exv10w1



 





Exhibit 10.1




FIRST AMENDMENT TO CREDIT AGREEMENT




     THIS FIRST AMENDMENT TO CREDIT AGREEMENT (“Amendment”) is made as of
August 13, 2004 (the “ Amendment Closing Date”) by and among AKORN, INC., a
Louisiana corporation (the “Akorn”), AKORN (NEW JERSEY), INC., an Illinois
corporation (“Akorn New Jersey”, and together with Akorn, the “Companies” and
each a “Company”), DR. JOHN N. KAPOOR, THE JOHN N. KAPOOR TRUST DTD 9/29/89,
LASALLE BANK NATIONAL ASSOCIATION, a national banking association, as agent for
the Lenders (as hereinafter defined) (in such capacity, the “Administrative
Agent”), and the financial institutions signatory hereto.



RECITALS



     A.     The Administrative Agent, the Companies and certain other financial
institutions (the “Lenders”), entered into a Credit Agreement dated as of
October 7, 2003 (as may be amended, restated, modified, and supplemented, the
“Credit Agreement”).



     B.     The Administrative Agent, the Companies and the Lenders signatory
hereto desire to enter into this Amendment for the purpose of, among other
things, (i) amending and adding certain definitions, (ii) deleting Section
10.13, (iii) amending Section 11.14, (iv) waiving certain “Events of Default”
which have occurred or may occur relating to Sections 10.1.1, 10.11 and 11.14
and (v) amending the Kapoor Guaranty, all of the foregoing subject to
conditions and terms set forth herein.



AGREEMENT




     In consideration of the matters set forth in the recitals and the
covenants and provisions herein set forth, and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:



     1.     Definitions. Capitalized terms used but not defined herein are used as
defined in the Credit Agreement.



     2.     Amendments. Upon the Effective Date (as defined below), the Credit
Agreement shall be amended as follows:



            (a)     The definition of “EBITDA” set forth in Section 1.1 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:




     EBITDA means, for any period, Consolidated Net Income for such
period plus, to the extent deducted in determining such Consolidated Net
Income, Interest Expense, income tax expense, depreciation and
amortization for such period plus, solely for the purposes of determining
EBITDA for the Fiscal Year 2003, the Decatur Add Back and the Refinancing
Expense Add Back.



 









 





            (b)     The definition of “Computation Period” set forth in Section 1.1 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:




Computation Period means each period of twelve consecutive calendar
months ending on the last day of a calendar month; provided that
for the purpose of determining compliance with Section 11.14.1, the
Computation Period used in such determination for any Computation
Period ending in the 2004 calendar year, shall be the period
beginning January 1, 2004 and ending on the last day of the
applicable calendar month.



            (c)     The following new definitions are hereby added in Section 1.1 of the
Credit Agreement in proper alphabetical order:




Decatur Add Back means an amount not to exceed $860,000 associated
with the cost of shutting down Akorn’s facility located in Decatur,
Illinois in December 2003.




Refinancing Expense Add Back means an amount not to exceed
$3,400,000 associated with non-recurring legal and consulting
expenses incurred in the month of October 2003 in connection with
the Loan Documents and the Related Transactions.



            (d)     Section 10.13 of the Credit Agreement is hereby deleted in its
entirety.



            (e)     Section 11.14.1 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:



            “11.14 Financial Covenants.




11.14.1      EBITDA.      Not Permit EBITDA for any Computation
Period to be less than the applicable amount set forth
below for such Computation Period:



	 	 	 	 	 
	Computation	 	 
	Period Ending	 	EBITDA
	March 31, 2004
	 	$	1,100,000	 
	April 30, 2004
	 	$	1,100,000	 
	May 31, 2004
	 	$	1,100,000	 
	June 30, 2004
	 	$	1,800,000	 
	July 31, 2004
	 	$	1,800,000	 
	August 31, 2004
	 	$	1,800,000	 
	September 30, 2004
	 	$	3,600,000	 
	October 31, 2004
	 	$	3,600,000	 
	November 30, 2004
	 	$	3,600,000	 







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December 31, 2004, and the last day of each Computation Period
thereafter $5,500,000




     11.14.2     Fixed Charge Coverage Ratio. Not permit
the Fixed Charge Coverage Ratio to be less 1.25:1.00
for the Computation Period ending on December 31, 2004
and for each Computation Period thereafter.




     11.14.3     Senior Debt to EBITDA Ratio. Not permit
the Senior Debt to EBITDA Ratio for any Computation
Period to exceed the applicable ratio set forth below
for such Computation Period:



	 	 	 	 	 
	Computation	 	Senior Debt to
	Period Ending	 	EBITDA Ratio
	December 31, 2004 and the last day of each Computation

Period thereafter ending on or before May 31, 2005
	 	 	1.75	 
	June 30, 2005 and the last day of each Computation Period

thereafter
	 	 	1.50	 








     11.14.4     Total Debt to EBITDA Ratio. Not permit
the Total Debt to EBITDA Ratio to exceed 3.50:1.00 for
the Computation Period ending on December 31, 2004 and
for each Computation Period thereafter.




     11.14.5     Capital Expenditures. Not permit the
aggregate amount of all Capital Expenditures made by
the Loan Parties in Fiscal Year 2003 to exceed
$1,900,000 and in any Fiscal Year thereafter to exceed
$3,200,000.”



     3.     Waiver. Upon the terms and subject to the conditions set forth in this
Amendment, including the satisfaction of the conditions set forth in Section 8
hereof, the Administrative Agent and the Lenders signatory hereto hereby waive
any Event of Default (a) under Section 13.1.5(b) of the Credit Agreement
arising out of (i) the Companies’ noncompliance with Section 10.1.1 of the
Credit Agreement relating solely to the adverse reference to the going concern
value of the Companies contained in the annual audit report delivered by the
Companies for Fiscal Year 2003 and (ii) Section 10.11 of the Credit Agreement
relating solely to the Companies’ failure to comply with provisions of Section
10.11 of the Credit Agreement and (b) Section 13.1.5(a) of the Credit
Agreement relating to the Companies’ failure to comply with Section 11.14.1 of
the Credit Agreement for the Computation Periods ending on December 31, 2003,
January 31, 2004, February 29, 2004 and March 31, 2004. This waiver by the
Administrative Agent and the Lenders party hereto shall not operate as a
consent or waiver of



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(y) any other right, power or remedy of the Administrative Agent or the
Lenders under the Loan Documents, or (z) any other Event of Default under the
Credit Agreement.



     4.     Representations and Warranties. To induce the Administrative Agent and
the Lenders to execute this Amendment, each Company jointly and severally
represents and warrants to the Administrative Agent and the Lenders as follows:



            (a)     Each Company is in good standing under the laws of its jurisdiction of
formation and in each jurisdiction where, because of the nature of its
activities or properties, such qualification is required, except for such
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect.



            (b)     Each Company is duly authorized to execute and deliver this Amendment
and is duly authorized to perform its obligations hereunder.



            (c)      The execution, delivery and performance by the Companies of this
Amendment do not and will not (i) require any consent or approval of any
governmental agency or authority (other than any consent or approval which has
been obtained and is in full force and effect), (ii) conflict with (A) any
provision of law, (B) the charter, by-laws or other organizational documents of
any Company or (C) any agreement, indenture, instrument or other document, or
any judgment, order or decree, which is binding upon any Company or any of its
properties or (iii) require, or result in, the creation or imposition of any
Lien on any asset of any Company.



            (d)     This Amendment is the legal, valid and binding obligation of each
Company, enforceable against such Company in accordance with its terms, subject
to bankruptcy, insolvency and similar laws affecting enforceability of
creditors’ rights generally and to general principals of equity.



            (e)      The representations and warranties in the Loan Documents (including
but not limited to Section 9 of the Credit Agreement) are true and correct in
all material respects with the same effect as though made on and as of the date
of this Amendment (except to the extent stated to relate to a specific earlier
date, in which case such representations and warranties were true and correct
as of such earlier date).



            (f)      Except as specifically waived in this Amendment, no Event of Default
or Unmatured Event of Default shall have then occurred and be continuing.



     5.     Affirmation. Except as expressly amended hereby, the Credit Agreement
and the other Loan Documents are and shall continue in full force and effect
and each Company hereby fully ratifies and affirms each Loan Document to which
it is a party. Reference in any of this Amendment, the Credit Agreement or any
other Loan Document to the Credit Agreement shall be a reference to the Credit
Agreement and the Kapoor Guaranty as amended hereby and as further amended,
modified, restated, supplemented or extended from time to time. This Amendment
shall constitute a Loan Document for purposes of the Credit Agreement and the
other Loan Documents.



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     6.     Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute one instrument. Delivery of an executed
counterpart of this Amendment by facsimile shall be effective as delivery of an
original counterpart.



     7.     Headings. The headings and captions of this Amendment are for the
purposes of reference only and shall not affect the construction of, or be
taken into consideration in interpreting, this Amendment.



     8.     Conditions to Amendment. This Amendment shall become effective upon
the satisfaction in full of all of the following conditions precedent, each of
which shall be satisfactory to the Administrative Agent and the Lenders:



            (a)     Amendment. The Companies shall have executed and delivered to the
Administrative Agent this Amendment.



            (b)     Payment of Fee. Receipt by the Administrative Agent of a
non-refundable amendment fee in the amount of $25,000.



            (c)     Officer’s Certificate. Each of the Companies shall have delivered a
certificate of an officer of the each Company (i) evidencing that all corporate
proceedings required to authorize the execution and delivery of this Amendment
and all other documents relating hereto on behalf of the Companies have been
duly taken, and (ii) which sets forth the names, offices and specimen
signatures of the officers of such Company who are authorized to execute this
Amendment and such other documents on behalf of such Company.


The date upon which such events have occurred is the “Effective Date.”



     9.     Conditions Subsequent to Effective Date. As promptly as practicable
and in any event prior to September 13, 2004 (or such longer period as the
Administrative Agent shall approve), the Companies shall satisfy in full of all
of the conditions, each of which shall be satisfactory to the Administrative
Agent and the Lenders, set forth in Section 10.11 of the Credit Agreement. The
Companies acknowledge and agree that any breach of this Section 9 shall
constitute an immediate Event of Default under the Credit Agreement.



     10.     Further Assurances. Each Company agrees to execute and deliver in
form and substance satisfactory to the Lender such further documents,
instruments, amendments, financing statements and to take such further action,
as may be necessary from time to time to perfect and maintain the liens and
security interests created by the Loan Documents, as amended hereby.



     11.     APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO
ILLINOIS CHOICE OF LAW DOCTRINE.



     12.     Amendment to the Kapoor Guaranty. Upon the Effective Date, the
Administrative Agent and each of the Lenders consent to and hereby amend the
Kapoor



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Guaranty such that (i) the dollar amount “$5,500,000” set forth in fourth
unnumbered paragraph of the Kapoor Guaranty following Recital (B) is replaced
with the dollar amount “$4,000,000” (such that the “L/C Collateralized Guaranty
Amount” shall hereafter be $4,000,000), and (ii) the fifth unnumbered paragraph
of the Kapoor Guaranty following Recital (B) is hereby amended and restated in
full as follows:




     “Notwithstanding anything to the contrary set forth herein,
the Uncollateralized Guaranty Amount shall be reduced to the
amounts set forth below if EBITDA of Akorn and its Subsidiaries is
at or above the level specified below for the corresponding period
(such reduction to be effective as provided below):



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Uncollateralized
	 	 	 	 	 	 	Guaranty
	“Period
	 	EBITDA
	 	Amount

	1/1/04-6/30/04
	 	$	1,800,000	 	 	$	3,500,000	 
	1/1/04-7/31/04
	 	$	1,800,000	 	 	$	3,500,000	 
	1/1/04-8/31/04
	 	$	1,800,000	 	 	$	3,500,000	 
	1/1/04-9/30/04
	 	$	3,600,000	 	 	$	2,000,000	 
	1/1/04-10/31/04
	 	$	3,600,000	 	 	$	2,000,000	 
	1/1/04-11/30/04
	 	$	3,600,000	 	 	$	2,000,000	 
	Twelve month period ending
12/31/04 and the twelve
month period ending on the
last day of each calendar
month thereafter
	 	$	5,500,000	 	 	$	0”	 








 provided, that if after any such reduction of the Uncollateralized
Guaranty Amount, EBITDA for any twelve month period ceases to be
above $5,500,000, the Uncollateralized Guaranty Amount shall
automatically and without further action by any party increase and
reinstate to the Uncollateralized Guaranty Amount corresponding to
such EBITDA (and if EBITDA for any later twelve-month period falls
below $1,800,000, the Uncollateralized Guaranty Amount shall be
increased back to the full original Uncollateralized Guaranty
Amount) regardless of whether the Uncollateralized Guaranty Amount
had previously been reduced to zero. All calculations of EBITDA
shall be made in accordance with the requirements of the Credit
Agreement. The effective date of any reduction of the
Uncollateralized Guaranty Amount shall be the date which is 10
Business Days after which the Companies deliver a properly
completed Compliance



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Certificate for the relevant period specified in the chart above to
the Administrative Agent; provided that if the Administrative Agent
disagrees with any such EBITDA calculation, the Uncollateralized
Guaranty Amount shall not be subject to reduction until Akorn’s
independent auditor has confirmed such EBITDA calculation in
writing as complying with GAAP and the requirements of the Credit
Agreement. The Uncollateralized Guaranty Amount shall not be
subject to reduction at any time that a Default or an Event of
Default has occurred and is continuing under the Credit Agreement
(but such Default or Event of Default shall not affect any prior
reduction in accordance with this Guaranty). No reduction of the
Uncollateralized Guaranty Amount shall affect the undersigned’s
obligations with respect to the full L/C Collateralized Guaranty
Amount or any costs or expenses of collection hereunder (neither of
which shall be subject to reduction).”



     Notwithstanding the foregoing, if prior to a date which is within 91 days
after the receipt of any Novadaq Payoff Amount (as hereinafter defined), there
is then pending a petition in bankruptcy court against either Company and there
is then existing a claim or argument that all or any portion of the Novadaq
Payoff is a fraudulent transfer or a preferential payment, or should otherwise
be set aside, then the amendments to the Kapoor Guaranty set forth in this
Section 12 shall be null and void and the Kapoor Guaranty shall reinstate on
its original terms. As used herein, the “Novadaq Payoff Amount” means all
amounts received by the Administrative Agent, on behalf of the Lenders, in
prepayment of the Term Loans from the Companies as a result of the sale (the
"Novadaq Sale”) of Akorn’s equity interest in Novadaq Technologies Inc. Upon
the Administrative Agent’s receipt of any additional proceeds from the Novadaq
Sale, the Administrative Agent and the Lenders agree to reduce the “L/C
Collateralized Guarantee Amount” (as defined in the Kapoor Guaranty) by the
amount so received. By signing as indicated below, Dr. John N. Kapoor and the
Kapoor Trust hereby (i) acknowledge and consent to this Amendment, (ii) agree
to the amendment and conditions set forth in this Section 12 with respect to
the Kapoor Guaranty, and (iii) ratify, confirm and reaffirm their obligations
under the Kapoor Guaranty (as amended hereby) and agree that the Kapoor
Guaranty (as amended hereby) is in full force and effect.



     13.     Acknowledgment. Each of the Companies, Kapoor and the Kapoor Trust
hereby waives, discharges and forever releases the Administrative Agent and
each of the Lenders, and each of said Person’s employees, officers, directors,
attorneys, stockholders and successors and assigns, from and of any and all
claims, causes of action, allegations or assertions that they have or may have
had at any time through (and including) the date of this Amendment, against any
or all of the foregoing, regardless of whether any such claims, causes of
action, allegations or assertions are known to them or whether any such claims,
causes of action, allegations or assertions arose as a result of the
Administrative Agent’s or any Lender’s actions or omissions in connection with
the Credit Agreement or any other Loan Document, including any amendments or
modifications thereto, or otherwise.



[signature page follows]




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     The parties hereto have caused this Amendment to be executed by their duly
authorized officers, all as of the day and year first above written.

	 	 	 	 	 
	 	AKORN, INC., a Louisiana corporation

 	 
	 	By:  	                                                            
 	 
	 	Title:  	                                                             	 
	 	 	 	 
	 


	 	 	 	 	 
	 	AKORN (NEW JERSEY), INC., an Illinois

corporation

 	 
	 	By:  	                                                            
 	 
	 	Title:  	                                                             	 
	 	 	 	 
	 


	 	 	 	 	 
	 	LASALLE BANK NATIONAL ASSOCIATION, as

Administrative Agent, as Issuing Lender and

as a Lender

 	 
	 	By:  	                                                            
 	 
	 	Title:  	                                                             	 
	 	 	 	 
	 


	 	 	 	 	 
	 	                                                            

Dr. John N. Kapoor

 	 
	 	 	 
	 	 	 
	 	 	 
	 


	 	 	 	 	 
	 	THE JOHN N. KAPOOR TRUST DTD 9/20/89

 	 
	 	By:  	                                                            
 	 
	 	Dr. John N. Kapoor, as trustee