April 27, 1998
COMMITMENT LETTER
Kos Pharmaceuticals, Inc.
0000 Xxxxxxxx Xxx Xxxxx
00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: President
Re: $30,000,000 Credit Facility
Ladies and Gentlemen:
This letter constitutes the Commitment of the undersigned (the
"Lender") to make available the credit line (the "Loan") to Kos Pharmaceuticals,
Inc., a Florida corporation (the "Borrower"), subject to the terms and
conditions set forth in a Promissory Note, Loan Agreement, and such other
documents as Lender may reasonably require. The terms and conditions of this
Commitment are as follows:
1. LOAN. The Loan will be evidenced by a promissory note in the
principal amount of up to thirty million dollars ($30,000,000) (the
"Note").
2. TERM AND MATURITY. The Borrower may borrow amounts from time to time
under the Loan during the period commencing July 1, 1998 (the
"Commencement Date") and ending June 30, 1999 (the "Termination
Date"). All amounts outstanding under the Loan shall become due and
payable on December 31, 2000 (the "Maturity Date").
3. INTEREST RATE. Through the Maturity Date, so long as there is no
default under the Loan, the Note shall bear interest at a variable
rate equal to the prime rate established by a bank to be agreed upon
by Xxxxxxxx and Lender (the "Prime Rate"), subject to adjustment on
the first banking day of each month through the Maturity Date, on the
principal balance outstanding. In no event shall said rate of
interest exceed the maximum annual rate of interest permitted under
Connecticut Law or Federal Law in the event Federal Law preempts
Connecticut Law or is otherwise applicable. Through the Maturity
Date, interest only, at the above-mentioned variable rate, shall be
due and payable monthly on the seventh business day of each month on
loan funds previously disbursed. In the event of a payment default or
after the Maturity Date, interest shall accrue from the due date of
such payment until such payment default is cured, or until full
payment is received by Lender, at an annual rate of the Prime Rate
plus 6%.
4. REPAYMENT OF LOAN. Through the Maturity Date, interest shall be
computed on the outstanding principal balance for the actual number
of days which have elapsed in an interest period, calculated on the
basis of a 360-day year.
Kos Pharmaceuticals, Inc.
April 27, 1998
Page -2-
Principal amounts outstanding under the Loan from time to time shall
become due and payable on the Maturity Date and may be prepaid in
whole or in part from time to time without penalty.
5. TERMS AND CONDITIONS. This Commitment shall be supplemented by all of
the terms and conditions set forth in the Note, Loan Agreement and
other collateral Loan Documents (as hereinafter defined). The Note
and Loan Agreement shall contain substantially the following:
a. Default: In the event any payment, including any payment of
interest, is not made when due, and such payment is not
made by Borrower within ten (10) days of such due date,
the Loan may be declared in default and the entire
principal balance together with interest thereon may be
accelerated and declared to be immediately due and
payable. In addition, the documentation will provide for
customary events of default. In the case of non-monetary
defaults other than bankruptcy, insolvency and other
uncurable defaults, Lender shall provide Borrower with
prior notice of an event of default and allow Borrower a
thirty (30) day period in which to cure such default.
b. Right to Accelerate: In the event of a Change in Control
of the Borrower, the Lender shall have the right to
accelerate the entire principal balance of the Note
together with interest thereon and declare same to be
immediately due and payable. For purposes of this
condition, a Change in Control shall be deemed to occur
(i) when there is a sale or transfer of all or
substantially all of the assets of Borrower to an
unaffiliated third party, (ii) when Borrower is a party to
merger, consolidation, reorganization, or other
transaction in which the members of the Board of Directors
of Borrower immediately prior to such transaction fail to
constitute at least a majority of the Board of Directors
of the surviving entity following such transaction, or
(iii) upon the occurrence of such other events as Borrower
and Xxxxxx may agree.
c. Prepayment Penalty: There shall be no prepayment penalty
during the term of the Loan.
d. Other Borrower Financing: Except as provided herein or with
the consent of the Lender, Borrower shall not incur any
additional indebtedness secured by a pledge of Borrower's
assets as collateral or with repayment terms senior to those
of Lender under the terms of the Note; provided that
Borrower may incur equipment financing indebtedness and
letters of
Kos Pharmaceuticals, Inc.
April 27, 1998
Page -3-
credit in the ordinary course of business in amounts not
exceeding $100,000 per transaction.
6. ADVANCES.
a. Proceeds from the Loan shall may be utilized by Borrower for
any purpose.
b. Requisitions for advances shall be made directly to the
Lender in writing on at least three business days prior
notice. Other requirements with respect to advances shall be
set forth in the Loan Documents.
c. Any and all costs of recording the Loan Documents,
including, but not limited to, documentary stamps,
intangible tax and recording fees (collectively "Costs")
shall be paid by Borrower at closing and at such other times
as advances are made and monies for the payment of said
Costs are required.
7. CLOSING DOCUMENTS. The following documents ("Loan Documents") shall
be executed and delivered at closing in form and content satisfactory
to Borrower and Lender:
a. Promissory Note in the amount of the Loan, executed by
Xxxxxxxx, made payable to the Lender.
b. Loan Agreement, executed by Xxxxxxxx and Xxxxxx.
c. Counter-signature of this Commitment by Xxxxxxxx.
d. Such other documents as may be required by Xxxxxx.
This Loan shall be closed on or prior to June 30, 1998 ("Closing
Date"). This Commitment shall remain in full force and effect until
June 30, 1998.
8. COSTS. All costs of making and administering this Loan, including,
but not limited to, legal fees (including Xxxxxx's counsel), fees for
advisors in connection with the Loan (including a reasonable fee for
Xxxxxx's advisor), intangible taxes, documentary stamp taxes, and
sales taxes are to be paid by Xxxxxxxx. All out-of-pocket costs
incurred by Xxxxxx will be reimbursed to Lender by Borrower in the
event this Loan is not closed for any reason other than the arbitrary
refusal of Lender.
Kos Pharmaceuticals, Inc.
April 27, 1998
Page -4-
9. MATERIAL ADVERSE CHANGES. At the time of the closing of the Loan
contemplated by this Commitment, there shall be neither any material
adverse change in the operations, management or financial condition
of the Borrower nor any material litigation in effect, pending or
threatened, involving the Borrower.
10. ASSIGNMENT. This Commitment is not assignable and may only be
modified in writing, signed by the parties hereto.
11. GOVERNING LAW. This Commitment shall be governed in its enforcement,
construction and interpretation by the laws of the State of
Connecticut.
12. COMMITMENT LETTER. Any statements, agreements or representations,
oral or written, which may have been made by Lender or by any
employee, agent, or broker acting on Xxxxxx's behalf with respect to
this Commitment, and all prior agreements and representations with
respect to this Commitment and the Loan referred to herein are merged
herein so that this Commitment Letter shall contain the entire
agreement with respect to the Loan.
13. ADDITIONAL FINANCING BY LENDER. The Lender's obligation to fund this
Loan is limited to the principal amount set forth herein and the
Lender is not obligated to fund any additional amounts other than as
set forth herein.
14. BINDING. This Commitment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and/or
assigns, heirs and legal representatives.
15. WAIVERS. Xxxxxxxx's counsel in this matter shall be the law firm of
Holland & Knight LLP and both Borrower and Xxxxxx waive any potential
or actual conflict of interest with respect thereto.
Yours truly,
/s/ Xxxxxxx Xxxxxxx
--------------------
Xxxxxxx Xxxxxxx
Kos Pharmaceuticals, Inc.
April 27, 1998
Page -5-
Agreed to and Accepted:
KOS PHARMACEUTICALS, INC., a Florida corporation
By:
/s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxx X.Xxxxxxx, Senior Vice President
Dated: April 27, 1998
