FORM OF STAR NOTE
Exhibit
4.3
FORM
OF STAR NOTE
THIS
INSTRUMENT IS SUBJECT TO THE TERMS OF THE SUBORDINATION AGREEMENT BY AND AMONG
▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ CAPITAL FOCUS III, L.P., AISLING CAPITAL II, L.P., ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ FAMILY REALTY, LLC AND ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
ACTING THROUGH ITS ▇▇▇▇▇ FARGO BUSINESS CREDIT OPERATING DIVISION, DATED
NOVEMBER __, 2007.
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No.
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$[ ]
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Date:
[_________ __], 2007
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AND
INTERPHARM,
INC.
SECURED
12% NOTE DUE 2009
THIS
NOTE
is one of a series of duly authorized and issued promissory notes of INTERPHARM
HOLDINGS INC., a Delaware corporation (the “Company”),
and
INTERPHARM, INC., a New York corporation (“Interpharm”
and
together with the Company, the “Borrowers”)
designated as their Secured 12% Notes due 2009, in the original aggregate
principal amount of $5,000,000 (each a “Note”
and
collectively, the “Notes”).
Notwithstanding anything to the contrary herein, any rights or remedies of
the
Holder under this Note and the Holders under all other Notes may be exercised
or
waived, and this Note may be amended or modified, only by the holders of a
majority in principal amount of Notes outstanding held by ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇
Capital Focus III, L.P., Aisling Capital II, L.P. and ▇▇▇▇▇▇▇ ▇▇▇▇ or any of
their successors in interest or transferees (such majority, the “Required
Holders”),
and
any right so exercised or waived, and any such amendment or modification, shall
apply to all Notes; provided that if such modification, amendment or waiver
would adversely affect a Holder in a manner different than any other Holder,
then such modification, amendment or waiver will require the consent of such
Holder adversely affected. Holder acknowledges that by the operation of this
paragraph, the Required Holders will have the right and power to diminish or
eliminate rights of such Holder under this Note.
FOR
VALUE
RECEIVED, the Borrowers, jointly and severally, promise to pay to the order
of
[Holder] or its registered assigns (the “Holder”),
the
principal sum of [__________] $(__________), on the Maturity Date (as defined
below), or such earlier date as the Notes are required or permitted to be repaid
as provided hereunder, and to pay interest to the Holder on the then outstanding
principal amount of this Note in accordance with the provisions hereof.
Notwithstanding anything to the contrary contained herein, this Note shall
bear
interest on the due and unpaid interest and outstanding principal amount hereof
from and after the occurrence and during the continuance of an Event of Default
at the rate (the “Default
Rate”)
equal
to the lower of eighteen percent (18%) or the highest rate permitted by law.
Interest
payable under this Note shall be computed on the basis of a year of 360 days
and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which interest is payable.
Payments
of principal and interest shall be made in lawful money of the United States
of
America to the Holder at its address as provided in Section 7
or by
wire transfer to such account specified from time to time by the Holder hereof
for such purpose as provided in Section 7.
1. Definitions.
In
addition to the terms defined above and elsewhere in this Note,
(a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Securities Purchase Agreement, dated as
of
November __, 2007, among the Borrowers and the Purchasers identified therein
(the “Purchase
Agreement”),
and
(b) for the purposes of this Note, the following terms shall have the meanings
indicated:
“Bankruptcy
Event”
means
any
of
the following events: (a) any of the Borrowers commences a case or other
proceeding under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar
law
of any jurisdiction relating to such Borrower; (b) there is commenced against
any of the Borrowers any such case or proceeding that is not dismissed within
60
days after commencement; (c) any of the Borrowers is adjudicated insolvent
or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) any of the Borrowers suffers any appointment of
any
custodian or the like for it or any substantial part of its property that is
not
discharged or stayed within 60 days; (e) any of the Borrowers makes a general
assignment for the benefit of creditors; (f) any of the Borrowers fails to
pay,
or states that it is unable to pay or is unable to pay, its debts generally
as
they become due; (g) any of the Borrowers calls a meeting of its creditors
with
a view to arranging a composition, adjustment or restructuring of its debts;
or
(h) any of the Borrowers, by any act or failure to act, expressly indicates
its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
“Change
of Control”
will
be
deemed to exist if (i) there occurs any consolidation, merger or other business
combination of a Borrower with or into any other corporation or other entity
or
person (whether or not such Borrower is the surviving corporation), or any
other
corporate reorganization or transaction or series of related transactions in
which in any of such events the voting stockholders of such Borrower prior
to
such event cease to own fifty percent (50%) or more of the voting power, or
corresponding voting equity interests, of the surviving corporation after such
event (including without limitation: (x) any “going private” transaction under
Rule 13e-3 promulgated pursuant to the 1934 Act or (y) any tender offer by
the
Company under Rule 13e-4 promulgated pursuant to the 1934 Act for twenty percent
(20%) or more of the Company's Common Stock), (ii) any person (as defined in
Section 13(d) of the 1934 Act), other than the ▇▇▇▇▇▇▇ Parties, together with
their affiliates and associates (as such terms are defined in Rule 405 under
the
1933 Act), beneficially owns or is deemed to beneficially own (as described
in
Rule 13d-3 under the 1934 Act without regard to the 60-day exercise period)
in
excess of fifty percent (50%) of the Company’s voting power, (iii) there is a
replacement of more than one-half of the members of the Company’s Board of
Directors which is not approved by those individuals who are members of the
Company’s Board of Directors on the date thereof, (iv) in one or a series of
related transactions, there is a sale or transfer of all or substantially all
of
the assets of the Company, determined on a consolidated basis, or (v) any
Borrower enters into any agreement providing for an event set forth in (i),
(ii), (iii) or (iv) above
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“Convertible
Securities”
means
any convertible securities, warrants, options or other rights to subscribe
for
or to purchase or exchange for, shares of Common Stock.
“Maturity
Date” means
October 1, 2009; provided, in the event the Senior Credit Agreement is amended,
refinanced or extended such that the maturity date thereunder is later than
February 1, 2011, the Maturity Date hereunder shall be automatically extended
to
October 1, 2010.
“Options”
shall
mean any rights, warrants or options to subscribe for or purchase common stock
or Convertible Securities of the Company.
“Original
Issue Date”
means
the date of the first issuance of any Notes, regardless of the number of
transfers of any particular Note.
“Trading
Day”
means
(a) any day on which the Common Stock is listed or quoted and traded on its
primary Trading Market, (b) if the Common Stock is not then listed or
quoted and traded on any Eligible Market, then any day on which trading occurs
on the NASDAQ Global Market (or any successor thereto), or (c) if trading
ceases to occur on the NASDAQ Global Market (or any successor thereto), any
Business Day.
“Triggering
Event”
means
any of the following events: (a) at any time after November 30, 2007, the Common
Stock is not listed or quoted, or is suspended from trading, on an Eligible
Market for a period of five or more Trading Days (which need not be consecutive
Trading Days); (b) the Company fails to obtain the Shareholder Approval
contemplated by the Purchase Agreement on or prior to the date required therein;
(c)
any of
the
Borrowers fails to make any cash payment required under the Transaction
Documents and such failure is not cured within five Trading Days after notice
of
such default is first given to such Borrower by a Purchaser; or (d) any
of
the
Borrowers defaults in the timely performance of any other obligation under
the
Transaction Documents and such default continues uncured for a period of 10
calendar days after the date on which notice of such default is first given
to
such Borrower by a Purchaser (it being understood that no prior notice need
be
given in the case of a default that cannot reasonably be cured within such
10
days).
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2. Payment
of Principal and Interest.
(a) Interest.
The
Company shall pay interest to the Holder on the aggregate and then outstanding
principal amount of this Note at a rate equal to 12% per annum, payable
quarterly in arrears on each March 31, June 30, September 30 and December 31,
except if such date is not a Trading Day, in which case such interest shall
be
payable on the next succeeding Trading Day (each, an “Interest
Payment Date”).
The
first Interest Payment Date shall be December 31, 2007.
(b) Principal
Payment at Maturity.
The
Company shall pay the outstanding principal balance of this Note to the Holder
on the Maturity Date, together with any accrued and unpaid
interest.
(c) Cash,
PIK Notes or Accrual.
Subject
to the conditions and limitations set forth below, the Company may pay interest
on this Note (i) in cash, or (ii) by the Borrowers issuing an additional Note
with a principal amount equal to the interest then due and payable (a
“PIK
Note”),
or
(iii) in lieu of a PIK Note, any unpaid interest may accrue and be added to
the
principal amount of this Note.
(d) Prepayment.
This
Note may not be prepaid.
3. Ranking
and Covenants.
(a) Except
pursuant to the Senior Credit Agreement, (the “Existing
Indebtedness”),
no
indebtedness of any of the Borrowers is senior to this Note in right of payment,
whether with respect to interest, damages or upon liquidation or dissolution
or
otherwise. Other than the Existing Indebtedness and any renewal, refinancing
or
replacement thereof that does not exceed the aggregate amount of the borrowing
availability under the Senior Credit Agreement as it exists on the date hereof,
the Borrowers will not, and will not permit any Subsidiary to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, that is senior in any respect to the Borrowers’
obligations under the Notes, and the Borrowers will not, and will not permit
any
Subsidiary to, directly or indirectly, incur any Lien on or with respect to
any
of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom.
(b) So
long
as any Notes are outstanding, none of the Borrowers nor any Subsidiary shall,
directly or indirectly, (i) redeem, purchase or otherwise acquire any of the
Company’s capital stock or set aside any monies for such a redemption, purchase
or other acquisition or (ii) issue any Options or Convertible Securities with
an
exercise price or a conversion price or a number of underlying shares that
floats or resets or otherwise varies or is subject to adjustment based (directly
or indirectly) on market prices of the Common Stock.
4. Registration
of Notes.
The
Borrowers shall register the Notes upon records to be maintained by the
Borrowers for that purpose (the “Note
Register”)
in the
name of each record holder thereof from time to time. The Borrowers may deem
and
treat the registered Holder of this Note as the absolute owner hereof for the
purpose of any conversion hereof or any payment of interest or principal hereon,
and for all other purposes, absent actual notice to the contrary.
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5. Registration
of Transfers and Exchanges.
The
Borrowers shall register the transfer of any portion of this Note in the Note
Register upon surrender of this Note to the Borrowers at their address for
notice set forth herein. Upon any such registration or transfer, a new Note,
in
substantially the form of this Note (any such new Note, a “New
Note”),
evidencing the portion of this Note so transferred shall be issued to the
transferee and a New Note evidencing the remaining portion of this Note not
so
transferred, if any, shall be issued to the transferring Holder. The acceptance
of the New Note by the transferee thereof shall be deemed the acceptance by
such
transferee of all of the rights and obligations of a holder of a Note. This
Note
is exchangeable for an equal aggregate principal amount of Notes of different
authorized denominations, as requested by the Holder surrendering the same.
No
service charge or other fee will be imposed in connection with any such
registration of transfer or exchange.
6. Events
of Default.
(a) “Event
of Default”
means
any one of the following events (whatever the reason and whether it shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of
any
administrative or governmental body):
(i) any
default in the payment of principal, interest or liquidated damages in respect
of any Notes, as and when the same becomes due and payable (whether on a date
specified for the payment of interest or the date on which the obligations
under
the Note mature or by acceleration, redemption, prepayment or otherwise) and
such default continues for a period of five (5) Trading Days;
(ii) any
of
the Borrowers or any Subsidiary defaults in any of its obligations under any
other note or any mortgage, credit agreement (including the Senior Credit
Agreement) or other facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be secured
or
evidenced, any indebtedness for borrowed money or money due under any long
term
leasing or factoring arrangement of any Borrower or any Subsidiary in an amount
exceeding $1,000,000, whether such indebtedness now exists or is hereafter
created, and such default (after any applicable notice and passage of time)
results in such indebtedness becoming or being declared due and payable prior
to
the date on which it would otherwise become due and payable;
(iii) a
material breach by any of the Borrowers of its covenants, representations or
warranties hereunder or in any other Transaction Document that remains uncured
for a period of ten (10) days following receipt by the Borrowers of written
notice of such breach;
(iv) any
material provision hereof or any other Transaction Document shall for any reason
cease to be valid, binding and enforceable with respect to any party hereto
or
thereto (other than the Holder) in accordance with its terms (and to the extent
curable, is not cured within ten (10) Trading Days), or any such party
challenges the enforceability hereof or thereof, or shall assert in writing,
or
take any action or fail to take any action based on the assertion that any
provision hereof or any other Transaction Document has ceased to be or is
otherwise not valid, binding or enforceable in accordance with its terms, or
any
security interest provided for therein shall cease to be a valid and perfected
security interest in any of the collateral purported to be subject
thereto;
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(v) the
occurrence of a Triggering Event, which is not cured within 15 calendar days;
(vi) any
Borrower revokes or terminates or purports to revoke or terminate or fails
to
perform any of the terms, covenants, conditions provisions of any guarantee,
endorsement or other agreement of such party in favor of Collateral Agent or
the
Holders;
(vii) any
Borrower which is a partnership, limited liability company, limited partnership
or a corporation, dissolves, suspends or discontinues doing business;
or
(viii) the
occurrence of a Bankruptcy Event.
(b) At
any
time or times following the occurrence of an Event of Default, in addition
to
any other remedy available to the Required Holders under the Notes or under
any
other Transaction Document or available under any applicable law, the Required
Holders shall have the option to elect, by notice to the Borrowers (an
“Event
Notice”),
to
require the Borrowers to repurchase all or any portion of the outstanding
principal amount of this Note and all other Notes, at a repurchase price equal
to 115% of such outstanding principal amount, plus all accrued but unpaid
interest thereon through the date of payment. The aggregate amount payable
pursuant to the preceding sentence is referred to as the “Event
Price.”
The
Borrowers shall pay the Event Price to the Holder no later than the third
Trading Day following the date of delivery of the Event Notice, and upon receipt
thereof the Holder shall deliver this Note to the Borrowers.
(c) Upon
the
occurrence of any Bankruptcy Event, all amounts pursuant to Section
6(b)
shall
immediately become due and payable in full in cash, without any further action
by the Holder or the Required Holders.
(d) In
connection with any Event of Default, the Holder and Required Holders need
not
provide and the Borrowers hereby waive any presentment, demand, protest or
other
notice of any kind, and the Required Holders may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to Holder under applicable law.
Any
such declaration may be rescinded and annulled by the Required Holders or Holder
at any time prior to payment hereunder. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent thereto.
The remedies under this Note and any other Transaction Document or available
under applicable law shall be cumulative.
7. Notices.
Any and
all notices or other communications or deliveries hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the
facsimile number specified in this Section 7
prior to
6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day
after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section
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on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any
Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt
by
the party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to any of the Borrowers, as set forth in the
Purchase Agreement, or (ii) if to the Holder, to the address or facsimile number
appearing on the Company’s Holders records or such other address or facsimile
number as the Holder may provide to the Company in accordance with this
Section 7,
with a
copy to the Required Holders.
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8. Miscellaneous.
(a) This
Note
shall be binding on and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. The Borrowers shall not be
permitted to assign this Note.
(b) Subject
to Section
8(a),
and
subject to the right of the Required Holders to act for and on behalf of Holder
with respect to remedies hereunder, nothing in this Note shall be construed
to
give to any person or corporation other than the Borrowers and the Holder any
legal or equitable right, remedy or cause under this Note.
(c) Governing
Law; Venue; Waiver Of Jury Trial.
ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES
OF
CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING
IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS
AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE BORROWERS HEREBY WAIVES ALL RIGHTS TO A TRIAL BY
JURY.
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(d) The
headings herein are for convenience only, do not constitute a part of this
Note
and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In
case
any one or more of the provisions of this Note shall be invalid or unenforceable
in any respect, the validity and enforceability of the remaining terms and
provisions of this Note shall not in any way be affected or impaired thereby
and
the parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and
upon
so agreeing, shall incorporate such substitute provision in this
Note.
(f) No
provision of this Note may be waived or amended except in a written instrument
signed, in the case of an amendment, by the Borrowers and the Required Holders
or, in the case of a waiver, by the Holder or the Required Holders. No waiver
of
any default with respect to any provision, condition or requirement of this
Note
shall be deemed to be a continuing waiver in the future or a waiver of any
subsequent default or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right.
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PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the Borrowers have caused this Note to be duly executed by
a
duly authorized officer as of the date first above indicated.
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