or
claims, in the form required in such proceedings, for the full outstanding
amount of the Junior Liabilities, and shall cause said claim or claims to be
approved and all payments and other distributions in respect thereof to be made
directly to the Bank, and (c) the Junior Lender hereby irrevocably agrees that
the Bank may, at its sole discretion, in the name of the Junior Lender or
otherwise, demand, xxx for, collect, receive and receipt for any and all such
payments
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or distributions, and file, prove, and vote or consent in any such proceedings
with respect to, any and all claims of the Junior Lender relating to the Junior
Liabilities.
5. In the event that the Junior Lender receives any payment or other
distribution of any kind or character from any Borrower or from any other source
whatsoever in respect of any of the Junior Liabilities, other than as expressly
permitted by the terms of this Agreement, such payment or other distribution
shall be received in trust for the Bank and promptly turned over by the Junior
Lender to the Bank. The Junior Lender will xxxx its books and records, and cause
the applicable Borrower to xxxx its books and records, so as to clearly indicate
that the Junior Liabilities are subordinated in accordance with the terms of
this Agreement, and will cause to be clearly inserted in any promissory note or
other instrument which at any time evidences any of the Junior Liabilities a
statement to the effect that the payment thereof is subordinated in accordance
with the terms of this Agreement. The Junior Lender will execute such further
documents or instruments and take such further action as the Bank may reasonably
from time to time request to carry out the intent of this Agreement.
6. All payments and distributions received by the Bank in respect of the
Junior Liabilities, to the extent received in or converted into cash, may be
applied by the Bank first to the payment of any and all expenses (including
attorneys fees and legal expenses) paid or incurred by the Bank in enforcing
this Agreement or in endeavoring to collect or realize upon any of the Junior
Liabilities or any security therefor, and any balance thereof shall, solely as
between the Junior Lender and the Bank, be applied by the Bank, in such order of
application as the Bank may from time to time select, toward the payment of the
Senior Liabilities remaining unpaid; but, as between any Borrower and its
respective creditors, no such payments or distributions of any kind or character
shall be deemed to be payments or distributions in respect of the Senior
Liabilities; and, notwithstanding any such payments or distributions received by
the Bank in respect of the Junior Liabilities and so applied by the Bank toward
the payment of the Senior Liabilities, the Junior Lender shall be subrogated to
the then existing rights of the Bank, if any, in respect of the Senior
Liabilities only at such time as this Agreement shall have been discontinued and
the Bank shall have received payment of the full amount of the Senior
Liabilities, as provided for in paragraph 11 hereof.
7. Notwithstanding anything to the contrary contained in the Subordinated
Note, until such time as this Agreement shall have been discontinued and the
Bank shall have received payment of the full amount of the Senior Liabilities,
as provided for in paragraph 11 hereof, no action or inaction by either of the
Borrowers shall be deemed to be in violation of the provisions contained in
Article 5 of the Subordinate Note if such action or inaction either (i) is not
in violation of any of the provisions of the Credit Agreement, or (ii) has been
consented to in writing by the Bank.
8. The Junior Lender hereby waives: (a) notice of acceptance by the Bank
of this Agreement; (b) notice of the existence or creation or non-payment of all
or any of the Senior Liabilities; and (c) all
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diligence in collection or protection of or realization upon the Senior
Liabilities or any thereof or any security therefor.
9. The Junior Lender will not without the prior written consent of the
Bank: (a) cancel, waive, forgive, transfer or assign, or attempt to enforce or
collect, or subordinate to any Liabilities other than the Senior Liabilities,
any Junior Liabilities or any rights in respect thereof; (b) take any collateral
security for any Junior Liabilities; or (c) commence, or join with any other
creditor in commencing, any bankruptcy, reorganization or insolvency proceedings
with respect to any Borrower.
10. This Agreement shall in all respects be a continuing agreement and
shall remain in full force and effect (notwithstanding, without limitation, the
dissolution of the Junior Lender or that at any time or from time to time all
Senior Liabilities may have been paid in full), subject to discontinuance only
upon receipt by the Bank of payment in full of all Senior Liabilities and
termination of any and all commitments by the Bank to extend credit to either of
the Borrowers.
11. The Bank may, from time to time, whether before or after any
discontinuance of this Agreement, at its sole discretion and without notice to
the Junior Lender, take any or all of the following actions: (a) retain or
obtain a security interest in any property to secure any of the Senior
Liabilities, (b) retain or obtain the primary or secondary obligation of any
other obligor or obligors with respect to any of the Senior Liabilities, (c)
extend or renew or forbear for one or more periods (whether or not longer than
the original period), alter or exchange any of the Senior Liabilities, or
release or compromise any obligation of any nature of any obligor with respect
to any of the Senior Liabilities, and (d) release its security interest in, or
surrender, release or permit any substitution or exchange for, all or any part
of any property securing any of the Senior Liabilities, or extend or renew or
forbear for one or more periods (whether or not longer than the original period)
or release, compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property.
12. The Bank may, from time to time, whether before or after any
discontinuance of this Agreement, without notice to the Junior Lender, assign or
transfer any or all of the Senior Liabilities or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Senior Liabilities shall be and remain Senior Liabilities
for the purposes of this Agreement, and every immediate and successive assignee
or transferee of any of the Senior Liabilities or of any interest therein shall,
to the extent of the interest of such assignee or transferee in the Senior
Liabilities, be entitled to the benefits of this Agreement to the same extent as
if such assignee or transferee were the Bank; provided, however, that, unless
the Bank shall otherwise consent in writing, the Bank shall have an unimpaired
right, prior and superior to that of any such assignee or transferee, to enforce
this Agreement, for the benefit of the Bank, as to those of the Senior
Liabilities which the Bank has not assigned or transferred.
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13. The Bank shall not be prejudiced in its rights under this Agreement by
any act or failure to act of any Borrower or the Junior Lender, or any
noncompliance of any Borrower or the Junior Lender with any agreement or
obligation, regardless of any knowledge thereof which the Bank may have or with
which the Bank may be charged; and no action of the Bank permitted hereunder
shall in any way affect or impair the rights of the Bank and the obligations of
the Junior Lender under this Agreement.
14. No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Bank of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy; nor shall any modification or
waiver of any of the provisions of this Agreement be binding upon the Bank
except as expressly set forth in a writing duly signed and delivered on behalf
of the Bank. For the purposes of this Agreement, Senior Liabilities shall
include all obligations of each of the Borrowers to the Bank, notwithstanding
any right or power of either Borrower or anyone else to assert any claim or
defense as to the invalidity or unenforceability of any such obligation, and no
such claim or defense shall affect or impair the agreements and obligations of
the Junior Lender hereunder.
15. This Agreement shall be binding upon the Junior Lender and upon the
heirs, legal representatives, successors and assigns of the Junior Lender; and,
to the extent that either Borrower or the Junior Lender is either a partnership
or a corporation, all references herein to such Borrower and to the Junior
Lender, respectively, shall be deemed to include any successor or successors,
whether immediate or remote, to such partnership or corporation. If more than
one party shall execute this Agreement, the term "undersigned" as used herein
shall mean all parties executing this Agreement and each of them, and all such
parties shall be jointly and severally obligated hereunder.
16. This Agreement shall be construed in accordance with and governed by
the laws of the State of Illinois. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17. THE JUNIOR LENDER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. THE JUNIOR LENDER HEREBY ABSOLUTELY AND IRREVOCABLY CONSENTS AND SUBMITS
TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS HAVING SITUS IN XXXX
COUNTY, ILLINOIS OR THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF
ILLINOIS IN CONNECTION WITH ANY SUITS, ACTIONS OR PROCEEDINGS BROUGHT AGAINST
THE JUNIOR LENDER BY THE BANK ARISING OUT OF OR RELATING TO
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THIS AGREEMENT, AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE
JUNIOR LENDER HEREBY WAIVES AND AGREES NOT TO ASSERT IN SUCH SUIT, ACTION OR
PROCEEDING, IN EACH CASE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
CLAIM THAT (A) THE JUNIOR LENDER IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF ANY SUCH COURT; (B) THE JUNIOR LENDER IS IMMUNE FROM SUIT OR ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR
ITS PROPERTY; (C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM; (D) THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER; OR (E) THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY ANY SUCH COURT.
NOTHING CONTAINED HEREIN SHALL AFFECT ANY RIGHT THAT THE BANK MAY HAVE TO BRING
ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE JUNIOR
LENDER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
[SIGNATURE PAGE(S) AND EXHIBIT(S),
IF ANY, FOLLOW THIS PAGE]
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IN WITNESS WHEREOF, this Agreement has been made and delivered at Chicago,
Illinois as of the _________ day of December, 2001.
NEOPHARM, INC.
By_______________________________________
Name:
Title:
ACCEPTED December _____, 2001
THE NORTHERN TRUST COMPANY
By_________________________________
Title:
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ACKNOWLEDGMENT OF SUBORDINATION
The Borrowers each hereby acknowledge receipt of a copy of the foregoing
Subordination, Standby and Intercreditor Agreement, waive notice of acceptance
thereof by the Bank, and agree to be bound by the terms and provisions thereof,
to make no payments or distributions contrary to the terms and provisions
thereof, and to do every other act and thing necessary or appropriate to carry
out such terms and provisions. In the event of any violation of any of the terms
and provisions of the foregoing Subordination and Standby Agreement, then, at
the election of the Bank, any and all obligations of each of the Borrowers to
the Bank shall forthwith become due and payable and any and all agreements of
the Bank to make loans, advances or other financial accommodations to the
Borrowers, or to forbear from exercising remedies, shall forthwith terminate,
notwithstanding any provisions thereof to the contrary.
Dated as of December ______, 2001 AKORN, INC.
By_______________________________________
Name:
Title:
Dated as of December ______, 2001 AKORN (NEW JERSEY), INC.
By_______________________________________
Name:
Title:
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SCHEDULE A
PROMISSORY NOTE
