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.

 











 

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.

 











 

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]

 











 

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
    


 











 

	
 
    	
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
    


 












 

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.

 











 

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.

 











 

Schedule III

 

COMMERCIAL TORT CLAIMS

 

None.

 











 

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

 











 

Schedule V

 

MATTERS RELATING TO ACCOUNTS
 AND INVENTORY

 

None.

 











 

Schedule VI

 

LETTER OF CREDIT RIGHTS

 

None.