Exhibit 10.2
MASTER LETTER OF CREDIT AGREEMENT
Dated as of September     , 2005
THIS MASTER LETTER OF CREDIT AGREEMENT (this “Agreement”) is issued by the
undersigned applicant (the “Applicant”) in favor of LaSalle Bank National
Association (together with its affiliates as set forth in Section 11.8, the
“Bank”).
The Applicant may from time to time request that the Bank issue letters of
credit for the account of the Applicant. The Applicant agrees that, except as
provided below, any such letter of credit shall be subject to the terms and
provisions of this Agreement, and the Applicant further agrees with and for the
benefit of the Bank as follows:
SECTION 1 CERTAIN DEFINITIONS. When used herein the following terms shall have
the following meanings (such definitions to be applicable to both the singular
and plural forms of such terms):
Application means, at any time, an application (which shall be in writing,
including by facsimile, or made by electronic transmission) for a letter of
credit to be issued by the Bank, specifying (a) the requested issuance date, the
amount, the beneficiary and the expiration date of such letter of credit,
(b) the documentary requirements for drawing thereunder and (c) such other
information as the Bank may reasonably request.
Business Day means any day on which the Bank is open for commercial banking
business at its principal office in Chicago, Illinois.
Event of Default means any of the events described in Section 9.1.
Item means any draft, order, instrument, demand or other document drawn or
presented, or to be drawn or presented, under any Letter of Credit.
ISP means at any time the most recent International Standby Practices issued by
the Institute for International Banking Law & Practice, Inc.
Letter of Credit means any letter of credit issued (including any letter of
credit issued prior to the date hereof) by the Bank for the account of the
Applicant (including any letter of credit issued jointly for the account of the
Applicant and any other Person), in each case as amended or otherwise modified
from time to time, but excluding any letter of credit that is issued pursuant to
an Application which expressly provides that such letter of credit is not issued
pursuant to this Agreement. A letter of credit issued by the Bank pursuant to an
Application from the Applicant (either individually or together with any other
Person) shall be a Letter of Credit hereunder even if another Person is named as
the “Applicant” or “Account Party” in such letter of credit.
Liabilities means all obligations of the Applicant to the Bank and its
successors and assigns, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, now or hereafter existing or due or to
become due, arising out of or in connection with this Agreement, any Letter of
Credit, any Application or any instrument or document delivered in connection
herewith or therewith.
Person means any natural person, corporation, partnership, trust, limited
liability company, association, governmental authority or unit, or any other
entity, whether acting in an individual, fiduciary or other capacity.
Prime Rate means the rate per annum established by the Bank from time to time as
its “Prime Rate” for commercial customers. The Prime Rate is a reference rate
and does not necessarily represent the lowest or best rate actually charged to
any customer.
UCC means at any time the Uniform Commercial Code as in effect in the State of
Illinois.
UCP means at any time the most recent Uniform Customs and Practice for
Documentary Credits issued by the International Chamber of Commerce.
Unmatured Event of Default means any event which if it continues uncured will,
with lapse of time or notice or both, constitute an Event of Default.
SECTION 2 LETTER OF CREDIT PROCEDURES.
2.1 Issuance of Letters of Credit. Subject to the terms and conditions of this
Agreement, the Bank may from time to time, in its sole and complete discretion,
issue Letters of Credit for the account of the Applicant; provided that the
terms and provisions of each Letter of Credit and the Application therefor shall
be satisfactory to the Bank in its discretion.
2.2 Applications. Not later than three Business Days prior to the date of the
proposed issuance of a Letter of Credit (or such later date as the Bank shall
agree), the Applicant shall deliver an Application for such Letter of Credit to
the Bank. An Application may be sent by facsimile, by United States mail, by
overnight courier, by electronic transmission using the system provided by the
Bank, by personal delivery or by any other means acceptable to the Bank.
2.3 Form of Letters of Credit. (a) The Applicant authorizes the Bank to set
forth the terms of each Application in the Letter of Credit corresponding to
such Application (and in any amendment thereto) in such language as the Bank
deems appropriate, with such variations from such terms as the Bank may in its
discretion determine to be necessary (which determination shall be conclusive)
and not materially inconsistent with such Application. The Bank may, but shall
not be obligated to, request the Applicant to review the form of a Letter of
Credit prior to issuance thereof, in which case the Applicant shall be deemed to
have approved the form of such Letter of Credit. With respect to any other
Letter of Credit, the Applicant agrees that such Letter of Credit shall be
conclusively presumed to be in proper form unless the Applicant notifies the
Bank in writing of any inconsistency in such Letter of Credit within three
Business Days of its issuance. Upon receipt of timely notice of any discrepancy
in any Letter of Credit, the Bank will endeavor to obtain the consent of the
beneficiary and any confirming bank for an appropriate modification to such
Letter of Credit; provided that the Bank shall have no liability or
responsibility for its failure to obtain such consent.
(b) The Applicant accepts the risk that a Letter of Credit will be interpreted
or applied other than as intended by the Applicant to the extent such Letter of
Credit (i) permits presentation at a place other than the place of issuance,
(ii) permits application of laws or practice rules with which the Applicant is
unfamiliar, (iii) includes ambiguous, inconsistent or impossible requirements,
(iv) requires termination or reduction against a presentation made by the
Applicant rather than the beneficiary or (v) fails to incorporate appropriate
letter of credit practices rules.
2.4 Representations and Warranties. The delivery of each Application shall
automatically constitute a representation and warranty by the Applicant to the
Bank to the effect that on the requested date of issuance of such Letter of
Credit, (a) the representations and warranties of the Applicant set forth in
Section 4 shall be true and correct as of such requested date as though made on
the date thereof and (b) no Event of Default or Unmatured Event of Default shall
have then occurred and be continuing or will result from such issuance.
SECTION 3 REIMBURSEMENT OBLIGATIONS; RESPONSIBILITIES, ETC.
3.1 Reimbursement Obligations. The Applicant hereby agrees to reimburse the Bank
forthwith upon demand in an amount equal to any payment or disbursement made by
the Bank under any Letter of Credit or any time draft issued pursuant thereto,
together with interest on the amount so paid or disbursed by the Bank from and
including the date of payment or disbursement to but not including the date the
Bank is reimbursed by the Applicant at a rate per annum equal to the Prime Rate
from time to time in effect plus 2% (or, if less, the maximum rate permitted by
applicable law). The obligation of the Applicant to reimburse the Bank under
this Section 3 for payments and disbursements made by the Bank under any Letter
of Credit or any time draft issued pursuant thereto shall be absolute and
unconditional under any and all circumstances, including, without limitation,
the following:

(a)   any failure of any Item presented under such Letter of Credit to strictly
comply with the terms of such Letter of Credit;

(b)   the legality, validity, regularity or enforceability of such Letter of
Credit or of any Item presented thereunder;

 

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(c)   any defense based on the identity of the transferee of such Letter of
Credit or the sufficiency of the transfer if such Letter of Credit is
transferable;

(d)   the existence of any claim, set-off, defense or other right that the
Applicant may have at any time against any beneficiary or transferee of such
Letter of Credit, the Bank or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or any unrelated transaction;

(e)   any Item presented under such Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;

(f)   honor of a demand for payment presented electronically even if such Letter
of Credit requires that demand be in the form of a draft;

(g)   waiver by the Bank of any requirement that exists for the Bank’s
protection and not the protection of the Applicant or any waiver by the Bank
which does not in fact materially prejudice the Applicant;

(h)   any payment made by the Bank in respect of an Item presented after the
date specified as the expiration date of, or the date by which documents must be
received under, such Letter of Credit if payment after such date is authorized
by the ISP, the UCC or the UCP, as applicable; or

(i)   any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing;

provided that the Applicant shall not be obligated to reimburse the Bank for any
wrongful payment or disbursement made by the Bank under any Letter of Credit as
a result of any act or omission constituting gross negligence or willful
misconduct on the part of the Bank.
3.2 Discrepancies. (a) The Applicant agrees that it will promptly examine any
and all instruments and documents delivered to it from time to time in
connection with any Letter of Credit, and if the Applicant has any claim of
non-compliance with its instructions or of discrepancies or other irregularity,
the Applicant will immediately (and, in any event, within three Business Days)
notify the Bank thereof in writing, and the Applicant shall be deemed to have
waived any claim against the Bank unless such notice is given within such time
period. Without limiting the foregoing, if the Bank makes any payment or
disbursement under a Letter of Credit and the Applicant does not send a notice
to the Bank within three Business Days objecting to such payment or disbursement
and specifying in reasonable detail the discrepancy or irregularity which is the
basis for such objection, then the Applicant shall be precluded from making any
objection to the Bank’s honor of the presentation with respect to which such
payment or disbursement was made (but shall not be precluded from asserting any
objection to any different presentation under the same or a different Letter of
Credit).
(b) The Applicant’s acceptance or retention of any documents presented under or
in connection with a Letter of Credit (including originals or copies of
documents sent directly to the Applicant) or of any property for which payment
is supported by a Letter of Credit shall ratify the Bank’s honor of the
documents and absolutely preclude the Applicant from raising a defense or claim
with respect to the Bank’s honor of the relevant presentation.
3.3 Documents. Unless specified to the contrary in the relevant Application, the
Applicant agrees that the Bank and its correspondents: (a) may accept as
complying with the applicable Letter of Credit any Item drawn, issued or
presented under such Letter of Credit which is issued or purportedly issued by
an agent, executor, trustee in bankruptcy, receiver or other representative of
the party identified in such Letter of Credit as the party permitted to draw,
issue or present such Item; and (b) may in its or their discretion, but shall
not be obligated to, accept or honor (i) any Item which substantially complies
with the terms of the applicable Letter of Credit; (ii) any Item which
substantially complies under the laws, rules, regulations and general banking or
trade customs and usages of the place of presentation, negotiation or payment;
(iii) drafts which fail to bear any or adequate reference to the applicable
Letter of Credit; (iv) any Item presented to the Bank after the stated
expiration date of a Letter of Credit but within any applicable time period
during which such Letter of Credit may be honored in accordance with the UCP,
the UCC and/or the ISP, as applicable (and, in any event, any Item presented to
the Bank on the Business Day immediately following the stated expiration date of
any Letter of Credit, if such stated expiration date falls on a day which is not
a Business Day); or (v) any Item which substantially complies with the
requirements of the UCP, the UCC and/or the ISP, as applicable. In determining
whether to pay under any Letter of Credit, the Bank shall have no obligation to
the Applicant or any other Person except to confirm that the Items required to
be delivered under such Letter of Credit appear to have been delivered and
appear on their face to substantially comply with the requirements of such
Letter of Credit. For purposes of the foregoing, an Item “substantially
complies” unless there are discrepancies in the presentation which appear to be
substantial and which reflect corresponding defects in the beneficiary’s
performance in the underlying transaction. A discrepancy is not substantial if
it is unrelated or immaterial to the nature or amount of the Applicant’s loss.
For example, documents honored by the Bank that do not comply with the timing
requirements of the Letter of Credit for presenting or dating any required
beneficiary statement nonetheless substantially comply if those timing
requirements are not material in determining whether the underlying agreement
has been substantially performed or violated.
3.4 Exculpation. In addition to the exculpatory provisions contained in the UCP,
the UCC and/or the ISP, as applicable, the Bank and its correspondents shall not
be responsible for, and the Applicant’s obligation to reimburse the Bank shall
not be affected by, (a) compliance with any law, custom or regulation in effect
in the country of issuance, presentation, negotiation or payment of any Letter
of Credit, (b) any refusal by the Bank to honor any Item because of an
applicable law, regulation or ruling of any governmental agency, whether now or
hereafter in effect, (c) any action or inaction required or permitted under the
UCC, the UCP, the ISP or the United Nations Convention on Independent Guarantees
and Stand-by Letters of Credit, in each case as applicable, or (d) any act or
the failure to act of any agent or correspondent of the Bank, including, without
limitation, failure of any such agent or correspondent to pay any Item because
of any law, decree, regulation, ruling or interpretation of any governmental
agency.
3.5 Risks. The Applicant assumes all risks of the acts or omissions of any
beneficiary or transferee of any Letter of Credit (it being understood that such
assumption is not intended to, and shall not, preclude the Applicant from
pursuing any right or remedy it may have against any such beneficiary or
transferee). The Applicant further agrees that any action or omission by the
Bank under or in connection with any Letter of Credit or any related Item,
document or property shall, unless in breach of good faith, be binding on the
Applicant and shall not put the Bank under any resulting liability to the
Applicant. Without limiting the foregoing, the Applicant agrees that in no event
shall the Bank be liable for incidental, consequential, punitive, exemplary or
special damages.
3.6 Limitation on Bank’s Obligations. Without limiting any other provision
herein, the Bank is expressly authorized and directed to honor any request for
payment which is made under and in compliance with the terms of any Letter of
Credit without regard to, and without any duty on the part of the Bank to
inquire into, the existence of any dispute or controversy between any of the
Applicant, the beneficiary of any Letter of Credit or any other Person, or the
respective rights, duties or liabilities of any of them, or whether any facts
represented in any Item presented under a Letter of Credit are true or correct.
Furthermore, the Applicant agrees that the Bank’s obligation to the Applicant
shall be limited to honoring requests for payment made under and in compliance
with the terms of any Letter of Credit, and the Bank’s obligation remains so
limited even if the Bank may have prepared or assisted in the preparation of the
wording of any Letter of Credit or any Item required to be presented thereunder
or the Bank may otherwise be aware of the underlying transaction giving rise to
any Letter of Credit.
3.7 Automatic Renewal of Letters of Credit. IF ANY LETTER OF CREDIT CONTAINS ANY
PROVISION FOR AUTOMATIC RENEWAL, THE APPLICANT ACKNOWLEDGES AND AGREES THAT THE
BANK IS UNDER NO OBLIGATION TO ALLOW SUCH RENEWAL TO OCCUR AND ANY SUCH RENEWAL
SHALL REMAIN WITHIN THE SOLE AND ABSOLUTE DISCRETION OF THE BANK. THE APPLICANT
IRREVOCABLY CONSENTS TO THE AUTOMATIC RENEWAL OF EACH SUCH LETTER OF CREDIT IN
ACCORDANCE WITH ITS TERMS IF THE BANK ALLOWS SUCH RENEWAL TO OCCUR; PROVIDED
THAT THE APPLICANT SHALL HAVE THE RIGHT TO REQUEST THE BANK TO DISALLOW ANY SUCH
RENEWAL ON THE CONDITION THAT THE APPLICANT SHALL GIVE THE BANK PRIOR WRITTEN

 

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NOTICE OF SUCH REQUEST NOT LESS THAN 30 DAYS PRIOR TO THE DEADLINE IMPOSED UPON
THE BANK FOR NOTIFICATION TO THE BENEFICIARY OF NON-RENEWAL OF ANY SUCH LETTER
OF CREDIT.
SECTION 4 REPRESENTATIONS AND WARRANTIES. The Applicant represents and warrants
to the Bank that:

(a)   Organization, etc. The Applicant is duly organized or formed, validly
existing and (to the extent applicable under the laws of the relevant
jurisdiction) in good standing under the laws of the jurisdiction of its
organization or formation, and the Applicant is duly qualified and in good
standing as a foreign entity authorized to do business in each other
jurisdiction where, because of the nature of its activities or properties, such
qualification is required.

(b)   Authorization; No Conflict. The execution and delivery by the Applicant of
this Agreement and each Application, the issuance of Letters of Credit for the
account of the Applicant hereunder and the performance by the Applicant of its
obligations under this Agreement and the Applications are within the
organizational powers of the Applicant, have been duly authorized by all
necessary organizational action, have received all necessary governmental
approval (if any shall be required), and do not and will not contravene or
conflict with, or result in or require the imposition of any lien or security
interest under, any provision of law or of the charter or by-laws of the
Applicant or of any indenture, loan agreement or other contract, or any
judgment, order or decree, which is binding upon the Applicant.

(c)   Validity and Binding Nature. This Agreement is, and upon delivery to the
Bank each Application will be, the legal, valid and binding obligation of the
Applicant, enforceable against the Applicant in accordance with its terms,
subject to bankruptcy, insolvency and similar laws of general application
affecting the rights of creditors and to general principles of equity.

(d)   Approvals. No authorization, approval or consent of, or notice to or
filing with, any governmental or regulatory authority is required to be made in
connection with the execution and delivery by the Applicant of this Agreement or
the issuance of any Letter of Credit for the account of the Applicant pursuant
hereto.

SECTION 5 FEES. The Applicant agrees to pay the Bank all reasonable fees of the
Bank (at the rates specified by the Bank from time to time in schedules
delivered by the Bank to the Applicant) with respect to each Letter of Credit
(including, without limitation, all fees associated with any amendment to,
drawing under, banker’s acceptance pursuant to, or transfer of a Letter of
Credit), such fees to be payable on demand by the Bank therefor.
SECTION 6 COMPUTATION OF INTEREST AND FEES. All interest and fees hereunder
shall be computed for the actual number of days elapsed on the basis of a year
of 360 days. The interest rate applicable to Letter of Credit reimbursement
obligations shall change simultaneously with each change in the Prime Rate.
SECTION 7 MAKING OF PAYMENTS. (a) All payments of principal of, or interest on,
letter of credit reimbursement obligations, all payments of fees and all other
payments hereunder shall be made by the Applicant in immediately available funds
to the Bank at its principal office in Chicago not later than 12:30 P.M.,
Chicago time, on the date due, and funds received after that time shall be
deemed to have been received by the Bank on the next Business Day. If any
payment of principal, interest or fees falls due on a Saturday, Sunday or other
day which is not a Business Day, then such due date shall be extended to the
next Business Day, and additional interest shall accrue and be payable for the
period of such extension.
(b) The Applicant irrevocably agrees that the Bank or any affiliate thereof may
(but neither the Bank nor any such affiliate shall be obligated to) debit any
deposit account of the Applicant in an amount sufficient to pay any fee,
reimbursement obligation or other amount that is due and payable hereunder. The
Bank or the applicable affiliate shall promptly notify the Applicant of any such
debit (but failure of the Bank or any such affiliate to do so shall not impair
the effectiveness thereof or impose any liability on the Bank or such
affiliate).
(c) The Applicant shall reimburse the Bank for each payment under a Letter of
Credit in the same currency in which such payment was made; provided that, if
the Bank so requests (in its discretion), the Applicant shall reimburse the Bank
in United States dollars for any payment under a Letter of Credit made in a
foreign currency at the rate at which the Bank could sell such foreign currency
in exchange for United States dollars for transfer to the place of payment of
such payment or, if there is no such rate, the United States dollar equivalent
of the Bank’s actual cost of settlement. The Applicant agrees to pay the Bank on
demand in United States dollars such amounts as the Bank may be required to
expend to comply with any and all governmental exchange regulations now or
hereafter applicable to the purchase of foreign currency.
(d) All payments by the Applicant hereunder shall be made free and clear of and
without deduction for any present or future income, excise or stamp taxes and
any other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise taxes and
taxes imposed on or measured by the Bank’s net income or receipts (such
non-excluded items being called “Taxes”). If any withholding or deduction from
any payment to be made by the Bank hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then the Applicant will

(i)   pay directly to the relevant authority the full amount required to be so
withheld or deducted;

(ii)   promptly forward to the Bank an official receipt or other documentation
satisfactory to the Bank evidencing such payment to such authority, and

(iii)   pay to the Bank such additional amount as is necessary to ensure that
the net amount actually received by the Bank will equal the full amount the Bank
would have received had no such withholding or deduction been required.

Moreover, if any Taxes are directly asserted against the Bank or on any payment
received by the Bank hereunder, the Bank may pay such Taxes and the Applicant
will promptly pay such additional amount (including any penalty, interest or
expense) as is necessary in order that the net amount received by the Bank after
the payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount the Bank would have received had no such Taxes been asserted.
If the Applicant fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Bank the required receipts or other required
documentary evidence, the Applicant shall indemnify the Bank for any incremental
Tax, interest, penalty or expense that may become payable by the Bank as a
result of such failure.
SECTION 8 INCREASED COSTS. If, after the date hereof, the adoption of, or any
change in, any applicable law, rule or regulation, or any change in the
interpretation or administration of any applicable law, rule or regulation by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request, guideline or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency,

(a)   affects or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and (taking into
consideration the Bank’s or such controlling corporation’s policies with respect
to capital adequacy) the Bank determines that the amount of such capital is
increased as a consequence of this Agreement or the Letters of Credit; or

(b)   imposes, modifies or deems applicable any reserve (including, without
limitation, any reserve imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by the Bank with respect to letters of
credit, or imposes on the Bank any other condition affecting this Agreement or
the Letters of Credit, and the Bank determines that the result of any of the
foregoing is to increase the cost to, or to impose a cost on, the Bank of
issuing or maintaining any Letter of Credit or of making any payment or
disbursement under any Letter of Credit, or to reduce the amount of any sum
received or receivable by the Bank under this Agreement;

 

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then within five Business Days after demand by the Bank (which demand shall be
accompanied by a statement setting forth in reasonable detail the basis of such
demand and a calculation thereof in reasonable detail), the Applicant shall pay
directly to the Bank such additional amount as will compensate the Bank for such
increased capital requirement, such increased cost or such reduction, as the
case may be. Determinations and statements of the Bank pursuant to this
Section 8 shall be conclusive absent manifest error, and the provisions of this
Section 8 shall survive termination of this Agreement.
SECTION 9 EVENTS OF DEFAULT AND THEIR EFFECT.
9.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement:

      9.1.1   Non-Payment of Liabilities, etc. Default in the payment when due
of any principal of or interest on any Liabilities; or default, and continuance
thereof for five days after notice thereof from the Bank, in the payment when
due of any fees or other amounts payable by the Applicant hereunder.

      9.1.2   Bankruptcy, etc. The Applicant or any guarantor of the Liabilities
shall become insolvent or admit in writing its inability to pay debts as they
mature, or the Applicant or any such guarantor shall apply for, consent to or
acquiesce in the appointment of a trustee or receiver, or in the absence of such
application, consent or acquiescence, a trustee or receiver is appointed for the
Applicant or any such guarantor, or any proceeding under any bankruptcy or
insolvency law or any dissolution or liquidation proceeding is instituted by or
against the Applicant or any such guarantor and, if instituted against the
Applicant or such guarantor, remains for 30 days undismissed, or any writ of
attachment is issued against any substantial portion of the Applicant’s or any
such guarantor’s property and is not released within 30 days of service, or the
Applicant or any such guarantor takes any action to authorize, or in furtherance
of, any of the foregoing.

      9.1.3   Other Agreements with Bank. Any default shall occur (subject to
any applicable grace period) under any other agreement between the Applicant and
the Bank or any of its affiliates (including any agreement under which the
Applicant is a borrower and the Bank or any such affiliate and one or more other
financial institutions are the lenders); or the Applicant shall fail to comply
with or to perform (subject to any applicable grace period) any covenant set
forth in any such other agreement as such covenant is in effect on the date
hereof or is amended from time to time with the consent of the Bank (but without
giving effect to the expiration or termination of any such agreement unless such
agreement is replaced by another agreement to which the Bank is a party).

      9.1.4   Representations and Warranties. Any representation or warranty
made by the Applicant herein or in any writing furnished in connection with or
pursuant to this Agreement shall be false or misleading in any material respect
on the date made.

9.2 Effect of Event of Default. If any Event of Default described in Section
9.1.2 shall occur, all Liabilities shall immediately become due and payable and
the Applicant shall immediately become obligated to deliver to the Bank cash
collateral in an amount equal to the face amount of all outstanding Letters of
Credit; and if any other Event of Default shall occur, the Bank may declare all
Liabilities to be due and payable and may demand that the Applicant immediately
deliver to the Bank cash collateral in an amount equal to the face amount of all
outstanding Letters of Credit, whereupon all Liabilities shall become
immediately due and payable and the Applicant shall immediately become obligated
to deliver to the Bank cash collateral in an amount equal to the face amount of
all outstanding Letters of Credit. The Bank shall promptly advise the Applicant
of any such declaration, but failure to do so shall not impair the effect of
such declaration. The Applicant hereby grants the Bank a security interest in
all cash collateral delivered hereunder. All cash collateral shall be held by
the Bank and applied to Liabilities arising in connection with any drawing under
a Letter of Credit. After all Letters of Credit have been fully drawn, expired
or been terminated, such cash collateral shall be applied by the Bank, first, to
any remaining Liabilities and, then, to any other liabilities of the Applicant
to the Bank, and any excess shall be delivered to the Applicant or as a court of
competent jurisdiction may direct.
SECTION 10 SECURITY.
10.1 Grant of Security Interest. As security for the prompt payment and
performance of all Liabilities, and in addition to any other security given to
the Bank by separate agreement, the Applicant hereby grants to the Bank a
continuing security interest in all of the following, whether now existing or
hereafter arising: (i) all property shipped, stored or dealt with in connection
with any Letter of Credit; and (ii) all drafts, documents, instruments,
contracts (including, without limitation, shipping documents, warehouse receipts
and policies or certificates of insurance), inventory, accounts, chattel paper
and general intangibles, and all proceeds of the foregoing, arising from or in
connection with any Letter of Credit, including, without limitation, any of the
foregoing which is in the Bank’s actual or constructive possession or is in
transit to the Bank or any of its affiliates, agents or correspondents (and
regardless of whether such property has been released to the Applicant). The
Applicant further agrees that the Bank or any of its affiliates may set off and
apply to any of the Liabilities which are then due and payable (by acceleration
or otherwise) any deposit of the Applicant at any time held by the Bank or any
of its affiliates. The Applicant agrees that this Agreement (or a carbon or
photographic copy hereof) may be filed as a financing statement to the extent
permitted by law. The Applicant authorizes the Bank to file such financing
statements as may be required by the Bank to perfect the security interest of
the Bank hereunder. The Applicant also agrees that, on request by the Bank, the
Applicant shall execute and deliver such financing statements and other
documents or instruments as may be required by the Bank to perfect or maintain
the security interest of the Bank hereunder.
10.2 Rights and Remedies. The Bank shall have all rights and remedies of a
secured party under the UCC. If prior notice to the Applicant is required for
any action, the Bank shall give the Applicant at least five days’ notice in
writing of the time and place of the sale, disposition or other event giving
rise to such required notice, and the Applicant agrees that such notice will be
deemed commercially reasonable. Any property or document representing collateral
may be held by the Bank in its name or in the name of the Bank’s nominee, all
without prior notice. Proceeds of any sale or other disposition of collateral
shall be applied, in order, to the expenses of retaking, holding and preparing
the collateral for sale (including reasonable attomeys’ fees and legal
expenses), and then to the obligations of the Applicant hereunder until paid in
full. The Applicant shall be liable for any deficiency.
SECTION 11 GENERAL.
11.1 Waiver; Amendments. No delay on the part of the Bank 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 preclude other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement shall be effective unless the same shall be in writing and
signed and delivered by the Bank, and then any such amendment, modification,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
11.2 Notices. (a) Except as otherwise expressly provided herein, all notices
hereunder shall be in writing (including facsimile and electronic transmission,
which shall be considered original writings). Notices given by mail shall be
deemed to have been given three Business Days after the date sent if sent by
registered or certified mail, postage prepaid, to the applicable party at its
address shown below its signature hereto or at such other address as such party
may, by written notice received by the other party to this Agreement, have
designated as its address for notices. Notices given by facsimile or electronic
transmission shall be deemed to have been given when sent. Notices sent by any
other means shall be deemed to have been given when received (or when delivery
is refused).
(b) The Bank may rely on any writing (including any facsimile, any electronic
transmission or any information on a computer disk or similar medium which may
be reduced to writing), or any telephonic or other oral message or instruction
(including, without limitation, any oral waiver of any discrepancy with respect
to any Item), that the Bank believes in good faith to have been received from an
authorized officer, employee or representative of the Applicant, and the Bank
shall not be liable for any action taken in good faith with respect to any
writing, message or instruction from an unauthorized person. The Bank shall not
be under any duty to verify the identity of any

 

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person submitting any Application or other writing or making any other
communication hereunder. Notwithstanding the foregoing, the Bank is not
obligated to recognize the authenticity of any request to issue, amend, honor or
otherwise act on any Letter of Credit that is not evidenced to the Bank’s
satisfaction by a writing originally signed by a person the Applicant has
certified is authorized to act for the Applicant hereunder or by a message or
instruction authenticated to the Bank’s satisfaction.
11.3 Costs, Expenses and Taxes, Indemnification. (a) The Applicant agrees to pay
on demand all reasonable out-of-pocket costs and expenses of the Bank (including
the reasonable fees and charges of counsel for the Bank) in connection with the
enforcement of this Agreement. In addition, the Applicant agrees to pay, and to
save the Bank harmless from all liability for, any stamp or other taxes which
may be payable in connection with the execution or delivery of this Agreement,
the issuance of Letters of Credit hereunder, or the issuance of any other
instrument or document provided for herein or delivered or to be delivered
hereunder or in connection herewith.
(b) The Applicant agrees to indemnify the Bank and each of its affiliates and
each of their respective officers, directors, employees and agents (each an
“Indemnified Party”) against, and to hold each Indemnified Party harmless from,
any and all actions, causes of action, suits, losses, costs, damages, expenses
(including reasonable attorneys’ fees and charges, expert witness fees and other
dispute resolution expenses) and other liabilities (collectively the
“Indemnified Liabilities”) incurred by any Indemnified Party as a result of, or
arising out of, or relating to, this Agreement or any Letter of Credit (and
without regard to whether the applicable Indemnified Party is a party to any
proceeding out of which such Indemnified Liabilities arise), except to the
extent that a court of competent jurisdiction determines in a final,
non-appealable order that any Indemnified Liability resulted directly from the
gross negligence or willful misconduct of such Indemnified Party. Without
limiting the generality of the foregoing sentence, the term “Indemnified
Liabilities” includes any claim or liability in which an advising, confirming or
other nominated bank, or a beneficiary requested to issue its own undertaking,
seeks to be reimbursed, indemnified or compensated. If and to the extent the
foregoing undertaking may be unenforceable for any reason, the Applicant agrees
to make the maximum contribution to the payment of each of the Indemnified
Liabilities which is permitted under applicable law.
(c) Without limiting clause (b), the Applicant agrees to indemnify the Bank, and
to hold the Bank harmless from, any loss or expense incurred by the Bank as a
result of any judgment or order being given or made for the payment of any
amount due hereunder in a particular currency (the “Currency of Account”) and
such judgment or order being expressed in a currency (the “Judgment Currency”)
other than the Currency of Account and as a result of any variation having
occurred in the rate of exchange between the date which such amount is converted
into the Judgment Currency and the date of actual payment pursuant thereto. The
foregoing indemnity shall constitute a separate and independent obligation of
the Applicant.
(d) All obligations provided for in this Section 11.3 shall survive any
termination of this Agreement.
11.4 Captions. Section captions used in this Agreement are for convenience only
and shall not affect the construction of this Agreement.
11.5 Governing Law. This Agreement shall be a contract made under and governed
by the laws of the State of Illinois applicable to contracts made and to be
performed entirely within such State. Except to the extent inconsistent with
such state law or otherwise expressly stated in any Letter of Credit, each
Letter of Credit and this Agreement also are subject to the terms of (i) with
respect to matters relating to standby Letters of Credit and Applications
therefor, the ISP, and (ii) with respect to matters relating to commercial
Letters of Credit and Applications therefor, the UCP. Whenever 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 applicable 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. All obligations of the Applicant and rights of the Bank expressed
herein shall be in addition to and not in limitation of those provided by
applicable law.
11.6 Counterparts. This Agreement may be executed in any number of counterparts
and by the parties hereto on separate counterparts and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Agreement.
11.7 Successors and Assigns. This Agreement shall be binding upon the Applicant
and its successors and assigns, provide d that the Applicant may not assign any
of its rights or obligations hereunder without the prior written consent of the
Bank.
11.8 Right of Bank to Act through Branches and Affiliates. The Bank may cause
any Letter of Credit requested by the Applicant to be issued by a branch or
affiliate of the Bank, and all references to the “Bank” herein or in any related
document shall include each applicable branch or affiliate.
11.9 Foreign Assets Control Regulations. The Applicant certifies that no
transaction in foreign commodities covered by any Application will be prohibited
under the foreign assets control regulations of the United States Treasury
Department and that any importation related to any Letter of Credit will conform
with all applicable laws, rules and regulations.
11.10 Mitigation. Limitation of Liability. The Applicant agrees to take action
to avoid or reduce the amount of any damages which may be claimed against the
Bank. For example, (a) in the case of wrongful honor, the Applicant agrees to
enforce its rights arising out of the underlying transaction (except to the
extent that enforcement is impractical due to the insolvency of the beneficiary
or other Person from whom the Applicant might otherwise recover), and (b) in the
case of wrongful dishonor, the Applicant agrees to specifically and timely
authorize the Bank to effect a cure and give written assurances to the
beneficiary that a cure is being arranged. The Applicant’s aggregate remedies
against the Bank for honoring a presentation or retaining honored documents in
breach of the Bank’s obligations to the Applicant (whether arising under this
Agreement, applicable letter of credit practice or law, or any other agreement
or law) are limited to the aggregate amount paid by the Applicant to the Bank
with respect to the honored presentation.
11.11 Subrogation. The Bank shall be subrogated (for purposes of defending
against the Applicant’s claims and proceeding against others to the extent of
any liability of the Bank to the Applicant) to the Applicant’s rights against
any Person who may be liable to the Applicant on any underlying transaction, to
the rights of any holder in due course or Person with similar status against the
Applicant and to the rights of the beneficiary of any Letter of Credit or its
assignee or any Person with similar status against the Applicant.
11.12 Co-Applicants. (a) If this Agreement is signed by two or more Persons
(each a “Co-Applicant”), then the term “Applicant” shall mean each such Person
and all such Persons shall be jointly and severally liable for all obligations
of the “Applicant” hereunder and in respect of the Letters of Credit issued
pursuant hereto. Any Co-Applicant shall have the right to issue all instructions
relating to Letters of Credit (including, without limitation, instructions as to
the disposition of documents and waiver of discrepancies) and to agree with the
Bank upon any amendment, extension, renewal or modification of, or change in the
amount of, any Letter of Credit, and such instructions and agreements shall be
binding upon all Co-Applicants. Each Co-Applicant shall be bound by (i) any
notice from the Bank to any other CoApplicant, (ii) any other Co-Applicant’s
settlement or release of any claim against the Bank arising under this Agreement
and (iii) any default under this Agreement attributable to any other
Co-Applicant.
(b) Each Co-Applicant agrees that if at any time all or any part of any payment
theretofore applied by the Bank to any of the Liabilities is or must be
rescinded or returned by the Bank for any reason whatsoever (including the
insolvency, bankruptcy or reorganization of any Co-Applicant), such Liabilities
shall, to the extent that such payment is or must be rescinded or returned, be
deemed to have continued in existence, notwithstanding such application by the
Bank, and the obligations of such Co-Applicant with respect thereto shall
continue to be effective or be reinstated, as the case may be, as to such
Liabilities, all as though such application by the Bank had not been made.
(c) The Bank may, from time to time, in its sole discretion and without
affecting the obligation of any Co-Applicant, take any or all of the following
actions: (a) retain or obtain the primary or secondary obligation of any other
obligor, in addition to such Co-Applicant, with respect to any of the
Liabilities, and take any security for the obligations of any such other
obligor, (b) extend

 

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or renew any of the Liabilities for one or more periods (whether or not longer
than the original period), alter or exchange any of the Liabilities, or release
or compromise any obligation of any other Co-Applicant or any obligation of any
nature of any other obligor with respect to any of the Liabilities, (c) 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 Liabilities,
or extend or renew 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, and (d) resort to
such Co-Applicant for payment of any of the Liabilities when due, whether or not
the Bank shall have resorted to any property securing any of the Liabilities or
shall have proceeded against any other Co-Applicant or any other obligor
primarily or secondarily obligated with respect to any of the Liabilities.
11.13 Continuation of Liability. Regardless of the expiry date of any Letter of
Credit, the Applicant shall remain liable hereunder until the Bank is released
from liability by every Person that is entitled to draw or demand payment under
each Letter of Credit issued pursuant hereto.
11.14 Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY APPLICATION, SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF COOK COUNTY, ILLINOIS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED THAT ANY
SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE BANK’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE APPLICANT HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF COOK COUNTY, ILLINOIS
AND OF THE UNITED STATES (DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR) THE PURPOSE OF ANY SUCH LITIGATION. THE APPLICANT FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, TO THE
ADDRESS SET FORTH BENEATH ITS SIGNATURE HERETO (OR SUCH OTHER ADDRESS AS IT
SHALL HAVE SPECIFIED IN WRITING TO THE BANK AS ITS ADDRESS FOR NOTICES
HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE
APPLICANT EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
11.15 Waiver of Jury Trial. EACH OF THE APPLICANT AND, BY ISSUING ANY LETTER OF
CREDIT, THE BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY
APPLICATION, INSTRUMENT, DOCUMENT, AMENDMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
11.16 This Agreement is being executed and delivered by the parties hereto in
connection with that certain Credit Agreement, dated as of October 7, 2003 (as
heretofore and hereafter amended, restated, supplemented or otherwise modified,
the “Credit Agreement"), by and among the Applicant, the Co-Applicant, the
financial institutions party thereto from time to time as lenders and the Bank
as administrative agent. In the event of any conflict or inconsistency between
this Agreement and the Credit Agreement, the provisions of the Credit Agreement
shall control.
Delivered at Chicago, Illinois, as of the day and year first above written.
Akorn, Inc.
[Applicant]

          By:    /s/ Jeffrey A. Whitnell   Title     CFO   By:       Title     

     
Address:
  2500 Millbrook Drive
Buffalo Grove, IL 60089
 
   
Attention:
  Chief Financial Officer
 
   
Facsimile:
  847-279-6123

Akorn (New Jersey), Inc.
[Second Applicant, if applicable]

          By:    /s/ Jeffrey A. Whitnell   Title     CFO   By:       Title     

     
Address:
  2500 Millbrook Drive
Buffalo Grove, IL 60089
 
   
Attention:
  Chief Financial Officer
 
   
Facsimile:
  847-279-6123