Document:

exv10w53

 

EXHIBIT 10.53

THIRD AMENDMENT TO CREDIT AGREEMENT

     THIS THIRD AMENDMENT TO CREDIT AGREEMENT (“Amendment”) is made as
of October 8, 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”), and 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 amended by that certain First Amendment to Credit
Agreement dated as of August 12, 2004 and that certain Second Amendment to
Credit Agreement dated as of August 26, 2004, and as may be further amended,
restated, modified, and supplemented as 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) adding a definition for “EBITDA to Interest Expense Ratio” and
amending the definition of “Computation Period”, (ii) waiving certain Events of
Defaults which have occurred under the Credit Agreement, 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.       AEG and NeoPharm Waiver. Subject to the terms and conditions
herein, the Required Lenders hereby (i) waive any Event of Default which, if
not for the execution of this Amendment, would arise solely from (A) Akorn’s
failure to comply with Section 11.10 of the Credit Agreement resulting
from issuance of Akorn Capital Securities by Akorn to AEG Partners LLC in
accordance with that certain Warrant Purchase and Registration Agreement dated
June 18, 2003 by and between Akorn and AEG Partners LLC as in effect on the
date hereof, (B) Akorn’s failure to comply with Section 13.1.2 of the
Credit Agreement resulting from the “Event of Default” that has occurred under
section 6.1(d) that certain promissory note issued in connection with Neopharm
Subordinated Debt Documents.

     3.       Waiver under Section 10.11. The Required Lenders hereby waive
any Event of Default which has occurred under Section 13.1.5 of the
Credit Agreement resulting solely from

 

the Companies failure to comply with (i)
the requirements under Sections 10.11(a), (d) and (e) (it being
understood with respect to Section 10.11(e) of the Credit Agreement that
the waiver hereunder of such Section 10.11(e) does not release the
Companies from their obligations under Section 10.3 of the Credit
Agreement), (ii) the requirement under Section 10.11(h) of the Credit
Agreement; provided, that the Companies hereby acknowledge and agree
that any Inventory located at the New Mexico facility shall be excluded from
the calculation of Eligible Inventory and (iii) the requirement under
Section 10.11(i) of the Credit Agreement. Akorn hereby represents and
warrants that it has hired a Director of Regulatory Affairs as required under
Section 10.11(b) of the Credit Agreement and, based upon such
representation and warranty, the Required Lenders hereby waive any Event of
Default which has occurred under Section 13.1.5 of the Credit Agreement
resulting solely from the Akorn’s failure to comply with that requirement under
Section 10.11(b) of the Credit Agreement; provided, that the
Companies acknowledge and agree that the Required Lenders have not waived the
other requirement contained in Section 10.11(b) of the Credit Agreement
pursuant to which the Companies are required to pursue all necessary corrective
action with respect to the FDA inspection disclosed in Schedule 9.6 of
the Credit Agreement. Akorn hereby represents and warrants that it has settled
the claims described in Section 10.11(c) of the Credit Agreement as
required thereby and, based upon such representation and warranty, the Required
Lenders hereby waive any Event of Default which has occurred under Section
13.1.5 of the Credit Agreement resulting solely from the Akorn’s failure to
comply with Section 10.11(c) of the Credit Agreement. Akorn hereby
represents and warrants that it has hired a qualified independent consultant
acceptable to the SEC staff and directed such consultant to prepare its
findings, in each case in accordance within the time and other requirements of
the consent order described in the first item on Schedule 9.6 of the
Credit Agreement as required under Section 10.11(f) of the Credit
Agreement as required thereby and, based upon such representation and warranty,
the Required Lenders hereby waive any Event of Default which has occurred under
Section 13.1.5 of the Credit Agreement resulting solely from the Akorn’s
failure to comply with Section 10.11(f) of the Credit Agreement

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

     (a)       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 (i)
Section 11.14.1, for any Computation Period ending in the
2004 calendar year, such Computation Period shall be the period
beginning January 1, 2004 and ending on the last day of the
applicable calendar month and (ii) Section 11.14.2, the
Computation Period used in (X) determining EBITDA in the 2004
calendar year, shall be calculated by annualizing the period
beginning January 1, 2004 and ending on the last day of the
applicable calendar month and (Y) determining Interest Expense, for
any Computation Period ending prior to July 1, 2005, shall be
calculated by annualizing the period beginning on July 1, 2004 and
ending on the last day of the applicable calendar month, with
respect to Interest Expense.

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                (b)       The definition of “EBITDA to Interest Expense Ratio” set forth below
is added to Section 1.1 of the Credit Agreement:

	 	 	 	EBITDA to Interest Expense Ratio means, as of the last day
of any Computation Period, the ratio of (a) EBITDA as of such day
to (b) cash Interest Expense for the Computation Period ending on
such day.

                
(c)       Section 11.14 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:

        “11.14 Financial Covenants.

           11.14.1       Senior Debt to EBITDA Ratio. Not
permit the Senior Debt to EBITDA Ratio to exceed
1.75:1.00 for the Computation Period ending on
September 30, 2004 and for each Computation Period
thereafter.

           11.14.2       EBITDA to Interest Expense Ratio.
Not permit the EBITDA to Interest Expense Ratio to be
less than 4.00:1.00 for the Computation Period ending
on September 30, 2004 and for each Computation Period
thereafter.”

     5.       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

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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)       No Event of Default or Unmatured Event of Default shall have then
occurred and be continuing (including, without limitation, with respect to the
requirement under Section 10.11(g) of the Credit Agreement that the
Companies take all action as may reasonably necessary to comply with the
consent decree issue by the DEA and described in the third item on Schedule
9.6 of the Credit Agreement).

     6.       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 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.

     7.       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.

     8.       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.

     9.       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)       Insurance Certificates. The Companies shall have delivered
updated insurance certificates to be delivered to the Administration Agent
naming the Administration Agent as the lender loss payee and additional insured
with respect to its property, general liability, automobile, product liability
and umbrella insurance policies.

                
(c)       Secretary’s Certificate. Each of the Companies shall have
delivered a certificate of its Secretary or Assistant Secretary (i) evidencing
that all corporate proceedings required to authorize the execution and delivery
of this Amendment and all other documents

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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.”

     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.       Acknowledgment. Each of the Companies 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]

5

 

     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:
	 	/s/ Jeffrey A. Whitnell

Chief Financial Officer

	 	 	AKORN (NEW JERSEY), INC., an Illinois

corporation
	 	 	
By:

Title:
	 	/s/ Jeffrey A. Whitnell

Chief Financial Officer

	 	 	LASALLE BANK NATIONAL ASSOCIATION, as

Administrative Agent, as Issuing Lender and

as a Lender
	 	 	
By:

Title:
	 	/s/ Patrick J. O’Toole

Vice Presidentexv10w54

 

EXHIBIT 10.54

WAIVER AND CONSENT TO CREDIT AGREEMENT

     THIS WAIVER AND CONSENT TO CREDIT AGREEMENT (this “Consent”) is
executed and delivered as of this 8th day of October, 2004 among LASALLE BANK
NATIONAL ASSOCIATION, as administrative agent (the “Administrative
Agent”), the financial institutions party hereto (the “Lenders”),
AKORN, INC., a Louisiana corporation (“Akorn”) and Akorn (New Jersey),
Inc., an Illinois corporation (“Akorn New Jersey”).

W I T N E S S E T H :

     A.   The Administrative Agent, Akorn, Akorn New Jersey and the Lenders
entered into a Credit Agreement dated as of October 7, 2003 (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Capitalized terms used but not defined herein shall have the
meanings attributed to them in the Credit Agreement.

     B.   Akorn intends to (i) enter into that certain Limited Liability Company
Agreement for Akorn-Strides, LLC, a Delaware limited liability company
(“Akorn-Strides”), to be dated on or around the date hereof (the “LLC
Agreement”) along with Strides Arcolab Limited, a company organized under
the laws of India (a copy of which is attached hereto as Exhibit A)
pursuant to which Akorn may be required to contribute up to $2,500,000 in cash
for an equity interest therein and (ii) advance up to $2,500,000 in cash
pursuant to that certain Promissory Note issued on September 22, 2004 (the
“A-S Note”) by Akorn-Strides in favor of Akorn (the foregoing referred
to herein in as the “Transaction”).

     C.   The Companies have requested that the Administrative Agent and the
Required Lenders consent to the action to be taken by the Companies in
connection with the Transaction with respect to the Credit Agreement, subject
to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto hereby agree as follows:

     1.   Waiver and Consent.  Subject to the terms and conditions herein,
the Required Lenders hereby (i) consent to Akorn’s execution of and performance
under the LLC Agreement and (ii) waive any Event of Default which, if not for
the execution of this Consent, arising solely from (A) Akorn’s failure to
comply with Section 11.1 of the Credit Agreement resulting from the Debt
incurred by Akorn under the LLC Agreement with respect to Akorn’s Contingent
Liability to contribute cash in Akorn-Strides and (B) Akorn’s failure to comply
with Sections 11.5 and 11.11 of the Credit Agreement resulting from
Akorn’s acquisition of a 50% equity interest in Akorn-Strides, Akorn’s capital
contribution in Akorn-Strides and the Investment made by Akorn pursuant to the
A-S Note; provided, that the foregoing clauses (i) and (ii) are
expressly conditioned upon the requirements that (a) Akorn’s Investment with
respect to Akorn-Strides shall be limited to cash contributed in accordance
with the LLC Agreement or cash advanced under the A-S Note in amount which
shall not (I) at any time prior to December 10, 2004, exceed $2,500,000 in the
aggregate with respect to both cash contributed under the LLC Agreement and
cash advance under the A-S Note and (II) at any time after the date hereof
exceed $5,000,000 in the aggregate with respect to both cash contributed under
the LLC Agreement and cash advance

 

 

under the A-S Note at any time (b) with respect to any cash advanced or
contributed pursuant to LLC Agreement or the A-S Note made after December 10,
2004, no advance or contribution shall be permitted if the total outstanding
Revolving Loans (after giving effect to any such advance or contribution) is
greater than or equal to $500,000 unless the Administrative Agent has given its
prior written consent to such advance or contribution and (c) Akorn shall make
no investment, payment or contribution in or to Akorn-Strides so long as any
Event of Default exists or would result therefrom.

     2.   Representations and Warranties.  To induce the Administrative
Agent and the Required Lenders to execute this Consent, each Company represents
and warrants to the Administrative Agent and the Lenders as follows: (a) each
Company has all requisite power and authority to execute, deliver and perform
this Consent; (b) this Consent constitutes the legal, valid and binding
obligation of each Company, enforceable against each Company in accordance with
its terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors’ rights generally and to general principles of
equity; (c) the representations and warranties in the Loan Documents are true
and correct in all material respects with the same effect as though made on and
as of the date of this Consent (except to the extent stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date); and (d) after giving effect to
this Consent, no Unmatured Event of Default or Event of Default exists.

     3.   Conditions to Effectiveness.  The effectiveness of this Consent
is expressly conditioned upon delivering to the Administrative Agent all of the
following in form and substance acceptable to the Administrative Agent: (a)
this Consent executed by each Company, the Administrative Agent and the
Required Lenders and (b) an executed copy of the LLC Agreement certified by the
secretary of Akorn as true, accurate and complete.

     4.   Affirmation.  Except as specifically provided in this Consent,
the execution, delivery and effectiveness of this Consent shall not operate as
a waiver or forbearance of any Default or Event of Default or any right, power
or remedy of the Administrative Agent or any Lender under the Credit Agreement
or any of the other Loan Documents, or constitute a consent, waiver or
modification with respect to any provision of the Credit Agreement or any of
the other Loan Documents, and the Company hereby fully ratifies and affirms
each Loan Document to which it is a party. Reference in any of this Consent,
the Credit Agreement or any other Loan Document to the Credit Agreement shall
be a reference to the Credit Agreement as modified hereby and as further
amended, modified, restated, supplemented or extended from time to time. This
Consent shall constitute a Loan Document for purposes of the Credit Agreement
and the other Loan Documents.

     5.   Counterparts.  This Consent 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 Consent by facsimile shall be effective as delivery of an
original counterpart.

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

     7.   Further Assurances.  Each Company agrees to execute and deliver,
or cause to be executed and delivered, in form and substance satisfactory to
the Administrative Agent and the Lenders, such further documents, instruments,
amendments and 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.

     8.   APPLICABLE LAW.  THIS CONSENT 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.

     9.   Acknowledgment.  Each Company 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 either Company has or may have had at any time
through (and including) the date of this Consent, against any or all of the
foregoing, regardless of whether any such claims, causes of action, allegations
or assertions are known to either Company 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, including any amendments or modifications thereto, or otherwise.

[signature pages follow]

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     IN WITNESS WHEREOF, this Consent has been duly executed and delivered as
of the day and year first above written.

	 	 	 	 	 
	 	 	AKORN, INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Jeffrey A. Whitnell
	

	 	 	 	
 
	

	 	Title:
	 	Chief Financial Officer
	

	 	 	 	
 
	 
	 	 	 	 
	 	 	AKORN (NEW JERSEY), INC.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Jeffrey A. Whitnell
	

	 	 	 	
 
	

	 	Title:
	 	Chief Financial Officer
	

	 	 	 	
 
	 
	 	 	 	 
	 	 	LASALLE BANK NATIONAL ASSOCIATION,

as Administrative Agent and Lender
	 
	 	 	 	 
	

	 	By:
	 	/s/ Patrick J. O’Toole
	

	 	 	 	
 
	

	 	Title:
	 	Vice President

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