Exhibit 10.1
The Stock and Warrant Purchase Agreement, dated as of March 2, 1999, between
Global Pharmaceutical Corporation and ▇▇▇▇▇▇▇ US Discovery Offshore Fund III,
L.P., is substantially identical to the agreement attached hereto (Stock and
Warrant Purchase Agreement, dated as of March 2, 1999, between Global
Pharmaceutical Corporation and ▇▇▇▇▇▇▇ US Discovery Fund III, L.P.) except that
the parties to the former agreement are Global Pharmaceutical Corporation and
▇▇▇▇▇▇▇ US Discovery Offshore Fund III, L.P., and the parties to the latter
agreement are Global Pharmaceutical Corporation and ▇▇▇▇▇▇▇ US Discovery Fund
III, L.P.
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STOCK AND WARRANT PURCHASE AGREEMENT
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dated
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March 2, 1999
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between
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GLOBAL PHARMACEUTICAL CORPORATION
=================================
and
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▇▇▇▇▇▇▇ US DISCOVERY FUND III, L.P.
==================================
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TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK AND WARRANTS.............................................1
SECTION 2. CLOSING.......................................................................................2
SECTION 3. DEFINITIONS...................................................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................15
4.1. Corporate Existence, Power and Authority.....................................................15
4.2. Capital Stock................................................................................16
4.3. Subsidiaries.................................................................................18
4.4. Business.....................................................................................18
4.5. No Defaults or Conflicts.....................................................................18
4.6. Disclosure Materials; Other Information......................................................19
4.7. Litigation...................................................................................20
4.8. Taxes........................................................................................20
4.9. ERISA........................................................................................21
4.10. Legal Compliance.............................................................................22
4.11. Outstanding Securities.......................................................................23
4.12. Permits, Licenses and Approvals; Intellectual Property and Other Rights......................23
4.13. Key Employees................................................................................23
4.14. Properties...................................................................................24
4.15. Suppliers and Customers......................................................................24
4.16. Environmental Compliance.....................................................................24
4.18. Offering of Shares and Warrants..............................................................25
4.19. SEC Reports..................................................................................25
4.20. Indebtedness.................................................................................26
4.21. Use of Proceeds..............................................................................26
4.22. Other Names..................................................................................27
4.23. Brokers......................................................................................27
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..............................................27
5.1. Corporate Power and Authority................................................................27
5.2. Investment Intent............................................................................27
5.3. Brokers......................................................................................28
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Page
SECTION 6. RESTRICTIONS ON TRANSFER.....................................................................28
SECTION 7. INFORMATION AS TO THE COMPANY................................................................28
7.1. Financial Information........................................................................28
7.2. Communication with Accountants...............................................................31
7.3. Inspection...................................................................................31
7.4. Notices......................................................................................31
7.5. Confidentiality Agreement....................................................................32
SECTION 8. AFFIRMATIVE COVENANTS........................................................................33
8.1. Maintenance of Existence, Properties and Franchises; Compliance with Law;
Taxes; Insurance.............................................................................33
8.2. Office for Payment, Exchange and Registration; Location of Office;
Notice of Change of Name or Office...........................................................34
8.3. Fiscal Year..................................................................................34
8.4. Environmental Matters........................................................................34
8.5. Reservation of Shares........................................................................35
8.6. Stockholders' Meeting........................................................................36
8.7. Securities Exchange Act Registration.........................................................36
8.8. Delivery of Information for Rule 144A Transactions...........................................36
8.9. Senior Securities............................................................................37
8.10. Shelf Registration...........................................................................37
8.11. Further Assurances...........................................................................37
SECTION 9. NEGATIVE COVENANTS...........................................................................37
9.1. No Dilution or Impairment; No Changes in Capital Stock.......................................38
9.2. Indebtedness.................................................................................39
9.3. Consolidation, Merger and Sale...............................................................39
9.4. No Change in Business........................................................................39
9.5. Restricted Payments; Investments.............................................................39
9.6. Sale of Substantial Portion of Assets........................................................40
9.7. Affiliate Loans and Guaranties...............................................................40
9.8. Transactions with Affiliates.................................................................41
9.9. Liens........................................................................................41
9.10. Private Placement Status.....................................................................41
9.11. Maintenance of Public Market.................................................................41
9.12. Actions Prior to Any Closing Date............................................................42
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Page
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS........................................................42
10.1. Certificate of Designations; Stockholders' Agreement; Registration Rights
Agreement....................................................................................42
10.2. Certificates for Shares and Warrants.........................................................43
10.3. Stockholders' Meeting........................................................................43
10.4. Senior Status................................................................................43
10.5. Accuracy of Representations and Warranties...................................................43
10.6. Compliance with Agreements...................................................................44
10.7. Officers' Certificates.......................................................................44
10.8. Proceedings..................................................................................44
10.9. Legality; Governmental and Other Authorization...............................................44
10.10. No Material Adverse Change...................................................................44
10.11. Opinion of Counsel...........................................................................45
10.12. Additional Purchases of Shares and Warrants..................................................45
10.13. Acceptance of Agent for Service of Process...................................................45
10.14. Other Documents and Opinions.................................................................45
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
............................................................................................45
SECTION 12. SPECIFIC PERFORMANCE.........................................................................46
SECTION 13. EXPENSES.....................................................................................46
SECTION 14. DIRECT PAYMENTS..............................................................................48
SECTION 15. AMENDMENTS AND WAIVERS.......................................................................48
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED
SHARES; REPLACEMENT..........................................................................49
SECTION 17. NOTICES......................................................................................50
SECTION 18. MISCELLANEOUS................................................................................50
iii
Schedule 1 Purchasers; Number of Shares; Number of Warrants
Schedule 2 Indebtedness
Schedule 3 Investments
Schedule 4 Disclosure Material
Schedule 5 Liens
Schedule 6 Capital Stock
EXHIBIT A-1 Certificate of Designations
EXHIBIT A-2 Form of Warrant Certificates
EXHIBIT B Disclosure Schedule
EXHIBIT C Stockholders' Agreement
EXHIBIT D Registration Rights Agreement
EXHIBIT E Opinion of Counsel for the Company
EXHIBIT F Confidentiality Agreement
iv
STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT is dated as of March
2, 1999 between Global Pharmaceutical Corporation, a Delaware corporation (the
"Company"), and the Purchaser listed on the signature page of this Agreement
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, shares of the
Company's Series D Convertible Preferred Stock, par value $.01 per share (the
"Series D Convertible Preferred Stock"), and Warrants to purchase shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), all upon
the terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK AND WARRANTS
(a) The Company agrees to sell to the Purchaser and, subject
to the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company at one or more of the Closings
provided for in Section 2 hereof, the number of shares of Series D Convertible
Preferred Stock and the number of Warrants, each to purchase one share of Common
Stock of the Company, set forth opposite the Purchaser's name on Schedule 1
hereto. The shares of Series D Convertible Preferred Stock being acquired under
this Agreement and by the other Purchaser under the other Stock and Warrant
Purchase Agreement (as hereinafter defined) are collectively referred to herein
as the "Shares", containing rights and privileges as more fully set forth in the
Certificate of Designations of the Company in the form attached hereto as
Exhibit ▇- ▇ (the "Certificate of Designations"). As used herein, "Warrants"
means Warrants to purchase the aggregate of up to the number of shares of Common
Stock equal to 25% of the number of shares of Common Stock obtainable upon
conversion of the Shares. The Warrants contain rights and privileges as more
fully set forth in the Warrant Certificates of the Company in the form attached
hereto as Exhibit A-2 (the "Warrant Certificates").
(b) The aggregate purchase price to be paid to the Company by
the Purchaser for the Shares and Warrants to be purchased by the Purchaser
pursuant to this Agreement shall be
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the amount set forth opposite the Purchaser's name on Schedule 1 hereto. No
further payment shall be required from the Purchaser for the Shares and
Warrants. The parties further acknowledge and agree that the Shares do not
constitute "preferred stock" as that term is used in Section 305(b)(4) of the
Code and Treasury Regulation ss. 1.305-5(a) and agree not to take any position
inconsistent with the characterization of the Shares as common stock for
purposes of Section 305 of the Code on any Tax Return or before any Taxing
Authority.
(c) The Shares and Warrants are being sold to the purchasers
listed on Schedule 1 hereto (the "Purchasers") pursuant to this Agreement and
the other Series D Convertible Preferred Stock and Warrant Purchase Agreement
(both of such agreements collectively, as from time to time assigned,
supplemented or amended or as the terms thereof may be waived, the "Stock and
Warrant Purchase Agreements"). Both Stock and Warrant Purchase Agreements shall
be dated the date hereof and shall be identical except as to the identities of
the respective Purchasers. The sale of Shares and Warrants to each Purchaser
under each Stock and Warrant Purchase Agreement is to be a separate sale, and no
Purchaser shall have any liability under any Stock and Warrant Purchase
Agreement other than the Stock and Warrant Purchase Agreement to which it is a
party.
(d) The Company will use the proceeds from the sale of the
Shares and Warrants, together with other funds it will receive on each Closing
Date to repay debt, to fund future development opportunities and for working
capital and general corporate purposes.
SECTION 2. CLOSINGS
(a) Subject to the terms and conditions hereof, the closing of the
purchase and sale of the Shares and Warrants to be purchased by the Purchaser
and the other Purchasers will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ &
Bockius LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 A.M., New York City
time, (i) on March 2, 1999, or such other time and date as shall be mutually
agreed to by the Company and the Purchaser (the "First Closing") (such time and
date are herein referred to as the "First Closing Date"), and (ii) on the date
which is within five business days of the Company's 1999 annual meeting of
stockholders (the "Stockholders' Meeting") or such other time and date as shall
be mutually agreed to by the Company and the Purchaser, but in any event no
later than June 30, 1999; provided that at such Stockholders' Meeting the
appropriate corporate action has been taken to authorize sufficient additional
shares of Common Stock to permit conversion in full of the Series D Convertible
Preferred Stock into shares of Common Stock and to permit exercise in full of
all Warrants issued on such date (the "Second Closing") (such time and date are
herein referred to as the "Second Closing Date"). The First Closing and the
Second Closing are called individually a "Closing" and collectively the
"Closings"; the First Closing Date and the Second Closing Date are called
individually a "Closing Date" and collectively, the "Closing Dates." The sale
and purchase of Shares and Warrants by the ▇▇▇▇▇▇▇ Funds pursuant to the Stock
and Warrant Purchase Agreements between each of the ▇▇▇▇▇▇▇ Funds and the
Company shall be consummated concurrently, (a) for
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an aggregate purchase price of $3,000,000 on the First Closing Date and (b) for
an aggregate purchase price of $2,000,000 on the Second Closing Date.
(b) Subject to the terms and conditions hereof, at each Closing (i)
the Company will deliver to the Purchaser (x) a certificate registered in the
Purchaser's name (or the name of its nominee, if any, as specified on Schedule 1
hereto) evidencing the number of Shares set forth opposite the Purchaser's name
on Schedule 1 and (y) a Warrant Certificate registered in the Purchaser's name
(or the name of its nominee, if any, as specified on Schedule 1 hereto)
evidencing a number of Warrants equal to the number set forth opposite the
Purchaser's name on Schedule 1, and (ii) upon the Purchaser's receipt thereof,
the Purchaser will deliver to the Company a certified or official bank check (or
wire transfer) in an amount equal to the aggregate purchase price (as specified
in Section 1(b) hereof) for the Shares and Warrants to be purchased by the
Purchaser payable to the order of the Company in federal or other immediately
available funds.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall
apply (such definitions to be equally applicable to both the singular and plural
forms of the terms defined):
"Affiliate", when used with respect to any Person, means (i) if
such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4(c) of the Certificate
of Designations) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more than
five percent (5%) of any class of any equity security (within the
meaning of the Securities Exchange Act) thereof, and, if such
beneficial owner is a partnership, any general partner thereof, or if
such beneficial owner is a corporation, any Person controlling,
controlled by or under common control with such beneficial owner, or
any officer or director of such beneficial owner or of any
corporation occupying any such control relationship, (ii) if such
Person is a partnership, any general or limited partner thereof, and
(iii) any other Person which, directly or indirectly, controls or is
controlled by or is under common control with such Person. For
purposes of this definition, "control" (including the correlative
terms "controlling", "controlled by" and "under common control
with"), with respect to any Person, shall mean possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of voting securities or by contract or otherwise. The holding of
Shares (or of Conversion Shares obtained upon conversion of Shares)
or Warrants (or of Warrant Shares issuable upon the exercise of the
Warrants), and the rights under any Stock and Warrant Purchase
Agreement or under the Certificate of Designations, Warrant
Certificates, the
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Stockholders' Agreement or the Registration Rights Agreement (or the
exercise of any such rights, including, without limitation,
nominating a director to the Board (or Board committee) of the
Company and or sending an observer to Board (or Board committee)
meetings of the Company), shall not cause a Purchaser to be deemed to
be an "Affiliate" of the Company.
"Agreement" means this Stock and Warrant Purchase Agreement
(together with exhibits and schedules) as from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
"Benefit Plan" means any Plan, existing at any Closing,
established or to which contributions have at any time been made by
the Company, or any predecessor of any of the foregoing, or under
which any employee, former employee or director of the Company or any
beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Board" or "Board of Directors" means with respect to any Person
which is a corporation, a business trust or other entity, the board
of directors or other group, however, designated, which is charged
with legal responsibility for the management of such Person, or any
committee of such board of directors or group, however designated,
which is authorized to exercise the power of such board or group in
respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or
any day on which banks in the location of the office of the Company
provided for in Section 17 hereof are authorized or obligated to
close.
"Capitalized Leases" means any lease to which the Company is
party as lessee, or by which it is bound, under which it leases any
property (real, personal or mixed) from any lessor other than the
Company, and which either is required to be capitalized in accordance
with generally accepted accounting principles consistently applied,
or, even if not so required to be capitalized, shall have (or have
had), at the time first entered into, an initial term of greater than
three (3) years (including leases of shorter duration which are or
were extendible to a total term greater than three (3) years at the
option of the lessor). The value of Capitalized Leases, as of the
time of any determination thereof, shall mean the sum of the then
present values, determined as hereinafter provided, of future
obligations of lessees under then existing Capitalized Leases. To
compute the value of any Capitalized Lease, the following methods
shall be used, as applicable:
(i) values of leases required to be capitalized in
accordance with generally accepted accounting principles
shall be computed in accordance with such principles;
and
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(ii) values of other leases (and values of contracts or other
items which this Agreement provides are to be valued as
if they were Capitalized Leases) shall be computed by
discounting, to the date of determination, at an assumed
interest rate of eight percent (8%) per annum, the
minimum amount of future rental payments that will be
due under the related documentation, including rental
payments that may be due during extensions which are at
the other party's option, but excluding any amounts in
respect of insurance on, taxes on and/or maintenance of
the properties subject to such leases (provided that
such amounts are owed and paid only to the extent
actually incurred).
"Certificate of Designations" has the meaning set forth in
Section 1(a) hereof.
"Closing" or "Closings" have the meanings set forth in Section
2(a) hereof.
"Closing Date" or "Closing Dates" have the meanings set forth in
Section 2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and the regulations and interpretations thereunder.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value $.01
per share, and shall also include any common stock of the Company
hereafter authorized and any capital stock of the Company of any
other class hereafter authorized which is not preferred as to
dividends or assets over any other class of capital stock of the
Company or which has ordinary voting power for the election of
directors of the Company; provided that Common Stock shall not
include the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock
or the Series D Convertible Preferred Stock.
"Company" means Global Pharmaceutical Corporation, a Delaware
corporation, its successors and assigns.
"Confidentiality Agreement" has the meaning set forth in Section
7.5 hereof.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement, means the aggregate for the
Company of the amounts signified by
-5-
such term for all such Persons, with intercompany items eliminated,
and, with respect to net worth, after eliminating the portion of net
worth properly attributable to minority interests, if any, in the
capital of any such Person (other than in the capital of the Company)
and otherwise as determined in accordance with generally accepted
accounting principles consistently applied (except as otherwise
expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of
Shares and shall also include any capital stock or other securities
into which Conversion Shares are changed and any capital stock or
other securities resulting from or comprising a reclassification,
combination or subdivision of, or a stock dividend on, any Conversion
Shares. In the event that any Conversion Shares are sold either in a
public offering pursuant to a registration statement under the
Securities Act or pursuant to a Rule 144 Transaction, then the
transferees of such Conversion Shares shall not be entitled to any
benefits under this Agreement with respect to such Conversion Shares
and such Conversion Shares shall no longer be considered to be
"Conversion Shares" for purposes of any consent or waiver provision
of this Agreement.
"Disclosure Material" has the meaning specified in Section
4.6(a) hereof.
"Environmental Laws" means all federal, state, local, foreign,
civil and criminal laws, statutes, ordinances, orders, codes,
Environmental Permits, rules, policies, and regulations and common
law relating to the protection of the environment and human health or
relating to the handling, use, generation, treatment, storage,
transportation or disposal of Hazardous Materials, including but not
limited to the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss. 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C.
ss. 2601 et seq.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq.;
the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq.;
the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1801 et seq.; The
Occupational Safety and Health Act, 29 U.S.C. ss. 651; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 136y et
seq.; and the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq.,
all as may be amended or superseded from time to time.
"Environmental Lien" has the meaning set forth in Section 4.16
hereof.
"Environmental Permits" means all permits, licenses, approvals,
authorizations or consents required by any Governmental Authority
under any applicable Environmental Law and includes any and all
orders, consent orders or binding agreements issued or entered into
by a Governmental Authority under any applicable Environmental Law.
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"ERISA" means Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means each "person" (as defined in Section
3(9) of ERISA) which is under "common control" with the Company
(within the meaning of Section 414(b), (c), (m) or (o) of the Code).
"First Closing" has the meaning set forth in Section 2(a)
hereof.
"First Closing Date" has the meaning set forth in Section 2(a)
hereof.
"▇▇▇▇▇▇▇ Funds" means ▇▇▇▇▇▇▇ US Discovery Fund III, L.P. and
▇▇▇▇▇▇▇ US Discovery Offshore Fund III, L.P.
"▇▇▇▇▇▇▇ Holders" means (i) the ▇▇▇▇▇▇▇ Funds, (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the ▇▇▇▇▇▇▇ Funds to which the ▇▇▇▇▇▇▇
Funds may transfer record and/or beneficial ownership of the Shares,
the Conversion Shares, the Warrants or the Warrant Shares and (iii)
any transferee of Shares, Conversion Shares, Warrants or Warrant
Shares from a ▇▇▇▇▇▇▇ Holder other than a transferee of Shares,
Conversion Shares, Warrants or Warrant Shares sold in either a public
offering pursuant to a registration statement under the Securities
Act or pursuant to a Rule 144 Transaction, except that for purposes
of Section 9 hereof, such transferee shall be a ▇▇▇▇▇▇▇ Holder only
if such transferee is reasonably acceptable to the Company.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority)
having jurisdiction over the Company or any of its respective assets
or businesses.
"Guaranty" means (i) any guaranty or endorsement of the payment
or performance of, or any contingent obligation in respect of, any
indebtedness or other obligation of any other Person, (ii) any other
arrangement whereby credit is extended to one obligor (directly or
indirectly) on the basis of any promise or undertaking of another
Person (a) to pay the indebtedness of such obligor, (b) to purchase
an obligation owed by such obligor, (c) to purchase or lease assets
(or to provide funds, goods or services) under circumstances that
would enable such obligor to discharge one or more of its obligations
or (d) to maintain the capital, working capital, solvency or general
financial condition of such obligor, in each case whether or not such
arrangement is disclosed in the balance sheet of such other Person or
is referred to in a footnote thereto and (iii) any liability as a
general partner of a partnership in respect of indebtedness or other
obligations of such partnership; provided, however, that the term
"Guaranty" shall not include
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(1) endorsements for collection or deposit in the ordinary course of
business, (2) any guaranty of indebtedness of the Company by a
subsidiary of the Company or (3) obligations of the Company which
would constitute Guaranties solely by virtue of the continuing
liability of a Person which has sold assets subject to liabilities
for the liabilities which were assumed by the Person acquiring the
assets, unless such liability is required to be carried on the
consolidated balance sheet of the Company. The amount of any Guaranty
and the amount of indebtedness resulting from such Guaranty shall be
the maximum amount of the guarantor's potential obligation in respect
of such Guaranty.
"Hazardous Materials" means any petroleum, petroleum
hydrocarbons, petroleum waste or petroleum products, underground
storage tanks, asbestos or asbestos-containing materials, pesticides,
lead and lead-containing materials, urea formaldehyde insulation and
polychlorinated biphenyls (PCBs), ionizing and non-ionizing radiation
including radon and electromagnetic frequency radiation; and any
chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants" or words of similar import, under any applicable
Environmental Law.
"Indebtedness" of any Person means, without duplication, as of
any date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including,
without limitation, all notes payable and drafts accepted
representing extensions of credit, all obligations under letters of
credit, all obligations evidenced by bonds, debentures, notes or
other similar instruments and all obligations upon which interest
charges are customarily paid), (ii) all Capitalized Leases in respect
of which such Person is liable as lessee or as the guarantor of the
lessee, (iii) all monetary obligations which are secured by any Lien
existing on property owned by such Person whether or not the
obligations secured thereby have been incurred or assumed by such
Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to
make payments, (v) all Guaranties by such Person and (vi) all
contractual obligations (whether absolute or contingent) of such
Person to repurchase goods sold and distributed. "Indebtedness" shall
not include, however, any unfunded obligations in any employee
pension benefit plan (as defined in ERISA) of the Company.
"Initial Shelf Registration" has the meaning set forth in
Section 8.10 hereof.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any
contributions to the capital of, any other Person, (ii) any Guaranty
by such Person, (iii) any interest in any capital stock, equity
interest or other securities of any other Person, (iv) any transfer
or sale of property of
-8-
such Person to any other Person other than upon full payment, in cash
or other consideration, of not less than the agreed sale price
bargained on an arms-length basis and (v) any commitment or option to
make an Investment if, in the case of an option, the consideration
therefor exceeds $10,000, and any of the foregoing under clauses (i)
through (v) shall be considered an Investment whether such Investment
is acquired by purchase, exchange, merger or any other method;
provided, that the term "Investment" (1) shall not include an
Investment in the Company, (2) shall not include current trade and
customer accounts receivable and allowances, provided they relate to
goods furnished in the ordinary course of business and are given in
accordance with the customary practices of the Company, (3) shall not
include temporary investments of excess cash of the Company in any of
the following: (A) investment grade obligations maturing within one
year of their issuance which as to principal and interest constitute
direct obligations of, or obligations guaranteed by, the United
States of America, (B) negotiable certificates of deposit of banks or
trust companies which are organized under the laws of the United
States of America or any state thereof and which have capital and
surplus of at least $500,000,000, (C) commercial paper which is rated
not less than prime-one or A-1 or their equivalents by ▇▇▇▇▇'▇
Investor Service, Inc. or Standard & Poor's Corporation or their
successors, (D) any repurchase agreement secured by any one or more
of the foregoing and (E) money market funds primarily investing in
any of the foregoing securities and sponsored by or affiliated with
nationally recognized brokerage or investment advisory firms, and (4)
shall not include Investments of the Company existing on the date
hereof and disclosed on Schedule 3 hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other
security interest of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same effect
as any of the foregoing, any assignment or other conveyance of any
right to receive income and any assignment of receivables with
recourse against the assignor), any filing of a financing statement
as debtor under the Uniform Commercial Code or any similar statute
and any agreement to give or make any of the foregoing; provided that
the term "Lien" shall not include Permitted Liens.
"Outside Directors" means those directors on the Company's Board
of Directors at any time who are not otherwise Affiliates of or
employed by the Company.
"Outstanding" or "outstanding" means (a) when used with
reference to the Shares, the Conversion Shares, the Warrants or the
Warrant Shares as of a particular time, all Shares, Conversion
Shares, Warrants or Warrant Shares theretofore duly issued except (i)
Shares, Conversion Shares, Warrants and Warrant Shares theretofore
reported as lost, stolen, mutilated or destroyed or surrendered for
transfer, exchange or replacement, in respect of which new or
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replacement Shares, Conversion Shares, Warrants or Warrant Shares
have been issued by the Company, (ii) Shares, Conversion Shares,
Warrants and Warrant Shares theretofore cancelled by the Company and
(iii) Shares, Conversion Shares, Warrants and Warrant Shares
registered in the name of, as well as Shares, Warrants and Warrant
Shares owned beneficially by, the Company, or any of its Affiliates.
For purposes of the preceding sentence, in no event shall
"Affiliates" include (x) the persons which are identified as
"Purchasers" on Schedule 1 hereto or (y) any Affiliates of any such
persons.
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes, governmental
charges or levies not yet due or delinquent or being contested in
good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, (ii) any imperfections
of title, easements, rights of way or similar Liens, zoning laws or
land use restrictions as normally exist with respect to property
similar in character to the property affected thereby and which
individually or in the aggregate with other such Liens, zoning laws
or land use restrictions do not materially impair the value or
marketability of the property subject to such Liens, zoning laws or
land use restrictions or interfere with the use of such property in
the conduct of the business of the Company and which do not secure
obligations for money borrowed, (iii) Liens imposed by any law, such
as mechanic's, materialman's, landlord's, warehouseman's and
carrier's Liens, securing obligations incurred in the ordinary course
of business which are not yet overdue or which are being diligently
contested in good faith by appropriate proceedings and, with respect
to such obligations which are being contested, for which the Company
has set aside adequate reserves, if appropriate, and (iv) any Lien
resulting from purchase by the Company of goods in the ordinary
course of business as to which Liens are not filed of record.
"Person" or "person" means an individual, corporation,
partnership, firm, association, joint venture, trust, unincorporated
organization, government, governmental body, agency, political
subdivision or other entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or
other employee benefit plan, practice, policy or arrangement of any
kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
-10-
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent,
to receive dividends or other distributions of the assets of such
corporation (including, without limitation, amounts payable in the
event of the voluntary or involuntary liquidation, dissolution or
winding-up of such corporation), which right is superior to the
rights of another class of the capital stock of such corporation.
"Preferred Stock" includes, without limitation, the Series A
Convertible Preferred Stock, the Series B Convertible Preferred
Stock, the Series C Convertible Preferred Stock and the Series D
Convertible Preferred Stock.
"Purchaser" means the person who accepts and agrees to the terms
hereof as indicated by such person's signature (as "the undersigned
Purchaser") on the execution page of this Agreement, together with
its successors and assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the First Closing Date, among the Company and
each of the Purchasers.
"Restricted Payment" means (i) every payment in connection with
the redemption, purchase, retirement or other acquisition by or on
behalf of the Company of any shares of the Company's capital stock
(as defined below), whether or not owned by the Company, (ii) any
prepayments or repayments made on Indebtedness of the Company, (iii)
every payment to or on behalf of any Affiliate of the Company on
account of or with respect to any lease arrangements, and (iv) every
payment by or on behalf of the Company (whether as repayment or
prepayment of principal or as interest or otherwise) on or with
respect to (A) any obligation to repay money borrowed owing to any
Affiliate of the Company or (B) any obligation, to any Person, of any
Affiliate of the Company or to any other holder of shares of the
Company's capital stock (as defined below), which obligation is
assumed, or is the subject of a Guaranty, by the Company; provided,
however, (a) that the restrictions of the foregoing clause (i) shall
not apply to (A) any payment in respect of capital stock of the
Company to the extent payable in shares of the capital stock of the
Company, (B) any redemption of the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock or the Series C
Convertible Preferred Stock in accordance with Section 5(a) of their
respective Certificate of Designations as in effect on the date
hereof, (C) any redemption of the Series D Preferred Stock or (D) any
redemption or repurchase pursuant to the 1995 Stock Incentive Plan as
in effect on the date hereof, (b) that the restrictions of the
foregoing clause (ii) shall not apply to any regularly
-11-
scheduled prepayment or repayment of Indebtedness, provided that such
Indebtedness being prepaid or repaid is not at the time of such
prepayment or repayment or at any prior time thereto owing to an
Affiliate of the Company, and (c) that none of the foregoing clauses
shall apply to any payments, distributions or other transfers or
actions on or with respect to the Shares or the Conversion Shares or
to the Purchasers (or holders of Shares or the Conversion Shares)
under the Stock and Warrant Purchase Agreements. For purposes of this
definition, "capital stock" shall also include warrants and other
rights and options to acquire shares of capital stock (whether upon
exercise, conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A)
complying with Rule 144 as such Rule is in effect on the date of such
transfer (but not including a sale other than pursuant to "brokers'
transactions" as defined in clauses (1) and (2) of paragraph (g) of
such Rule as in effect on the date hereof) and (B) occurring at a
time when Conversion Shares are registered pursuant to Section 12 of
the Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19 hereof.
"Second Closing" has the meaning set forth in Section 2(a)
hereof.
"Second Closing Date" has the meaning set forth in Section 2(a)
hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations
thereunder.
"Series A Convertible Preferred Stock" means the Company's
Series A Convertible Preferred Stock, par value $.01 per share.
"Series B Convertible Preferred Stock" means the Company's
Series B Convertible Preferred Stock, par value $.01 per share.
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"Series C Convertible Preferred Stock" means the Company's
Series C Convertible Preferred Stock, par value $.01 per share.
"Series D Convertible Preferred Stock" means the Company's
Series D Convertible Preferred Stock, par value $.01 per share, which
will have the rights, powers and privileges on such Closing Date as
more fully set forth in the Certificate of Designations.
"Shares" has the meaning set forth in Section 1(a) hereof. In
the event that any Shares are sold either in a public offering
pursuant to a registration statement under Section 5 of the
Securities Act or pursuant to a Rule 144 Transaction, then the
transferees of such Shares shall not be entitled to any benefits
under this Agreement with respect to such Shares and such Shares
shall no longer be considered to be "Shares" for purposes of any
consent or waiver provision of this Agreement.
"Shelf Registration" has the meaning set forth in Section 8.10
hereof.
"Stock and Warrant Purchase Agreements" has the meaning set
forth in Section 1(c) hereof.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated as of the First Closing Date, among the Company, the Purchasers
and certain other stockholders of the Company.
"Stockholders' Meeting" has the meaning set forth in Section
2(a) hereof.
"Subsequent Shelf Registration" has the meaning set forth in
Section 8.10 hereof.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total
voting power of shares of stock or other equity interests (without
regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is, at the time as of
which any determination is being made, owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries, or
both. The term "Subsidiary" or "Subsidiaries" when used herein
without reference to any particular Person, means a Subsidiary or
Subsidiaries of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, ad
valorem, value added, franchise, bank shares, withholding, payroll,
employment, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatsoever, whether
-13-
disputed or not, together with any interest, penalties, additions to
tax or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements
(including any information returns) required to be filed for purposes
of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or
local jurisdiction, or any foreign jurisdiction, having or purporting
to exercise jurisdiction with respect to any Tax.
"Transferees" shall mean any transferee (except for a ▇▇▇▇▇▇▇
Holder) of Shares or Conversion Shares (as such terms are defined within the
definition of "▇▇▇▇▇▇▇ Holders") from a ▇▇▇▇▇▇▇ Holder. Transferees shall not
include a transferee of Shares or Conversion Shares sold in either a public
offering pursuant to a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), or pursuant to Rule 144 under the Securities
Act.
"Warrant Certificates" has the meaning set forth in Section 1(a)
hereof.
"Warrants" has the meaning set forth in Section 1(a) hereof.
"Warrant Share" or "Warrant Shares" means the shares of the
Company's Common Stock obtained or obtainable upon the exercise of Warrants and
shall also include any capital stock or other securities into which Warrant
Shares are changed and any capital stock or other securities resulting from or
comprising a reclassification, combination or subdivision of, or a stock
dividend on, any Warrant Shares. In the event that any Warrant Shares are sold
either in a public offering pursuant to a registration statement under the
Securities Act or pursuant to a Rule 144 Transaction, then the transferees of
such Warrant Shares shall not be entitled to any benefits under this Agreement
with respect to such Warrant Shares and such Warrant Shares shall no longer be
considered to be "Warrant Shares" for purposes of any consent or waiver
provision of this Agreement.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision;
(ii) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles consistently applied (except as otherwise
provided herein);
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(iii) all computations provided for herein, if any, shall be
made in accordance with generally accepted accounting principles
consistently applied (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter gender
shall also be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company, such as
"create", "sell", "transfer", "dispose of", etc., mean such action
whether voluntary or involuntary, by operation of law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be
deemed a part of this Agreement;
(vii) each of the representations and warranties of the
Company contained in Section 4 hereof is separate and is not limited,
qualified or modified by the existence, wording or satisfaction of
any other representation or warranty of the Company in Section 4 or
otherwise;
(viii) each of the covenants of the Company contained in
Sections 7, 8 and 9 hereof or otherwise contained in any Stock and
Warrant Purchase Agreement, the Certificate of Designations, the
Warrant Certificates, the Stockholders' Agreement or the Registration
Rights Agreement is separate and is not limited or satisfied by the
existence, wording or satisfaction of any other covenant of the
Company in Section 7, 8 or 9 or otherwise; and
(ix) all references herein (in covenants or otherwise) to
any action(s) which are to be taken (or which are prohibited from
being taken) by any Person or the Company shall apply to such Person
or the Company, as the case may be, whether such action is taken
directly or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows as of
the date hereof and as of any Closing Date, except as set forth in the
Disclosure Schedule attached hereto as Exhibit B:
4.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation. The
Company is duly qualified, licensed and authorized to do business and is in good
standing in each jurisdiction in which it
-15-
owns or leases any property or in which the conduct of its business requires it
to so qualify or be so licensed, except for such jurisdictions where the failure
to so qualify or be so licensed would not have a material adverse effect on the
Company's assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects.
(b) No proceeding has been commenced looking toward the dissolution
or merger of the Company or the amendment of its certificate of incorporation
(other than the Certificate of Designations). The Company is not in violation in
any respect of its certificate of incorporation or by-laws.
(c) The Company has all requisite power, authority (corporate and
other) and legal right to own or to hold under lease and to operate the
properties it owns or holds and to conduct its business as now being conducted.
(d) The Company has all requisite power, authority (corporate and
other) and legal right to execute, deliver, enter into, consummate the
transactions contemplated by and perform its obligations under (i) the Stock and
Warrant Purchase Agreements, including, without limitation, the issuance by the
Company of the Shares and the Conversion Shares as contemplated herein and
therein and in the Certificate of Designations and the issuance by the Company
of the Warrants and Warrant Shares as contemplated herein and therein and in the
Warrant Certificates (subject to the proper filing with the Secretary of State
of the State of Delaware of (I) the Certificate of Designations for the Series D
Preferred Stock, and (II) amendments to the respective Certificate of
Designations for each of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock and the Series C Convertible Preferred Stock), (ii)
the Stockholders' Agreement and (iii) the Registration Rights Agreement. The
execution, delivery and performance of the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement and the Registration Rights Agreement by
the Company (including, without limitation, the issuance by the Company of the
Shares and the Conversion Shares as contemplated herein and therein and in the
Certificate of Designations and the issuance by the Company of the Warrants and
Warrant Shares as contemplated herein and therein and in the Warrant
Certificates) have been duly authorized by all required corporate and other
actions; provided that the Second Closing is contingent upon the due
authorization by corporate and other actions of sufficient additional shares of
Common Stock to permit conversion in full of the Series D Convertible Preferred
Stock into shares of Common Stock at the Shareholders' Meeting. The Company has
duly executed and delivered the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement and the Registration Rights Agreement. The Stock and
Warrant Purchase Agreements, the Stockholders' Agreement and the Registration
Rights Agreement constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally.
4.2. Capital Stock.
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(a) Schedule 6(a) hereto correctly and completely lists (i) the
authorized capital stock of the Company (Common Stock and Preferred Stock), (ii)
the number of designated shares of Preferred Stock in each Series or Class after
giving effect to the Certificate of Designations and (iii) on January 31, 1999,
after giving effect to the issuance of Shares contemplated by the Stock and
Warrant Purchase Agreements, the number of shares outstanding in each Series or
Class. Other than the conversion of certain shares of the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock and the Series C
Convertible Preferred Stock, there have been no material issuances of shares
since January 31, 1999. All of such outstanding shares are, or on such Closing
Date will be, duly authorized, validly issued and outstanding, fully paid and
non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series D Convertible Preferred Stock will be, when issued in
accordance with the terms of the Series D Convertible Preferred Stock, duly
authorized, validly issued, fully paid and non-assessable. Except as provided in
the Certificate of Designations, none of the shares of the Company's capital
stock which will be outstanding at each Closing (i) were or will be subject to
preemptive rights when issued or (ii) provide the holders thereof with any
preemptive rights with respect to any issuances of capital stock.
(b) Schedule 6(b) hereto correctly and completely lists the number
and purpose for which such shares of the Company's Common Stock are reserved for
issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no outstanding
options, warrants, subscriptions, rights, convertible securities or other
agreements or plans under which the Company may become obligated to issue, sell
or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the Registration
Rights Agreement, there are and will be no outstanding registration rights with
respect to any capital stock of the Company, which (in either case) will be
outstanding on such Closing Date, or any capital stock referred to in Section
4.2(b) or 4.2(c).
(e) There are no voting agreements, voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
the Company of which the Company is a party, except as provided herein, in the
Stockholders' Agreement and the Certificate of Designations.
(f) There are no anti-dilution protections or other adjustment
provisions in existence with respect to any capital stock of the Company or any
capital stock referred to in Section 4.2(b) or 4.2(c) or in the last sentence of
Section 4.3(b) below.
(g) The Certificate of Designations has been duly adopted by the
Company and is fully effective as an amendment to the Company's certificate of
incorporation. The Shares have all of the rights, priorities and terms set forth
in the Certificate of Designations.
-17-
(h) The Warrant Certificates have been duly adopted by the Company,
and the Warrants will have all of the rights and privileges set forth in the
Warrant Certificates.
(i) To the knowledge of the Company, those persons who own, directly
or indirectly, more than 5% (calculated in accordance with Rule 13d-3 of the
Securities Exchange Act) of the Company's outstanding Common Stock are as
follows: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Bear ▇▇▇▇▇▇▇ Asset Management Inc., Kingdon Capital
Management Corporation, ▇. ▇▇▇▇▇▇▇ Offshore N.V.
4.3. Subsidiaries.
The Company has no Subsidiaries. The Company has no Investments in
any other Person.
4.4. Business.
The Company is engaged primarily in the business of the manufacture
and sale of liquid and solid oral generic prescription and over-the-counter
drugs. The Company neither currently engages in, nor has any intention of
engaging in, any other business.
4.5. No Defaults or Conflicts.
(a) The Company is not in violation or default in any material
respect (and is not in default in any respect regarding any Indebtedness) under
any indenture, agreement or instrument to which it is a party or by which it or
its properties may be bound. The Company is not in default in any material
respect under any material order, writ, injunction, judgment or decree of any
court or other governmental authority or arbitrator(s).
(b) The execution, delivery and performance by the Company of the
Stock and Warrant Purchase Agreements, the Stockholders' Agreement and the
Registration Rights Agreement and any of the transactions contemplated hereby or
thereby (including, without limitation, the issuance of the Shares and the
Conversion Shares as contemplated herein and therein and in the Certificate of
Designations, the adoption of the Certificate of Designations as an amendment to
the Company's certificate of incorporation and the issuance by the Company of
the Warrants and Warrant Shares as contemplated herein and therein and in the
Warrant Certificates) do not and will not (i) violate or conflict with, with or
without the giving of notice or the passage of time or both, any provision of
(A) the respective certificates of incorporation or by-laws of the Company, (B)
any law, rule, regulation or order of any federal, state, county, municipal or
other governmental authority, (C) any judgment, writ, injunction, decree, award
or other action of any court or governmental authority or arbitrator(s), or (D)
any agreement, indenture or other instrument applicable to the Company or any of
its respective properties, (ii) result in the creation of any Lien upon any of
the Company's properties, assets or revenues,
-18-
except as provided in the Certificate of Designations of the Series D
Convertible Preferred Stock, (iii) require the consent, waiver, approval, order
or authorization of, or declaration, registration, qualification or filing with,
any Person (whether or not a governmental authority and including, without
limitation, any shareholder approval) (other than the vote at the Stockholders'
Meeting regarding authorized stock and other than approvals which have been
obtained prior to the Closing Date), or (iv) cause antidilution clauses of any
outstanding securities to become operative or give rise to any preemptive
rights. No provision referred to in Sections (A) and (C) of the preceding clause
(i) materially adversely affects the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis or the ability of the Company to perform
its obligations under the Stock and Warrant Purchase Agreements, the Certificate
of Designations, the Warrant Certificates, the Stockholders' Agreement, the
Registration Rights Agreement or any of the transactions contemplated hereby or
thereby.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchaser the
materials described on Schedule 4 hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4 fairly present the consolidated financial
condition of the Company as of the respective dates thereof and the consolidated
results of the operations of the Company for such periods and have been prepared
in accordance with generally accepted accounting principles consistently
applied, except that any such unaudited statements may omit notes and may be
subject to year-end adjustment.
(b) Since September 30, 1998, except as disclosed in the unaudited
financial statements for December 31, 1998 provided to the Purchaser, (i) the
business of the Company has been conducted in the ordinary course and (ii) there
has been no material adverse change in the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis. As of such Closing Date and as
of the date hereof, there are no material liabilities of the Company which would
be required to be provided for in a consolidated balance sheet of the Company as
of either such date prepared in accordance with generally accepted accounting
principles consistently applied, other than liabilities provided for in the
financial statements referred to in Section 4.6(a). Since September 30, 1998, no
amount or property has directly or indirectly been declared, ordered, paid, made
or set aside for any Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or otherwise, of
the Company that have not been disclosed in the financial statements referred to
in Section 4.6(a) or otherwise disclosed in the Disclosure Material.
(d) The financial projections included in the Disclosure Material
conform with the internal operating forecasts of the Company and were based on
reasonable assumptions when made and have been prepared in good faith.
-19-
(e) There is no fact known to the Company which is not in the
Disclosure Material and which materially and adversely affects, or in the future
would be reasonably likely (as far as the Company currently can reasonably
foresee) to materially and adversely affect, the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.7. Litigation.
There is no action, suit, proceeding, investigation or claim pending
or, to the knowledge of the Company, threatened in law, equity or otherwise
before any court, administrative agency or arbitrator which (i) questions the
validity of the Stock and Warrant Purchase Agreements, the Certificate of
Designations, the Warrant Certificates, the Stockholders' Agreement, the
Registration Rights Agreement, the Shares, the Conversion Shares, the Warrants
or the Warrant Shares or any action taken or to be taken pursuant hereto or
thereto, (ii) might adversely affect the right, title or interest of any
Purchaser to the Shares, the Conversion Shares, the Warrants or the Warrant
Shares or (iii) might result in a material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis.
4.8. Taxes.
The Company has duly and timely filed all Tax Returns required to be
filed by it, and each such Tax Return correctly and completely reflects the Tax
liability and all other information required to be reported thereon. The Company
has paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company in
the most recent financial statement included in the Disclosure Material is
sufficient for all unpaid Taxes, being current Taxes not yet due and payable, of
the Company, as of the end of the period covered by such financial statement,
and as of such Closing Date, such provision, as adjusted for the passage of time
through such Closing Date, will be sufficient for the then-accrued and unpaid
Taxes not yet due and payable of the Company. No Tax Returns of the Company have
ever been audited by any Taxing Authority, there is no dispute concerning any
Tax liability of the Company either threatened, claimed or raised by any Taxing
Authority, and the Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it for any past period. The Company
has withheld and paid, or, if not yet due for payment, set aside in accounts for
such purposes, all Taxes required to have been withheld in connection with
amounts paid or owing to any employee, creditor, independent contractor or other
third party. Other than stamp taxes, the Company has no liability for Taxes of
any Person other than the Company (i) as a transferee or successor, (ii) by
contract, or (iii) otherwise. There are no applicable Taxes payable by the
Company in connection with the execution and delivery of the Stock and Warrant
Purchase Agreements, the Stockholders' Agreement or the Registration Rights
Agreement or the issuance by the Company of the Shares, the Conversion Shares,
the Warrants or the Warrant Shares.
-20-
4.9. ERISA.
(a) All Benefit Plans are listed in Exhibit B, and copies of all
documentation relating to such Benefit Plans have been delivered to or made
available for review by Purchasers (including copies of written Benefit Plans,
written descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications, and
IRS determination letters).
(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including ERISA and the Code, and each
Benefit Plan intended to qualify under section 401(a) of the Code has at all
times since its adoption been so qualified, and each trust which forms a part of
any such plan has at all times since its adoption been tax-exempt under section
501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding deficiency"
within the meaning of section 302 of ERISA or section 412 of the Code, and the
"amount of unfunded benefit liabilities" within the meaning of section
4001(a)(18) of ERISA does not exceed zero with respect to any Benefit Plan
subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA Affiliate since the effective date of said section 4043 for which
notice is not waived under the regulations issued pursuant to said Section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning of
section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been incurred or
is expected to be incurred by the Company under Title IV of ERISA to any party
with respect to any Benefit Plan, or with respect to any other Plan presently or
heretofore maintained or contributed to by any ERISA Affiliate.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax imposed under section 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA.
(h) No benefit under any Benefit Plan, including, without limitation,
any severance or parachute payment plan or agreement, will be established or
become accelerated, vested or payable by reason of any transaction contemplated
under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of
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ERISA or section 4980B of the Code or any State laws requiring continuation of
benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities and any other claim
which could reasonably be expected to result in a material liability or expense
to the Company) has been brought or, to the knowledge of the Company, threatened
against or with respect to any Benefit Plan and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to any such suit, action or other litigation.
(k) All contributions to Benefit Plans that were required to be made
under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with generally accepted accounting principles, all of which
accruals under unfunded Benefit Plans are as disclosed in Exhibit B, and the
Company has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock and Warrant
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Purchaser of the Shares, the Conversion Shares,
the Warrants and the Warrant Shares) will not involve any "prohibited
transaction" within the meaning of ERISA or the Code with respect to any Benefit
Plan.
4.10. Legal Compliance.
(a) The Company's manufacturing, distribution and marketing practices
are in compliance in all material respects with all applicable laws, rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, including, without limitation, laws and regulations administered by the
Food and Drug Administration ("FDA") and the Drug Enforcement Administration
("DEA").
(b) The Company possesses all material Food and Drug Administration
new drug applications, abbreviated new drug applications, and new animal drug
applications as are necessary for the conduct of its business as now being
conducted, a list of such which will be provided to the Purchaser upon the
Purchaser's request.
(c) Other than the May 25, 1993 "Richlyn Order," there are no adverse
orders, judgments, writs, injunctions, decrees, or demands of any court or
administrative body, domestic or foreign, or of any governmental agency or
instrumentality, domestic or foreign, outstanding against the Company.
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(d) The Company has not and will not use the services of any person
debarred under the provisions of the Generic Drug Enforcement Act of 1992, 21
U.S.C. ss. 335(a)(b). None of the Company's officers or employees has been
convicted of a felony under federal law for conduct relating to the development,
approval or regulation of any product subject to the Federal Food, Drug, and
Cosmetic Act or the Controlled Substances Act.
4.11. Outstanding Securities.
All securities (as defined in the Securities Act) of the Company have
been offered, issued, sold and delivered in compliance with, or pursuant to
exemptions from, all applicable federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
4.12. Permits, Licenses and Approvals; Intellectual Property and
Other Rights.
The Company owns or possesses and holds free from material conflicts
with the rights of others all franchises, licenses, permits, consents, approvals
and other authority (governmental or otherwise), patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and copyrights
(each of which patent, trademark or copyright is listed on Exhibit B hereto),
and all rights and privileges with respect to any of the foregoing, as are
necessary for the conduct of its business as now being conducted and as
currently proposed to be conducted; provided that, no such representation is
made with respect to government franchises, licenses, permits, consents,
approvals or other authority which may be required with respect to the Company's
business as proposed to be conducted. The Company is not in default in any
material respect under any of such franchises, licenses, permits, consents,
approvals or other authority. The rights of (and use by) the Company with
respect to such or any other patents, patent rights, trademarks, trademark
rights, trade names, trade name rights or copyrights do not conflict with or
infringe any rights of others in a manner which might materially and adversely
affect the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
The Company has good relationships with its employees and has not had
and does not expect any substantial labor problems. The Company has no knowledge
as to any intentions of any key employee or any group of employees to leave the
employ of the Company. The employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company.
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4.14. Properties.
Other than the Permitted Liens, the Company has good and marketable
title to its real property, all of which is disclosed on Exhibit B hereto, and
good and marketable title to each of its other properties other than leased
properties. Certain real property used by the Company in the conduct of their
respective businesses is held under lease (as identified on Exhibit B hereto),
and the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate any such lease. All such leases are
valid and in full force and effect, and none of such leases is in default. None
of the properties owned or leased by the Company is subject to any Liens which
could materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) The Company has adequate sources of supply for its business as
currently conducted and as proposed to be conducted. The Company has good
relationships with all of its material sources of supply of goods and services
and does not anticipate any material problem with any such material sources of
supply.
(b) The Company has no knowledge that the customer base of the
Company might materially decrease.
4.16. Environmental Compliance.
(a) There is no Hazardous Material on, about, under or in, any
property, real or personal, in which the Company has any interest in an amount
or concentration which could constitute a violation that would result in a
liability in excess of $5,000 or otherwise result in a liability in excess of
$5,000 to the Company under any applicable Environmental Law.
(b) There is no (and has not been any) off-site use, handling,
storage or disposal or on-site use, handling, storage or disposal of Hazardous
Material at or from any locations currently or formerly owned, leased, operated
or occupied by the Company as a result of which use, handling, storage or
disposal there would exist a risk that the Company could incur a material
liability or obligation under any applicable Environmental Law.
(c) The Company has not received any verbal or written notice,
citation, subpoena, summons, complaint or other correspondence or communication
from any person with respect to the presence of any non-indigenous Hazardous
Material upon, into, beneath, or emanating from or affecting any of the real
property (including improvements) currently or formerly owned or occupied by the
Company that could result in a liability to the Company in excess of $5,000.
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(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge by the Company or, to the Company's
knowledge, by others, upon, into or beneath the real property (including
improvements) currently or formerly owned or occupied by the Company that has
caused or is causing soil or groundwater contamination which, under applicable
Environmental Laws could require investigation or remediation or could otherwise
create a material liability or obligation on the part of the Company.
(e) The Company is in material compliance with all applicable
Environmental Laws and the terms and conditions of all Environmental Permits.
(f) To the best knowledge of the Company after reasonable inquiry,
there are no Liens arising under or pursuant to any Environmental Law
("Environmental Liens") relating to any real property (including improvements
thereon) currently owned by the Company.
(g) There are no (i) underground storage tanks, (ii) polychlorinated
biphenyl containing equipment or (iii) asbestos-containing materials at any site
currently owned, operated or leased by the Company, except in compliance with
all applicable Environmental Laws.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company, other than this
Agreement and the related documents, the Company is not a party to any contract
or agreement with any Affiliate of the Company, the terms of which are less
favorable to the Company than those which might have been obtained, at the time
such contract or agreement was entered into, from a person who was not such an
Affiliate.
4.18. Offering of Shares and Warrants.
None of the Company, any agent or any other person acting on its
behalf, directly or indirectly, (i) offered any of the Shares, the Warrants or
any similar security of the Company (A) by any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) or (B) for sale to or solicited offers to buy any thereof from, or
otherwise approached or negotiated with respect thereto with, any person other
than the Purchasers and not more than twenty-four (24) other institutional
investors each of which the Company reasonably believed was an "accredited
investor" within the meaning of Regulation D under the Securities Act or (ii)
has done or caused to be done (or has omitted to do or to cause to be done) any
act which act (or which omission) would result in bringing the issuance or sale
of the Shares within the provisions of Section 5 of the Securities Act or the
filing, notification or reporting provisions of any state securities laws.
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4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1997, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998 and (iii) its Proxy Statement dated April 6, 1998
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.20. Indebtedness.
Schedule 2 hereto sets forth (i) the amount of all Indebtedness of
the Company outstanding as of January 31, 1999 (and there is no additional
material amount of Indebtedness of the Company outstanding other than that
listed as of January 31, 1999 or as set forth in Schedule B), (ii) any Lien with
respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the
Purchaser a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No material
default exists with respect to or under any such Indebtedness or any instrument
or agreement relating thereto and no event or circumstance exists with respect
thereto that (with notice or the lapse of time or both) could give rise to such
a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of the
Shares and the Warrants to repay debt, to fund future development opportunities
and for working capital and general corporate purposes. No portion of such
proceeds will be used for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying, within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, as amended from time to time,
any "margin stock" as defined in said Regulation U, or any "margin stock" as
defined in Regulation G of the Board of Governors of the Federal Reserve System,
as amended from time to time, or for the purpose of purchasing, carrying or
trading in securities within the meaning of Regulation T of the Board of
Governors of the Federal Reserve System, as amended from time to time, or for
the purpose of reducing or retiring any indebtedness which both (i) was
originally incurred to purchase any such margin stock or other securities and
(ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company includes any such "margin stock."
The Company has no present intention of acquiring any such "margin stock."
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4.22. Other Names.
The businesses previously or presently conducted by the Company has
not been conducted under any corporate, trade or fictitious name.
4.23. Brokers.
No broker, finder or investment banker or other party is entitled to
any brokerage, finder's or other similar fee or commission in connection with
any Stock and Warrant Purchase Agreement, the Stockholders' Agreement, the
Registration Rights Agreement, the Warrant Certificates or the Certificate of
Designations or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Company or any of its Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under this Agreement, the Stockholders' Agreement and
the Registration Rights Agreement. The execution, delivery and performance of
this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its investment in
the Shares and Warrants being purchased by it and is able to bear the economic
risk of such investment. The Purchaser is purchasing the Shares and the Warrants
to be purchased by it for its own account for investment and not with a present
view to any distribution thereof in violation of applicable securities laws;
provided, however, that the Purchaser may transfer record and/or beneficial
ownership of the Shares, the Conversion Shares, the Warrants or the Warrant
Shares to one or more Affiliates, officers or employees of Affiliates or
investment funds managed by Affiliates of the Purchaser, in all cases in
compliance with federal securities laws. It is understood that the
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disposition of the Purchaser's property shall at all times be within the
Purchaser's control. If the Purchaser should in the future decide to dispose of
any of its Shares, Conversion Shares, Warrants or Warrant Shares, it is
understood that it may do so only in compliance with the Securities Act,
applicable securities laws and this Agreement. The Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or
investment banker or other party is entitled to any brokerage, finder's or other
similar fee or commission in connection with any Stock and Warrant Purchase
Agreement, the Stockholders' Agreement, the Registration Rights Agreement, the
Warrant Certificates or the Certificate of Designations or any of the
transactions contemplated hereby or thereby, based upon arrangements made by or
on behalf of the Purchaser or any of its Affiliates.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise dispose of
any Shares, Conversion Shares, Warrants or Warrant Shares unless such Shares,
Conversion Shares, Warrants or Warrant Shares have been registered under the
Securities Act and, to the extent required, under any applicable state
securities laws, or pursuant to an applicable exemption from such registration
requirements. The Company may endorse on all Share certificates or Warrant
Certificates a legend stating or referring to such transfer restrictions;
provided, that no such legend shall be endorsed on any Share certificates or
Warrant Certificates which, when issued, are no longer subject to the
restrictions of this Section 6.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied.
(b) So long as any of the Shares remain outstanding, the Company will
deliver to (I) the ▇▇▇▇▇▇▇ Funds and (II) each Transferee, provided that each
such Transferee holds not less than an aggregate of 5000 Shares, the following:
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(i) as soon as practicable but not later than five (5) Business
Days after their issuance, and in any event within ninety (90) days after the
close of each fiscal year of the Company, (A) a consolidated balance sheet of
the Company as of the end of such fiscal year and (B) consolidated statements of
operations, stockholders' equity and cash flows of the Company for such fiscal
year, in each case setting forth in comparative form the corresponding figures
for the preceding fiscal year, all such balance sheets and statements to be in
reasonable detail and certified without qualification by Price Waterhouse
Coopers LLC or any "Big Five" independent public accounting firm selected by the
Company, and such statements shall be accompanied by a management analysis of
any material differences between the results for such fiscal year and the
corresponding figures for the preceding year; the Company's Annual Report on
Form 10-KSB shall satisfy such requirement provided that it is in compliance
with all applicable requirements of the SEC and is certified by a "Big Five"
accounting firm;
(ii) as soon as practicable, copies (A) of all financial
statements, proxy material or reports sent to the Company's stockholders, (B) of
any public press releases and (C) of all reports or registration statements
filed with the Commission pursuant to the Securities Act or the Securities
Exchange Act;
(iii) as soon as practicable and in any event within forty-five
(45) days after the close of each of the first three (3) fiscal quarters of the
Company, (A) a consolidated balance sheet of the Company as of the end of such
fiscal quarter, (B) consolidated statements of operations, stockholders' equity
and cash flows of the Company for the portion of the fiscal year ended with the
end of such quarter, in each case in reasonable detail, certified by the Chief
Financial Officer, Chief Executive Officer or the President of the Company and
setting forth in comparative form the corresponding figures for the comparable
period one year prior thereto (subject to normal year-end adjustments), together
with a management analysis of any material differences between such results and
the corresponding figures for such prior period and (C) a certificate of the
Chief Financial Officer, Chief Executive Officer or the President certifying the
Company's compliance with the covenants contained in Section 9 of this
Agreement; the Company's Quarterly Report on Form 10-QSB shall satisfy such
requirement provided that it is in compliance with all applicable requirements
of the SEC;
(iv) as soon as practicable and without duplication of any of the
above items, any other materials furnished to the Company's Board of Directors
or to holders of the Company's capital stock or Indebtedness, including, without
limitation, any compliance certificates furnished in respect of such
Indebtedness; and
(v) as soon as practicable, such other information as may
reasonably be requested by (I) the ▇▇▇▇▇▇▇ Funds or (II) any Transferee,
provided that such Transferee holds not less than an aggregate of 5000 Shares.
(c) The Company will deliver to each member of the Company's Board of
Directors and each observer to the Company's Board of Directors appointed
pursuant to
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Section 3(a) of the Stockholders' Agreement, as soon as practicable (and in the
case of (iii), prior to the end of each fiscal year) and without duplication of
any of the items listed below, the following:
(i) copies of any annual, special or interim audit reports or
management or comment letters with respect to the Company or their operations
submitted to the Company by independent public accountants;
(ii) copies of summary financial information prepared on a
quarterly basis regarding the Company on a consolidated basis as presented to
the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan for the next
fiscal year;
(iv) copies of all formal communications, from time to time, to
directors of the Company (including without limitation all information furnished
to such directors in connection with such communications), and copies of minutes
of meetings of the Board of Directors (and of any executive committees thereof)
of the Company;
(v) notice of default under any material agreement, contract or
other instrument to which the Company is a party or by which it is bound;
(vi) notice of any action or proceeding which has been commenced
or threatened against the Company and which, if adversely determined, would
have, individually or in the aggregate, a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section 7.1
shall be prepared in accordance with generally accepted accounting principles
consistently applied (except for any change in accounting principles specified
in the accompanying certificate, in the financial statements themselves or
required by GAAP, and except that any interim financial statements may omit
notes and may be subject to normal year-end adjustments).
(e) Without limiting the foregoing provisions of this Section 7.1,
the Company agrees that, if requested in writing by any holder of Shares, it
will not deliver to such holder (until otherwise instructed by such holder) (x)
any non-public information or non-public materials regarding the Company
(whether described in this Section 7.1 or otherwise) and (y) any information
(whether or not included in clause (x)) which such holder specifies that it does
not want to receive. The Company shall comply with any such request with respect
to each such
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Purchaser and any subsequent holders of Shares acquired directly or indirectly
(through one or more transfers) from such Purchaser, until instructed otherwise
by the then holder of such Shares.
7.2. Communication with Accountants.
The Company hereby authorizes the Purchaser to communicate directly
with the independent certified public accountants for the Company and authorizes
such accountants to disclose to the Purchaser any and all financial statements
and any other information of any kind that they may have with respect to the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. The Company
shall deliver a letter addressed to such accountants instructing them to comply
with the provisions of this Section 7.2.
7.3. Inspection.
The Company will permit (I) the ▇▇▇▇▇▇▇ Funds, (II) any Transferee,
provided that such Transferee holds not less than an aggregate of 5000 Shares
and (III) any authorized representative of the ▇▇▇▇▇▇▇ Funds or such Transferee,
to visit and inspect any of the properties of the Company, to examine their
respective books and records and to discuss with their officers their books and
records and the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company, all
at such reasonable times, all on reasonable notice and as often as may be
reasonably requested.
7.4. Notices.
The Company will give notice to all holders of Shares promptly after
it learns (other than by notice from all of such holders) of the existence of
any of the following:
(a) any default under any Indebtedness (or under any indenture,
mortgage or other agreement relating to any Indebtedness) which Indebtedness is
in an aggregate principal amount exceeding $250,000 (or the equivalent thereof
in other currencies) in respect of which the Company is liable;
(b) any action or proceeding which has been commenced or threatened
against the Company and which, if adversely determined, would have, individually
or in the aggregate, a material adverse effect on the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement, the Registration Rights Agreement, the
Warrant Certificates or the Certificate of Designations;
(c) any dispute which may exist between the Company and any
governmental regulatory body which, in the reasonable opinion of the Company is
reasonably likely to,
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individually or in the aggregate, materially adversely affect the normal
business operations of the Company or the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement, the Warrant
Certificates or the Certificate of Designations; and
(d) if any (i) "reportable event" (as such term is described in
Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding deficiency"
(within the meaning of Section 412(a) of the Code) has been incurred with
respect to a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate that is
subject to the funding requirements of ERISA and the Code or that an application
may be or has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including any required installment
payments) or an extension of any amortization period under Section 412 of the
Code, in each case with respect to such a Pension Plan; or (iii) Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate has been terminated, reorganized, petitioned
or declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has an unfunded current liability giving rise to
a lien under ERISA or the Code; or (v) proceeding has been instituted pursuant
to Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA), maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate.
Such notice (i) with respect to (a), shall specify the nature and period of
existence of any such default and what the Company proposes to do with respect
thereto and (ii) with respect to (b), (c) or (d), shall specify the nature of
any such matter referred to in such clause, what action the Company proposes to
take with respect thereto and what action any other relevant Person is taking or
proposes to take with respect thereto.
7.5. Confidentiality Agreement.
The Company's obligation to provide any non-public information under
this Section 7 or otherwise to any person other than members of its Board of
Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient
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of such information as more fully set forth in the form attached hereto as
Exhibit F (the "Confidentiality Agreement").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.
The Company will:
(a) maintain its corporate existence, rights and other franchises in
full force and effect;
(b) maintain its tangible assets in good repair, working order and
condition so far as necessary or advantageous to the proper carrying on of its
businesses;
(c) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, provided, that such compliance shall not be necessary
so long as (i) the applicability or validity of any such law, order, rule,
ruling, certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings and (ii)
failure to so comply will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
(d) pay promptly when due all Taxes imposed upon its properties,
assets or income and all claims or indebtedness (including, without limitation,
vendor's, workmen's and like claims) which might become a lien upon such
properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and reputable
insurers of nationally recognized stature, all its properties of a character
customarily insured by entities similarly situated, against loss or damage of
the kinds and in amounts customarily insured against by such entities and with
such deductibles or coinsurance as is customary.
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8.2. Office for Payment, Exchange and Registration; Location of
Office; Notice of Change of Name or Office.
(a) So long as any of the Shares or the Warrants is outstanding, the
Company will maintain an office or agency where Shares or Warrants may be
presented for redemption, exchange, conversion, exercise or registration of
transfer as provided in this Agreement. Such office or agency initially shall be
the office of the Company specified in Section 17 hereof, subject to Section
8.2(b).
(b) The Company shall give each holder of Shares or Warrants at least
twenty (20) days' prior written notice of any change in (i) the name of the
Company as then in effect or (ii) the location of the office of the Company
required to be maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company for tax, accounting and any other
purposes shall end on December 31 of each calendar year.
8.4. Environmental Matters.
(a) The Company and shall keep and maintain any property either owned
leased, operated or occupied by the Company free and clear of any Environmental
Liens, and the Company shall keep all such property free of Hazardous Material
contamination and in compliance with all applicable Environmental Laws and the
terms and conditions of any Environmental Permits; provided, however, that the
Company shall have the right at its cost and expense, and acting in good faith,
to contest, object or appeal by appropriate legal proceeding the validity of any
Environmental Lien. The contest, objection or appeal with respect to the
validity of an Environmental Lien shall suspend the Company's obligation to
eliminate such Environmental Lien under this paragraph pending a final
determination by appropriate administrative or judicial authority of the
legality, enforceability or status of such Environmental Lien, provided that the
following conditions are satisfied: (i) contemporaneously with the commencement
of such proceedings, the Company shall give written notice thereof to each
holder of Shares, Conversion Shares, Warrants or Warrant Shares; and (ii) if
under applicable law any real property or improvements thereon are subject to
sale or forfeiture for failure to satisfy the Environmental Lien prior to a
final determination of the legal proceedings, the Company must successfully move
to stay such sale, forfeiture or foreclosure pending final determination of the
Company's action; and (iii) the Company must, if requested, furnish to the
holders of Shares, Conversion Shares, Warrants or Warrant Shares a good and
sufficient bond, surety, letter of credit or other security satisfactory to such
holders equal to the amount (including any interest and penalty) secured by the
Environmental Lien.
(b) The Company will, by administrative or judicial process, enforce
the obligations of any other Person who is potentially liable for damages,
contribution or other relief
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in connection with any violation of Environmental Laws, including, but not
limited to, asbestos abatement, Hazardous Material remediation or off-site or
on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares, Conversion Shares, Warrants or
Warrant Shares, its employees, officers, directors, stockholders, partners,
financial and legal representatives and assigns, from and against any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits
and claims, joint or several, and any costs, disbursements and expenses
(including attorneys' fees and expenses and costs of investigation) of whatever
kind or nature, known or unknown, contingent or otherwise asserted against,
imposed on, or sustained by, them, arising out of or in any way related to (i)
the presence, disposal, release, removal, discharge, storage or transportation
by the Company on behalf of any predecessors thereof of any Hazardous Material
upon, into, from or affecting any real property (including improvements)
currently or formerly owned, leased, operated or occupied by the Company; (ii)
any judicial or administrative action, suit or proceeding, actual or threatened,
relating to Hazardous Material upon, in, from or affecting any real property
(including improvements) currently or formerly owned, leased, operated or
occupied by the Company for which the Company could be liable; (iii) any
violation of any Environmental Law, by the Company or any of their agents,
tenants, subtenants or invitees; (iv) the imposition of any Environmental Lien
for the recovery of costs expended in the investigation, study or remediation of
any environmental liability of (or asserted against) the Company; and (v) any
liability arising out of or related to the off-site shipment, disposal,
treatment, handling or disposal of Hazardous Materials. This Section 8.4(c) and
Section 8.4(d) shall survive any payment, conversion or transfer of Shares or
Warrants and any termination of this Agreement.
(d) To the extent that the Company is strictly liable without regard
to fault under any environmental law, regulation or ordinance, the Company's
obligations to the holders of Shares, Conversion Shares, Warrants or Warrant
Shares under any of the indemnification provisions of the Stock and Warrant
Purchase Agreements shall likewise be strict without regard to fault with
respect to the violation of any environmental law, regulation or ordinance which
results in any liability to any of the indemnified persons referred to in
Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Certificate of Designations and
the exercise of the Warrants pursuant to Section 1 of the Warrant Certificates;
except to the extent that such shares reservation is contingent upon the
authorization of additional shares at the Shareholders' Meeting described in
Section 8.6 hereof and provided that after such Shareholders' Meeting such
shares shall be reserved in accordance with this Section 8.5.
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8.6. Stockholders' Meeting.
Prior to the Second Closing the Company shall cause there to be a
Stockholders' Meeting and cause the appropriate corporate action to be taken to
authorize sufficient additional shares of Common Stock to permit conversion in
full of the Series D Convertible Preferred Stock. The Company shall use its best
efforts to have the principal shareholders of the Company vote their shares in
favor of increasing the additional shares of Common Stock to permit conversion
in full of the Series D Convertible Preferred Stock. The Company shall mail all
proxy materials for such Shareholders' Meeting, and file all such proxy
materials with the Commission, on or before April 15, 1999 and shall hold such
Shareholders' Meeting no later than May 31, 1999. In the event that the Second
Closing does not take place before June 30, 1999, and the conversion price of
the Shares subsequently is reduced as provided in the Certificate of
Designations, the Company shall use its best efforts to authorize sufficient
additional shares of Common Stock to permit conversion in full of the Series D
Convertible Preferred Stock and shall not use any such additional shares of
authorized Common Stock for any other purpose.
8.7. Securities Exchange Act Registration.
(a) The Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act), under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Common Stock of the Company, and the Company will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares or
Warrants, make whatever other filings with the Commission, or otherwise make
generally available to the public such financial and other information, as any
such holder may deem reasonably necessary or desirable in order to enable such
holder to be permitted to sell Shares or Warrants pursuant to the provisions of
Rule 144.
8.8. Delivery of Information for Rule 144A Transactions.
If a holder of Shares or Warrants proposes to transfer any such
Shares or Warrants pursuant to Rule 144A under the Securities Act (as in effect
from time to time), the Company agrees to provide (upon the request of such
holder or the prospective transferee) to such holder and (if requested) to the
prospective transferee any financial or other information concerning the Company
which is required to be delivered by such holder to any transferee of such
Shares or Warrants pursuant to such Rule 144A, subject to confidentiality
provisions, if applicable.
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8.9. Senior Securities.
The Company shall maintain the senior status of the Series D
Convertible Preferred Stock such that it shall rank senior in all respects,
including the payment on limitation and redemption, to all other equity
securities of the Company, including the Series A Convertible Preferred Stock
and the Series B Convertible Preferred Stock, except that the Series C
Convertible Preferred Stock shall rank senior to the Series D Convertible
Preferred Stock.
8.10. Shelf Registration.
On or before July 1, 1999, the Company shall prepare and file with
the SEC a registration statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration") registering the resale from time to time by the Investors of all
the Registrable Securities (the "Initial Shelf Registration"). The registration
statement shall be on Form S-3 or another appropriate form permitting
registration of such Registrable Securities for resale by the Investors. If the
Initial Shelf Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time, the Company shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event shall within thirty (30) days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or to
promptly file an additional Shelf Registration covering all the Registrable
Securities (a "Subsequent Shelf Registration").
8.11. Further Assurances.
The Company will from time to time, upon the request of the ▇▇▇▇▇▇▇
Holders, promptly and duly execute and deliver any and all such further
instruments and documents as the ▇▇▇▇▇▇▇ Holders may reasonably deem necessary
or desirable to obtain the full benefits of (i) the obligations of the Company
under this Agreement and (ii) the other rights and powers herein granted. Upon
the instructions from time to time of (I) the ▇▇▇▇▇▇▇ Funds or (II) any
Transferee, provided that such Transferee holds not less than an aggregate of
5000 Shares, the Company shall execute and cause to be filed any document or
filing presented to the Company in proper form for signing or filing, in each
case as the ▇▇▇▇▇▇▇ Funds or such Transferee may reasonably deem necessary or
desirable in light of the Company's obligations under this Agreement, and the
Company shall pay or cause to be paid any filing or other fees in connection
therewith.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that without the prior written
consent of the holders of more than 50% of outstanding Shares:
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9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Stock and Warrant Purchase Agreements, the Certificate of Designations, the
Warrant Certificates, the Registration Rights Agreement or the Stockholders'
Agreement. The Company will at all times in good faith assist in the carrying
out of all such terms, and in the taking of all such action, as may be necessary
or appropriate in order to protect the rights of the holders of Shares and
Warrants (as such rights are set forth in the Stock and Warrant Purchase
Agreements, the Warrant Certificates, the Certificate of Designations, the
Registration Rights Agreement and the Stockholders' Agreement) against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company (a) will not issue any shares or class or series of equity or
equity-linked security, which is senior to, or pari passu with, the Series D
Convertible Preferred Stock as to dividend payments or amounts payable in the
event of liquidation or winding up of the Company; except that the Series C
Convertible Preferred Stock shall be senior to the Series D Convertible
Preferred Stock, (b) will not enter into any agreement or instrument which would
restrict or otherwise materially adversely affect the ability of the Company to
perform its obligations under the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement, the Warrant
Certificates or the Certificate of Designations, (c) will not amend its
certificate of incorporation or by-laws in any manner which would impair or
reduce the rights of the Preferred Stock, including, without limitation, an
amendment which would alter or change the powers, privileges or preferences of
the holders of the Series D Convertible Preferred Stock (including, without
limitation, changing the Certificate of Designations after any Shares have been
called for redemption), (d) except as otherwise provided in the Certificate of
Designations or the Warrant Certificates or in accordance with Section 5(a) of
the respective Certificate of Designations of each of the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock or the Series C
Convertible Preferred Stock, as in effect on the date hereof, will not redeem,
repurchase or otherwise acquire any shares of capital stock of the Company or
any other rights or options to subscribe for or purchase any capital stock of
the Company or any other securities convertible into or exchangeable for capital
stock of the Company, (e) will not permit the par value or the determined or
stated value of any shares of Common Stock receivable upon the conversion of the
Shares or exercise of the Warrants to exceed the amount payable therefor upon
such conversion, (f) will take all such action as may be necessary or
appropriate in order that the Company may at all times validly and legally issue
duly authorized, fully paid and nonassessable shares of the Common Stock free
from all taxes, Liens and charges with respect to the issue thereof, upon the
conversion of the Shares or exercise of the Warrants from time to time
outstanding, (g) will not take any action which results in any adjustment of the
current conversion price under the Certificate of Designations or the current
exercise price under the Warrant Certificates if the total number of shares of
the Common Stock (or other securities) issuable after the action upon the
conversion of all of the then outstanding Shares or the exercise of all of the
then outstanding Warrants would exceed the total number of shares of Common
Stock (or other securities) then
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authorized by the Company's certificate of incorporation and available for the
purpose of issuance upon such conversion or exercise, (h) will not have any
authorized Common Stock (and will not issue any Common Stock) other than its
existing authorized Common Stock, $.01 par value per share, and (i) will not
amend its certificate of incorporation to change any terms of its Common Stock.
9.2. Indebtedness.
So long as the ▇▇▇▇▇▇▇ Holders hold at least 50% of the aggregate
number of shares of the Series D Convertible Preferred Stock purchased pursuant
to the Stock and Warrant Purchase Agreements, the Company will not (i) incur
Indebtedness, excluding any Indebtedness set forth on Schedule 2 hereto, in
excess of $10 million in aggregate principal amount; or (ii) enter into any
agreement, amendment or modification with respect to any Indebtedness, which
agreement, amendment or modification under clause (ii) restricts or prohibits
(or was intended primarily to restrict or prohibit) the Company from making any
payments under, or otherwise performing under the Stock and Warrant Purchase
Agreements.
9.3. Consolidation, Merger and Sale.
So long as the ▇▇▇▇▇▇▇ Holders hold at least 50% of the aggregate
number of shares of the Series D Convertible Preferred Stock purchased pursuant
to the Stock and Warrant Purchase Agreements, the Company will not (or will not
agree to): (a) wind up, liquidate or dissolve its affairs, (b) sell, lease,
transfer or otherwise dispose of all or substantially all of its assets to any
other Person for a period ending one (1) year after the First Closing Date; or
(c) effect a merger or consolidation if the Company is not the surviving
corporation from such merger or consolidation for a period ending one (1) year
after the First Closing Date.
9.4. No Change in Business.
The Company will not change substantially the character of its
business as conducted on each Closing Date as represented in Section 4.4 hereof
and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
The Company will not declare or make or permit to be declared or
made:
(a) any Restricted Payment; or
(b) any Investment.
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9.6. Sale of Substantial Portion of Assets.
For a period ending one (1) year after the First Closing Date, the
Company will not sell, transfer, lease or otherwise dispose of any assets to any
Person (other than to the Company and other than assets consisting of inventory
being disposed of in the ordinary course of business and other than assets which
are, contemporaneously with such disposition (or within ninety (90) days
thereafter), being replaced with other substantially similar (or improved)
assets which are used by the Company for substantially the same purpose as the
assets being replaced) to the extent the aggregate assets so sold, transferred,
leased or disposed of:
(x) during the twelve (12) month period ending on such sale,
transfer, lease or disposition (i) had an aggregate book value equal
to ten percent (10%) or more of the aggregate book value of the
consolidated total assets of the Company at the end of the most
recent fiscal quarter preceding such sale, transfer, lease or
disposition or (ii) accounted for ten percent (10%) or more of the
consolidated revenues of the Company as shown on the consolidated
income statement of the Company for the most recent fiscal quarter or
the then preceding fiscal year; or
(y) during the period from such Closing Date through such sale,
transfer, lease or disposition (i) had an aggregate book value equal
to ten percent (10%) or more of the aggregate book value of the
consolidated total assets of the Company at the end of the most
recent fiscal quarter preceding such sale, transfer, lease or
disposition or (ii) accounted for ten percent (10%) or more of the
consolidated revenues of the Company over the Company's fiscal
periods beginning after such Closing Date and ending at the end of
the most recent fiscal quarter as shown on the consolidated income
statements of the Company for such periods.
9.7. Affiliate Loans and Guaranties.
The Company may not incur or permit to exist any of the following:
(a) any obligation of the Company to repay money borrowed owing to
(i) any Affiliate of the Company or (ii) any other holder of shares of the
capital stock of the Company; or
(b) any obligation, to any Person, which obligation is assumed or
guaranteed by the Company and which is an obligation of (i) any Affiliate of the
Company or (ii) any other holder of shares of the capital stock of the Company
(excluding, in the case of this clause (b), any obligation of the Company which
is not owed to an Affiliate of the Company or to an Affiliate or to any other
holder of shares of the capital stock of the Company).
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This Section 9.7 shall not apply to (1) any obligations under the Stock and
Warrant Purchase Agreements or with respect to the Shares or Warrants, (2) any
loans, advances or Guarantees referred to in clause (1) of the proviso to the
definition of "Investment" contained in Section 3 hereof or (3) Indebtedness
identified on Schedule 2 hereto.
9.8. Transactions with Affiliates.
The Company will not directly or indirectly, enter into any
transaction or agreement (including, without limitation, the purchase, sale,
distribution, lease or exchange of any property or the rendering of any service)
with any Affiliate of the Company, unless such transaction or agreement (a) is
approved by a majority of the Outside Directors on the Board of Directors, and
(b) is on terms that are no less favorable to the Company, as the case may be,
than those which might be obtained at the time of such transaction from a Person
who is not such an Affiliate; provided, however, that this Section 9.8 shall not
limit, or be applicable to, (i) employment arrangements with (and general salary
and benefits compensation for) any individual who is a full-time employee of the
Company if such arrangements are approved by a majority of the Outside Directors
on the Board of Directors; and (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
and (iii) existing arrangements as disclosed on the Disclosure Schedule.
9.9. Liens.
The Company will not create or permit to exist, to create or suffer
to exist, any Lien upon or with respect to any of its assets or income, other
than Permitted Liens and existing liens set forth on Schedule 5 hereto.
9.10. Private Placement Status.
Neither the Company nor any agent nor other Person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares, the Conversion Shares, the Warrants or the
Warrant Shares within the provisions of Section 5 of the Securities Act or the
filing, notification or reporting requirements of any state securities law
(other than in accordance with a registration and qualification of Conversion
Shares or Warrant Shares pursuant to the Registration Rights Agreement).
9.11. Maintenance of Public Market.
The Company will not proceed with a program of acquisition of its
Common Stock, initiate a corporate reorganization or recapitalization or
undertake a consolidation or merger or authorize, consent to or take any action
which would have the effect of:
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(a) removing the Company from registration with the Commission under
the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e) of
the Securities Exchange Act;
(c) reducing substantially or eliminating the public market for
shares of Common Stock of the Company;
(d) causing a delisting of the Company's Common Stock as a Small Cap
Market Security on the NASDAQ Stock Market (unless such stock is delisted as a
result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any time
listed on a national exchange, causing a delisting of such stock from such
exchange.
9.12. Actions Prior to Any Closing Date.
From the date hereof through any Closing Date, the Company will not,
(a) issue or agree to issue any capital stock or any securities exercisable for,
or convertible or exchangeable into, capital stock or (b) purchase, redeem or
otherwise acquire any of its capital stock; provided, however, that this Section
9.12 shall not limit, or be applicable to, (i) the transactions contemplated by
the Stock and Warrant Purchase Agreements, including any issuance of capital
stock in connection with the transactions contemplated by Sections 9.1 and 9.11
hereof, (ii) grants of options or issuances of Common Stock to officers,
directors or employees of the Company pursuant to the current terms of the
Company's 1995 Stock Incentive Plan and (iii) the conversion of the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock or the exercise of existing warrants.
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares and Warrants hereunder
is subject to satisfaction of the following conditions at any Closing (any of
which may be waived by the Purchaser); provided that (A) Section 10.3 shall
apply only to the Second Closing and (B) Section 10.12 is a condition to the
obligations to consummate the transaction provided for herein of each of (I) the
Purchaser and (II) the Company:
10.1. Certificate of Designations; Stockholders' Agreement;
Registration Rights Agreement.
(a) The certificate of incorporation of the Company shall have been
duly amended by the filing of the Certificate of Designations in the form of
Exhibit A-1 hereto.
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(b) The Company, the Purchasers and certain other stockholders of
the Company named therein shall have entered into a Stockholders' Agreement
substantially in the form of Exhibit C hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit D hereto.
10.2. Certificates for Shares and Warrants.
The Purchaser shall concurrently receive the certificates for Shares
and Warrants contemplated by Section 2(b) hereof.
10.3. Stockholders' Meeting.
The Company shall have held its Stockholders' Meeting, and at such
Stockholders' Meeting taken the appropriate corporate and other actions to
authorize sufficient additional shares of Common Stock to permit conversion in
full of the Series D Convertible Preferred Stock into Shares of Common Stock.
10.4. Senior Status.
The Company shall have taken all of the necessary actions, including
the amendment of the appropriate existing agreements, so that, except as
provided in this Section 10.4, the Series D Convertible Preferred Stock shall
rank senior in all respects, including the payment on limitation and redemption,
to all other equity securities of the Company, including the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock, except
that the Series C Convertible Preferred Stock shall rank senior to the Series D
Convertible Preferred Stock.
10.5. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in the
Stock and Warrant Purchase Agreement herein or in any certificate or document
delivered pursuant hereto shall be (i) correct and complete on and as of the
First Closing Date with the same effect as though made on and as of such Closing
Date (after giving effect to the transactions contemplated by this Agreement)
and (ii) correct and complete in all material respects on and as of the Second
Closing Date with the same effect as though made on and as of such Closing Date
(after giving effect to the transactions contemplated by this Agreement);
provided that Sections 4.1, 4.3, 4.4, 4.5, 4.7, 4.10, 4.11, 4.12, 4.16, 4.18,
4.19, 4.21, 4.22 and 4.23 shall be correct and complete in all respects and
shall not be qualified by materiality, unless specifically qualified therein.
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10.6. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
and Warrant Purchase Agreements and any other document contemplated hereby or
thereby which are required to be performed or complied with by the Company on or
before such Closing Date.
10.7. Officers' Certificates.
The Purchaser shall have received a certificate dated such Closing
Date and signed by the President or Chief Executive Officer and by the Secretary
or the Treasurer of the Company, to the effect that the conditions of Sections
10.5, 10.6, 10.9 (second sentence only) and 10.10 have been satisfied.
10.8. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock and Warrant Purchase Agreements, and all
documents incident thereto, shall be in form and substance satisfactory to the
Purchaser and its counsel, and the Purchaser shall have received all such
originals or certified or other copies of such documents as the Purchaser or its
counsel may reasonably request.
10.9. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares and the Warrants shall
not be prohibited by any law or governmental order, rule, ruling, regulation,
release, interpretation or opinion applicable to the Purchaser and shall not
subject the Purchaser to any penalty, tax, liability or other onerous condition.
Any necessary consents, approvals, licenses, permits, orders and authorizations
of, and any filings, registrations or qualifications with, any governmental or
administrative agency or other Person, with respect to the transactions
contemplated by the Stock and Warrant Purchase Agreements shall have been
obtained or made and shall be in full force and effect. The Company shall have
delivered to the Purchaser, upon its reasonable request setting forth what is
required, factual certificates or other evidence, in form and substance
satisfactory to the Purchaser and its counsel, to enable the Purchaser to
establish compliance with this condition.
10.10. No Material Adverse Change.
There shall have been no material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis
since September 30, 1998, except that its cash position as of January 31, 1999
is $1,105,000.
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10.11. Opinion of Counsel.
The Purchaser shall have received an opinion, dated such Closing
Date and addressed to the Purchasers, of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., counsel
for the Company, which opinion shall be in form and substance satisfactory to
the Purchaser and its counsel and shall be to the effect set forth in Exhibit E
hereto.
10.12. Additional Purchases of Shares and Warrants.
The sale and purchase of Shares and Warrants by the ▇▇▇▇▇▇▇ Funds
pursuant to the Stock and Warrant Purchase Agreements between each of the
▇▇▇▇▇▇▇ Funds and the Company shall be consummated concurrently, (a) for an
aggregate purchase price of $3,000,000 on the First Closing Date and (b) for an
aggregate purchase price of $2,000,000 on the Second Closing Date.
10.13. Acceptance of Agent for Service of Process.
CSC, The United States Corporation Company shall have accepted its
appointment as the Company's agent in New York to receive service of process
pursuant to Section 18(i) hereof.
10.14. Other Documents and Opinions.
The Purchaser shall have received such other documents and opinions,
in form and substance reasonably satisfactory to the Purchaser and its counsel,
relating to matters incident to the transactions contemplated hereby as the
Purchaser may reasonably request.
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements of the
Company and the Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith shall survive for
a period of two (2) years from the First Closing Date, and shall continue in
effect following, the execution and delivery of the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement, the Registration Rights Agreement, the
closings hereunder and thereunder, any investigation at any time made by the
Purchaser or on its behalf or by any other Person, the issuance, sale and
delivery of the Shares or the Warrants, any disposition thereof and any payment,
conversion or cancellation of the Shares; provided that Section 9 shall
terminate upon conversion of all of the Shares (or as earlier provided therein).
All statements contained in any certificate or other document delivered by or on
behalf of the Company pursuant hereto shall constitute representations and
warranties by the Company hereunder.
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(b) The Company agrees to indemnify and hold the Purchaser harmless
from and against and will pay to the Purchaser the full amount of any loss,
damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock and Warrant
Purchase Agreement, or in the Stockholders' Agreement, the Registration Rights
Agreement or any other document or certificate delivered pursuant hereto or
thereto or in connection herewith or therewith.
SECTION 12. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event
that this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an adequate
remedy. Therefore, the provisions hereof and the obligations of the parties
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
SECTION 13. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock and Warrant Purchase
Agreements, the Certificate of Designations, the Warrant Certificates, the
Stockholders' Agreement and the Registration Rights Agreement, other related
documentation and the issuance of the Shares, the Conversion Shares, the
Warrants and the Warrant Shares and the furnishing of all opinions by counsel
for the Company, (ii) the costs, fees and expenses of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius
LLP in connection with the Stock and Warrant Purchase Agreements, the
Certificate of Designations, the Warrant Certificates, the Stockholders'
Agreement and the Registration Rights Agreement, other related documentation and
the ▇▇▇▇ sactions contemplated hereby and thereby (whether or not a Closing
occurs hereunder) and if the First Closing occurs the Company will make such
payment on the First Closing Date (with respect to costs, fees and expenses
incurred prior to such date) and on the Second Closing Date (with respect to the
remainder of such costs, fees and expenses if such Second Closing occurs));
provided, however, that (x) such fees and expenses shall not exceed $80,000
without the approval of the Company and (y) in the event that the First Closing
does not occur (other than as a result of a breach by the Company of its
obligations to the ▇▇▇▇▇▇▇ Holders), the Company shall pay 50% of such fees and
expenses upon the termination of negotiations between the Company and the
▇▇▇▇▇▇▇ Holders, (iii) the fees and expenses of counsel to the Purchasers in
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connection with any amendments to or modifications or waivers of any provisions
of the Stock and Warrant Purchase Agreements, the Certificate of Designations,
the Warrant Certificates, the Stockholders' Agreement or the Registration Rights
Agreement, other related documentation or in connection with any other
agreements between the Purchasers and the Company and (iv) the fees and expenses
(including attorneys' fees and expenses) of any holder of Shares, Conversion
Shares, Warrants or Warrant Shares in enforcing its rights against the Company
if the Company defaults in its obligations hereunder, under the Certificate of
Designations, the Warrant Certificates, the Stockholders' Agreement or the
Registration Rights Agreement.
(b) In addition to all other sums due hereunder or provided for in
this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable costs of investigation)
and damages and liabilities incurred by the Purchaser or its agents pursuant to
any investigation or proceeding against any or all of the Company, the
Purchasers, or their agents, arising out of or in connection with the Stock and
Warrant Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, or purchase of the Shares or the Warrants (or any transaction
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated, which investigation
or proceeding requires the participation of the Purchaser or its agents or is
commenced or filed against the Purchaser or its agents because of the Stock and
Warrant Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the purchase of the Shares or the Warrants or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by Purchaser of any
provision of the Confidentiality Agreement or any other confidentiality
agreement between the Company and the Purchaser, in any case, which was not
taken by them in reliance upon any of the Company's representations, warranties,
covenants or agreements in the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or in any other
documents or instruments contemplated hereby or thereby or executed herewith or
therewith or pursuant hereto or thereto. The Company shall assume the defense,
and shall have its counsel represent the Purchaser and such agents, in
connection with investigating, defending or preparing to defend any such action,
suit, claim or proceeding (including any inquiry or investigation); provided,
however, that the Purchaser, or any such agent, shall have the right (without
releasing the Company from any of its obligations hereunder) to employ its own
counsel and either to direct its own defense or to participate in the Company's
defense, but the fees and expenses of such counsel shall be at the expense of
such person unless (i) the employment of such counsel shall have been authorized
in writing by the Company in connection with such defense, (ii) the Company
shall not have provided its counsel to take charge of such defense or (iii)
there may be defenses available to the Purchaser, or such agent of
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the Purchaser which are different from or additional to those available to the
Company, then in any of such events referred to in clauses (i), (ii) or (iii)
such counsel fees and expenses (but only for one counsel for the Purchaser and
its agents) shall be borne by the Company. Any settlement of any such action,
suit, claim or proceeding shall require the consent of both the Company and such
indemnified person (neither of which shall unreasonably withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes, other than transfer taxes payable
upon the transfer by the Purchaser of Shares to a Transferee, levied under the
laws of the United States of America, any state or local Taxing Authority
thereof or therein or any other applicable jurisdiction in connection with the
issuance and sale of the Shares or Warrants and the execution and delivery of
the Stock and Warrant Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement and any other documents or instruments
contemplated hereby or thereby and any modification of the Certificate of
Designations, the Warrant Certificates, the Stockholders' Agreement, the
Registration Rights Agreement or the Stock and Warrant Purchase Agreements or
any such other documents or instruments and will hold the Purchaser harmless
without limitation as to time against any and all liabilities with respect to
all such Taxes.
(d) The obligations of the Company under this Section 13 shall
survive any Closing hereunder and any termination of the Stock and Warrant
Purchase Agreements.
SECTION 14. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is a
direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares or Warrants, the Company will make
all redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's certificate of incorporation with respect to the place of payment.
The Purchaser has provided an address on Schedule 1 hereto for payments by wire
transfer, and such address may be changed for the Purchaser or any subsequent
holder by notice to the Company. All such payments shall be made in U.S. dollars
and in federal or other immediately available funds.
SECTION 15. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the holders of
more than 50% of outstanding Shares; provided, however, that no such amendment,
waiver, modification or termination shall change this Section 15(a) without the
written consent of the holders of all the Shares, Conversion Shares, the
Warrants and the Warrant Shares then outstanding.
-48-
(b) Promptly after obtaining the written consent of the holders as
herein provided, the Company shall transmit a copy of any amendment, waiver,
modification or termination which has been adopted to all holders of Shares,
Conversions Shares, Warrants and Warrant Shares then outstanding, but failure to
transmit copies shall not in any way affect the validity of any such amendment,
waiver, modification or termination.
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any
holder of Shares or Warrants to the Company at its address provided under
Section 17 hereof, the Company at its expense (except for any transfer tax
arising out of the exchange) will issue and deliver to or upon the order of the
holder in exchange therefor a new certificate or certificates in such amount or
amounts as such holder may request in the aggregate representing the number of
Shares or Warrants represented by such surrendered certificates, and registered
in the name of such holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion Shares
in whole or in part shall be cancelled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part. Any Warrant underlying
a Warrant Certificate which is exercised in whole or in part shall be cancelled
by the Company, and no new Warrant Certificate shall be issued in lieu of any
Warrants which have been exercised. The Company shall issue a new certificate
with respect to any Warrants which were not exercised and were represented by a
certificate which was exercised in part.
(c) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Share certificate or any Warrant
Certificate and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Company (if
requested by the Company and unsecured in the case of the Purchaser or another
similar institutional holder), or in the case of any such mutilation, upon
surrender of such Share certificate or Warrant certificate, as the case may be,
(which surrendered Share certificate or Warrant Certificate, as the case may be,
shall be cancelled by the Company), the Company will issue a new Share
certificate, or Warrant Certificate, as the case may be, of like tenor in lieu
of such lost, stolen, destroyed or mutilated Share certificate or Warrant
Certificate, as the case may be, as if the lost, stolen, destroyed or mutilated
Share certificate or Warrant Certificate, as the case may be, were then
surrendered for exchange.
-49-
SECTION 17. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent by
telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), (i) if to the Company, to Global
Pharmaceutical Corporation, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇, Attention: President, with a copy to Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
or (ii) if to the Purchaser, at the address indicated on Schedule 1 hereto, with
a copy to ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
SECTION 18. MISCELLANEOUS
(a) The Stock and Warrant Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement and, upon any closing hereunder,
the Certificate of Designations and the Warrant Certificates, together with any
further agreements entered into by the Purchaser and the Company at any closing
hereunder, contain the entire agreement between the Purchaser and the Company,
and supersede any prior oral or written agreements, commitments, terms or
understandings, regarding the subject matter hereof.
(b) 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 any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that (a) the Company may not assign any of its
rights, duties or obligations under this Agreement, except with the Purchaser's
written consent, and (b) the Purchaser may assign any of its rights, duties or
obligations under this Agreement to a purchaser of its Shares, provided that
such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law, the Purchaser
may assign, in whole or in part, any or all of its rights (and/or obligations)
under this Agreement to any permitted transferee of any or all of its Shares,
Conversion Shares, Warrants or Warrant
-50-
Shares, and (unless such assignment expressly provides otherwise) any such
assignment shall not diminish the rights the Purchaser would otherwise have
under this Agreement or with respect to any remaining Shares, Conversion Shares,
Warrants or Warrant Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any of the
terms or provisions hereof.
(g) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York (other than any conflict of laws rule
which might result in the application of the laws of any other jurisdiction).
(h) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE
WARRANT CERTIFICATES, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SHARES OR THE CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS.
THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE
CERTIFICATE OF DESIGNATIONS, THE WARRANT CERTIFICATES, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES. THE COMPANY DESIGNATES AND APPOINTS CSC, THE UNITED STATES CORPORATION
COMPANY, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY THE COMPANY AND
WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT, TO RECEIVE ON ITS
BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY THE
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COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE COMPANY AT THE
ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF PROCESS ON SUCH AGENT
(WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE COMPANY HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF
PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE PURCHASER TO BRING
PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF
ANY OTHER JURISDICTION.
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE WARRANT CERTIFICATES,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR
SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED
OF THE PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THE COMPANY AND THE PURCHASER FURTHER WARRANT AND REPRESENT
THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS
OF) THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE WARRANT CERTIFICATES,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
GLOBAL PHARMACEUTICAL CORPORATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
▇▇▇▇▇▇▇ US DISCOVERY FUND III, L.P.
By: ▇▇▇▇▇▇▇ US DISCOVERY PARTNERS, L.P.,
its general partner
By: ▇▇▇▇▇▇▇ US DISCOVERY FUND, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, member
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Schedule 1
to the Stock and Warrant
Purchase Agreement
Aggregate Aggregate
Number at Number at Purchase Purchase
First Second Price at Price at
Name of Closing Closing First Second
Purchaser Shares Warrants Shares Warrants Closing Closing
--------- ------ -------- -------- -------- ---------- ----------
▇▇▇▇▇▇▇ US Discovery 25,856 323,200 17,237 215,462 $2,585,600 $1,723,700
Fund III, ▇.▇.
▇▇▇▇▇▇▇ US Discovery 4,144 51,800 2,763 34,538 $ 414,400 $ 276,300
Offshore Fund III, L.P.
(a) address for communications:
▇▇▇▇▇▇▇ Capital Management
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) address for payments by
wire transfer:
▇▇▇▇▇▇▇ US Discovery Fund III, ▇.▇. ▇▇▇▇▇▇▇ US Discovery Offshore Fund III, ▇.▇.
▇▇▇▇▇ Manhattan Bank Citibank, N.A.
ABA # ▇▇▇▇▇▇▇▇▇ ABA # ▇▇▇▇▇▇▇▇▇ / Chips UID# 0008 / Swift Code - ▇▇▇▇▇▇▇▇
A/C # 10921671 A/C: The Bank of Bermuda Limited, ▇▇▇▇▇▇▇▇, Bermuda
A/C: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. Chips UID# 005584
A/C # 400-470551 Swift Code: BBDA BM HM
A/C: ▇▇▇▇▇▇▇ US Discovery Fund III, L.P. A/C: ▇▇▇▇▇▇▇ US Discovery Offshore Fund III, L.P.
A/C # 0246769