EXHIBIT 10.3
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WOMEN FIRST HEALTHCARE, INC.
$28,000,000
SENIOR SECURED NOTES
DUE SEPTEMBER 30, 2005
AND
WARRANTS TO PURCHASE COMMON STOCK
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NOTE AND WARRANT PURCHASE AGREEMENT
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Dated as of June 25, 2002
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TABLE OF CONTENTS
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PARAGRAPH 1. AUTHORIZATION OF ISSUANCE OF THE NOTES AND WARRANTS .................. 1
PARAGRAPH 2. PURCHASE AND SALE OF NOTES AND WARRANTS .............................. 1
PARAGRAPH 3. CONDITIONS PRECEDENT ................................................. 2
3A. Purchasers' Conditions to Closing .................................. 2
3B. Conditions Precedent to Obligations of the Company ................. 7
PARAGRAPH 4. REDEMPTION OF THE NOTES .............................................. 8
4A. Optional Redemption ................................................ 8
4B. Mandatory Redemption ............................................... 8
4C. Notice of Redemption ............................................... 8
4D. Change in Control .................................................. 9
4E. Excess Cash Flow Repurchase Offer .................................. 10
4F. Partial Redemptions Pro Rata ....................................... 11
4G. Retirement of the Notes ............................................ 11
PARAGRAPH 5. AFFIRMATIVE COVENANTS ................................................ 11
5A. Payment and Performance ............................................ 12
5B. Books, Financial Statements and Reports ............................ 12
5C. Other Information and Inspections .................................. 13
5D. Notice of Material Events .......................................... 14
5E. Maintenance of Properties .......................................... 15
5F. Maintenance of Existence and Qualifications ........................ 15
5G. Payment of Taxes ................................................... 15
5H. Insurance .......................................................... 16
5I. Evidence of Compliance ............................................. 16
5J. Information Required by Rule 144A .................................. 16
5K. Compliance with Agreements and Law ................................. 16
5L. Indemnity .......................................................... 16
5M. Subordination ...................................................... 17
5N. Maintenance of Perfected Security Interests in the Collateral ...... 17
5O. Non-Voting Observer ................................................ 18
5P. Key Man Insurance .................................................. 19
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PARAGRAPH 6. NEGATIVE COVENANTS ................................................... 20
6A. Prohibition on Additional Indebtedness ............................. 20
6B. Maintenance of EBITDA .............................................. 20
6C. Maintenance of Fixed Charge Coverage Ratio ......................... 21
6D. Maintenance of Minimum Net Worth ................................... 21
6E. Capital Expenditures ............................................... 21
6F. Limitation on Liens ................................................ 22
6G. Limitation on Mergers .............................................. 23
6H. Limitation on Asset Sales; Application or Other Proceeds ........... 23
6I. Limitation on Restricted Payments .................................. 25
6J. Limitation on Restrictions on Distributions from Subsidiaries ...... 26
6K. Limitation on Transactions with Affiliates ......................... 26
6L. Limitation on Ownership of Subsidiaries ............................ 27
6M. Modification of Material Agreements ................................ 28
6N. Limitation on Transfer of Assets to Certain Subsidiaries ........... 28
6O. Payments for Consent ............................................... 28
6P. Limitations on Preferred Stock of Subsidiaries ..................... 28
6Q. Use of Proceeds .................................................... 28
6R. Business Activities ................................................ 28
PARAGRAPH 7. EVENTS OF DEFAULT .................................................... 28
7A. Acceleration ....................................................... 28
7B. Rescission of Acceleration ......................................... 31
7C. Notice of Acceleration or Rescission ............................... 32
7D. Other Remedies ..................................................... 32
PARAGRAPH 8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ........................ 32
PARAGRAPH 9. REPRESENTATIONS AND COVENANTS OF THE PURCHASERS ...................... 45
PARAGRAPH 10. DEFINITIONS .......................................................... 47
PARAGRAPH 11. MISCELLANEOUS ........................................................ 63
11A. Note Payments ...................................................... 63
11B. Expenses ........................................................... 63
11C. Consent to Amendments .............................................. 64
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes ..... 65
11E. Persons Deemed Owners; Participations .............................. 66
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11F. Survival of Representations and Warranties; Entire Agreement .... 66
11G. Successors and Assigns .......................................... 66
11H. Disclosure to Other Persons ..................................... 66
11I. Notices ......................................................... 67
11J. Payments Due on Non-Business Days ............................... 67
11K. Satisfaction Requirement ........................................ 67
11L. Governing Law ................................................... 67
11M. Severability .................................................... 67
11N. Descriptive Headings ............................................ 68
11O. Counterparts .................................................... 68
Schedule 8A-1 Capitalization
Schedule 8A-2 Subsidiaries
Schedule 8A-3 Options and Warrants
Schedule 8M Unaudited Financial Statements
Schedule 8N Pro Forma Financial Statements
Schedule 8Q Licenses
Schedule 8V Liens
Schedule 8X Clinical Trials
EXHIBIT A FORM OF SENIOR SECURED NOTE
EXHIBIT B FORM OF COMMON STOCK PURCHASE WARRANT
EXHIBIT C-1 FORM OF SECURITY AGREEMENT
EXHIBIT C-2 FORM OF INTERCREDITOR AGREEMENT
EXHIBIT D FORM OF OPINION OF ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
EXHIBIT E FORM OF OPINION OF ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
EXHIBIT F FORM OF REGISTRATION RIGHTS AGREEMENT
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WOMEN FIRST HEALTHCARE, INC.
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
As of June 25, 2002
Ladies and Gentlemen:
The undersigned, WOMEN FIRST HEALTHCARE, INC., a Delaware corporation
(the "Company"), hereby agrees with each purchaser (collectively, the
"Purchasers") executing a signature page hereto as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUANCE OF THE NOTES AND warrants.
The Company has authorized issuance of its Senior Secured Notes due
September 30, 2005 (the "Notes") in the initial aggregate principal amount of
$28,000,000, together with warrants to purchase 1,699,437 shares of common stock
of the Company (the "Warrants"). Interest on the Notes shall be payable
quarterly. The initial interest rate shall be 11.0% per annum (payable in cash)
and, following the first 18 months after issuance, shall be increased by 1.5%
per annum (payable in additional Notes of like tenor and maturity, bearing the
same interest rate ("Additional Notes") or, at the option of the Company, in
cash) and then increased by an additional 0.5% per annum six months thereafter
(also payable in Additional Notes or, at the option of the Company, in cash), as
set forth in the form of Note attached as Exhibit A hereto. The initial exercise
price of the Warrants shall be $5.50 per share, subject to adjustment as set
forth in the form of Warrant attached as Exhibit B hereto.
Certain capitalized terms used herein have the meanings specified in
Paragraph 10. Unless otherwise indicated, all dollar amounts contained in this
Agreement are in U.S. Dollars and all covenants contained herein shall be
calculated in U.S. Dollars.
PARAGRAPH 2. PURCHASE AND SALE OF NOTES AND WARRANTS.
Subject to the terms and conditions herein set forth, the Company
hereby agrees to sell to the Purchasers and each Purchaser agrees to purchase
from the Company at the Closing (as defined below), (i) Notes in the amount set
forth on the signature pages hereof below its name at 100% of principal amount;
provided, however, that all such issuances of Notes (exclusive of Additional
Notes which may be issued to satisfy interest payment
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Obligations) shall not result in originally issued Notes with an aggregate
principal amount exceeding $28,000,000 and (ii) Warrants in the amount set forth
on the signature pages hereof below its name for no additional consideration;
provided, however, that total of all such Warrants shall not exceed 5.75% of the
fully diluted common equity of the Company on the Date of Closing (as defined
below). The Company will deliver to each Purchaser one or more Notes in the form
attached as Exhibit A hereto registered in the name of such Purchaser (or its
nominee), evidencing the aggregate principal amount of Notes to be purchased by
such Purchaser and in the denomination or denominations specified by such
Purchaser and one or more Warrants in the form attached as Exhibit B hereto
registered in the name of such Purchaser (or its nominee), evidencing the number
of shares of common stock of the Company to be issued upon exercise of the
Warrants to be purchased by such Purchaser and in the denomination or
denominations specified by such Purchaser against payment of the purchase price
thereof by transfer of immediately available funds on the date of closing, which
shall be June 25, 2002 (the "Closing"; the "Date of Closing"), to accounts
specified by the Company in a funds flow memorandum to be delivered by the
Company to the Purchasers not later than one Business Day prior to the Date of
Closing. To the extent Additional Notes are issued, the Company will deliver to
each then holder of the Notes the Additional Notes registered in the name of
such holder (or its nominee). The issuance of Additional Notes shall not require
the issuance of additional Warrants.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3A. Purchasers' Conditions to Closing. The obligation of each
Purchaser to purchase and pay for the Notes and the Warrants to be purchased by
such Purchaser hereunder is subject to the satisfaction of the following
conditions, on or before the Date of Closing:
(i) Documents To Be Delivered. Each Purchaser shall have received all
of the following, duly executed and delivered:
(a) The Notes to be purchased by such Purchaser.
(b) The Warrants to be purchased by such Purchaser.
(c) The Registration Rights Agreement in substantially the form
set forth as Exhibit F hereto.
(d) The Security Documents in substantially the forms set forth
as Exhibits C-1 and C-2 hereto.
(e) Arrangements reasonably satisfactory to the Purchasers shall
have been made for all recordings and filings of, or with respect to,
the Security Agreement, including filings with the United States
Patent and Trademark and Copyright offices, and delivery of such other
security and other documents
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including, without limitation, consents of counterparties, and the
taking of all actions as may be necessary or, in the reasonable opinion
of the Collateral Agent, desirable to perfect the Lien created, or
purported to be created, by the Security Agreement.
(f) A certificate of the Secretary of the Company dated the
Date of Closing, certifying the incumbency and authority of the
officers or authorized signatories of the Company who executed the
Documents and the truth, correctness and completeness of the following
exhibits attached thereto: (i) a copy of resolutions duly adopted by
the Board of Directors of the Company, in full force and effect at the
time this Agreement is entered into, authorizing the execution of this
Agreement and the other Documents delivered or to be delivered in
connection herewith and the consummation of the transactions
contemplated herein and therein, as applicable, (ii) a copy of the
certificate of incorporation of the Company, and all amendments
thereto, certified by an appropriate official of the Company's
jurisdiction of incorporation, and (iii) a copy of the By-laws of the
Company.
(g) Certificates, dated as of a recent date, as to the valid
existence and good standing of the Company and each of its Subsidiaries
in its jurisdiction of formation, issued by the appropriate authorities
of such jurisdiction.
(h) A certificate executed by the principal executive officer
of the Company, dated the Date of Closing, in which such officer
certifies that the conditions set forth in subsections (a), (b), and
(c) of Paragraph 3A(iii) have been satisfied.
(i) The opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Company,
dated the Date of Closing and substantially in the form set forth as
Exhibit D hereto, subject only to such qualifications, limitations or
exceptions as may be acceptable to each Purchaser.
(j) The opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, the Purchasers'
special counsel, dated the Date of Closing and substantially in the
form set forth as Exhibit E hereto, subject only to such
qualifications, limitations or exceptions as may be acceptable to each
Purchaser.
(k) Certificates, dated as of a recent date, of the Company's
and its Subsidiaries' good standing and qualification to do business,
issued by appropriate officials in each jurisdiction listed on Schedule
3A(i)(k).
(ii) Fees and Expenses. The payment by the Company, by wire
transfer of immediately available funds, of (i) an upfront fee of 2.0% of the
total amount
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committed by the Purchasers (as defined in the commitment letter dated
June 18, 2002), to be allocated to such Purchasers pro rata on the
basis of their respective commitments set forth therein, (ii) the
travel and other reasonable out-of-pocket expenses of the Purchasers
related to the Vaniqa Acquisition or this Transaction and (iii) the
reasonable fees and disbursements of the Purchasers' counsel (including
without limitation ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇) and consultants related to
the Vaniqa Acquisition or this Transaction.
(iii) Representations; No Default. (a) All representations and
warranties made by the Company in any Document shall be true and
correct on and as of the Date of Closing (except to the extent that the
facts upon which such representations are based have been changed by
the transactions herein contemplated and such changes are set forth to
the satisfaction of each Purchaser) as if such representations and
warranties had been made as of the Date of Closing.
(b) No Default under this Agreement or the other Documents
shall exist at the Date of Closing.
(c) The Company shall have performed and complied with all
agreements and conditions required in the Documents to be performed or
complied with by the Company on or prior to the Date of Closing.
(iv) Purchase Permitted by Applicable Laws. The offer by the
Company of, and the purchase of and payment for, the Notes and the
Warrants on the terms and conditions herein provided (including the use
of the proceeds of the sale of such Notes and the Warrants by the
Company) shall not violate any applicable law or governmental
regulation (including, without limitation, Section 5 of the Securities
Act), shall not be enjoined under the laws of any jurisdiction to which
the Company or either Purchaser is subject (temporarily or permanently)
and shall not subject any Purchaser or any then holders of the Notes or
the Warrants to any tax, penalty, liability or other materially adverse
condition under or pursuant to any applicable law or governmental
regulation.
(v) Concurrent Consummation of Acquisition. Concurrently
with the issuance of the Notes, the Company shall consummate the Vaniqa
Acquisition on terms and in form and substance reasonably satisfactory
to the Purchasers.
(vi) Concurrent Consummation of Preferred Stock Financing.
Concurrently with the issuance of the Notes, the Company shall
consummate the issuance and sale of the Preferred Stock on terms and in
form and substance reasonably satisfactory to the Purchasers.
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(vii) Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in
form and substance to each Purchaser, and each Purchaser shall have
received all such counterpart originals or certified or other copies of
such documents as they or their counsel may reasonably request.
(viii) Reliance on Related Documents. Each Purchaser shall be
entitled to rely on all written representations, warranties, covenants
and opinions rendered by buyer in connection with the consummation of
the transactions contemplated by the Transaction Documents.
(ix) No Adverse Change or Development, Etc. (I) There shall
not have occurred or become known to the Purchasers any events or
changes (A) since December 31, 2001 that, individually or in the
aggregate, have had or could reasonably be expected to have a Material
Adverse Effect, after giving effect to the Transaction, or (B) that
have had or could reasonably be expected to have an adverse effect on
the rights or remedies of any Purchaser, or on the ability of the
Company to perform its obligations to any Purchaser; (II) trading in
any securities of the Company shall not have been suspended or
materially limited by the Securities and Exchange Commission or Nasdaq
and trading in securities generally on the New York Stock Exchange,
American Stock Exchange, Ontario Stock Exchange or the Nasdaq National
Market shall not have been suspended or limited and minimum or maximum
prices or maximum ranges for prices shall not have been established on
any such exchange; (III) a banking moratorium shall not have been
declared by New York, Canadian or United States authorities; and (IV)
there shall not have been (A) an outbreak or escalation of material
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other material insurrection or armed
conflict involving the United States or any other national or
international calamity or emergency or (C) any material change or
disruption in the general financial, banking or capital markets of the
United States which, in each case, in the judgment of the Purchasers
could reasonably be expected to materially and adversely affect or
impair the ability to syndicate, sell or place the Notes or the
Warrants.
(x) Capital Structure. The pro forma consolidated capital
structure of the Company, after giving effect to the Transaction
(including only those adjustments approved by the Purchasers), shall be
consistent in all material respects with the Projections and capital
structure contemplated herein, and other than any Notes and other
indebtedness satisfactory to the Purchasers, after giving effect to,
and upon consummation of, the Transaction, the Company and its
subsidiary shall have no outstanding indebtedness for money borrowed
other than currently outstanding Indebtedness of the Company and its
subsidiaries in an aggregate principal amount outstanding not to exceed
$21.6 million.
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(xi) Approvals. All governmental and third party approvals
required by the Transaction and any other material governmental and
third party approvals required in connection with the financing
contemplated hereby shall have been obtained on reasonably satisfactory
terms and shall be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened
by any competent authority that would materially restrain, prevent or
otherwise impose material adverse conditions on the financing thereof.
(xii) Financial Statements. The Purchasers shall have
received (I) satisfactory audited financial statements of the Company
for the three most recent Fiscal Years for which such financial
statements are available, (II) satisfactory unaudited interim
consolidated financial statements of the Company for each fiscal month
and quarterly period ended after the latest Fiscal Year referred to in
clause (I) above as to which such financial statements are available
and for the corresponding period in the preceding Fiscal Year, (III) a
satisfactory pro forma (a) balance sheet of the Company as of the date
of the most recent financial statements provided pursuant to clause
(II) above and (b) income statement for the most recent of the Fiscal
Years provided pursuant to clause (I) above and for the quarterly
period provided pursuant to clause (II) above, in each case, which
shall give pro forma effect (including only those adjustments approved
by the Purchasers) to the Transaction and (IV) the Projections; and
such financial statements and Projections shall not reflect any
material adverse change in the consolidated financial condition of the
Company and its subsidiaries from what was reflected in the financial
statements or projections previously furnished to the Purchasers.
(xiii) Minimum EBITDA. The Purchasers shall be satisfied that
consolidated EBITDA (as adjusted on a pro forma basis for the
Transaction in accordance with customary investment banking practice
and including only those adjustments approved by the Purchasers) of the
Company, after giving effect to the Transaction, for the latest three
month period annualized for which the relevant financial information is
available shall equal at least $15.4 million, and the Company shall
provide support for such calculation of a nature that is satisfactory
to the Purchasers.
(xiv) Minimum Cash Balance. The Purchasers shall be satisfied
that, as of the Date of Closing and after giving effect to the
Transaction, the Company shall have a minimum cash balance of at least
$14.0 million.
(xv) Solvency. Each Purchaser shall have received a
certificate satisfactory in form and substance to the Purchasers and
executed by the Chief Executive Officer and the Chief Financial Officer
of the Company that shall certify to the solvency of the Company and
its subsidiaries after giving effect to the Transaction and the other
transactions contemplated hereby.
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3B. Conditions Precedent to Obligations of the Company. The
obligation of the Company to issue and sell the Notes and the Warrants is
subject to the satisfaction, on or before the Date of Closing, of the following
conditions:
(i) Purchaser Deliveries. (a) The Company shall have received
the following from each Purchaser, duly executed and delivered: (A) the
Registration Rights Agreement in substantially the form set forth as
Exhibit F hereto and (B) the Security Documents in substantially the
forms set forth as Exhibits C-1 and C-2 hereto.
(b) The Purchasers shall have tendered payment pursuant to
Paragraph 2 above.
(ii) Expenses. The Purchasers shall have provided to the
Company a statement of, and at the request of the Company reasonable
documentation for, (a) the travel and other reasonable out-of-pocket
expenses of the Purchasers related to the Vaniqa Acquisition or the
Transaction and (b) the reasonable fees and disbursements of the
Purchasers' counsel (including without limitation ▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇) and consultants related to the Vaniqa Acquisition or the
Transaction.
(iii) Representations and Warranties. The representations and
warranties made by each Purchaser herein shall be true and correct on
and as of the Date of Closing with the same effect as though such
representations and warranties had been made on and as of the Date of
Closing.
(iv) Purchase Permitted by Applicable Laws. The offer by the
Company of, and the purchase of and payment for, the Notes and the
Warrants on the terms and conditions herein provided (including the use
of the proceeds of the sale of such Notes and the Warrants by the
Company) shall not violate any applicable law or governmental
regulation (including, without limitation, Section 5 of the Securities
Act) and shall not be enjoined under the laws of any jurisdiction to
which the Company or any Purchaser is subject (temporarily or
permanently).
(v) Vaniqa Closing. All conditions to consummation of the
Vaniqa Acquisition shall have been performed or waived by the
appropriate parties thereto at the Date of Closing.
(vi) Concurrent Consummation of Preferred Stock Financing.
Concurrently with the issuance of the Notes, the Company shall
consummate the issuance and sale of the Preferred Stock.
(vii) Approvals. All governmental and third party approvals
required by the Transaction and any other material governmental and
third party approvals required in connection with the financing
contemplated hereby shall have been obtained on
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reasonably satisfactory terms and shall be in full force and effect,
and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
materially restrain, prevent or otherwise impose material adverse
conditions on the financing thereof.
PARAGRAPH 4. REDEMPTION OF THE NOTES.
4A. Optional Redemption. On or after the Date of Closing, the
Notes may be redeemed at the option of the Company at any time as a whole, or
from time to time in part, without premium or penalty except as set forth below,
in amounts not less than $1,000,000 and in increments of $500,000, at a
redemption price of 108% of the aggregate principal amount of Notes outstanding
(the "Optional Redemption Price"), plus accrued and unpaid interest (if any) to
the date of redemption.
4B. Mandatory Redemption. Net Proceeds of loans or sales of
other debt securities (to include, but not limited to, loans or debt securities
related to currently unencumbered assets) other than Net Proceeds of the
Permitted Debt incurred after the Date of Closing, to the full extent of the Net
Proceeds so received, and 75% of the Net Proceeds of an offering of equity
securities, whether in a public offering or private placement and whether by the
Company or any of its Subsidiaries, shall be used to redeem the Notes at the
Optional Redemption Price, plus accrued and unpaid interest (if any) to the date
of redemption within 30 days of receipt of such proceeds. Excluded from the
foregoing mandatory redemption requirement shall be (a) proceeds from any equity
offering to the extent used (i) to acquire substantially all of the rights to
Esclim under license as of the Date of Closing, (ii) to refinance the senior
secured note of the Company held by American Home Products Corporation or (iii)
to make a Permitted Acquisition. Also excluded from the foregoing mandatory
redemption requirement for a period of six months following receipt thereof by
the Company shall be up to $7.5 million of proceeds from one or more equity
offerings yielding proceeds of less than $7.5 million, which proceeds shall
promptly be deposited in a revolving escrow account to be used solely to either
(a) before the six-month anniversary of the receipt of such proceeds by the
Company, make a Permitted Acquisition, or (b) on or after such six-month
anniversary, commence a mandatory redemption of the Notes in accordance with
this Paragraph 4B; provided, that the Purchasers shall have a perfected first
priority security interest in all amounts held in such escrow account at all
times while any amount is on deposit therein. The Company shall not be required
to redeem Notes pursuant to this Paragraph 4B if the Net Proceeds available to
redeem Notes pursuant to this Paragraph 4B are less than $500,000 (which lesser
amount shall be carried forward for purposes of determining whether such a
redemption is required with respect to the Net Proceeds from any subsequent
loans or offerings of debt or equity securities).
4C. Notice of Redemption. The Company shall give the holder of
each Note irrevocable written notice of any redemption pursuant to Paragraph 4A
or 4B not less than 15
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Business Days nor more than 30 Business Days prior to the date specified for
such redemption, specifying such date and the principal amount of the Notes held
by such holder to be redeemed on such date and stating that such redemption is
to be made pursuant to Paragraph 4A or 4B. Notice of redemption having been
given as aforesaid, the principal amount of the Notes specified in such notice,
together with any premium and accrued and unpaid interest (if any) thereon to
the redemption date with respect thereto, shall become due and payable on such
redemption date.
4D. Change in Control. (a) In the event of any Change in Control,
holders of Notes shall have the right, at their option, to require the Company
to purchase all or any portion of the Notes on the date (the "Change in Control
Payment Date") which is 20 Business Days after the date the Change in Control
Notice (as defined below) is required to be mailed (or such later date as is
required by applicable law) at the Optional Redemption Price, plus accrued and
unpaid interest (if any) to the Change in Control Payment Date.
(b) The Company shall send all holders of the Notes, within five
Business Days after the occurrence of any Change in Control, a notice of the
occurrence of such Change in Control (the "Change in Control Notice"); provided
that the foregoing five Business Day period will be extended by 120 days in the
event of ▇▇. ▇▇▇▇▇▇'▇ death prior to the earlier of (i) 60 days after the Date
of Closing or (ii) the date on which the Company is first in compliance with
Paragraph 5P.
Each Change in Control Notice shall state:
(1) the Change in Control Payment Date;
(2) the date by which the right to have Notes purchased must be
exercised;
(3) that such right is conditioned on receipt of notice from the
holders;
(4) the purchase price, if the right to have Notes purchased is
exercised;
(5) a description of the procedure which the holders of Notes must
follow to exercise the right to have Notes purchased;
(6) that the purchase is being made pursuant to this Paragraph 4D;
(7) that any Note not tendered will continue to accrue interest if
interest is then accruing; and
(8) that, unless the Company defaults in making payment therefor, any
Note accepted for purchase shall cease to accrue interest after the Change
in Control Payment Date.
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No failure of the Company to give the foregoing notice shall limit any
holder's right to exercise a right to have Notes purchased.
The Company shall not be required to purchase all or any portion of
the Notes under subparagraph (a) of this Paragraph 4D if a third party offers to
purchase the Notes in the manner, at the time and otherwise in compliance with
the requirements set forth in this Paragraph 4D and purchases all Notes or
portions thereof validly tendered and not withdrawn under this Paragraph 4D.
4E. Excess Cash Flow. (a) If the Company has Excess Cash Flow for the
period commencing on the Date of Closing and ending December 31, 2002 or for any
Fiscal Year thereafter, the Company shall apply an amount equal to 75% of the
Excess Cash Flow for such period or Fiscal Year:
(1) first, to make an offer to the holders of the Notes to purchase
Notes pursuant to and subject to the conditions contained in this Agreement
(an "Excess Cash Flow Offer");
(2) second, to the extent of the balance of such percentage of Excess
Cash Flow after application in accordance with subsection (1) above, to
make an offer to the holders of the Preferred Stock to purchase their
shares of Series A Preferred Stock pursuant to and subject to the
conditions contained in the certificate of designations relating thereto;
and
(3) third, to the extent of the balance of such percentage of Excess
Cash Flow after application in accordance with clauses (1) and (2) above,
to any other application or use not prohibited by this Agreement.
(b) In the event of the occurrence of an Excess Cash Flow Offer,
holders of Notes shall have the right, at their option, to require the Company
to purchase such portion of the Notes on the date (the "Excess Cash Flow Payment
Date") which is 20 Business Days after the date the Excess Cash Flow Notice (as
defined below) is required to be mailed (or such later date as is required by
applicable law) at a price equal to 100% of the principal amount thereof plus
accrued and unpaid interest (if any) to the Excess Cash Flow Payment Date. The
Company shall not be required to make an Excess Cash Flow Offer to purchase
Notes pursuant to this Paragraph 4E if the Excess Cash Flow available therefor
is less than $500,000 (which lesser amount shall be carried forward for purposes
of determining whether such an offer is required with respect to the Excess Cash
Flow in any subsequent Fiscal Year).
(c) The Company shall send all holders of the Notes, within 90
Business Days after end of the Fiscal Year, a notice of the occurrence of such
Excess Cash Flow (the "Excess Cash Flow Notice").
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Each Excess Cash Flow Notice shall state:
(1) the Excess Cash Flow Payment Date;
(2) the date by which the right to have Notes purchased must be
exercised;
(3) that such right is conditioned on receipt of notice from the
holders;
(4) the purchase price, if the right to have Notes purchased is
exercised;
(5) a description of the procedure which the holders of Notes must
follow to exercise the right to have Notes purchased;
(6) that the purchase is being made pursuant to this ▇▇▇▇▇▇▇▇▇ ▇▇;
(7) that any Note not tendered will continue to accrue interest if
interest is then accruing; and
(8) that, unless the Company defaults in making payment therefor, any
Note accepted for purchase shall cease to accrue interest after the Excess
Cash Flow Payment Date.
No failure of the Company to give the foregoing notice shall limit any
holder's right to exercise a right to have Notes purchased.
4F. Partial Redemptions Pro Rata. Upon any partial redemption of the
Notes pursuant to Paragraph 4A or 4B, the principal amount so redeemed shall be
allocated to all Notes at the time outstanding in proportion to the respective
outstanding principal amounts thereof.
4G. Retirement of the Notes. The Company shall not redeem or otherwise
retire in whole or in part prior to their stated final maturity (other than by
redemption pursuant to Paragraph 4A or 4B or upon acceleration of such final
maturity pursuant to Paragraph 7A), or purchase or otherwise acquire, directly
or indirectly, Notes held by any holder unless the Company shall have offered to
redeem or otherwise retire or purchase or otherwise acquire, as the case may be,
the same proportion of the aggregate principal amount of Notes held by each
other holder of Notes at the time outstanding upon the same terms and
conditions. Any Notes so redeemed or otherwise retired or purchased or otherwise
acquired by the Company shall not be deemed to be outstanding for any purpose
under this Agreement.
PARAGRAPH 5. AFFIRMATIVE COVENANTS.
To induce each Purchaser to enter into this Agreement and purchase the
Notes and the Warrants, the Company covenants and agrees as follows:
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5A. Payment and Performance. The Company shall pay all amounts due by
it under the Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition in the Documents
applicable to it.
5B. Books, Financial Statements and Reports. The Company shall at all
times maintain and shall cause its Subsidiaries to at all times maintain
materially complete and accurate books of accounts and records. The Company
shall maintain and shall cause its Subsidiaries to maintain a standard system of
accounting and will furnish the following statements and reports to each
Purchaser or each then holder of Notes at the Company's expense:
(i) (A) No later than 90 days after the end of each Fiscal Year,
audited consolidated financial statements of the Company, together with all
notes thereto, prepared in reasonable detail in accordance with GAAP,
together with an opinion, based on an audit using United States generally
accepted auditing standards, by independent certified public accountants of
national reputation selected by the Company, stating that such financial
statements have been so prepared. The consolidated financial statements of
the Company shall contain a balance sheet as of the end of such Fiscal Year
and a statement of operations, cash flows and stockholders' equity for such
Fiscal Year, each setting forth in comparative form the corresponding
figures for the preceding Fiscal Year. (B) No later than 90 days following
the first day of each Fiscal Year of the Company, a budget prepared by the
Company for each of the four quarters of such Fiscal Year prepared in the
same level of detail as prepared for and delivered to the Company's Board
of Directors for the Company and its Subsidiaries, accompanied by a
statement of the Chief Financial Officer of the Company to the effect that
the budget is a reasonable estimate for the period covered thereby.
(ii) No later than 45 days after the end of each of the first three
Fiscal Quarters of the Company's Fiscal Year, the Company's unaudited
consolidated balance sheet as of the end of such Fiscal Quarter and an
unaudited consolidated statement of operations and cash flows for such
Fiscal Quarter and for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, setting forth in each case,
in comparative form, figures for the corresponding periods in the preceding
Fiscal Year, all in reasonable detail and prepared in accordance with GAAP,
subject to changes resulting from normal or recurring year-end adjustments.
(iii) No later than 30 days after the end of each calendar month, the
Company's unaudited consolidated interim balance sheet as of the end of
such month and the related unaudited consolidated interim statements of
operations and cash flows for such one-month period and the portion of the
Fiscal Year through the end of such month, setting forth in each case, in
comparative form, figures for the corresponding fiscal periods in the
preceding Fiscal Year (subject to normal year-end audit adjustments and the
absence of footnote disclosure).
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(iv) The Company will (A) together with each set of financial
statements furnished under subsection (i) of this Paragraph, furnish a
certificate signed by the firm auditing such financial statements
containing a statement to the effect that such firm has examined Paragraphs
6 and 7 of this Agreement and that in the course of their examination they
did not become aware of any Event of Default, or any event which upon
notice or lapse of time or both would constitute an Event of Default, under
such Paragraph 6 (or, if such an event has occurred, a statement explaining
its nature and extent); provided, however, that in issuing such statement,
such firm shall not be required to exceed the scope of normal auditing
procedures conducted in connection with their opinion referred to above;
and (B) together with each set of financial statements furnished under
subsections (i) and (ii) of this Paragraph, furnish a certificate signed by
the Chief Financial Officer of the Company containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Year or Fiscal
Quarter, as the case may be, with the requirements of Paragraphs 4B, 4E,
6A, 6B, 6C, 6D, 6E, 6H, 6I and 6K and stating that such financial
statements fairly present the financial condition of the Company and its
consolidated Subsidiaries, that the signatory has reviewed the Documents
and that no Event of Default or Default exists at the end of such Fiscal
Year or Fiscal Quarter, as the case may be, or at the time of such
certificate or specifying the nature and period of existence of any such
Event of Default or Default.
(v) For so long as the Company is required to make filings with the
Securities and Exchange Commission pursuant to Sections 13 and 15(d) of the
Exchange Act, so long as any of the Notes are outstanding, the Company
shall furnish to each Noteholder the annual reports, quarterly reports,
current reports, proxy statements and other documents that the Company has
filed with the Securities and Exchange Commission pursuant to Sections 13
and 15(d) of the Exchange Act, such documents to be furnished to each
Noteholder within 15 days of the respective dates by which the Company has
filed such documents (unless an earlier time is specified herein).
5C. Other Information and Inspections. The Company shall, and shall
cause its Subsidiaries to, furnish to each Noteholder any information which such
holder may from time to time reasonably request concerning any covenant,
provision or condition of the Documents or any matter in connection with the
Company's, or any of its Subsidiaries', business and operations. During normal
business hours, upon reasonable notice, and without undue interruption of the
Company's and its Subsidiaries' business, the Company shall, and shall cause its
Subsidiaries to, permit representatives of each holder or group of holders of a
combination of at least $5,000,000 in (i) principal amount of the Notes and (ii)
accreted stated value of the Preferred Stock (each such holder or group
"Significant Noteholders"), including each Significant Noteholder's independent
accountants, agents, attorneys, appraisers and any other representatives, to
visit and inspect any of the Company's, or such Subsidiary's, Property,
including its books of account, other books and records, and any facilities or
other business assets; provided that no individual Noteholder shall be permitted
such inspection rights
-14-
in the event such Noteholder does not hold a combination of at least $2,500,000
(i) in principal amount of Notes and (ii) accreted stated value of the Preferred
Stock. The inspections in accordance with the preceding sentence shall be
limited to no more than four times each calendar year for each Noteholder. The
out-of-pocket costs and expenses of the first inspection by each Noteholder
shall be borne by the Company, except to the extent such cost and expenses of
all Noteholders and the holders of Preferred Stock exceed $50,000 per year, and
all out-of-pocket costs and expenses of the remaining three inspections per year
shall be borne by the relevant Noteholders; provided, however, that during any
period in which an Event of Default has occurred and is continuing, the number
of inspections shall not be limited, and the reasonable, documented
out-of-pockets costs and expenses of the inspections during the period in which
an Event of Default has occurred and is continuing shall be borne by the
Company. The representatives of the Significant Holders who conduct any
inspections shall execute a confidentiality agreement reasonably acceptable to
the Company. In connection with any such inspections, the Company shall, and
shall cause its Subsidiaries to, permit the Significant Noteholders or
representatives of the Noteholders to investigate and verify the accuracy of the
information furnished to the Significant Noteholders in connection with the
Documents and to discuss all such matters with its officers, employees and
representatives. Each Noteholder agrees that it shall keep confidential any
proprietary information given to it by the Company or any of its Subsidiaries;
provided, however, that this restriction shall not apply to information which
(i) has at the time in question entered the public domain other than by reason
of breach of this provision by any Noteholder, (ii) is required to be disclosed
by law or by any order, rule or regulation of any court or governmental agency,
or authority, (iii) is disclosed to any Affiliates, auditors, attorneys, or
agents of the Noteholders so long as the Noteholders request that such Person or
Persons keep such information confidential in accordance with the terms of the
confidentiality provisions of this Paragraph 5C, or (iv) is furnished to
purchasers or prospective purchasers of the Notes; provided that such purchasers
or prospective purchasers shall be apprised of the confidential nature of such
information and shall agree with the Company to hold such information
confidential in accordance with the terms of the confidentiality provisions of
this Paragraph 5C. With respect to clause (ii) of the preceding sentence, the
Noteholder proposing to disclose such information shall promptly notify the
Company and shall use commercially reasonable efforts to obtain or provide the
Company with the opportunity to obtain confidential treatment of such
information by the court, governmental agency, authority or other disclosee.
5D. Notice of Material Events. The Company shall, and shall cause its
Subsidiaries to, promptly notify the Noteholders (i) of the existence of any
Lien (other than Liens permitted under Paragraph 6F of this Agreement) on the
Company's or such Subsidiary's property or an event or condition that could
reasonably be expected to result in a Material Adverse Effect, (ii) of the
occurrence of any Default, (iii) of the default in payment on, or the
acceleration of the maturity of, any Debt owed by the Company or any of its
Subsidiaries or of any other default by the Company or any of its Subsidiaries
under any indenture, mortgage, agreement, contract or other instrument to which
any of them is a party or by which any of
-15-
them or any of their Properties is bound if such other default could reasonably
be expected to have a Material Adverse Effect, (iv) of any claim asserted
against the Company or any of its Subsidiaries or with respect to the Company's
or any of its Subsidiaries' Properties that could reasonably be expected to have
a Material Adverse Effect, (v) of the filing of any suit or proceeding against
the Company or any of its Subsidiaries in which an adverse decision could
reasonably be expected to have a Material Adverse Effect (vi) of the occurrence
of any (a) Termination Event; (b) "prohibited transaction" (within the meaning
of Section 4975 of the IRC or Section 406 of ERISA), other than one to which an
exemption applies; (c) failure to make a timely contribution to any Pension
Plan, if such failure has given rise to a Lien under Section 412(n) of the IRC;
or (d) actual, asserted or alleged violation of ERISA, the IRC or comparable
provision of applicable foreign law that, with respect to any of the events set
forth in the foregoing clauses (a) through (d), could reasonably be expected to
result in a material tax, penalty or other material adverse consequence to the
Company, any of its Subsidiaries or any ERISA Affiliate in connection with any
Pension Plan, and shall provide a written notice specifying the nature thereof,
what action the Company is taking or proposes to take with respect thereto, and,
when known, any action taken by the IRS, the U.S. Department of Labor, the PBGC,
any foreign governmental entity or any other Person with respect thereto and
(vii) of the receipt of any notice of termination or notice that exclusive
rights will become non-exclusive under any material license agreement under
which the Company receives rights to manufacture, distribute or sell a product.
Upon the occurrence of any of the foregoing, the Company shall, and shall cause
its Subsidiaries to, take all reasonably necessary or appropriate steps to
remedy promptly any such material event, Default or default, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing.
5E. Maintenance of Properties. The Company shall, and shall
cause its Subsidiaries to, maintain, preserve, protect, and keep all Property
necessary to the business of the Company and its Subsidiaries in reasonably good
condition (ordinary wear and tear excepted) and in compliance with all
applicable laws, rules and regulations, except where non-compliance could not
reasonably be expected to have a Material Adverse Effect.
5F. Maintenance of Existence and Qualifications. Except as
provided in Paragraph 6G, the Company shall, and shall cause each of its
Subsidiaries to, (a) maintain and preserve its corporate or other existence and
its rights, franchises and privileges in full force and effect; and (b) qualify
to do business as a foreign corporation or limited liability company, as the
case may be, in all states or jurisdictions where required by applicable law
except where the failure to be so qualified would not result, individually or in
the aggregate, in a Material Adverse Effect.
5G. Payment of Taxes. The Company shall, and shall cause each
of its Subsidiaries to, (i) timely file all required tax returns; and (ii)
timely pay all Taxes, assessments,
-16-
and other governmental charges or levies imposed upon it or upon its income,
profits or Property, except to the extent the same are being contested in good
faith and for which adequate reserves under GAAP have been established.
5H. Insurance. The Company shall, and shall cause each of its
Subsidiaries to, maintain insurance in such amounts and covering such risks as
are usually and customarily carried with respect to all Property of a character
usually insured by similar Persons engaged in the same or similar businesses.
The Company shall, and shall cause each of its Subsidiaries to, at all times
maintain insurance against its liability for injury to persons or Property,
which insurance shall be by financially sound and reputable insurers.
5I. Evidence of Compliance. The Company shall furnish to each
Noteholder at the Company's expense (i) within 45 days after the end of each of
the first three Fiscal Quarters of any Fiscal Year and within 90 days after the
end of each Fiscal Year, a certificate signed by the Chairman of the Board, the
President or the Chief Financial Officer of the Company and (ii) all evidence
that any Noteholder from time to time reasonably requests, in each case, as to
the accuracy and validity of or compliance with all representations, warranties
and covenants made by the Company in the Documents, the satisfaction of all
conditions contained therein and all other matters pertaining thereto, except to
the extent any of the foregoing matters are covered by another compliance
provision contained herein.
5J. Information Required by Rule 144A. The Company shall, upon
the request of a Noteholder, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule l44A under the
Securities Act in connection with the resale of Notes, except at such times as
the Company is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act. For the purpose of this Paragraph 5J, the term "qualified
institutional buyer" shall have the meaning specified in Rule l44A under the
Securities Act.
5K. Compliance with Agreements and Law. The Company shall, and
shall cause each of its Subsidiaries to, perform all obligations it is required
to perform under the terms of each indenture, mortgage, deed of trust, security
agreement, lease, franchise, agreement, contract or other instrument or
obligation to which it is a party or by which it or any of its Properties is
bound, except where failure to comply could not reasonably be expected to have a
Material Adverse Effect. The Company shall, and shall cause each of its
Subsidiaries to, conduct its business and affairs in compliance with all laws,
regulations, and orders applicable thereto, except where failure to comply could
not reasonably be expected to have a Material Adverse Effect.
5L. Indemnity. The Company agrees to indemnify each holder of
Notes or Warrants, upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (including
-17-
reasonable fees of attorneys, accountants, experts and advisors) of any kind or
nature whatsoever (in this section collectively called "liabilities and costs")
which to any extent (in whole or in part) may be imposed on, incurred by or
asserted against any holder of a Note or Warrant growing out of, resulting from
or in any other way associated with the Documents and the transactions and
events associated herewith or therewith or contemplated herein or therein. No
holder of Notes or Warrants shall be entitled under this paragraph to receive
indemnification for any liabilities and costs (i) to the extent caused by its
own individual gross negligence, willful misconduct or bad faith, (ii) to the
extent caused by its breach of any law, rule, regulation, order or any contract,
agreement or other instrument to which it is a party or otherwise bound, or
(iii) which arise from actions or proceedings convened by a Noteholder against
another Noteholder or by a holder of Warrants against another holder of
Warrants. The Company shall not, in connection with any one action or proceeding
or separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances,
be responsible hereunder for the reasonable fees and expenses of more than one
law firm, in addition to any local counsel, for all of the holders of Notes or
Warrants, except to the extent any holder of Notes or Warrants shall have been
advised by legal counsel that there is a reasonable likelihood that there may
exist a conflict of interest between any of such holders of Notes or Warrants or
that any such holders of Notes or Warrants may have one or more defenses
available that are different from or additional to any defense or defenses
available to any other holder of Notes or Warrants. None of the Company, any
Noteholder or any holder of Warrants will, without the prior written consent of
the other, settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification by such Noteholder or holder of Warrants may be sought hereunder
(whether or not such Noteholder or holder of Warrants is a party to such claim,
action, suit or proceeding); provided that the Noteholder or holder of Warrants
may so settle such claim without such consent if such settlement includes a full
release of the Company by the Noteholder or holder of Warrants or if the Company
is not then in material compliance with its obligations under this Paragraph 5L.
5M. Subordination. All existing and hereafter arising
Indebtedness of the Company (excluding the Existing Secured Debt as of the Date
of Closing and a Permitted Working Capital Facility) shall be subordinated to
the Indebtedness and other obligations of the Company under the Documents
pursuant to subordination agreements reasonably satisfactory in form and
substance to the Required Holders, in their sole and absolute discretion.
5N. Maintenance of Perfected Security Interests in the
Collateral. The Company shall, and shall cause its Subsidiaries to, perform any
and all acts and execute any and all documents (including, without limitation,
the execution, amendment or supplementation of any financing statement and
continuation statement) for filing in any appropriate jurisdiction under the
provisions of the UCC, local law or any statute, rule or regulation of any
applicable jurisdiction and for filing with the United States Patent and
Trademark Office and the United States Copyright Office which are necessary or,
in the reasonable opinion of the
-18-
Collateral Agent, desirable in order to maintain, confirm, grant, preserve,
protect and perfect the validity and first priority in favor of the Collateral
Agent for the ratable benefit of the Purchasers a valid and perfected Lien on
the Collateral, subject to no Liens except for the Liens permitted by the
applicable Security Documents, and shall deliver to the Purchasers an opinion of
outside counsel acceptable to the Purchasers (whose acceptance shall not be
unreasonably withheld) which shall opine as to the perfection of such filings
with United States Patent and Trademark Office and the United States Copyright
Office. The Company shall, as promptly as practicable after receipt of copies of
any financing statements, deliver to the Collateral Agent acknowledgment copies
of, or copies of lien search reports confirming the filing of, financing
statements duly filed under the UCC of all jurisdictions as may be necessary or,
in the reasonable opinion of the Collateral Agent, desirable to perfect the Lien
created, or purported or intended to be created, by each Security Document. The
Company agrees to, from time to time, provide such evidence as the Collateral
Agent shall reasonably request as to the perfection and priority status of each
security interest and Lien contemplated. If the Company has not performed all
such acts, delivered such opinion of counsel and executed all such filings
within the date which is ten days from the Date of Closing, interest on the
Notes shall increase by a rate of 50 basis points, and shall increase by an
additional 50 basis points if such acts have not been performed and filings have
not been executed another ten days thereafter; and if such acts have not been
performed and such filings have not been executed 30 days after the Date of
Closing, such failure to act shall constitute an Event of Default without giving
effect to the grace period referenced in Paragraph 7A(vi). Any rate increase
pursuant to this Paragraph 5N shall be of no further force or effect immediately
upon demonstration to the Purchasers that all such actions and filings have been
taken and made. Notwithstanding the foregoing, the Company shall not be deemed
to have defaulted under this Paragraph 5N for any failure to create, perfect or
maintain a security interest by reason of any invalidity or enforceability of
the Security Documents with respect to the rights, if any, of the holders of the
Preferred Stock (including as a result of the application of the laws and other
principles set forth in the Preferred Security Interest Exceptions (defined in
Paragraph 8E below)).
5O. Non-Voting Observer. For so long as shares of the
Preferred Stock or any Notes, with combined accreted stated value and principal
amount thereof in excess of 10% of the combined accreted stated value and
principal amount issued at the Closing, remain outstanding, the holders of
outstanding shares of Preferred Stock and Notes shall be entitled to designate a
non-voting observer (an "Observer") to the Board of Directors of the Company
(which Observer shall be entitled to have expenses reimbursed by the Company as
if such Observer were a director of the Company). The Observer shall be
appointed by the holders of a majority of the aggregate accreted stated value of
Preferred Stock and the aggregate principal amount of Notes, voting together as
a single class. Any person designated as an Observer to the Board of Directors
will, to the extent permissible under Delaware law, have the right (w) to notice
of and to be present at all meetings of the Board of Directors and its
committees and to receive all materials, notices, minutes, consents and forms of
consents in lieu of meetings distributed to the Board of Directors generally or
to members of its committees at or in
-19-
connection with any such meeting or action by written consent in lieu of such
meeting, (x) to have the same access to which directors are entitled under
Delaware law to the books and records of, and information concerning the
business and operations of, the Company and Board of Directors, (y) to be
provided with copies of all notices, minutes, consents, forms of consents in
lieu of meetings and all other materials provided to one or more of the
directors of the Company (who are not officers or employees of the Company), and
(z) to have the same access to all information and materials, books and records
and employees of the Company and of its Subsidiaries as may be given to any
director of the Company (who is not an officer or employee of the Company);
provided, however, that the rights granted to the Observer under this Agreement
(including the right to receive all materials, notices, minutes, consents and
forms of consents in lieu of meetings) shall be temporarily suspended if and to
the extent, in the reasonable opinion of the Board of Directors, the Observer's
attendance at any such meeting or portion thereof (i) violates any law or
Company policy regarding conflicts of interest with interested members of the
Board of Directors as applied generally to meetings of the Board of Directors or
(ii) otherwise could violate the fiduciary duties of the Board of Directors or
constitute a waiver of any attorney-client privilege that may exist in
connection with such meeting or any portion thereof, as advised by outside
counsel to the Company. The Board of Directors shall not hold informal meetings
of the Board of Directors or any committee thereof (unless the Observer is
invited thereto) as a means designed to circumvent or having the effect of
circumventing the intention that the holders of Notes and Preferred Stock will
have access to the Board of Directors and its committees as provided under this
Agreement.
5P. Key Man Insurance. Within 60 days after the Date of
Closing, the Company shall obtain a "key man" life insurance policy on ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ on terms satisfactory to the Purchasers (including naming the Purchasers
as beneficiaries) and shall keep effective such policy in an amount of at least
$5,000,000. The Purchasers agree to apply any proceeds received by them as
beneficiaries under such policy on a pro rata basis in satisfaction of the
Company's obligations under the Notes.
5Q. Reliance on Related Documents. The Company hereby agrees
that each Purchaser shall be entitled to rely on all written representations,
warranties and covenants rendered by the Company in connection with the
consummation of the transactions contemplated by the Transaction Documents.
5R. Allocation of Shares of Common Stock. The Company shall,
at all times after the Date of Closing, take instructions from the Required
Holders as relates to the allocation of shares of its Common Stock issuable upon
exercise of the Warrants and conversion of the shares of Preferred Stock. The
Company shall not issue shares of its Common Stock pursuant to any exercise of
the Warrants or conversion of the shares of Preferred Stock, except as in
accordance with instructions from the Required Holders.
-20-
5S. Certain Approval. Not later than the next annual meeting
of the Company's held in accordance with the Company's by-laws, the Company
shall submit to the stockholders for their approval the issuance by the Company
of shares of Common Stock exceeding 20% of the number of shares of Common Stock
outstanding on the Date of Closing as a consequence of the conversion of shares
of Preferred Stock and exercise of the Warrants into shares of Common Stock,
together with the recommendation of its Board of Directors for approval of such
proposal. The Company shall use its best efforts to cause the approval by a
majority of the total votes cast on the proposal, in person or by proxy, of such
proposal, which may include securing a voting agreement from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
agreeing to vote in favor of the proposal, hiring a proxy solicitor and direct
solicitation efforts of significant stockholders.
PARAGRAPH 6. NEGATIVE COVENANTS.
To induce each Purchaser to enter into this Agreement and
purchase the Notes, the Company warrants, covenants and agrees as follows:
6A. Prohibition on Additional Indebtedness. The Company shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
create, assume, incur or otherwise be liable for (collectively, "incur") any
Debt (including, without limitation, Acquired Indebtedness and Purchase Money
Indebtedness) other than the Permitted Debt.
6B. Maintenance of EBITDA. The Company shall not, and shall
not permit any of its Subsidiaries to, permit Actual EBITDA for the Company (a)
for the three consecutive Fiscal Quarters ending September 30, 2002 to be less
than $6.2 million and (b) for the period of four consecutive Fiscal Quarters
ending on each date specified below to be less than the amount set forth
opposite such period below:
Actual
Date EBITDA Amount
-------------- -------------
December 31, 2002 $9.0 million
March 31, 2003 $11.3 million
June 30, 2003 $12.3 million
September 30, 2003 $13.3 million
December 31, 2003 $14.5 million
March 31, 2004 $15.5 million
June 30, 2004 $16.5 million
September 30, 2004 $17.5 million
December 31, 2004 $18.5 million
March 31, 2005 $18.5 million
June 30, 2005 $18.5 million
-21-
6C. Maintenance of Fixed Charge Coverage Ratio. The Company shall
not, and shall not permit any of its Subsidiaries to, permit the Fixed Charge
Coverage Ratio of the Company (a) for the three consecutive Fiscal Quarters
ending September 30, 2002 to be less than 2.0:1 and (b) for the period of four
consecutive Fiscal Quarters ending on each date specified below to be less than
the amount set forth opposite such period below:
Date Fixed Charge Coverage
-------------- ---------------------
December 31, 2002 2.0:1
March 31, 2003 2.0:1
June 30, 2003 2.0:1
September 30, 2003 2.0:1
December 31, 2003 1.75:1
March 31, 2004 2.0:1
June 30, 2004 2.0:1
September 30, 2004 2.0:1
December 31, 2004 2.0:1
March 31, 2005 2.0:1
June 30, 2005 2.0:1
6D. Maintenance of Minimum Net Worth. The Company shall not, and
shall not permit any of its Subsidiaries to permit Adjusted Net Worth of the
Company, as of the end of any Fiscal Quarter of the Company, to be less than 90%
of the Net Worth of the Company as of June 30, 2002, increasing at the end of
fiscal 2002 by 50% of Consolidated Net Income from July 1, 2002 to the end of
fiscal 2002 and at the end of each Fiscal Year thereafter by 50% of the
Consolidated Net Income; provided that no adjustment shall be made for any
period in which the Company has negative Consolidated Net Income.
6E. Capital Expenditures. The Company shall not, and shall not
permit any of its Subsidiaries to, make any Capital Expenditures, during the
Fiscal Years ending on each date specified below to exceed the amount set forth
opposite such period below:
Fiscal Year Capital Expenditures
----------- --------------------
2002 $ 2.9 million
2003 $1.75 million
2004 $1.75 million
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6F. Limitation on Liens. The Company shall not, and shall not
permit any of its Subsidiaries, to incur or suffer to be incurred or allow to
exist any Lien in respect of any Property of the Company or any of its
Subsidiaries, other than:
(1) Liens on the Collateral in favor of the Collateral Agent
for the benefit of the Noteholders and the holders of the Preferred
Stock in accordance with the Security Agreement;
(2) Liens on inventory and/or receivables of the Company
securing Indebtedness under a Permitted Working Capital Facility;
(3) Liens for taxes or assessments or other governmental
charges or levies, not yet due or payable or which are being contested
in good faith by appropriate proceedings; provided that adequate
reserves with respect thereto are maintained on the books of the
Company or its Subsidiaries, as the case may be, in conformity with
GAAP;
(4) Liens created by or resulting from any litigation or legal
proceeding which is being contested in good faith by appropriate
proceedings; provided that adequate reserves with respect thereto are
maintained on the books of the Company or its Subsidiaries, as the
case may be, in conformity with GAAP;
(5) other Liens incidental to the normal conduct of the
business of the Company or its Subsidiaries which do not secure Debt
and which do not in the aggregate materially impair the use of such
Property in the operation of the business of the Company and its
Subsidiaries taken as a whole or the value of such Property for the
purposes of such business;
(6) subject to compliance with or a waiver of ▇▇▇▇▇▇▇▇▇ ▇▇, (▇)
any Lien on Property existing on such Property at the time of
acquisition thereof, whether or not the Debt secured thereby is
assumed by the Company or any Subsidiary thereof, or (ii) any Lien
existing on the Property of a Person at the time such Person is merged
into or consolidated with the Company or any Subsidiary thereof or at
the time of a sale, lease or other disposition of the Properties of a
Person or firm as an entirety or substantially as an entirety to the
Company or any Subsidiary thereof; provided that none of such Liens
shall exceed 100% of the fair market value of the related Property and
no other Property of the Company or any Subsidiary shall be subject to
any such Lien;
(7) subject to compliance with or a waiver of Paragraph 6A,
purchase money Liens to finance Property or assets of the Company or
any Subsidiary acquired in the ordinary course of business; provided,
however, that (A) the related purchase money Debt shall not exceed the
cost of such Property or assets and shall not be secured by any
Property or assets of the Company or its Subsidiaries other than the
-23-
Property and assets so acquired and (B) the Lien securing such Debt
shall be created within 90 days of such acquisition;
(8) subject to compliance with or a waiver of Paragraph 6A,
Liens securing Capitalized Lease Obligations; provided that such Lien
does not extend to any property other than that subject to the
underlying lease;
(9) Liens existing on the Date of Closing; or
(10) Liens in favor of the Company.
6G. Limitation on Mergers. The Company shall not, nor shall it
permit any of its Subsidiaries to, in a single transaction or through a series
of related transactions, merge or consolidate with or into any other Person;
provided that this Paragraph 6G shall not apply in the event of a Change in
Control where the Company complies with Paragraph 4D; and provided, further,
that this Paragraph 6G shall not apply to a merger or consolidation of one of
the Company's Subsidiaries with or into any other Person if the surviving Person
in such merger or consolidation will be a Subsidiary of the Company following
such transaction.
Notwithstanding the foregoing, any Subsidiary of the Company may
merge with the Company or any other Subsidiary of the Company; provided that the
Company or a Subsidiary shall be the surviving Person.
6H. Limitation on Asset Sales; Application of Certain Proceeds.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, in a single transaction or a series of related
transactions, sell, lease, transfer or otherwise dispose of or suffer to be
sold, leased, transferred, abandoned or otherwise disposed of, all or any part
of its assets except:
(i) the Company and its Subsidiaries may sell their inventory
in the ordinary course of their business and may sell obsolete assets
having no or immaterial book value;
(ii) any Subsidiary may sell, lease or otherwise dispose of any
or all of its assets to the Company or another Subsidiary of the
Company;
(iii) the Company or any Subsidiary thereof may sell, lease or
otherwise dispose of assets in transactions not otherwise permitted
under clause (i) of this Paragraph 6H (each such sale, lease or other
disposition of assets being hereinafter referred to as an "Asset
Sale"), so long as (A) the Company demonstrates to the satisfaction of
the Noteholders that, after giving effect to such sale, lease or other
disposition, the Company and its Subsidiaries remain in compliance
with the terms of this Agreement and the Notes, including all
covenants, (B) no part of any asset sold, leased or otherwise disposed
of consists of any Collateral, (C) the Company receives consideration
at the time of such sale or other disposition at least equal to the
fair market value, as determined by the Board of Directors, of the
assets sold or otherwise
-24-
disposed of consists of any Collateral, (C) the Company receives
consideration at the time of such sale or other disposition at least
equal to the fair market value, as determined by the Board of
Directors, of the assets sold or otherwise disposed of, and (D) not
less than 80% of the consideration received by the Company is in the
form of cash or Cash Equivalents except to the extent the Company
receives as consideration for such Asset Sale rights or assets in a
Permitted Acquisition; and
(iv) (a) to the extent that an amount equal to 100% of the Net
Proceeds from any Asset Sale is applied by the Company
(A) first, to make an offer to the holders of the Notes to
purchase Notes pursuant to and subject to the conditions
contained in this Agreement (an "Asset Sale Proceeds Offer"); and
(B) second, to the extent of the balance of such proceeds
after application in accordance with clause (A) above, to any
other application or use not prohibited by this Agreement.
In the event of an Asset Sale Proceeds Offer, the Company will be
required to purchase Notes tendered pursuant to an offer by the
Company for the Notes at a purchase price of 100% of their principal
amount plus accrued but unpaid interest in accordance with the
procedures (including prorating in the event of oversubscription) set
forth in this Agreement. Excluded from the foregoing provisions of
this subparagraph 6H(iv) will be (i) proceeds from any asset sale
which, when taken together with all proceeds from asset sales
occurring within the 12 months preceding such asset sale, do not
exceed $2.5 million (which amount shall be carried forward for
purposes of determining whether such an offer is required with respect
to the asset sale proceeds for any subsequent asset sale), (ii) all
proceeds from the sale of the Company's Catalog Business (as
constituted on the Date of Closing) as and (iii) all proceeds used to
repay Indebtedness secured by the assets sold as required by the terms
of such Indebtedness.
(b) In the event of an Asset Sale Proceeds Offer, holders of
Notes shall have the right, at their option, to require the Company to purchase
all or any portion of the Notes on the date (the "Asset Sale Proceeds Payment
Date") which is 20 Business Days after the date the Asset Sale Proceeds Notice
(as defined below) is required to be mailed (or such later date as is required
by applicable law) at the a price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest (if any) to the Asset Sale Proceeds Payment
Date. The Company shall not be required to make an offer to purchase Notes
pursuant to this subparagraph 6H(a)(iv) if the Net Proceeds available therefor
for are less than $500,000 (which lesser amount shall be carried forward for
purposes of determining whether such an offer is required with respect to the
Net Proceeds from any subsequent assets sales).
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(c) The Company shall send all holders of the Notes, within
five Business Days after the occurrence of such Asset Sale, a notice of the
occurrence of such Asset Sale (the "Asset Sale Proceeds Notice").
Each Asset Sale Proceeds Notice shall state:
(1) the Asset Sale Proceeds Payment Date;
(2) the date by which the right to have Notes purchased must be
exercised;
(3) that such right is conditioned on receipt of notice from
the holders;
(4) the purchase price, if the right to have Notes purchased is
exercised;
(5) a description of the procedure which the holders of Notes
must follow to exercise the right to have Notes purchased;
(6) that the purchase is being made pursuant to this Paragraph
6H;
(7) that any Note not tendered will continue to accrue interest
if interest is then accruing; and
(8) that, unless the Company defaults in making payment
therefor, any Note accepted for purchase shall cease to accrue
interest after the Asset Sale Proceeds Payment Date.
No failure of the Company to give the foregoing notice shall
limit any holder's right to exercise a right to have Notes purchased.
(d) In addition to the foregoing, the Company agrees to apply
any proceeds received by it from the Seller, ▇▇▇▇▇▇▇▇ and/or BMS (as each is
defined in the Transaction Documents) in connection with any claim by the
Company for indemnity or breach or the like under the Vaniqa Acquisition
documents to make an offer to repurchase the Notes in the same manner and
subject to the same limitations as set forth above as if such offer were an
Asset Sale Proceeds Offer.
6I. Limitation on Restricted Payments. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on the Capital Stock of the
Company or any of its Subsidiaries (except dividends or stock splits payable
solely in Qualified Capital Stock, accretion of stated value or dividends
payable on the Preferred Stock or dividends payable solely to the Company or a
Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for value any
of the Capital Stock or rights to acquire Capital Stock of the Company or its
Subsidiaries which are not wholly-owned (including, in each case, any payments
made pursuant to any Company or Subsidiary
-26-
stock appreciation rights plan or reasonable equivalent thereof) other than (A)
Preferred Stock in accordance with Sections 9E, 9F and 9G of the certificate of
designations relating thereto and (B) restricted shares of Capital Stock issued
to officers, directors or employees pursuant to the terms for repurchase thereof
upon a termination of employment or directorship, (iii) repay, prepay, redeem,
or otherwise acquire or retire for value, make principal payments with respect
to or defease, any Debt of the Company or its Subsidiaries that is subordinate
or junior in right of payment to the Notes or the Existing Senior Debt (except,
with respect to the Existing Senior Debt, for scheduled amortization payments
and payment of principal at maturity) (each of the foregoing actions set forth
in clauses (i) through (iii) hereof being referred to as a "Restricted Payment")
or (iv) make any Investment other than a Permitted Investment.
6J. Limitation on Restrictions on Distributions from
Subsidiaries. The Company shall not, and shall not permit any of its
Subsidiaries to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction which by its terms encumbers
or restricts the ability of any Subsidiary to (a) pay dividends or make any
other distributions on its Capital Stock or pay any Debt or other obligation
owed to the Company, (b) make any loans or advances to the Company, (c) transfer
any of its Property or assets to the Company, or (d) guarantee any Debt of the
Company, except for such encumbrances or restrictions existing under or
contemplated by or by reason of (i) applicable law or any applicable rule,
regulation or order, (ii) the Documents, (iii) encumbrances or restrictions
existing on the Date of Closing to the extent and in the manner such
encumbrances and restrictions are in effect on the Date of Closing, (iv) subject
to compliance with or a waiver under Paragraph 6A, any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person (including any Subsidiary of the Person), so
acquired, (v) customary non-assignment provisions in leases or other agreements
entered in the ordinary course of business and consistent with past practices,
(vi) customary restrictions in security agreements or mortgages securing
Indebtedness of the Company or a Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements and
mortgages, (vii) customary restrictions pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of a Subsidiary of the Company, or (viii) subject to
compliance with or a waiver under Paragraph 6A, restrictions contained in
Purchase Money Indebtedness or Capitalized Lease Obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (c) above on the property so acquired so long as such
restrictions are limited to such property.
6K. Limitation on Transactions with Affiliates. The Company
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any Property, assets or the rendering of any service) with, or for
the
-27-
benefit of, any of its Affiliates (each an "Affiliate Transaction") or
extend, renew, waive or otherwise modify in any material respect the terms of
any Affiliate Transaction entered into prior to the Date of Closing other than
Affiliate Transactions on terms that are fair and reasonable to the Company or
the Subsidiary, as the case may be, and the terms are no less favorable than
those that would reasonably have been obtained in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate of the
Company or such wholly-owned Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions) entered into after the Date of Closing
which involve an aggregate fair market value of more than $500,000 shall be
approved by the Board of Directors of the Company or such Subsidiary, as the
case may be, and approval shall be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
standard set forth in the immediately preceding sentence. If the Company or any
Subsidiary of the Company enters into an Affiliate Transaction (or a series of
related Affiliate Transactions) after the Date of Closing that involves an
aggregate fair market value of more than $1,000,000, the Company or such
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Subsidiary, as the case may be, from
a financial point of view, from an Independent Financial Advisor and provide the
same to each Noteholder.
The foregoing provisions shall not apply to:
(1) any Restricted Payment that is not prohibited by the
provisions described in Paragraph 6I hereof;
(2) any employment agreement entered into by the Company or
any of its Subsidiaries in the ordinary course of business, consistent
with the past practice of the Company or such Subsidiary and approved
by the independent members of the Board of Directors;
(3) transactions between or among the Company and one or
more wholly owned Subsidiaries or among wholly owned Subsidiaries; and
(4) any transaction pursuant to an agreement, arrangement or
understanding existing on the Date of Closing and known to the
Purchasers.
6L. Limitation on Ownership of Subsidiaries. The Company shall
at all times own, either directly or through a wholly-owned Subsidiary, 100% of
the Voting Stock of its Subsidiaries existing as of the date hereof.
Notwithstanding the foregoing, any Subsidiary of the Company may issue shares of
its Capital Stock to any Person to the extent but only to the extent that a
requirement of law applicable to such Subsidiary requires the issuance of shares
of Capital Stock to such Person in order for such Person to qualify for service
as a director of such Subsidiary.
-28-
6M. Modification of Material Agreements. Without the consent
of the Required Holders, the Company shall not, and shall not permit any of its
Subsidiaries to, amend any of its Material Agreements.
6N. Limitation on Transfer of Assets to Certain Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries to, sell,
convey, transfer, lease or other wise dispose of any of its assets or property
to any Subsidiary that is not a wholly-owned Subsidiary of the Company.
6O. Payments for Consent. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
holder of any Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of this Agreement or the Notes unless such
consideration is offered to be paid or agreed to be paid to all holders of the
Notes which so consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or agreement.
6P. Limitations on Preferred Stock of Subsidiaries. The
Company shall not permit any of its Subsidiaries to issue any preferred stock
(other than to the Company or any of its Subsidiaries) or permit any Person
(other than the Company or one or more Subsidiaries) to hold any such preferred
stock.
6Q. Use of Proceeds. (a) The proceeds from the issuance of the
Notes on the Date of Closing shall be used to consummate the Vaniqa Acquisition
and pay related fees and expenses.
(b) No portion of the proceeds from the issuance of Notes
shall be used in any manner which would violate Regulation U, T or X of the
Board of Governors of the Federal Reserve System or any other regulation of such
Board or to violate the Exchange Act, as in effect on the date or dates of such
borrowing and such use of proceeds.
6R. Business Activities. The Company shall not, nor shall the
Company cause or permit any of its Subsidiaries to, directly or indirectly,
engage in any business other than the marketing, sale or distribution of
pharmaceutical or health care products or (unless and until the Catalog Business
is sold) products of the type currently sold by the Catalog Business.
PARAGRAPH 7. EVENTS OF DEFAULT.
7A. Acceleration. If any of the following events (each an
"Event of Default") shall occur and be continuing for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or otherwise):
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(i) there is a default in the payment of any principal of
any of the Notes when the same shall become due, either by the terms
thereof or otherwise as herein provided, including, without limitation,
as a result of the failure by the Company to redeem or purchase the
Notes as required by the provisions of Paragraph 4;
(ii) there is a default in the payment of any interest on any
of the Notes, or a default in the payment of other amounts payable
under this Agreement, in either case for more than 5 Business Days
after the date due;
(iii) the Company or any of its Subsidiaries fails to comply
with any provision of Paragraph 6 of this Agreement;
(iv) the Company fails to comply with any of its other
covenants or obligations under the Notes or this Agreement and the
default continues and is not remedied within 30 days from the date
notice is required to be given to Noteholders pursuant to Paragraph 5D;
(v) any representation or warranty made in this Agreement,
the other Documents or in any certificate furnished in connection
therewith is proven to be false or incorrect in any material respect as
of the date made;
(vi) the Company or any of the Subsidiaries shall (A) default
in any payment of principal of or interest of any Indebtedness other
than the Notes involving payment in respect of obligations in the
aggregate of $250,000 or more, beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement under
which such Indebtedness was created or (B) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist the effect of which default or other event or condition
is to cause, or to permit the holder or holders or other beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice, if required, such Indebtedness to become due
prior to its stated maturity or otherwise payable, which default or
other condition shall continue and not be cured under the terms of such
Indebtedness within 30 days of its occurrence;
(vii) the Company or any of its Subsidiaries:
(a) suffers the entry against it of a judgment, decree
or order for relief by a court of competent jurisdiction in an
involuntary proceeding commenced under any applicable
bankruptcy, insolvency, composition or other similar law of
any jurisdiction now or hereafter in effect, including the
federal
-30-
Bankruptcy Code, as from time to time amended, or has any such
proceeding commenced against it which remains undismissed for
a period of 60 days; or
(b) commences a voluntary case under any applicable
bankruptcy, insolvency, composition or similar law now or
hereafter in effect, including the federal Bankruptcy Code, as
from time to time amended; or applies for or consents to the
entry of an order for relief in an involuntary case under any
such law; or makes a conveyance, assignment for the benefit
of, or enters into any composition with, its creditors
generally; or fails generally to pay (or admits in writing its
inability to pay) its debts as such debts become due; or takes
corporate or other action to authorize any of the foregoing;
or
(c) suffers the appointment of or taking possession
by any holder of a Lien, receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of all or
a substantial part of its assets in a proceeding brought
against or initiated by it, and such appointment or taking
possession is neither made ineffective nor discharged within
60 days after the making thereof, or such appointment or
taking possession is at any time consented to, requested by,
or acquiesced to by it; or
(d) suffers the entry against it of a final judgment
or judgments for the payment of money in excess of $100,000
which is not fully covered by insurance (less customary
deductibles) unless the same is discharged within 30 days
after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and
a stay of execution pending such appeal is obtained; or
(viii) any of the Security Documents shall cease to be in full
force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges for the benefit of the Noteholders
purported to be created thereby (other than any such cessation due to
an act or failure to act on the part of the Lenders), in favor of the
Collateral Agent, superior to and prior to the rights of all third
Persons and subject to no Liens other than the Liens permitted by the
applicable Security Document; or
(ix) the Company receives a notice of termination or notice
that exclusive rights will become non-exclusive under any material
license agreement under which the Company receives rights to
manufacture, distribute or sell a product and fails to cure such
termination or change in license rights on or before a date that falls
two thirds of the way through the period between the notice date and
the first date on which the other party may terminate such rights or
may elect to make an exclusive license non-exclusive; provided that it
shall not be an Event of Default hereunder if on or before the date
that falls two thirds of the way through such period the Company
demonstrates to the reasonable satisfaction of the Purchasers that, on
a pro forma basis
-31-
after taking into account the termination of such license rights or the
conversion of such rights from exclusive to non-exclusive rights, the
Company continues to satisfy the covenants set forth in Section 6B
(calculated for the most recent four consecutive Fiscal Quarters and
compared to the required minimum Actual EBITDA amount for such Fiscal
Quarters) and Sections 6C and 6D (determined as of such date); provided
further that the Purchasers agree to negotiate with the Company in good
faith to determine the effects for purposes of the preceding proviso of
a change from exclusive to non-exclusive rights to a product for a
period of one week;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this Paragraph 7A, any Noteholder (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable together with interest accrued thereon, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company, (b) if such event is an Event of Default specified
in clause (vii)(a), (vii)(b) or (vii)(c) of this Paragraph 7A, all of the Notes
at the time outstanding shall automatically become immediately due and payable
at par together with interest accrued thereon, without presentment, demand,
protest or notice of any kind (including, without limitation, notice of intent
to accelerate and notice of acceleration of maturity), all of which are hereby
waived by the Company, and (c) if such event is any other Event of Default, the
holders of at least 25% of the aggregate principal amount of the Notes then
outstanding may at their option, by notice in writing to the Company, declare
all of the Notes to be, and all of the Notes shall thereupon be and become,
immediately due and payable together with interest accrued thereon with respect
to each Note, without presentment, demand, protest or other notice of any kind
(including, without limitation, notice of intent to accelerate), all of which
are hereby waived by the Company.
7B. Rescission of Acceleration. At any time after any or all
of the Notes shall have been declared immediately due and payable pursuant to
Paragraph 7A, the Required Holders may, by notice in writing to the Company,
rescind and annul such declaration and its consequences if (i) the Company shall
have paid all overdue interest on the Notes, the principal of any Notes which
have become due otherwise than by reason of such declaration, and interest on
such overdue interest and overdue principal at the rate specified in the Notes,
(ii) the Company shall not have paid any amounts which have become due solely by
reason of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to Paragraph 11C, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this Agreement. No such rescission or annulment shall
extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.
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7C. Notice of Acceleration or Rescission. Whenever any Note
shall be declared immediately due and payable pursuant to Paragraph 7A or any
such declaration shall be rescinded and annulled pursuant to Paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. Other Remedies. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for specific
performance of any covenant or other agreement contained in this Agreement or in
aid of the exercise of any power granted in this Agreement. No remedy conferred
in this Agreement upon the holder of any Note is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
PARAGRAPH 8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
To induce each Purchaser to enter into this Agreement and to
purchase the Notes and the Warrants, the Company represents and warrants to and
agrees with each Purchaser, as of the date hereof and as of the Date of Closing,
that:
(a) The Company and its Subsidiaries have been duly
incorporated, formed or organized, as the case may be, and each of the
Company and its Subsidiaries is validly existing in good standing as a
corporation, limited liability company or a limited partnership, as the
case may be, under the laws of its jurisdiction of incorporation,
formation or organization, with all requisite power and authority as a
corporation, limited liability company or limited partnership, as the
case may be, to own its properties and conduct its business as now
conducted (as described in the Exchange Act Documents) and is duly
qualified to do business as a corporation or foreign limited liability
company in good standing in all other jurisdictions where the ownership
or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; as of the Date of Closing and after giving pro
forma effect to the closing of the Transaction, the Company will have
the authorized, issued and outstanding capitalization set forth in
Schedule 8A-1; except as set forth in Schedule 8A-2 hereto, the Company
does not have any subsidiaries or own directly or indirectly any of the
capital stock or other equity or long-term debt securities of or have
any equity interest in any other person; all of the outstanding shares
of capital stock or membership interests, as the case may be, of the
Company and its Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable
-33-
and were not issued in violation of any preemptive or similar rights;
all of the outstanding shares of capital stock or membership interests,
as the case may be, of the Subsidiaries are owned free and clear of all
liens, encumbrances, equities and restrictions on transferability or
voting; all of the outstanding shares of capital stock or membership
interests, as the case may be, of the Subsidiaries are owned, directly
or indirectly, by the Company; except as set forth in this Agreement
and in Schedule 8A-3, no options, warrants or other rights to purchase
from the Company or any Subsidiary, or agreements or other obligations
of the Company or any Subsidiary to issue or other rights to convert
any obligation into, or exchange any securities for, shares of capital
stock of or ownership interests (including the Warrants) in the Company
or any Subsidiary are outstanding and no holder of securities of the
Company or any Subsidiary is entitled to have such securities
registered under the Securities Act; there is no agreement,
understanding or arrangement among the Company or any Subsidiary and
each of their respective members or stockholders, as the case may be,
or any other person relating to the ownership or disposition of any
capital stock or membership interest (including any Warrant), as the
case may be, of the Company or any Subsidiary or the election of
directors or other governing persons of the Company or any Subsidiary
or the governance of the Company's or any Subsidiary's affairs, and, if
any, such agreements, understandings and arrangements will not be
breached or violated as a result of the execution and delivery of, or
the consummation of the transactions contemplated by, this Agreement,
the other Documents and the Transaction Documents.
(b) The Company has all requisite power and authority as a
corporation to execute, deliver and perform its obligations under the
Notes. The Notes have each been duly and validly authorized by the
Company for issuance and, when executed by the Company in accordance
with the provisions of this Agreement, and delivered to and paid for by
the Purchasers in accordance with the terms hereof, will have been duly
executed, issued and delivered and will constitute valid and legally
binding obligations of the Company, entitled to the benefits of this
Agreement and enforceable against the Company in accordance with their
terms except that the enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally or (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought (regardless of whether such enforcement is considered in a
proceeding at law or in equity) (collectively, the "Enforceability
Exceptions"); the Notes are in the form contemplated by this Agreement.
(c) The Company has all requisite power and authority as a
corporation to execute, deliver and perform its obligations under the
Warrants. The Warrants have each been duly and validly authorized by
the Company for issuance and, when executed by the Company in
accordance with the provisions of this Agreement, and delivered to and
paid for by the Purchasers in accordance with the terms hereof, will
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have been duly executed, issued and delivered and will constitute valid
and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms except that the enforcement
thereof may be limited by the Enforceability Exceptions; the Warrants
are in the form contemplated by this Agreement.
(d) The Company has all requisite power and authority as a
corporation to execute, deliver and perform its obligations under this
Agreement (including without limitation the issuance of the Notes and
the Warrants). This Agreement has been duly and validly authorized by
the Company, and, when executed and delivered by the Company, will
constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms except
that (i) the enforcement thereof may be limited by the Enforceability
Exceptions and (ii) any rights to indemnity or contribution hereunder
may be limited by federal and state securities laws and public policy
considerations.
(e) The Company has all requisite power and authority as a
corporation to execute, deliver and perform its obligations under each
of the Security Documents. Each Security Document has been duly and
validly authorized by the Company and, when executed by the Company and
delivered to the Purchasers in accordance with the terms hereof, will
have been duly executed and delivered and will constitute a valid and
legally binding obligation of the Company, enforceable against the
Company in accordance with its terms except that the enforcement
thereof may be limited by the Enforceability Exceptions and no
representation or warranty is made by the Company hereunder or in the
Security Documents with respect to the validity or enforceability of
the Security Documents with respect to the rights, if any, of the
holders of the Preferred Stock thereunder, including with respect the
creation or perfection of a security interest, and the relative
priority of any such security interest, or the effect of the federal
Bankruptcy Code and comparable provisions of state law, and other
applicable antifraud laws, securities laws, usury laws or public policy
considerations on the rights, if any, of such holders under the
Security Documents (collectively, the "Preferred Security Interest
Exceptions").
(f) The Security Agreement is effective to create in favor of
the Collateral Agent, for the benefit of the Purchasers with respect to
the Notes, a legal, valid and enforceable security interest in the
Collateral and, when (i) the Security Agreement is filed in the United
States Patent and Trademark Office and the United States Copyright
Office and (ii) such other filings which are necessary to be made to
create the security interest pursuant to the Security Agreement, the
Security Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the grantors
thereunder in such Collateral (other than as defined in the Security
Agreement), in each case prior and superior in right to any other
person, subject to no other Liens except for Liens expressly permitted
to exist on such Collateral by the
-39-
terms of the Security Agreement; provided, however, that the foregoing
representation and warranty is expressly subject to the Preferred
Security Interest Exceptions.
(g) The Company has all requisite power and authority as a
corporation to execute, deliver and perform its obligations under the
Registration Rights Agreement. The Registration Rights Agreement has
been duly and validly authorized by the Company and, when executed by
the Company and delivered to the Purchasers in accordance with the
terms hereof, will have been duly executed and delivered and will
constitute a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms except
that (i) the enforcement thereof may be limited by the Enforceability
Exceptions and (ii) any rights to indemnity or contribution hereunder
may be limited by federal and state securities laws and public policy
considerations.
(h) The Company has all requisite power and authority as a
corporation to issue the shares of common stock issuable upon exercise
of the Warrants (the "Warrant Shares"). The Warrant Shares have been
duly and validly authorized by the Company and, when issued by the
Company in accordance with the provisions of the Warrants, will be
fully paid and nonassessable and will not be issued in violation of any
preemptive or similar rights and will be issued free and clear of all
liens, encumbrances, equities and restrictions on transferability or
voting other than those imposed under applicable federal and state
securities laws or otherwise granted by the Purchasers.
(i) (i) The Company has delivered to the Purchasers a true and
correct copy of each of the Transaction Documents that have been
executed and delivered prior to the date of this Agreement and each
other Transaction Document in the form substantially as it will be
executed and delivered on or prior to the Date of Closing, together
with all related agreements and all schedules and exhibits thereto, and
there have been no amendments, alterations, modifications or waivers of
any of the provisions of any of the Transaction Documents since their
date of execution or from the form in which any such Transaction
Document has been delivered to the Purchasers; and (ii) to the
Company's knowledge, there exists no event or condition that would
constitute a default or an event of default (in each case as defined in
each of the Transaction Documents) under any of the Transaction
Documents that could reasonably be expected to result, individually or
in the aggregate, in a Material Adverse Effect or affect the ability of
the Company or its Subsidiaries to consummate the Vaniqa Acquisition.
(j) No consent, approval, authorization, license,
qualification, exemption or order of any court or governmental agency
or body (including, without limitation, the Food and Drug
Administration (the "FDA")) or third party is required for the
-36-
performance of this Agreement or the Notes or the Warrants by the
Company, or for the consummation by the Company of the Transaction or
any transaction contemplated hereby, or the application of the proceeds
of the issuance of the Notes as described in this Agreement, except as
has already been acquired or as may be required under state securities
or "Blue Sky" laws in connection with the purchase of the Notes by the
Purchasers; all such consents, approvals, authorizations, licenses,
qualifications, exemptions and orders which are required to be obtained
by the Date of Closing have been obtained or made, as the case may be,
and are in full force and effect and not the subject of any pending or,
to the knowledge of the Company, threatened attack by appeal or direct
proceeding or otherwise.
(k) None of the Company or its Subsidiaries is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational document, including any certificate of formation and
operating agreement), (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation (including, without
limitation, those relating to the development, commercialization and
sale of pharmaceutical and biotechnology products) applicable to any of
them or any of their properties or assets (including, without
limitation, any order, rule or regulation of the FDA, the Securities
and Exchange Commission and the National Association of Securities
Dealers, Inc.), which breach or violation could, individually or in the
aggregate, have a Material Adverse Effect, or (iii) except as set forth
in Schedule 8J, in default (nor has any event occurred which with
notice or passage of time, or both, would constitute a default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in this Agreement or the Notes or any Transaction
Document or any other contract, indenture, mortgage, deed of trust,
loan agreement, note, lease, license, permit, certificate or agreement
or instrument to which it is a party or to which it is subject, which
default could, individually or in the aggregate, have a Material
Adverse Effect.
(l) The execution, delivery and performance by the Company of
this Agreement (including without limitation, the issuance of the Notes
and the Warrants), the other Documents and the Transaction Documents
and the consummation by the Company of the transactions contemplated
hereby and thereby and the fulfillment of the terms hereof and thereof
will not (a) violate, conflict with or constitute or result in a breach
of or a default under (or an event that, with notice or lapse of time,
or both, would constitute a breach of or a default under) any of (i)
the terms or provisions of any contract, indenture, mortgage, deed of
trust, loan agreement, note, lease, license, permit, certificate or
agreement or instrument to which any of the Company or its Subsidiaries
is a party or to which any of their respective properties or assets are
subject, (ii) the certificate of incorporation or bylaws of any of the
Company or its Subsidiaries (or similar organizational document,
including any certificate of formation and operating agreement) or
(iii) (assuming compliance with all applicable state securities or
-37-
"Blue Sky" laws and the accuracy of the representations and warranties
of the Purchasers in Paragraph 9 hereof) any statute, judgment, decree,
order, rule or regulation of any court or governmental agency or other
body applicable to the Company or its Subsidiaries or any of their
respective properties or assets (including, without limitation, the
rules and regulations of the FDA), that, in each case described in this
clause (a), could reasonably be expected to result, individually or in
the aggregate, in a Material Adverse Effect, or (b) result in the
imposition of any lien upon or with respect to any of the properties or
assets now owned or hereafter acquired by the Company or any of their
Subsidiaries, other than as contemplated by the Security Agreements.
(m) The audited consolidated financial statements contained in
the Exchange Act Documents present fairly in all material respects the
consolidated financial position, results of operations and cash flows
of such entities at the dates and for the periods to which they relate
and have been prepared in accordance with GAAP applied on a consistent
basis except as otherwise stated therein; the interim unaudited
consolidated financial statements contained in the Exchange Act
Documents and delivered to the Purchasers as a closing condition and
attached hereto as Schedule 8M present fairly in all material respects
the consolidated financial position, results of operations and cash
flows of such entities at the dates and for the periods to which they
relate subject to year-end audit adjustments and have been prepared in
accordance with GAAP applied on a basis substantially consistent with
the audited consolidated financial statements included therein; and
Ernst & Young LLP, which has examined certain of such financial
statements, is an independent certified public accounting firm within
the meaning of the Securities Act.
(n) The pro forma financial statements and other pro forma
financial information (including the notes thereto) attached hereto as
Schedule 8N have been properly computed on the bases described therein;
and the assumptions used in the preparation of the pro forma financial
statements and other pro forma financial information are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(o) The Projections have been prepared by the Company and are
based on the reasonable and good faith estimates and assumptions of the
Company and the Company has no reason to believe that such estimates
and assumptions are not fair and reasonable.
(p) There is not pending or, to the best knowledge of the
Company, threatened any action, suit, proceeding, inquiry or
investigation, governmental or otherwise, to which any of the Company
or its Subsidiaries is a party, or to which their respective properties
or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, that, if determined adversely to the
Company or any such
-38-
Subsidiary could, individually or in the aggregate, have a Material
Adverse Effect or that seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the Vaniqa Acquisition or the
issuance or sale of the Notes or the Warrants hereunder or the
application of the proceeds therefrom or the other transactions
consummated as of the date of this Agreement.
(q) Except as set forth on Schedule 8Q, the Company and its
Subsidiaries possess, and upon consummation of the Vaniqa Acquisition
will possess, all licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and have made all declarations
and filings with, all federal, state, local and other governmental
authorities (including, without limitation, the FDA), all
self-regulatory organizations and all courts and other tribunals,
presently required or necessary to own or lease, as the case may be,
and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted, except where the failure
to obtain such licenses, permits, certificates, consents, orders,
approvals and other authorizations, or to make all such declarations
and filings, could not, individually or in the aggregate, have a
Material Adverse Effect, and the Company and its Subsidiaries have not
received any notice of any proceeding relating to revocation or
modification of any such license, permit, certificate, consent, order,
approval or other authorization.
(r) To the best knowledge of the Company, none of the Company
or its Subsidiaries has, and, after giving effect to the Vaniqa
Acquisition and the issuance and sale of the Notes, will not have, any
liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability, or other liability under
Title IV of ERISA, with respect to any pension, profit sharing or other
plan which is subject to ERISA, to which any of the Company or its
Subsidiaries makes or ever has made a contribution and in which any
employee of any of the Company or its Subsidiaries is or has ever been
a participant. With respect to such plans, the Company and its
Subsidiaries are, and, after giving effect to the Vaniqa Acquisition
and the issuance and sale of the Notes, will be, in compliance in all
material respects with all provisions of ERISA.
(s) The Exchange Act Documents, as of the date such filings
were made, did not contain any untrue statement of a material fact or
omit to state a material fact necessary to make such information or
statements not misleading. All information provided to the Purchasers
about the Company, its Subsidiaries and its existing business,
financial conditions and results of operations, and all statements made
to the Purchasers about the Company, did not when made and do not as of
the date hereof contain or include any untrue statement of a material
fact or omit to state a material fact necessary to make such
information or statements, in the light of the circumstances under
which they were made or given, not misleading. To the knowledge of the
Company, all information provided to the Purchasers, and all statements
made to
-39-
the Purchasers, about the Seller, ▇▇▇▇▇▇▇▇, BMS and Vaniqa (as such terms
are defined in the Vaniqa Acquisition Agreements), did not when made and do
not as of the date hereof contain or include any untrue statement of a
material fact or omit to state a material fact necessary to make such
information or statements, in the light of the circumstances under which
they were made or given, not misleading. The statistical and market and
industry-related data included therein are based on or derived from sources
which the Company believes to be reliable and accurate or represent the
Company's good faith estimates that are made on the basis of data derived
from such sources. The operating data included therein are based on or
derived from internal records of the Company or the sellers of Vaniqa, as
the case may be, which the Company has no reason to believe are not
reliable and accurate.
(t) Since March 31, 2002, except as contemplated by the Documents and
the Transaction Documents, (A) the Company has not (i) made, paid or
declared any dividend or distribution to any equity holder (in such
capacity) or redeemed any of its capital stock, (ii) varied its business
plan or practices, in any material respect, from past practices, (iii)
entered into any financing, joint venture, license or similar arrangement
that would limit or restrict its ability to perform its obligations
hereunder and under each of the other Documents or (iv) suffered or
permitted to be incurred any liability or obligation or any encumbrance
against any of its properties or assets that would limit or restrict its
ability to perform its obligations hereunder and under each of the other
Documents; and (B) there has not been any change or development which has
had, or could reasonably be expected to have, a Material Adverse Effect.
Without limiting the generality of the foregoing, since March 31, 2002,
there has not been (1) any lapse of any of the Company's trade secrets,
inventions, patents, patent applications or continuations (in whole or in
part), trademarks, trademark registrations, service marks, service ▇▇▇▇
registrations, copyrights, copyright registrations, or any application
therefor or filing in respect thereof (collectively, and together with any
and all know-how, trade secrets and proprietary business or technology
information, the "Intellectual Property"); (2) any loss of the services of
any of the key officers or key employees of the Company; (3) any incurrence
of or entry into any liability, mortgage, encumbrance, commitment or
transaction, including without limitation, any borrowing (or assumption or
guarantee thereof) or guarantee of a third party's obligations, or capital
expenditure (or lease in the nature of a conditional purchase of capital
equipment) in excess of $100,000, other than in the ordinary course of
business; (4) any material change by the Company in accounting methods or
principles; or (5) any change in the assets, liabilities, condition
(financial or otherwise), results or operations or prospects of the Company
from those reflected on the Exchange Act Documents, except changes in the
ordinary course of business and changes that have not had or could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
-40-
(u) Since March 31, 2002, the Company has not incurred or suffered any
liability or obligation, matured or unmatured, contingent or otherwise,
except in the ordinary course of business and except any such liability or
obligation that has not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(v) The Company owns or possesses sufficient legal rights to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property used in the operation of its business as presently or proposed to
be conducted, in each case, subject to no encumbrances except as set forth
in the Exchange Act Documents. All of the Intellectual Property which is
owned by the Company is owned free and clear of all encumbrances, except
for the liens set forth on Schedule 8V, none of the Company's rights in or
use of the Intellectual Property has been or, to the Company's knowledge,
is currently threatened to be challenged; no current or currently planned
product based upon the Company's Intellectual Property would infringe or
otherwise conflict with any patent, trademark, service ▇▇▇▇, trade name or
copyright of any other person or entity issued or pending on the Date of
Closing if the Company were to distribute, sell, market or manufacture such
products, there are no actions, suits or judicial proceedings pending
relating to patents or proprietary information to which the Company is a
party or of which any property of the Company is subject, and the Company
is not aware of any actual or threatened claim by any person or entity
alleging any infringement or other conflict with the Company of a patent,
trademark, service ▇▇▇▇, trade name or copyright possessed by such person
or entity, or of any facts or circumstances which could render any
Intellectual Property invalid or inadequate to protect the interest of the
Company therein. None of such Intellectual Property, whether foreign or
domestic, has been canceled, abandoned, or otherwise terminated in a manner
which has had, or could reasonably be expected to have, a Material Adverse
Effect.
(w) The patent applications, if any, filed by or on behalf of the
Company (the "Patent Applications") have been properly prepared and filed
on behalf of the Company; each of the Patent Applications and each of the
patents that constitute Intellectual Property (the "Patents") is assigned
or licensed to the Company; except as set forth in the Exchange Act
Documents, no other entity or individual has any right or claim in any
Patent, Patent Application or any patent to be issued therefrom; and, to
the knowledge of the Company, each of the Patent Applications discloses
potentially patentable subject matter.
(x) The Phase IV human clinical trials conducted by or on behalf of
the Company or in which the Company has participated relating to Esclim are
the only human clinical trials currently being conducted by or on behalf of
the Company, and, to the best of the Company's knowledge, such trials were,
and, if still pending, are
-41-
being, conducted in accordance with experimental protocols, procedures and
controls pursuant to accepted professional scientific standards. Other than
as set forth on Schedule 8X, the Company has no knowledge of any studies or
tests, the results of which call into question the results of the clinical
trials providing the basis for approval of any of its products or Vaniqa.
Other than as set forth on Schedule 8X, the Company has not received any
notices or correspondence from the FDA or any other governmental agency
requiring the termination, suspension or modification of any clinical
trials conducted by, or on behalf of, the Company or in which the Company
has participated or that otherwise relate to its products or Vaniqa. All
human clinical trials previously conducted by or on behalf of the Company,
while conducted by or on behalf of the Company, were conducted in
accordance with experimental protocols, procedures and controls pursuant to
accepted professional scientific standards.
(y) There are no legal or governmental proceedings (including, without
limitation, proceedings before the FDA), nor are there any contracts or
other documents that would be required to be disclosed pursuant to the
Exchange Act that are not so disclosed.
(z) The relationships of the Company and its Subsidiaries with
suppliers, sales representatives, customers and others having business
relationships with them are generally satisfactory, and there is no
indication of any intention by any party thereto to terminate or modify the
terms of any such relationship. Without limiting the generality of the
foregoing, no supplier has notified or otherwise indicated to the Company
or any of its Subsidiaries that it intends to stop, or decrease the rate
of, or, other than publicly announced generally applicable price increases,
materially increase the cost of, its supply of materials, products or
services used by the Company and its Subsidiaries, and no supplier has,
since January 1, 2002, ceased, materially decreased the rate of, or
materially raised the cost of, any such materials, products or services.
(aa) All contracts that are material to the conduct of the Company's
business (including without limitation all supply contracts) constitute
legal, valid and binding obligations of the Company and, to the best
knowledge of the Company, each of the other parties thereto and are
enforceable against the Company and, to the best knowledge of the Company,
each of the other parties thereto in accordance with their terms, subject
to the Enforceability Exceptions and, to the extent any such contracts
contain indemnification or contribution provisions, subject to limitations
under federal and state securities laws and public policy considerations,
and no act, omission or course of conduct has occurred that would impair
the enforceability of any such material contract against the other party or
parties thereto. As regards such material contracts, the Company (A) is not
in default (nor is there any event which with notice or lapse of time or
both would constitute a default), and (B) has not received notification (i)
that any such material contract is about to be terminated or otherwise
modified
-42-
(ii) alleging that the Company or any employee thereof has breached any
obligation under, or violated any term of, any such material contract.
(bb) The Company and its Subsidiaries have good and marketable title
to all real property described in the Company's filings under the Exchange
Act as being owned by them and good and marketable title to the leasehold
estate in the real property described therein as being leased by them, free
and clear of all liens, charges, encumbrances or restrictions, except, in
each case, such as could not, individually or in the aggregate, have a
Material Adverse Effect. All leases, contracts and agreements, including
those referred to in the Exchange Act Documents, to which the Company or
any of its Subsidiaries is a party or by which any of them is bound are
valid and enforceable against the Company or any such Subsidiary, are, to
the knowledge of the Company, valid and enforceable against the other party
or parties thereto and are in full force and effect subject, in each case,
to the Enforceability Exceptions except as could not, individually or in
the aggregate, have a Material Adverse Effect.
(cc) The Company and its Subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns, except where
the failure to so file such returns could not, individually or in the
aggregate, have a Material Adverse Effect, and have paid all taxes shown as
due thereon; and other than tax deficiencies which the Company or any
Subsidiary is contesting in good faith and for which adequate reserves have
been provided in accordance with GAAP, there is no tax deficiency that has
been asserted against the Company or any Subsidiary that could,
individually or in the aggregate, have a Material Adverse Effect.
(dd) (i) Immediately after the consummation of the Vaniqa Acquisition
and the other transactions contemplated by this Agreement, the other
Documents and the Transaction Documents, the fair value and present fair
saleable value of the assets of each of the Company and its Subsidiaries
will exceed the sum of their stated liabilities and identified contingent
liabilities; and (ii) the Company and its Subsidiaries are not, nor will
they be, after giving effect to the execution, delivery and performance of
this Agreement, the other Documents and the Transaction Documents, and the
consummation of the Vaniqa Acquisition and the other transactions
contemplated hereby and thereby, (a) left with unreasonably small capital
with which to carry on their business as it is proposed to be conducted,
(b) unable to pay their debts (contingent or otherwise) as they mature or
(c) otherwise insolvent.
(ee) Except as could not, individually or in the aggregate, have a
Material Adverse Effect, (A) each of the Company and its Subsidiaries is in
compliance with all applicable Environmental Laws (as defined below), (B)
each of the Company and its Subsidiaries has made all filings and provided
all notices required under any applicable Environmental Law, and has all
permits, authorizations and approvals required
-43-
under any applicable Environmental Laws and is in compliance with their
requirements, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter or request for information pending or,
to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries under any Environmental Law, (D) no lien, charge,
encumbrance or restriction has been recorded under any Environmental Law
with respect to any assets, facility or property owned, operated, leased or
controlled by the Company or any of its Subsidiaries, (E) neither the
Company nor any of its Subsidiaries have received notice that they have
been identified as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any comparable state law, and (F) no property or facility of
the Company or any of its Subsidiaries is (i) listed or proposed for
listing on the National Priorities List under CERCLA or (ii) listed in the
Comprehensive Environmental Response, Compensation and Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental authority.
For purposes of this Agreement, the following terms shall have the
following meanings: "Environmental Law" means any federal, state, local or
municipal statute, law, rule, regulation, ordinance, code, policy or rule
of common law and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment
binding on the Company or its Subsidiaries, relating to pollution or
protection of the environment or health or safety or any chemical, material
or substance, that is subject to regulation thereunder. "Environmental
Claims" means any and all administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, notices of responsibility,
information requests, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law.
(ff) Neither the Company nor its Subsidiaries are, or immediately
after the Date of Closing will be, required to register as an "investment
company" or a company "controlled by" an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(gg) Neither the Company nor its Subsidiaries nor any of such
entities' directors, officers, employees, agents or controlling persons
have taken, directly or indirectly, any action designed, or that might
reasonably be expected, to cause or result, under the Securities Act or
otherwise, in, or that has constituted, stabilization or manipulation of
the price of the Notes or the Warrants; provided that no representation or
warranty is made as to the activities of any purchaser of the Notes or any
person acting on such purchaser's behalf.
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(hh) Neither the Company, its Subsidiaries nor any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Securities
Act) directly, or through any agent, (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of any "security" (as
defined in the Securities Act) which is or could be integrated with the
sale of the Notes and the Warrants in a manner that would require the
registration under the Securities Act of the Notes or the Warrants or (ii)
engaged in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Securities Act) in
connection with the offering of the Notes and the Warrants or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act; provided that no representation or warranty is made as to
the activities of any purchaser of the Notes and the Warrants or any person
acting on such purchaser's behalf. Assuming the accuracy of the
representations and warranties of the Purchasers in Paragraph 9 hereof, the
offer and sale of the Notes and Warrants pursuant to this Agreement are
exempt from the registration and prospectus delivery requirements of the
Securities Act.
(ii) No securities of the Company are of the same class (within the
meaning of Rule 144A under the Securities Act) as the Notes and listed on a
national securities exchange registered under Section 6 of the Exchange
Act, or quoted in a U.S. automated inter-dealer quotation system.
(jj) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company or any of its Subsidiaries which is pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened.
(kk) Each of the Company and its Subsidiaries carries insurance in
such amounts and covering such risks as in its reasonable determination is
adequate for the conduct of its business and the value of its properties.
(ll) Each of the Company and its Subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded
as necessary to permit preparation of its financial statements in
conformity with GAAP and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(mm) None of the Company, its Subsidiaries, any of their respective
Affiliates or any person acting on its or their behalf (other than any
purchaser of the Notes or any other person acting on such purchaser's
behalf) has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S")) with
respect to the Notes and the Warrants and each of the Company, its
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Subsidiaries and their respective Affiliates and any person acting on its
or their behalf (other than the Purchasers and any other person acting on
their behalf) has acted in accordance with the offering restrictions
requirement of Regulation S.
PARAGRAPH 9. REPRESENTATIONS AND COVENANTS OF THE PURCHASERS.
(a) Each Purchaser, severally but not jointly, hereby represents and
warrants as to itself as follows:
(i) Such Purchaser has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement. This Agreement
has been duly and validly authorized by such Purchaser, and, when executed
and delivered by such Purchaser, will constitute a valid and legally
binding agreement of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as may be limited by the Enforceability
Exceptions.
(ii) The Notes and Warrants to be acquired by such Purchaser pursuant
to this Agreement are being or will be acquired for its own account and
with no intention of distributing or reselling such securities or any part
thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state, without prejudice,
however, to its right at all times to sell or otherwise dispose of all or
any part of the Securities, under an effective registration statement under
the Securities Act, or under an exemption from such registration available
under the Securities Act, and subject, nevertheless, to the disposition of
its property being at all times within its control. If such Purchaser
should in the future decide to dispose of any of the Notes and Warrants,
such Purchaser understands and agrees that it may do so only in compliance
with the Securities Act and applicable state securities laws, as then in
effect.
(iii) Such Purchaser acknowledges that investment in the Notes and
Warrants involves a high degree of risk, and represents that it is able to
hold the Notes and Warrants, and securities which may underlie them, for an
indefinite period of time and to suffer a complete loss of its investment.
(iv) Such Purchaser is an "accredited investor" as such term is
defined in Rule 501 under the Securities Act.
(b) Each Purchaser understands and acknowledges to the Company that:
(i) the offering and sale of the Notes and the Warrants is
intended to be exempt from registration under the Securities Act by virtue
of the provisions of Section 4(2) of the Securities Act;
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(ii) there is no existing public or other market for the Notes or
the Warrants and there can be no assurance that such Purchaser will be able
to sell or dispose of its Notes or Warrants;
(iii) it is aware that federal and state securities laws prohibit
any person who has material non-public information about an issuer from
purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities; provided, however, that an affiliate of any Purchaser may buy
or sell securities of the Company so long as such affiliate has not had
access to any material non-public information; and
(iv) the Projections are not to be viewed as facts, actual results
may differ from such statements, and the differences may be material.
(c) Each Purchaser covenants to the Company that if it offers, sells
or otherwise transfers, pledges or hypothecates all or any part of the Notes or
the Warrants (other than pursuant to an effective registration statement under
the Securities Act or pursuant to Rule 144 or, in the case of the Notes only,
Rule 144A), it shall deliver to the Company a written opinion of counsel
reasonably satisfactory to the Company (who may be in-house or special counsel),
reasonably satisfactory in form and substance to the Company, that an exemption
from the registration requirements of the Securities Act and applicable state
securities laws is available; provided, however, that such an opinion is not
required in the event that any holder of Notes or Warrants pledges Notes or
Warrants held by it, in whole or in part, to its lenders or securityholders, or
any trustee or agent therefor, or transfers Notes or Warrants held by it to any
entity formed for the purpose of holding the Notes or Warrants and/or other
securities held by such holder. Upon original issuance thereof, and until such
time as the same is no longer a Restricted Security, each certificate evidencing
the Notes (and all securities issued in exchange therefor or substitution
thereof) shall bear a legend in substantially the following form:
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "ACT"), AND THE NOTE EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE
144A UNDER THE ACT. THE HOLDER OF THE NOTE EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF THE ISSUER THAT (A)
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SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, OR IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR PURSUANT
TO ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT (AND BASED UPON AN OPINION OF COUNSEL), (b) TO THE ISSUER OR
ANY OF ITS SUBSIDIARIES, (c) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE ACT
OR (d) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE
NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
PARAGRAPH 10. DEFINITIONS.
For the purpose of this Agreement, the following terms shall have the
meanings specified with respect thereto below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acquired Indebtedness" means Indebtedness of a Person (including a
Subsidiary) existing at the time such Person becomes a Subsidiary of such
specified Person or is merged into or consolidated with any other Person or
which is assumed in connection with the acquisition of assets from such Person
and, in each case, incurred in compliance with or pursuant to a waiver under
Paragraph 6A and not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary or such
merger, consolidation or acquisition.
"Actual EBITDA" means, with respect to any Person and its
Subsidiaries, for any period, an amount equal to (a) the sum of (1) Consolidated
Net Income for such period; plus (2) the provision for taxes for such period
based on income or profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes utilized in
computing net loss under clause (1) hereof; plus (3) Consolidated Interest
Expense; provided, however, for purposes of this definition only, that dividends
or distributions paid on Disqualified Capital Stock shall not be included in the
definition of Consolidated Interest Expense to the extent such dividends or
distributions have not been included in
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the computation of Consolidated Net Income for such period; plus (4)
depreciation for such period on a consolidated basis; plus (5) amortization of
intangibles for such period on a consolidated basis; plus (6) the accretion of
stated value and dividends, if any, on the Preferred Stock and dividends on any
other class or series of preferred stock; plus (7) any other non- cash items
reducing Consolidated Net Income for such period; minus (b) the sum of (1)
interest income for such period, and (2) all non-cash items increasing
Consolidated Net Income for such period.
"Additional Notes" shall have the meaning specified in Paragraph 1.
"Adjusted Net Worth" means, with respect to any Person, the Net Worth
of such Person, at any time, plus the sum of (i) cumulative charges associated
with any write-downs or write-offs of impaired assets or assets previously used
in discontinued operations made in accordance with FASB 142 under GAAP incurred
by such Person since July 1, 2002 and (ii) cumulative charges associated with
the early extinguishment of debt incurred by such Person since July 1, 2002.
"Affiliate" shall mean, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person, including, but not
limited to, any holder of 10% or more of the voting securities of any Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Affiliate Transaction" shall have the meaning specified in Paragraph
6K.
"Asset Sale" shall have the meaning specified in Paragraph 6H(iii).
"Asset Sale Proceeds Notice" shall have the meaning specified in
Paragraph 6H(iv).
"Asset Sale Proceeds Offer" shall have the meaning specified in
Paragraph 6H(iv).
"Asset Sale Proceeds Payment Date" shall have the meaning specified in
Paragraph 6H.
"Attributable Indebtedness" means, with respect to any Sale and
Leaseback Transaction, as at the time of determination, the greater of (1) the
fair market value of the property subject to such arrangement and (2) the
present value of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale and
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Leaseback Transaction (including any period for which such lease has been
extended). Such present value shall be calculated using a discount rate equal to
the rate of interest implicit in such transaction, determined in accordance with
GAAP.
"Bankruptcy Code" shall mean Title 11 of the United States Code,
entitled "Bankruptcy," as amended from time to time, or any successor statute.
"Board of Directors" means, with respect to any Person, the Board of
Directors, management committee, or reasonable equivalent thereof, as the case
may be, of such Person or any committee of the Board of Directors, management
committee, or reasonable equivalent thereof, as the case may be, of such Person
duly authorized, with respect to any particular matter, to exercise the power of
the Board of Directors, management committee, or reasonable equivalent thereof,
as the case may be, of such Person.
"Board Resolution" shall mean, with respect to any Person, a copy of a
resolution certified by the secretary, an assistant secretary or authorized
signatory of such Person to have been duly adopted by the Board of Directors of
such Person and to be in full force and effect on the date of such
certification, and delivered to the Noteholders.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York, New York are required or authorized
to be closed.
"Capital Expenditure" means any amount paid or incurred in connection
with the purchase of real estate, plant, machinery, equipment or the
expenditures in connection with moving the manufacturing of a product from the
former owner of the product to a contract manufacturer or other similar
expenditure (including all renewals, improvements and replacements thereto, and
all obligations under any lease of any of the foregoing) which would be required
to be capitalized and shown on the consolidated balance sheet of the Company in
accordance with GAAP.
"Capital Lease" shall mean any lease of Property which in accordance
with GAAP would be capitalized on the lessee's balance sheet.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or membership interests, as the case may be, including each class of
common stock and preferred stock of such Person.
"Capitalized Lease Obligations" means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
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"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency or
instrumentality thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's;
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$500.0 million;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"Cash Interest Expense" shall mean, for any Person for any period,
interest expense for such period, determined on a consolidated basis in
accordance with GAAP, excluding (a) interest paid in kind or by accretion or
addition to principal, (b) amortization of commissions, discounts, fees, costs
and other charges paid in connection with the incurrence of Indebtedness and (c)
other interest costs not paid in cash.
"Catalog Business" shall mean the As We Change(R) national mail order
catalog and related business activities, as described in the Exchange Act
Documents.
A "Change in Control" shall be deemed to have occurred at such time
as:
(1) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases to beneficially own, directly or
indirectly, at least 4,500,000 shares of the Company's Common Stock;
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(2) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases to serve as the Chief Executive Officer
of the Company;
(3) any Person or related group of Persons for purposes of Section
13(d) of the Exchange Act (other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇) shall at any time
be, directly or indirectly, the beneficial owner of 25% of the Voting Stock
of the Company;
(4) there shall be consummated (A) any consolidation or merger of the
Company in which the Company is not the continuing or surviving entity or
pursuant to which the Capital Stock of the Company would be converted into
cash, securities or other property, other than a merger or consolidation of
the Company in which the holders of the Capital Stock of the Company
outstanding immediately prior to the consolidation or merger hold, directly
or indirectly, at least a majority of the voting power of the surviving
entity's Capital Stock immediately after such consolidation or merger, or
(B) any sale of 50% or more of the Company's assets;
(5) the Company or the Company's shareholders approve any plan or
proposal for the liquidation or dissolution of the Company; or
(6) any person shall cause, as a result of any proxy solicitation
made otherwise than by or on behalf of management, Continuing Directors to
cease to be a majority of the Board of Directors of the Company (where
"Continuing Directors" are (x) members of the original Board of Directors
or (y) members appointed or whose nomination is approved by a majority of
the Continuing Directors or nominated at a time that the Continuing
Directors form a majority of the Board of Directors);
provided that if the Company maintains "key man" insurance on ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
as provided for in Paragraph 5P hereof in an amount of at least $10,000,000 (the
"Key Man Threshold"), clauses (1), (2) and (3) above shall not be deemed a
Change in Control if the events contemplated by such clauses are caused by the
death of ▇▇. ▇▇▇▇▇▇; provided, further, that the Key Man Threshold shall be
decreased proportionately as the aggregate principal amount of Notes outstanding
decreases, but in no event shall the Key Man Threshold be less than $5,000,000.
"Change in Control Notice" shall have the meaning specified in
Paragraph 4D(b).
"Change in Control Payment Date" shall have the meaning specified in
Paragraph 4D(a).
"Closing" and "Date of Closing" shall have the meaning specified in
Paragraph 2.
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"Collateral" shall mean all the rights and interests related to Vaniqa
acquired by the Company in connection with the Transaction.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Subsidiaries on a consolidated
basis (including, but not limited to:
(1) imputed interest included in Capitalized Lease Obligations;
(2) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing;
(3) the net costs associated with Interest Rate Agreements and other
hedging obligations;
(4) amortization of debt issuance costs fees and expenses;
(5) the interest portion of any deferred payment obligation;
(6) amortization of discount or premium, if any; and
(7) all other non-cash interest expense (other than interest
allocated to cost of sales));
plus, without duplication, all net capitalized interest for such period and all
interest incurred or paid under any guarantee of Indebtedness (including a
guarantee of principal, interest or any combination thereof) of any Person, plus
the amount of all dividends or distributions paid on Disqualified Capital Stock
(other than dividends paid or payable in shares of Capital Stock of the
Company).
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) (1) the equity of the Person in question in the Net
Income of any other Person (the "other Person") in which the Person in question
or any of its Subsidiaries has less than a 100% interest (which interest is not
sufficient to cause the Net Income of such other Person to be consolidated into
the Net Income of the Person in question in accordance with GAAP) for such
period shall be included in such Person's Consolidated Net Income only to the
extent of the amount of dividends or distributions actually paid to the Person
in question or the Subsidiary (subject, in the case of a dividend or
distribution to a Subsidiary, to the limitations contained in clause (b) of this
definition of "Consolidated Net Income"), and (2) such Person's equity in a net
loss of any such Person for such period shall be included in determining such
Person's Consolidated
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Net Income; (b) the Net Income of any Subsidiary of the Person in question that
is subject to any restriction or limitation on the payment of dividends or the
making of other distributions shall be excluded to the extent of such
restriction or limitation, except that (1) subject to the limitations contained
in subclause (b)(2) of this definition of "Consolidated Net Income", the equity
of such Person in the Net Income of any such Subsidiary for such period shall be
included in such Person's Consolidated Net Income to the extent of dividends or
distributions that could have been paid by such Subsidiary during such period to
such Person or another Subsidiary (subject, in the case of a dividend or
distribution to another Subsidiary, to the limitations contained in this
clause), and (2) such Person's equity in a net loss of any such Subsidiary for
such period shall be included in determining such Consolidated Net Income; (c)
any net gain or loss resulting from an asset sale by the Person in question or
any of its Subsidiaries other than in the ordinary course of business shall be
excluded; (d) extraordinary gains and losses shall be excluded; (e) charges
associated with any write-downs or write-offs of impaired assets or assets
previously used in discontinued operations made in accordance with GAAP shall be
excluded; (f) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued) shall be excluded; (g) charges
associated with the early extinguishment of debt shall be excluded; and (h) in
the case of a successor to the referent Person by consolidation or merger or as
a transferee of the referent Person's assets, any earnings of the successor
entity prior to such consolidation, merger or transfer of assets shall be
excluded.
"Debt" or "Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute subscriber advance payments and deposits, accounts payable or trade
payables, and other accrued liabilities arising in the ordinary course of
business) if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, and shall also include, to the extent not otherwise included:
(1) any Capitalized Lease Obligations of such Person;
(2) obligations secured by a Lien to which the property or assets
owned or held by such Person are subject, whether or not the obligation or
obligations secured thereby shall have been assumed;
(3) guarantees of Indebtedness of other Persons which would be
included within this definition for such other Persons (whether or not such
items would appear upon the balance sheet of the guarantor);
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(4) all obligations (including contingent obligations) for the
reimbursement of any obligor on any letter of credit, banker's acceptance
or similar credit transaction;
(5) Disqualified Capital Stock of such Person or any Subsidiary
thereof;
(6) Attributable Indebtedness with respect to any Sale and Leaseback
Transaction; and
(7) obligations of any such Person under any currency agreement or
any Interest Rate Agreement applicable to any of the foregoing (if and to
the extent such currency agreement or Interest Rate Agreement obligations
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP).
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided that
Indebtedness shall not include any liability for federal, state, local or other
taxes. Notwithstanding any other provision of the foregoing definition, any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business shall not be deemed to be
Indebtedness of the Company or any of its Subsidiaries for purposes of this
definition. Furthermore, guarantees of (or obligations with respect to letters
of credit supporting) Indebtedness otherwise included in the determination of
such amount shall also not be included.
"Default" shall mean any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Disqualified Capital Stock" shall mean any Capital Stock which, by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holders), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof, in whole or in part, on or prior to the final maturity date of the
Notes for cash or securities constituting Debt.
"Documents" shall mean this Agreement, the Notes, the Warrants, the
Security Documents and the Registration Rights Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated with respect thereto.
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"ERISA Affiliate" shall mean any Person which (a) is a member of the
same controlled group (within the meaning of Section 414(b) of the IRC) of
corporations as the Company, or (b) is under common control (within the meaning
of Section 414(c) of the IRC) with the Company, or (c) is a member of an
affiliated service group (within the meaning of Section 414(m) of the IRC) with
the Company, or (d) is treated, pursuant to Section 414(o) of the IRC or the
regulations promulgated thereunder, together with the Company as a single
employer.
"Esclim" shall mean the estrogen patch system for which the Company
acquired rights to market, use, distribute and sell in the United States and
Puerto Rico from Laboratoires ▇▇▇▇▇▇▇▇ ▇.▇., as described in the Exchange Act
Documents.
"Event of Default" has the meaning specified in Paragraph 7A.
"Excess Cash Flow" shall mean, for any period of the Company, the
difference of (a) Actual EBITDA for such period minus (b) the sum, without
duplication, of (i) the amount of any cash income taxes payable by the Company
and its Subsidiaries with respect to such period, (ii) scheduled cash interest
paid (net of cash interest received) by the Company and its Subsidiaries during
such period, (iii) Capital Expenditures made in cash by the Company and its
Subsidiaries during such period, except to the extent financed with net
insurance proceeds or net condemnation awards and (iv) scheduled permanent
repayments of Indebtedness made by the Company and its Subsidiaries during such
period.
"Excess Cash Flow Notice" shall have the meaning specified in
Paragraph 4E(c).
"Excess Cash Flow Offer" shall have the meaning specified in Paragraph
4E(a).
"Excess Cash Flow Payment Date" shall have the meaning specified in
Paragraph 4E(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Documents" means the Company's Annual Report on Form
10-K for the Fiscal Year ended December 31, 2001 and its Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2002.
"Existing Secured Debt" means any Indebtedness outstanding on the Date
of Closing pursuant to the Securities Purchase Agreement dated June 29, 2001
between the Company and Elan Pharma International Limited and the Senior Secured
Promissory Note dated November 15, 2001 issued by the Company to American Home
Products Corporation.
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"Fiscal Quarter" means each quarterly accounting period of each Fiscal
Year of the Company.
"Fiscal Year" means each annual accounting period of the Company
ending on December 31 of each calendar year.
"Fixed Charge Coverage Ratio" means for any Person for any period, a
fraction, the numerator of which is Actual EBITDA of such Person for such period
plus the aggregate amount of rental expenses actually incurred by such Person
and its Subsidiaries during such period, and the denominator of which is Fixed
Charges for such period.
"Fixed Charges" means for any Person for any period, the sum of (a)
regularly scheduled mandatory principal payments on Indebtedness of such Person
and its Subsidiaries for such period, excluding the regularly scheduled
mandatory principal payment of $3.25 million due in November 2002 to American
Home Products Corporation under the Existing Secured Debt held by American Home
Products Corporation, (b) the aggregate amount of any optional prepayments of
Indebtedness of such Person and its Subsidiaries made during such period, (c)
the amount of taxes actually paid in cash by such Person or any Subsidiary
during such period, (d) Cash Interest Expense for such period, (e) Capital
Expenditures actually made by such Person and its Subsidiaries during such
period and (f) rental expenses actually incurred by such Person and its
Subsidiaries during such period, in each case determined on a consolidated basis
in accordance with GAAP.
"GAAP" shall mean United States generally accepted accounting
principles as they may be amended as of the Date of Closing.
"Independent Financial Advisor" means an independent investment
banking firm of national standing.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect the party indicated
therein against fluctuations in interest rates.
"Investment" means, with respect of any Person, directly or
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business of such Person), loan or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities (other than the purchase of the Notes
pursuant to Paragraph 4B, 4D, 4E or 6H and other than the purchase of Preferred
Stock pursuant to Sections 9E, 9F and 9H of the certificate of designations
relating thereto) of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership
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of, or any division, line of business or product of, any Person or the making of
any investment in any Person. Investments shall exclude (a) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices of such Person and (b) the repurchase of securities of any Person by
such Person. For the purposes of Paragraph 6I, the amount of any Investment
shall be the original cost of such Investment plus the cost of all additional
Investments by the Company or any of its Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of cash distributions
which constitute a return of capital in connection with such Investment;
provided that the aggregate of all such reductions shall not exceed the amount
of such initial Investment plus the cost of all additional Investments;
provided, further, that no such payment of distributions or receipt of any such
other amounts shall reduce the amount of any Investment if such payment of
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any common stock of any direct or indirect Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, greater than 50% of the outstanding common
stock of such Subsidiary, the Company shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the common stock of such Subsidiary not sold or disposed of.
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"IRS" shall mean the Internal Revenue Service.
"Lien" shall mean, as to any Person, any mortgage, lien, pledge,
adverse claim, charge, security interest or other encumbrance in or on, or
interest of title of any vendor, lessor, lender or other secured party to or of
the Person under a conditional sale or other title retention agreement or
Capital Lease with respect to, any Property or asset of such Person, or the
signing or filing of a financing statement which names such Person as debtor, or
the signing of any security agreement authorizing any other party as the secured
party thereunder to file any financing statement.
"Material Adverse Effect" shall mean, with respect to the Company and
its Subsidiaries, a material adverse effect on (a) the business, condition
(financial or otherwise), properties, results of operations or prospects of the
Company and its Subsidiaries, taken as a whole, or (b) the validity or
enforceability of, or the ability of the Company to perform its obligations
under, this Agreement or any of the other Documents, or the rights or remedies
of a Purchaser or the Collateral Agent hereunder or thereunder.
"Material Agreements" shall mean Documents, the Transaction Documents,
the governing instruments of the Company and its Subsidiaries and all agreements
relating to its investment in or relationship with its Subsidiaries.
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"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. or any successor to
the rating agency business thereof.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the IRC to
which the Company or any of its ERISA Affiliates is or has been making, or is or
has been obligated to make, contributions or as to which the Company or any of
its ERISA Affiliates may have liability.
"Net Income" means, with respect to any Person, for any period, the
net income (loss) available to common stockholders of such Person determined in
accordance with GAAP.
"Net Proceeds" means
(i) in the case of any incurrence of a loan or sale of debt
securities or Capital Stock or other equity securities of any Person, the
aggregate net proceeds received by such Person, after payment of expenses,
commissions and the like incurred in connection therewith, whether such
proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors of such
Person, at the time of receipt), and
(ii) in the case of any asset sale (including, without limitation,
any cash received upon the sale or other disposition of any non-cash
consideration received in any asset sale), net of the direct costs relating
to such asset sale, including, without limitation, legal, accounting and
investment banking fees, sales commissions, and any relocation expenses
incurred as a result thereof, and taxes paid or payable as a result
thereof, in each case, after taking into account any available tax credits
or deductions and any tax sharing arrangements, and any reserve for
adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Net Worth" means, with respect to any Person, at any time, the
consolidated stockholders' equity of such Person at such time, determined in
accordance with GAAP, except that there shall be deducted any amount of treasury
stock reflected as an asset at such time.
"Noteholder" shall mean the holder of any Note.
"Notes" shall have the meaning specified in Paragraph 1.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereof.
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"Pension Plan" means any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA.
"Permitted Acquisition" means an acquisition by the Company of either
(a) rights to (i) pharmaceutical products or (ii) similar products sold into the
OB/GYN, dermatological or dental markets or (b) assets of a business reasonably
similar to the business of the Company and its Subsidiaries on the Date of
Closing, in the case of either clause (a) or (b) to the extent the Company
demonstrates to the reasonable satisfaction of the holders of the Notes that (A)
such acquisition is accretive to the earnings of the Company for the first 12
calendar month period beginning after the closing date and (B) that, after
giving effect to such acquisition, the Company and its Subsidiaries remain in
compliance with the terms of this Agreement and the Notes, including all
covenants.
"Permitted Asset Sale" means any asset sale permitted by paragraph 6H
hereof.
"Permitted Debt" means (i) the Notes; (ii) Debt existing and
outstanding on the Date of Closing; (iii) a Permitted Working Capital Facility;
(iv) the incurrence by the Company or any of its Subsidiaries of intercompany
Indebtedness between or among the Company and any of its Subsidiaries; (v) the
accrual of interest, the accretion or amortization of original issue discount,
the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms (including any Additional Notes), and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of the definition
thereof; provided in each such case, that the amount thereof is included in
Fixed Charges of the Company as accrued; (vi) Indebtedness issued to or borrowed
from Elan Pharma International or an Affiliate thereof by the Company in
consideration of the elimination of the royalty provisions of the Midrin Asset
and Inventory Purchase Agreement dated as of June 29, 2001 by and among the
Company, Elan Pharma International Limited and Elan Pharmaceuticals, Inc. in an
aggregate principal amount not to exceed $1.5 million, so long as the Company
fulfills its obligations under that certain letter agreement dated the date
hereof between the Company and the Purchasers; and (vii) the incurrence by the
Company or any of its Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any one time outstanding
not to exceed $500,000.
"Permitted Investments" means Investments made on or after the Date of
Closing consisting of:
(a) Investments in cash and Cash Equivalents;
(b) any Investment in a wholly-owned Subsidiary;
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(c) an Investment that is made by the Company or a Subsidiary thereof
in the form of any Capital Stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or such Subsidiary solely as partial consideration for
the consummation of a Permitted Asset Sale;
(d) any Permitted Acquisition (i) solely in exchange for the issuance
of Capital Stock (other than Disqualified Capital Stock) of the Company or
(ii) for cash if after giving effect to the transaction the Company will
have a minimum cash balance of $14,000,000;
(e) Capital Stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to the
Company or any Subsidiary or in satisfaction of judgments;
(f) any Investment existing on the Date of Closing;
(g) any Investment by the Company or any of its Subsidiaries in a
Person, if as a result of such Investment: (i) such Person becomes a
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Subsidiary of the
Company; and
(h) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (i), not to exceed $500,000.
"Permitted Working Capital Facility" means a revolving credit facility
of the Company secured by inventory and receivables of the Company with an
aggregate amount of Indebtedness permitted thereunder not to exceed $5,000,000
at any one time outstanding, including any amendment, extension or refinancing
thereof secured by the same assets and not in excess of the same amount.
"Person" shall mean and include an individual, corporation,
partnership, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"Preferred Stock" means the Senior Convertible Redeemable Preferred
Stock, Series A of the Company to be issued on the Date of Closing as part of
the financing of the Vaniqa Acquisition.
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"Projections" shall mean the financial projections concerning the
Company delivered to the Purchasers by the Company pursuant to Paragraph
3A(xii).
"Property" shall mean any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (1) 100% of such cost and (2) reasonable
fees and expenses of such Person incurred in connection therewith.
"Purchasers" shall have the meaning set forth in the introductory
paragraph of this Agreement and shall include its successors and assigns.
"Qualified Capital Stock" shall mean any Capital Stock that is not
Disqualified Capital Stock.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement relating to the Warrants dated as of the date hereof by and between
the Company and the Purchasers.
"Required Holders" shall mean the holders of at least 66 2/3% of the
aggregate principal amount of the Notes from time to time outstanding.
"Restricted Payment" shall have the meaning specified in ▇▇▇▇▇▇▇▇▇ ▇▇.
"Restricted Security" shall mean any Note or Warrant upon original
issuance thereof, and at all times subsequent thereto until, in the case of any
such Note or Warrant, (A) it has been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering it, or (B) it is sold pursuant to Rule 144 or becomes eligible for
resale under Rule 144(k).
"S&P" means Standard & Poor's Ratings Service, a division of
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or any successor to the rating agency business
thereof.
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Securities and Exchange Commission" shall mean the Securities and
Exchange Commission of the United States.
"Security Documents" means the Security Agreement and the
Intercreditor Agreement in substantially the form as set forth as Exhibits C-1
and C-2 hereto.
"Subsidiary" shall mean any corporation or other entity of which a
Person owns, directly or indirectly, that number of shares of Voting Stock which
has the power to elect a majority of the Board of Directors or other governing
body.
"Taxes" shall mean all taxes, assessments, fees and other charges
including, without limitation, withholding taxes, penalties, and interest.
"Termination Event" shall mean (a) a "reportable event" (within the
meaning of Section 4043(b) of ERISA) with respect to a Pension Plan (other than
a "reportable event" as to which the PBGC has by regulation waived the thirty
(30) day notice requirement under Section 4043(a) of ERISA); provided, however,
that a failure to meet the minimum funding standards of Section 412 of the IRC
shall be a Termination Event regardless of the issuance of any waiver under
Section 412(d) of the IRC; (b) the withdrawal of the Company, any of its
Subsidiaries or any ERISA Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" (within the meaning of Section 4001(a)(2)
of ERISA); (c) the complete or partial withdrawal of the Company, any of its
Subsidiaries or any ERISA Affiliate from a Multiemployer Plan under Section 4201
or 4204 of ERISA; (d) the receipt by the Company, any of its Subsidiaries or any
ERISA Affiliate of notice from a Multiemployer Plan that is in reorganization or
insolvent under Section 4241 or 4245 of ERISA or that it intends to terminate or
has terminated under Section 4041A of ERISA; (e) the providing of a notice of
intent to terminate a Pension Plan pursuant to Section 4041(a)(2) of ERISA or
the treatment of a Pension Plan amendment as a termination under Section 4041(e)
of ERISA; (f) the institution of proceedings by the PBGC to terminate a Pension
Plan or the appointment of a trustee to administer any Pension Plan under
Section 4042 of ERISA; (g) the receipt by the Company, any of its Subsidiaries
or any ERISA Affiliate of a notice from any Multiemployer Plan that any action
described in clause (f) has been taken with respect to that Multiemployer Plan;
or (h) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan.
"Total Indebtedness" means, of any Person, as of the date of
determination, all Indebtedness of such Person which, in accordance with GAAP,
would be included as indebtedness on a consolidated balance sheet of such Person
at such date. For the avoidance of doubt, the Preferred Stock shall not be
considered part of Total Indebtedness.
"Transaction" shall mean the Vaniqa Acquisition and the financing
thereof.
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"Transaction Documents" shall mean each agreement entered into in
connection with the Transaction.
"Transferee" shall mean any direct or indirect transferee of all or
any part of any Note or Warrant purchased under this Agreement.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"Vaniqa" shall mean VANIQA(R) (eflornithine hydrochloride) Cream,
13.9%.
"Vaniqa Acquisition" shall mean the acquisition by the Company of
Vaniqa and related assets from Westwood-Squibb Colton Holdings Partnership, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇-▇▇▇▇▇ Squibb Company, for approximately $38.3
million.
"Voting Stock" shall mean, with respect to any corporation or other
Person, as the case may be, any shares of Capital Stock of any class or classes
of such corporation or other Person, as the case may be, whose holders are
entitled under ordinary circumstances to vote for the election of directors of
such corporation or other Person, as the case may be, or persons performing
similar functions (irrespective of whether or not at the time Capital Stock of
the class or any other class or classes shall have or might have special voting
power or rights by reason of the happening of any contingency).
Unless otherwise specified or the context otherwise requires, all
phrases used herein that have a specific meaning under GAAP shall have their
meaning under GAAP.
PARAGRAPH 11. MISCELLANEOUS.
11A. Note Payments. So long as each Purchaser shall hold any Note, the
Company will make payments of principal of and interest on such Note which
comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 1:00 p.m., New York time, on the date
due) to the account or accounts as specified in the signature pages hereto, or
such other account or accounts in the United States as such Purchaser may
designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees that, before
disposing of any Note, such Purchaser will make a notation thereon (or on a
schedule attached thereto) of all principal payments previously made thereon, if
any, and of the date to which interest thereon has been paid. The Company agrees
to afford the benefits of this Paragraph 11A to any Transferee which shall have
made the same agreement as each Purchaser has made in this Paragraph 11A.
11B. Expenses. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save each Purchaser and
any Transferee
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harmless against liability for the payment of, all reasonable out-of-pocket
expenses arising in connection with such transactions, including (i) all fees
and expenses of the Purchasers' counsel in connection with this Agreement and
the transactions contemplated hereby, (ii) all document production and
duplication charges and the reasonable fees and expenses of any counsel engaged
by such Purchaser or such Transferee in connection with any subsequent proposed
modification of, or proposed consent under, this Agreement, whether or not such
proposed modification shall be effected or proposed consent granted, and (iii)
the costs and expenses, including reasonable attorneys' fees, incurred by such
Purchaser or such Transferee in enforcing (or determining whether or how to
enforce) any rights under this Agreement, the Notes or the Warrants or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the transactions contemplated
hereby or by reason of such Purchaser's or such Transferee's having acquired any
Note or Warrant, including without limitation costs and expenses incurred in any
bankruptcy case. The obligations of the Company under this ▇▇▇▇▇▇▇▇▇ ▇▇▇ shall
survive the transfer of any Note or Warrant or portion thereof or interest
therein by each Purchaser or any Transferee and the payment of any Note or the
exercise of any Warrant.
11C. Consent to Amendments. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by them, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required Holders
except that, without the written consent of each holder, no amendment to this
Agreement shall
(a) reduce the amount of Notes whose holders must consent to an
amendment, supplement or waiver to this Agreement or the Notes;
(b) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Note;
(c) reduce the principal of or premium on or change the stated
maturity of any Note or change the date on which any Notes may be subject
to redemption or repurchase or reduce the redemption or repurchase price
thereof;
(d) make any Note payable in money other than that stated in the Note
or change the place of payment from New York, New York;
(e) waive a default on the payment of the principal of, interest on,
or redemption payment with respect to any Note;
(f) make any change in the provisions of this Agreement or the Notes
protecting the right of each holder of Notes to receive payment of the
principal of and interest on such Note on or after the due date thereof or
to bring suit to enforce such
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payment, or permitting holders of a majority in principal amount at
maturity of Notes to waive Defaults or Events of Default;
(g) amend, change or modify in any material respect the obligation of
the Company to purchase all or a portion of the Notes upon an Asset Sale or
with Excess Cash Flow or redeem the Notes in accordance with Paragraphs 4B,
4D, 4E and Paragraph 6H in the event of an issuance of Capital Stock or
asset sale that has been consummated or modify any provisions or
definitions with respect thereto; or
(h) modify or change any provision of this Agreement or the related
definitions affecting the ranking of the Notes in a manner which adversely
affects the holders of Notes.
Subject to Paragraph 6O, each holder of any Note at the time or
thereafter outstanding shall be bound by any consent authorized by this
Paragraph 11C, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring to any
such consent. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As used herein and
in the Notes, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes.
The Notes are issuable as registered Notes without coupons in denominations of
at least $1,000, except as may be necessary to reflect any principal amount not
evenly divisible by $1,000. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of Notes and of
transfers of Notes. Upon surrender for registration of transfer of any Note at
the principal office of the Company, the Company shall, at its expense, execute
and deliver one or more new Notes of the like tenor and of a like aggregate
principal amount or number, registered in the name of such transferee or
transferees; provided that in no event will the Company be required to register
for transfer or execute and deliver new Notes in connection with any transfer of
less than $2,000,000 aggregate principal amount of the Notes unless the
transferee thereof is a registered holder of Notes at the time of such transfer
or the amount to be transferred represents the entire principal amount of Notes
registered in the name of the transferor. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount or number, upon
surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at its
expense, execute and deliver the Notes which the holder making the exchange is
entitled to receive. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed by the holder of such Note or such holder's attorney duly
authorized in writing. Any Note or Notes
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issued in exchange for any Note or upon transfer thereof shall carry the rights
to unpaid interest and interest to accrue which were carried by the Note so
exchanged or transferred, so that neither gain nor loss of interest shall result
from any such transfer or exchange. Upon receipt of written notice from the
holder of any Note of the loss, theft, destruction or mutilation of such Note
and, in the case of any such loss, theft or destruction, upon receipt of such
holder's unsecured indemnity agreement, or in the case of any such mutilation
upon surrender and cancellation of such Note, the Company will make and deliver
a new Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Note.
11E. Persons Deemed Owners; Participations. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, interest on such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary.
11F. Survival of Representations and Warranties; Entire Agreement. All
representations and warranties contained herein or made in writing by or on
behalf of the Company or any Purchaser in connection herewith shall survive the
execution and delivery of this Agreement, the Notes and the Warrants and the
transfer by any Purchaser of any Note or Warrant or portion thereof or interest
therein, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement and the other
Documents embody the entire agreement and understanding between the Purchasers
and the Company and supersede all prior agreements and understandings relating
to the subject matter hereof.
11G. Successors and Assigns. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
11H. Disclosure to Other Persons. The Company acknowledges that the
holder of any Note may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder, by or on behalf of the Company or any of its Subsidiaries in
connection with or pursuant to this Agreement to (i) such holder's directors,
officers, employees, agents and professional consultants, (ii) any other holder
of any Note, (iii) any Person to which such holder offers to sell such Note or
any part thereof, (iv) any Person from which such holder offers to purchase any
security of the Company, (v) any federal or state regulatory authority having
jurisdiction over such holder or proposed purchase of a Note or interest
therein, (vi) the National Association of Insurance Commissioners or any similar
organization or (vii) any other Person to which such delivery or disclosure may
be necessary or appropriate (a) in compliance with any law, rule, regulation or
order applicable to such holder, (b) in response to any subpoena or other legal
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process or informal investigative demand or (c) in connection with any
litigation to which such holder is a party; provided that, in respect of (i)
through (vii), there shall be no violation of applicable securities laws and, in
respect of (i), (iii), (iv) and (vii)(c), the Person to whom such information is
disclosed shall be apprised of the confidential nature of such information and
shall agree with the Company to keep such information confidential.
11I. Notices. All notices or other communications provided for
hereunder shall be in writing and sent by first class mail or overnight delivery
service (with charges prepaid) and (i) if to a Purchaser, addressed to such
Purchaser at the address specified for such communications on the signature
pages hereof, or at such other address as such Purchaser shall have specified to
the Company in writing, (ii) if to any other holder of any Note or Warrant,
addressed to such other holder at such address as such other holder shall have
specified to the Company in writing or, if any such other holder shall not have
so specified an address to the Company, then addressed to such other holder in
care of the last holder of such Note which shall have so specified an address to
the Company and (iii) if to the Company, addressed to it at ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, or at
such other address as the Company shall have specified to the holder of each
Note and Warrant.
11J. Payments Due on Non-Business Days. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall be included in the computation of
the interest payable on such Business Day.
11K. Satisfaction Requirement. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Required Holders, the determination of such
satisfaction shall be made by the Required Holders in the sole and exclusive
judgment (exercised in good faith) of the Person or Persons making such
determination.
11L. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. This
Agreement may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
11M. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and
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and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11N. Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11O. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
If you are in agreement with the foregoing, please sign the form of
acceptance below or on the enclosed counterpart of this letter and return the
same to the Company, whereupon this letter shall become a binding agreement
between the Company and you.
Very truly yours,
WOMEN FIRST HEALTHCARE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
SIGNATURE PAGE TO PURCHASE AGREEMENT
Accepted and Agreed as of the
date first above written:
CIBC WMC INC.
By: /s/ ▇. ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
-2-
Accepted and Agreed as of the
date first above written:
WHITNEY PRIVATE DEBT FUND
By: Whitney Private Debt GP, LLC
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Attorney-in-Fact
▇.▇. ▇▇▇▇▇▇▇ MEZZANINE FUND, L.P.
By: ▇▇▇▇▇▇▇ ▇▇, L.L.C.
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Attorney-in-Fact