AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND WAIVER
This Amendment is entered into as of the 24th day of September, 1999
among Lannett Company, Inc., a Delaware corporation, with its principal place
of business at 0000 Xxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx (the "Borrower"),
Xxxxxxx Xxxxxx ("Guarantor") and FIRST UNION NATIONAL BANK a national banking
association with offices at 000 Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xx 00000 (the
"Bank").
The parties have entered into a (a) a Reimbursement Agreement (the
"Agreement") dated as of April 30, 1999, which, inter alia, provided for the
issuance of a letter of credit by the Bank in the original Stated Amount of
$2,349,276.72, (b) a Reimbursement Agreement (the "Agreement") dated as of
April 30, 1999, which, inter alia, provided for the issuance of a letter of
credit by the Bank in the original Stated Amount of $3,769,945.20, and (c)
the Bank's Loan Agreement dated March 11, 1999 in the amount of $2,000,000.00
(the "Loan Agreement"). The Borrower and the Guarantor entered in certain
covenants with the Bank in each Agreement and the Loan Agreement. The Bank,
the Borrower and the Guarantor have agreed to amend certain representations
in each Agreement and the Loan Agreement and record their agreement in this
Amendment.
NOW, THEREFORE, in consideration of the within premises and for
other good and valuable consideration, the receipt and sufficiency of with is
hereby acknowledged, the parties agree as follows:
1. Section 6.10 of each Agreement and the Financial Covenants
of the Loan Agreement are hereby amended to read as follows:
SECTION 6.10 Financial Covenants. Prior to the termination of
Borrower's obligations hereunder, the Borrower and Guarantor shall comply
with the following financial covenants at all times, to be reviewed by the
Bank periodically as set forth below:
(a) Senior Debt to Effective Net Worth Ratio. Borrower shall
maintain a ratio of Senior Debt divided by Effective Net Worth
of not more than 2.25 to 1.00 through June 29, 2000, and 2.00
to 1.00 at June 30, 2000 and each fiscal year thereafter, such
ratio to be tested annually. "Senior debt" shall mean the sum
of total liabilities, including capitalized leases as all
reserves for deferred taxes and other deferred sums appearing
on the liabilities side of the balance sheet, in accordance
with generally accepted accounting principles applied on a
consistent basis, excluding debt subordinated to the Bank.
"Effective Net Worth" shall mean total assets (less
intangibles) minus Total Liabilities. "Total Liabilities"
shall mean all liabilities of Borrower, excluding debt fully
subordinated to the Bank on terms and conditions acceptable to
Bank, and including capitalized leases and all reserves for
deferred taxes and other deferred sums appearing on the
liabilities side of a balance sheet, in accordance with
generally accepted accounting principles applied on a
consistent basis.
(b) Effective Net Worth. Borrower shall, at fiscal year ending
6/30/99, maintain an Effective Net Worth of not less than four
million dollars ($4,000,000.00), at fiscal year ending 6/30/00
maintain an Effective Net Worth of not less than five million
seven hundred and fifty thousand dollars ($5,750,000.00), and
at fiscal year ending 6/30/01 maintain an Effective Net Worth
of not less than seven million, five hundred thousand dollars
($7,500,000.00), tested annually. Thereafter, to the extent
that the Letter of Credit is extended, the Borrower shall
maintain Effective Net Worth as required by the Bank.
(c) Debt Service Coverage Ratio. Borrower shall maintain a Debt
Service Coverage Ratio of not less than 1.50 to 1.00, tested
quarterly on a rolling four-quarter basis, Effective fiscal
year 2000, "Debt Service Coverage Ratio" shall mean the sum of
earnings before interest, taxes, depreciation, and
amortization divided by the sum of interest expense and
current maturities of long term debt and capital leases
excluding prncipal outstanding under the working capital line
of credit of Borrower with the Bank and any Subordinated Debt
with a maturity of twelve months or less.
(d) Current Ratio. Borrower shall maintain a Current Ratio of not
less than 1.50 to 1.0, tested quarterly. "Current Ratio" shall
mean the ratio of Current Assets to Current Liabilities.
"Current Assets" shall mean all assets (less intangibles)
which are so classified in accordance with generally accepted
accounting principles. Effective fiscal year 2000 "Current
Liabilities" shall mean all liabilities which are so
classified in accordance with generally accepted accounting
principles, excluding debt fully subordinated to the Bank on
terms and conditions acceptable to the bank and also the
principal outstanding under the working capital line of credit
of Borrower with the Bank.
All determinations under this Section 6.10 and the Financial
Covenants section in the Loan Agreements shall be made in accordance
with generally accepted accounting principals consistently applied.
3. The Bank agrees to waive any Event of Default resulting
from non-compliance with (a) the Senior Debt to Effective Net Worth Ratio and
(b) the Debt Service Coverage Ratio and (c) the Current Ratio, as of June 30,
1999.
4. The Remainder of the terms of each Agreement and the Loan
Agreement remain unchanged and are hereby restated.
5. All capitalized terms unless specifically defined herein
shall have the meaning given to them in each Agreement and the Loan
Agreement.
IN WITNESS whereof, the parties have executed this Amendment as of
the date first above written.
LANNETT COMPANY, INC.
Attest:
By: /s/ Xxxxxxx Xxxxxx
-------------------------
Xxxxxxx Xxxxxx, Chairman
GUARANTOR
By: /s/ Xxxxxxx Xxxxxx
-------------------------
Xxxxxxx Xxxxxx, Chairman
FIRST UNION NATIONAL BANK
By: /s/ Xxxxx Xxx
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Xxxxx Xxx, Vice President
