the Administrative Agent, all of the Borrower’s obligations under the Credit Agreement are secured by a first-priority lien on and security interest in substantially all of the tangible and intangible assets of the Loan Parties, including intellectual property and all of the equity interests in the Borrower and the Target.
Representations, Warranties, Covenants and Events of Default
The Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants, financial covenants, and conditions that are customarily required for similar financings. The affirmative covenants, among other things, require the Borrower to undertake various reporting and notice requirements, maintain insurance, comply with all applicable laws and use the proceeds of all loans consistent with the manners contemplated by the Credit Agreement. The negative covenants restrict or limit the ability of the Borrower and its Subsidiaries to, among other things and subject to certain exceptions contained in the Credit Agreement, incur new indebtedness, create liens on assets, engage in certain fundamental corporate changes (such as certain mergers or acquisitions), or make certain Investments or Restricted Payments (each as defined in the Credit Agreement), engage in certain transactions with Affiliates (as defined in the Credit Agreement), and violate anti-corruption laws. In addition, the Borrower must, at all times prior to the Maturity Date and calculated as of the last day of each fiscal quarter, (i) maintain a Total Net Leverage Ratio of less than or equal to 4.50 to 1.00, and (ii) maintain an Interest Coverage Ratio (as defined in the Credit Agreement) of greater than or equal to 2.00 to 1.00.
The Credit Agreement also contains certain customary Events of Default (as defined in the Credit Agreement) which include, among others,non-payment of principal, interest, or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, events constituting a change of control and the cessation of any applicable intercreditor agreements between the Lenders and other creditors of the Borrower. The occurrence of an Event of Default may result in, among other things, the acceleration of the Borrower’s obligations under the Credit Agreement such that the outstanding principal and interest thereon is immediately due and payable in whole or in part, and/or the election of the Lenders to increase interest rates on all outstanding loans to the Default Rate.
Incremental Facilities
The Credit Agreement permits the Borrower to enter into an agreement with one or more Lenders to increase the aggregate Revolving Commitments and/or add one or more term loan facilities or to increase the aggregate amount of any existing term loans, so long as the aggregate principal amount of any such incremental facilities do not exceed the Incremental Cap (as defined in the Credit Agreement). Incremental increases to the aggregate Revolving Commitments may not exceed $20 million.
Other Related Matters
The foregoing descriptions of the Operating Agreement, the Credit Agreement, and the Guaranty and Security Agreement (together, the “Agreements”) are not complete and are qualified in their entirety by reference to the Loan Agreements, copies of each of which are filed as Exhibits 2.1, 2.2, and 2.3, respectively, to this Current Report on Form8-K.
The representations, warranties, and covenants contained in the Agreements were made solely for purposes of such documents and as of specific dates, were made solely for the benefit of the parties to the applicable documents, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Agreements and such other documents instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to stockholders. The Company’s stockholders are not third-party beneficiaries under the Agreements and should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, the Borrower, Holdings, AvKARE, R&S Northeast or any other affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Agreements, which subsequent information may or may not be fully reflected in the Company’s public disclosure.
