AAIPHARMA INC
3RD AMEND(11/31/2000) TO AMEND & RESTATED LOAN AG
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>3
<FILENAME>g68166ex10-18.txt
<DESCRIPTION>3RD AMEND(11/31/2000) TO AMEND & RESTATED LOAN AG
<TEXT>

<PAGE>   1


                                                                   EXHIBIT 10.18


                        THIRD AMENDMENT TO LOAN AGREEMENT

         This Third Amendment to Loan Agreement, dated as of November 30, 2000
(this "Agreement"), is by and among aaiPHARMA INC., formerly known as Applied
Analytical Industries, Inc., a Delaware corporation having its principal place
of business in Wilmington, North Carolina (the "U.S. Borrower"), AAI APPLIED
ANALYTICAL INDUSTRIES DEUTSCHLAND GmbH & CO., KG, a German corporation (the
"German Borrower" and, together with the U.S. Borrower, the "Borrowers"), each
of the subsidiaries of the U.S. Borrower identified on the signature pages
hereof (the "Guarantors"), and BANK OF AMERICA, N.A., a national banking
association (the "Bank").

RECITALS:

         A. Pursuant to that certain Amended and Restated Loan Agreement dated
as of November 30, 1999, as amended by a First Amendment to Loan Agreement dated
May 31, 2000 and a Second Amendment to Loan Agreement dated August 31, 2000 (the
"Existing Loan Agreement"), the Bank has extended a revolving credit facility to
the U.S. Borrower in the amount of up to $25,000,000, has made a term loan to
the German Borrower in the principal amount of DM 12,000,000 and has extended a
revolving credit facility to the German Borrower in the principal amount of up
to DM 5,000,000.

         B. The Borrowers have requested that the Bank amend the Existing Loan
Agreement to, among other things, (i) provide an additional term loan to the
U.S. Borrower, (ii) terminate the German Borrower's DM 12,000,000 term loan and
(iii) extend the Maturity Date.

         C. The Bank is willing to make such an additional term loan facility
available to the U.S. Borrower, to terminate the German Borrower's DM 12,000,000
term loan, to extend the Maturity Date and to make other amendments based upon
and subject to the terms and conditions specified in this Agreement.

         NOW, THEREFORE, based upon the foregoing, and for good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged, the
parties hereby agree as follows:

                                     PART I
                                   DEFINITIONS

         SUBPART 1.1. Certain Definitions. Terms defined in the recitals of this
Agreement shall have the meanings ascribed to them therein. Unless otherwise
defined herein or the context otherwise requires, the following terms used in
this Agreement have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):

                  "Amended Loan Agreement" means the Existing Loan Agreement as
         amended hereby.

                  "Effective Date" shall have the meaning ascribed to such term
         in Subpart 3.1.

         SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement have the meanings
provided in the Amended Loan Agreement.

                                     PART II
                      AMENDMENTS TO EXISTING LOAN AGREEMENT

         Subject to satisfaction of the conditions specified in Part III of this
Agreement, the Existing Loan Agreement is hereby amended in accordance with this
Part II. Except as so amended, the Existing Loan Agreement, the Notes and the
other Loan Documents shall continue in full force and effect.

         SUBPART 2.1. New Definitions. Section 1.1 of the Existing Loan
Agreement is amended by adding the following definitions to read as follows:

         "Target Funded Debt Level" means, for any period, the product of (A)
EBITDA for such period times (B) 2.25.


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<PAGE>   2

         "Term Loan" means the Loan made pursuant to Section 2.07(a) hereof.

         "Term Note" means the promissory note of the U.S. Borrower executed and
delivered as provided in Section 2.07(b) hereof.

         SUBPART 2.2. Amended Definitions. The definitions for "Business Day",
"Deutsche Mark Revolving Loan Maturity Date", "EBITDA", "German Borrower
Obligations", "Loans", "Maturity Date", "Notes", "Obligations" and "U.S.
Borrower" in Section 1.1 of the Existing Loan Agreement are hereby amended and
restated in their entirety as follows:

         "Business Day" means any day not a Saturday, Sunday or legal holiday on
which the Bank is open for business in Wilmington, North Carolina; provided,
however, that with respect to the Deutsche Mark Revolving Loan such day shall
also be a day on which dealings between banks are carried on in U.S. dollar
deposits and in Deutsche Marks in the London interbank market;

         "Deutsche Mark Revolving Loan Maturity Date" means June 30, 2001;

         "EBITDA" means, for any period of computation, earnings of the U.S.
Borrower and its consolidated Subsidiaries before interest expense, provision
for income taxes, depreciation and amortization, other non-cash changes, lease
expenses under the tax retention operating lease (or similar agreement) entered
into with the Bank or any of its affiliates and payment of the Utilization Fee.

         "German Borrower Obligations" means all obligations of the German
Borrower (in its capacity as such) hereunder, under the Deutsche Mark Revolving
Note or otherwise in connection with the Deutsche Mark Revolving Loan;

         "Loans" means, collectively, the Revolving Loans, the Term Loan and the
Deutsche Mark Revolving Loans;

         "Maturity Date" means June 30, 2001;

         "Notes" means, collectively, the Revolving Note, the Term Note and the
Deutsche Mark Revolving Note;

         "Obligations" means a collective reference to (a) all obligations of
the U.S. Borrower to the Bank in connection with the Revolving Loans and the
Term Loan and (b) all German Borrower Obligations;

         "U.S. Borrower" means aaiPharma Inc., formerly known as Applied
Analytical Industries, Inc., a corporation organized and existing under the laws
of the state of Delaware and having its principal place of business in
Wilmington, North Carolina.

         SUBPART 2.3. Commitment and Utilization Fees. Section 2.04 of the
Existing Credit Agreement is amended in its entirety to read as follows:

         (a) The U.S. Borrower agrees to pay the Bank a commitment fee in an
         amount equal to 0.375% per annum of the average daily unused portion of
         the Revolving Loan Committed Amount, such fee to be paid quarterly in
         arrears on the last day of each such quarter, commencing December 31,
         2000. In addition, the German Borrower agrees to pay the Bank a
         commitment fee in an amount equal to 0.375% per annum of the average
         daily unused portion of the Deutsche Mark Revolving Loan Committed
         Amount, such fee to be paid quarterly in arrears on the last day of
         each such quarter, commencing December 31, 2000.

         (b) The U.S. Borrower agrees to pay the bank a utilization fee (the
         "Utilization Fee") in an amount equal to (i) for the four fiscal
         quarter period ending December 31, 2000, 0.75% of the portion of Funded
         Debt as of December 31, 2000 that is greater than the Target Funded
         Debt Level for such period and (ii) for the four fiscal quarter period
         ending March 31, 2001, 1.50% of the portion of Funded Debt as of March
         31, 2001 that is greater that the Target Funded Debt Level for such
         period. The utilization fee for the period ending December 31, 2000
         shall be deemed earned as of January 15, 2001 and due and payable on
         February 28, 2001. The utilization fee for the period ending March 31,
         2001 shall be deemed earned as of April 15, 2001 and due and payable on
         May 31, 2001.


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<PAGE>   3

         SUBPART 2.4. Deutsche Mark Loan. Section 2.05 of the Existing Credit
Agreement is amended in its entirety to read as follows:

         Intentionally Omitted.

         SUBPART 2.5. Deutsche Mark Revolving Loan. Section 2.06 of the Existing
Credit Agreement is amended in its entirety to read as follows:

                          2.06 DEUTSCHE MARK REVOLVING LOAN.

                  (a) Subject to the terms and conditions hereof and relying
         upon the representations and warranties herein set forth, the Bank
         agrees to make Deutsche Mark Revolving Loans to the German Borrower in
         Deutsche Marks, at any time and from time to time until the Deutsche
         Mark Revolving Loan Maturity Date, in an aggregate principal amount at
         any time outstanding not to exceed DM 5,000,000 (the "Deutsche Mark
         Revolving Loan Committed Amount"). The German Borrower may borrow,
         repay and reborrow hereunder on or after the date hereof and prior to
         the Deutsche Mark Revolving Loan Maturity Date, subject to the terms,
         provisions and limitations set forth herein. The outstanding principal
         balance of the Deutsche Mark Revolving Loan, together with all accrued
         but unpaid interest, fees and other charges, shall be due and payable
         in full on the Deutsche Mark Revolving Loan Maturity Date. The proceeds
         of the Deutsche Mark Revolving Loan will be used by the German Borrower
         to finance working capital needs from the acquisition of additional
         contracts.

                  (b) The Deutsche Mark Revolving Loans shall be made, shall be
         repaid and shall bear interest in accordance with the terms of a
         Promissory Note dated as of August 31, 2000 and executed by the German
         Borrower in favor of the Bank in substantially the form of Exhibit 2.06
         (the "Deutsche Mark Revolving Note"), the terms of which are
         incorporated herein by reference.

                  (c) (i) If, as a result of the implementation of the European
                  economic and monetary union ("EMU"), (i) any currency
                  available for borrowing under this Loan Agreement (a "national
                  currency") ceases to be lawful currency of the state issuing
                  the same and is replaced by a European single or common
                  currency (the "Euro") or (ii) any national currency and the
                  Euro are at the same time both recognized by the central bank
                  or comparable governmental authority of the state issuing such
                  currency as lawful currency of such state, then any amount
                  payable hereunder by any party hereto in such national
                  currency shall instead be payable in the Euro and the amount
                  so payable shall be determined by redenominating or converting
                  such amount into the Euro at the exchange rate officially
                  fixed by the European Central Bank for the purpose of
                  implementing the EMU, provided, that to the extent any EMU
                  legislation provides that an amount denominated either in the
                  Euro or in the applicable national currency can be paid either
                  in Euros or in the applicable national currency, each party to
                  this Loan Agreement shall be entitled to pay or repay such
                  amount in Euros or in the applicable national currency. Prior
                  to the occurrence of the event or events described in clause
                  (i) or (ii) of the preceding sentence, each amount payable
                  hereunder in any such national currency will, except as
                  otherwise provided herein, continue to be payable only in that
                  national currency.

                           (ii) The Borrowers shall from time to time, at the
                  request of the Bank, pay to the Bank for the account of the
                  Bank the amount of any cost or increased cost incurred by, or
                  of any reduction in any amount payable to or in the effective
                  return on its capital to, or of interest or other return
                  foregone by, the Bank or any holding company of the Bank as a
                  result of the introduction of, changeover to or operation of
                  the Euro in any applicable state.

                           (iii) In addition, this Loan Agreement and the
                  Deutsche Mark Revolving Note (including, without limitation,
                  the definition of Adjusted LIBOR Rate) will be amended to the
                  extent determined by the Bank (acting reasonably and in
                  consultation with the Borrowers) to be necessary to reflect
                  such implementation of the EMU and change in currency and to
                  put the Bank and the Borrowers in the same position, so far as
                  possible, that they would have been in if such implementation
                  and change in currency had not occurred. Except as provided in
                  the foregoing provisions of this Section, no such
                  implementation or change in currency nor any economic
                  consequences resulting therefrom shall (a) give rise to any
                  right to terminate prematurely, contest, cancel, rescind,
                  alter, modify or renegotiate the provisions of this Loan
                  Agreement or (b) discharge, excuse or


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<PAGE>   4

                  otherwise affect the performance of any obligations of the
                  German Borrower under this Loan Agreement, the Deutsche Mark
                  Revolving Note or other Loan Documents.

         SUBPART 2.6. Term Loan. A new Section 2.07 is added to the Existing
Loan Agreement to read as follows:

                                    2.07 TERM LOAN.

                  (a) Subject to the terms and conditions hereof and relying
         upon the representations and warranties herein set forth, the Bank
         agrees to make, in any number of advances and on any Business Day from
         November 30, 2000 until December 15, 2000, inclusive, a term loan to
         the U.S. Borrower in U.S. Dollars in an aggregate principal amount
         equal to $5,250,000 (the "Term Loan"). Amounts repaid on the Term Loan
         may not be reborrowed. The proceeds of the Term Loan will be used by
         the U.S. Borrower to refinance the Deutsche Mark Loan by paying down
         Revolving Loans (which had been funded to pay off in full the Deutsche
         Mark Loan).

                  (b) The Term Loan shall be made, shall be repaid and shall
         bear interest in accordance with the terms of a Promissory Note dated
         as of November 30, 2000 and executed by the U.S. Borrower in favor of
         the Bank in substantially the form of Exhibit 2.07 (the "Term Note"),
         the terms of which are incorporated herein by reference.

         SUBPART 2.7. Increased Costs. Section 3.04 of the Existing Loan
Agreement is hereby amended by replacing the term "Deutsche Mark Loan" with the
term "Deutsche Mark Revolving Loan" in the first sentence thereof.

         SUBPART 2.8. Additional Conditions to the Deutsche Mark Loan. Section
4.03 of the Existing Loan Agreement is hereby amended and restated in its
entirety to read as follows:

         Intentionally omitted.

         SUBPART 2.9. Additional Conditions to Deutsche Mark Revolving Loans.
Section 4.04 of the Existing Loan Agreement is hereby amended and restated in
its entirety to read as follows:

              4.04 ADDITIONAL CONDITIONS TO THE DEUTSCHE MARK REVOLVING LOANS.

         On or prior to the funding date of any installment of the Deutsche Mark
Revolving Loan, the Bank shall have received (a) the executed Deutsche Mark
Revolving Loan Note; (b) such security documents and evidence of collateral
filings as the Bank may request with respect to the assets of the German
Borrower and the other Foreign Subsidiaries, all such documents and filings to
be in form and substance satisfactory to the Bank and its counsel and (c) such
corporate authority documents, officer's certificates, insurance certificates,
legal opinions and similar documents as the Bank reasonably requests in
connection with the Deutsche Mark Revolving Loan, the German Borrower and the
Foreign Subsidiaries, all such documents to be in form and substance
satisfactory to the Bank and its counsel.


         SUBPART 2.10. Additional Conditions to Term Loan. A new Section 4.05 is
added to the Existing Loan Agreement to read as follows:

                       4.05 ADDITIONAL CONDITIONS TO THE TERM LOAN.

         On or prior to the funding date of the Term Loan, the Bank shall have
received (a) the executed Term Loan Note, (b) evidence satisfactory to the Bank
that the German Borrower's indebtedness to the Bank under the Deutsche Mark Loan
has been paid in full, (c) such amendments to security documents and evidence of
amendments to collateral filings as the Bank may request with respect to the
assets of the U.S. Borrower and the other Subsidiaries, all such amendment
documents and filings to be in form and substance satisfactory to the Bank and
its counsel and (d) such corporate authority documents, officer's certificates,
insurance certificates, legal opinions and similar documents as the Bank
reasonably requests in connection with the Term Loan, the U.S. Borrower and the
Subsidiaries, all such documents to be in form and substance satisfactory to the
Bank and its counsel.

         SUBPART 2.11. Financial Covenants. Section 6.01(p) of the Existing Loan
Agreement is hereby amended and restated in its entirety to read as follows:


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<PAGE>   5

                  (p) satisfy or cause to be satisfied the following financial
         tests:

                           (i) the U.S. Borrower will maintain as of the end of
                  each fiscal quarter (commencing with the fiscal quarter ending
                  September 30, 2000) Tangible Net Worth of not less than an
                  amount (the "Net Worth Floor") initially equal to $50,750,000,
                  provided that the Net Worth Floor shall increase on the last
                  day of each fiscal quarter to occur after September 30, 2000
                  by the sum of (i) 50% of the net income of the U.S. Borrower
                  and its Subsidiaries for the fiscal quarter then ending
                  (computed on a consolidated basis and in accordance with
                  Generally Accepted Accounting Principles and included only to
                  the extent such net income is positive) and (ii) 100% of the
                  proceeds (net of any associated fees) of any equity issuance
                  by the U.S. Borrower or its Subsidiaries during the fiscal
                  quarter then ending (computed in accordance with Generally
                  Accepted Accounting Principles), such increases to be
                  cumulative;

                           (ii) the U.S. Borrower shall maintain a Cash Flow
                  Coverage Ratio computed as of the last day of each fiscal
                  quarter (commencing with the fiscal quarter ending December
                  31, 2000) of not less than 1.25 to 1.00;

                           (iii) the U.S. Borrower shall maintain a ratio of
                  Funded Debt to EBITDA computed as of the last day of each
                  fiscal quarter (commencing with the fiscal quarter ending
                  December 31, 2000) of (A) with respect to the fiscal quarter
                  ending December 31, 2000, not greater than 3.25 to 1.00, and
                  (B) with respect to each fiscal quarter thereafter, not
                  greater than 3.15 to 1.00.; and

                           (iv) the U.S. Borrower shall maintain at all times
                  Eligible Receivables such that, on each day, the product of
                  (A) Eligible Receivables times (B) 80% is no less than
                  $13,000,000.

                  SUBPART 2.12. Events of Default. Section 8.01(a) of the
         Existing Loan Agreement is hereby amended and restated in its entirety
         to read as follows:

         (a) Nonpayment when and as due of any principal, interest or other
payment hereunder, under the Revolving Note, under the Term Note or under the
Deutsche Mark Revolving Note and the continuation of such nonpayment for a
period of five (5) days.

         SUBPART 2.13. Notices. Section 9.01(a) of the Existing Loan Agreement
is hereby amended and restated in its entirety to read as follows:

         (a)      If to the Borrower:

                  aaiPharma Inc.
                  2320 Scientific Park Drive
                  Wilmington, North Carolina 28405

                  Attention:        William L. Ginna, Jr.

                  Phone:            (910) 254-7013
                  Telecopy:         (910) 815-2387

         SUBPART 2.14. Exhibits. A new Exhibit 2.07 is hereby created in the
form attached to this Agreement and marked Exhibit 2.07.


                                    PART III
                           CONDITIONS TO EFFECTIVENESS

         SUBPART 3.1 Effective Date. This Agreement shall be and become
effective as of the date hereof (the "Effective Date") when all of the
conditions set forth in this Subpart 3.1 shall have been satisfied.


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<PAGE>   6

                  3.1.1. Execution of Agreement. The Bank shall have received an
         original duly executed counterpart of this Agreement from the Borrowers
         and the Guarantors.

                  3.1.2. Closing Certificate. The Bank shall have received a
         certificate from the U.S. Borrower, in form and substance satisfactory
         to the Bank, certifying inter alia that (i) no Default or Event of
         Default exists as of the Effective Date, and (ii) the representations
         and warranties of the Credit Parties made in or pursuant to the
         Existing Loan Agreement and the other Loan Documents are true in all
         material respects on and as of the Effective Date.

                                     PART IV
                                  MISCELLANEOUS

         SUBPART 4.1 Cross-References. References in this Agreement to any Part
or Subpart are, unless otherwise specified, to such Part or Subpart of this
Agreement.

         SUBPART 4.2 Instrument Pursuant to Existing Loan Agreement. This
Agreement is a document executed pursuant to the Existing Loan Agreement and
shall (unless otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the Existing Loan
Agreement.

         SUBPART 4.3 Loan Documents. Each Credit Party hereby confirms and
agrees that the Loan Documents are, and shall continue to be, in full force and
effect, except as amended hereby, and except that, on and after the Effective
Date references in each Loan Document to the "Loan Agreement", "thereunder",
"thereof" or words of like import referring to the Existing Loan Agreement shall
mean the Amended Loan Agreement.

         SUBPART 4.4. Representations and Warranties. Each Credit Party hereby
represents and warrants that (i) it has the requisite corporate power and
authority to execute, deliver and perform this Agreement, (ii) it is duly
authorized to, and has been authorized by all necessary corporate action, to
execute, deliver and perform this Agreement, (iii) it has no claims,
counterclaims, offsets, or defenses to the Loan Documents and the performance of
its obligations thereunder, or if such Credit Party has any such claims,
counterclaims, offsets, or defenses to the Loan Documents or any transaction
related to the Loan Documents, the same are hereby waived, relinquished and
released in consideration of the Bank's execution and delivery of this
Agreement, (iv) the representations and warranties contained in the Loan
Documents are, subject to the limitations set forth therein, true and correct in
all material respects on and as of the date hereof as though made on and as of
such date (except for those which expressly relate to an earlier date), (v) no
event of default under any other agreement, document or instrument to which such
Credit Party is a party will occur as a result of the transactions contemplated
hereby, and (vi) as of the date of this Agreement, no Event of Default exists.

         SUBPART 4.5. Costs and Expenses. The U.S. Borrower hereby agrees to pay
on demand all costs and expenses (including without limitation the reasonable
fees and expenses of counsel to the Bank) incurred by the Bank in connection
with the negotiation, preparation, execution, and delivery of this Agreement and
the enforcement or preservation of any rights and remedies of the Bank hereunder
(including without limitation any such fees and expenses subsequently incurred
by the Bank in any subsequent bankruptcy or insolvency proceeding involving a
Credit Party).

         SUBPART 4.6. Counterparts, Effectiveness, Etc. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement.

         SUBPART 4.7. Captions. The captions in this Agreement are inserted only
as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Agreement or any provision hereof.

         SUBPART 4.8 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NORTH
CAROLINA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

         SUBPART 4.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.


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<PAGE>   7

U.S. BORROWER:            aaiPHARMA INC., formerly known as
                               APPLIED ANALYTICAL INDUSTRIES, INC.,
                               a Delaware corporation

                               By _____________________________________________
                               Name   William L. Ginna, Jr.
                               Title  Executive Vice President and
                                      Chief Financial Officer

GERMAN BORROWER:         AAI APPLIED ANALYTICAL INDUSTRIES
                               DEUTSCHLAND GmbH & CO., KG,
                               a German corporation

                               By _____________________________________________
                               Name   Frederick D. Sancilio
                               Title  Managing Director

THE GUARANTORS:          APPLIED ANALYTICAL INDUSTRIES LEARNING CENTER, INC.
                              AAI TECHNOLOGIES, INC.
                              AAI PROPERTIES, INC.
                              KANSAS CITY ANALYTICAL SERVICES, INC.
                              MEDICAL & TECHNICAL RESEARCH ASSOCIATES, INC.
                              AAI JAPAN, INC.
                              APPLIED ANALYTICAL INDUSTRIES ITALY, S.r.l.
                              AAI UK LTD.
                              AAI VERMOGENSVER-WALTUNGSGESELLSCHAFT mgH
                              AAI APPLIED ANALYTICAL INDUSTRIES DEUTSCHLAND
                              VERWALTUNGS-GESELLSCHAFT mbH
                              APPLIED ANALYTICAL INDUSTRIES DEUTSCHLAND GmbH
                              AAI BENELUX B.V.
                              AAI APPLIED ANALYTICAL INDUSTRIES FRANCE S.A.R.L.
                              NEOSAN ARZNEIMITTEL-VERTRIEBSGESELLSCHAFT mbH
                              I.P.A.- INTERNATIONALE PHARMA AGENTUR GmbH
                              INPHARMCO GESELLSCHAFT zur VERMARKTUNG VON
                                ARZNEIMITTELN mbH
                              LAB (GREAT BRITAIN) LIMITED
                              PROSCIENTIA HOLDING AG
                              TECHNOPHARM S.A.

                              By ______________________________________________
                              Name   Frederick D. Sancilio
                              Title  Chairman of the Board of Directors/
                                     Managing Director

BANK:                   BANK OF AMERICA, N.A.

                              By: _____________________________________________
                              Name: ___________________________________________
                              Title: __________________________________________


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