EXHIBIT 4.3(B)
ANNEX I
TO
NOTE PURCHASE
AGREEMENT
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT"). THE ISSUANCE TO THE HOLDER OF THE SHARES OF COMMON STOCK
ISSUABLE IN PARTIAL PAYMENT OF PRINCIPAL OR THE REDEMPTION PRICE OF THIS NOTE
AND IN PAYMENT OF INTEREST ON THIS NOTE ARE NOT COVERED BY A REGISTRATION
STATEMENT UNDER THE 1933 ACT. PURSUANT TO THE NOTE PURCHASE AGREEMENT, THIS
NOTE HAS BEEN ACQUIRED, AND SUCH SHARES MUST BE ACQUIRED, FOR INVESTMENT ONLY
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF
THE RESALE THEREOF UNDER THE 1933 ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
CEPHALON, INC.
11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002
No. ____ $________
New York, New York
March 1, 1999
FOR VALUE RECEIVED, CEPHALON, INC., a Delaware corporation
(hereinafter called the "Company"), hereby promises to pay to [NAME], [ADDRESS],
or registered assigns (the "Holder"), or order, the sum of ______________
Dollars ($________________), on the Maturity Date, and to pay interest on the
unpaid principal balance hereof at the Applicable Rate from the date hereof,
until the same becomes due and payable, whether at maturity or upon acceleration
or by repurchase in accordance with the terms hereof or otherwise. Any amount,
including, without limitation, principal of or interest on this Note or the
Optional Redemption Price, the Repurchase Price or the Registration Repurchase
Price, that is payable under this Note that is not paid when due shall bear
interest at the Default Rate from the due date thereof until the same is paid
("Default Interest"). Regular interest shall be payable in arrears on each
Interest Payment Date, commencing on June 1, 1999, on the principal amount
outstanding on such date. Regular interest on this Note shall be computed on
the basis of a 360-day year of 12 30-day months and actual days elapsed. No
regular interest shall be payable on an Interest Payment Date on any portion of
the principal amount of this Note which shall have been redeemed prior to such
Interest Payment Date so long as the Company shall have complied in full with
its obligations with respect to such redemption.
All payments of principal of and premium, if any, interest, and other
amounts on this Note shall be made in lawful money of the United States of
America, or, at the option of the
-1-
Company and subject to the provisions of this Note, interest payable on the
Interest Payment Dates may be paid in whole or in part in fully paid and
nonassessable shares of Common Stock or, in accordance with Section 1.4, the
Company is entitled under certain circumstances to pay a portion of the
principal of this Note in shares of Common Stock. All cash payments shall be
made by wire transfer of immediately available funds to such account as the
Holder may from time to time designate by written notice in accordance with the
provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day and, in the case of
any Interest Payment Date which is not the date on which this Note is paid in
full, the extension of the due date thereof shall not be taken into account for
purposes of determining the amount of interest due on such date. Certain
capitalized terms used in this Note are defined in Article VIII.
The obligations of the Company under this Note shall rank in right of
payment on a parity with all other unsubordinated obligations of the Company for
indebtedness for borrowed money or the purchase price of property. This Note is
issued pursuant to the Note Purchase Agreement and the Holder of this Note and
this Note are subject to the terms and entitled to the benefits of the Note
Purchase Agreement. This Note is entitled to the benefits of the Security
Agreement and the Patent and Trademark Security Agreement.
The following terms shall apply to this Note:
ARTICLE I
CERTAIN PAYMENTS IN COMMON STOCK;
OPTIONAL REDEMPTION
1.1 ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (a) If the
-------------------------------------------------
Company exercises its option to make a payment of interest on this Note wholly
or partly in Common Stock (herein sometimes called the "Share Interest Payment
Option"), the issuance of Interest Payment Shares upon such exercise of the
Share Interest Payment Option shall have been authorized by the Board of
Directors of the Company.
(b) The Company shall not be permitted to exercise the Share Interest
Payment Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of Interest Payment Shares or the public
resale of such Interest Payment Shares by the Holder would require
registration or filing with or
-2-
approval of any governmental authority under any law or regulation, and
such registration, filing or approval has not been effected or obtained or
is not in effect or on such Interest Payment Date or the date the Company
delivers the Interest Payment Shares to the Holder the Interest Share
Registration Statement is unavailable for use by the Holder for the resale
of the Interest Payment Shares;
(iii) the outstanding shares of Common Stock are neither (A) listed or
admitted for trading on a national securities exchange nor (B) quoted on
Nasdaq; or the Interest Payment Shares shall not at the time of issuance
have been authorized for listing, upon official notice of issuance, on the
principal securities exchange on which the Common Stock is then listed and
traded;
(iv) the Interest Share Price for the Interest Payment Shares is less
than the par value of the Common Stock; or
(v) an Event of Default has occurred and is continuing on the date
the Company makes such election or on the applicable Interest Payment Date.
(c) The Company may exercise its right to elect the Share Interest
Payment Option with respect to any Interest Payment Date only by giving notice
of such election to the Holder not less than 24 or more than 28 Trading Days
prior to such Interest Payment Date, which notice shall state the percentage of
the interest payable on such Interest Payment Date which is to be paid in
Interest Payment Shares. The Company shall have the right to elect the Share
Interest Payment Option with respect to this Note only if the Company also
elects the similar option which it has with respect to the Other Notes for the
interest due thereon on the date which is such Interest Payment Date and in each
such case pro rata among this Note and the Other Notes, based on the amounts of
interest due on such date hereon and thereon. If the Company elects the Share
Interest Payment Option with respect to a particular Interest Payment Date, the
Company shall issue to the Holder in respect of such Interest Payment Date the
aggregate number of whole shares of Common Stock determined by dividing the per
share Interest Share Price of the Common Stock on the applicable Interest
Payment Date into an amount equal to 102% of the total amount of lawful money of
the United States of America which the Holder would receive if the aggregate
amount of interest on this Note which is being paid in Common Stock were being
paid in such lawful money. If the Company elects the Share Interest Payment
Option with respect to an Interest Payment Date, the Interest Payment Shares for
such Interest Payment Date shall become issuable on such Interest Payment Date
and the Company shall deliver, or cause to be delivered, the appropriate number
of shares of Common Stock to the Holder within three Trading Days after the
applicable Interest Payment Date. If in any case the Company shall fail to
deliver or cause to be delivered such number of shares of Common Stock to the
Holder within such period of three Trading Days, then in addition to any other
liabilities the Company may have hereunder and under applicable law (1) the
Company shall pay or reimburse the Holder on demand for all out-of-pocket
expenses, including, without limitation, reasonable fees and expenses of legal
counsel, incurred by the Holder as a result of such failure, (2) if as a result
of such failure the Holder shall suffer any direct damages or liabilities from
such
-3-
failure (including, without limitation, margin interest and the cost of covering
a purchase (whether by the Holder or the Holder's securities broker) or
borrowing of shares of Common Stock by the Holder for purposes of settling any
trade involving a sale of shares of Common Stock made by the Holder during the
period beginning on the date the Company notified the Holder of the Company's
election of the Share Interest Payment Option and ending on the date the Company
delivers or causes to be delivered to the Holder the shares of Common Stock
issuable in respect thereof), then the Company shall upon demand of the Holder
pay to the Holder an amount equal to the actual direct, out-of-pocket damages
and liabilities suffered by the Holder by reason thereof which the Holder
documents to the reasonable satisfaction of the Company, and (3) the Holder may
by written notice (which may be given by mail, courier, personal service or
telephone line facsimile transmission) or oral notice (promptly confirmed in
writing), given at any time prior to delivery to the Holder of the shares of
Common Stock issuable in connection with such exercise of the Share Interest
Payment Option, require payment in cash of the interest in respect of which the
Company exercised the Share Interest Payment Option, in which case the amount of
such interest shall be immediately due and payable, with Default Interest
thereon from the applicable Interest Payment Date until paid in full and the
Company shall not be obligated or entitled to issue such Interest Payment Shares
in respect of such Interest Payment Date. Notwithstanding the foregoing the
Company shall not be liable to the Holder under clause (2) of the immediately
preceding sentence to the extent the failure of the Company to deliver or to
cause to be delivered such shares of Common Stock results from fire, flood,
storm, earthquake, shipwreck, strike, war, acts of terrorism, crash involving
facilities of a common carrier, acts of God, or any similar event outside the
control of the Company (it being understood that the action or failure to act of
the Transfer Agent shall not be deemed an event outside the control of the
Company except to the extent resulting from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, the bankruptcy, liquidation or reorganization of
the Transfer Agent under any bankruptcy, insolvency or other similar law or any
similar event outside the control of the Transfer Agent). The Holder shall
notify the Company in writing (or by telephone conversation, confirmed in
writing) as promptly as practicable following the third Trading Day after such
Interest Payment Date if the Holder becomes aware that shares of Common Stock so
issuable have not been received as provided herein. If the Company shall have
exercised the Share Interest Payment Option with respect to a particular
Interest Payment Date and either (1) the Company shall notify the Holder on or
after such Interest Payment Date that the Interest Payment Shares might not be
delivered within three Trading Days after such Interest Payment Date or (2) the
Holder learns after the date which is three Trading Days after such Interest
Payment Date that the Holder has not received such Interest Payment Shares,
then, without releasing the Company of its obligations with respect thereto,
from and after the next succeeding Trading Day the Holder shall make reasonable
efforts not to sell shares of Common Stock in anticipation of receipt of such
Interest Payment Shares in a manner which is likely to increase materially the
liability of the Company under clause (2) of the second preceding sentence. No
fractional shares of Common Stock shall be issued in payment of interest on this
Note. In lieu thereof, the Company may, at its option, issue a number of shares
of Common Stock which reflects a rounding up to the next whole number or may pay
lawful money of the United States of America in lieu of issuance of such
fractional share.
-4-
(d) If the Company elects the Share Interest Payment Option with
respect to a payment of interest on this Note with respect to a particular
Interest Payment Date, the Company shall deliver to the Holder, on or prior to
the date on which Interest Payment Shares for such payment of interest on this
Note are to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the cash interest payment to which the Holder is entitled,
(ii) the portion of such interest payment being made in Interest Payment Shares
and the amount which is 102% thereof, (iii) the number of Interest Payment
Shares allocable to such payment, as calculated pursuant to this Section 1.1,
(iv) any rounding adjustment to such number or any payment necessary to be made
pursuant to Section 1.1(c), (v) a brief statement of the facts requiring such
adjustment, and (vi) a brief statement that none of the conditions set forth in
Section 1.1(b) has occurred and is existing and that all of the requirements of
this Section 1.1 have been met. The Interest Payment Shares shall be duly
issued in the name of the Holder or its nominee. Such Company Certificate shall
be conclusive evidence of the correctness of the calculation of the number of
Interest Payment Shares allocable to the payments to which such Company
Certificate relates and of any adjustments to such number made pursuant to this
Section 1.1 in the absence of manifest error. On or before the pertinent
payment date, the Company shall issue, or cause the transfer agent for the
Common Stock to prepare and issue, the Interest Payment Shares in the name of
the Holder or its nominee before being so delivered by the Company on the
payment date.
(e) The Interest Payment Shares, when issued pursuant to and in
compliance with this Section 1.1, shall be, and for all purposes shall be deemed
to be, validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of Common Stock, will be, and for all
purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the interest on this Note to which such Interest
Payment Shares relate.
1.2 OPTIONAL REDEMPTION. (a) At any time during the Optional
-------------------
Redemption Period, the Company shall have the right to redeem at any one time
all or from time to time any part of the outstanding principal amount of this
Note at the Optional Redemption Price pursuant to this Section 1.2 on any
Optional Redemption Date, so long as (x) on the date an Optional Redemption
Notice is given and at all times to and including the applicable Optional
Redemption Date, no Event of Default and no event which, with notice or passage
of time, or both, would become an Event of Default has occurred and is
continuing (unless the requirements of this clause (x) will be satisfied
immediately after the applicable Optional Redemption Date and the Company shall
furnish to the Holder Company Certificates to such effect on the date the
applicable Optional Redemption Notice is given to the Holder and on the
applicable Optional Redemption Date), (y) on the date an Optional Redemption
Notice is given and at all times to and including the applicable Optional
Redemption Date no Repurchase Event or Registration Repurchase Event has
occurred with respect to which the Holder has the right to exercise repurchase
rights pursuant to Sections 5.1 and 5.2 or Section 5.3 or with respect to which
the Holder has exercised such repurchase rights and the Repurchase Price or the
Registration Repurchase Price, as the case may be, has not been paid to the
Holder and no event which, with notice or passage of time, or both, would become
a
-0-
Xxxxxxxxxx Event has occurred and is continuing, and (z) on the date an Optional
Redemption Notice is given, the Company has funds available to pay the Optional
Redemption Price. In order to exercise its right of redemption under this
Section 1.2, the Company shall give an Optional Redemption Notice to the Holder
not less than 20 days or more than 30 days prior to the Optional Redemption Date
stating that: (1) the Company is exercising its right to redeem a specified
portion of this Note in accordance with this Section 1.2, (2) the principal
amount of this Note to be redeemed, (3) the Optional Redemption Price and (4)
the Optional Redemption Date. On the applicable Optional Redemption Date (or
such later date as the Holder surrenders this Note to the Company) the Company
shall pay to or upon the order of the Holder, by wire transfer of immediately
available funds to such account as shall be specified for such purpose by the
Holder at least one Business Day prior to the Optional Redemption Date, an
amount equal to the Optional Redemption Price of the portion (which may be all)
of this Note to be redeemed.
(b) The Company shall not be entitled to give an Optional Redemption
Notice or to redeem any portion of this Note with respect to which the Company
has given the Holder notice pursuant to Section 1.4 that the Company is
exercising the Share Principal Payment Option and to which exercise the Holder
has consented.
(c) Any redemption of this Note pursuant to this Section 1.2 shall be
made at the same time as a redemption by the Company of a pro rata portion
(based on the outstanding principal amounts) of the Other Notes and in each such
case the aggregate principal amount of this Note and the Other Notes to be so
redeemed shall be at least $5,000,000.00 or such lesser aggregate principal
amount of this Note and the Other Notes as shall remain outstanding at the time
an Optional Redemption Notice is given. The Company shall not redeem any of the
Other Notes pursuant to the provisions thereof similar to this Section 1.2 or
repurchase or otherwise acquire any of the Other Notes (other than a mandatory
redemption pursuant to provisions of the Other Notes comparable to Article V)
unless the Company offers simultaneously to redeem, repurchase or otherwise
acquire a pro rata portion (based on outstanding principal amount) of this Note
for cash at the same unit price as the Other Note or Other Notes.
1.3 NO PREPAYMENT. Except as specifically provided in Sections 1.2
-------------
and 6.2, this Note may not be prepaid, redeemed or repurchased at the option of
the Company prior to the Maturity Date. The Company shall not repurchase or
otherwise acquire any of the Other Notes unless the Company offers
simultaneously to redeem, repurchase or otherwise acquire a pro rata portion of
this Note for cash at the same price per unit of outstanding principal amount as
the Other Note or Other Notes. Nothing in this Section 1.3 shall limit the
Company's rights under Article VII.
1.4 ISSUANCE OF COMMON STOCK IN LIEU OF CASH PAYMENT OF PRINCIPAL OR
----------------------------------------------------------------
REDEMPTION PREMIUM. (a) The Company shall have the right to elect to pay (1) a
------------------
portion of the principal amount of this Note on the Maturity Date or (2) a
portion of the Optional Redemption Price payable upon a redemption of this Note
in accordance with Section 1.2, in either such case in shares of Common Stock,
if the Holder consents to such election (herein sometimes called the "Share
Principal Payment Option"). If the Company elects the Share Principal Payment
Option, the
-6-
issuance of Principal Payment Shares upon the exercise of the Share Principal
Payment Option shall have been authorized by the Board of Directors of the
Company. Such election, once made, shall be irrevocable.
(b) The Company shall not be entitled to exercise the Share
Principal Payment Option with respect to payment of a portion of this principal
Note if:
(i) the number of shares of Common Stock authorized, unissued, and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such principal to be paid in Common
Stock;
(ii) the issuance or delivery of Principal Payment Shares or the
public resale of such Principal Payment Shares by the Holder would require
registration or filing with or approval of any governmental authority under
any law or regulation, and such registration, filing or approval has not
been effected or obtained or is not in effect or on the Maturity Date the
Payment Share Registration Statement is unavailable for use by the Holder
for the resale of the Principal Payment Shares;
(iii) the outstanding shares of Common Stock are neither (A) listed
or admitted to trading on a national securities exchange nor (B) quoted on
Nasdaq; or the Principal Payment Shares shall not at the time of issuance
have been authorized for listing, upon official notice of issuance, on the
principal securities exchange on which the Common Stock is then listed and
traded;
(iv) the Payment Share Price for the Principal Payment Shares is less
than the par value of the Common Stock; or
(v) an Event of Default has occurred and is continuing on the date
the Company makes such election or on the Maturity Date.
(c) The Company may exercise its right to elect the Share Principal
Payment Option only by giving notice of such election to the Holder at least 100
Trading Days prior to the Maturity Date or the applicable Optional Redemption
Date, as the case may be. The Company shall have the right to elect the Share
Principal Payment Option with respect to a portion of the principal amount of
this Note that is due on the Maturity Date that is equal to not more than 50
percent of the original principal amount of this Note (or, if less than 50
percent of the original principal amount of this Note is outstanding, up to the
outstanding principal amount of this Note). The Company shall have the right to
elect the Share Principal Payment Option with respect to a portion of the
Optional Redemption Price equal to not more than 20 percent of the principal
amount of this Note to be redeemed on any Optional Redemption Date. In each
such case, the Company shall have the right to elect the Share Principal Payment
Option with respect to this Note only if:
-7-
(i) the Company also elects the similar option which it has with
respect to the Other Notes for the principal thereof due on the date which
is the Maturity Date or a portion of the redemption price thereof which is
payable on the applicable Optional Redemption Date, as the case may be, and
in each such case pro rata among this Note and the Other Notes, based on
the outstanding principal amounts hereof and thereof; and
(ii) the Holder in its sole discretion consents to such election with
respect to this Note by notice to the Company within ten Trading Days after
the Company makes such election.
If the Company elects the Share Principal Payment Option and the Holder so
consents, the Company shall issue and deliver, or cause to be delivered to the
Holder on or before the Maturity Date or the applicable Optional Redemption
Date, as the case may be, the aggregate number of whole shares of Common Stock
determined by dividing the per share Payment Share Price on the Maturity Date or
the applicable Optional Redemption Date, as the case may be, into an amount
equal to 105% of the total amount of lawful money of the United States of
America which the Holder would receive if the aggregate amount of principal of
this Note or the portion of the Optional Redemption Price of this Note, as the
case may be, which is being paid in Common Stock were being paid in such lawful
money. If the Company shall fail to deliver or cause to be delivered such
number of shares of Common Stock to the Holder on or prior to the Maturity Date,
or the applicable Optional Redemption Date, as the case may be, then in addition
to any other liabilities the Company may have hereunder and under applicable law
(1) the Company shall pay or reimburse the Holder on demand for all out-of-
pocket expenses, including, without limitation, reasonable fees and expenses of
legal counsel, incurred by the Holder as a result of such failure, (2) if as a
result of such failure the Holder shall suffer any direct damages or liabilities
from such failure (including, without limitation, margin interest and the cost
of covering a purchase (whether by the Holder or the Holder's securities broker)
or borrowing of shares of Common Stock by the Holder for purposes of settling
any trade involving a sale of shares of Common Stock made by the Holder during
the period beginning on the date the Company notified the Holder of the
Company's election of the Share Principal Payment Option and ending on the
Maturity Date or the applicable Optional Redemption Date, as the case may be),
then the Company shall upon demand of the Holder pay to the Holder an amount
equal to the actual direct, out-of-pocket damages and liabilities suffered by
the Holder by reason thereof which the Holder documents to the reasonable
satisfaction of the Company, and (3) the Holder may by written notice (which may
be given by mail, courier, personal service or telephone line facsimile
transmission) or oral notice (promptly confirmed in writing), given at any time
prior to delivery to the Holder of the shares of Common Stock issuable in
connection with such exercise of the Share Principal Payment Option, require
payment in cash of the portion of the principal amount of this Note in respect
of which the Company exercised the Share Principal Payment Option, in which case
the amount of such principal shall be immediately due and payable, with Default
Interest thereon from the Maturity Date or the applicable Optional Redemption
Date, as the case may be, until paid in full and the Company shall not be
obligated or entitled to issue such Principal Payment Shares in respect of such
payment of principal or the Optional Redemption Date, as the case may be.
Notwithstanding the foregoing the Company shall not be liable to the
-8-
Holder under clause (2) of the immediately preceding sentence to the extent the
failure of the Company to deliver or to cause to be delivered such shares of
Common Stock results from fire, flood, storm, earthquake, shipwreck, strike,
war, acts of terrorism, crash involving facilities of a common carrier, acts of
God, or any similar event outside the control of the Company (it being
understood that the action or failure to act of the Transfer Agent shall not be
deemed an event outside the control of the Company except to the extent
resulting from fire, flood, storm, earthquake, shipwreck, strike, war, acts of
terrorism, crash involving facilities of a common carrier, acts of God, the
bankruptcy, liquidation or reorganization of the Transfer Agent under any
bankruptcy, insolvency or other similar law or any similar event outside the
control of the Transfer Agent). The Holder shall notify the Company in writing
(or by telephone conversation, confirmed in writing) as promptly as practicable
following the Maturity Date or the applicable Optional Redemption Date, as the
case may be, if the Holder becomes aware that shares of Common Stock so issuable
have not been received as provided herein. If the Company shall have exercised
the Share Principal Payment Option with respect to a particular payment and
either (1) the Company shall notify the Holder that such Principal Payment
Shares might not be delivered when due or (2) the Holder learns after the date
on which such Principal Payment Shares are due to be delivered to such Holder
that the Holder has not received such Principal Payment Shares, then, without
releasing the Company of its obligations with respect thereto (x) from and after
the next succeeding Trading Day the Holder shall make reasonable efforts not to
sell shares of Common Stock in anticipation of receipt of such Principal Payment
Shares is a manner which is likely to increase materially the liability of the
Company under clause (2) of the second preceding sentence and (y) if the Company
so requests, the Holder will advise the Company of the Holder's open trading
position in the Common Stock with respect to which the Holder expects receipt of
such Principal Payment Shares and will take such action as may be directed by
the Company to close such open trading position (subject to prevailing market
conditions) so long as the Company pays in advance, or makes provision for such
payment which is satisfactory to the Holder in its sole discretion, of all
amounts required by the Holder to assure that the Holder will not suffer any
economic or trading loss by reason of taking such action. No fractional shares
of Common Stock shall be issued in payment of principal or any portion of the
Optional Redemption Price of this Note. In lieu thereof, the Company may, at its
option, issue a number of shares of Common Stock which reflects a rounding up to
the next whole number or may pay lawful money of the United States of America in
lieu of issuance of such fractional share.
(d) (1) If the Company shall be entitled to issue Principal Payment
Shares on the Maturity Date, the Company shall deliver to the Holder, on or
prior to the Maturity Date:
(A) a Company Certificate setting forth (i) the total amount of
principal to which the Holder is entitled, (ii) the portion of the
principal of this Note being paid in Principal Payment Shares and the
amount which is 105% thereof, (iii) the number of Principal Payment Shares
allocable to the payment of such amount, as calculated pursuant to this
Section 1.4, (iv) any rounding adjustment to such number or any payment
necessary to be made pursuant to Section 1.1(c), (v) a brief statement of
the facts requiring such adjustment, and (vi) a brief statement that none
of the conditions set forth in Section 1.4(b) has occurred and is existing
and that all of the requirements of this Section 1.4 have been met; and
-9-
(B) an opinion of counsel selected by the Company and reasonably
acceptable to the Majority Holders to the effect set forth in EXHIBIT B.
(2) If the Company shall be entitled to issue Principal Payment
Shares in partial payment of the Optional Redemption Price, the Company shall
deliver to the Holder, on or prior to the applicable Optional Redemption Date:
(A) a Company Certificate setting forth (i) the total amount of
principal being redeemed on such Optional Redemption Date, (ii) the portion
of the premium on such principal amount of this Note being paid in
Principal Payment Shares and the amount which is 105% thereof, (iii) the
number of Principal Payment Shares allocable to the payment of such amount,
as calculated pursuant to this Section 1.4, (iv) any rounding adjustment to
such number or any payment necessary to be made pursuant to Section 1.1(c),
(v) a brief statement of the facts requiring such adjustment, and (vi) a
brief statement that none of the conditions set forth in Section 1.4(b) has
occurred and is existing and that all of the requirements of this Section
1.4 have been met; and
(B) an opinion of counsel selected by the Company and reasonably
acceptable to the Majority Holders to the effect set forth in EXHIBIT B.
(3) The Principal Payment Shares shall be duly issued in the name of
the Holder or its nominee. Such Company Certificate shall be conclusive
evidence of the correctness of the calculation of the number of Principal
Payment Shares and of any adjustments to such number made pursuant to this
Section 1.4 in the absence of manifest error. On or before the Maturity Date or
the applicable Optional Redemption Date, as the case may be, the Company shall
issue, or cause the Transfer Agent for the Common Stock to prepare and issue,
the Principal Payment Shares in the name of the Holder or its nominee before
being so delivered by the Company on the Maturity Date or the applicable
Optional Redemption Date, as the case may be.
(f) The Principal Payment Shares, when issued pursuant to and in
compliance with this Section 1.4, shall be, and for all purposes shall be deemed
to be, validly issued, fully paid and nonassessable shares of Common Stock; the
issuance and delivery thereof is in all respects hereby authorized; and the
issuance thereof, together with lawful money of the United States of America, if
any, paid in lieu of fractional shares of Common Stock, will be, and for all
purposes shall be deemed to be, in full discharge and satisfaction of the
Company's obligation to pay the portion of the principal amount of this Note to
which such Principal Payment Shares relate or the portion of the Optional
Redemption Price of this Note to which such Principal Payment Shares relate, as
the case may be.
(g) Notwithstanding any other provision hereof, if the Aggregate
Share Payment Amount exceeds the Share Payment Threshold, then the Holder shall
have the right, exercisable
-10-
by notice given to the Company on or before the Business Day immediately
preceding the Maturity Date, to receive payment in cash rather than Principal
Payment Shares on the Maturity Date of all or any portion of the Holder's pro
rata (based on the portion of the principal amount of this Note and the Other
Notes which the Company has elected to pay in shares of Common Stock and as to
which the holders have consented) portion of such excess.
ARTICLE II
ADDITIONAL INTEREST
2.1 RIGHT TO ADDITIONAL INTEREST. In addition to all other amounts
----------------------------
provided in this Note and the Other Notes to be paid by the Company, the Holder
and the registered holders of the Other Notes shall be entitled to payments
based on a portion of the Net Revenues of the Products and the Competitive
Products in the Territory during the Payment Period. The amount of such
payments based on a portion of such Net Revenues of the Products and the
Competitive Products during any Determination Period shall be the product
obtained by multiplying (x) an amount equal to the Net Revenues from the
Products and the Competitive Products in the Territory during such Determination
Period times (y) the Payment Percentage in effect during such Determination
Period, with each change therein during such Determination Period being given
effect (such product, the "Noteholder Payment Amount"). Based on the U.S.
federal income tax laws in effect on the Issuance Date, the Company intends to
treat the Noteholder Payment Amounts as additional interest on this Note for
U.S. federal income tax purposes. The Company shall remain obligated to make
payments to the Holder pursuant to this Article II notwithstanding the payment
or redemption of all or any portion of this Note.
2.2 CALCULATION OF NET REVENUES. The Company shall maintain in
---------------------------
reasonable and adequate detail records of all components of and adjustments made
in determining Net Revenues of the Products and the Competitive Products in the
Territory during each Determination Period. Within 45 days after the end of
each Determination Period, the Company shall (a) furnish to the Holder a Company
Certificate setting forth (x) in reasonable detail for each Product or
Competitive Product for which there were sales in the Territory during such
Determination Period the amounts of (1) gross sales (excluding sales to
Affiliates), (2) prompt payment and other discounts, (3) transportation and
related insurance charges, (4) returns, bad debt and other allowances, (5) taxes
deducted from gross sales in determining Net Revenues, (6) distributors',
consignees' and wholesalers' fees and commissions, and (7) Net Revenues, in each
such case of the preceding clauses (1) through (7) for such Determination
Period, (y) the percentage and the amount, in currency of the United States of
America, of such Net Revenues to be paid to the Holder and the holders of the
Other Notes pursuant to Article II hereof and thereof, identifying each such
Person, and (z) a statement that the information set forth in such Company
Certificate is true and correct and (b) pay to the Holder an amount equal to the
portion of the Noteholder Payment Amount for such Determination Period to which
the Holder is entitled.
-11-
2.3 ALLOCATION OF NOTEHOLDER PAYMENT AMOUNT. The Noteholder Payment
---------------------------------------
Amount for any Determination Period shall be allocated among the Persons
(including the Holder) who were registered holders of this Note and the Other
Notes at any time during such Determination Period pro rata based on the
principal amounts held by each and the portion of such Determination Period
during which such registered holders held this Note and the Other Notes.
2.4 RECORDS, INSPECTION, ETC. The Holder shall have the right,
------------------------
exercisable from time to time, to examine, or to have its representatives
examine, the relevant books of account and records of the Company, its
Subsidiaries and their respective Affiliates upon reasonable prior notice and
during normal business hours, to confirm the accuracy of the statements and
information provided to the Holder pursuant to this Article II and the amounts
of the payments required to be made by the Company to the Holder pursuant to
this Article II. The Holder shall have the right from time to time to retain a
firm of independent public accountants to examine the books of account and
records of the Company and its Subsidiaries for any one or more Determination
Periods for purposes of confirming the accuracy of such statements, information
and amounts. The cost of such accountants shall be paid by the Holder unless
(i) the amount of the Noteholder Payment Amount as determined by such
accountants for any Determination Period was more than $25,000 greater than the
amount thereof set forth in the Company Certificate furnished to the Holder for
such Determination Period pursuant to Section 2.2 or (ii) the Company shall have
failed to furnish a Company Certificate for such Determination Period to the
Holder pursuant to Section 2.2 on or before the due date for such Company
Certificate. The Company shall not be obligated to maintain the books and
records referred to in this section for more than three years after the end of
the Payment Period.
2.5 CERTAIN TRANSFERS OF PRODUCT OR PRODUCT RIGHTS. The Company
----------------------------------------------
shall not sell, assign, transfer or convey (including, without limitation, by
means of a license) any Product or Competitive Product as an entirety or
substantially as an entirety (except to the extent unrelated to sales and
marketing of the Products and Competitive Products in the Territory), or any of
its rights relating to any Product or Competitive Product in the Territory
unless (1) such transfer is expressly made subject to the lien, security
interest and other rights of the Holder and the holders of the Other Notes under
the Transaction Documents, (2) such transferee shall execute and deliver such
documents and instruments as shall be reasonably satisfactory to the Majority
Holders to give effect to the preceding clause (1), and (3) such transferee
shall by written instrument reasonably satisfactory to the Majority Holders
expressly assume, jointly and severally with the Company, all obligations for
the due and punctual payment and performance of all of the Company's obligations
under this Article II and under the Security Agreement and Patent and Trademark
Security Agreement; provided, however, that the provisions of this clause (3)
only shall be inapplicable to any license or sublicense by the Company of its
rights with respect to a Product or Competitive Product with respect to the
Territory to a Person in connection with a co-marketing arrangement between the
Company and such Person, so long as all revenues from sales of such Product or
Competitive Product by such Person are included in the computation of Net
Revenues for purposes of determining the Noteholder Payment Amount, whether or
not such revenues are received by the
-12-
Company or reflected in the Company's books, records or financial statements.
2.6 NO REDEMPTION. The obligations of the Company under this Article
-------------
II shall not be extinguished or eliminated by any redemption of this Note
pursuant to Section 1.2, any acceleration or payment of this Note upon the
occurrence of an Event of Default, any exercise by the Holder of repurchase
rights under Article V or any prepayment of this Note in accordance with Section
6.2.
ARTICLE III
CERTAIN COVENANTS
So long as the Company shall have any obligation under this Note,
unless otherwise consented to in advance by the Majority Holders:
3.1 LIMITATIONS ON CERTAIN INDEBTEDNESS. The Company will not
-----------------------------------
itself, and will not permit any Subsidiary to, create, assume, incur or in any
manner become liable in respect of, including, without limitation, by reason of
any business combination transaction (all of which are referred to herein as
"incurring"), any Indebtedness other than Permitted Indebtedness.
3.2 MAINTENANCE OF CASH, CASH EQUIVALENT AND ELIGIBLE INVESTMENT
------------------------------------------------------------
BALANCES. The Company shall maintain Cash, Cash Equivalent and Eligible
--------
Investment Balances during the following periods at least equal to the amounts
set forth below:
Period Amount
------ ------
Issuance Date through December 31,1999
$40 million
January 1, 2000 and thereafter
30 million
The Company's Cash, Cash Equivalent and Eligible Investment Balances shall be
determined as of the end of each calendar quarter. Within fifteen days after
the end of each calendar quarter, the Company shall furnish to the Holder a
Company Certificate setting forth the amount of the Company's Cash, Cash
Equivalent and Eligible Investment Balances as of the end of such calendar
quarter. If at the end of any calendar quarter the Company shall have less than
the required amount of Cash, Cash Equivalents and Eligible Investment Balances,
then the Company shall not be deemed to be in violation of this Section 3.2
unless such insufficiency exists on the date which is 30 days after the end of
such calendar quarter, so long as during such 30-day period the Company is
making bona fide efforts to cure such insufficiency.
-13-
3.3 PAYMENT OF OBLIGATIONS. The Company will pay and discharge, and
----------------------
will cause each Significant Subsidiary to pay and discharge, all their
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings.
3.4 MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will keep,
----------------------------------
and will cause each Significant Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Company will maintain, and will cause each Significant
Subsidiary to maintain, with financially sound and responsible insurance
companies, insurance, including, without limitation, products liability
insurance relating to the Product, in at least such amounts and against such
risks as is reasonably adequate for the conduct of their respective businesses
and the value of their respective properties.
3.5 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company
------------------------------------------------
will continue, and will cause each Significant Subsidiary to continue, to engage
in business of the same general type as now conducted by the Company, and will
preserve, renew and keep in full force and effect, and will cause each
Significant Subsidiary to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business and except
for any Subsidiary which is not involved in the manufacture, sale or marketing
in the Territory of Products or Competitive Products and which the Board of
Directors determines it is no longer in the Company's interest to own or operate
and, if being sold, is being sold for a fair consideration.
3.6 COMPLIANCE WITH LAWS. The Company will comply, and will cause
--------------------
each Significant Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and the Subsidiaries, taken as a whole.
3.7 INVESTMENT COMPANY ACT. The Company will not be or become an
----------------------
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
3.8 LIMITATIONS ON ASSET SALES, LIQUIDATIONS, ETC.; CERTAIN MATTERS.
---------------------------------------------------------------
The Company shall not
-14-
(a) sell, convey or otherwise dispose of all or substantially all of
the assets of the Company as an entirety or substantially as an entirety in a
single transaction or in a series of related transactions; or
(b) liquidate, dissolve or otherwise wind up the affairs of the
Company.
3.9 LIMITATIONS ON LIENS. The Company will not itself, and will not
--------------------
permit any Subsidiary to, create, assume or suffer to exist any mortgage, lien,
pledge, security interest or other charge or encumbrance (including, without
limitation, the lien or retained security title of a conditional vendor), all of
which are referred to below as "liens", upon all or any part of its property of
any character, whether owned at the date hereof or thereafter acquired, except:
(a) liens upon any property of any Subsidiary or Subsidiaries as
security for indebtedness owing to the Company;
(b) purchase money liens upon any property acquired by the Company or
any Subsidiary, or liens existing on such property at the time of acquisition;
provided that (i) no such lien shall extend to or cover any other property of
the Company or any Subsidiary, (ii) the principal amount of indebtedness secured
by each such lien on any such property shall not exceed the cost (including such
principal amount of the indebtedness secured thereby) to the Company or the
Subsidiary of the property subject thereto, and (iii) the aggregate principal
amount of all indebtedness of the Company and all Subsidiaries secured by all
liens described in this subsection (b) and any extensions, renewals or
replacements thereof, at any one time outstanding, shall not exceed $10 million
for the Company and the Subsidiaries; and the extending, renewing or replacing
of any lien permitted by this subsection (b) or of the indebtedness secured
thereby; provided, however, that in any such case the lien by which any lien is
extended, renewed or replaced shall not extend to or cover any other property of
the Company or any Subsidiary and the principal amount of such indebtedness
extended, renewed or replaced shall not be increased;
(c) liens securing this Note and the Other Notes ratably;
(d) liens for taxes or assessments or governmental charges or levies
on its property if such taxes or assessments or charges or levies shall not at
the time be due and payable or if the amount, applicability, or validity of any
such tax, assessment, charge or levy shall currently be contested in good faith
by appropriate proceedings or necessary preliminary steps are being taken to
contest, compromise or settle the amount thereof or to determine the
applicability or validity thereof and if the Company or such Subsidiary, as the
case may be, shall have set aside on its books reserves (segregated to the
extent required by sound accounting practice) deemed by it adequate with respect
thereto; deposits or pledges to secure payment of worker's compensation,
unemployment insurance, old age pensions or other social security; deposits or
pledges to secure performance of bids, tenders, contracts (other than contracts
for the payment of money borrowed or credit extended), leases, public or
statutory obligations, surety or appeal bonds, or other deposits
-15-
or pledges for purposes of like general nature in the ordinary course of
business; mechanics', carriers', workers', repairmen's or other like liens
arising in the ordinary course of business securing obligations which are not
overdue for a period of 60 days, or which are in good faith being contested or
litigated, or deposits to obtain the release of such liens; liens created by or
resulting from any litigation or legal proceedings or proceedings being
contested in good faith by appropriate proceedings, provided any execution
levied thereon shall be stayed; leases made, or existing on property acquired,
in the ordinary course of business; landlords' liens under leases to which the
Company or any Subsidiary is a party; and zoning restrictions, easements,
licenses or restrictions on the use of real property or minor irregularities in
title thereto; provided that all such liens described in this subsection (d) do
not, in the aggregate, materially impair the use of such property in the
operations of the business of the Company or any Subsidiary or the value of such
property for the purpose of such business; and
(e) liens existing on the Issuance Date and listed in Schedule 4(r)
to the Note Purchase Agreement.
3.10 PRODUCTS AND COMPETITIVE PRODUCTS MARKETING. Until the end of
-------------------------------------------
the Payment Period, the Company shall use all commercially reasonable efforts to
market the Products and the Competitive Products in the Territory directly or
through reliable third parties.
3.11 MANUFACTURE AND SALE OF THE PRODUCTS AND THE COMPETITIVE
--------------------------------------------------------
PRODUCTS. Until the end of the Payment Period, the Company shall use all
commercially reasonable efforts (a) to manufacture the Products and the
Competitive Products in accordance with GMP in sufficient quantities to meet the
demand therefor, either directly or through third party manufacturing and supply
arrangements, and (b) to sell the Products and the Competitive Products in the
Territory.
3.12 CERTAIN OBLIGATIONS. (a) The Company shall not amend, modify or
-------------------
waive any provision of any of the Xxxxx Agreements as they relate to the
Territory in a manner which would adversely affect the Collateral Agent's lien
on and Security Interest in the Collateral.
(b) The Company shall perform and comply in all material respects
with the Xxxxx Agreements; and shall perform and comply in all material respects
with any other agreement relating to any of the Products or the Competitive
Products, the failure to comply with which could have a material adverse effect
on the Net Revenues from the Products and the Competitive Products or adversely
affect the Collateral Agent's lien on and security interest in the Collateral.
3.13 NOTICE OF DEFAULTS. The Company shall notify the Holder
------------------
promptly, but in any event not later than five days after the Company becomes
aware of the fact, of any failure by the Company to comply with this Article
III.
3.14 CERTAIN EVENTS OF DEFAULT. If an Event of Default specified in
-------------------------
clause (c), (e), or (f) of Section 4.1 shall occur and be continuing, then, at
the request of the Majority Holders, the
-16-
Company shall use all commercially reasonable efforts (a) to sell, license or
otherwise dispose of the Products and the Competitive Products and the Company's
interests therein as they relate to the Territory, subject to the terms and
requirements of the Security Agreement and the Patent and Trademark Security
Agreement, for a cash consideration at least equal to the fair market value
thereof or (b) to complete one or more financing transactions to provide cash to
the Company to enable it to repay or redeem this Note and the Other Notes in
accordance with their terms on the earliest date on which the Company is
permitted to do so and, if such Event of Default involves a violation by the
Company of Section 3.2, to cure such violation.
ARTICLE IV
EVENTS OF DEFAULT
4.1 If any of the following events of default (each, an "Event of
Default") shall occur:
(A) FAILURE TO PAY PRINCIPAL, INTEREST, ETC. The Company fails (1) to
---------------------------------------
pay the principal, the Optional Redemption Price, the Repurchase Price or
the Registration Repurchase Price hereof when due, whether at maturity,
upon acceleration or otherwise, as applicable, (2) to pay or perform the
obligations of the Company under Article II (other than Section 2.4) or (3)
to pay any installment of interest hereon when due and, in the case of this
clause (3) of this Section 4.1(a) only, such failure continues for a period
of five Business Days after the due date thereof; or
(B) BREACH OF CERTAIN COVENANTS. The Company fails to comply with
---------------------------
Section 3.1, 3.10, 3.11, 3.12, 3.13, or 3.14; or
(C) BREACH OF OTHER COVENANTS. The Company fails to comply with
-------------------------
Section 3.2 or fails to comply in any material respect with any other
provision of Article III of this Note (other than Section 3.1, 3.10, 3.11,
3.12, 3.13, or 3.14) or breaches any other material covenant or other
material term or condition of this Note or any of the other Transaction
Documents (other than as specifically provided in clauses (a), (b), (i),
and (j) of this Section 4.1), and such breach continues for a period of
five days after written notice thereof to the Company from the Holder; or
(D) BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
----------------------------------------
warranty of the Company made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Transaction Documents) shall be false
or misleading in any material respect when made; or
-17-
(E) CERTAIN VOLUNTARY PROCEEDINGS. The Company or any Subsidiary
-----------------------------
shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due or
shall admit in writing its inability generally to pay its debts as they
become due; or
(F) CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or other
-------------------------------
proceeding shall be commenced against the Company or any Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 consecutive days; or
(G) JUDGMENTS. Any court of competent jurisdiction shall enter one or
---------
more final judgments against the Company or any Subsidiary or any of their
respective properties or other assets in an aggregate amount in excess of
the Judgment Default Threshold, which is not vacated, bonded, stayed,
discharged, satisfied or waived for a period of 30 consecutive days; or
(H) DEFAULT UNDER OTHER AGREEMENTS. (a) The Company or any Subsidiary
------------------------------
shall (i) default in any payment with respect to any Indebtedness for
borrowed money (other than this Note) which Indebtedness has an outstanding
principal amount in excess of the Cross-Default Threshold, beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created or (ii) default in the observance or
performance of any agreement, covenant or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause,
or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, any such Indebtedness
to become due prior to its stated maturity and such default or event shall
continue beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created (after giving effect to
any consent or waiver obtained and then in effect thereunder); or (b) any
Indebtedness of the Company or any Subsidiary which has an outstanding
principal amount in excess of the Cross-Default Threshold shall, in
accordance with its terms, be declared to be due and payable, or required
to be prepaid other than by a regularly scheduled or required payment prior
to the stated maturity thereof; or
-18-
(I) SECURITY AGREEMENT AND PATENT AND TRADEMARK SECURITY AGREEMENT,
---------------------------------------------------------------
ETC. The occurrence of any "Event of Default" as defined in the Security
---
Agreement or the Patent and Trademark Security Agreement;
(J) CESSATION OF MANUFACTURE, SALES OR MARKETING. None of the Company
--------------------------------------------
or any of its Affiliates shall (directly or through reliable third parties)
be manufacturing, selling or marketing the Products in the Territory;
then,
(1) upon the occurrence and during the continuation of any Event of
Default specified in clause (a), (b), (d), (i), or (j) of this Section 4.1,
at the option of the Holder, and upon the occurrence of any Event of
Default specified in clause (e) or (f) of this Section 4.1: (X) the
Company shall, pay to the Holder an amount equal to the outstanding
principal amount of this Note plus accrued and unpaid interest on such
principal amount to the date of payment plus accrued and unpaid Default
Interest, if any, thereon at the rate provided in this Note to the date of
payment, (V) all other amounts payable hereunder or under any of the other
Transaction Documents shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, reasonable legal
fees and expenses, of collection, (Y) the Collateral Agent shall be
entitled to exercise all rights and remedies under the Security Agreement
and the Patent and Trademark Security Agreement, and (Z) the Holder shall
be entitled to exercise all other rights and remedies available at law or
in equity; and
(2) upon the occurrence and during the continuation of any Event of
Default specified in clause (c), (g) or (h) of this Section 4.1: (A) if
any Event of Default continues during the period of 365 consecutive days
following the occurrence of such Event of Default, then thereafter so long
as any Event of Default is continuing (i) at the option of the Holder the
Company shall pay to the Holder an amount equal to the outstanding
principal amount of this Note plus accrued and unpaid interest on such
principal amount to the date of payment plus accrued and unpaid Default
Interest, if any, thereon at the rate provided in this Note to the date of
payment, (ii) all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, reasonable legal fees and expenses, of collection and (and) the
Collateral Agent shall be entitled to exercise all rights and remedies
under the Security Agreement, the Patent and Trademark Security Agreement,
and (B) the Holder shall be entitled to exercise all rights and remedies
available at law or in equity other than those set forth in the immediately
preceding clause (A).
ARTICLE V
-19-
REPURCHASE UPON A REPURCHASE EVENT
OR REGISTRATION REPURCHASE EVENT
5.1 REPURCHASE RIGHT UPON REPURCHASE EVENT. If a Repurchase Event
--------------------------------------
occurs, in addition to any other right of the Holder, the Holder shall have the
right, at the Holder's option, to require the Company to repurchase all of this
Note, or any portion hereof on the repurchase date that is five Business Days
after the date of the Holder Notice delivered with respect to such Repurchase
Event. The Holder shall have the right to require the Company to repurchase all
or any such portion of this Note if a Repurchase Event occurs at any time while
any portion of the principal amount of this Note is outstanding at a price equal
to the Repurchase Price.
5.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS, ETC. (a) On or
----------------------------------------------------
before the fifth Business Day after the occurrence of a Repurchase Event, the
Company shall give to the Holder a Company Notice of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised, and
(ii) a description of the procedure (set forth in this Section 5.2)
which the Holder must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's right to exercise the repurchase right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.
(b) To exercise the repurchase right, the Holder shall deliver to the
Company on or before the 30th day after a Company Notice (or if no such Company
Notice has been given, within 40 days after the Holder first learns of the
Repurchase Event) (i) a Holder Notice setting forth the name of the Holder and
the principal amount of this Note to be repurchased, and (ii) this Note, duly
endorsed for transfer to the Company of the portion of the outstanding principal
amount of this Note to be repurchased. A Holder Notice may be revoked by the
Holder at any time prior to the time the Company pays the applicable Repurchase
Price to the Holder.
(c) If the Holder shall have given a Holder Notice, then on the date
which is five Business Days after the date such Holder Notice is given (or such
later date as the Holder surrenders this Note) the Company shall make payment in
immediately available funds of the applicable Repurchase Price to such account
as specified by the Holder in writing to the Company at least one Business Day
prior to the applicable repurchase date.
5.3 REPURCHASE RIGHT UPON REGISTRATION REPURCHASE EVENT. If a
---------------------------------------------------
Registration Repurchase Event occurs, in addition to any other right of the
Holder, the Holder shall have the right, at the Holder's option, to require the
Company to repurchase all of this Note, or from time to
-20-
time any portion hereof, by making payment of the Registration Repurchase Price
to the Holder in immediately available funds to such account as specified by the
Holder by notice to the Company at least one Business Day prior to the
applicable repurchase date, on the repurchase date that is five Business Days
after the date a Holder Registration Repurchase Notice is given by the Holder
(or such later date as the Holder surrenders this Note to the Company). The
Holder shall exercise its right to require repurchase pursuant to this Section
5.3 by giving a Holder Registration Repurchase Notice as follows: (i) if the
Registration Repurchase Event occurs by reason of the Company's failure to
timely file the Registration Statement with the SEC, at any time prior to the
earlier of (x) the date which is 31 days after such event and (y) the date the
Company files the Registration Statement with the SEC or (ii) if the
Registration Repurchase Event occurs by reason of the non-occurrence of the SEC
Effective Date within 90 days after the Issuance Date, at any time prior to the
SEC Effective Date. If the Holder shall have given a Holder Registration
Repurchase Notice, the Company shall repurchase this Note or the portion of this
Note as stated in such Holder Registration Repurchase Notice at a purchase price
equal to the Registration Repurchase Price. A Holder Registration Repurchase
Notice may be revoked by the Holder at any time prior to the time the Company
pays the applicable Registration Repurchase Price.
5.4 OTHER. A Holder Notice or a Holder Registration Repurchase
-----
Notice given by the Holder shall be deemed for all purposes to be in proper form
unless the Company notifies the Holder within three Business Days after such
Holder Notice or Holder Registration Repurchase Notice has been given (which
notice shall specify all defects in such Holder Notice or Holder Registration
Repurchase Notice), and any Holder Notice or Holder Registration Repurchase
Notice containing any such defect shall nonetheless be effective on the date
given if the Holder promptly undertakes to correct all such defects. No such
claim of defect shall limit or delay performance of the Company's obligation to
repurchase any portion of this Note, the repurchase of which is not in dispute.
ARTICLE VI
EXTENSION OF MATURITY DATE
6.1 RIGHT TO EXTEND MATURITY DATE. The Company shall have the right,
-----------------------------
exercisable by notice given to the Holder on a date not earlier than 90 or later
than 30 days prior to the Original Maturity Date, which notice shall refer to
this Section 6.1, to extend the Maturity Date to the Extended Maturity Date so
long as the following conditions precedent are satisfied on the date the Company
gives such notice to the Holder:
(a) no Event of Default and no event which, with notice or passage of
time, or both, would become an Event of Default, shall have occurred and be
continuing;
(b) no Repurchase Event or Registration Repurchase Event shall have
occurred
-21-
with respect to which the Holder has the right to exercise repurchase
rights under Sections 5.1 and 5.2 or Section 5.3 or with respect to which
the Holder has exercised such repurchase rights and the Repurchase Price or
the Registration Repurchase Price, as the case may be, has not been paid to
the Holder and no event which, with notice or passage of time, or both,
would become a Repurchase Event shall have occurred and be continuing;
(c) Net Revenues from the Products and the Competitive Products in
the Territory during the then most recent full calendar quarter preceding
the date on which the Company gives such notice to the Holder shall have
been at least 75% of the Target Revenues for the Products and the
Competitive Products in the Territory for such calendar quarter;
(d) the Company's Cash, Cash Equivalent and Eligible Investment
Balances shall be greater than the sum of (1) an amount equal to 125% of
the aggregate outstanding principal amount of this Note and the Other Notes
at the close of business on the Business Day prior to the date on which the
Company gives such notice to the Holder plus (2) an amount equal to 400% of
the cash used in operations by the Company and the Subsidiaries during the
then most recently completed fiscal quarter, as shown in the Company's
consolidated statement of cash flows, prepared in accordance with Generally
Accepted Accounting Principles on a basis consistent with the Company's
then most recently prepared audited annual financial statements;
(e) the Company shall be operating under a current business plan
approved by the Company's Board of Directors which shows that from the date
such notice is given to the Holder to the Extended Maturity Date the
Company's Cash, Cash Equivalent and Eligible Investment Balances will not
be less than 125% of the aggregate outstanding principal amount of this
Note and the Other Notes on the date such notice is given to the Holder;
(f) the Company shall have given notice to the holders of all of the
Other Notes to extend the maturity date thereof to the Extended Maturity
Date; and
(g) the Company shall have furnished to the Holder a Company
Certificate setting forth in reasonable detail confirmation of the
satisfaction of the conditions in the preceding clauses (a) through (f).
6.2 ALTERNATIVE RIGHT TO EXTEND MATURITY DATE. If the Company is
-----------------------------------------
unable to satisfy any one or more of the requirements of clause (c), (d) or (e)
of Section 6.1, the Company shall have the right, exercisable by notice given to
the Holder not earlier than 90 or later than 30 days prior to the Original
Maturity Date, which notice shall refer to this Section 6.2, to extend the
Maturity Date to the Extended Maturity Date so long as (x) the conditions
precedent specified in clauses (a) (other than an Event of Default solely by
reason of the Company's violation of Section 3.2), (b) and (f) of Section 6.1
are satisfied on the date the Company gives such notice to the Holder
-22-
and (y) Net Revenues of the Product and the portion of the Net Revenues of the
Competitive Products included in the determination of the Noteholder Payment
Amount in the Territory during the then most recent full fiscal quarter
preceding the date on which the Company gives such notice to the Holder shall
have been at least $3,750,000. If the Company gives such notice, then from and
after the Original Maturity Date (1) the Applicable Rate shall be increased from
11% per annum to 14% per annum, (2) the Default Rate shall be increased from 21%
per annum to 26% per annum and (3) the Payment Percentage shall be increased to
25 percent and, so long as no Event of Default has occurred and is continuing,
the portion of the Noteholder Payment Amount paid to the Holder for any period
during which such higher Payment Percentage shall be in effect which is in
excess of the portion of the Noteholder Payment Amount which would have been
paid to the Holder if the Payment Percentage during such period were 9.0 percent
shall be paid to and applied by the Holder to the outstanding principal amount
of this Note.
ARTICLE VII
SATISFACTION AND DISCHARGE OF CERTAIN PROVISIONS
7.1. DISCHARGE OF CERTAIN PROVISIONS. If
-------------------------------
(i) the Company shall have deposited with the Collateral Agent, in
trust, funds or Government Obligations, the principal of and interest on
which when due will, together with any funds set aside at the same time and
without the necessity for investment or reinvestment of such funds or for
further investment or reinvestment of the principal amount of or interest
on such Government Obligations, provide funds sufficient to pay at maturity
or upon redemption all of this Note and the Other Notes, including
principal and interest due or to become due to the Maturity Date or earlier
redemption;
(ii) in the case of this Note and the Other Notes which the Company
may elect to redeem pursuant to Section 1.2 and the comparable provisions
of the Other Notes, in whole or in part, prior to their maturity, all
action other than the giving of notice of redemption necessary to redeem
such of this Note and the Other Notes as of the specified redemption date
or dates for this Note and such Other Notes shall have been taken and
arrangements reasonably satisfactory to the Majority Holders shall have
been made for the giving of notice of such redemption;
(iii) notice of such deposit shall have been given to the Holder and
the Holders of the Other Notes as to which such deposit is applicable,
within ten days after the date of such deposit;
(iv) no Event of Default or event which with notice or passage of
time, or both, would become an Event of Default under Section 4.1(e) or
4.1(f) has occurred and is
-23-
continuing; and
(v) no Event of Default or event which with notice or passage of
time, or both would become an Event of Default (other than as specifically
provided in the immediately preceding clause (iv)) has occurred and is
continuing (unless the requirements of this clause (v) will be satisfied
immediately after the 92-day period hereinbelow specified and the Company
shall furnish to the Holder Company Certificates to such effect on the date
of such deposit and on such 92nd day);
and the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then on the date which is 92 days after the date of
such deposit by the Company with the Collateral Agent, so long as during such
92-day period no Event of Default or event which with notice or passage of time,
or both, would become an Event of Default under Section 4.1(e) or 4.1(f) has
occurred (x) this Note shall cease to be of further effect (except as provided
herein), (y) the Company shall be entitled to release of Collateral (other than
the funds and Government Obligations so deposited and any interest or income
thereon or any proceeds thereof) as provided in the Pledge Agreement and (z) the
Holder, on demand of the Company accompanied by a Company Certificate and an
opinion of counsel and at the cost and expense of the Company, shall execute
proper instruments acknowledging the satisfaction and discharge of this Note to
the extent set forth herein.
So long as this Note shall remain outstanding after such discharge,
this Note shall continue in effect following the discharge provided for above
solely with respect to rights of registration of transfer, exchange or
replacement of outstanding Notes, rights to receive payment of the principal
hereof and interest hereon in accordance with the terms of this Note from such
deposited funds or the proceeds of or interest on such deposited Government
Obligations, the rights under Article II and the rights under Sections 3.10 and
3.11; provided, however, that, following such discharge, no claim for payment of
principal of or interest on this Note shall be made against the Company. Upon
such discharge, any Event of Default which occurred prior to such discharge
solely by reason of one or more provisions of this Note with which the Company
thereafter is no longer obligated to comply, then such Event of Default shall no
longer exist.
7.2. DEPOSITED MONEYS AND GOVERNMENT OBLIGATIONS TO BE HELD IN
---------------------------------------------------------
ACCORDANCE WITH SECURITY AGREEMENT. All funds and Government Obligations
----------------------------------
deposited with the Collateral Agent pursuant to Section 7.1 shall be held in
trust and subject to and in accordance with the terms of the Security Agreement
and such funds and interest on such Government Obligations shall be applied by
it to the payment of the Notes in accordance with the Security Agreement.
7.3. REINSTATEMENT. If (i) the Collateral Agent is unable to apply
-------------
any funds in accordance with Section 7.2 and the Security Agreement by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application and (ii) the Majority
Holders so specify by this notice to the Company, the Company's obligations
under this Note shall be revived and reinstated as though no deposit had
occurred pursuant to Section 7.1
-24-
until such time as the Collateral Agent is permitted to apply all such funds in
accordance with Section 7.2 and the Security Agreement.
ARTICLE VIII
DEFINITIONS
8.1 CERTAIN DEFINED TERMS. (a) All the agreements or instruments
---------------------
herein defined shall mean such agreements or instruments as the same may from
time to time be supplemented or amended or the terms thereof waived or modified
to the extent permitted by, and in accordance with, the terms thereof and of
this Note.
(b) The following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Aggregate Share Payment Amount" means the sum of (1) the principal
amount of this Note as to which the Company has elected the Share Principal
Payment Option and to which the Holder has consented plus (2) the aggregate
principal amount of the Other Notes as to which the Company has elected to make
payment in shares of Common Stock pursuant to provisions comparable to Section
1.4 and to which the respective holders of the Other Notes have consented in
accordance with the terms of the Other Notes.
"Applicable Rate" means 11 percent per annum except that, if the
Company exercises its right to extend the Original Maturity Date to the Extended
Maturity Date pursuant to Section 6.2, then from and after the Original Maturity
Date such rate shall be increased to 14 percent per annum (or in either such
case such lesser rate as shall be the highest rate permitted by applicable law).
"Assignment Agreement" shall have the meaning provided in the Note
Purchase Agreement.
"Business Day" means any day other than a Saturday, Sunday or a day on
which commercial banks in The City of New York are authorized or required by law
or executive order to remain closed.
"Cash, Cash Equivalent and Eligible Investment Balances" of any Person
on any date shall be determined from such Person's books maintained in
accordance with Generally Accepted Accounting Principles, and means, without
duplication, the sum of (1) the cash accrued by such Person and its subsidiaries
on a consolidated basis on such date and available for use by such Person and
its subsidiaries on such date, (2) all assets which would, on a consolidated
balance sheet of such Person and its subsidiaries prepared as of such date in
accordance with
-25-
Generally Accepted Accounting Principles, be classified as cash equivalents and
(3) all Eligible Marketable Securities which are assets which would, on a
consolidated balance sheet of such Person and its subsidiaries prepared as of
such date in accordance with Generally Accepted Accounting Principles, be
classified as marketable securities.
"Collateral Agent" means Delta Opportunity Fund, Ltd., as collateral
agent under the Security Agreement and the Patent and Trademark Security
Agreement, or its successors.
"Common Stock" means the Common Stock, par value $.01 per share, or
any shares of capital stock of the Company into which such shares shall be
changed or reclassified after the Issuance Date.
"Company" shall have the meaning provided in the first paragraph of
this Note.
"Company Certificate" means a certificate of the Company signed by an
Officer.
"Company Notice" means a Company Notice in the form attached hereto as
EXHIBIT C.
"Competitive Product" means a product, method or system, other than
the Product, that (x) has received regulatory approval for use, or has received
regulatory approval for any substantially similar use, in a human therapeutic
indication as any Product, or (y) is so used for human therapeutic indication of
excessive sleep disorder or excessive daytime sleep disorder but shall not
include any product, method or system that an Affiliate of the Company was
testing in preclinical or clinical trials or for which regulatory approval was
received, prior to becoming an Affiliate of the Company.
"Cross-Default Threshold" means as of any date an amount equal to the
greater of
(1) an amount equal to the product obtained by multiplying (a) the
amount, if any, by which the Company's Cash, Cash Equivalent and Eligible
Investment Balances on such date exceed the aggregate outstanding principal
amount of this Note and the Other Notes on such date times (b) 50 percent;
and
(2) $1,000,000 for any single Indebtedness of the type referred to in
Section 4.7 and $2,000,000 in the aggregate for the Company and the
Subsidiaries for all Indebtedness referred to in Section 4.1(h).
"Default Interest" shall have the meaning provided in the first
paragraph of this Note.
"Default Rate" means 21 percent per annum except that, if the Company
exercises its right to extend the Original Maturity Date to the Extended
Maturity Date pursuant to Section 6.2,
-26-
then from and after the Original Maturity Date such rate shall be increased to
26 percent per annum (or in either case such lesser rate equal to the highest
rate permitted by applicable law).
"Determination Period" means each calendar quarter, except that the
first Determination Period shall begin on the Issuance Date and end on March 31,
1999 and the final Determination Period shall end on the last day of the Payment
Period.
"Eligible Bank" means a corporation organized or existing under the
laws of the United States or any other state, having combined capital and
surplus of at least $100 million and subject to supervision by federal or state
authority and which has a branch located in New York, New York.
"Eligible Marketable Securities" of the Company as of any date means
marketable securities which would be reflected on a consolidated balance sheet
of the Company and its subsidiaries prepared as of such date in accordance with
Generally Accepted Accounting Principles and which are debt obligations within
the Company's investment policies set forth on Exhibit M to the Company's Senior
Convertible Notes due April 7, 1998.
"Event of Default" shall have the meaning provided in Section 4.1.
"Extended Maturity Date" means March 1, 2003.
"Fundamental Change" means
(a) Any consolidation or merger of the Company or any Subsidiary with
or into another entity (other than a merger or consolidation of a
Subsidiary into the Company or a wholly-owned Subsidiary) where the
stockholders of the Company immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of the
surviving corporation of such consolidation or merger immediately following
such transaction; or the sale of all or substantially all of the assets of
the Company and the Subsidiaries in a safe transaction or a series of
related transactions; or
(b) The occurrence of any transaction or event in connection with
which all or substantially all the Common Stock shall be exchanged for,
converted into, acquired for or constitute the right to receive
consideration (whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock which is (or will, upon consummation of or immediately following such
transaction or event, will be) listed on a national securities exchange or
approved for quotation on Nasdaq or any similar United States system of
automated dissemination of transaction reporting of securities prices; or
(c) The acquisition by a Person or entity or group of Persons or
entities acting
-27-
in concert as a partnership, limited partnership, syndicate or group, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, of beneficial ownership of securities of
the Company representing 50% or more of the combined voting power of the
outstanding voting securities of the Company ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in the
election of directors.
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and practices applied by such Person
from time to time in the preparation of its audited financial statements.
"GMP" means the Good Manufacturing Practices established from time to
time by the United States Food and Drug Administration.
"Government Obligations" means direct obligations of, or obligations
the timely payment of the principal of and the interest on which are
unconditionally guaranteed by, the United States of America and which are not,
by their terms, callable.
"Holder" shall have the meaning provided in the first paragraph of
this Note.
"Holder Notice" means a Holder Notice in the form attached hereto as
EXHIBIT D.
"Holder Registration Repurchase Notice" means a Holder Registration
Repurchase Notice in the form attached hereto as EXHIBIT E.
"Indebtedness" as used in reference to any Person means all
indebtedness of such Person for borrowed money, the deferred purchase price of
property, goods and services and obligations under leases which are required to
be capitalized in accordance with Generally Accepted Accounting Principles and
shall include all such indebtedness guaranteed in any manner by such Person or
in effect guaranteed by such Person through a contingent agreement to purchase
and all indebtedness for the payment or purchase of which such Person has
contingently agreed to advance or supply funds and all indebtedness secured by
mortgage or other lien upon property owned by such Person, although such Person
has not assumed or become liable for the payment of such indebtedness, and, for
all purposes hereof, such indebtedness shall be treated as though it has been
assumed by such Person.
"Interest Payment Dates" means each March 1, June 1, September 1 and
December 1 and the Maturity Date.
"Interest Payment Shares" means the shares of Common Stock and the
related Preferred Share Purchase Rights issuable in payment of interest on this
Note in accordance with Section 1.1.
-28-
"Interest Share Price" for any Interest Payment Date means the
arithmetic average of the Market Price of the Common Stock for all of the
Trading Days during [
] *
"Interest Share Registration Statement" means the registration
statement filed by the Company with the SEC under the 1933 Act pursuant to
Section 8(a)(1) of the Note Purchase Agreement.
"Issuance Date" means March 1, 1999.
"Judgment Default Threshold" means as of any date of determination an
amount equal to the greater of
(1) an amount equal to the product obtained by multiplying (a) the
amount, if any, by which the Company's Cash, Cash Equivalent and Eligible
Investment Balances on such date exceed the aggregate outstanding principal
amount of this Note and the Other Notes on such date times (b) 50 percent;
and
(2) $1,000,000.
"Xxxxx" means Laboratoire X. Xxxxx, a French corporation.
"Xxxxx Agreements" means (1) the License Agreement, dated January 20,
1993, by and between Xxxxx and the Company, as amended, (2) the Trademark
Agreement, dated January 20, 1993, by and between Genelco S.A. and the Company,
as amended, and (3) the Supply Agreement, dated January 20, 1993, between the
Company and Xxxxx, as amended.
"Majority Holders" means at any time such of the holders of this Note
and the Other Notes which hold Notes and Other Notes which, based on the
outstanding principal amounts thereof, represent a majority of the aggregate
outstanding principal amount of this Note and the Other Notes.
"Market Price" of any security on any date shall mean the closing bid
price of such security on such date on Nasdaq or such other securities exchange
or other market on which such security is listed for trading on such date which
constitutes the principal securities market for such security, as reported by
Bloomberg, L.P.
"Maturity Date" means at any time the Original Maturity Date or the
Extended Maturity Date, as in effect at such time.
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN HAS BEEN OMITTTED AND FILED
SEPARATELY WITH THE COMMISSION
-29-
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"Net Revenues" means, with respect to sales for any period and with
respect to any item, the amount thereof accrued by the Company for financial
reporting purposes, determined under the Generally Accepted Accounting
Principles used in the preparation of the Company's then most recently published
audited financial statements, from sales of Products or Competitive Products (as
and to the extent applicable) by the Company, any Affiliate of the Company or
any licensee or sublicensee of the Company or any Affiliate of the Company, but
excluding sales to any Affiliate, licensee or sublicensee of the Company or any
Affiliate of the Company; provided, however, that if for any period the
aggregate Net Revenues for the Products and the Competitive Products (before
application of this proviso) would exceed the Target Revenues for such period,
then in determining Net Revenues for such period there shall be excluded the
portion thereof, if any, arising from Competitive Products equal to the lesser
of (x) the amount thereof for such period arising from Competitive Products and
(y) the portion of the aggregate Net Revenues for the Products and the
Competitive Products for such period (before application of this proviso) which
shall be in excess of the Target Revenues for such period. In determining such
amount, the amounts received from such sales shall be reduced by related prompt
payment and other trade discounts, transportation and related insurance charges,
returns, bad debt and other allowances, taxes (except income and franchise
taxes) and distributors', consignees' and wholesalers' fees and commissions.
The terms "licensee" and "sublicensee" shall mean any Person licensed or
sublicensed by the Company or any Affiliate of the Company, including, without
limitation, pursuant to any marketing, co-marketing or co-detailing agreement
(or similar arrangement that is the functional equivalent of a license), but
excluding customary distribution, wholesaling and consignment arrangements. For
the purposes of this definition, distribution, wholesaling or consignment
arrangements shall be limited to arrangements where the distributor, wholesaler
or consignee is not obligated, in addition to selling a Product or Competitive
Product, to undertake any significant promotional or similar marketing efforts
directed at a Product or Competitive Product. In computing the portion of Net
Revenues from Products which contain modafinil or any compound based on or
derived therefrom as an active ingredient in combination with any other
substance as an active ingredient which substance is also sold by the Company or
any of its Affiliates not in combination with modafinil or any such compound
based or derived therefrom, the portion of Net Revenues from such combination
product included in Net Revenues for any period shall be a portion of the total
Net Revenues for such combination product for such period which portion shall be
determined as the product obtained by multiplying (x) an amount equal to the Net
Revenues for such period from sales of such combination product times (y) a
fraction (i) the numerator of which shall be the unit price at which the Company
or an Affiliate sells products containing modafinil or such compound based on or
derived therefrom and (ii) the denominator of which shall be the sum of (A) the
amount referred to in the immediately preceding clause (i) plus (B) the unit
price at which the Company or an Affiliate sells the products containing such
other substance; provided, however, that in no event shall such combination
product be sold at a unit price less than the amount referred to in the
immediately preceding clause (i). In calculating Net Revenues, any particular
unit of a
-30-
Product or Competitive Product shall be taken into account only once.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Note" means this instrument as originally executed, or if later
amended or supplemented in accordance with its terms, then as so amended or
supplemented.
"Noteholder Payment Amount" shall have the meaning provided in Section
2.1.
"Note Purchase Agreement" means the Note Purchase Agreement, dated as
of February 24, 1999, by and between the Company and the original Holder of this
Note.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Optional Redemption Date" means each Business Day on which this Note
is to be redeemed in whole or in part pursuant to Section 1.2.
"Optional Redemption Notice" means an Optional Redemption Notice in
the form attached hereto as EXHIBIT A.
"Optional Redemption Period" means the period which commences on March
1, 2001 and ends on the Original Maturity Date.
"Optional Redemption Price" means an amount in cash equal to the sum
of (1) 120% of the outstanding principal amount of this Note specified in an
Optional Redemption Notice as being redeemed by the Company plus (2) accrued and
unpaid interest on such principal amount to the applicable Optional Redemption
Date plus (3) accrued and unpaid Default Interest, if any, on the amount
referred to in the immediately preceding clause (2) at the rate provided in this
Note to the Optional Redemption Date.
"Original Maturity Date" means March 1, 2002.
"Other Note Purchase Agreements" means the several Note Purchase
Agreements, dated as of February 24, 1999, by and between the Company and the
respective original holders of the Other Notes.
"Other Notes" means the several 11% Senior Secured Notes due 2002
issued by the Company pursuant to the Other Note Purchase Agreements.
-31-
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement, dated as of March 1, 1999, by and between the
Company and the Collateral Agent.
"Payment Percentage" means six percent; provided, however, that if an
Event of Default shall have occurred, then the Payment Percentage shall be
increased to 25 percent during the period from the date of such Event of Default
until the earlier of (x) the date no Event of Default is continuing and (y) the
date the Company pays the redemption price in full for a redemption of this Note
and the Other Notes pursuant to Section 1.2 and the comparable provisions of the
Other Notes; provided further, however, that if the Company extends the Original
Maturity Date to the Extended Maturity Date pursuant to Section 6.2, then the
Payment Percentage shall be increased as provided in Section 6.2; and provided
further, however, that, unless a Fundamental Change shall have occurred, if the
Company redeems all or any portion of this Note pursuant to Section 1.2 and the
Other Notes pursuant to the comparable provisions thereof, then the Payment
Percentage (as in effect immediately prior to such redemption) which shall be
applicable during the last 12 months of the Payment Period shall be reduced for
each such redemption by an amount determined as
RPP = PP x PR x D
-- ---
PO 365
where
RPP = amount of reduction in the Payment Percentage (as in effect
immediately prior to such redemption) by reason of such
redemption
PP = Payment Percentage which would be in effect without regard to
any reduction thereof at any time pursuant to this formula.
PR = the aggregate principal amount of this Note and the Other
Notes redeemed in such redemption
PO = the original aggregate principal amount of this Note and the
Other Notes
D = the number of calendar days during the period commencing on
and including the date the Company pays the full redemption
price of this Note and the Other Notes which is in connection
with such redemption and ending on and excluding the date
which is the third anniversary of the Issuance Date
"Payment Period" means the period which commences on the Issuance
Date and ends on the fifth anniversary of the Issuance Date; provided, however,
that if in accordance with Article VI the Company elects to extend the Maturity
Date to the Extended Maturity Date, effective
-32-
on the date the Company gives notice of such extension to the Holder and the
holders of the Other Notes, the Payment Period shall be extended by one year
from the date the Payment Period would have ended as in effect immediately prior
to such extension of the Maturity Date.
"Payment Share Price" means the arithmetic average of the Market Price
of the Common Stock for all of the Trading Days during [
]. *
"Payment Share Registration Statement" means the Registration
Statement required to be filed by the Company with the SEC pursuant to Section
8(a)(2) of the Note Purchase Agreement if the Company elects to make the Share
Principal Payment Option and the Holder consents to such election.
"Permitted Indebtedness" means
(1) Indebtedness outstanding on the Issuance Date; and
(2) Indebtedness incurred after the Issuance Date which is unsecured
and on a parity with or subordinated to this Note and the Other Notes.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, unincorporated association
or similar entity or any government, governmental agency or political
subdivision.
"Preferred Share Purchase Rights" means the Preferred Share Purchase
Rights issued or issuable pursuant to the Rights Agreement (or any similar
rights issued by the Company with respect to the Common Stock after the date of
this Agreement).
"Principal Payment Shares" means the shares of Common Stock and the
related Preferred Share Purchase Rights issuable in payment of a portion of the
principal amount of the Note in accordance with Section 1.4.
"Products" means all pharmaceutical compositions containing modafinil
or any compound based on or derived therefrom as an active ingredient, whether
alone or in combination with any other substance, which are developed, marketed
or sold by the Company or any Subsidiary or Affiliate of the Company, including,
without limitation, that pharmaceutical composition marketed by the Company on
the Issuance Date under the name Provigil(R).
"Registration Repurchase Event" means the occurrence of either of the
following events:
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN HAS BEEN OMITTTED AND FILED
SEPARATELY WITH THE COMMISSION
-33-
(a) the Company fails to file the Registration Statement within the
45-day period provided in Section 8(a)(1) of the Note Purchase Agreement;
or
(b) the SEC Effective Date shall not have occurred on or before the
date which is 90 days after the Issuance Date.
"Registration Repurchase Price" means an amount in cash equal to the
sum of (1) 100% of the principal amount of this Note to be repurchased, plus (2)
accrued and unpaid interest on such principal amount to the date of such
repurchase, plus (3) accrued and unpaid Default Interest, if any, thereon at the
rate provided in this Note to the date of repurchase in accordance with Article
V.
"Registration Statement" means the Registration Statement required to
be filed by the Company with the SEC pursuant to Section 8(a)(1) of the Note
Purchase Agreement.
"Repurchase Event" means the occurrence of any one or more of the
following events:
(a) Any Fundamental Change; or
(b) The occurrence of any Event of Default specified in Article IV of
this Note; provided, however, that in the case of only an Event of Default
specified in clause (c), (g) or (h) of Section 4.1, such Event of Default
shall become a Repurchase Event only on and after the date which is 365
days after the occurrence of such Event of Default if any Event of Default
is continuing at such time.
"Repurchase Price" means with respect to any repurchase pursuant to
Sections 5.1 and 5.2 an amount in cash equal to the sum of (1) 101% of the
outstanding principal amount of this Note plus (2) accrued and unpaid interest
on such principal amount to the date of such repurchase plus (3) accrued and
unpaid Default Interest, if any, thereon at the rate provided in this Note to
the date of such repurchase.
"Rights Agreement" means the Amended and Restated Rights Agreement,
dated as of January 1, 1999, by and between the Company and Stocktrans, Inc., as
Rights Agent.
"SEC" means the Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
first declared effective by the SEC.
"Security Agreement" means the Security Agreement, dated as of March
1, 1999, by and between the Company and the Collateral Agent.
-34-
"Share Interest Payment Option" shall have the meaning provided in
Section 1.1(a).
"Share Payment Threshold" means the product obtained by multiplying
(x) the volume-weighted average Trading Price (as reported by Bloomberg, L.P. in
its AQR function, or if such source or function ceases to be available, a
comparable source and function selected by the Majority Holders and acceptable
to the Company in its reasonable judgment) for all of the Trading Days during
the 90 consecutive Trading Days ending on (and including) the Trading Day that
is three Trading Days prior to the Maturity Date, times (y) the aggregate number
of shares of Common Stock traded during such 90 consecutive Trading Days, as
reported by Bloomberg, L.P. (or if such source ceases to be available, a
comparable source selected by the Majority Holders and acceptable to the Company
in its reasonable judgment), times (z) 0.05.
"Share Principal Payment Option" shall have the meaning provided in
Section 1.4(a).
"Significant Subsidiary" shall have the meaning provided in Regulation
S-X of the SEC, except that a Subsidiary shall not be a Significant Subsidiary
only if such Subsidiary, when consolidated for financial reporting purposes with
all other Subsidiaries which are not Significant Subsidiaries, would not
constitute a Significant Subsidiary.
"Subsidiary" means any corporation or other entity of which a majority
of the capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by the Company.
"Target Revenues" means for any period the amount set forth for such
period in EXHIBIT F attached hereto.
"Territory" means the United States, its territories and possessions.
"Trading Day" means a day on which either the national securities
exchange or Nasdaq which then constitutes the principal securities market for
the Common Stock is open for general trading of securities.
"Trading Price" for any trade of the Common Stock on any date means
the lowest sale price (regular way) for one share of Common Stock on such date
in such trade, on the first applicable among the following: (a) the national
securities exchange on which the Common Stock is listed which constitutes the
principal securities market for the Common Stock, (b) Nasdaq, (c) the Nasdaq
SmallCap Market or (d) such other market as at the time constitutes the
principal trading market for the Common Stock, in any such case as reported by
Bloomberg, L.P. (subject to equitable adjustment from time to time on terms
reasonably acceptable to the Majority Holders for (i) stock splits, (ii) stock
dividends, (iii) combinations, (iv) capital reorganizations, (v) issuance to all
-35-
holders of Common Stock of rights or warrants to purchase Common Stock at a
price per share less than the Trading Price which would otherwise be applicable,
(vi) the distribution by the Company to all holders of Common Stock of evidences
of indebtedness of the Company or cash (other than regular quarterly cash
dividends), (vii) Tender Offers by the Company or any subsidiary of the Company
or other repurchases of Common Stock in one or more transactions which,
individually or in the aggregate, result in the purchase of more than 10% of the
Common Stock outstanding and (viii) similar events, in each such case relating
to the Common Stock and which occur on or after the Issuance Date).
"Transaction Documents" means this Note, the Note Purchase Agreement,
the Security Agreement, the Patent and Trademark Security Agreement, and the
Warrants.
"Transfer Agent" means Stocktrans, Inc., or its successor as transfer
agent and registrar for the Common Stock.
"Warrants" means Common Stock Purchase Warrants of the Company issued
to the original Holder of this Note pursuant to the Note Purchase Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
--------------------------------
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.2 NOTICES. Except as otherwise specifically provided herein, any
-------
notice herein required or permitted to be given shall be in writing and may be
personally served, sent by telephone line facsimile transmission or delivered by
courier or sent by United States mail and shall be deemed to have been given
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three days after being deposited in the facilities of the
United States Postal Service, certified, with postage pre-paid and properly
addressed, if sent by mail. For the purposes hereof, the address and facsimile
line transmission number of the Holder shall be as furnished by the Holder for
such purpose and shown on the records of the Company; and the address of the
Company shall be 000 Xxxxxxxxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxxxxxxxxx 00000,
Attention: Chief Financial Officer (telephone line facsimile transmission
number (000) 000-0000). The Holder or the Company may change its address for
notice by service of written notice to the other as herein provided.
-36-
9.3 AMENDMENT, WAIVER, ETC. Neither this Note or any Other Note nor
----------------------
any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by the
Company and the Majority Holders, provided that no such change, waiver,
discharge or termination shall, without the consent of the Holder and the
holders of the Other Notes affected thereby (i) extend the scheduled final
maturity of this Note or any Other Note, or reduce the rate or extend the time
of payment of interest (other than as a result of waiving the applicability of
any post-default increase in interest rates) hereon or thereon or reduce the
principal amount hereof or thereof or the Optional Redemption Price, the
Repurchase Price or the Registration Repurchase Price, (ii) release the
collateral or reduce the amount of collateral required to be deposited or
maintained by the Company pursuant to the Security Agreement or the Patent and
Trademark Security Agreement, except as expressly provided in the respective
agreement, (iii) amend, modify or waive any provision of Article II, (iv) amend,
modify or waive any provision of this Section 9.3, (v) reduce any percentage
specified in, or otherwise modify, the definition of Majority Holders or (vi)
except as provided in this Note, change the method of calculating the Payment
Share Price, the Interest Share Price or the Optional Redemption Price in a
manner adverse to the Holder.
9.4 ASSIGNABILITY. This Note shall be binding upon the Company and
-------------
its successors, and shall inure to the benefit of and be binding upon the Holder
and its successors and permitted assigns. The Company may not assign its rights
or obligations under this Note.
9.5 CERTAIN EXPENSES. The Company shall pay on demand all expenses
----------------
incurred by the Holder, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with (x) any amendment or waiver of this Note
or any other Transaction Document, (y) any default or breach of any of the
Company's obligations set forth in the Transaction Documents and (z) the
enforcement or restructuring of any right of, including the collection of any
payments due, the Holder under the Transaction Documents, including any action
or proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Holder.
9.6 GOVERNING LAW. This Note shall be governed by the internal laws
-------------
of the State of New York, without regard to the principles of conflict of laws.
9.7 TRANSFER OF NOTE AND NOTEHOLDER PAYMENT AMOUNT. This Note has
----------------------------------------------
not been and is not being registered under the provisions of the 1933 Act or any
state securities laws and this Note may not be transferred unless the Holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
this Note may be sold or transferred without registration under the 1933 Act.
Prior to any such transfer, such transferee shall have represented in writing to
the Company that such transferee has requested and received from the Company all
information relating to the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and the
Subsidiaries deemed relevant by such transferee; that such transferee has been
afforded the opportunity to ask questions of the Company concerning the
foregoing and has had the opportunity
-37-
to obtain and review the reports and other information concerning the Company
which at the time of such transfer have been filed by the Company with the SEC
pursuant to the 1934 Act. If such transfer is intended to assign the rights and
obligations under 5(a), 5(b), 8, 9 and 10 of the Note Purchase Agreement, such
transfer shall otherwise be made in compliance with Article V of the Note
Purchase Agreement. The Holder may not transfer a portion of this Note to any
Person if such transfer would result in an increase in the aggregate number of
registered holders of this Note and the Other Notes of more than one such holder
without the prior written consent of the Company, which consent will not be
unreasonably withheld. Any instrument issued upon any such transfer of a portion
of this Note which results in such increase of one holder shall bear a legend
that the holder thereof shall not be entitled to transfer such instrument in a
manner which would further increase the aggregate number of registered holders
of this Note and the Other Notes without the prior written consent of the
Company, which consent shall not be unreasonably withheld. The Holder shall have
the right to transfer all or any part of its rights under Article II of this
Note separate from its rights under the other provisions of this Note only with
the prior written consent of the Company, which consent will not be unreasonably
withheld.
9.8 ENFORCEABLE OBLIGATION. The Company represents and warrants that
-----------------------
at the time of the original issuance of this Note it received the full purchase
price payable pursuant to the Note Purchase Agreement in an amount at least
equal to the original principal amount of this Note, and that this Note is an
enforceable obligation of the Company which is not subject to any offset,
reduction, counterclaim or disallowance of any sort.
9.9 NOTE REGISTER; REPLACEMENT OF NOTES. The Company shall maintain
-----------------------------------
a register showing the names, addresses and telephone line facsimile numbers of
the Holder and the registered holders of the Other Notes. The Company shall
also maintain a facility for the registration of transfers of this Note and the
Other Notes and at which this Note and the Other Notes may be surrendered for
split up into instruments of smaller denominations or for combination into
instruments of larger denominations. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Note and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security) or (b)
in the case of mutilation, upon surrender and cancellation of this Note, the
Company will execute and deliver to the Holder a new Note of like tenor without
charge to the Holder.
9.10 PAYMENT OF NOTE ON REDEMPTION OR REPURCHASE; DEPOSIT OF
-------------------------------------------------------
REDEMPTION PRICE OR REPURCHASE PRICE, ETC. (a) If this Note or any portion of
-----------------------------------------
this Note is to be redeemed as provided in Section 1.2 or repurchased as
provided in Sections 5.1 and 5.2 or Section 5.3 and any notice required in
connection therewith shall have been given as provided therein and the Company
shall have otherwise complied with the requirements of this Note with respect
thereto, then this Note or the portion of this Note to be so redeemed or
repurchased and with respect to which any such notice has been given shall
become due and payable on the date stated in such notice at the applicable
Optional Redemption Price, Repurchase Price or Registration Repurchase Price.
On and after the Optional Redemption Date or repurchase date so stated in such
notice, provided that the
-38-
Company shall have deposited with an Eligible Bank on or prior to such Optional
Redemption Date or repurchase date, an amount sufficient to pay the applicable
Optional Redemption Price, Repurchase Price or Registration Repurchase Price,
interest on this Note or the portion of this Note to be so redeemed or
repurchased shall cease to accrue, and this Note or such portion hereof shall be
deemed not to be outstanding and shall not be entitled to any benefit with
respect to principal of or interest on the portion to be so redeemed or
repurchased except to receive payment of the applicable Optional Redemption
Price, Repurchase Price or Registration Repurchase Price. On presentation and
surrender of this Note or such portion hereof, this Note or the specified
portion hereof shall be paid and redeemed or repurchased at the applicable
Optional Redemption Price, Repurchase Price or Registration Repurchase Price. If
a portion of this Note is to be redeemed or repurchased, upon surrender of this
Note to the Company in accordance with the terms hereof, the Company shall
execute and deliver to the Holder without service charge, a new Note or Notes,
having the same date hereof and containing identical terms and conditions, in
such denomination or denominations as requested by the Holder in aggregate
principal amount equal to, and in exchange for, the unredeemed or unrepurchased
portion of the principal amount of this Note so surrendered.
(b) Upon the payment in full of all amounts payable by the Company
under this Note and the Other Notes (other than amounts payable pursuant to
Article II hereof and thereof which are not yet due) or the deposit thereof as
provided in Section 9.10(a) and the like provisions of the Other Notes,
thereafter the obligations of the Company under this Note shall be as set forth
in Article II, Sections 3.10, 3.11, this Article IX, and, in the case of such
deposit, to pay the Optional Redemption Price, Repurchase Price or Registration
Repurchase Price, as the case may be, from the funds so deposited. Upon such
payment or deposit, any Event of Default which occurred prior to such payment or
deposit by reason of one or more provisions of this Note with which the Company
thereafter is no longer obligated to comply, then such Event of Default shall no
longer exist.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-39-
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer as of the day and in the year first
above written.
CEPHALON, INC.
By:
Name:
Title:
-40-
EXHIBIT A
---------
OPTIONAL REDEMPTION NOTICE
(SECTION 1.2 OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: ___________________________
(Name of Holder)
(1) Pursuant to the terms of the 11% Revenue Sharing Senior Secured
Note due 2002 (the "Note"), Cephalon, Inc., a Delaware corporation (the
"Company"), hereby notifies the above-named Holder that the Company is
exercising its right to redeem the Note in accordance with Section 1.2 of the
Note as set forth below:
(i) The principal amount of the Note to be redeemed is
$_____________.
(ii) The Optional Redemption Price is $_______________.
(iii) The Optional Redemption Date is ______________.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date _________________________ CEPHALON, INC.
By:
Title:
A-41
EXHIBIT B
---------
FORM OF OPINION OF COUNSEL TO BE
DELIVERED IN CONNECTION WITH ISSUANCE
OF PRINCIPAL PAYMENT SHARES
[Letterhead of Counsel]
_______________, 200_____
To The Holders Listed on Schedule A hereto
Re: Cephalon, Inc.
--------------
Ladies and Gentlemen:
We have acted as counsel to Cephalon, Inc., a Delaware corporation (the
"Company"), in connection with the issuance by the Company of
____________________________ Principal Payment Shares in accordance with the
terms of the Company's 11% Revenue Sharing Senior Secured Notes due 2002 in the
original aggregate principal amount of $30,000,000 (the "Notes"), which Notes
were issued pursuant to the several Note Purchase Agreements, dated as of
February __, 1999 (the "Note Purchase Agreements"), by and between the Company
and the Buyers parties thereto (the "Buyers"). All capitalized terms used
herein without definition are used herein with the respective meanings ascribed
to them in the Notes or, if not defined in the Notes, in the Note Purchase
Agreements. This opinion is being delivered to you pursuant to Section
1.4(d)[(1)(B) OR (2)(B)] of the Notes. In connection with this opinion letter,
we have relied upon the representations and warranties of the Company set forth
in the Note Purchase Agreements and the Notes (the "Principal Documents").
As to various questions of fact material to our opinion, we have also relied
upon certificates of officers and representatives of the Company and upon
certificates of public officials. We have made no independent review or
investigation of any nature as to such representations and warranties, the
matters set forth in the certificates or the assumptions set forth below upon
which we are relying, and no inference of any knowledge on the part of this Firm
as to these legal or factual matters should be drawn from our representation of
the Company in connection with the Principal Documents or otherwise.
We have also assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with originals of all
documents submitted to us as copies. We have also assumed that the Principal
Documents have each been duly authorized,
B-42
executed and delivered by all parties thereto other than the Company and that
all such other parties have full power, authority and legal right to execute,
deliver and perform their obligations under the Principal Documents, and that
such Principal Documents are valid, binding and enforceable in accordance with
their respective terms against such other parties.
Based on the foregoing, and subject to the qualifications and limitations set
forth below, we are of the opinion that the Principal Payment Shares are duly
authorized and will be, upon issuance and delivery in accordance with the terms
of the Notes, validly issued, fully paid and nonassessable. Upon issuance, each
Principal Payment Share will have attached thereto a Preferred Share Purchase
Right pursuant to the terms of the Company's Rights Plan if and as then in
effect. We express no opinion as to the validity of the Rights Plan or the
Preferred Share Purchase Rights. None of the Principal Payment Shares are
subject to preemptive rights pursuant to the Certificate of Incorporation or the
Delaware General Corporation Law (the "DGCL") or, to our knowledge, other
similar rights of the stockholders of the Company.
The foregoing opinions and comments are subject to the following additional
qualifications:
(a) Wherever we have stated herein that we have assumed a matter, it
is intended to indicate that we have assumed such matter without making any
independent legal or factual review or investigation of any nature to determine
the accuracy of such assumption, and without expressing any opinion or
conclusion of any kind concerning the matter, and no inference as to our
knowledge of any legal or factual matters bearing on the accuracy of any such
assumption should be drawn from the fact of our current or prior representation
of the Company.
(b) We express no opinion with respect to the laws of any jurisdiction
other than the federal laws of the United States of America, the laws of the
Commonwealth of Pennsylvania and the State of New York and the DGCL. We express
no opinion with respect to any federal or state laws relating to tax and
antitrust matters. We express no opinion as to compliance with applicable anti-
fraud statutes, rules or regulations of any applicable jurisdiction governing
the issuance of securities.
(c) The opinions expressed above are subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
(including without limitation preference rules) affecting the rights of
creditors generally and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
(d) [IF OPINION GIVEN PURSUANT TO SECTION 1.4(D)(2)(B) OF NOTE: For
purposes of this opinion, we have assumed that the formulas contained in the
Notes to calculate the Optional Redemption Price represent stipulated damages
that are not plainly disproportionate to the possible loss to the holders of the
Notes and, therefore, are not "penalties" as a matter of law. We express no
opinion as to whether the issuance of the Principal Payment Shares may be
determined to be interest payable with respect to the Notes, or as to the effect
of any laws of any
B-43
jurisdiction restricting the interest that may be charged upon debt obligations,
and our opinion set forth above assumes that such laws do not adversely affect
any determination that the Principal Payment Shares are fully paid and non-
assessable.]
(e) The foregoing opinion and comments are as of the date hereof, and
we assume no obligation to update or supplement them to reflect any facts or
circumstances which may hereafter come to our attention or any changes in laws
which may hereafter occur.
This opinion letter is solely for the benefit of the Holders for use in
connection with the transactions contemplated by the Notes and may not be relied
upon by any other person or for any other purpose without our express written
consent.
Very truly yours,
B-44
Schedule A
Holders of Notes
----------------
B-45
EXHIBIT C
---------
COMPANY NOTICE
(SECTION 5.2(A) OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: ___________________________
(Name of Holder)
(1) A Repurchase Event described in the 11% Revenue Sharing Senior
Secured Note due 2002 (the "Note") of Cephalon, Inc., a Delaware corporation
(the "Company"), occurred on ____________________, ______. As a result of such
Repurchase Event, the Holder is entitled to exercise its repurchase rights
pursuant to Section 5.2 of the Note.
(2) The Holder's repurchase right must be exercised on or before
______________, _______.
(3) At or before the date set forth in the preceding paragraph (2),
the Holder must:
(a) deliver to the Company a Holder Notice, in the form attached
as EXHIBIT D to the Note; and
(b) the Note, duly endorsed for transfer to the Company of the
portion of the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date _________________________ CEPHALON, INC.
By:
Title:
C-46
EXHIBIT D
---------
HOLDER NOTICE
(SECTION 5.2(B) OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: CEPHALON, INC.
(1) Pursuant to the terms of the 11% Revenue Sharing Senior Secured
Note due 2002 (the "Note"), the undersigned Holder hereby elects to exercise its
right to require repurchase by the Company pursuant to Sections 5.2(a) and
5.2(b) of $_________________________ of the Note, equal to the sum of
$____________________ principal amount of the Note, $____________________ of
accrued and unpaid interest on such principal amount and $____________________
of Default Interest on such interest at the Repurchase Price provided in the
Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
By
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
D-47
EXHIBIT E
---------
HOLDER REGISTRATION REPURCHASE NOTICE
(SECTION 5.3 OF 11% REVENUE SHARING SENIOR SECURED NOTE DUE 2002)
TO: CEPHALON, INC.
(1) Pursuant to the terms of the 11% Revenue Sharing Senior Secured
Note due 2002 (the "Note"), the undersigned Holder hereby elects to exercise its
right to require repurchase by the Company pursuant to Section 5.3 of
$____________________ of the Note, equal to the sum of $____________________
principal amount of the Note, $____________________ of accrued and unpaid
interest on such principal amount and $____________________ of Default Interest
on such interest at the Registration Repurchase Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
By _________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
E-48
EXHIBIT F
---------
TARGET REVENUES
Period 3 Months 12 Months
Ended Ended Ended
----- ----------- -----------
[
] *
* THE CONFIDENTIAL MATERIAL CONTAINED HEREIN HAS BEEN OMITTTED AND FILED
SEPARATELY WITH THE COMMISSION
F-49
