Exhibit 10.39

 

EXECUTION VERSION

 

SUPPLEMENT NO. 1 TO THE PLEDGE AND SECURITY AGREEMENT

 

SUPPLEMENT NO. 1, dated as of November 25, 2015 (this “Supplement”), to the
Pledge and Security Agreement dated as of November 25, 2015 (as amended,
restated, supplemented, waived or otherwise modified from time to time, the
“Security Agreement”), among the Borrower, each Guarantor from time to time
party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent (in
such capacity and any successor in such capacity, the “Administrative Agent”)
and as collateral agent (in such capacity and any successor in such capacity,
the “Collateral Agent”) for the Secured Parties (as defined therein).

 

A.            Reference is made to (i) the Credit and Guaranty Agreement dated
as of November 25, 2015, (as amended, restated, supplemented, waived or
otherwise modified from time to time, the “Credit Agreement”), among the
Borrower, certain subsidiaries of the Borrower party thereto as Guarantors from
time to time, the Lenders party thereto from time to time and Morgan Stanley
Senior Funding, Inc., as Administrative Agent and Collateral Agent and (ii) the
Credit Agreement Joinder dated as of November 25, 2015 entered into by Kremers
Urban Pharmaceuticals Inc., an Indiana corporation (the “New Subsidiary”),  as
required by Section 5.11 of the Credit Agreement.

 

B.            Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Credit Agreement and the
Security Agreement.

 

C.            The Credit Parties have entered into the Security Agreement in
order to induce the Lenders to make extensions of credit under the Credit
Agreement.  Section 5.16 of the Security Agreement provides that additional
subsidiaries may become Guarantors under the Security Agreement by execution and
delivery of an instrument in the form of this Supplement.  The New Subsidiary is
executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Guarantor under the Security Agreement in order to induce
the Lenders to make extensions of credit (if available under the Credit
Agreement) and as consideration for extensions of credit previously made under
the Credit Agreement.

 

Accordingly, the Administrative Agent, the Collateral Agent and the New
Subsidiary agree as follows:

 

SECTION 1.  In accordance with Section 5.16 of the Security Agreement, the New
Subsidiary by its signature below becomes a Guarantor under the Security
Agreement and agrees to be bound by all terms, covenants and conditions
thereunder with the same force and effect as if originally named therein as a
Guarantor and the New Subsidiary hereby (a) agrees to all the terms, covenants
and provisions of the Security Agreement applicable to it as a Guarantor
thereunder and (b) represents and warrants that (i) with respect to
representations and warranties made by it under the Security Agreement that are
not qualified by materiality, such representations and warranties are true and
correct in all material respects, and (ii) with respect to the representations
and warranties made by it under the Security Agreement that are qualified by
materiality, such representations and warranties are true and correct in all
respects, in each case, on and as of the date hereof.  In furtherance of the
foregoing, the New Subsidiary, as security for the payment and performance in
full of the Obligations when due (whether at stated maturity, by acceleration or
otherwise), does hereby create, grant and pledge to the Collateral Agent, for
the benefit of the Secured Parties, a security interest in and Lien on all the
New Subsidiary’s right, title and interest in and to the Collateral of the New
Subsidiary and expressly assumes all obligations and liabilities of a Guarantor
under the Security Agreement.  Each reference to a “Guarantor” or “Credit Party”
in the Security Agreement shall be deemed to include the New Subsidiary.  The
Security Agreement is hereby incorporated herein by reference.

 

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SECTION 2.  The New Subsidiary represents and warrants to the Administrative
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to (i) the effects of bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or other similar laws affecting creditors’ rights
generally, (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
(iii) implied covenants of good faith and fair dealing.

 

SECTION 3.  This Supplement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one contract.  Delivery of an executed counterpart to this
Agreement by facsimile or any other electronic transmission (e.g., “PDF” or
“TIFF”) shall be as effective as delivery of a manually signed original. This
Supplement shall become effective when (a) the Collateral Agent shall have
received a counterpart of this Supplement that bears the signature of the New
Subsidiary and (b) the Agents have executed a counterpart hereof.

 

SECTION 4.  The New Subsidiary hereby represents and warrants that (a) set forth
on Schedule I attached hereto is a true, correct and complete schedule of all
the Pledged Collateral of the New Subsidiary as of the date hereof, (b) set
forth on Schedule II attached hereto is a true, correct and complete schedule of
all of the material issued Patents, registered Trademarks and registered
Copyrights owned by the New Subsidiary as of the date hereof, (c) set forth on
Schedule III attached hereto is a true, correct and complete schedule of all
Commercial Tort Claims of the New Subsidiary individually in excess of
$5,000,000 as of the date hereof, (d) set forth on Schedule IV attached hereto,
is the true, correct and complete legal name of the New Subsidiary, its
jurisdiction of formation and the location of its chief executive office ,
(e) except as set forth in Schedule V, all Accounts of the New Subsidiary have
been originated by the New Subsidiary and all Inventory has been produced or
acquired by the New Subsidiary in the ordinary course of business, and (f) set
forth on Schedule VI attached hereto is a true, correct and complete schedule of
all Letter of Credit Rights of the New Subsidiary relating to Letters of Credit
with a face amount in excess of $5,000,000 as of the date hereof.

 

SECTION 5.  Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.

 

SECTION 6.  THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS
PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

SECTION 7.  In the event any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby.  The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

 

SECTION 8.  All communications and notices hereunder shall be in writing and
given as provided in Section 5.01 of the Security Agreement.

 

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SECTION 9.  The New Subsidiary agrees to reimburse the Collateral Agent for its
reasonable and documented out-of-pocket expenses in connection with this
Supplement, including the reasonable and documented fees, disbursements and
other charges of counsel for the Collateral Agent.

 

[REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]

 

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IN WITNESS WHEREOF, the New Subsidiary and the Agents have duly executed this
Supplement to the Security Agreement as of the day and year first above written.

 

 

 

KREMERS URBAN PHARMACEUTICALS INC.

 

 

 

By:

/s/ Marsha Keefe

 

 

Name:

Marsha Keefe

 

 

Title:

Assistant Secretary

 

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MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent

 

 

 

By:

/s/ Nehal Abdel Hakim

 

 

Name:

Nehal Abdel Hakim

 

 

Title:

Authorized Signatory

 

 

 

 

 

MORGAN STANLEY SENIOR FUNDING, INC., as Collateral Agent

 

 

 

By:

/s/ Nehal Abdel Hakim

 

 

Name:

Nehal Abdel Hakim

 

 

Title:

Authorized Signatory

 

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Execution Copy

 

Schedule I

 

PLEDGED EQUITY SECURITIES

 

Name of Issuer

 

Owner

 

Number and
Class of
Pledged
Equity
Security

 

Number of
Issuer
Certificate
(if
applicable)

 

Percentage of
Equity Interests

 

Kremers Urban Pharmaceuticals Inc.

 

Lannett Company, Inc.

 

1 share of common stock

 

3

 

100%

 

 

PLEDGED DEBT SECURITIES

 

None.

 

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Schedule II

 

INTELLECTUAL PROPERTY

 

PATENTS

 

Patents

 

TITLE

 

Patent No.

 

Issue Date

Novel composition containing an acid-labile benzimidazole and process for its
preparation

 

US 6159499

 

12/12/2000

Composition comprising a benzimidazole and process for its manufacture

 

US 8968776

 

03/03/2015

Composition containing an acid-labile omeprazole and process for its preparation

 

US 6207198

 

03/27/2001

Pharmaceutical composition containing an acid-labile omeprazole and process for
its preparation

 

US 6248355

 

06/19/2001

 

Patent Applications

 

TITLE

 

App. No.

 

Filing Date

Minitab feeder

 

US 13/810,596

 

01/16/2013

Statin Compositions

 

US 12/041,976

 

03/04/2008

Pharmaceutical compositions comprising niacin and process for their preparation

 

US 13/756,588

 

02/01/2013

Composition comprising a benzimidazole and process for its manufacture

 

US 14/633,766

 

02/27/2015

 

TRADEMARKS

 

Trademark Registrations

 

TRADEMARK

 

Appl. No.

 

Filing Date

 

Reg. No.

 

Reg. Date

GLYCOLAX

 

78229257

 

03/24/2003

 

2903907

 

11/16/2004

MONOKET

 

73642900

 

02/04/1987

 

1453886

 

08/25/1987

 

COPYRIGHTS

 

None.

 

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Schedule III

 

COMMERCIAL TORT CLAIMS

 

None.

 

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Schedule IV

 

LEGAL NAME, JURISDICTION OF FORMATION AND ADDRESS

 

Name:

Kremers Urban Pharmaceuticals Inc.

 

Jurisdiction of Formation:

State of Indiana

 

Location of Chief Executive Office:

902 Carnegie Center, Suite 360

Princeton, New Jersey 08540

 

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Schedule V

 

MATTERS RELATING TO ACCOUNTS
AND INVENTORY

 

None.

 

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Schedule VI

 

LETTER OF CREDIT RIGHTS

 

None.

 

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