LOAN AGREEMENT
EXHIBIT
10.1
This
Loan
Agreement (“Agreement”)
is
made as of September 16, 2005 by and among (i) Acura Pharmaceuticals, Inc.,
a
New York corporation (“Company”),
(ii)
Essex Woodlands Health Ventures V, L.P. (“Essex”),
(iii)
Care Capital Investments II, L.P. and Care Capital Offshore Investments II,
L.P.
(collectively “Care
Capital”)
and
(iv) Xxxxx Partners III, L.P., Xxxxx Partners International III, L.P. and
Xxxxx
Employee Fund III, L.P. (collectively
“Xxxxx
and,
together with Essex and Care Capital, the “Lenders”).
In
consideration of the mutual covenants contained in this Agreement and other
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE
I
LOAN;
SECURITY DOCUMENTS
1.1. TERM
LOAN
On
the
terms and subject to the conditions of this Agreement, each Lender severally
agrees to make to the Company on the Closing Date a term loan (each, a
“Loan”)
in a
principal amount equal to such Lender’s Commitment. No amounts paid or prepaid
with respect to any Loan may be reborrowed.
1.2. NOTES
The
Company’s unconditional and absolute obligation to repay to the Lenders the
principal of the Loans and interest thereon shall be evidenced by a promissory
note (each, as the same may be amended, supplemented or otherwise modified
from
time to time in accordance with the terms hereof, and together with any renewals
thereof or substitutions therefor, a “Note”),
in
the form of Exhibit
A
hereto
with appropriate insertions, dated the Closing Date. The date and amount
of each
repayment and prepayment of principal thereon received by a Lender shall
be
recorded by the Lender in its records or, at its option, on the schedule
attached to the Note. The aggregate unpaid principal amount so recorded shall
be
prima facie evidence of the principal amount owing and unpaid on the Note
to the
Lender absent manifest error. The failure to so record any such amount or
any
error in so recording any such amount, however, shall not limit or otherwise
affect the Company’s obligations hereunder or under the Note to repay the
principal amount of the Loan together with all interest accruing
thereon.
1.3. CLOSING
The
closing (the “Closing”)
at
which the Loans shall be disbursed to the Company will take place at the
offices
of St. Xxxx & Xxxxx, L.L.C., Xxx Xxxx Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxx 00000
upon the satisfaction of the conditions to Closing set forth in this Agreement
on the date hereof, or such other place, time and date as shall be mutually
agreed to by the Company and the Lenders. On the date of the Closing (the
“Closing
Date”),
the
Company shall deliver to each Lender a Note, dated the Closing Date, in the
principal amount equal to such Lender’s Commitment. The Company shall deliver
the foregoing Notes against receipt by the Company from each Lender of an
amount
equal to the Commitment of such Lender, in each case by wire transfer in
immediately available funds in U.S. dollars to an account designated by the
Company.
1.4. USE
OF PROCEEDS
The
Company shall apply the proceeds of the Loans to general corporate purposes.
The
Company shall not use any proceeds of the Loans to purchase or carry any
“margin
stock” (as defined in Regulation U promulgated by the Board of Governors of the
Federal Reserve System).
1.5. COMPANY
SECURITY DOCUMENTS
All
of
the obligations of the Company under the Transaction Documents to or for
the
benefit of the Lenders (or their agents and representatives) shall be secured
by
the following items (collectively, the “Company
Collateral”),
each
of which shall be senior and superior to all other liens: (a) a lien on all
the
personal property and assets of the Company now existing or hereinafter acquired
granted pursuant to the Company General Security Agreement, including, without
limitation, a lien on and security interest in all of the issued and outstanding
shares of common stock of the Guarantors pursuant to a separate Stock Pledge
Agreement; and (b) collateral assignments of all leases, contracts, patents,
copyrights, trademarks and service marks of the Company.
1.6. GUARANTIES;
GUARANTOR SECURITY
All
of
the obligations of the Company under the Notes and this Agreement shall be
guaranteed pursuant to the Guaranties by the Guarantors. All of the obligations
of the Guarantors under the Guaranties shall be secured by the following
(collectively, the “Guarantor
Collateral”)
each
of which shall be a lien ranking senior and superior to all other liens:
(a) a
lien on all of the personal property and assets of the respective Guarantors
now
existing or hereinafter acquired, granted pursuant to the Guarantors General
Security Agreement; and (b) collateral assignments of all leases, contracts,
patents, copyrights, trademarks and service marks of the
Guarantors.
ARTICLE
II
REPAYMENT;
PREPAYMENTS; INTEREST
2.1. REPAYMENT
OF THE LOANS
The
Company shall repay the aggregate outstanding principal amount of the Loans,
together with all accrued but unpaid interest thereon, in full on the earlier
of
June 1, 2006 (the
“Maturity
Date”),
or
the date upon which the Loans become or are declared due and payable pursuant
to
Article VII of this Agreement.
2.2. PREPAYMENTS
The
Company shall have the right to prepay the principal amount of a Loan, in
whole
or in part, at any time without penalty or premium. Any prepayment of principal
shall be accompanied by a payment of all interest accrued and unpaid on the
portion of the principal amount being prepaid. In
addition the Company shall, unless the Lenders shall otherwise agree in writing,
prepay the Loans from time to time in an amount equal to the net amounts
received (after satisfaction of associated expenses) by the Company in
connection with any Funding Event immediately upon the Company’s receipt
thereof.
2.3. INTEREST
(a) The
Loans
shall bear interest on the outstanding principal amount thereof at a rate
of ten
percent (10%) per annum from the Closing Date. All accrued interest on each
Loan
shall be payable in arrears on the last day of each calendar quarter; provided
that (i) interest accrued pursuant to Section 2.3(b) shall be payable on
demand,
and (ii) in the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable on the
date
of such repayment or prepayment. All computations of interest shall be made
on
the basis of a year of 360 days, and actual days elapsed.
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(b) Notwithstanding
the rate of interest specified above, after an Event of Default and during
the
continuance thereof (regardless of whether the Loans have been accelerated),
the
Company agrees to pay interest (after as well as before judgment to the extent
permitted by applicable law) on all unpaid principal, interest or other amounts
owing under the Transaction Documents, at a rate of thirteen percent (13%)
per
annum. Unpaid interest on such amounts will continue to accrue and will (to
the
extent permitted by applicable law) be compounded daily.
2.4. USURY
Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable
to
a Loan, together with all fees, charges and other amounts which are treated
as
interest on the Loan under applicable law shall exceed the maximum lawful
rate
(the “Maximum
Rate”)
which
may be contracted for, charged, taken, received or reserved by the Lenders
in
accordance with applicable law, the rate of interest payable in respect of
such
Loan hereunder, together with all charges payable in respect thereof, shall
be
limited to the Maximum Rate.
ARTICLE
III
CONDITIONS
TO CLOSING
The
obligation of each Lender to make its Loan at the Closing is subject to the
fulfillment to such Lender’s satisfaction on or prior to the Closing Date of
each of the following conditions, unless otherwise waived by such
Lender:
3.1. REPRESENTATIONS
AND WARRANTIES CORRECT; NO DEFAULT
The
representations and warranties of the Company set forth in Article IV hereof
shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and
as
of the Closing Date. No Event of Default, or any other event which, with
the
giving of notice, the lapse of time, or both, would constitute an Event of
Default, shall have occurred and be continuing on the date of this Agreement
or
on the Closing Date.
3.2. PERFORMANCE
All
covenants, agreements and conditions contained in this Agreement to be performed
or complied with by the Company on or prior to the Closing Date shall have
been
performed or complied with by the Company.
3.3. NO
IMPEDIMENTS
None
of
the Company, or any of the Guarantors, or any Lender shall be subject to
any
order, decree or injunction of a court or administrative or governmental
body or
agency of competent jurisdiction directing that the transactions provided
for in
the Transaction Documents or any material aspect thereof not be consummated
as
contemplated by the Transaction Documents. There shall not be any action,
suit,
proceeding, complaint, charge, hearing, inquiry or investigation before or
by
any court or administrative or governmental body or agency pending or, to
the
Company’s best knowledge, threatened, wherein an unfavorable order, decree or
injunction would prevent the performance of any of the Transaction Documents
or
the consummation of any material aspect of the transactions or events
contemplated thereby, declare unlawful any aspect of the transactions or
events
contemplated by the Transaction Documents, cause any material aspect of the
transactions contemplated by the Transaction Documents to be rescinded or
have a
Material Adverse Effect.
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3.4. OTHER
AGREEMENTS AND DOCUMENTS
The
Company shall have executed and delivered to each Lender this Agreement,
issued
to such Lender its Note, and the Company and each of the Guarantors, as
applicable, shall have executed and delivered the following agreements and
documents:
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(a)
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the
Company General Security Agreement;
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(b)
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the
Guaranties;
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(c)
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the
Guarantors Security Agreement;
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(d)
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the
Stock Pledge Agreement;
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(e)
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a
secretary’s certificate of the Company, (i) attaching a certified copy of
the Certificate of Incorporation and current bylaws of the Company
and
certifying the same as not having been amended and as being in
being in
full force and effect, (ii) attaching and certifying resolutions
by the
Board of Directors approving the execution, delivery and performance
of
the Transaction Documents and the transactions contemplated thereby,
and
(iii) certifying as to the incumbency, and attaching specimen signatures
of, the officers or representatives of the Company signing the
Transaction
Documents to which the Company is a
party;
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(f)
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a
secretary’s certificate of each of the Guarantors, (i) attaching a
certified copy of the certificate of incorporation and current
bylaws of
such Guarantor and certifying the same as not having been amended
and as
being in being in full force and effect, (ii) attaching and certifying
resolutions by the board of directors of such Guarantor approving
the
execution, delivery and performance of the Transaction Documents
and the
transactions contemplated thereby, and (iii) certifying as to the
incumbency, and attaching specimen signatures of, the officers
or
representatives of such Guarantor signing the Transaction Documents
to
which such Guarantor is a party;
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(g)
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a
Certificate of Good Standing and Tax Status from the state of
incorporation of the Company and each Guarantor and from every
state in
which any of them is qualified to do business;
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(h)
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the
IP Collateral Assignments; and
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(i)
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Financing
Statements with respect to all personal property and assets of
the Company
and each Guarantor.
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3.5. CONSENTS
The
Company shall have obtained all necessary consents or waivers, if any, from
all
parties governmental and private to any other material agreements to which
the
Company is a party or by which it is bound immediately prior to the Closing
in
order that the transactions contemplated by the Transaction Documents may
be
consummated.
3.6. PROCEEDINGS
AND OTHER DOCUMENTS
All
corporate and other proceedings taken or required to be taken by the Company
and
any Guarantor in connection with the transactions contemplated by this Agreement
and the other Transaction Documents to be consummated prior to the Closing
shall
have been taken, and the Lenders shall have received such other documents,
in
form and substance reasonably satisfactory to the Lenders and their counsel,
as
to such other matters incident to the transactions contemplated hereby as
the
Lenders may reasonably request.
3.7. OPINION
OF COUNSEL
The
Lenders shall have received the opinion of St. Xxxx & Xxxxx, L.L.C., counsel
to the Company, dated the Closing Date, substantially in the form of
Exhibit
B
attached
hereto.
3.8. INDEPENDENT
COMMITTEE OF BOARD OF DIRECTORS
The
Company’s independent committee of the Board of Directors (the “Independent
Committee”)
shall
deliver to each of the Lenders the Independent Committee’s resolutions approving
the execution, delivery and performance of the Transaction Documents to which
the Company is a party and the transactions contemplated thereby, each in
form
and substance reasonably acceptable to the Lenders.
3.9. SUBORDINATION
AGREEMENT
The
holders of the Senior Note and the holders of the June 2005 Notes shall have
entered into a subordination agreement, in form and substance acceptable
to the
Lenders, pursuant to which all liens (and all other interests in collateral)
securing the Company’s obligations under the Senior Note, the Xxxxxx Term Loan,
the June 2005 Notes and the June 2005 Bridge Loan shall be fully subordinated
to
the liens (and other interests in collateral) securing the Loans.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
As
a
material inducement to each Lender to enter into and perform its obligations
under this Agreement, except as set forth in the Schedule of Exceptions,
the
Company hereby represents and warrants to each Lender as follows:
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4.1. ORGANIZATION
AND EXISTENCE
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of New York and is qualified to do business in such other
jurisdictions as the nature or conduct of its operations or the ownership
of its
properties require such qualification. The Company does not own or lease
any
property or engage in any activity in any jurisdiction that might require
qualification to do business as a foreign corporation in such jurisdiction
and
where the failure to so qualify could reasonably be expected to have a Material
Adverse Effect or subject the Company to a material liability. The Company
has
furnished the Lenders with true, correct and complete copies of its Certificate
of Incorporation, By-Laws and all amendments thereto, as of the date
hereof.
4.2. SUBSIDIARIES
AND AFFILIATES
Section
4.2
of the
Schedule of Exceptions sets forth the name, jurisdiction of incorporation
and
authorized and outstanding capitalization of each Subsidiary. Except as
disclosed in Section
4.2
of the
Schedule of Exceptions, all of the outstanding shares of capital stock of
each
of the Subsidiaries are duly and validly authorized, are validly issued and
are
fully paid and nonassessable and have been offered, issued, sold and delivered
in compliance with applicable federal and state securities laws. Except as
set
forth in Section
4.2
of the
Schedule of Exceptions, the Company has, and upon the Closing will have,
no
Subsidiaries and will not own of record or beneficially any capital stock
or
equity interest or investment in any corporation, association or business
entity. Except as disclosed in Section
4.2
of the
Schedule of Exceptions, each Subsidiary is a corporation duly organized,
validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry
on
its business as now conducted and proposed to be conducted. Except as set
forth
in Section
4.2
of the
Schedule of Exceptions, no Subsidiary owns or leases any property or engages
in
any activity in any jurisdiction which might require such Subsidiary to qualify
to do business as a foreign corporation in such jurisdiction and where the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect or subject such Subsidiary to a material liability.
4.3. CAPITALIZATION
As
of the
date hereof, the Company’s authorized capital stock consists of (i) 650,000,000
shares of Common Stock, of which 23,187,688 shares
are outstanding and approximately 362,848,081 shares
are reserved for issuance for the purposes set forth in Section
4.3
of the
Schedule of Exception, and (ii) 290,000,000 shares of Preferred Stock, of
which
(1) 45,000,000 shares are Series A Preferred, (2) 25,000,000 shares are Series
B
Preferred, (3) 70,000,000 shares are Series C-1 Preferred, (4) 50,000,000
shares
are Series C-2 Preferred and (5) 100,000,000 shares are Series C-3 Preferred.
Set forth in Section
4.3
of the
Schedule of Exceptions is a complete and correct list, as of the Closing
Date,
of the number of shares of Common Stock held by the Company’s public
stockholders generally, stockholders holding in excess of 5% of the Company’s
Common Stock and all holders of Preferred Stock, options, warrants, debentures
and other securities convertible or exercisable for Common Stock. Such schedule
is complete and correct in all material respects. All the issued and outstanding
shares of capital stock of the Company are (i)
duly
authorized and validly issued, (ii)
fully
paid and nonassessable and (iii)
have
been offered, issued, sold and delivered by the Company in compliance with
applicable federal and state securities laws.
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4.4. AUTHORIZATION
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(a)
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Each
of the Company and the Guarantors has all requisite corporate power
and
authority (1)
to
execute and deliver, and to perform and observe their respective
obligations under, the Transaction Documents to which it is a respective
party, and (2)
to
consummate the transactions contemplated hereby and thereby, including,
without limitation, the grant of any security interest, mortgage,
payment
trust, guaranty or other security arrangement by the Company in,
on or in
respect of the Company Collateral, and by any and all of the Guarantors
in, on or in respect of the Guarantor
Collateral.
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(b)
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All
corporate action on the part of (i) the Company and the directors
and,
except as set forth in Section
4.4(b)
of
the Schedule of Exceptions, the stockholders of the Company necessary
for
the authorization, execution, delivery and performance by the Company
of
the Transaction Documents and the transactions contemplated therein,
and
for the authorization, issuance and delivery of the Notes, has
been taken
and (ii) each Guarantor and their respective directors and stockholders
necessary for the authorization, execution,
delivery and performance by each Guarantor of the Guarantors General
Security Document, the Guaranties and the transactions contemplated
therein or in any other Transaction Document with respect to the
Guarantors, has been taken.
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4.5. BINDING
OBLIGATIONS; NO MATERIAL ADVERSE CONTRACTS
The
Transaction Documents constitute valid and binding obligations of the Company
and the Guarantors enforceable in accordance with their respective terms.
Except
as set forth in Section
4.5
of the
Schedule of Exceptions, the execution, delivery and performance by the Company
and the Guarantors of the Transaction Documents and compliance therewith
will
not result in any violation of and will not conflict with, or result in a
breach
of any of the terms of, or constitute a default, or accelerate or permit
the
acceleration of any rights or obligations, under, any provision of state,
local,
federal or foreign law to which the Company or either of the Guarantors is
subject, the Certificate of Incorporation, as amended, or the By-Laws, as
amended, of the Company or either of the Guarantors, or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Company or either of the Guarantors is a party or
by
which it is bound, and except for Permitted Liens, result in the creation
of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties
or
assets of the Company or either of the Guarantors pursuant to any such term.
No
stockholder of the Company or either Guarantor has or will have any preemptive
rights or rights of first refusal by reason of the issuance of the Notes.
4.6. COMPLIANCE
WITH INSTRUMENTS
Neither
the Company nor any Subsidiary (a) is in violation of its organizational
documents, (b) is in default, and no event has occurred which, with the giving
of notice, or the lapse of time, or both, would constitute such a default,
in
the due performance or observance of any term, covenant or condition contained
in any material agreement, including, without limitation, any license, indenture
or other instrument to which it is a party or by which it is bound or to
which
any of its property or assets is subject or (c) is in violation of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property may be subject (including without limitation any Legal Requirements
relating to the biotechnology and pharmaceutical industry) except for (x)
such
defaults and violations set forth in Section
4.6
of the
Schedule of Exceptions, and (y) such violations under clause (b) and (c)
that
would not, individually or in the aggregate, have a Material Adverse Effect.
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4.7. LITIGATION
Except
as
set forth in Section
4.7
of the
Schedule of Exceptions, there are no actions, suits or proceedings (including
governmental or administrative proceedings), investigations, third-party
subpoenas or inquiries by any regulatory agency, body or other governmental
authority, to which the Company or any of the Subsidiaries is a party or
is
subject, or to which any of their authorizations, consents and approvals
or
other properties or assets, is subject, which is pending, or, to the best
knowledge of the Company, threatened or contemplated against the Company
or any
Subsidiary, or any of such property or assets, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
The
Company is not subject to any actions, suits or proceedings (including
governmental or administrative proceedings), investigation, third-party
subpoenas or inquiries by any regulatory agency, body or other governmental
authority or any third Person regarding its accounting practices or policies.
4.8. FINANCIAL
INFORMATION; SEC DOCUMENTS
(a) The
Company has furnished to the Lenders complete and correct copies of the
consolidated financial statements of the Company and its Subsidiaries, including
consolidated balance sheets as of December 31, 2004 and 2003 and consolidated
statements of operations, changes in cash flows and stockholders’ equity,
covering the three years ended December 31, 2004, all of which statements
have
been certified by BDO Xxxxxxx LLP or Xxxxx Xxxxxxxx LLP, independent accountants
within the meaning of the Securities Act and the rules and regulations
thereunder, and all of which statements are included or incorporated by
reference in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 filed with the SEC under the Exchange Act. Such financial
statements have been prepared in conformity with GAAP applied on a consistent
basis throughout the periods involved, except as otherwise stated therein
and
fairly present the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and their consolidated results of
operations for such periods. Except as previously disclosed to the Lenders
in
writing, the Company’s auditors have raised no material issues nor delivered any
material correspondence with respect to any of the Company’s financial
statements or financial affairs.
(b) The
Company has also furnished to the Lenders the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of June 30, 2005 and the related
unaudited consolidated statements of operations, consolidated statements
of cash
flow and consolidated statements of stockholders’ equity for the six months
ended June 30, 2005. Such financial statements were prepared in conformity
with
GAAP applied on a basis consistent with the financial statements referred
to in
Section 4.8(a) and fairly present the consolidated financial position of
the
Company and its Subsidiaries as of such date and their consolidated results
of
operations for such periods (subject to normal year-end
adjustments).
(c) None
of
the documents filed by the Company with the SEC since December 31, 2003 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 are no facts which the Company has not disclosed in
the
Company Reports or disclosed to the Lenders which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
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(d) Except
as
set forth in Section
4.8
of the
Schedule of Exceptions or in the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005, subsequent to December 31, 2004, (i) none of
the
Company or any Guarantor has incurred any liability or obligations, direct
or
indirect, or entered into any transactions not in the ordinary course of
business, in either case which is material to the Company or any Guarantor,
as a
whole, (ii) there has not been any material change in the short-term debt
or
long-term debt of any of the Company or any Guarantor and (iii) there has
been
no material change in the Company’s accounting principles.
(e) Except
as
set forth in Section
4.8
of the
Schedule of Exceptions or in the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005, since December 31, 2004, there has been no Material
Adverse Effect with respect to the Company and its Subsidiaries.
4.9. OFFERING
EXEMPTION
(a) None
of
the Company, its Affiliates or any Person acting on its or their behalf has
engaged or will engage, in connection with the offering and sale of the Notes,
in any form in general solicitation or general advertising within the meaning
of
Rule 502(c) under the Securities Act, and none of the Company, or any of
its
Affiliates has, directly or indirectly, solicited any offer to buy, sell
or
offer to sell or otherwise negotiate in respect of, in the United States
or to
any United States citizen or resident, any security which is or would be
integrated with the sale of the Notes in a manner that would require the
Notes
to be registered under the Securities Act. The offering, sale and issuance
of
the Notes have been, are, and will be exempt from registration under the
Securities Act, and such offering, sale and issuance is also exempt from
registration under applicable state securities and “blue sky” laws.
(b) None
of
the Company or any Guarantor is, or upon consummation of the transactions
contemplated under the Transaction Documents, will be, subject to registration
as an “investment company” under the 1940 Act.
4.10. PERMITS;
GOVERNMENTAL AND OTHER APPROVALS
(a) Other
than as set forth in Section
4.10
of the
Schedule of Exceptions or in the Company Reports, each of the Company and
its
Subsidiaries possesses all necessary consents, approvals, authorizations,
orders, registrations, stamps, filings, qualifications, licenses, permits
or
other analogous acts by, of, from or with all public, regulatory or governmental
agencies, bodies and authorities and all other third parties, to own, lease
and
operate its respective properties and to carry on its business as now conducted
and proposed to be conducted except to the extent that the failure to obtain
any
such consents, approvals, authorizations, orders, registrations, stamps,
filings, qualifications, licenses or permits would not have a Material Adverse
Effect. Other than as set forth in Section
4.10
of the
Schedule of Exceptions, no approval, consent, authorization or other order
of,
and no designation, filing, registration, qualification or recording with,
any
governmental authority or any other Person is required in connection with
the
Company’s valid execution, delivery and performance of this Agreement or the
offer, issuance and sale of the Notes by the Company to the Lenders or the
consummation of any other transaction contemplated on the part of the Company
hereby.
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(b) Without
limiting the generality of the representations and warranties made in Section
4.10(a), the Company represents and warrants that (i)
it and
the Guarantors are in compliance with all applicable provisions of the FDC
Act,
except where any such noncompliance could not reasonably be expected to have
a
Material Adverse Effect; (ii)
its
products and those of the Guarantors are not adulterated or misbranded and
are
in lawful distribution; (iii)
the
consent agreement entered into by the Company with the United States Attorney
for the Eastern District of New York on behalf of the FDA on June 29, 1993
has
been terminated; and (iv)
it and
the Guarantors are, and will be, in compliance with the following specific
requirements: (A) Acura Pharmaceutical Technologies, Inc. has registered
its
facility with the FDA, (B) the Company and the Guarantors have listed their
drug
products with the FDA, (C) each drug product marketed by the Company or any
Guarantor is the subject of an application approved by the FDA, (D) all drug
products marketed by the Company or either Guarantor comply with any conditions
of approval and the terms of the application submitted to the FDA, (E) all
of
the Company’s and the Guarantors’ drug products are manufactured in compliance
with the FDA’s good manufacturing practice regulations, (F) all of the Company’s
and the Guarantors’ products are labeled and promoted in accordance with the
terms of the marketing application and the provisions of the FDC Act, (G)
all
adverse events relating to the Company and the Guarantors that were required
to
be reported to the FDA have been reported to the FDA in a timely manner,
(H)
to
the Company’s best knowledge, neither the Company nor any Guarantor is employing
or utilizing the services of any individual who has been debarred under the
FDC
Act, (I) all stability studies required to be performed for products distributed
by the Company or a Guarantor have been completed or are ongoing in accordance
with the applicable FDA requirements, (J) to the best of the Company’s
knowledge, none of the Company’s or a Guarantor’s products have been exported
for sale outside the United States, and (K) each of the Company and the
Guarantors is in compliance with the provisions of the Prescription Drug
Marketing Act, to the extent applicable; except, with respect to subclauses
(iv)(E), (iv)(G), (iv)(J) and (iv)(K) above, where any such noncompliance
could
not reasonably be expected to have a Material Adverse Effect.
(c) Without
limiting the generality of the representations and warranties made in Section
4.10(a), the Company also represents and warrants that it and the Guarantors
are
in compliance with all applicable provisions of the CSA and that the Company
and
the Guarantors are in compliance with the following specific requirements,
except where such noncompliance could not reasonably be expected to have
a
Material Adverse Effect: (i) the Company and the Guarantors are registered
with
the DEA at each facility where controlled substances are exported, imported,
manufactured or distributed; (ii) all controlled substances are stored and
handled pursuant to DEA security requirements; (iii) all records and inventories
of receipt and distributions of controlled substances are maintained in the
manner and form as required by DEA regulations; (iv) all reports, including,
but
not limited to, XXXXX, manufacturing quotas, production quotas, and disposals,
have been submitted to the DEA in a timely manner; (v) all adverse events,
including thefts or significant losses of controlled substances, have been
reported to the DEA in a timely manner; (vi) to the Company’s best knowledge,
neither the Company nor any Guarantor is employing any individual, with access
to controlled substances, who has previously been convicted of a felony
involving controlled substances; and (vii) any imports or exports of controlled
substances have been conducted in compliance with the CSA and DEA
regulations.
10
4.11. SALES
REPRESENTATIVES; CUSTOMERS AND KEY EMPLOYEES
(a) Except
as
set forth in Section
4.11
of the
Schedule of Exceptions, to the best knowledge of the Company, no independent
sales representatives, customers, officers or key employees or group of key
employees of the Company or any Guarantor has any intention to terminate
his,
her or its relationship with the Company or such Guarantor on or after the
Closing or, in the case of employees, leave the employ of the Company or
any of
the Guarantors on and after the Closing, nor has the Company or any of the
Guarantors discussed or taken any steps to terminate the employment of any
officer or key employee or group of key employees. Other than as set forth
in
Section
4.11
of the
Schedule of Exceptions or in the Company Reports, all personnel of the Company
and any of the Guarantors are employed on an “at will” basis and may be
terminated upon notice of not more than 30 days.
(b) To
the
Company’s best knowledge, no employee of the Company or any of the Guarantors,
or any consultant (including any scientific advisor) with whom the Company
or
any of the Guarantors has contracted, is in violation of any term of any
employment contract, proprietary information agreement, licenses, or any
other
agreement relating to the right of any such
individual to be employed by, or to contract with, the Company or any of
the
Guarantors because of the nature of the business conducted by the Company
and
the Guarantors; and the continued employment by the Company or any of the
Guarantors of their present employees, and the performance of the Company’s and
the Guarantor’s contracts with its independent contractors, will not result in
any such violation, except where any such violation could not reasonably
be
expected to have a Material Adverse Effect. None of the Company or any of
the
Guarantors has received any written, or to the best knowledge of the Company,
oral notice alleging that any such violation has occurred.
(c) All
of
the Company’s and any of the Guarantor’s consultants (including scientific
advisors), officers and key employees are subject to customary non-disclosure
and non-competition agreements.
4.12. COPYRIGHTS,
TRADEMARKS AND PATENTS; LICENSES
(a) Section
4.12
of the
Schedule of Exceptions sets forth a list of all of the Company’s and any
Guarantor’s Intellectual Property Rights. The Intellectual Property Rights are,
to the best of the Company’s knowledge, fully valid and are in full force and
effect; provided, that the Company makes no representation as to whether
any
pending patent applications will be allowed.
(b) The
Company or a Guarantor owns outright all of the Intellectual Property Rights
listed on Section
4.12
of the
Schedule of Exceptions attached hereto free and clear of all liens and
encumbrances except for the Permitted Liens, and does not pay, and is not
required to pay, any royalty to anyone under or with respect to any of
them.
(c) Neither
the Company nor any Guarantor has licensed anyone to use any of such
Intellectual Property Rights and has no knowledge of, nor has it received
any
notice relating to, the infringing use by the Company or any Guarantor of
any
Intellectual Property Rights.
(d) Except
as
otherwise disclosed to the Company’s Board of Directors, the Company has no
knowledge, nor has it received any notice (i) of any conflict with the asserted
rights of others with respect to any Intellectual Property Rights used in,
or
useful to, the operation of the business conducted by the Company and the
Guarantors or with respect to any license under which the Company or a Guarantor
is licensor or licensee; or (ii) that the Intellectual Property Rights infringe
upon the rights of any third party.
11
(e) Except
as
set forth in Section
4.12
of the
Schedule of Exceptions, neither the Company nor any Guarantor is a party
to any
license agreement pursuant to which the Company is the licensor or licensee
of
any Intellectual Property Rights.
4.13. INVENTORY
The
Company and its Subsidiaries do not maintain any material
inventory.
4.14. NO
DISCRIMINATION; LABOR MATTERS
Neither
the Company nor any Guarantor in any manner or form discriminates, fosters
discrimination or permits discrimination against any Person based on gender
or
age, or belonging to any minority race or believing in any minority creed
or
religion. No charge of discrimination in employment, whether by reason of
age,
gender, race, religion or other legally protected category that has been
asserted or is now pending or, to the best knowledge of the Company and the
Guarantors, threatened before the United States Equal Employment Opportunity
Commission or other federal or governmental authorities. The Company and
each
Guarantor is in compliance with all applicable Legal Requirements respecting
employment practices, terms and conditions of employment and wages and hours
and
is not and has not engaged in any unfair labor practice. The Company and
each
Guarantor has withheld and paid to the appropriate governmental authorities
or
is holding for payment not yet due to governmental authorities, all amounts
required to be withheld from such employees of the Company or the Guarantors
and
is not liable for any arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing. Except as set forth in Section
4.14
of the
Schedule of Exceptions, in connection with the operation of the Company’s and
each Guarantor’s business, (a) there is no unfair labor practice charge or
complaint against the Company or any Guarantor pending before the National
Labor
Relations Board or any other governmental agency arising out of the Company’s or
any Guarantor’s activities and the Company has no knowledge, nor has it received
notice of any facts or information that would give rise thereto; (b) there
is no
significant labor trouble, labor strike, material controversy, material
unsettled grievance, dispute, request for representation, slowdown or stoppage
actually pending against or affecting the Company or any of the Guarantors
and,
to the best knowledge of the Company, none is or has been threatened; and
(c)
none of the Company or any of the Guarantors has any collective bargaining
agreements with respect to any personnel nor is the Company aware of any
current
attempts to organize or establish any labor union or employee association
with
respect to any personnel, nor is there any certification, interim certifications
or voluntary recognition of any such union with regard to a bargaining unit.
4.15. ENVIRONMENTAL
MATTERS
(a) Without
limiting the generality of the representations and warranties given in
Section
4.10(a),
each of
the Company and the Subsidiaries has obtained all environmental, health and
safety permits, licenses and other authorizations necessary or required for
the
operation of its business, except where the failure to possess such franchises,
licenses, permits or other authority could not reasonably be expected to
have a
Material Adverse Effect, and all such permits, licenses and other authorizations
are in full force and effect and each of the Company and, except as set forth
in
Section
4.15
of the
Schedule of Exceptions, the Subsidiaries is in compliance with all terms
and
conditions of such permits, except where such noncompliance could not reasonably
be expected to have a Material Adverse Effect.
12
(b) There
is
no proceeding pending or, to the best knowledge of the Company, threatened,
which may result in the denial, rescission, termination, modification or
suspension of any environmental or health or safety permits, licenses or
other
authorizations necessary for the operation of the business of the Company
and
the Subsidiaries.
(c) During
the occupancy by the Company or any Subsidiary of any real property owned
or
leased by the Company or such Subsidiary, neither the Company nor any
Subsidiary, and to the best knowledge of the Company, no other Person, has
caused or permitted materials to be generated, released, stored, treated,
recycled, disposed of on, under or at such parcels, which materials, if known
to
be present, would require cleanup, removal or other remedial or responsive
action under any environmental Legal Requirements. To the best knowledge
of the
Company, there are no underground storage tanks and no PCB, PCB contaminated
oil
or asbestos on any property leased by the Company or any
Subsidiary.
(d) Except
as
set forth in Section
4.15
of the
Schedule of Exceptions, neither the Company nor any Subsidiary is subject
to any
judgment, decree, order or citation related to or arising out of environmental
Legal Requirements, or has received notice that it has been named or listed
as a
potentially responsible party by any Person in any matter arising under
environmental Legal Requirements.
(e) To
the
Company’s best knowledge, each of the Company and the Subsidiaries has disposed
of all waste in full compliance with all environmental Legal
Requirements.
4.16. TAXES
The
Company and each of the Guarantors have (a) filed all necessary income,
franchise and other material tax returns, domestic and foreign, (b) paid
all
taxes shown as due thereunder and (c) withheld and paid to the appropriate
tax
authorities all amounts required to be withheld from wages, salaries and
other
remuneration to employees. The Company has no knowledge, nor has it received
notice, of any tax deficiency which might be assessed against the Company
or any
Guarantor which, if so assessed, could reasonably be expected to have a Material
Adverse Effect.
4.17. EMPLOYEE
BENEFIT PLANS AND SIMILAR ARRANGEMENTS
(a) Section
4.17
of the
Schedule of Exceptions and the Company Reports list all employee benefit
plans
and collective bargaining, labor and employment agreements or other similar
arrangements in effect to which the Company, the Guarantors, and any of their
respective ERISA Affiliates are a party or by which the Company, the Guarantors,
and any of respective ERISA Affiliates are bound, legally or otherwise,
including, without limitation, (i) any profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement; (ii) any
plan,
agreement or arrangement providing for fringe benefits or perquisites to
employees, officers, directors or agents, including but not limited to benefits
relating to employer-supplied automobiles, clubs, medical, dental,
hospitalization, life insurance and other types of insurance, retiree medical,
retiree life insurance and any other type of benefits for retired and terminated
employees; (iii) any employment agreement; or (iv) any other “employee benefit
plan” (within the meaning of Section 3(3) of ERISA) (herein referred to
individually as “Plan”
and
collectively as “Plans”).
13
(b) True
and
complete copies of the following documents with respect to any Plan of the
Company, its Subsidiaries, and each ERISA Affiliate, as applicable, have
been
made available to each of the Lenders: (i) the most recent Plan document
and
trust agreement (including any amendments thereto and prior plan documents,
if
amended within the last two years), (ii) the last two Form 5500 filings and
schedules thereto, (iii) the most recent IRS determination letter, (iv) all
summary plan descriptions, (v) a written description of each material
non-written Plan, (vi) each written communication to employees intended to
describe a Plan or any benefit provided by such Plan, (vii) the most recent
actuarial report, and (viii) all correspondence with the IRS, the Department
of
Labor and the PBGC concerning any controversy. Each report described in clause
(vii) accurately reflects the funding status of the Plan to which it relates
and
subsequent to the date of such report there has been no adverse change in
the
funding status or financial condition of such Plan.
(c) Each
Plan
is and has been maintained in compliance with applicable Legal Requirements,
including but not limited to ERISA and the Code, and with any applicable
collective bargaining agreements or other contractual obligations.
(d) With
respect to any 412 Plan, there has been no failure to make any contribution
or
pay any amount due as required by Section 412 of the Code, Section 302 of
ERISA
or the terms of any such Plan, and no funding waiver has been requested or
received from the IRS. The assets of the Company, its Subsidiaries, or any
ERISA
Affiliates are not now, nor will they after the passage of time be, subject
to
any lien imposed under Section 412(n) of the Code by reason of a failure
of the
Company, any Subsidiary, or any ERISA Affiliate to make timely installments
or
other payments required under Section 412 of the Code.
(e) No
Plan
subject to Title IV of ERISA has any Unfunded Pension Liability.
(f) Except
as
shown on Section
4.17
of the
Schedule of Exceptions, there are no pending, or to the best knowledge of
the
Company, its Subsidiaries, and ERISA Affiliates, threatened
claims, investigations, actions or lawsuits, other than routine claims for
benefits in the ordinary course, asserted or instituted against (i) any Plan
or
its assets, (ii) any ERISA Affiliate with respect to any 412 Plan, or (iii)
any
fiduciary with respect to any Plan for which the Company, its Subsidiaries,
or
any ERISA Affiliate may be directly or indirectly liable, through
indemnification obligations or otherwise.
(g) Except
as
set forth in Section
4.17
of the
Schedule of Exceptions, none of the Company, any Subsidiary, or any ERISA
Affiliate has incurred and or reasonably expects to incur (i) any Withdrawal
Liability and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in Withdrawal Liabilities, or any liability
under Section 4063, 4064, or 4243, or (ii) any outstanding liability under
Title
IV of ERISA with respect to any 412 Plan.
(h) Except
as
shown on Section
4.17
of the
Schedule of Exceptions, within the last five years, none of the Company,
any
Subsidiary or any ERISA Affiliate has transferred any assets or liabilities
of a
412 Plan subject to Title IV of ERISA which had, at the date of such transfer,
an Unfunded Pension Liability or has engaged in a transaction which may
reasonably be subject to Section 4212(c) or Section 4069 of ERISA.
14
(i) None
of
the Company, any Subsidiary, or any ERISA Affiliate has engaged, directly
or
indirectly, in a non-exempt prohibited transaction (as defined in Section
4975
of the Code or Section 406 of ERISA) in connection with any Plan.
(j) No
“reportable event” (within the meaning of Section 4043 of ERISA) has occurred
with respect to any Plan.
(k) Neither
the Company nor any of its Subsidiaries provides, or has provided, retiree
welfare benefits for the benefit of any present or former employee or
director.
(l) Neither
the Company nor any of its Subsidiaries has made any commitment or any formal
plan to create any additional Plan or to modify or terminate (except to the
extent required by applicable law) any existing Plan.
(m) Neither
the Company nor any of its Subsidiaries is a party to any plan, agreement
or
arrangement pursuant to the terms of which the consummation or announcement
of
any transaction contemplated by this Agreement will result (either alone
or in
connection with the occurrence of any additional or further acts or events)
in
any benefit under any Plan being established or becoming accelerated or
immediately vested and payable.
(n) The
provisions of Section 280G of the Code will not apply with respect to any
payment made or to be made pursuant to or in connection with any
Plan.
4.18. PERSONAL
PROPERTY
The
Company and the Guarantors have good and marketable title to each item of
equipment, machinery, furniture, fixtures, vehicles, structures and other
personal property, tangible and intangible, included as an asset in the
Financial Statements filed as part of the Company Reports, free and clear
of any
security interests, options, liens, claims, charges or encumbrances whatsoever,
except as set forth in Section
4.18
of the
Schedule of Exceptions and as disclosed in the Company General Security
Agreement and the Guarantors General Security Agreement.
4.19. REAL
PROPERTY
(a) The
Company and the Guarantors do not own any fee simple interest in real property
other than as set forth in Section
4.19
of the
Schedule of Exceptions (the “Owned
Property”).
The
Company and the Guarantors do not lease or sublease any real property other
than
as set forth on Schedule
4.19
(the
“Leased
Property”).
The
Company has made available for inspection by the Lenders true and complete
copies of all Leases. The Company and each Guarantor enjoys a peaceful and
undisturbed possession of the Owned Property and Leased Property. No Person
other than the Company or any Guarantor has any right to use or occupy any
part
of the Owned Property and the Leased Property. Except as set forth in
Section
4.19
of the
Schedule of Exceptions, the Leases are valid, binding and in full force and
effect, all rent and other sums and charges payable thereunder are current,
no
notice of default or termination under any of the Leases is outstanding,
no
termination event or condition or uncured default on the part of the Company
or,
to the best of the Company’s knowledge, on the part of the landlord,
sublandlord, as the case may be, thereunder, exists under the Leases, and
no
event has occurred and no condition exists which, with the giving of notice,
or
the lapse of time, or both, would constitute such a default or termination
event
or condition. There are no subleases, licenses or other agreements granting
to
any Person other than the Company or the Guarantors any right to possession,
use, occupancy or enjoyment of the Premises demised by the Leases. Each Owned
Property and Leased Property is used in the conduct of the Company’s or the
Guarantors’ business.
15
(b) Without
limiting the generality of the representations and warranties given in
Section
4.10(a),
all
required permits, licenses, franchises, approvals and authorizations of all
governmental authorities having jurisdiction over each Leased Property and
from
all insurance companies and fire rating and other similar boards and
organizations have been issued to the Company and the Guarantors to enable
each
Leased Property or Owned Property to be lawfully occupied and used for all
the
purposes for which they are currently occupied and used and have been lawfully
issued and are in full force and effect, except where the failure to possess
such permits, licenses, franchises, approvals and authorizations, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse
Effect.
(c) Neither
the Company nor the Guarantors have received any notice nor have they any
knowledge of any pending, threatened or contemplated condemnation proceeding
affecting any Leased Property or the Owned Property or any part
thereof.
4.20. DISCLOSURE
The
information heretofore provided and to be provided in connection with this
Agreement, including, without limitation, the Schedule of Exceptions and
the
Exhibits hereto, the Transaction Documents and each of the agreements,
documents, certificates and writings previously furnished to the Lenders
or
their representatives, do not and will not contain any untrue statement of
a
material fact and do not and will not omit to state a material fact necessary
in
order to make the statements and writings contained herein and therein not
false
or misleading in the light of the circumstances under which they were made.
There are no facts that (individually or in the aggregate) could reasonably
be
expected to have a Material Adverse Effect, which has not been set forth
herein
or in the Schedule of Exceptions or the Company Reports.
4.21. INSURANCE
(a) Each
of
the Company and the Guarantors maintains, with financially sound and reputable
insurers, insurance against loss or damage by theft, fire, explosion and
other
risks customarily insured against by companies in the line of business of
the
Company or the Guarantors, in amounts sufficient to prevent the Company or
the
Guarantors from becoming a co-insurer of the property insured as well as
insurance against other hazards and risks and liability to Persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated or as may be required by law, including, without limitation,
general liability, fire and business interruption insurance, and product
liability insurance as may be required pursuant to any license agreement
to
which the Company or the Guarantors is a party or by which it is
bound.
(b) The
Company maintains D&O Insurance as detailed in Section
4.21(b)
of the
Schedule of Exceptions, which D&O Insurance is in full force and effect and
as to which the Company has not received any notice of default, termination,
change in terms, change in coverage or similar notice.
16
4.22. NON-COMPETES
Except
as
set forth in Section
4.22
of the
Schedule of Exceptions, and as contemplated by Section
4.11(c),
the
Company and its Subsidiaries are not subject to any non-compete or similar
arrangements with any Persons that restrict or may restrict the Company and
its
Subsidiaries from carrying on its business as now conducted and as it is
proposed to be conducted.
4.23. PRODUCT
WARRANTY
Except
as
set forth in Section
4.23
of the
Schedule of Exceptions, or as reflected or reserved against in the Financial
Statements, (a) to the knowledge of the Company, each product manufactured
by
the Company or any Subsidiary has been in material conformity with all
applicable contractual commitments of the Company or any Subsidiary, and
(b) no
product currently manufactured by the Company or any Subsidiary is subject
to
any guaranty, warranty or indemnity of a contractual nature other than the
applicable standard terms and conditions, if any, applicable to the sale
or
delivery of such product.
4.24. MINUTE
BOOKS
The
Company and the Subsidiaries have made accurate and complete copies of their
minute books available for inspection by the Lenders.
ARTICLE
V
AFFIRMATIVE
COVENANTS
The
Company hereby covenants and agrees, so long as any Note remains outstanding,
as
follows:
5.1. MAINTENANCE
OF CORPORATE EXISTENCE; PROPERTIES AND LEASES; TAXES;
INSURANCE
(a) The
Company shall, and shall cause each of the Guarantors to, maintain in full
force
and effect its corporate existence, rights and franchises and all terms of
licenses and other rights to use licenses, trademarks, trade names, service
marks, copyrights, patents, processes or any other Intellectual Property
Rights
owned or possessed by it and necessary to the conduct of its business, except
where failure to maintain such rights, franchises and terms of licenses and
other rights to use such Intellectual Property Rights could not reasonably
be
expected to have a Material Adverse Effect.
17
(b) The
Company shall, and shall cause the Guarantors to, keep each of its properties
necessary to the conduct of its business in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make
all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company shall, and shall cause the Guarantors to, at all
times
comply with each provision of all leases to which it is a party or under
which
it occupies property, except where any such noncompliance could not reasonably
be expected to have a Material Adverse Effect.
(c) The
Company shall, and shall cause each of the Guarantors to, (i) promptly pay
and
discharge, or cause to be paid and discharged when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, assets, property or business of the Company and the Guarantors,
(ii)
withhold and promptly pay to the appropriate tax authorities all amounts
required to be withheld from wages, salaries and other remuneration to
employees, and (iii) promptly pay all claims or indebtedness (including,
without
limitation, claims or demands of workmen, materialmen, vendors, suppliers,
mechanics, carriers, warehousemen and landlords) which, if unpaid might become
a
lien upon the assets or property of the Company or the Guarantors; provided,
however,
that
any such tax, lien, assessment, charge or levy need not be paid if (1) the
validity thereof shall be contested timely and in good faith by appropriate
proceedings, (2) the Company or the Guarantors shall have set aside on its
books
adequate reserves with respect thereto, and (3) the failure to pay shall
not be
prejudicial in any material respect to the holders of the Notes, and
provided further that
the
Company or the Guarantors will pay or cause to be paid any such tax, lien,
assessment, charge or levy forthwith upon the commencement of proceedings
to
foreclose any lien which may have attached as security therefore. Except
to the
extent prohibited by Article VI of this Agreement, the Company shall, and
shall
cause the Guarantors to, pay or cause to be paid all other indebtedness incident
to the operations of the Company or the Guarantors.
(d) The
Company shall, and shall cause each of the Guarantors to, keep its assets
which
are of an insurable character insured by financially sound and reputable
insurers against loss or damage by theft, fire, explosion and other risks
customarily insured against by companies in the line of business of the Company
or the Guarantors, in amounts sufficient to prevent the Company or the
Guarantors from becoming a co-insurer of the property insured; and the Company
shall, and shall cause the Guarantors to, maintain, with financially sound
and
reputable insurers, insurance against other hazards and risks and liability
to
Persons and property to the extent and in the manner customary for companies
in
similar businesses similarly situated or as may be required by law, including,
without limitation, general liability, fire and business interruption insurance,
and product liability insurance as may be required pursuant to any license
agreement to which the Company or the Guarantors is a party or by which it
is
bound.
5.2. BASIC
FINANCIAL INFORMATION
The
Company shall furnish the following reports to each Lender, so long as it
is a
holder of a Note:
(a) as
soon
as practicable, but in any event within 90 days after the end of each fiscal
year of the Company, (i) audited balance sheets of the Company as at the
end of
such year, together with audited statements of income and retained earnings
and
statements of cash flows of the Company for such year, together with notes
related thereto, each prepared in accordance with GAAP, consistently applied,
and setting out in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by certified independent
public accountants of established national reputation, and (ii) a report
of the
principal financial officer of the Company containing a management discussion
and analysis of the Company’s consolidated financial condition at the end of
such year and the results of operations for such year, including, but not
limited to, a description of significant events with respect to the Company
and
its Subsidiaries, if any, during the preceding year and any planned or
anticipated significant activities or events during the upcoming
months;
18
(b) as
soon
as practicable, but in any event within 45 days after the end of each of
the
first three fiscal quarters of the Company in each year, (i) an unaudited
balance sheet at the end of such quarter, and unaudited statements of income,
of
profit and loss and of changes in financial condition of the Company (including
cash flow statements) for such period and for the current fiscal year to
date,
in each case prepared in accordance with GAAP, consistently applied (other
than
for accompanying notes and subject to changes resulting from year-end audit
adjustments), and (ii) a report of the principal financial officer of the
Company containing a management discussion and analysis of the Company’s
consolidated financial condition at the end of such quarter and the results
of
operations for such quarter and the year to date, including, but not limited
to,
a description of significant events with respect to the Company and its
Subsidiaries, if any, during such periods and any planned or anticipated
significant activities or events during the upcoming months; and
(c) with
reasonable promptness such other information and financial data concerning
the
Company as any Person entitled to receive materials under this Section 5.2
may
reasonably request.
5.3. NOTICE
OF ADVERSE CHANGE
The
Company shall promptly give notice to all Lenders (but in any event within
two
days) after becoming aware of the existence of any condition or event which
constitutes, or the occurrence of, any of the following:
(a) any
Event
of Default or any default that with the passage of time or the giving of
notice
would constitute an Event of Default;
(b) the
institution or threatening of institution of any action, suit or proceeding
against the Company or any Subsidiary before any court, administrative agency
or
arbitrator, including, without limitation, any action of a foreign government
or
instrumentality, which, if adversely decided, could reasonably be expected
to
have a Material Adverse Effect;
(c) any
information relating to the Company or any Subsidiary which could reasonably
be
expected to have a Material Adverse Effect; or
(d) any
failure by the Company or any of its Subsidiaries to comply with the provisions
of Section 5.4 below.
Any
notice given under this Section 5.3 shall specify the nature and period of
existence of the condition, event, information, development or circumstance,
the
anticipated effect thereof and what actions the Company or any Guarantor,
as the
case may be, has taken and proposes to take with respect thereto.
19
5.4. COMPLIANCE
WITH AGREEMENTS; COMPLIANCE WITH LAWS
The
Company shall, and shall cause its Subsidiaries to, comply with the terms
and
conditions of all material agreements, commitments or instruments to which
the
Company or any of its Subsidiaries is a party or by which it or they may
be
bound. The Company shall, and shall cause each of its Subsidiaries to, duly
comply with any Legal Requirements relating to the conduct of their respective
businesses, properties or assets, including, but not limited to, the
requirements of the FDA Act, the Prescription Drug Marketing Act, the CSA,
ERISA, the Environmental Protection Act, the Occupational Safety and Health
Act,
the Foreign Corrupt Practices Act, the Xxxxxxxx-Xxxxx Act of 2002 and the
rules
and regulations of each of the agencies administering such acts, in each
case
except for any such noncompliance that could not reasonably be expected to
have
a Material Adverse Effect.
5.5. PROTECTION
OF LICENSES
The
Company shall, and shall cause its Subsidiaries to, maintain, defend and
protect
to the best of their ability licenses and sublicenses (and to the extent
the
Company or a Subsidiary is a licensee or sublicensee under any license or
sublicense, as permitted by the license or sublicense agreement), trademarks,
trade names, service marks, patents and applications therefore and other
proprietary information or Intellectual Property Rights owned or used by
it or
them and shall keep duplicate copies of any licenses, trademarks, service
marks
or patents owned or used by it, if any, at a secure place selected by the
Company.
5.6. ACCOUNTS
AND RECORDS; INSPECTIONS
(a) The
Company shall keep true records and books of account in which full, true
and
correct entries will be made of all dealings or transactions in relation
to the
business and affairs of the Company and its Subsidiaries in accordance with
GAAP
applied on a consistent basis.
(b) The
Company shall permit each Lender or any of such Lender’s officers, employees or
representatives during regular business hours of the Company, upon reasonable
notice and as often as such Lender may reasonably request, to visit and inspect
the offices and properties of the Company and its Subsidiaries and to make
extracts or copies of the books, accounts and records of the Company or its
Subsidiaries, and to discuss the affairs, finances and accounts of the Company
and its Subsidiaries, with the Company’s (or Subsidiary’s) directors and
officers, its independent public accountants, consultants and
attorneys.
(c) Nothing
contained in this Section 5.6 shall be construed to limit any rights that
a
Lender may have with respect to the books and records of the Company and
its
Subsidiaries, to inspect its properties or to discuss its affairs, finances
and
accounts.
(d) The
Company will retain an Approved Accounting Firm to audit the Company’s financial
statements at the end of each fiscal year. In the event the services of an
Approved Accounting Firm or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter request the firm of independent public
accountants whose services are terminated to deliver to the Lenders a letter
of
such firm setting forth its understanding as to the reasons for the termination
of their services and whether there were, during the two most recent fiscal
years or such shorter period during which said firm had been retained by
the
Company any disagreements between them and the Company on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. In its notice, the Company shall state whether the change
of
accountants was recommended or approved by the Board of Directors or any
committee thereof. In the event of such termination, the Company will promptly
thereafter engage another Approved Accounting Firm.
20
5.7. MAINTENANCE
OF OFFICE
The
Company will maintain its principal office at the address of the Company
set
forth in Section 10.4 of this Agreement where notices, presentments and demands
in respect of this Agreement and any of the Notes may be made upon the Company,
until such time as the Company shall notify the Lenders in writing, at least
30
days prior thereto, of any change of location of such office.
5.8. FURTHER
ASSURANCES
From
time
to time the Company shall execute and deliver to the Lenders such other
instruments, certificates, agreements and documents and take such other action
and do all other things as may be reasonably requested by the Lenders in
order
to implement or effectuate the terms and provisions of this Agreement and
the
transactions contemplated hereby.
5.9. SEC
REPORTS
The
Company will file, on a timely basis, any SEC Reports and keep all such SEC
Reports and public information current. The Company agrees that none of the
SEC
Reports filed by the Company will, at the time of filing, contain any untrue
statement of a material fact or omit to state any material fact required
to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not
misleading.
5.10. COLLATERAL
With
respect to all Company Collateral and Guarantor Collateral, the Company shall
(and shall cause the Guarantors to) take all actions necessary to preserve
and
protect the Lenders’ first priority security interest therein pursuant to the
applicable Transaction Documents or otherwise.
5.11. MINIMUM
CASH
The
Company shall maintain at all times cash or cash deposits in an amount of
at
least Two Hundred Thousand Dollars ($200,000).
ARTICLE
VI
NEGATIVE
COVENANTS
The
Company hereby covenants and agrees, so long as any Note remains outstanding,
it
will not (and not allow any of the Guarantors to), directly or indirectly,
without the prior written consent of the Lenders:
21
6.1. STAY,
EXTENSION AND USURY LAWS
At
any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law wherever enacted, now or
at
any time hereinafter in force, which may affect the covenants or the performance
of the Notes or this Agreement, the Company hereby expressly waiving all
benefit
or advantage of any such law, or by resort to any such law, hinder, delay
or
impede the execution of any power herein granted to the Lenders but will
suffer
and permit the execution of every such power as though no such law had been
enacted.
6.2. LIENS
Except
as
otherwise provided in this Agreement or any other Transaction Document, create,
incur, assume or permit to exist any mortgage, pledge, lien, security interest
or encumbrance on any part of its properties or assets, or on any interest
it
may have therein, now owned or hereafter acquired, nor acquire or agree to
acquire property or assets under any conditional sale agreement or title
retention contract, except that the foregoing restrictions shall not apply
to:
(a) 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
therefore;
(b) 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 that are being contested in good faith and provided
that an
adverse decision in such contest would not materially affect the business
of the
Company;
(c) liens
securing the Company’s obligations under (i) the Senior Note and the Xxxxxx Term
Loan, and (ii) the June 2005 Notes and the June 2005 Bridge Loan;
(d) 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 faith by appropriate proceedings, so long as
reserves or other appropriate provisions, if any, as shall be required by
GAAP,
shall have been made for any such contested amounts;
(e) 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);
(f) any
attachment or judgment lien not otherwise constituting an Event of Default,
or
an event which, with the giving of notice, the lapse of time, or both, would
not
otherwise constitute an Event of Default;
(g) easements,
rights-of-way, restrictions, encroachments, and other minor defects or
irregularities in title, in each case which do not and will not interfere
with
the ordinary conduct of the business of the Company or any of its Subsidiaries,
except where such interference could not reasonably be expected to have a
Material Adverse Effect;
22
(h) 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;
(i) 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;
(j) 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;
(k) liens
securing obligations (other than obligations representing Indebtedness for
borrowed money) under operating, reciprocal easement or similar agreements
entered into in the ordinary course of business of the Company and its
Subsidiaries;
and
(l) the
replacement, extension or renewal of any lien permitted by this Section 6.2
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.
6.3. INDEBTEDNESS
Create,
incur, assume, suffer, permit to exist, or guarantee, directly or indirectly,
any Indebtedness, excluding:
(a) the
endorsement of instruments for the purpose of deposit or collection in the
ordinary course of business;
(b) Indebtedness
which may, from time to time be incurred or guaranteed by the Company which
in
the aggregate principal amount does not exceed $500,000 and is subordinate
to
the Indebtedness under this Agreement on terms reasonably satisfactory to
the
Lenders;
(c) Indebtedness
existing on the date hereof and described in Section 6.3
of the
Schedule of Exceptions;
(d) Indebtedness
relating to contingent obligations of the Company and its Subsidiaries under
guaranties in the ordinary course of business of the obligations of suppliers,
customers, and licensees of the Company and its Subsidiaries;
(e) Indebtedness
relating to loans from the Company to its Subsidiaries or Indebtedness owed
to
any of the Guarantors;
(f) Indebtedness
relating to capital leases in an amount not to exceed $500,000;
(g) Indebtedness
relating to a working capital line of credit in an amount not to exceed
$5,000,000 and which is subordinate to the Indebtedness under this Agreement
on
terms reasonably satisfactory to the Lenders;
23
(h) accounts
or notes payable arising out of the purchase of merchandise or services in
the
ordinary course of business; or
(i) the
Notes.
6.4. ARM’S
LENGTH TRANSACTIONS
Enter
into any transaction, contract or commitment or take any action other than
at
Arm’s Length.
6.5. LOANS
AND ADVANCES
Except
for loans and advances outstanding as of the Closing Date and set forth in
Section
6.5
of the
Schedule of Exceptions, directly or indirectly, make any advance or loan
to, or
guarantee any obligation of, any Person, except for intercompany loans or
advances in the ordinary course of business and those provided for in this
Agreement.
6.6. INTERCOMPANY
TRANSFERS; TRANSACTIONS WITH AFFILIATES; DIVERSION OF CORPORATE
OPPORTUNITIES
(a) Make
any
intercompany transfers of monies or other assets in any single transaction
or
series of transactions, except as otherwise permitted in this
Agreement.
(b) Engage
in
any transaction with any of the officers, directors, employees or Affiliates
of
the Company or of its Subsidiaries, except on terms no less favorable to
the
Company or the Subsidiary as could be obtained at Arm’s Length.
(c) Divert
(or permit anyone to divert) any business or opportunity of the Company or
any
Subsidiary to any other corporate or business entity.
6.7. INVESTMENTS
Make
any
investments in, or purchase any stock, option, warrant, or other security
or
evidence of Indebtedness of, any Person (exclusive of any Subsidiary), other
than obligations of the United States Government or certificates of deposit
or
other instruments maturing within one year from the date of purchase from
financial institutions with capital in excess of $100 million, in each case
which are pledged to the Lenders (or their agent) in a manner that is acceptable
to the Lenders and that results in a perfected first priority security interest
in favor of the Lenders (or their agent).
6.8. OTHER
BUSINESS
Enter
into or engage, directly or indirectly, in any business other than the business
currently conducted or proposed to be conducted as disclosed to the Lenders
prior to the date hereof by the Company or any Subsidiary.
6.9. EMPLOYEE
BENEFIT PLANS AND COMPENSATION
Except
as
otherwise approved by the Board, or by a committee thereof to whom the Board
has
delegate such authority, (a) enter into or materially amend any agreement
to
provide for or otherwise establish any written or unwritten employee benefit
plan, program or other arrangement of any kind, covering current or former
employees of the Company or its Subsidiaries except for any such plan, program
or arrangement expressly permitted under an existing agreement listed in
Section
4.17
the
Schedule of Exceptions or in the Company Reports; or (b) provide for or agree
to
any material increase in any benefit provided to current or former employees
of
the Company or its Subsidiaries over that which is provided to such individuals
pursuant to a plan or arrangement disclosed in Section
4.17
of the
Schedule of Exceptions or in the Company Reports.
24
6.10. CAPITAL
EXPENDITURES
Other
than for capital expenditures approved by the Company’s Board of Directors, make
or commit to make, or permit any of its Subsidiaries to make or commit to
make,
any capital expenditures in excess of $25,000 in the aggregate during any
fiscal
year of the Company.
6.11. FORMATION
OF SUBSIDIARIES
Organize
or invest, or permit any Subsidiary to organize or invest, in any new
corporation, partnership, joint venture, limited liability company, trust
or
estate of which (or in which) (a) more than 50% of the issued and outstanding
capital stock having ordinary voting power to elect a majority of the board
of
directors of such corporation (irrespective of whether at the time capital
stock
of any other class of such corporation shall or might have voting power upon
the
occurrence of any contingency), the interest in the capital or profits of
such
partnership, joint venture or limited liability company or the beneficial
interest in such trust or estate, is at the time directly or indirectly owned
or
controlled by the Company, any of its Subsidiaries or any of their respective
officers or directors, or (b) a material minority investment in any such
entity
is directly or indirectly owned or controlled by the Company, any of its
Subsidiaries or any of their respective officers or directors.
6.12. CERTAIN
PAYMENTS
Make
any
cash payments of principal or interest with respect to any Indebtedness (other
than the Loans or as expressly provided for in the Budget), without the prior
written consent of the Lenders, which consent shall be within their sole
and
absolute discretion.
ARTICLE
VII
EVENTS
OF DEFAULT
7.1. EVENTS
OF DEFAULT
If
any of
the following events shall occur and be continuing, an “Event
of Default”
shall
be deemed to have occurred:
(a) if
the
Company shall default in the payment of any part of the principal or interest
of
any Note, when the same shall become due and payable, whether at maturity
or at
a date fixed for payment or prepayment or by acceleration or
otherwise;
(b) if
the
Company shall default in the performance of any of the covenants contained
in
Articles V or VI
and, in
a case of a default under Section 5.1 through and including Section 5.7
(exclusive of Section 5.1(c)), such default shall have continued without
cure
for fifteen (15) days after written notice (“Default
Notice”)
is
given to the Company with respect to such covenant by any holder of the Notes
(and the Company shall give to all of the holders of the Notes at the time
outstanding prompt written notice of the receipt of such Default Notice,
specifying the default referred to therein); provided,
however,
that
such 15 day grace period shall not apply in the event the Company fails to
give
notice as provided in Section 5.3;
25
(c) except
as
provided in Section 7.1(b), if the Company or any of the Guarantors shall
default in the performance of any other agreement contained in any Transaction
Document or in any other agreement executed in connection with this Agreement
and such default shall not have been remedied to the satisfaction of the
Lenders
within 15 days after notice thereof shall have been given to the Company;
provided,
however,
that
such 15 day grace period shall not apply in the event the Company fails to
give
notice as provided in Section 5.3;
(d) if
any
representation or warranty made by the Company, any Guarantor or any of their
officers in any Transaction Document or in or any certificate delivered pursuant
thereto shall prove to have been incorrect in any material respect when
made;
(e) if
(i)
any default shall occur under any indenture, mortgage, agreement, instrument
or
commitment evidencing, or under which there is at the time outstanding, any
Indebtedness of the Company or a Subsidiary, in excess of $250,000, or which
results in such Indebtedness, in an aggregate amount (with other defaulted
Indebtedness) in excess of $250,000 becoming (or being declared by its holders
or, on its behalf, by an agent or trustee therefore to be) due and payable
prior
to its due date; (ii) irrespective of the monetary thresholds specified in
subclause (i) above, if any default, event of default or any other condition
shall occur or exist under the Xxxxxx Term Loan or the June 2005 Bridge Loan
which shall be continuing after the respective grace period, if any, specified
in the Xxxxxx Term Loan or the June 2005 Bridge Loan, and the effect of which
is
to permit the acceleration of the maturity of the Indebtedness outstanding
thereunder; (iii) a
Change
of Control shall have occurred; or (iv) a Funding Event shall have occurred
without the simultaneous prepayment in full of the Loans pursuant to Section
2.2
above;
(f) if
any of
the Company or its Subsidiaries shall default in the observance or performance
of any term or provision of an agreement to which it is a party or by which
it
is bound which default could reasonably be expected to have a Material Adverse
Effect and such default is not waived or cured within the applicable grace
period;
(g) if
a
final judgment which, either alone or together with other outstanding final
judgments against the Company and its Subsidiaries, exceeds an aggregate
of
$250,000 shall be rendered against the Company or any Subsidiary and such
judgment shall have continued undischarged or unstayed for 45 days after
entry
thereof;
(h) if
the
Company or any Subsidiary shall generally not pay its debts as such debts
become
due or shall make an assignment for the benefit of creditors generally, or
shall
admit in writing its inability to pay its debts generally; or if any proceeding
shall be instituted by or against the Company or any Subsidiary seeking to
adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition
of it
or its debts under any law relating to bankruptcy, insolvency or the
reorganization or relief of debtors, or seeking entry of an order for relief
or
the appointment of a receiver, trustee, custodian or other similar official
for
it or for any substantial part of its property and, in the case of such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall remain
undismissed or unstayed for a period of 45 days or any of the actions sought
in
such proceeding (including, without limitation, the entry of an order for
relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall occur; or
if any
writ of attachment or execution or any similar process shall be issued or
levied
against it or any substantial part of its property which is either not released,
stayed, bonded or vacated within 45 days after its issue or levy or any of
the
actions sought or relief sought in any proceeding pursuant to which such
writ or
similar process shall be issued or initiated shall occur or be granted; or
if
the Company or any Subsidiary takes corporate action in furtherance of any
of
the aforesaid purposes or conditions;
26
(i) if
any
provision of any Transaction Document shall for any reason cease to be valid
and
binding
on, or
enforceable
against,
the Company or any Guarantor, or the Company or any Guarantor shall so assert
in
writing; or
(j) any
Transaction Document (or any financing statement) which purports:
(i) to
create, perfect or evidence a lien on or security interest in any Company
Collateral or Guarantor Collateral in favor of the Lenders (or their agents
and
representatives), or to provide for the priority of any such lien or security
interest over the interest of any other party in the same Collateral, shall
cease to create, or to preserve the enforceability, perfection or priority
of,
such lien and security interest; or
(ii) to
provide for the priority in right of payment of the Company’s obligations under
the Transaction Documents to or in favor of the Lenders (or their agents
or
representatives) shall cease to preserve such priority.
7.2. REMEDIES
Upon
the
occurrence and during the continuance of an Event of Default, any Lender
or
Lenders of 60% of the then outstanding principal amount of the Loans 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 (a) 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 by the Company; and (b)
declare any other amounts payable to the Lenders under this Agreement or
as
contemplated hereby due and payable; provided,
however,
that
upon the occurrence of an Event of Default under Section 7.1(h), the Notes,
together with interest accrued thereon, shall automatically become and be
due
and payable, without presentment, demand, protest or notice of any kind,
or any
other action of any Lender of any kind, all of which are hereby waived by
the
Company.
Notwithstanding
anything to the contrary contained in this Section 7.2, in the event that
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 an
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 the holder
or
holders of sixty percent (60%) of the then outstanding principal amount of
the
Loans, by written notice or notices 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 a right resulting therefrom. If any
holder
of the Note shall give any notices or take any other action with respect
to a
claimed default, the Company, forthwith upon receipt of such notice or obtaining
knowledge of any such other action, will give notice thereof to all other
holders of the Notes, describing such notice or other action and the nature
of
the claimed default.
27
7.3. ENFORCEMENT
In
case
any one or more Events of Default shall occur and be continuing, the Lenders
or
their agent may proceed to protect and enforce the rights of the Lenders
(granted to them or to their agent) by an action at law, suit in equity or
other
appropriate proceeding, whether for the specific performance of any agreement
in
favor of the Lenders or their agent which is contained in any of the Transaction
Documents or in such Note or for an injunction against a violation of any
of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law (including, without limitation, the right to enforce
the
Company Collateral, the Guaranties and the Guarantor Collateral, each in
accordance with its respective terms). Each Lender agrees that it will give
written notice to the other Lenders prior to instituting any such action.
In
case of a default in the payment of any principal of or interest on any Note,
the Company will pay to the holder thereof such further amount as shall be
sufficient to cover the cost and the expenses of collection, including, without
limitation, reasonable attorney’s fees, expenses and disbursements. No course of
dealing and no delay on the part of any Lender or their agent in exercising
any
rights shall operate as a waiver thereof or otherwise prejudice such Lender’s or
their agent’s rights. No right conferred hereby or by any Note upon any holder
thereof shall be exclusive of any other right referred to herein or therein
or
now available at law or in equity, by statute or otherwise.
ARTICLE
VIII
INDEMNIFICATION
To
the
greatest extent permitted by applicable law, the Company agrees to indemnify
each Lender, its Affiliates and respective legal counsel, and each of the
officers, directors, partners and stockholders of each, against and hold
it
harmless from all Losses arising out of or resulting from: (i) the breach
of any
representation or warranty of the Company in any Transaction Document or
in any
agreement, certificate or instrument delivered pursuant thereto; and (ii)
the
breach of any agreement by the Company contained in any Transaction Document
or
any agreement, certificate of instrument delivered pursuant
thereto.
ARTICLE
IX
AMENDMENT
AND WAIVER
No
amendment of any provision of this Agreement, including any amendment of
this
Article IX, shall be valid unless the same shall be in writing and signed
by the
Company (and the Independent Committee) and the Lenders. No waiver by any
party
of any default, misrepresentation, or breach of warranty or covenant hereunder
or under any other Transaction Document, whether intentional or not, shall
be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or thereunder or affect in any way
any
rights arising by virtue of any prior or
subsequent such occurrence.
28
ARTICLE
X
MISCELLANEOUS
10.1. GOVERNING
LAW
This
Agreement and the rights of the parties hereunder shall be governed in all
respects by the laws of the State of New York wherein the terms of this
Agreement were negotiated, excluding to the greatest extent permitted by
law any
rule of law that would cause the application of the laws of any jurisdiction
other than the State of New York.
10.2. SUCCESSORS
AND ASSIGNS
Except
as
otherwise expressly provided herein, the provisions hereof shall inure to
the
benefit of, and be binding upon and enforceable by and against, the parties
hereto and their respective successors, assigns, heirs, executors and
administrators. No party may assign any of its rights hereunder without the
prior written consent of the other parties; provided,
however,
that
any Lender may assign any of its rights under any of the Transaction Documents
to (a) any Affiliate of such Lender or (b) any Person to whom such Lender
shall
transfer its Note, provided,
that in
each case the transferee will be subject to the applicable terms of the
Transaction Documents to the same extent as if such transferee were an original
Lender hereunder.
10.3. ENTIRE
AGREEMENT
This
Agreement (including the Exhibits and Schedules hereto), the other Transaction
Documents and any other documents delivered pursuant hereto and simultaneously
herewith constitute the full and entire understanding and agreement between
the
parties with regard to the subject matter hereof and thereof.
10.4. NOTICES
All
notices, demands or other communications given hereunder shall be in writing
and
shall be sufficiently given if transmitted by facsimile or delivered either
personally or by a nationally recognized courier service marked for next
business day delivery or sent in a sealed envelope by first class mail, postage
prepaid and either registered or certified, return receipt requested, addressed
as follows:
(a) if
to the
Company:
000
X.
Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxx 00000
Attention:
Xx. Xxxxxx X. Xxxxxxx
President
and Chief Executive Officer
Facsimile:
(000) 000-0000
29
(b) if
to a
Lender, to the address set forth on the signature page hereto,
or to
such other address with respect to any party hereto as such party may from
time
to time notify (as provided above) the other parties hereto. Any such notice,
demand or communication shall be deemed to have been given (i) on the date
of
delivery, if delivered personally, (ii) on the date of facsimile transmission,
receipt confirmed, (iii) one business day after delivery to a nationally
recognized overnight courier service, if marked for next day delivery, or
(iv)
five business days after the date of mailing, if mailed.
(c) Copies
of
any notice, demand or communication given to the Company shall also be delivered
to St. Xxxx & Xxxxx, L.L.C., Xxx Xxxx Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxx,
00000-0000 Attn.: Xxxx X. Xxxxxx, Esq., or such other address as may be
directed.
10.5. DELAYS,
OMISSIONS OR WAIVERS
No
delay
or omission to exercise any right, power or remedy accruing to any Lender
upon
any breach or default of the Company under this Agreement shall impair any
such
right, power or remedy of such Lender nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence, therein, or of or in any
similar breach or default thereafter occurring. Any permit, consent or approval
of any kind or character on the part of any Lender of any breach or default
under this Agreement must be made in writing and shall be effective only
to the
extent specifically set forth in such writing. All remedies, either under
this
Agreement or by law or otherwise afforded to any Lender, shall be cumulative
and
not alternative. Notwithstanding anything set forth herein or in any Transaction
Document, if the consent of or the waiver by any Lender is needed or otherwise
desirable under any Transaction Document and the Company, or any Affiliate
thereof, pays or other gives consideration to any Lender, or an Affiliate
thereof, for such consent or waiver the Company shall offer the same to all
other Lenders.
10.6. INDEPENDENCE
OF COVENANTS AND REPRESENTATIONS AND WARRANTIES
All
covenants hereunder shall be given independent effect so that if a certain
action or condition constitutes a default under a certain covenant, the fact
that such action or condition is permitted by another covenant shall not
affect
the occurrence of such default. In addition, all representations and warranties
hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact
that
another representation or warranty concerning the same or similar subject
matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder.
10.7. RIGHTS
AND OBLIGATIONS; SEVERABILITY
Unless
otherwise expressly provided herein, each Lender’s rights and obligations
hereunder are several rights and obligations, not rights and obligations
jointly
held with any other Person. In case any provision of this Agreement shall
be
invalid, illegal or unenforceable, the validity, legality and enforceability
of
the remaining provisions shall not in any way be affected or impaired
thereby.
30
10.8. AGENT’S
FEES
The
Company hereby (a) represents and warrants that the Company has not retained
a
finder or broker in connection with the transactions contemplated by this
Agreement and (b) agrees to indemnify and to hold the Lenders harmless of
and
from any liability for commission or compensation in the nature of an agent’s
fee to any broker or other Person, and the costs and expenses of defending
against such liability or asserted liability, including, without limitation,
reasonable attorney’s fees, arising from any act by the Company or any of the
Company’s employees or representatives.
10.9. EXPENSES
(a) The
Company shall bear its own expenses and legal fees incurred on its behalf
with
respect to the negotiation, execution and consummation of the transactions
contemplated by this Agreement, and, subject to Section 10.9(b) the Company
will
reimburse each Lender for all of the legal fees and expenses incurred by
such
Lender’s counsel with respect to the negotiation, execution and consummation of
the transactions contemplated by this Agreement and the transactions
contemplated hereby; provided, however, that the Company’s reimbursement
obligation under this Section 10.9(a) shall not exceed Ten Thousand Dollars
($10,000) in
the
aggregate.
(b) If
the
Loans are not disbursed, then each party shall bear its own expenses and
legal
fees incurred on its behalf with respect to the negotiation, execution and
consummation of the transactions contemplated by this Agreement.
(c) The
Company also agrees to reimburse each Lender for all reasonable legal fees
and
expenses subsequently incurred by such Lender or its agent and their respective
Affiliates in connection with the negotiation, execution and consummation
of any
amendment, waiver or consent with respect to any agreement to which the Company
and the Lender or its agent are parties; provided, that such waiver, amendment
or consent (i) is requested by the Company or (ii) is required by the terms
of
the agreement or is required as a result of any action or inaction of the
Company in violation of any such agreement.
(d) The
Company further agrees to pay or reimburse each Lender and their agent for
all
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys’ fees and disbursements, and costs of settlement incurred by the
Lenders or their agent after the occurrence of an Event of Default (i) in
enforcing any obligation or in foreclosing against the Company Collateral
or
Guarantors Collateral or exercising or enforcing any other right or remedy
available by reason of such Event of Default; (ii) in connection with any
negotiation, refinancing or restructuring of, or attempted refinancing or
restructuring of, the credit arrangements provided under this Agreement and
the
other Transaction Documents in the nature of a “work-out” or in any insolvency
or bankruptcy proceeding; (iii) in commencing, defending or intervening in
any
litigation or in filing a petition, complaint, answer, motion or other pleadings
in any legal proceeding relating to either Company or any of its Affiliates
and
related to or arising out of the transactions contemplated hereby or by any
of
the other Transaction Documents; (iv) in taking any other action in or with
respect to any suit or proceeding (whether in bankruptcy or otherwise) arising
out of or in connection with this Agreement or any of the other Transaction
Documents; (v) in protecting, preserving, collecting, leasing, selling, taking
possession of, or liquidating any of the Company Collateral or Guarantors
Collateral; or (vi) attempting to enforce or enforcing any security interest
in
any of the Company Collateral, the Guarantors Collateral or any other rights
under any Transaction Document.
31
10.10. JURISDICTION
(a) Each
of
the parties hereto hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any New York State
court
or United States Federal court sitting in New York City, and any appellate
court
from any thereof, in any action or proceeding arising out of or relating
to this
Agreement or any of the other Transaction Documents to which it is a party
or to
whose benefit it is entitled, or for recognition or enforcement of any judgment,
and each of the parties hereto irrevocably and unconditionally agrees that
all
claims in respect of any such action or proceeding may be heard and determined
in any such New York State court or, to the fullest extent permitted by law,
in
such United States Federal court. Each of the parties hereto agrees that
a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the right that any party may
otherwise have to bring any action or proceeding relating to this Agreement
or
any of the other Transaction Documents in the courts of any other jurisdiction.
(b) Each
of
the parties hereto irrevocably and unconditionally waives, to the fullest
extent
it may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out
of or
in relation to this Agreement or any other Transaction Document to which
it is a
party in any such New York State or United States Federal court sitting in
New
York City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
10.11. WAIVER
OF JURY TRIAL
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT OR THE
ACTIONS
OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
10.12. CONFIDENTIALITY
(a) Each
of
the Lenders hereby agrees to keep (and to cause its Affiliates, employees,
agents, attorneys, accountants and other professional advisors to keep)
confidential the confidential information provided to it by or on behalf
of the
Company or its Subsidiaries pursuant to or in connection with the Agreement
or
any other Transaction Document, provided
that,
such information may be disclosed (i) solely in connection with the performance
of the transactions contemplated by this Agreement and any other Transaction
Document to (A) its Affiliates, directors, officers and employees who have
a
need to know such information and its agents, attorneys, accountants and
other
professional advisors or (B) the other Lenders, (ii) in response to any order
of
any court or other governmental or administrative body or agency or as may
be
required by any law binding upon any of the Lenders, (iii) in connection
with
the exercise of any remedies under any Transaction Document or the enforcement
of rights hereunder and thereunder, (iv) with the consent of the Company
or (v)
to the extent such information (A) is on the date hereof, or at or before
the
time such disclosure becomes, publicly available other than as a result of
a
breach by such disclosing Person of the obligation set forth in this Agreement
or (B) at or before the time of such disclosure becomes available to any
Lender
on a nonconfidential basis from a source other than the Company or its
Subsidiaries, which source is not known to the recipient of such information
to
have breached a confidentiality agreement with the Company or its Subsidiaries
in respect of such information.
32
(b) Each
Lender hereby agrees that in the event such Lender is requested or required
other than by applicable law (by interrogatory, request for information or
documents, subpoena, deposition, civil investigative demand or other process)
to
disclose any information pursuant to Section 10.12(a)(ii), such Lender will,
except to the extent such notice would cause such Lender to be in violation
of
law, provide the Company with prompt notice of any such request or requirement
so that the Company may seek an appropriate protective order or other similar
assurance to prevent disclosure of such information or waive compliance with
the
provisions of this Section 10.12. Such Lender may not oppose action by the
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded such information, provided
that
such Lender may oppose the Company’s action to obtain an appropriate protective
order or other reliable assurance in the event that, in connection with any
action, suit or other legal or equitable proceeding (including any bankruptcy
proceeding), such Lender reasonably believes that the failure to publicly
disclose such information would adversely affect such Lender’s ability to
protect or exercise its rights and remedies hereunder or under any other
Transaction Document.
(c) A
Lender
may also disclose, subject to their compliance with the requirements of Section
10.12(b), such information to the extent the Lender reasonably believe
it is appropriate to in connection with any action, suit or other legal or
equitable proceeding (including any bankruptcy proceeding) to protect or
otherwise exercise their rights and remedies hereunder or under any other
Transaction Document in any legal or equitable proceeding.
(d) In
furtherance to the foregoing, each of the Lenders agrees that its right to
request any information pursuant to Section 5.2(b) or to avail itself of
the
provisions of Section 5.6(b) shall be conditioned on its continuing compliance
with the requirements of this Section 10.12.
10.13. TITLES
AND SUBTITLES
The
titles of the articles, sections and subsections of this Agreement are for
convenience of reference only and are not to be considered in construing
this
Agreement.
10.14. COUNTERPARTS
This
Agreement may be executed in any number of counterparts, including by facsimile
copy, each of which shall be deemed an original, but all of which together
shall
constitute one instrument.
10.15. MARSHALLING;
RECOURSE TO SECURITY; PAYMENTS SET ASIDE
The
Lenders shall not be under any obligation to marshal any assets in favor
of the
Company or any of its Affiliates or any other party or against or in payment
of
any or all of the Loan or other obligations hereunder. Recourse to security
shall not be required at any time. To the extent that the Company makes a
payment or payments to a Lender or a Lender enforces its security interests
or
exercises its rights of setoff, and such payment or payments or the proceeds
of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law,
state
or federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all liens, rights and remedies therefor, shall be revived and continued
in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
33
ARTICLE
XI
CERTAIN
DEFINED TERMS
For
purposes of this Agreement, the following terms have the meanings indicated
(unless otherwise expressly provided herein):
“412
Plan”
means a
Plan that is subject to Section 412 of the Code.
“1940
Act”
means
the Investment Company Act of 1940, as amended, and any applicable rules
and
regulations thereunder, and any successor to such statute, rules or regulations.
Any reference herein to a specific section, rule or regulation of the 1940
Act
shall be deemed to include any corresponding provisions of future
law.
“Affiliate”
has the
meaning specified in Rule 501(b) under the Securities Act.
“Approved
Accounting Firm”
means
any firm
of
independent certified public accountants reasonably acceptable to the
Lenders.
“XXXXX”
means
the Automation of Reports and Consolidated Orders System which monitors the
flow
of DEA controlled substances from their point of manufacture to point of
sale or
distribution.
“Board
of Directors”
means
the board of directors of the Company.
“Change
of Control”
means
the occurrence of any of the following: (a) the Company 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 the Company’s assets or the assets of
the Company and its Subsidiaries taken as a whole to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company,
as the case may be, is converted into or exchanged for cash, securities or
other
property, other than any such transaction where the outstanding Voting Stock
of
the Company, 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 the Company 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, or (b) the Company,
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 the Company 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 the Company or a wholly owned Subsidiary of the Company). For purposes
of
this definition, the term “Voting
Stock”
of the
Company means securities of any class of capital stock of the Company entitling
the holders thereof to vote in the election of members of the Board of
Directors.
34
“Code”
means
the Internal Revenue Code of 1986, as amended, and any applicable rules and
regulations thereunder, and any successor to such statute, rules or regulations.
Any reference herein to a specific section, rule or regulation of the Code
shall
be deemed to include any corresponding provisions of future law.
“Commitment”
means,
with respect to each Lender, the commitment of such Lender to make such Loan
hereunder. The initial amount of each Lender’s Commitment is set forth opposite
its signature hereto. The aggregate amount of the Commitments is $500,000.
“Common
Stock”
means
the common stock, $0.01 par value, of the Company (now or hereafter issued).
“Company
General Security Agreement”
means
that certain Company General Security Agreement of even date herewith by
and
between the Company and Xxxxx Partners III, L.P, as agent for the Lenders,
as
such agreement may be supplemented, amended or otherwise modified from time
to
time in accordance with its terms.
“Company
Reports”
means,
collectively, (a) the Company’s Annual Reports on Form 10-K for the fiscal years
ended December 31, 2004, and (b) the Company’s Quarterly Reports on Form 10-Q
for the three months ended March 31, 2005 and six months ended June 30,
2005.
“CSA”
means
Controlled Substances Act, as amended, and any applicable rules and regulations
thereunder, and any successor to such statute, rules or regulations. Any
reference herein to a specific section, rule or regulation of the CSA shall
be
deemed to include any corresponding provisions of future law.
“D&O
Insurance”
means
“directors and officers” insurance.
“DEA”
means
the United States Drug Enforcement Administration.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended and any
applicable rules and regulations thereunder, and any successor to such statute,
rules or regulations. Any reference herein to a specific section, rule or
regulation of ERISA shall be deemed to include any corresponding provisions
of
future law.
“ERISA
Affiliates”
means
(a) any corporation which at any time on or before the Closing Date is or
was a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company, its Subsidiaries, or any ERISA
Affiliate; (b) any partnership, trade or business (whether or not incorporated)
which at any time on or before the Closing Date is or was under common control
(within the meaning of Section 414(c) of the Code) with the Company, its
Subsidiaries, or any ERISA Affiliate; and (c) any entity which at any time
on or
before the Closing Date is or was a member of the same affiliated service
group
(within the meaning of Section 414(m) of the Code) as the Company, its
Subsidiaries or any ERISA Affiliate, or any corporation described in clause
(a)
or any partnership, trade or business described in clause (b) of this
paragraph.
35
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and any applicable rules
and
regulations thereunder, and any successor to such statute, rules or regulations.
Any reference herein to a specific section, rule or regulation of the Exchange
Act shall be deemed to include any corresponding provisions of future law.
“FDA”
means
the United States Food and Drug Administration.
“FDC
Act”
means
the federal Food, Drug, and Cosmetic Act, as amended, and any applicable
rules
and regulations thereunder, and any successor to such statute, rules or
regulations. Any reference herein to a specific section, rule or regulation
of
the FDC Act shall be deemed to include any corresponding provisions of future
law.
“Funding
Event”
means
the consummation by the Company or any of its Subsidiaries after the date
hereof
of (a) any equity or debt financing, or (b) any sale, transfer, license or
similar arrangement (including by means of a joint venture) whereby the Company
or any of its Subsidiaries sells, transfers, licenses or otherwise grants
an
interest in any material portion of its assets (including Intellectual Property
Rights) to another Person, provided that the consummation of a transaction
under
Section (a) and/or (b) results in cash proceeds to the Company, net of all
costs
and expenses, of at least Four
Million
Dollars ($4,000,000).
“GAAP”
means
generally accepted accounting principles in the United States.
“Guaranties”
means
the Continuing Unconditional Secured Guaranties of even date herewith by
each of
the Guarantors.
“Guarantors”
means
Acura
Pharmaceutical Technologies, Inc. and Axiom
Pharmaceutical Corporation.
“Guarantors
Security Agreement”
means
that certain Guarantors General Security Agreement of even date herewith
by and
among the Guarantors and Xxxxx Partners III, L.P, as agent for the Lenders,
as
such agreement may be supplemented, amended or otherwise modified from time
to
time in accordance with its terms.
“Intellectual
Property Rights”
means
any and all patents, patent applications, trademarks, copyrights, trademark
registrations and applications therefore, patent, trademark or trade name
licenses, service marks, domain names, contracts with employees or others
relating in whole or in part to disclosure, assignment or patenting of any
inventions, discoveries, improvements, processes, formulae or other know-how,
and all patent, trademark or trade names or copyright licenses which are
in
force.
“IP
Collateral Assignments”
means
(a) that certain Patent Security Agreement and that certain Trademark Security
Agreement, each of even date herewith by and between the Company and Xxxxx
Partners III, L.P, as agent for the Lenders, and (b) that certain Trademark
Security Agreement of even date herewith by and between Axiom Pharmaceutical
Corporation and Xxxxx Partners III, L.P, as agent for the Lenders, as such
agreements may be supplemented, amended or otherwise modified from time to
time
in accordance with their terms.
36
“IRS”
means
the Internal Revenue Service.
“June
2005 Bridge Loan”
means
the curtain Loan Agreement dated June 22, 2005 by and among the Company and
the
holders of the June 2005 Notes, as such agreement may be supplemented, amended
or otherwise modified from time to time in accordance with its
terms.
“June
2005 Notes”
means
those certain Promissory Notes dated June 22, 2005 in the aggregate principal
amount of $1,000,000 issued by the Company pursuant to the June 2005 Bridge
Loan.
“Leases”
any
lease and sublease agreements, as amended to date, relating to the Owned
Property and the Leased Property.
“Legal
Requirements”
means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, order,
edict, judgment, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by
or
under the authority of any governmental entity.
“Losses”
means
any claims, losses, damages, liabilities (or actions in respect thereof),
obligations, penalties, awards, judgments, expenses (including, without
limitation, reasonable fees and expenses of counsel) or
disbursements.
“Material
Adverse Effect”
means
(a) a material adverse effect on, or change in, the business, prospects,
properties, operations, condition (financial or other) or results of operations
of the Company and its Subsidiaries, taken as a whole, or (b) a material
adverse
effect on (i) the ability of the Company or any of the Guarantors to perform
its
respective obligations or (ii) the rights or remedies of any Lender under
any
Transaction Document.
“PBGC”
means
the Pension Benefit Guaranty Corporation.
“PCB”
means
polychlorinated biphenyls.
“Permitted
Liens”
means
the liens permitted by Section 6.2.
“Person”
means
any individual, corporation, limited liability company, partnership,
association, trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Preferred
Stock”
means
the Series A Preferred, the Series B Preferred, the Series C-1 Preferred,
the
Series C-2 Preferred and the Series C-3 Preferred.
“Schedule
of Exceptions”
means
the Schedule of Exceptions attached to this Agreement.
“SEC”
means
the Securities and Exchange Commission.
“SEC
Reports”
means
any reports, statements, releases or other documents required to be filed
by the
Company with the SEC under the Exchange Act.
“Securities
Act”
means
the Securities Act of 1933, as amended, and any applicable rules and regulations
thereunder, and any successor to such statute, rules or regulations. Any
reference herein to a specific section, rule or regulation of the Securities
Act
shall be deemed to include any corresponding provisions of future law.
37
“Senior
Note”
means
that certain Amended and Restated Note in the principal amount of $5,000,000
issued by the Company pursuant to the Xxxxxx Term Loan, and any other promissory
notes issued by the Company pursuant to the Xxxxxx Term Loan from time to
time.
“Series
A Preferred”
means
the Series A Convertible Preferred Stock, $.01 par value, of the Company
(now or
hereafter issued).
“Series
B Preferred”
means
the Series B Convertible Preferred Stock, $.01 par value, of the Company
(now or
hereafter issued).
“Series
C-1 Preferred”
means
the Series C-1 Convertible Preferred Stock, $.01 par value, of the Company
(now
or hereafter issued).
“Series
C-2 Preferred”
means
the Series C-2 Convertible Preferred Stock, $.01 par value, of the Company
(now
or hereafter issued).
“Series
C-3 Preferred”
means
the Series C-3 Convertible Preferred Stock, $.01 par value, of the Company
(now
or hereafter issued).
“Stock
Pledge Agreement”
means
the Stock Pledge Agreement of even date herewith by and among the Company
and
Xxxxx Partners III, L.P, as agent for the Lenders, as such agreement may
be
supplemented, amended or otherwise modified from time to time in accordance
with
its terms.
“Subsidiary”
means
any entity in which the Company owns securities having a majority of the
voting
power in the election of directors or persons serving equivalent
functions.
“Transaction
Documents”
means,
collectively, (a) this Agreement, (b) the Notes, (c) the Company General
Security Agreement, (d) the Guaranties, (e) the Guarantors Security Agreement,
(f) the IP Collateral Assignments and (g) the Stock Pledge
Agreement.
“Unfunded
Pension Liability”
means,
as of any determination date, the amount, if any, by which the present value
of
all benefit liabilities (as that term is defined in Section 4001(a)(16) of
ERISA) of a plan subject to Title IV of ERISA exceeds the fair market value
of
all assets of such plan, all determined using the actuarial assumptions that
would be used by the PBGC in the event of a termination of the plan on such
determination date.
“Xxxxxx
Term Loan”
means
that certain Term Loan Agreement dated March 29, 2000 by and between the
Company
and Xxxxxx, as such agreement may be supplemented, amended or otherwise modified
from time to time in accordance with its terms, including, without limitation,
by the Third Amendment to the Xxxxxx Term Loan as of February 6, 2004.
“Withdrawal
Liability”
has the
meaning specified in Section 4201 of ERISA.
[SIGNATURE
PAGES TO FOLLOW]
38
IN
WITNESS WHEREOF, the parties hereto have executed this Loan Agreement as
of the
date first written above.
|
By:
/s/ Xxxxxx X.
Xxxxxxx
Name:
Xxxxxx X. Xxxxxxx
Title:
Chief Executive Officer
|
|
|
Commitment:
$10,700.00
|
CARE
CAPITAL OFFSHORE INVESTMENTS II, LP
By:
Care Capital II, LLC, as general partner
00
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
By:
/s/Xxxxx
X.
Xxxxxx
Name:
Xxxxx X. Xxxxxx
Its:
Authorized Signatory
|
|
Commitment:
$155,966.67
|
CARE
CAPITAL INVESTMENTS II, LP
By:
Care Capital II, LLC, as general partner
00
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
By:
/s/Xxxxx
X.
Xxxxxx
Name:
Xxxxx X. Xxxxxx
Its:
Authorized Signatory
|
|
Commitment:
$152,260.95
|
XXXXX
PARTNERS III, L.P.
By:
Claudius, L.L.C., General Partner
000
Xxxxx Xxxxxx, 0xx
Xx.
Xxx
Xxxx, Xxx Xxxx 00000
By: /s/
Xxxxx
Xxxxxxxxxxx
Name:
Xxxxx Xxxxxxxxxxx
Its:
General Partner
|
39
|
Commitment:
$13,782.24
|
XXXXX
PARTNERS INTERNATIONAL, III, L.P.
By:
Claudius, L.L.C., General Partner
000
Xxxxx Xxxxxx, 0xx
Xx.
Xxx
Xxxx, Xxx Xxxx 00000
By:
/s/
Xxxxx
Xxxxxxxxxxx
Name:
Xxxxx Xxxxxxxxxxx
Its:
General Partner
|
|
Commitment:
$623.48
|
XXXXX
EMPLOYEE FUND III, L.P.
By:
Wesson Enterprises, Inc.
000
Xxxxx Xxxxxx, 0xx
Xx.
Xxx
Xxxx, Xxx Xxxx 00000
By:
/s/
Xxxxx X.
Xxxxxx
Name:
Xxxxx X. Xxxxxx
Its:
General Partner
|
|
Commitment:
$166,666.67
|
ESSEX
WOODLANDS HEALTH
VENTURES
V, L.P.
000
Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000
By:
/s/
Xxxxxxxx
Xxxxxxxxx
Name:
Xxxxxxxx Xxxxxxxxx
Its:
Managing Director
|
40
