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Exhibit 10.45
[Amended, Restated and Consolidated Bridge Loan Agreement dated as of
December 2, 1998 between the Company, ▇▇▇▇▇ Partners III, L.P., ▇▇▇▇▇
Partners International III, L.P., ▇▇▇▇▇ Employee Fund III, L.P. and the
other signatures thereto]
================================================================================
AMENDED, RESTATED AND CONSOLIDATED
BRIDGE LOAN AGREEMENT
for
$8,500,000
among
▇▇▇▇▇▇ DRUG CO., INC., as Borrower,
and
▇▇▇▇▇ PARTNERS III, L.P.
GALEN PARTNERS INTERNATIONAL III, L.P.
GALEN EMPLOYEE FUND III, L.P.
and OTHERS, as Lenders,
and
▇▇▇▇▇ PARTNERS III, L.P., as Agent for Lenders
Dated as of December 2, 1998
================================================================================
Wolf, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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TABLE of CONTENTS
SECTION 1. DEFINITIONS, TERMS AND HEADINGS..................................2
1.1. General Definitions..............................................2
1.2. Accounting Terms and Determinations..............................9
1.3. Other Terms; Headings............................................9
SECTION 2. TERMS OF THE CONSOLIDATED BRIDGE LOAN............................9
2.1. Commitment.......................................................9
2.2. Consolidated Bridge Loan.........................................9
2.3. Amended, Restated and Consolidated Notes........................10
(a) The Amount................................................10
(b) General Terms ............................................10
(c) Adjustment of Conversion Price............................10
(d) Payment...................................................10
(e) Interest..................................................10
(f) Prepayments of Notes......................................11
(g) Interest After Event of Default...........................11
(h) Exchange or Replacement...................................11
(i) Transfer..................................................12
2.4. Warrants........................................................12
2.5. Security; Subordination of the Existing Credit Facility.........12
2.6. Registration Rights.............................................12
2.7. Consent and Waiver..............................................12
2.8. Agency Agreement ...............................................13
2.9. Miscellaneous...................................................13
SECTION 3. CONDITION PRECEDENT.............................................13
3.1. Conditions Precedent to Consolidated Bridge Loan................13
3.2. No Liens........................................................13
3.3. Representations and Warranties Correct..........................14
3.4. Legal Opinion of Counsel to Borrower............................14
3.5. Officer's Certificate...........................................14
3.6. Closing Fees....................................................14
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................14
4.1. Representations and Warranties of Borrower......................14
(a) Organization and Qualification............................14
(b) Authority; Consents and Filings...........................14
(c) Enforceability............................................15
(d) No Conflict...............................................15
(e) Government Regulation.....................................15
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(f) Indebtedness; Rights in Collateral........................15
(g) Locations of Offices, Records and Inventory...............16
(h) Inventory.................................................16
(i) No Judgments or Litigation................................16
(j) No Defaults...............................................16
(k) Financial Information, SEC Documents......................16
(l) Compliance with Law.......................................16
(m) Intellectual Property.....................................16
(n) Licenses and Permits......................................17
(o) Taxes.....................................................18
(p) Labor Disputes and Acts of God............................18
(q) Partnerships..............................................18
(r) Solvency..................................................18
(s) Forfeiture Proceeding.....................................18
(t) Offering..................................................18
(u) No Discrimination.........................................19
(v) ERISA.....................................................19
(w) Registration Rights.......................................19
(x) Accuracy and Completeness of Information..................19
4.2. Representations and Warranties of Lenders.......................19
SECTION 5. CHANGE OF CONTROL PURCHASE ORDER;
CONVERSION RIGHTS...............................................20
5.1. Change of Control...............................................20
SECTION 6. AFFIRMATIVE COVENANTS...........................................22
(a) Financial Reporting and Projections.......................22
(b) Discharge Taxes and Indebtedness..........................22
(c) Notification Requirements.................................23
(d) Notice of Default.........................................23
(e) Proceedings or Adverse Changes............................23
(f) Corporate Existence, Charter and By-Laws; Corporate Name..23
(g) Books and Records; Inspections............................23
(h) Compliance with Laws; Compliance with Agreements..........23
(i) Use of Proceeds...........................................24
(j) Maintenance of Insurance..................................24
(k) Further Assurances........................................24
(l) Payment of Note...........................................24
(m) Reporting Requirements....................................24
(n) Authorization of Shares of Common Stock for Issuance
Upon Conversion of Note and Exercise of Warrants and
Voting Rights for Note Holders............................24
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(o) Listing of Common Stock...................................25
(p) HSR Act Filing............................................25
(q) Year 2000 Computer Capability.............................25
SECTION 7. NEGATIVE COVENANTS..............................................25
(a) Additional Indebtedness...................................25
(b) No Guarantee..............................................25
(c) Liens.....................................................26
(d) No Transfer of Asset......................................26
(e) Extraordinary Transactions and Disposal of Asset..........26
(f) Restricted Payments.......................................26
(g) Investments...............................................26
(h) Affiliate Transactions; Intercompany Transfers; Diversion
of Corporate Assets ......................................26
(i) Mergers...................................................27
(j) No Activities Leading to Forfeiture.......................27
(k) Corporate Documents; Fiscal Year..........................27
(l) Capital Expenditure.......................................27
SECTION 8. REGISTRATION RIGHTS.............................................27
8.1. Restrictive Legend..............................................27
8.2. Certain Definitions.............................................28
8.3. Requested Registration..........................................28
8.4. Piggyback Registrations.........................................29
8.5. Holdback Agreements.............................................30
8.6. Registration Procedures.........................................31
8.7. Expenses of Registration........................................32
8.8. Indemnification.................................................32
8.9. Information by Holders..........................................34
8.10. Limitations on Registration of Issues of Securities.............34
8.11. Rule 144 Reporting..............................................34
8.12. Participation in Underwritten Registrations.....................35
8.13. Selection of Underwriters.......................................35
8.14. Termination of Registration Rights..............................35
SECTION 9. EVENTS OF DEFAULT AND REMEDIES..................................35
9.1. Events of Default...............................................35
9.2. Acceleration....................................................36
9.3. Remedies........................................................37
9.4. Application of Proceeds; Surplus; Deficiencies..................37
SECTION 10. GENERAL PROVISIONS..............................................37
10.1. GOVERNING LAW...................................................37
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10.2. SUBMISSION TO JURISDICTION.....................................37
10.3. SERVICE OF PROCESS.............................................38
10.4. JURY TRIAL.....................................................38
10.5. LIMITATION OF LIABILITY........................................38
10.6. Notices........................................................38
10.7. Indemnification................................................39
10.8. Amendments and Waivers.........................................40
10.9 Construction...................................................40
10.10. Counterparts and Effectiveness.................................41
10.11. Severability...................................................41
10.12. Entire Agreement; Successors and Assigns.......................41
10.13. Assignments and Participations.................................41
10.14. No Brokers.....................................................41
10.15. No Novation....................................................42
Exhibits
Exhibit A List of Lenders, Their Contributions, Their Notes and Their
Warrants
Exhibit B Amended, Restated and Consolidated Notes
Exhibit C Warrants
Exhibit D Consent and Waiver
Exhibit E Agency Letter
Exhibit F Amended and Restated General Security Agreement
Exhibit G Subordination Agreement
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AMENDED, RESTATED AND CONSOLIDATED
BRIDGE LOAN AGREEMENT
THIS AMENDED, RESTATED AND CONSOLIDATED BRIDGE LOAN AGREEMENT is entered
into as of December 2, 1998 among ▇▇▇▇▇▇ DRUG CO., INC., a New York corporation
("Borrower"), ▇▇▇▇▇ PARTNERS III, L.P. ("▇▇▇▇▇" or a "Lender"), ▇▇▇▇▇ PARTNERS
INTERNATIONAL III, L.P. and ▇▇▇▇▇ EMPLOYEE FUND III, L.P., each a Delaware
limited partnership (each a "Lender", and collectively, with ▇▇▇▇▇, the "▇▇▇▇▇
Entities"), THOSE PERSONS WHOSE NAMES ARE SET FORTH ON THE SIGNATURE PAGE HERETO
(each a "Lender", and collectively, with the ▇▇▇▇▇ Entities, the "Lenders") and
▇▇▇▇▇, as agent for the Lenders (in such capacity, the "Agent").
WHEREAS, Borrower and the ▇▇▇▇▇ Entities entered into a Bridge Loan
Agreement dated as of August 12, 1998 (as amended through the date hereof, the
"Original Bridge Loan Agreement"), pursuant to which the ▇▇▇▇▇ Entities made a
loan to Borrower in the amount of $1,000,000 (the "Initial Bridge Loan"), as
evidenced by a promissory note ("Bridge Note 1") in such amount;
WHEREAS, Borrower and the ▇▇▇▇▇ Entities entered into a First Amendment to
Bridge Loan Agreement dated as of September 17, 1998 (the "First Amendment"),
pursuant to which the ▇▇▇▇▇ Entities made a loan to Borrower in the amount of
$500,000 (the "First Amendment Loan"), as evidenced by a promissory note
("Bridge Note 2") in such amount;
WHEREAS, Borrower and the ▇▇▇▇▇ Entities entered into a Second Amendment
to Bridge Loan Agreement dated as of October 2, 1998 (the "Second Amendment"),
pursuant to which the ▇▇▇▇▇ Entities made a loan to Borrower in the amount of
$500,000 (the "Second Amendment Loan"), as evidenced by a promissory note
("Bridge Note 3") in such amount;
WHEREAS, Borrower, the ▇▇▇▇▇ Entities and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇ (each, a "Lender" and collectively, the "Weisbrots") entered into a
Third Amendment to Bridge Loan Agreement dated as of October 19, 1998 (the
"Third Amendment"), pursuant to which the ▇▇▇▇▇ Entities made a loan to Borrower
in the amount of $150,000 (the "Third Amendment ▇▇▇▇▇ Loan"), as evidenced by a
promissory note ("Bridge Note 4") in such amount, and, pursuant to which the
Weisbrots made a loan to Borrower in the amount of $100,000 (the "Third
Amendment ▇▇▇▇▇▇▇▇ Loan", as evidenced by a promissory note ("Bridge Note 5") in
such amount (the Third Amendment ▇▇▇▇▇ Loan and the Third Amendment ▇▇▇▇▇▇▇▇
Loan, collectively the "Third Amendment Loan");
WHEREAS, Borrower and the ▇▇▇▇▇ Entities entered into a Fourth Amendment
to Bridge Loan Agreement dated as of October 29, 1998 (the "Fourth Amendment"),
pursuant to which the ▇▇▇▇▇ Entities made a loan to Borrower in the amount of
$750,000 (the "Fourth Amendment Loan"), as evidenced by a promissory note
("Bridge Note 6") in such amount;
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WHEREAS, Borrower and the ▇▇▇▇▇ Entities entered into a Fifth Amendment to
Bridge Loan Agreement dated as of November 6, 1998, pursuant to which the ▇▇▇▇▇
Entities made a loan to Borrower in the amount of $1,500,000 (the "Fifth
Amendment Loan"), as evidenced by a promissory note ("Bridge Note 7") in such
amount (the Initial Bridge Loan, the First Amendment Loan, the Second Amendment
Loan, the Third Amendment Loan, the Fourth Amendment Loan and the Fifth
Amendment Loan, collectively, the "Original Bridge Loan" and Bridge Note 1,
Bridge Note 2, Bridge Note 3, Bridge Note 4, Bridge Note 5, Bridge Note 6 and
Bridge Note 7, collectively, the "Original Notes");
WHEREAS, Borrower has requested that some or all Lenders consider making
an additional $3,250,000 bridge loan to Borrower ("Additional Bridge Loan");
WHEREAS, to induce such Lenders to extend to Borrower the Additional
Bridge Loan, Borrower has agreed to execute this Amended, Restated and
Consolidated Bridge Loan Agreement (the "Agreement");
WHEREAS, some or all of the Lenders, as signatories to a certain Debenture
and Warrant Purchase Agreement dated as of March 10, 1998 (the "Debenture and
Warrant Purchase Agreement") and as holders of certain 10% convertible
subordinated debentures issued and dated August 6, 1996 (the "1996 Debentures")
desire to participate in this Agreement by exercising certain first refusal or
preemptive rights granted under Section 16.1 of the Debenture and Warrant
Purchase Agreement and under Article 8A of the 1996 Debentures;
WHEREAS, Borrower and Lenders desire to amend and restate the Original
Bridge Loan Agreement and consolidate the Original Bridge Loan with the
Additional Bridge Loan, such that the terms of such Original Bridge Loan as set
forth in the Original Bridge Loan Agreement, as so amended and restated, the
terms of such Additional Bridge Loan and the terms of such consolidation, are
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the recipient and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
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SECTION 1.
DEFINITIONS, TERMS AND HEADINGS
1.1. General Definitions.
Additional Bridge Loan has the meaning set forth in the Recitals to
this Agreement.
Additional Bridge Loan Commitment means the commitment of each
Lender to fund the dollar amount of its share of the Additional Bridge Loan in
the amount set forth opposite such Lender's name on Exhibit A, copy of which is
attached hereto and made a part hereof.
Affiliate of a Person means another Person who directly or
indirectly controls, is controlled by, is under common control with or is a
director or officer of, such Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to vote five percent
(5%) or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a business.
Agency Agreement means the Agency Agreement by and among the Agent
and each Lender dated as of the date hereof and entered into simultaneously
herewith, substantially in the form of Exhibit E attached hereto
Agreement means this Agreement, as the same may be amended,
extended, modified, restated or supplemented from time to time.
Authorizations means all filings, recordings and registrations with,
and all validations or exemptions, approvals, orders, authorizations, consents,
licenses, certificates and permits from any Governmental Authority.
Bridge Loan Documents mean, collectively, this Agreement, the Notes,
the Warrants, the Consent and Waiver, the Agency Agreement, each of the
Collateral Documents and all other documents, agreements, instruments, opinions
and certificates now or hereafter executed and delivered in connection herewith
or therewith, as amended, extended, modified, restated or supplemented from time
to time.
Business Day means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
Closing Date means the date upon which the last of the events, the
fulfillment of each of which is condition precedent to the effectiveness of this
Agreement, as set forth in Section 3 of this Agreement, shall have occurred.
Code has the meaning set forth in Section 1.3.
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Collateral means all property of Borrower, of whatever kind or
nature whether now owned or hereafter acquired or created, wherever located,
including, without limitation, all property identified as security for the
Obligations under the Collateral Documents.
Collateral Documents means the General Security Agreement, the
Subordination Agreement and all other contracts, instruments and other documents
pursuant to which Liens are now or hereafter granted to Agent, for the benefit
of Lenders, or to Lenders, to secure the Obligations, as any of such documents
may be amended, extended, modified, restated or supplemented from time to time.
Common Stock means the common stock of Borrower, par value $.01 per
share.
Consent and Waiver means the Consent and Waiver executed by Majority
Holders simultaneously herewith as of the date hereof, substantially in the form
of Exhibit D attached hereto.
Consolidated Bridge Loan has the meaning set forth in Section 2.2.
Conversion Shares has the meaning set forth in Section 2.3(b) of
this Agreement.
Debenture and Warrant Purchase Agreement means the Debenture and
Warrant Purchase Agreement by and among Borrower, the ▇▇▇▇▇ Entities, the
Weisbrots and others, dated as of March 10, 1998.
Default means an event, condition or default which, with the giving
of notice, the passage of time, or, both, would be an Event of Default.
Equipment means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
Event(s) of Default has the meaning set forth in Section 9.1.
Existing Credit Facility/ies means the 5% Convertible Senior Secured
Debentures in the aggregate principal amount of $25,800,000 issued pursuant to
the Debenture and Warrant Purchase Agreement.
Expenses means (i) all reasonable costs and expenses of Lenders, or
Agent, on behalf of Lenders, incurred in connection with, arising under or
relating to the Bridge Loan Documents and the transactions contemplated therein
and (ii) all reasonable costs and expenses (including the reasonable fees and
expenses of legal counsel and other professionals) paid or incurred by Lenders,
or Agent, on behalf of Lenders, (a) during the continuance of an Event of
Default, (b) in enforcing or defending its rights under or with respect to this
Agreement, the other Bridge Loan Documents, the Collateral Documents or any
other document or instrument now or hereafter
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executed and delivered in connection herewith, (c) in collecting the
Consolidated Bridge Loan, (d) in foreclosing or otherwise collecting upon the
Collateral or any part thereof and (e) in obtaining any legal, accounting or
other advice in connection with any of the foregoing.
Forfeiture Proceeding means the commencement of any action or
proceeding affecting Borrower before any court, Governmental Authority,
commission, board, bureau, agency or instrumentality, domestic or foreign which
may result in the seizure or forfeiture of any of its property which would cause
a Material Adverse Effect upon the operations, business, properties or financial
condition of Borrower or on the ability of Borrower to perform its obligations
hereunder.
GAAP means generally accepted accounting principles in the United
States as in effect from time to time.
General Security Agreement means the Amended and Restated General
Security Agreement by and between Borrower and Agent dated the date hereof and
executed simultaneously herewith, substantially in the form of Exhibit F
attached hereto.
Governing Documents means certificates or articles of incorporation,
by-laws and other organizational or governing documents.
Governmental Authority means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Indebtedness of a Person means (a) indebtedness for borrowed money
or for the deferred purchase price of property or services (other than trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), whether on open account or evidenced by a
note, bond, debenture or similar instrument, (b) obligations under capital
leases, (c) reimbursement obligations for letters of credit, banker's
acceptances or other credit accommodations, (d) any direct, indirect, contingent
or non-contingent guaranty or obligation for the indebtedness of another Person,
except endorsements in the ordinary course of business and (e) indebtedness
secured by any Lien on that Person's property, even if that Person has not
assumed such Indebtedness.
Investment means all expenditures made and all liabilities incurred
(contingently or otherwise) for or in connection with the acquisition of stock
or Indebtedness of, or for loans, advances, capital contributions or transfers
of property to, or acquisition of substantially all the assets of, a Person. In
determining the aggregate amount of Investments outstanding at any particular
time, (i) the amount of any Investment represented by a guaranty shall be taken
at not less than the principal amount of the obligations guaranteed and
outstanding; (ii) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (iii)
there shall not be deducted in respect of any Investment any amounts received as
earnings on such Investment,
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whether as dividends, interest or otherwise; and (iv) there shall not be
deducted from the aggregate amount of Investments any decrease in the market
value thereof.
Lien means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, capitalized lease,
conditional sale, retention of title, or other preferential arrangement having
substantially the same economic effect as any of the foregoing, whether
voluntary or imposed by law.
Majority Holders has the meaning set forth in Section 6.1(p).
Material Adverse Effect means a material adverse effect on (i) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower, (ii) the ability of Borrower to
perform its obligations under the Bridge Loan Documents, (iii) the ability of
Agent or Lenders to enforce the Obligations or realize upon the Collateral, or
(iv) the value of the Collateral or the amount which Lenders would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in a liquidation of such Collateral.
Maturity Date means May 30, 1999.
1998 Debentures mean the 5% convertible senior secured debentures
issued pursuant to the Debenture and Warrant Purchase Agreement.
1996 Debentures mean the 10% convertible subordinated debentures
issued and dated August 6, 1996.
Notes has the meaning set forth in Section 2.3.
Obligations means the unpaid principal and interest hereunder,
Expenses and all other obligations and liabilities of Borrower to Lenders under
this Agreement, the Notes, or any other Bridge Loan Document and includes, but
is not limited to, any and all indebtedness of Borrower to Lenders, whether now
existing or hereafter incurred, of every kind and character, direct or indirect,
and whether such indebtedness is from time to time reduced and thereafter
increased, or entirely extinguished and thereafter reincurred, including,
without limitation: (a) indebtedness not yet outstanding, but contracted for, or
with respect to which any other commitment by Lenders exists; (b) all interest
provided in any instrument, document, or agreement (including this Agreement)
which accrues on any indebtedness until payment of such indebtedness in full;
and (c) any moneys payable as hereinabove provided.
Permitted Investments mean (i) marketable direct obligations issued
or unconditionally guaranteed by the United States of America or any agency or
any State thereof maturing within one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than one (1) year from the date
of creation thereof and currently having the highest rating
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obtainable from either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc., and (iii) certificates of deposit maturing no more than one (1)
year from the date of investment therein issued by Bank.
Permitted Liens mean:
(a) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such Equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment.
(b) Liens on Equipment leased by Borrower or any Subsidiary
pursuant to an operating lease in the ordinary course of business (including
proceeds thereof and accessions thereto) incurred solely for the purpose of
financing the lease of such Equipment and Liens arising from UCC financing
statements regarding leases permitted by this Agreement.
(c) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (b) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
(d) Liens securing the obligation arising out of the Debenture
and Warrant Purchase Agreement.
(e) Liens for taxes, assessments and other governmental
charges, if payment thereof shall not at the time be required to be made, and
provided such reserve as shall be required by GAAP consistently applied shall
have been made therefor;
(f) Liens of workmen, materialmen, vendors, suppliers,
mechanics, carriers, warehouseman and landlords or other like Liens, incurred in
the ordinary course of business for sums not then due or being contested in good
faith, if an adverse decision in which contest would not materially affect the
business of Borrower;
(g) Liens securing indebtedness of Borrower or any
Subsidiaries which (i) relates to a working capital line of credit in an amount
not to exceed $10,000,000 or (ii) is in an aggregate principal amount not
exceeding $500,000;
(h) Statutory Liens of landlords, statutory Liens of banks and
rights of set-off, and other Liens imposed by law, in each case incurred in the
ordinary course of business (i) for amounts not yet overdue or (ii) for amounts
that are overdue and that are being contested in good
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faith by appropriate proceedings, so long as such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made for any
such contested amounts;
(i) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(j) Any attachment or judgment Lien not constituting an Event
of Default;
(k) Easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not and
will not interfere in any material respect with the ordinary conduct of the
business of Borrower or any of its Subsidiaries;
(l) Any (i) Interest or title of a lessor or sublessor under
any lease, (ii) Restriction or encumbrance that the interest or title of such
lessor or sublessor may be subject to, or (iii) Subordination of the interest of
the lessee or sublessee under such lease to any restriction or encumbrance
referred to in the preceding clause (ii), So long as the holder of such
restriction or encumbrance agrees to recognize the rights of such lessee or
sublessee under such lease;
(m) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods;
(n) Any zoning or similar law or right reserved to or vested
in any governmental office or agency to control or regulate the use of any real
property;
(o) Liens securing obligations (other than obligations
representing debt for borrowed money) under operating, reciprocal easement or
similar agreements entered into in the ordinary course of business of Borrower
and its Subsidiaries;
(p) The liens listed in the Permitted Lien Schedule of the
Schedule of Exceptions; and
(q) The replacement, extension or renewal of any Lien
permitted by under Section 10.4 of the Debenture and Warrant Purchase Agreement
upon or in the same property theretofore subject or the replacement, extension
or renewal (without increase in the amount or change in any direct or contingent
obligor) of the indebtedness secured thereby.
Person means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and its successors, heirs and assigns.
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Prime Rate means the rate of interest quoted in the "Money Rates"
column of The Wall Street Journal as published in the City of New York from time
to time as the then prevailing prime rate, provided, however, that if no such
rate can be finally determined on any Business Day by reference to such column
or newspaper then the Prime Rate in effect on such day shall mean the rate of
interest then announced by ▇▇▇▇▇▇ Guaranty Trust Company as its "prime rate",
"base rate" or "reference rate".
Requirement of Law means any law, treaty, rule or regulation or
determination of an arbitrator, court or other Governmental Authority.
Solvent, when used with respect to any Person on a particular date,
means that on such date: (a) the fair saleable value of its assets is in excess
of the total amount of its liabilities, including, without limitation, the
reasonably expected amount of such Person's obligations with respect to
contingent liabilities, (b) the present fair saleable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction for which such Person's property would constitute an unreasonably
small capital.
Subordination Agreement means the subordination agreement by and
among the Borrower, the Agent and the agent acting on behalf of the purchasers
under the Debenture and Warrant Purchase Agreement dated the date hereof and
executed simultaneously herewith, substantially in the form of Exhibit G
attached hereto.
Subsidiary means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
Total Commitment means the commitment of each Lender to fund the
aggregate dollar amount of its share of the Consolidated Bridge Loan, in the
amount set forth opposite such Lender's name on Exhibit A. For purposes of
calculating such Total Commitment, the Total Commitment of the Weisbrots shall
be treated as a single joint and several commitment.
Warrant Shares has the meaning set forth in Section 2.4 of this
Agreement.
Warrants mean the warrants to purchase 689,722 shares, in the
aggregate, of the Common Stock, dated the date hereof, substantially in the form
of Exhibit C hereto.
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1.2. Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a consistent basis. The Financial Statements
required to be delivered hereunder from and after the Closing Date, and all
financial records, shall be maintained in accordance with reasonable accounting
standards and practices, consistently applied.
1.3. Other Terms; Headings. Terms used herein that are defined in the
Uniform Commercial Code in effect in the State of New York (the "Code") shall
have the meanings given in the Code. Each of the words "hereof," "herein," and
"hereunder" refer to this Agreement as a whole. An Event of Default shall
"continue" or be "continuing" until it shall have been cured or until Lenders
shall have agreed in writing to waive such Event of Default. References to
Sections, Articles, Annexes, Schedules, and Exhibits are internal references to
this Agreement, and to its attachments, unless otherwise specified. The headings
and the Table of Contents are for convenience only and shall not affect the
meaning or construction of any provision of this Agreement.
SECTION 2.
TERMS OF THE CONSOLIDATED BRIDGE LOAN
2.1. Commitment. Subject to the terms and conditions of this Agreement:
(i) each Lender hereby agrees to amend and restate the Original Notes and the
Original Bridge Loan Agreement; (ii) each Lender hereby agrees to fund the
amount of its Additional Bridge Loan Commitment and (iii) each Lender hereby
agrees to consolidate the Original Bridge Loan, together with all interest
accrued thereon, with the Additional Bridge Loan.
2.2. Consolidated Bridge Loan. Borrower warrants, represents and confirms
that, as of the Closing Date, (i) the aggregate outstanding principal balance of
the Original Bridge Loan equals $4,500,000, (ii) the aggregate accrued interest
on such principal balance equals $71,111 and (iii) the aggregate outstanding
principal balance of the Additional Bridge Loan equals $3,250,000. Borrower and
Lenders agree that effective on the Closing Date, upon the consolidation of the
outstanding principal balances of the Original Bridge Loan and the Additional
Bridge Loan, and the addition to principal of the accrued interest on the
Original Bridge Loan, Lenders shall be deemed to have made a single loan to
Borrower in the aggregate principal amount of $7,721,111 (the "Consolidated
Bridge Loan").
2.3 Amended, Restated and Consolidated Notes.
(a) The Amount. The Consolidated Bridge Loan is evidenced by
Amended, Restated and Consolidated Notes payable by Borrower to the order of
each Lender, each such Note in the form of Exhibit B attached hereto and each
such Note in the original principal amount equal to such Lender's Total
Commitment (each a "Note" and collectively, "Notes").
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(b) General Terms. The Notes are 10% Convertible Senior Secured
Notes due on May 30, 1999. Each Note is convertible, in whole or in part, from
time to time, into a number of shares of Common Stock, initially at the rate of
one share of Common Stock for each $1.3688 in principal amount of the Note to be
converted. For purposes of this Agreement, the term "Conversion Shares" shall
mean the shares of Common Stock which may be issued upon conversion of all or a
portion of the principal amount of the Notes.
(c) Adjustment of Conversion Price. The price at which the
Conversion Shares may be acquired upon conversion of the Notes is subject to
adjustment as set forth in Section 3.7 of each Note.
(d) Payment. So long as a Lender shall be the holder of any Note,
Borrower will make payments of principal and interest to such Lender no later
than 11 a.m. Eastern Standard Time on the date when such payment is due.
Payments shall be made by delivery to such Lender at such Lender's address,
furnished to Borrower in accordance with this Agreement, of a certified or
official bank check drawn upon or issued by a bank which is a member of the New
York Clearinghouse for banks or by wire transfer to such Lender's (or such
Lender's nominee's) account at any bank or trust company in the United States of
America, or with respect to the payment of accrued interest on the Notes, shares
of Common Stock, as provided in Section 2.3(e) below. Each Lender further agrees
that, before a Note is assigned or transferred, such Lender will make or cause
to be made a notation thereon of principal payments previously made thereof and
of the date to which interest thereon has been paid and will notify Borrower of
the name and address of the transferee of such Note.
(e) Interest.
(i) Payment of Interest. Borrower shall pay interest to
Lenders on the aggregate unpaid principal amount of the Consolidated Bridge Loan
at the fixed rate of ten percent (10%) per annum at Maturity Date, as further
set forth in each Note. Interest shall be calculated on the basis of a year of
360 days for the actual number of days elapsed. Each Lender shall have the
option of (i) having the accrued interest on the principal of such Lender's Note
paid at the Maturity Date in immediately available funds, or, alternatively,
having the accrued interest on the principal of such Lender's Note converted
into shares of Common Stock, the conversion price to be based on the average
closing price of the Common Stock for the twenty (20) days prior to the payment
date of the interest payment or as reported by the American Stock Exchange.
Interest on the Consolidated Bridge Loan shall be paid in arrears on the date of
any prepayment (on the amount prepaid), and on the Maturity Date (whether by
acceleration or otherwise).
(ii) Excessive Interest. Notwithstanding any provision
contained in this Agreement or any other Bridge Loan Document to the contrary,
Lenders shall not be entitled to receive, collect or apply, as interest on the
Consolidated Bridge Loan under this Agreement, any amount in excess of the
maximum rate of interest permitted to be charged by applicable law, and, if
Lenders shall have received, collected or applied as interest any such excess,
such amount which
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would be excessive interest shall be applied first to the reduction of principal
then outstanding, and second, if such principal amount is paid in full, any
remaining excess shall forthwith be returned to Borrower.
(f) Prepayments of Notes. Borrower may not, without having received
the prior written consent of the Majority Holders ("Majority Approval") prepay
any Note, in whole or in part. Upon receipt of Majority Approval, Borrower may,
upon at least three (3) Business Days' prior written notice to the Lenders,
prepay the Notes, in whole or in part, with accrued interest to the date of such
prepayment on the amount prepaid, provided that each such partial prepayment
shall be in a principal amount of not less than $100,000. Prepayment of all or
any portion of the Notes shall not entitle the Borrower to reborrow the amount
so prepaid.
(g) Interest After Event of Default. From the date of occurrence of
an Event of Default until the earlier to occur of the date upon which (i) all
Obligations shall have been paid and satisfied in full or (ii) such Event of
Default shall have been waived, interest on the Consolidated Bridge Loan shall
be payable on demand at a rate per annum equal to the Prime Rate plus five and
three-quarter percent (5-3/4%).
(h) Exchange or Replacement.
(i) Notice of Exchange or Replacement. Subject to Sections 2.3
(d); 2.3(g)(ii)and 10.13 below, at any time at the request of any holder of one
or more of the Notes to Borrower at its office provided under Section 10.6 (the
Notice Provision), Borrower, at its expense (except for any transfer tax or any
other tax arising out of the exchange) will issue in exchange therefor new
Notes, in such denomination or denominations ($100,000 or any larger multiple of
$100,000, plus one Note in a lesser denomination, if required) as such holder
may request, in the aggregate principal amount equal to the unpaid principal
amount of the Note or Notes surrendered and substantially in the form thereof,
dated as of the date to which interest has been paid on the Note or Notes
surrendered (or, if no interest has yet been so paid thereon, then dated the
date of the Note or Notes so surrendered) and payable to such person or persons
or order as may be designated by such holder.
(ii) Actual Exchange or Replacement. Upon receipt of evidence
satisfactory to Borrower of the loss, theft, destruction or mutilation of any
Note and, in the case of any such loss, theft, or destruction, upon delivery of
a bond of indemnity satisfactory to Borrower (provided that if the holder is a
Lender or a financial institution, its own agreement will be satisfactory), or
in the case of any such mutilation, upon surrender and cancellation of such
Note, Borrower will issue a new Note of like tenor as if the lost, stolen,
destroyed or mutilated Note were then surrendered for exchange in lieu of such
lost, stolen, destroyed or mutilated Note.
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(i) Transfer.
(i) Notification of Proposed Sale. Subject to Sections 2.3
(h)(ii) and 10.13 below, each holder of a Note, by acceptance thereof, agrees
that it will give Borrower ten (10) days written notice prior to selling or
otherwise disposing of such Note. No such sale or other disposition shall be
made unless:
(a) the holder shall have supplied to Borrower an
opinion of counsel to the holder, reasonably acceptable to Borrower, to the
effect that no registration under the Securities Act of 1933, as amended (the
"Securities Act") is required with respect to such sale or other disposition, or
(b) an appropriate registration statement with respect
to such sale or other disposition shall have been filed by Borrower and declared
effective by the Securities and Exchange Commission (the "Commission").
(ii) Transfer without Notification. If the holder of a Note
has obtained an opinion of counsel reasonably acceptable to Borrower to the
effect that the sale of its Note may be made without registration under the
Securities Act pursuant to compliance with Rule 144 (or any successor rule under
the Securities Act), the holder need not provide Borrower with the notice
required in Section 2.3 (h)(i) above.
2.4 Warrants. Subject to the terms of this Agreement and the terms of the
Warrants substantially in the form of Exhibit C, Borrower will issue Warrants to
purchase in the aggregate, 689,722 shares of the Common Stock, initially, at a
price per share equal to the average closing price of a share of the Common
Stock for the twenty (20) trading days immediately preceding the Closing Date,
as reported the price of each share is reported by the American Stock Exchange.
The Warrants shall be issued to each of Lenders in the amounts set forth
opposite their names on Exhibit A. For purposes of this Agreement, the term
"Warrant Shares" shall mean the shares of Common Stock that may be issued from
time to time pursuant to the exercise of the Warrants.
2.5 Security; Subordination of the Existing Credit Facility. All of the
Obligations of Borrower under this Agreement will be secured by the General
Security Agreement, substantially in the form of Exhibit F. The indebtedness and
Liens granted by Borrower pursuant to the Debenture and Warrant Purchase
Agreement are subordinate to the indebtedness and Liens granted by Borrower
pursuant to this Agreement, in accordance with the terms of the Subordination
Agreement, substantially in the form of Exhibit G.
2.6 Registration Rights. The Conversion Shares and the Warrant Shares are
entitled to the registrations rights set forth in Section 8 of this Agreement.
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2.7 Consent and Waiver. The lien, indebtedness and registration right
restrictions and limitations have been waived by the holders of the 1998
Debentures pursuant to the Consent and Waiver, substantially in the form of
Exhibit D.
2.8 Agency Agreement. In connection with the acts contemplated under this
Agreement, the Bridge Loan Documents, the Collateral Documents or any other
document relating hereto or thereto, the rights, powers, duties and obligations
of Agent are set forth in the Agency Agreement, substantially in the form of
Exhibit E.
2.9 Miscellaneous.
(a) Expenses. Borrower shall reimburse the Expenses of Lenders
and Agent promptly upon demand. Payment of Expenses shall be made not later than
2:00 P.M. Eastern Standard Time on the day when due, in immediately available
funds, to the offices of the Agent, at its offices located at the address set
forth on Exhibit A, or as Agent may otherwise direct Borrower.
(b) Distribution and Application of Payments. Unless an Event
of Default has occurred and is continuing, all payments received by Agent shall
be applied against the Obligations in the following order: first, to the payment
of any Expenses due and payable to Agent under any of the Bridge Loan Documents;
second, to the ratable payment of any Expenses or Obligations due and payable to
Lenders under any of the Bridge Loan Documents, other than those Obligations
specifically referred to in the two clauses below; third, to the ratable payment
of interest due on the Consolidated Bridge Loan; and, finally, to the ratable
payment of principal due on the Consolidated Bridge Loan.
SECTION 3
CONDITIONS PRECEDENT
3.1. Conditions Precedent to Consolidated Bridge Loan. The obligation of
each Lender to fund its ratable portion of the Additional Bridge Loan is subject
to the satisfaction or waiver of the following conditions precedent:
(a) Each Lender shall have received duly executed originals
of:
(i) this Agreement;
(ii) its Note;
(iii) its Warrant;
(iv) the General Security Agreement;
(v) the Subordination Agreement;
(vi) the Agency Agreement; and
(vii) the Waiver and Consent;
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each conforming to the requirements hereof and executed as of the date of this
Agreement by a duly authorized representative of Borrower, the Agent and each
Lender, as the case may require.
3.2. No Liens. From the date of effectiveness of the Fifth Amendment to
the Closing Date of this Agreement, no Liens shall have arisen or been recorded
against the Collateral.
3.3. Representations and Warranties Correct. The representations and
warranties in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of the Closing Date.
3.4. Legal Opinion of Counsel to Borrower. Agent and Lenders shall have
received an opinion of St. ▇▇▇▇ & ▇▇▇▇▇, L.L.C., counsel to Borrower, which
opinion shall be dated as of the Closing Date and shall be reasonably
satisfactory to Agent and Lenders and their respective counsel.
3.5. Officer's Certificate. Agent shall have received an Officer's
Certificate of Borrower dated as of the Closing Date, certifying as to the (i)
Borrower's Certificate of Incorporation and all amendments thereto, (ii)
accuracy and completeness of all By-Laws attached thereto, (iii) updated
Certificates of Good Standing with respect to the Borrower from the Secretaries
of State of New York and Illinois, (iv) resolutions of the Borrower's Board of
Directors approving the transactions relating to this Agreement and (v)
incumbency and signature of the Borrower's duly authorized officers signing this
Agreement and each of the Bridge Loan Documents to which it or they are a party
and any other certificate or other document to be delivered pursuant thereto,
together with evidence of the incumbency of such officer signing the same.
3.6. Closing Fees. All Expenses outstanding as of the date of this
Agreement, including legal fees, relating to this Agreement and any and all
documents relating thereto shall have been paid on or prior to the Closing Date.
SECTION 4
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of Borrower. To induce Lenders to
enter into this Agreement and make the Additional Bridge Loan, Borrower hereby
represents and warrants to Lenders that the representations and warranties
contained in this Section 4 are true, correct and complete. Such representations
and warranties, and all other representations and warranties made by Borrower in
any other Bridge Loan Documents, shall survive the execution and delivery of
this Agreement and such other Bridge Loan Documents.
(a) Organization and Qualification. Borrower (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation,
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(ii) has the power and authority to own its properties and assets and to
transact the businesses in which it presently is, or proposes to be, engaged and
(iii) is duly qualified and is authorized to do business and is in good standing
in each jurisdiction where it presently is, or proposes to be, engaged in
business, except where the failure to so qualify would not have a Material
Adverse Effect.
(b) Authority; Consents and Filings. Borrower has the requisite
corporate power and authority to execute and deliver each of the Bridge Loan
Documents. Subject to: (a) compliance with the terms of the right of first
refusal provided (i) in Section 16.1 of the Debenture and Warrant Purchase
Agreement and (ii) in Article 8A of the 10% convertible subordinated debentures
issued and dated August 6, 1996 and (b) the receipt of shareholder approval (i)
to amend Borrower's certificate of incorporation to increase its authorized
shares of Common Stock and (ii) to the extent required under Section 713 of the
American Company Stock Exchange Guide, to authorize the issuance of the
Conversion Shares and the Warrant Shares in the event a dilution adjustment to
the Warrants results in an issuances of the Conversion Shares or the Warrant
Shares at less than fair market value, no consent, authorization, permit or
filing is required in connection with the execution, delivery and performance of
this Agreement or any Bridge Loan Document, or the continuing operations of
Borrower, except (i) those that have been obtained or made and (ii) filings
necessary to create, perfect or retain the perfection of Liens against the
Collateral. Except as otherwise set forth in this Section, all corporate action
necessary for the execution, delivery and performance of any of the Bridge Loan
Documents has been taken, provided however, that the listing of the Conversion
Shares and the Warrant Shares on the American Stock Exchange is subject to the
consent of the American Stock Exchange.
(c) Enforceability. This Agreement and each Bridge Loan Document is
the legal, valid and binding obligation of Borrower, enforceable in accordance
with its terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency or similar laws affecting creditors' rights generally, and (ii)
general principles of equity.
(d) No Conflict. The execution, delivery and performance of each
Bridge Loan Document by Borrower is not in contravention of (i) the Governing
Documents of Borrower, or (ii) any Requirement of Law, or (iii) any franchise,
license, permit, indenture, contract, lease, agreement (other than the loan
agreements or security agreements executed in connection with the Existing
Credit Facilities), instrument or other commitment to which it is a party or by
which it or any of its properties are bound and will not, except as contemplated
herein, result in the such imposition of any Liens upon any of its properties.
No order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or completion by, any Governmental
Authority, or any subdivision thereof, is required to authorize, or is required
in connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, this Agreement or any of the
other Bridge Loan Documents.
(e) Government Regulation. Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, the Investment Company Act of 1940, or any other
Requirement of Law, other than the
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Bankruptcy Code, that limits its ability to incur indebtedness or its ability to
consummate the transactions contemplated in this Agreement and the other Bridge
Loan Documents.
(f) Indebtedness; Rights in Collateral. Borrower is not obligated or
liable with respect to any Indebtedness, other than Indebtedness described on
Borrower's Form 10-Q for the quarter ended September 30, 1998. All Collateral is
owned or leased by Borrower, free and clear of any and all Liens in favor of
third parties, other than the Permitted Liens, those Liens permitted in the
Existing Credit Facilities and the Lien in favor of Lenders. Upon the proper
filing of the UCC financing statements executed by Borrower in favor of the
Agent, the security interests granted pursuant to the Bridge Loan Documents
constitute valid and enforceable and perfected Liens on the Collateral, to the
extent such Liens can be perfected by the filing of such financing statements.
(g) Locations of Offices, Records and Inventory. The address of the
principal place of business and chief executive office of Borrower is set forth
on Borrower's Form 10-Q for the quarter ended September 30, 1998. The books and
records of Borrower, and all its chattel paper and records of Accounts, are
maintained exclusively at such locations. There is no jurisdiction in which
Borrower has any Collateral (except for vehicles and Inventory in transit for
processing) other than those jurisdictions identified on Borrower's Form 10-Q
for the quarter ended September 30, 1998.
(h) Inventory. All inventory of Borrower consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been or
will be written off or written down to net realizable value on the unaudited
consolidated balance sheet of Borrower and its Subsidiaries as of September 30,
1998. The quantities of each type of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable and
warranted in the present circumstances of Borrower.
(i) No Judgments or Litigation. No judgments, orders, writs or
decrees are outstanding against Borrower nor is there now pending or, to the
best of Borrower's knowledge after diligent inquiry, threatened, any litigation,
contested claim, investigation, arbitration, or governmental proceeding by or
against Borrower, other than those which, either singly or in the aggregate,
would not have a Material Adverse Effect other than those identified on
Borrower's Form 10-Q for the quarter ended September 30, 1998 and at its
Brooklyn facility located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
(j) No Defaults. Borrower is not in default in any material respect
under any term of any indenture, contract, lease, agreement, instrument or other
commitment to which it is a party or by which it is bound. Except as otherwise
described on Borrower's Form 10-Q for the quarter ended September 30, 1998,
Borrower knows of no dispute regarding any such indenture, contract, lease,
agreement, instrument or other commitment.
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(k) Financial Information, SEC Documents. None of the documents
filed by Borrower with the Commission since December 31, 1995 contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
not false or misleading in light of the circumstances in which they were made.
There is no fact known to Borrower which Borrower has not disclosed to Lenders
prior to or as of the date of this Agreement which materially and adversely
affects, or in the future is likely to materially and adversely affect, the
business, properties, condition (financial or otherwise) or business prospects
of Borrower and its Subsidiaries, taken as a whole.
(l) Compliance with Law. Borrower has not violated or failed to
comply in any material respect with any Requirement of Law, including without
limitation (a) applicable rules and regulations of any Governmental Authority
having jurisdiction over its activities, (b) environmental laws, the consequence
of which violation or failure has or is reasonably likely to have a Material
Adverse Effect.
(m) Intellectual Property. Borrower possesses such assets, licenses,
patents, patent applications, copyrights, service marks, trademarks, trade
names, New Drug Applications, Investigatory New Drug Applications, Abbreviated
New Drug Applications, Alternative New Drug Applications, registrations and
quotas as issued by the Drug Enforcement Agency or the Attorney General of the
United States pursuant to the Controlled Substances Act, as are necessary or
advisable to continue to conduct its present and proposed business activities.
(n) Licenses and Permits
(i) Generally. Borrower and its Subsidiaries possesses such
franchises, licenses, permits and other authority as are necessary for the
conduct of its business as now being conducted and proposed to be conducted
(except where the failure to possess such franchises, licenses, permits or other
authority would not have a Material Adverse Effect on Borrower and its
Subsidiaries taken as a whole) and Borrower and its Subsidiaries are not in
default under any of such franchises, licenses, permits or other authority.
Other than the approval required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"); other than as set forth in
Schedule 4.10 of the Schedule of Exceptions or [Selected Reports] to the
Debenture and Warrant Purchase Agreement; and other than those consents that
have been obtained; no approval, consent, authorization or other order of, and
no designation, filing, registration, qualification or recording with, any
governmental authority or any other person or entity is required in connection
with Borrower's valid execution, delivery and performance of this Agreement or
the offer, issuance and sale of the Notes, Warrants, the Conversion Shares or
the Warrant Shares by Borrower to Lenders or the consummation of any other
transaction contemplated on the part of Borrower hereby.
(ii) The FDC, FDA, DEA and Controlled Substances Act, etc.
Without limiting the generality of the representations and warranties made in
Section 4.1(n)(i) above, Borrower represents and warrants that (1) it and its
Subsidiaries are in compliance in all material
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respects with all applicable provisions of the Federal Food, Drug, and Cosmetic
Act (the "FDC Act"), (2) its products and those of its Subsidiaries are not
adulterated or misbranded and are in lawful distribution, and (3) it and its
Subsidiaries are in compliance with the following specific requirements:
Borrower and its Subsidiaries have registered all facilities with the United
States Food and Drug Administration (the "FDA"); Borrower and its Subsidiaries
have listed all drug products with the FDA; each drug product marketed by
Borrower or any Subsidiary is the subject of an application approved by the FDA;
all marketed drug products comply with any conditions of approval and the terms
of the application submitted to the FDA; all drug products are manufactured in
compliance with the FDA's good manufacturing practice regulations; all products
are labeled and promoted in accordance with the terms of the marketing
application and the provisions of the FDC Act; all adverse events that were
required to be reported to the FDA have been reported to the FDA in a timely
manner; each of Borrower and its Subsidiaries is in compliance in all material
respects with the terms of the consent agreement entered into by Borrower with
the United States Attorney for the Eastern District of New York on behalf of the
FDA on June 29, 1993, as modified by the Joint Motion for Modification of
Sentence dated May 8, 1998; to Borrower's knowledge, neither Borrower nor any
Subsidiary is employing or utilizing the services of any individual who has been
debarred under the FDC Act; all stability studies required to be performed for
products distributed by Borrower or a Subsidiary have been completed or are
ongoing in accordance with the applicable FDA requirements; any products
exported by Borrower or a Subsidiary have been exported in compliance with the
FDC Act; and each of Borrower and its Subsidiaries is in compliance in all
material respects with the provisions of the Prescription Drug Marketing Act, to
the extent applicable. Without limiting the generality of the representations
and warranties made in Section 4(q)(i), Borrower also represents and warrants
that it and its Subsidiaries are in compliance in all material respects with all
applicable provisions of the Controlled Substances Act (the "CSA") and that
Borrower and its Subsidiaries are in compliance with the following specific
requirements: Borrower and its Subsidiaries are registered with the Drug
Enforcement Administration (the "DEA") at each facility where controlled
substances are exported, imported, manufactured or distributed; all controlled
substances are stored and handled pursuant to DEA security requirements; all
records and inventories of receipt and distributions of controlled substances
are maintained in the manner and form as required by DEA regulations; all
reports, including, but not limited to, ▇▇▇▇▇, manufacturing quotas, production
quotas, and disposals, have been submitted to DEA in a timely manner; all
adverse events, including thefts or significant losses of controlled substances,
have been reported to DEA in a timely manner; to Borrower's knowledge, neither
Borrower nor any Subsidiary is employing any individual, with access to
controlled substances, who has previously been convicted of a felony involving
controlled substances; and any imports or exports of controlled substances have
been conducted in compliance with the CSA and DEA regulations.
(o) Taxes. Except as set forth on Schedule A to the General Security
Agreement, Borrower has filed all tax returns (federal, state and local)
required to be filed by it and Borrower has paid all taxes, assessments and
governmental charges and levies thereon that are due, including interest and
penalties, other than taxes, assessments and governmental charges and levies
being contested in good faith by appropriate proceedings and with respect to
which adequate
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reserves, in conformity with GAAP, consistently applied, shall have been
provided on the books of Borrower.
(p) Labor Disputes and Acts of God. Neither the business nor the
properties of Borrower are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (whether or not covered by
insurance), materially and adversely affecting such business or properties or
the operations of Borrower or the ability of Borrower to perform its
obligations.
(q) Partnerships. Borrower is not a partner in any partnership.
(r) Solvency. Borrower is solvent.
(s) Forfeiture Proceeding. Borrower is not engaged in or does not
propose to be engaged in the conduct of any business or activity which could
result in a Forfeiture Proceeding and no Forfeiture Proceeding against Borrower
is pending, or to the best knowledge of Borrower, threatened.
(t) Offering. Subject in part to the truth and accuracy of Lenders'
representations and the compliance by Lenders with its covenants set forth in
this Agreement and any subscription agreement executed and delivered by Lenders,
the issuance of the Notes, the Warrants, the Conversion Shares and the Warrant
Shares as contemplated by this Agreement are not subject to the registration
requirements of the Securities Act, and, Borrower, or anyone acting on its
behalf, will not take any action hereafter that would cause such registration
requirements to be applicable.
(u) No Discrimination. Borrower does not in any manner or form
discriminate, ▇▇▇▇▇▇ discrimination or permit discrimination against any person
on the grounds of age, color, handicap, mental status, national origin, race,
religion or sex.
(v) ERISA. Borrower has not received any notice indicating that it
is not in compliance with any of the requirements of the Employee Retirement
Income Security Act, as amended ("ERISA") and the regulations promulgated
thereunder. With respect to the Borrower, there exists no event described in
Section 4043 of ERISA.
(w) Registration Rights. Except as provided for in this Agreement,
the Debenture and Warrant Purchase Agreement, and as set forth in Schedule 4.14
of the Debenture and Warrant Purchase Agreement, the Borrower is not under any
binding obligation to register any of its currently outstanding securities or
any of its securities which may hereafter be issued.
(x) Accuracy and Completeness of Information. All factual
information furnished by or on behalf of Borrower in writing to Lenders for
purposes of or in connection with this Agreement or any Bridge Loan Documents,
or any transaction contemplated hereby or thereby
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is or will be true and accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information not misleading at such
time.
4.2. Representations and Warranties of Lenders. Each Lender represents and
warrants that:
(a) Investment Intent. The Warrants and the Notes being acquired
hereunder and the Conversion Shares and Warrant Shares that may be acquired upon
conversion or of any of the Notes or Warrants, as the case may be, would be
acquired for its own account and not with the view to, or the resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act by reason of their issuance in a transaction exemption
from the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) thereof, that they must be held indefinitely unless
they are registered under the Securities Act or are exempt from registration and
that the reliance of Borrower and others upon this exemption is predicated in
part upon this representation and warranty.
(b) Acts and Proceedings. This Agreement has been duly authorized by
all necessary action on the part of each Lender, has been executed and delivered
by it and is a valid and binding agreement upon its part, enforceable in
accordance with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
and (ii) general principles of equity.
SECTION 5.
CHANGE OF CONTROL
PURCHASE OFFER; CONVERSION RIGHTS
5.1. Change of Control.
(a) Upon the occurrence of a Change of Control (as hereinafter
defined), Borrower shall make an offer to all holders of Notes to purchase (a
"Change of Control Offer") all outstanding Notes and will purchase, on a day not
more than thirty (30) days after the occurrence of the Change of Control (such
purchase date being the "Change of Control Purchase Date"), all Notes properly
tendered pursuant to such offer to purchase for a cash price (the "Change of
Control Purchase Price") equal to 150% of the outstanding principal amount of
the Notes, plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date.
(b) In order to effect a Change of Control Offer, Borrower shall,
within ten (10) days after the occurrence of a Change of Control, in accordance
with Section 10.6 (the Notice Provision), provide a Change of Control Offer to
each Note holder. The Change of Control Offer shall remain open from the time of
receipt thereof for at least fifteen (15) calendar days. The notice,
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which shall govern the terms of the Change of Control Offer, shall include such
disclosures as are required by law and shall state:
(i) the date of such Change of Control and, briefly, the
events causing such Change of Control;
(ii) that the Change of Control Offer is being made pursuant
to this Section 5.1 and that all Notes properly tendered pursuant to the Change
of Control Offer will be accepted for payment;
(iii) the Change of Control Purchase Price for each Note, the
Change of Control Purchase Date, the date on which the Change of Control Offer
expires, that if the holder desires to accept the Change of Control Offer, the
Note held by such holder must be surrendered to Borrower or any designated
paying agent of Borrower prior to 5:00 p.m. Eastern Standard Time on the Change
of Control Purchase Date, and the name and address of any such paying agent, if
any;
(iv) that any Note not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
(v) that, unless Borrower shall default in the payment of the
Change of Control Purchase Price, any Note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Purchase Date;
(vi) that holders will be entitled to withdraw their
acceptance of the Change of Control Offer election if Borrower or paying agent
of Borrower receives, not later than 5:00 p.m. Eastern Standard Time on the day
preceding the Change of Control Purchase Date a telex or facsimile transmission
(confirmed by overnight delivery of the original thereof) or letter setting
forth the name of the holder, the principal amount of Notes the holder delivered
for purchase, and a statement that such holder is withdrawing its election to
have such Notes purchased;
(vii) that holders whose Notes are purchased only in part will
be issued Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; and
(viii) any other instructions that holders must follow in
order to tender their Notes and the procedures for withdrawing an election to
accept a Change of Control Offer.
(c) On the Change of Control Purchase Date, Borrower shall accept
for payment Notes or portions thereof tendered pursuant to the Change of Control
Offer and deposit with the paying agent, if any, money in United States dollars,
in immediately available funds, sufficient to pay the Change of Control Purchase
Price of all Notes or portions thereof so tendered and accepted. Borrower shall,
or cause any paying agent to, promptly disburse or deliver to the holders of
Notes so accepted payment in an amount equal to such Change of Control Purchase
Price,
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and mail or deliver to such holders a new Note equal in principal amount to any
unpurchased portion of each Note surrendered.
(d) Borrower shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and any other securities laws or regulations, in
connection with the repurchase of Notes pursuant to a Change of Control Offer.
To the extent that the provision of any securities laws or regulations conflict
with the provisions of this Section 5.1, Borrower shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 5.1 by virtue thereof.
(e) For purposes of this Section:
(i) the term "Change of Control" means the occurrence of any
of the following: the consummation of any transaction the result of which is
that any person or group (as such term is used in Section 13(d)(3) of the
Exchange Act), other than any of the ▇▇▇▇▇ Entities, the Lenders or any
Affiliate thereof or any group comprised of any of the foregoing, owns, directly
or indirectly, 51% of the Common Equity (as hereinafter defined) of Borrower,
Borrower consolidates with, or merges with or into, another person (other than a
direct or indirect wholly-owned Subsidiary) or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of
Borrower's assets or the assets of Borrower and its Subsidiaries taken as a
whole to any person, or any person consolidates with, or merges with or into,
Borrower, in any such event pursuant to a transaction in which the outstanding
Voting Stock (as hereinafter defined) of the Borrower, as the case may be, is
converted into or changed for cash, securities or other property, other than any
such transaction where the outstanding Voting Stock of Borrower, as the case may
be, is converted into or exchanged for Voting Stock of the surviving or
transferee corporation and the beneficial owners of the Voting Stock of Borrower
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving or transferee corporation
immediately after such transaction, Borrower, either individually or in
conjunction with one or more Subsidiaries sells, assigns, conveys, transfers,
leases or otherwise disposes of, or the Subsidiaries sell, assign, convey,
transfer, lease or otherwise dispose of, all or substantially all of the
properties and assets of Borrower and its Subsidiaries, taken as a whole (either
in one transaction or a series of related transactions), including capital stock
of the Subsidiaries, to any person (other than Borrower or a wholly owned
Subsidiary of Borrower), or during any two (2) year period commencing subsequent
to the date of this Agreement, individuals who at the beginning of such period
constituted the Board of Directors of Borrower (together with any new directors
whose election by such Board of Directors or whose nomination for election by
the stockholders of Borrower was approved by a vote of two-thirds of the
directors then still in office) who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved cease for any reason to constitute a majority of the Board of Directors
then in office; provided, however, that a person shall not be deemed to have
ceased being a director for such purpose if such person shall have resigned or
died or if the involuntary removal of such person was made at the direction the
▇▇▇▇▇ Entities or of persons holding a majority in principal amount of the
outstanding Notes;
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(ii) the term "Common Equity" of Borrower means all capital
stock of Borrower that is generally entitled to vote on the election of members
of the board of directors and (iii) the term "Voting Stock" of Borrower means
securities of any class of capital stock of Borrower entitling the holders
thereof to vote in the election of members of the board of directors of
Borrower.
SECTION 6.
AFFIRMATIVE COVENANTS
6.1. Until termination of this Agreement and payment and satisfaction of
all Obligations due hereunder, Borrower agrees as follows:
(a) Financial Reporting and Projections. Borrower shall keep
adequate records and books of account with respect to its business activities in
which true, proper and accurate entries are made in accordance with reasonable
accounting standards and practices, reflecting all its financial transactions.
In addition, Borrower shall cause to be prepared and furnished to Lenders the
financial information required to be delivered by it pursuant to the Debenture
and Warrant Purchase Agreement and the documents ancillary thereto, at the times
and in the manner set forth therein, provided, however, that in the event
Borrower is no longer obligated to comply with such financial reporting
requirements, then Borrower shall cause to be prepared and furnished to Lenders
(a) not later than (i) thirty (30) days after the end of each month after the
Closing Date, (ii) forty-five (45) days after the end of each fiscal quarter
after the Closing Date and (iii) 120 days after the end of each fiscal year
after the Closing Date, unaudited Financial Statements as of the end of such
month, quarter and year and of the portion of Borrower's fiscal year then
elapsed, each certified by the chief financial officer of Borrower as prepared
in accordance with GAAP, consistently applied and fairly presenting the
financial position, results of operations and statement of cash flows of
Borrower for such month, quarter and year, and (b) such other data and
information (financial and otherwise) as Lenders, from time to time, may
reasonably request, bearing upon or related to Borrower's financial condition or
results of operations.
(b) Discharge Taxes and Indebtedness. The Borrower will pay and
discharge, as they become due, all taxes, assessments, debts, claims and other
governmental or non-governmental charges lawfully imposed upon or incurred by it
or the properties and assets of the Borrower, except taxes, assessments, debts,
claims and charges contested in good faith in appropriate proceedings for which
the Borrower shall have set aside adequate reserves for the payment of such tax,
assessment, debt, claim or charge. The Borrower shall provide each Lender, upon
Lender's request, evidence of payment of such taxes, assessments, debts, claims
and charges satisfactory to Lender.
(c) Notification Requirements. Borrower shall timely give Lenders
the following notices:
(d) Notice of Defaults. Promptly, and in any event within two (2)
Business Days after becoming aware of the occurrence of a Default or Event of
Default, a certificate of the chief
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executive officer or chief financial officer of Borrower specifying the nature
thereof and Borrower's proposed response thereto, each in reasonable detail.
(e) Proceedings or Adverse Changes. Promptly, and in any event
within five (5) Business Days after Borrower becomes aware of (i) any proceeding
being instituted or threatened to be instituted by or against Borrower in any
federal, state, local or foreign court or before any commission or other
regulatory body (federal, state, local or foreign) which, if adversely
determined, could result in the entry of an order, judgment or decree against
Borrower; (ii) any order, judgment or decree being entered against Borrower or
any of its properties or assets or (iii) any actual or prospective change,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect, a written statement describing such proceeding, order,
judgment, decree, change, development or event and any action being taken with
respect thereto by Borrower.
(f) Corporate Existence, Charter and By-Laws; Corporate Name.
Borrower shall (i) maintain its corporate existence, (ii) maintain in full force
and effect all licenses, bonds, franchises, leases, trademarks and
qualifications to do business, and, all patents, New Drug Applications,
Investigatory Drug Applications, Abbreviated New Drug Applications, Alter New
Drug Applications, registrations and quotas as issued by the Drug Enforcement
Agency or the Attorney General of the United States, pursuant to the Controlled
Substances Act, contracts and other rights necessary or advisable to the
profitable conduct of its business, and (iii) continue in, and limit its
operations to, the same general lines of business as presently conducted by it.
(g) Books and Records; Inspections. Borrower agrees to maintain
books and records pertaining to the Collateral in such detail, form and scope as
is consistent with good business practice. Borrower agrees that Lenders or its
agents may enter upon the premises of Borrower at any time and from time to
time, during normal business hours and upon reasonable notice under the
circumstances, and at any time at all on and after the occurrence of a Default
which continues beyond the expiration of any grace or cure period applicable
thereto, and which has not otherwise been waived by Lenders, for the purposes of
(i) inspecting and verifying the Collateral, (ii) inspecting and/or copying (at
Borrower's expense) any and all records pertaining thereto, and (iii) discussing
the affairs, finances and business of Borrower with any officers, managerial
employees and directors of Borrower.
(h) Compliance with Laws; Compliance with Agreements. Borrower
agrees to comply in all material respects with all Requirements of Law
applicable to the Collateral or any part thereof, or to the operation of its
business or its assets generally, unless Borrower contests any such Requirements
of Law in a reasonable manner and in good faith. Borrower agrees to maintain in
full force and effect its licenses and permits granted by any Governmental
Authority as may be necessary or advisable for Borrower to conduct its business
in all material respects. Borrower shall comply with the terms and conditions of
all material agreements, commitments, or instruments to which Borrower is a
party or by which it may be bound, including, without limitation, this Agreement
and the Debenture and Warrant Purchase Agreement.
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(i) Use of Proceeds. Proceeds of the Consolidated Bridge Loan made
hereunder shall be used by Borrower solely for its ongoing working capital
requirements and other general corporate purposes. Borrower shall not use any
portion of the proceeds of the Consolidated Bridge Loan for the purpose of
purchasing or carrying any "margin stock" (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) in any manner which violates
the provisions of Regulation T or X of said Board of Governors or for any other
purpose in violation of any applicable statute or regulation, or of the terms
and conditions of this Agreement.
(j) Maintenance of Insurance. Borrower shall maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated. Borrower shall (i)
deliver to Agent, upon its request, a detailed list of insurance then in effect,
stating (A) the names of the insurance companies, (B) the amounts and rates of
the insurance, (C) dates of expiration thereof and the properties and risks
covered thereby; (ii) within fifteen (15) days after notice from Agent, obtain
such additional insurance as Agent may reasonably request; and (iii) upon
request, provide to Agent copies of all insurance policies. All such policies
shall name Agent for Lenders as an additional insured and shall be part of the
Collateral securing the Notes.
(k) Further Assurances. Borrower shall take all such further actions
and execute all such further documents and instruments as Lenders may at any
time reasonably determine in their sole discretion to be necessary or desirable
to further carry out and consummate the transactions contemplated by the
Consolidated Bridge Loan Documents and any documentation relating thereto, to
cause the execution, delivery and performance of the Bridge Loan Documents to be
duly authorized and to perfect or protect the Liens (and the priority status
thereof) of Lenders on the Collateral.
(l) Payment of Notes. Borrower shall pay the principal of and
interest on the Notes in the time, the manner and the form provided therein.
(m) Reporting Requirements. Borrower shall comply with its reporting
and filing obligations pursuant to Section 13 or 15(d) of the Exchange Act.
Borrower shall provide copies of such reports, including, without limitation,
reports on Form ▇▇-▇, ▇▇-▇, ▇-▇ and Schedule 14A promulgated under the Exchange
Act, or substantially the same information required to be contained in any
successor form, to each Lender promptly upon filing with the Commission.
(n) Authorization of Shares of Common Stock for Issuance Upon
Conversion of Note and Exercise of Warrants and Voting Rights for Note Holders.
Borrower will present to its shareholders for consideration at the next annual
meeting of Borrower's shareholders, to occur on or prior to May 30, 1999, a
proposal to amend Borrower's Certificate of Incorporation to increase the number
of authorized shares of Borrower's common stock available for issuance from
40,000,000 to 75,000,000 shares in order to provide for a sufficient number of
authorized shares to be available and reserved for issuance upon conversion of
the Notes and exercise of the Warrants. Upon receipt of approval from Borrower's
shareholders to increase Borrower's authorized shares from 40,000,000 to
75,000,000 shares, Borrower will at all times cause there to be reserved for
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issuance a sufficient number of Conversion Shares and Warrant Shares upon
conversion of the Notes and exercise of the Warrants.
(o) Listing of Common Stock. As promptly as practicable after the
filing of a Certificate of Amendment to Borrower's Certificate of Incorporation
to increase its Shares of Common Stock in accordance with Section 6.1(o) above,
Borrower shall file the appropriate applications for listing with the American
Stock Exchange the Conversion Shares and Warrant Shares. Borrower shall use its
best efforts and work diligently to accomplish such listings as promptly as
practicable after the annual meeting of the stockholders of the Company to take
place on or prior to May 30, 1999.
(p) HSR Act Filing. Borrower hereby agrees to file all the
Pre-Merger Notifications and reports, if any, required to be filed by it under
the HSR Act with forty-five (45) days after its receipt of a written request to
do so by the holder or holders of at least a majority of the aggregate principal
amount of the Notes, then outstanding ("Majority Holders"). Such request shall
be made in accordance with Section 10.6 below.
(q) Year 2000 Computer Capability. Borrower shall take all action
necessary to assure that at all times the computer-based systems utilized by
Borrower and each of its Subsidiaries are able to effectively interpret, process
and manipulate data, including dates before, on and after December 31, 1999. At
Agent's request, Borrower shall provide to Agent assurance that is reasonably
satisfactory to Agent that the computer-based systems utilized by Borrower and
each of its Subsidiaries are able to recognize and perform without error
functions involving dates before, on and after December 31, 1999.
SECTION 7.
NEGATIVE COVENANTS
7.1. Until the termination of this Agreement and the payment and
satisfaction in full of all Obligations due hereunder, neither the Borrower, nor
any of its Subsidiaries, will, either directly or indirectly, do or permit to be
done, absent the prior written consent of the Majority Holders, the following:
(a) Additional Indebtedness. Borrower shall not directly or
indirectly incur, create, assume or suffer to exist any Indebtedness other than
(a) Indebtedness under the Bridge Loan Documents, (b) Indebtedness permitted
under the Existing Credit Facility, but not any increase in the outstanding
principal amount thereof and (c) Indebtedness relating to a working capital line
of credit in an amount not to exceed $10,000,000.
(b) No Guarantees. Except for obligations owing to Lenders under
this Agreement and owing under the Existing Credit Facilities, Borrower will not
assume, endorse or become liable for or guarantee the obligations of any
corporation, partnership, individual or other
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entity excluding the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business.
(c) Liens. Except for Permitted Liens, Borrower shall not directly
or indirectly create, incur, assume, or suffer to exist any Lien on any of its
property now owned or hereafter acquired except Liens granted to Lenders under
the Bridge Loan Documents and Liens described or permitted under the Existing
Credit Facility.
(d) No Transfer of Assets. Borrower will not (a) enter into any
acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), (b) convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of the business, property, or assets,
whether now owned or hereafter acquired, of Borrower, or (c) acquire by purchase
or otherwise all or substantially all of the property, assets, stock, or other
evidence of beneficial ownership of any person or entity, except where the
purchase price for such acquisition is less than $10,000 and the aggregate
purchase price for all acquisitions made within any period of twelve months is
less than $25,000.
(e) Extraordinary Transactions and Disposal of Assets. Borrower will
not enter into any transaction not in the ordinary and usual course of
Borrower's business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of Borrower's
properties or assets (other than sales of inventory to buyers in the ordinary
course of Borrower's business as currently conducted).
(f) Restricted Payments. Borrower shall not directly or indirectly
(a) declare or pay any dividend (other than dividends payable solely in Common
Stock) on, or make any payment on account of, or set apart assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of any class of capital stock of Borrower or
any warrants, options or rights to purchase any such capital stock, whether now
or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
Borrower; or (b) make any optional payment or prepayment on or redemption
(including, without limitation, by making payments to a sinking or analogous
fund) or repurchase of any Indebtedness (other than Indebtedness pursuant to
this Agreement and in accordance with this Agreement).
(g) Investments. Except for Permitted Investments, Borrower shall
not directly or indirectly make any Investment in any Person, whether in cash,
securities, or other property of any kind.
(h) Affiliate Transactions; Intercompany Transfers; Diversion of
Corporate Assets. Borrower shall not directly or indirectly (a) Enter into any
transaction with, including, without limitation, the purchase, sale or exchange
of property or the rendering of any service to, any Subsidiary or Affiliate of
Borrower, unless any such transaction is at arm's length, on fair and reasonable
terms to Borrower, and on terms which are no more onerous to Borrower as
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could be obtained from a Person unrelated to Borrower; (b) Make any intercompany
transfers of monies or other assets in any single transaction or series of
transactions, except as otherwise permitted in this Agreement; or (c) Divert (or
permit anyone to divert) any business or opportunity of Borrower to any other
corporate or business entity.
(i) Mergers. Borrower shall not merge or consolidate with any Person
or sell, assign, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) or acquire all or substantially all of the assets
or the business of any Person (or enter into any agreement to do any of the
foregoing).
(j) No Activities Leading to Forfeiture. Borrower shall not engage
in the conduct of any business or activity which could result in a Forfeiture
Proceeding.
(k) Corporate Documents; Fiscal Year. Borrower shall not amend,
modify or supplement its certificate or articles of incorporation or by-laws in
any way which would adversely affect the ability of Borrower to perform its
obligations hereunder. Borrower shall not change its fiscal year.
(l) Capital Expenditures. Other than for a capital expenditure
contained in any budget approved by the Board of Directors, including a majority
of the directors designated by the purchasers pursuant to the terms and
conditions of Debenture and Warrant Purchase Agreement, or capital expenditures
not contained in any such budget, but which do not exceed $100,000 in the
aggregate during any fiscal year of Borrower, make or commit to make any capital
expenditures.
SECTION 8.
REGISTRATION RIGHTS
8.1. Restrictive Legend. Each certificate representing
(a) any Note, the Warrants or any Conversion Shares, any Warrant
Shares or other securities issued with respect to the Notes, Warrants,
Conversion Shares or Warrant Shares, upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event or upon the exercise of
the Warrants or conversion of the Notes, shall be stamped or otherwise imprinted
with a legend in the following form (in addition to any legend required under
applicable state securities laws):
"THIS [NAME OF SECURITY] [AND THE COMMON STOCK ISSUABLE UPON [CONVERSION]
[EXERCISE] HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, NOR ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1)
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A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAW OR (2) BORROWER RECEIVES AN
OPINION OF COUNSEL TO BORROWER OR OTHER COUNSEL TO THE HOLDER OF SUCH
[NAME OF SECURITY] REASONABLY SATISFACTORY TO BORROWER THAT SUCH [NAME OF
SECURITY] [AND/OR COMMON STOCK] MAY BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS."
8.2. Certain Definitions As used in this Section 8, the following terms
shall have the following respective meanings:
"Holders" shall mean Lenders or any person to whom a Lender or
transferee of a Lender has assigned any Note, Warrants, Conversion Shares or
Warrant Shares.
"Initiating Holders" shall mean any persons who in the aggregate are
Holders of at least a majority of the Conversion Shares and the Warrant Shares.
"Registrable Securities" shall mean any Conversions Shares and
Warrant Shares issued upon exercise of the Warrants, conversion of any Note or
in respect of the Conversion Shares and Warrant Shares issued upon exercise of
the Warrants or conversion of any Note upon any stock split, stock dividend,
recapitalization or similar event.
"Requesting Stockholders'" shall mean holders of securities of
Borrower entitled to have securities included in any registration pursuant to
Section 8.3 and who shall request such inclusion.
The terms "register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by Borrower
in compliance with Sections 8.3 and 8.4 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for Borrower, blue sky fees and expenses, reasonable fees and
disbursements of one counsel for all the selling Holders for a "due diligence"
examination of Borrower, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of Borrower, which shall be paid in any event by Borrower), exclusive
of Selling Expenses.
"Restricted Securities" shall mean the securities of Borrower
required to bear or bearing the legend set forth in Section 8.1 hereof.
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"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for any Holder, except as otherwise provided herein.
8.3. Requested Registration.
(a) Requests for Registration. The Initiating Holders may request
registration under the Securities Act of all or part of their Registrable
Securities. Within ten (10) days after receipt of any such request, Borrower
will give written notice of such requested registration to all other Holders of
Registrable Securities and any other stockholder having registration rights
which entitle it to participate in such registration. Borrower will include in
such registration all Registrable Securities with respect to which it has
received written requests for inclusion therein within fifteen (15) days after
receipt of Borrower's notice. Borrower shall cause its management to cooperate
fully and to use its best efforts to support the registration of the Registrable
Securities and the sale of the Registrable Securities pursuant to such
registration as promptly as is practicable. Such cooperation shall include, but
not be limited to, management's attendance and reasonable presentations in
respect of Borrower at road shows with respect to the offering of Registrable
Securities. The registration requested under this Section 8.3(a) is referred to
herein as a "Demand Registration."
(b) Number of Registrations. The Holders of Registrable Securities
will be entitled to request one (1) Demand Registration for which Borrower will
pay all Registration Expenses. A registration will not count as a Demand
Registration until it has become effective; provided, however, that whether or
not it becomes effective, Borrower will pay all Registration Expenses in
connection with any registration so initiated.
(c) Priority on Demand Registrations. If a Demand Registration is an
underwritten offering, and the managing underwriters advise Borrower in writing
that in their opinion the number of Registrable Securities requested to be
included exceeds the number which can be sold in such offering, Borrower will
include in such registration such number of Conversion Shares and Warrant
Shares, which in the opinion of such underwriters, may be sold, allocated among
the Holders electing to participate pro rata in accordance with the amounts of
securities requested to be so included by the respective Holders. Borrower will
not include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the Holders of a majority of the
Registrable Securities requesting such registration. Any persons other than
Holders of Registrable Securities who participate in a Demand Registration which
is not at Borrower's expense must pay their share of the Registration Expenses.
A registration shall not count as a Demand Registration if some or all of the
Conversion Shares and Warrant Shares which any Holder desires to include therein
are not included due to the determination of the managing underwriters referred
to in the first sentence of this Section 8.3(c).
(d) Restrictions on Demand Registrations. Borrower will not be
obligated to effect any Demand Registration within six (6) months after the
effective date of a previous registration in which the Holders of Registrable
Securities were given piggyback rights pursuant to Section 8.4 other than a
registration of Registrable Securities intended to be offered on a continuous
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or delayed basis under Rule 415 or any successor rule under the Securities Act
(a "Shelf Registration").
8.4. Piggyback Registrations.
(a) Right to Piggyback. Whenever Borrower proposes to register any
of its securities under the Securities Act (other than pursuant to a Demand
Registration or pursuant to a registration on Forms S-4 or S-8 or any successors
to such forms) and the registration form to be used may be used for the
registration and contemplated disposition of Registrable Securities (a
"Piggyback Registration"), Borrower will give prompt written notice to all
Holders of Registrable Securities of its intention to effect such a
registration. Borrower will include in such registration all Registrable
Securities with respect to which Borrower has received written requests for
inclusion therein within thirty (30) days after the receipt of Borrower's
notice.
(b) Piggyback Expenses. The Registration Expenses of the Holders of
Registrable Securities will be paid by Borrower.
(c) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of Borrower, and the managing
underwriters advise Borrower in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, Borrower will include in such registration
first, the securities Borrower proposes to sell, second, the Registrable
Securities and securities of Borrower with respect to which similar registration
rights have been granted and requested to be included in such registration, pro
rata in accordance with the amounts of Registrable Securities and such
securities requested to be so included by the respective Holders and holders of
such securities of Borrower; and third, any other securities requested to be
included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of Borrower's
securities, and the managing underwriters advise Borrower in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, Borrower
will include in such registration first, the securities requested to be included
therein by the holders requesting such registration, second, the Registrable
Securities and securities of Borrower with respect to which similar registration
rights have heretofore been granted and requested to be included in such
registration, pro rata in accordance with the amounts of Registrable Securities
and such securities requested to be so included by the respective Holders and
holders of such securities of Borrower, and third, other securities requested to
be included in such registration.
(e) Other Restrictions. Borrower hereby agrees that if it has
previously filed a registration statement with respect to Registrable Securities
pursuant to Section 8.3 or pursuant to this Section 8.4, and if such previous
registration has not been withdrawn or abandoned, Borrower will not file or
cause to be effected any other registration of any of its equity securities or
securities
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convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any other similar form for employee
benefit plans), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least six (6) months has
elapsed from the effective date of such previous registration or, if sooner,
until all Registrable Securities included in such previous registration have
been sold.
8.5. Holdback Agreements.
(a) Each Holder of Registrable Securities which is a party to this
Agreement agrees not to effect any public sale or distribution of equity
securities of Borrower, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven (7) days prior to and the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration) or, if sooner, until all Registrable Securities
included within such registration have been sold.
(b) Borrower agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven (7) days prior
to and the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration or pursuant to registrations on Form S-8 or
any other similar form for employee benefit plans) or, if sooner, until all
Registrable Securities included within such registration have been sold, and
(ii) to use its reasonable best efforts to cause each holder of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, purchased from Borrower at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution of any such securities during such period
(except as part of such underwritten registration, if otherwise permitted) or,
if sooner, until all Registrable Securities included within such registration
have been sold.
8.6. Registration Procedures. Whenever the Holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Section 8, Borrower will use its reasonable best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto Borrower will as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Securities, which registration statement will
state that the Holders of Registrable Securities covered thereby may sell such
Registrable Securities either under such registration statement or, at any
Holder's proper request, pursuant to Rule 144 (or any similar rule then in
effect), and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, Borrower will furnish to the counsel
selected by the Holders of a majority of the Registrable Securities covered
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by such registration statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period set forth in Section 8.6(j) hereof and comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that Borrower will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subsection, subject itself to taxation in any such jurisdiction, or
consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any fact necessary to make the statements
therein not misleading, and, at the request of any such seller, Borrower will
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the Lenders of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by Borrower are then
listed;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the Holders of a
majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate
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the disposition of such Registrable Securities (including, without limitation,
using its best efforts to effect a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of Borrower, and cause Borrower's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement; and
(j) keep each registration statement effective until the earlier to
occur of (i) the Holder or Holders have completed the distribution described in
the registration statement relating thereto (including a Shelf Registration) and
(ii) two (2) years.
8.7. Expenses of Registration. All Registration Expenses incurred in
connection with a registration, qualification or compliance pursuant to this
Section 8 shall be borne by Borrower, and all Selling Expenses shall be borne by
the Holders and the Requesting Stockholders of the securities so registered pro
rata on the basis of the number of their shares so registered; provided,
however, that Borrower shall not be required to pay any Registration Expenses
if, as a result of the withdrawal of a request for registration by Initiating
Holders, the registration statement does not become effective, in which case the
Holders and Requesting Stockholders requesting registration shall bear such
Registration Expenses pro rata on the basis of the number of their shares so
included in the registration request, and, further, that such registration shall
not be counted as a Demand Registration pursuant to Section 8.3.
8.8. Indemnification.
(a) Borrower will indemnify each Holder, each Holder's officers,
directors and partners, and each person controlling such Holder, with respect to
which registration, qualification or compliance of such Holder's securities has
been effected pursuant to this Section 8, and each underwriter, if any, and each
person who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any registration statement, prospectus, offering circular or other document
(including any related registration statement notification or the like) incident
to any such registration, qualification or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by Borrower of the Securities Act or any rule or regulation thereunder
applicable to Borrower and relating to action or inaction required of Borrower
in connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each Holder's officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, provided, that Borrower will not be liable in any
such case
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to the extent that any such claim, loss, damage, liability or action arises out
of or is based on any untrue statement or omission of material fact based upon
written information furnished to Borrower by such Holder or underwriter and
stated to be specifically for use therein.
(b) Each Holder and Requesting Stockholder will, if Registrable
Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify Borrower,
each of Borrower's directors and officers and each underwriter, if any, of
Borrower's securities covered by such registration statement, each person who
controls Borrower or such underwriter within the meaning of the Securities Act
and the rules and regulations thereunder, each other Holder and Requesting
Stockholder and each of their officers, directors and partners, and each person
controlling such Holder or Requesting Stockholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document incident to any such registration, qualification or compliance,
or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Borrower, its officers and directors, each
underwriter, each person controlling Borrower or such underwriter, each other
Holder and Requesting Stockholders, their officers, directors, partners and
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to Borrower by such Holder or Requesting Stockholder and stated to be
specifically for use therein; provided, however, that the obligations of each
Holder and Requesting Stockholders hereunder shall be limited to an amount equal
to the proceeds to each such Holder or Requesting Stockholder of securities sold
as contemplated herein.
(c) Each party entitled to indemnification under this Section 8.8
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld and for such purpose approval is hereby given for Wolf,
Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇ LLP ("▇▇▇▇, Block") to be such counsel), and the
Indemnified Party may participate in such defense at such party's expense, and
provided, further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 8 unless such failure has had a Material Adverse Effect on
such claim. The parties to this Agreement reserve any rights to claim under this
Agreement for damages actually incurred by reason of any failure of the
Indemnified Party to give prompt notice of a claim. To the extent counsel for
the Indemnifying Party shall in such counsel's reasonable judgment, have a
conflict in representing an Indemnified Party in conjunction with the
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Indemnifying Party or other Indemnified Parties, such Indemnified Party shall be
entitled to separate counsel at the expense of the Indemnifying Party subject to
the approval of such counsel by the Indemnified Party (whose approval shall not
be unreasonably withheld and for such purpose approval is hereby given for Wolf,
Block to be such counsel). No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability with respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and any litigation resulting therefrom.
8.9. Information by Holders. Each Holder of Registrable Securities, and
each Requesting Stockholder holding securities included in any registration,
shall furnish to Borrower such information regarding such Holder or Requesting
Stockholder and the distribution proposed by such Holder or Requesting
Stockholder as Borrower may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 8.
8.10. Limitations on Registration of Issues of Securities. From and after
the date of this Agreement, Borrower shall not enter into any agreement with any
holder or prospective holder of any securities of Borrower giving such holder or
prospective holder the right to require Borrower to register any securities of
Borrower equal to or more favorable than the rights granted under this Section
8. Any right given by Borrower to any holder or prospective holder of Borrower's
securities in connection with the registration of securities shall be
conditioned such that it shall be consistent with the provisions of this Section
8 and with the rights of the Holders provided in this Agreement and such holder
or prospective holder agrees to be bound by the terms of this Section 8.
8.11. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, Borrower agrees to:
(a) make and keep public information available, as those terms are
understood, defined and interpreted in and under Rule 144 under the Securities
Act, at all times from and after ninety (90) days following the effective date
of the first registration under the Securities Act filed by Borrower for an
offering of its securities to anyone other than its employees;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of Borrower under the Securities
Act and the Exchange Act at any time after it has become subject to such
reporting requirements; and
(c) so long as Lender owns any Restricted Securities, furnish to
Lender forthwith, upon request, a written statement by Borrower as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first
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registration statement filed by Borrower for an offering of its securities to
anyone other than its employees), and of the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements), a copy
of the most recent annual or quarterly report of Borrower, and such other
reports and documents so filed as Lender may reasonably request in availing
itself of any rule or regulation of the Commission allowing Lender to sell any
such securities without registration.
8.12. Participation in Underwritten Registrations. No person may
participate in any underwritten registration hereunder unless such person agrees
to sell such person's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and completes and executes all reasonable questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
8.13. Selection of Underwriters. If any Demand Registration is an
underwritten offering, the Holders of a majority of the Registrable Securities
included in such registration have the right to select the investment banker(s)
and manager(s) to administer the offering, subject to the approval of Borrower
(which approval will not be unreasonably withheld). If any registration other
than a Demand Registration is an underwritten offering, Borrower will have the
right to select the investment banker(s) and manager(s) to administer the
offering, subject to the approval of the Holders of a majority of the
Registrable Securities included in such registration (which approval will not be
unreasonably withheld).
8.14. Termination of Registration Rights. The rights of Holders to request
a Demand Registration or participate in a Piggyback Registration shall expire on
May 30, 2003.
SECTION 9.
EVENTS OF DEFAULT AND REMEDIES
9.1. Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) Failure to Pay. Borrower shall fail to pay any of its
Obligations when the same shall become due and payable.
(b) Breach of Certain Covenants. Borrower shall fail to comply with
any covenant contained in Sections 6 or 7 hereof ("Affirmative Covenants" and
"Negative Covenants"), which, in the case of Borrower's failure to comply with
the covenants contained in Sections 6.1 and 6.13 above, continues for a period
of ten (10) days following Borrower's receipt of written notice thereof from the
Agent.
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed to be made by Borrower in this Agreement or in any other
Bridge Loan Document (and
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in any statement or certificate given under this Agreement or any other Bridge
Loan Document), shall be false or misleading in any material respect when made
or deemed to be made.
(d) Breach of Other Covenants. Borrower shall fail to comply with
any covenant contained in this Agreement or any other Bridge Loan Document,
other than as set forth in Section 10.1(b), and such failure shall continue for
ten (10) Business Days after its occurrence.
(e) Cross Default. There shall occur any default or event of default
on the part of any Borrower under (i) any agreement, document or instrument to
which Borrower is a party or by which Borrower or any of its property is bound,
creating or relating to any indebtedness (other than the Obligations), the
unpaid principal balance of which is in excess of $100,000, if the payment or
maturity of such indebtedness is accelerated in consequence of such event of
default or demand for payment of such indebtedness is made or (ii) the Debenture
and Warrant Purchase Agreement.
(f) Dissolution, etc. Borrower shall cease to do business, take
steps to wind-up or dissolve or shall suffer the appointment of a receiver,
trustee, examiner, custodian or similar fiduciary, or shall make an assignment
for the benefit of creditors.
(g) Bankruptcy, etc.. Borrower (i) shall generally not, or be unable
to, or shall admit in writing its inability to, pay its debts as such debts
become due; (ii) shall make an assignment for the benefit of creditors, petition
or apply to any tribunal for the appointment of a custodian, receiver or trustee
for it or a substantial part of its assets; (iii) shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; (iv) shall have had any such petition or application filed
or any such proceeding shall have been commenced, against it, in which an
adjudication or appointment is made or order for relief is entered, or which
petition, application or proceeding remains undismissed for a period of 30 days
or more; or shall be the subject of any proceeding under which its assets may be
subject to seizure, forfeiture or divestiture; (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; (vi) shall
suffer any such custodianship, receivership or trusteeship to continue
discharged for a period of 30 days or more; or (vii) shall cease to be Solvent.
(h) Judgments. One or more judgments, decrees or orders for the
payment of money in excess of $100,000 in the aggregate shall be rendered
against Borrower, and such judgments, decrees, or orders shall continue
unsatisfied and in effect for a period of 30 consecutive days without being
vacated, discharged, satisfied or stayed or bonded pending appeal.
(i) Forfeiture Proceeding. Any Forfeiture Proceeding shall have been
commenced against Borrower.
9.2. Acceleration. Upon the occurrence and during the continuance of any
Event of Default, without prejudice to the rights of any Lender to enforce its
claims against Borrower and by
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delivery of written notice to Borrower from Agent on behalf of Lenders, all
Obligations shall be immediately due and payable (except with respect to any
Event of Default set forth in Section 9.1(f) or (g) hereof, in which case all
Obligations shall automatically become immediately due and payable without the
necessity of any notice or other demand to Borrower) without presentment,
demand, protest or any other action or obligation of Lenders.
9.3. Remedies.
(a) Upon the occurrence of an Event of Default, Majority Holders may
at any time (unless all defaults shall theretofore have been remedied) at its or
their option, by written notice or notices to the Company (i) declare all the
Notes to be due and payable, whereupon the same shall forthwith mature and
become due and payable, together with interest accrued thereon, without
presentment, demand, protest or notice, all of which are hereby waived; and (ii)
declare any other amounts payable to the Lenders under this Agreement or as
contemplated hereby due and payable.
(b) Notwithstanding anything contained in Section 9.3(a), if, at any
time after the principal of the Notes shall so become due and payable and prior
to the date of maturity stated in the Notes all arrears of principal of and
interest on the Notes (with interest at the rate specified in the Notes on any
overdue principal and, to the extent legally enforceable, on any interest
overdue) shall be paid by or for the account of the Company, then Majority
Holders, by written notice(s) to the Company, may (but shall not be obligated
to) waive such Event of Default and its consequences and rescind or annul such
declaration; but no such waiver shall extend to or affect any subsequent Event
of Default or impair any right resulting therefrom. If any holder of a Note
shall give any notice or take any other action with respect to a claimed
Default, the Company, forthwith upon receipt of such notice or obtaining
knowledge of such other action will give written notice thereof to all other
holders of the Notes then outstanding, describing such notice or other action
and, the nature of the claimed Default.
9.4. Application of Proceeds; Surplus; Deficiencies. The net cash proceeds
resulting from Agent's exercise of any of the foregoing rights against any
Collateral (after deducting all of Lenders' Expenses related thereto) shall be
applied by Agent to the payment of the Obligations, whether due or to become
due, in the order set forth in Section 2.9. Borrower shall remain liable to
Lenders for any deficiencies, and Lenders in turn agree to remit to Borrower or
its successors or assigns, any surplus resulting therefrom.
SECTION 10.
GENERAL PROVISIONS
10.1. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND THE OTHER BRIDGE LOAN DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE BRIDGE LOAN DOCUMENTS, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS (AS
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OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW
YORK.
10.2. SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG BORROWER AND LENDERS,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY
BY STATE AND FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT LENDERS SHALL
HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST
BORROWER OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY LENDERS IN GOOD
FAITH TO ENABLE LENDERS TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF LENDERS. BORROWER AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY LENDERS. BORROWER WAIVES ANY OBJECTION THAT THEY MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH LENDERS HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
10.3. SERVICE OF PROCESS. BORROWER HEREBY IRREVOCABLY AGREES THAT SERVICE
OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER BRIDGE LOAN DOCUMENT MAY BE AFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS RESPECTIVE
ADDRESS SET FORTH IN SECTION 10.6.
10.4. JURY TRIAL. BORROWER, AGENT AND LENDERS EACH HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY.
10.5. LIMITATION OF LIABILITY. NEITHER AGENT NOR ANY OF THE LENDERS SHALL
HAVE ANY LIABILITY TO BORROWER (WHETHER SOUNDING IN TORT, CONTRACT, OR
OTHERWISE) FOR LOSSES SUFFERED BY BORROWER IN CONNECTION WITH, ARISING OUT OF,
OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER
BINDING ON LENDERS, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
10.6. Notices. Except as otherwise provided herein, all notices and
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, or by facsimile transmission, promptly confirmed in
writing sent by first class mail:
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If to any Lender then to Agent, as follows:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ Partners III, ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇ Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
With copies to:
Wolf, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax no. (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower:
▇▇▇▇▇▇ Drug Co., Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax no. (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
St. ▇▇▇▇ & ▇▇▇▇▇ LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax no. (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and correspondence shall be deemed given (i) if sent by
certified or registered mail, three Business Days after being postmarked, (ii)
if sent by overnight delivery service, when received at the above stated
addresses or when delivery is refused and (iii) if sent by telex or facsimile
transmission, when receipt of such transmission is acknowledged.
10.7. Indemnification. Borrower hereby indemnifies and agrees to defend
and hold harmless Agent, each of the Lenders and their respective partners,
directors, officers, agents, employees and counsel from and against any and all
losses, claims, damages, liabilities, deficiencies, judgments or expenses
incurred by any of them (except to the extent that it is finally judicially
determined to have resulted from their own gross negligence or willful
misconduct) arising out of or by reason of (a) any litigations, investigations,
claims or proceedings which arise out of or are in any way related to (i) this
Agreement or the transactions contemplated hereby, (ii) any actual or
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proposed use by Borrower of the proceeds of the Consolidated Bridge Loan or
Lenders entering into this Agreement, the other Bridge Loan Documents or any
other agreements and documents relating hereto, including, without limitation,
amounts paid in settlement, court costs and the fees and disbursements of
counsel incurred in connection with any such litigation, investigation, claim or
proceeding or any advice rendered in connection with any of the foregoing and
(b) any remedial or other action taken by Borrower or Lenders in connection with
compliance by Borrower, or any of its property, with any federal, state or local
environmental laws, acts, rules, regulations, orders, directions, ordinances,
criteria or guidelines.
10.8. Amendments and Waivers. This Agreement may not be amended,
discharged or terminated (or any provision hereof waived) without the written
consent of Borrower and the Lenders as set forth below:
(a) Holders of at least fifty one percent (51%) in aggregate
principal amount of the Notes then outstanding may by written instrument amend
or waive any term or condition of this Agreement, except that no such amendment
or waiver shall (i) except as otherwise permitted in Section 2.3(f) hereof with
respect to voluntary prepayments of the Notes by the Borrower, extend the fixed
maturity of any Notes, the rate or the time of payment or mandatory prepayment
of principal thereof or payment of interest thereon, or the principal amount
thereof, without the consent of the holders of the Notes so affected, (ii)
change the aforesaid percentage of Notes, the holders of which are required to
consent to any such amendment or waiver, without the consent of the holders of
all the Notes then outstanding or (iii) change the percentage of the amount of
the Notes, the holders of which may declare the Notes to be due and payable
under Section 9.1.
Borrower and each holder of a Note then or thereafter outstanding
shall be bound by any amendment or waiver effected in accordance with the
provisions of this Section 10.8, whether or not such Note shall have been marked
to indicate such modification, but any Note issued thereafter shall bear a
notation as to any such modification. Promptly after obtaining the written
consent of the holders herein provided, Borrower shall transmit a copy of such
modification to all of the holders of the Notes then outstanding.
(b) Holders of at least a majority of the Conversion Shares and the
Warrant Shares in the aggregate then outstanding may by written instrument amend
or waive any term or condition of this Agreement relating to the rights or
obligations of holders of Conversion Shares and Warrant Shares, which amendment
or waiver operates for the benefit of such holders but in no event shall the
obligation of any holder of Conversion Shares and Warrant Shares hereunder be
increased, except upon the written consent of such holder of Conversion Shares
and Warrant Shares.
Borrower and each holder of a Conversion Share or a Warrant Share
then or thereafter outstanding shall be bound by any amendment or waiver
effected in accordance with the provisions of this Section 10.8, whether or not
such Conversion Share or Warrant Share shall have been marked to indicate such
modification, but any Conversion Share and Warrant Share issued thereafter shall
bear a notation as to any such modification. Promptly after obtaining the
written consent of the
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holders herein provided, Borrower shall transmit a copy of such modification to
all of the holders of the Conversion Shares and the Warrant Shares then
outstanding.
10.9. Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, Section, subsection,
paragraph, clause, schedule, and exhibit references are to this Agreement unless
otherwise specified. Any reference in this Agreement shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
10.10. Counterparts and Effectiveness. This Agreement and any waiver or
amendment hereto may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a copy hereof
(whether the same or different copies) and shall have delivered the same to
Lenders pursuant to Section 10.6 or shall have given to Lenders written,
telecopied or telex notice (actually received) at such office that the same has
been signed and mailed to it.
10.11. Severability. In case any provision in or obligation under this
Agreement or any Note or the other Bridge Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
10.12. Entire Agreement; Successors and Assigns. This Agreement and the
other Bridge Loan Documents constitute the entire agreement among Borrower and
Lenders, supersedes any prior agreements among them, and shall bind and benefit
Borrower and Lenders and their respective successors and assigns.
10.13 Assignments and Participations.
(a) Each Lender may assign its rights and delegate its obligations
under this Agreement and further may assign, or sell participations in, all or
any part of the Consolidated Bridge Loan, such Lender's Total Commitment or any
other interest herein to an Affiliate or to another Person. In the case of an
assignment authorized under this Section 10.13, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder, shall be deemed to be a Lender for all purposes,
and such assigning Lender shall be relieved of its obligations hereunder with
respect to such Lender's Total Commitment or assigned portion thereof. Borrower
hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a
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"Lender". Any such Lender may furnish any information concerning Borrower and
its Subsidiaries in its possession from time to time to assignees and
participants (including prospective assignees and participants).
(b) The Borrower and the Lenders hereby authorize the Agent to
modify this Agreement by unilaterally amending or supplementing Exhibit A to
reflect the assignment by a Lender of all or any part of its Total Commitment to
any other Lender hereunder or to any Person whatsoever, and to reflect the Total
Commitment of any Person that elects to become a Lender after the date hereof by
extending a new loan to Borrower.
10.14 No Brokers. Each Lender and Borrower represents and warrants to each
other that it has not employed or dealt with any broker in connection with any
transactions contemplated by this Agreement and each of Lender and the Borrower
shall indemnify and hold harmless the other from and against any and all claims
at any time heretofore or hereafter made for broker's or finder's fees or
commissions, which claim or claims arise from, out of, or in connection with any
of the transactions contemplated by this Agreement.
10.15 No Novation. This Agreement amends and restates in its entirety the
Original Bridge Loan Agreement and consolidates the Original Bridge Loan with
the Additional Bridge Loan. Neither this Agreement nor any of the Notes creates
a novation of or in any manner diminishes or extinguishes the unpaid principal
balance of, or the accrued interest on, Borrower's indebtedness to Lenders
originally evidenced by the Original Notes. Such unpaid principal balance of,
and such accrued interest on, such indebtedness continues to be due and owing by
Borrower to Lenders, as of the date hereof, and Borrower hereby reaffirms and
confirms same.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in the state of New York, and delivered by their proper and duly
authorized officers and representatives as of the date set forth above.
Borrower: ▇▇▇▇▇▇ DRUG CO., INC.
By: /s/
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
Lenders: ▇▇▇▇▇ PARTNERS III, L.P.
By: Claudius, L.L.C., General Partner
By: /s/
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
▇▇▇▇▇ PARTNERS INTERNATIONAL III, L.P.
By: Claudius, L.L.C., General Partner
By: /s/
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Member
▇▇▇▇▇ EMPLOYEE FUND III, L.P.
By: Wesson Enterprises, Inc., General Partner
By: /s/
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
/s/
----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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