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EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
July 18, 2000, between ATRIX LABORATORIES, INC., a Delaware corporation (the
"Company" or "Atrix"), and ELAN INTERNATIONAL SERVICES, LTD., a Bermuda exempted
limited liability company ("EIS"), and a wholly owned subsidiary of ELAN
CORPORATION, PLC, an Irish public limited company ("Elan").
RECITALS:
A. The Company desires to issue and sell to EIS, and EIS
desires to purchase from the Company, on the date hereof, (i) 12,015 shares of a
newly-created series of the Company's convertible exchangeable preferred stock,
par value U.S.$.001 per share, captioned "Series A Preferred Stock" (the "Series
A Preferred Stock"), (ii) a warrant to purchase up to 1,000,000 shares of the
Company's common stock, par value U.S. $.001 per share (the "Atrix Common
Stock"), as provided therein, in the form attached hereto as Exhibit A (as
amended at any time, the "Warrant"), and (iii) 442,478 shares of Atrix Common
Stock. The Company further desires to issue and sell to EIS, and EIS desires to
purchase from the Company a convertible promissory note, with a maximum
principal amount of U.S. $8,010,000 in the form attached hereto as Exhibit B
(the "Note"), amounts thereunder shall be disbursed in accordance with its terms
and subject to the conditions contained herein and therein. The Series A
Preferred Stock and the Atrix Common Stock collectively are referred to herein
as the "Shares". The Shares, the Warrant and the Note collectively are referred
to herein as the "Securities". The rights, preferences and privileges of the
Series A Preferred Stock are as set forth in the Company's Certificate of
Designations, Preferences and Rights, the form of which is attached hereto as
Exhibit C (the "Certificate of Designations").
B. The Company and EIS have formed ATRIX NEWCO, LTD., an
exempted limited liability company incorporated under the laws of Bermuda
("Newco"), and pursuant to the terms of a Subscription, Joint Development and
Operating Agreement, dated as of the date hereof (as amended at any time, the
"JDOA"), simultaneously with the transactions contemplated by this Agreement,
(i) the Company shall acquire 6,000 voting common shares of Newco, par value
U.S.$1.00 per share (the "Newco Common Stock"), representing 100% of the issued
and outstanding shares of such class of stock, and 3,612 non-voting convertible
preference shares of Newco, par value of U.S.$1.00 per share (the "Newco
Preferred Stock"; together with the Newco Common Stock, the "Newco Stock"),
representing 60.2% of the aggregate outstanding shares of Newco Preferred Stock
and, on a fully diluted basis, 30.1% of the aggregate outstanding shares of
Newco Stock and (ii) EIS shall acquire 2,388 shares of Newco Preferred Stock,
representing 39.8% of the aggregate outstanding shares of Newco Preferred Stock
and, on a fully diluted basis, 19.9% of the Newco Stock. Additionally, as of the
date hereof, Newco has entered into
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license agreements with (i) Elan (such agreement, as amended at any time,
collectively the "Elan License Agreement") and (ii) the Company (such agreement,
as amended at any time, the "Company License Agreement"; together with the Elan
License Agreement, the "License Agreements").
C. The Company and EIS are executing and delivering on the
date hereof a Registration Rights Agreement in the form attached hereto as
Exhibit D (as amended at any time, the "Company Registration Rights Agreement")
in respect of (i), the Atrix Common Stock issued or issuable upon conversion of
the Series A Preferred Stock, or exercise of all or any portion of the Warrant
or Note and (ii) any other Atrix Common Stock owned by EIS or any of its
affiliates or their respective permitted transferees, as a result of any stock,
split, stock dividend, recapitalization or similar event affecting the Atrix
Common Stock. The Company, EIS and Newco also are executing and delivering on
the date hereof a Registration Rights Agreement in the form attached hereto as
Exhibit E (as amended at any time, the "Newco Registration Rights Agreement").
This Agreement, the Certificate of Designations, the Note, the Warrant, the
JDOA, the Company Registration Rights Agreement, the Newco Registration Rights
Agreement, the License Agreements, and each other document or instrument
executed and delivered in connection with the transactions contemplated hereby
and by the JDOA collectively are referred to herein as the "Transaction
Documents".
AGREEMENT:
In consideration of the foregoing premises and the mutual
covenants contained herein, the sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. Closing.
(a) Time and Place. The closing of the Purchase (as defined
below) (the "Closing") shall occur on the date hereof (the "Closing Date"). The
Closing Date is referred to herein as a "Closing Date". The Closing shall be
held at the offices of Brock Silverstein LLC, 800 Third Avenue, 21st Floor, New
York, New York 10022.
(b) Sale and Purchase. At the Closing, subject to the terms
and conditions hereof, the Company shall issue and sell to EIS, and EIS shall
purchase from the Company, (i) 12,015 shares of Series A Preferred Stock, (ii)
442,478 shares of Atrix Common Stock and (iii) the Warrant (the "Purchase"). In
addition, subject to the terms and conditions hereof, the Company shall issue to
EIS, the Note.
(c) Purchase Price. The aggregate purchase price for the
Purchase shall be U.S.$17,015,000 (the "Purchase Price"), which represents the
purchase price for the 12,015
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shares of Series A Preferred Stock, the 442,478 shares of Atrix Common Stock and
the purchase price for the Warrant. The maximum aggregate amount outstanding
under the Note shall be U.S.$8,010,000.
(d) Closing Delivery. On the Closing Date, subject to the
terms and conditions hereof: (i) EIS shall pay the Purchase Price by wire
transfer of U.S.$17,015,000 to an account designated in writing by the Company;
(ii) the parties hereto shall execute and deliver to each other, as applicable,
(A) certificates representing 12,015 shares of Series A Preferred Stock and
442,478 shares of Atrix Common Stock, (B) the Warrant, (C) the Note, (D) the
Company Registration Rights Agreement, (E) the Newco Registration Rights
Agreement, (G) the JDOA, (H) the Certificate of Designations as filed with the
Secretary of State of the State of Delaware, (I) the License Agreements, (J)
certificates as to the incumbency of the officers of the Company and EIS
executing any of the Transaction Documents and (K) any other documents or
instruments reasonably requested by a party hereto; (iii) the Company shall
cause to be delivered to EIS an opinion of counsel in the form attached hereto
as Exhibit F; and (iv) EIS shall cause to be delivered to the Company an opinion
of counsel in the form attached hereto as Exhibit G.
(e) Exemption from Registration. The Securities and any
underlying shares of Atrix Common Stock will be issued under an exemption or
exemptions from registration under the U.S. Securities Act of 1933, as amended
(the "Securities Act"). Accordingly, the certificates evidencing the Series A
Preferred Stock, the Purchased Common Stock, the Warrant, the Note and any
shares of Atrix Common Stock or other securities issuable upon the exercise,
conversion or exchange of any of the Securities shall, upon issuance, contain a
legend, substantially in the form as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE
STATE SECURITIES LAWS AND NO INTEREST THEREIN MAY BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THE ISSUER OF THESE SECURITIES RECEIVES AN OPINION
OF COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO THE
ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS ALSO
SUBJECT TO THE RESTRICTIONS CONTAINED IN THAT CERTAIN SECURITIES
PURCHASE AGREEMENT, DATED AS OF JULY 18, 2000, BY AND BETWEEN ATRIX
LABORATORIES, INC.
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AND ELAN INTERNATIONAL SERVICES, LTD., AS MAY THEREAFTER BE AMENDED
FROM TIME TO TIME.
SECTION 2. Representations and Warranties of the Company. The
Company hereby represents and warrants to EIS, as follows:
(a) Organization and Qualification. The Company is duly
organized and validly existing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and to consummate the transactions
contemplated hereby. The Company is duly qualified as a foreign corporation and
in good standing to do business in each jurisdiction in which the nature of the
business conducted or the property owned by it requires such qualification,
except where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business, assets, liabilities
(contingent or otherwise), operations, or condition (financial or otherwise), or
prospects of the Company (a "Company Material Adverse Effect").
(b) Capitalization. (i) Immediately prior to the Closing, the
capitalization of the Company was as follows:
<TABLE>
<CAPTION>
Number of Shares
----------------------------------------------
Issued and Issued and
Capital Stock Authorized Outstanding Held in Treasury
------------- ---------- ----------- ----------------
<S> <C> <C> <C>
Common Stock, 25,000,000 11,521,783 0
par value $.001 per share
0
Series A Preferred Stock, 5,000,000 0
par value $.001 per share
</TABLE>
(ii) As of the Closing Date, the Company has reserved a
sufficient number of shares of Atrix Common Stock for issuance upon conversion
of the Series A Preferred Stock, exercise of the Warrant and conversion of the
Note, including a sufficient number of shares of Series A Preferred Stock for
issuance as dividends on the Series A Preferred Stock.
(iii) There are no preemptive rights, voting agreements,
rights of first offer or refusal, options, warrants or other conversion
privileges or rights presently outstanding to purchase, subscribe for or
otherwise acquire, or any securities convertible into or exercisable for or
into, any of the Company's capital stock (collectively, "Preemptive Rights"),
except as described on Schedule 2(b). There are no agreements to register any of
the Company's outstanding
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securities under U.S. federal securities laws, other than the Company
Registration Rights Agreement and except as described on Schedule 2(b).
(iv) All of the outstanding shares of capital stock of the
Company have been issued in accordance with applicable state and federal laws
and regulations (or exemptions therefrom) governing the sale and purchase of
securities, all of such shares have been duly and validly issued and are fully
paid and non-assessable. The Shares, when issued against payment therefor in
accordance with this Agreement or, in the case of the Series A Preferred Stock,
as dividends in respect of previously issued shares of Series A Preferred Stock,
will be duly and validly issued, fully paid and non-assessable, and the Note and
the Warrant, when issued against payment therefor in accordance with this
Agreement, will be duly and validly issued, and in each case will not be issued
in violation of any Preemptive Rights. The shares of Atrix Common Stock issuable
upon conversion or exercise of the Series A Preferred Stock, the Warrant and the
Note (the "Underlying Shares"), when issued upon conversion or exercise in
accordance with the terms thereof, will be duly and validly issued, fully paid
and non-assessable, and will not be issued in violation of any Preemptive
Rights.
(c) Authorization of Transaction Documents. The Company has
full corporate power and authority to execute and deliver this Agreement and
each of the other Transaction Documents to which it is a party, and to perform
its obligations hereunder and thereunder. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents to which it is a party (including the issuance and sale of the
Securities) have been duly authorized by all requisite corporate action by the
Company and this Agreement, and when executed and delivered by the Company, each
of the other Transaction Documents to which it is a party will be the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
(d) No Violations. The execution, delivery and performance by
the Company of this Agreement and each of the other Transaction Documents to
which it is a party (including the issuance and sale of the Securities) and the
compliance with the provisions hereof and thereof by the Company does not
violate, conflict with or constitute or result in a breach of or default under
(or an event which with notice or passage of time or both would constitute a
default) or give rise to any right of termination, cancellation or acceleration
under, or result in the creation of any Encumbrance (as defined below) upon any
properties or assets of the Company under (i) the Certificate of Incorporation
or bylaws of the Company, (ii) applicable law, statute, rule or regulation, or
any ruling, writ, injunction, order, judgment or decree of any court,
arbitrator, administrative agency or other governmental body applicable to the
Company or any of its properties or assets or (iii) any contract or agreement
affecting the Company, except, in each case, where such violation, conflict,
breach, default, termination, cancellation, acceleration or
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Encumbrance would not, individually or in the aggregate, have a Company Material
Adverse Effect. As used herein, the term "Encumbrance" shall mean any lien,
charge, encumbrance, equity, claim, option, proxy, pledge, security interest, or
other similar right of any nature other than statutory liens securing payments
not yet due and payable or due but not yet delinquent.
(e) Approvals. No material permit, authorization, consent,
approval, or order of or by, or any notification of or filing with, any person
or entity (governmental or otherwise) is required in connection with the
execution, delivery or performance of this Agreement or the other Transaction
Documents (including the issuance and sale of the Securities) by the Company,
except for filings required under the Securities Act, the Exchange Act, the
rules of the Nasdaq Stock Market or the Delaware General Corporation Law, and
such other permits, authorizations, consents, approvals, orders, notifications
and filings as have been made or obtained.
(f) Financial Statements. (i) The Company's Annual Report on
Form 10-K for the year ended December 31, 1999, as filed with the U.S.
Securities and Exchange Commission (the "SEC") on March 14, 2000, contains the
audited consolidated balance sheet of the Company at December 31, 1999 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year then ended, together with the reports and opinions thereon of
Deloitte & Touche LLP (the "Audited Financial Statements") and (ii) the
Company's Quarterly Report on Form 10-Q for the three months ended March 31,
2000, as filed with the SEC on April 26, 2000, contains the unaudited
consolidated balance sheet of the Company at March 31, 2000 and the related
consolidated statements of operations, shareholders equity and cash flows for
the three months then ended (the "Unaudited Financial Statements"; and
collectively with the Audited Financial Statements, the "Financial Statements").
The Financial Statements are accurate and complete and fairly present, in all
material respects, the financial position of the Company and the results of its
operations and its cash flows at such dates and for the periods indicated and
were prepared in conformity in all material respects with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be otherwise indicated therein),
subject, in the case of the Unaudited Financial Statements, to normal year-end
audit adjustments (which shall not be material in the aggregate) and the absence
of footnote disclosures. As of the Closing Date, the Company has not incurred
and is not liable for any material liabilities or obligations except as set
forth on the face of the balance sheet contained in the Unaudited Financial
Statements or on Schedule 2(f).
(g) Taxes. Since January 1, 1998, the Company has filed in a
timely manner (taking into account any extensions) any federal, state, local and
foreign tax returns, reports and filings (collectively, "Returns"), including
income, franchise, property and other taxes, and has paid or accrued the
appropriate amounts reflected on such Returns heretofore required to be filed.
Except as set forth on Schedule 2(g), none of the Returns have been audited or
challenged, nor has the Company received any notice of challenge nor have any of
the amounts or other data included in the Returns been challenged or reviewed by
any governmental authority.
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(h) Plans. Except as set forth on Schedule 2(h), which sets
forth an accurate and complete list of all employee benefit plans maintained or
sponsored by the Company or to which the Company is required to make
contributions (the "Benefit Plans"), the Company does not maintain, sponsor, is
not required to make contributions to or otherwise have any liability with
respect to any pension, profit sharing, thrift or other retirement plan,
employee stock ownership plan, deferred compensation, stock ownership, stock
purchase, performance share, bonus or other incentive plan, severance plan,
health or group insurance plan, welfare plan, or other similar plan, agreement,
policy or understanding (whether written or oral), whether or not such plan is
intended to be qualified under Section 401(a) of the U.S. Internal Revenue Code
of 1986, as amended, or within the meaning of Section 3(3) of the U.S. Employee
Retirement Income Security Act of 1974, as amended, which plan covers any
employee or former employee of the Company. The Benefit Plans have been and are
administered in substantial compliance with their terms and the requirements of
applicable law.
(i) Absence of Certain Events. Since December 31, 1999, except
as contemplated by the Transaction Documents or as set forth on Schedule 2(i),
or in the Company's Annual Report of Form 10-K for the year ended December 31,
1999 (the "Form 10-K") as filed with the SEC and the Company's Quarterly Report
on Form 10-Q for the three months ended March 31, 2000 (the "Form 10-Q" and
together with the Form 10-K, the "SEC Reports") (A) the Company has not (i)
made, paid or declared any dividend or distribution to any equity holder (in
such capacity) or redeemed any of its capital stock, (ii) varied its business
plan or practices, in any material respect, (iii) entered into any financing,
joint venture, license or similar arrangement that would materially limit or
restrict its ability to perform its obligations hereunder and under each of the
other Transaction Documents or (iv) suffered or permitted to be incurred any
liability or obligation or any Encumbrance against any of its properties or
assets that would materially limit or restrict its ability to perform its
obligations hereunder and under each of the other Transaction Documents; and (B)
there has not been any change or development which has had, or in the Company's
reasonable judgment is likely to have, a Company Material Adverse Effect.
Without limiting the generality of the foregoing, since March
31, 2000, except as set forth on Schedule 2(i), there has not been (1) any lapse
of any of the Company's trade secrets, inventions, patents, patent applications
or continuations (in whole or in part), trademarks, trademark registrations,
service marks, service mark registrations, copyrights, copyright registrations,
or any application therefor or filing in respect thereof (collectively, and
together with any and all know-how, trade secrets and proprietary business or
technology information, the "Intellectual Property") that would reasonably be
expected to result in a Company Material Adverse Effect; (2) loss of the
services of any of the key officers or key employees of the Company; (3) any
incurrence of or entry into any liability, mortgage, Encumbrance, commitment or
transaction, including without limitation, any borrowing (or assumption or
guarantee thereof) or guarantee of a third party's obligations, or capital
expenditure (or lease in the nature of a conditional purchase of capital
equipment) in excess of U.S.$250,000 other than in the ordinary course of
business;
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(4) any material change by the Company in accounting methods or principles,
other than as required by generally accepted accounting principles; or (5) any
change in the assets, liabilities, condition (financial or otherwise), results
or operations or prospects of the Company from those reflected on the Financial
Statements, except changes in the ordinary course of business and changes that
have not had or in the Company's reasonable judgment are not likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(j) No Liabilities. Since March 31, 2000, the Company has not
incurred or suffered any liability or obligation, matured or unmatured,
contingent or otherwise, except in the ordinary course of business and except
any such liability or obligation that have not had and in the Company's
reasonable judgment are not likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
(k) Properties and Assets; Etc. (i) Except as set forth on
Schedule 2(k) or in the SEC Reports, the Company has good and marketable title
to its properties and assets shown in the Financial Statements to be owned by
the Company, and has valid leasehold interests to the properties and assets
shown in the Financial Statements to be leased by the Company, in each case
subject to no Encumbrances, except where failure to have such title or leasehold
interest, in the Company's reasonable judgment, is not likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(ii) The Company owns or possesses sufficient legal rights to
use pursuant to license, sublicense, agreement or permission all Intellectual
Property used in the operation of its business as presently conducted, in each
case subject to no Encumbrances required to be disclosed in the Financial
Statements except as set forth therein or as set forth on Schedule 2(k), other
than any failure to own or possess sufficient legal rights which, individually
or in the aggregate, would not have a Company Material Adverse Effect. Except as
set forth on Schedule 2(k), none of the Company's rights in or use of the
Intellectual Property has been or, to the knowledge of the Company's executive
officers, is currently threatened to be challenged; to the knowledge of the
Company's executive officers, no current or currently planned product based upon
the Company's Intellectual Property would infringe any patent, trademark,
service mark, trade name or copyright of any other person or entity issued or
pending on the Closing Date if the Company were to distribute, sell, market or
manufacture such products, and to the knowledge of the Company's executive
officers there is no actual or threatened claim by any person or entity alleging
any infringement by the Company of a patent, trademark, service mark, trade name
or copyright possessed by such person or entity. Except as set forth on Schedule
2(k), none of such Intellectual Property, whether foreign or domestic, has been
canceled, abandoned, or otherwise terminated, other than such cancellations,
abandonments or terminations which, individually or in the aggregate, would not
have a Company Material Adverse Effect.
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(iii) The SEC Reports and Schedule 2(k) together, list the
material contracts and agreements of the Company, and each is a legal and valid
agreement binding upon the Company and, to the knowledge of the Company's
executive officers, is in full force and effect. To the knowledge of the
Company's executive officers, there is no material breach or default by any
party thereunder.
(iv) The Company has and maintains insurance, including
liability, casualty and products liability insurance, covering risks associated
with its business, properties and assets, including insurance that is customary
for companies similarly situated.
(v) The Company, its business and properties and assets are
in compliance in all material respects with all applicable laws and regulations,
including without limitation, those relating to (i) health, safety and employee
relations, (ii) environmental matters, including the discharge of any hazardous
or potentially hazardous materials into the environment and (iii) the
development, commercialization and sale of pharmaceutical and biotechnology
products, including all applicable regulations of the U.S. Food and Drug
Administration and comparable applicable foreign regulatory authorities, except
for such failure to comply that have not had and in the Company's reasonable
judgment are not likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
(l) Legal Proceedings, etc. Except as set forth on Schedule
2(l), there is no legal, administrative, arbitration or other action or
proceeding or governmental or investigation pending, or to the Company's
knowledge, threatened against the Company, or any director, officer or employee
of the Company in their capacities as such that (i) challenges the validity or
performance of this Agreement or the other Transaction Documents or (ii) would
reasonably be expected to have a Company Material Adverse Effect. The Company is
not in violation of or default under, any material laws, judgments, injunctions,
orders or decrees of any court, governmental department, commission, agency,
instrumentality or arbitrator applicable to its business, other than any
violation or default which, individually or in the aggregate, would not have a
Company Material Adverse Effect.
(m) Brokers or Finders. There have been no investment bankers,
brokers or finders used by the Company in connection with the transactions
contemplated by the Transaction Documents and no persons or entities are
entitled to a fee or compensation in respect thereof.
SECTION 3. Representation and Warranties of EIS. EIS hereby
represents and warrants to the Company as follows:
(a) Organization. EIS is an exempted company duly organized,
validly existing and in good standing under the laws of Bermuda and has all
requisite corporate power and
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authority to own and lease its properties, to carry on its business as presently
conducted and to consummate the transactions contemplated hereby. EIS is duly
qualified as a foreign corporation and in good standing to do business in each
jurisdiction in which the nature of the business conducted or the property owned
or held under lease by it requires such qualification, except where the failure
to be so qualified would not, individually or in the aggregate, have a material
adverse effect on the business, assets, liabilities (contingent or otherwise),
operations, or condition (financial or otherwise), of EIS (an "EIS Material
Adverse Effect").
(b) Authorization of Transaction Documents. EIS has full
corporate power and authority to execute and deliver this Agreement and each of
the other Transaction Documents to which it is a party, and to perform its
obligations hereunder and thereunder. The execution, delivery, and performance
by EIS of this Agreement and each other Transaction Document to which it is a
party (including the purchase and acceptance of the Securities) have been duly
authorized by all requisite corporate action by EIS and, when executed and
delivered by EIS, this Agreement and each of the other Transaction Documents to
which it is a party will be the valid and binding obligations of EIS,
enforceable against it in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to general
principles of equity.
(c) No Violation. The execution, delivery and performance by
EIS of this Agreement and each other Transaction Document to which it is a party
(including the purchase and acceptance of the Securities) and compliance with
provisions hereof and thereof by EIS will not violate conflict with or
constitute or result in a breach of or default under (or an event which with
notice or passage of time or both would constitute a default) or give rise to
any right of termination, cancellation or acceleration under (i) the charter or
bylaws of EIS, (ii) applicable law, statute, rule or regulation, or any ruling,
writ, injunction, order, judgment or decree of any court, arbitrator,
administrative agency or other governmental body applicable to EIS or any of its
properties or assets or (iii) any material contract to which EIS is a party,
except, in each case, where such violation, breach, default, termination,
cancellation or acceleration would not, individually or in the aggregate, have
an EIS Material Adverse Effect.
(d) Approvals. Except for consent required under the Mergers
and Takeovers (Control) Acts 1978-1996, no material permit, authorization,
consent, approval or order of or by, or any notification of or filing with, any
person or entity (governmental or otherwise) is required in connection with the
execution, delivery or performance of this Agreement or the other Transaction
Documents by EIS.
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(e) Investment Representations.
(i) EIS is sophisticated in transactions of this type and
capable of evaluating the merits and risks of the transactions described herein
and in the other Transaction Documents to which it is a party, and has the
capacity to protect its own interests. EIS has not been formed solely for the
purpose of entering into the transactions described herein and therein and is
acquiring the Securities (and the Underlying Shares) for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale,
distribution or fractionalization thereof, in whole or in part, and no other
person (other than Elan) has a direct or indirect interest, beneficial or
otherwise in the Securities (or the Underlying Shares); provided, however, that
EIS shall be permitted to convert or exchange such Securities in accordance with
their terms.
(ii) EIS has not and does not intend to enter into any
contract, undertaking, agreement or arrangement with any person or entity to
sell, transfer or pledge the Securities (or the Underlying Shares).
(iii) EIS acknowledges its understanding that the private
placement and sale of the Securities (and the Underlying Shares) is exempt from
registration under the Securities Act. In furtherance thereof, EIS represents
and warrants that it is an "accredited investor" as that term is defined in the
regulations under the Securities Act, has the financial ability to bear the
economic risk of its investment, has adequate means for providing for its
current needs and contingencies and has no need for liquidity with respect to
its investment in the Company.
(iv) EIS agrees that it shall not sell or otherwise transfer
any of the Securities (or the Underlying Shares) without registration under the
Securities Act or pursuant to an opinion of counsel reasonably satisfactory to
the Company that an exemption from registration is available, and fully
understands and agrees that it must bear the total economic risk of its purchase
for an indefinite period of time because, among other reasons, none of the
Securities (or the Underlying Shares) have been registered under the Securities
Act or under the securities laws of any applicable state or other jurisdiction
and, therefore, cannot be resold, pledged, assigned or otherwise disposed of
unless subsequently registered under the Securities Act and under the applicable
securities laws of such states or jurisdictions or an exemption from such
registration is available. EIS understands that the Company is under no
obligation to register the Securities (or the Underlying Shares) on its behalf
with the exception of certain registration rights with respect to certain of the
Securities (and the Underlying Shares), as provided in the Company Registration
Rights Agreement. EIS understands the lack of liquidity and restrictions on
transfer of the Securities (and the Underlying Shares) and that this investment
is suitable only for a person or entity of adequate financial means that has no
need for liquidity of this investment and that can afford a total loss of its
investment.
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(f) Legal Proceedings, etc. There is no legal, administrative,
arbitration or other action or proceeding or governmental investigation pending,
or to EIS's knowledge threatened, against EIS that challenges the validity or
performance of this Agreement or the other Transaction Documents to which EIS is
a party.
(g) Brokers or Finders. There have been no investment bankers,
brokers or finders used by EIS in connection with the transactions contemplated
by the Transaction Documents and no persons or entities are entitled to a fee or
compensation in respect thereof.
SECTION 4. Covenants of the Parties.
(a) Certain Covenants.
(i) From and after the Closing Date and until the earlier to
occur of the exercise or expiration of the EIS Exchange Right (as such term is
defined in Section 5(c) hereof), the Company shall not without the prior written
consent of EIS prevent or adversely affect, in any respect the Company's ability
to permit EIS to exercise the EIS Exchange Right in full as provided herein.
(ii) Notwithstanding any other provision of this Agreement or
the other Transaction Documents, in the event that the Underlying Shares to be
issued to EIS or any affiliate upon any exercise of the Warrant, or conversion
of the Series A Preferred Stock or the Note, exceed 19.9% of the issued and
outstanding shares of Atrix Common Stock as of the Closing Date (when taken
together with the Underlying Shares previously issued to EIS and its
affiliates), EIS is such affiliate shall receive non-voting securities of the
Company, having terms reasonably satisfactory to EIS and the Company and not
materially different from the Atrix Common Stock (other than the non-voting
status), in the amount of such excess.
(b) Fully-diluted Stock Ownership. Notwithstanding any other
provision of this Agreement, in the event that EIS determines that at any time
it (together with its affiliates, if applicable) holds or has the right to
receive Atrix Common Stock (or securities or rights, options or warrants
exercisable, exchangeable or convertible for or into Atrix Common Stock)
representing in the aggregate in excess of 9.9% of the Company's outstanding
Atrix Common Stock on a fully diluted basis, EIS shall have the right to cause
the Company to convert or exchange all or any part of the Securities into
non-voting securities of the Company (to be mutually agreed upon by EIS and the
Company, but having terms no more favorable to EIS or less favorable to the
Company than the Securities being so converted or exchanged) such that EIS and
its affiliates will not directly or indirectly own more than 9.9% of the Atrix
Common Stock on a fully diluted basis for a period of at least two years from
and after the date of EIS's election of such option. Each of the Company and EIS
shall use commercially reasonable efforts to effect such transactions and any
required subsequent conversions, exchanges or adjustments to EIS's
<PAGE> 13
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securities position, on a quarterly basis, within 15 business days of the end of
each of EIS's fiscal quarters.
(c) Use of Proceeds. The Company shall use the proceeds of (i)
the issuance and sale of the Series A Preferred Stock solely to meet its initial
capitalization obligations to Newco as described in the JDOA and (ii) the
issuance and sale of the Note solely to meet its developmental funding
commitments to Newco; and, in each case, for no other purpose.
(d) Confidentiality; Non-Disclosure.
(i) Subject to clause (ii) below, from and after the date
hereof, neither the Company nor EIS (nor their respective affiliates) shall
disclose to any person or entity this Agreement or the other Transaction
Documents or the contents thereof or the parties thereto, except that such
parties may make such disclosure (x) to their directors, officers, employees and
advisors, and potential bank creditors and investors, so long as they shall have
advised such persons of the obligation of confidentiality herein and for whose
breach or default the disclosing party shall be responsible or (y) as required
by applicable law, rule, regulation or judicial or administrative process, or
request of the governing body of a national stock market, provided that the
disclosing party uses reasonable efforts to obtain an order or ruling protecting
the confidentiality of confidential information of the other party contained
herein or therein. The parties shall be entitled to seek injunctive or other
equitable relief in respect of any breach or threatened breach of the foregoing
covenant without the requirement of posting a bond or other collateral.
(ii) Prior to issuing any press release or public disclosure
in respect of this Agreement or the transactions contemplated hereby, the party
proposing such issuance shall obtain the consent of the other party to the
contents thereof, which consent shall not be unreasonably withheld or delayed.
(e) Lock-Up. Notwithstanding anything to the contrary in this
Agreement or any other Transaction Document, EIS shall not sell, contract to
sell, grant any option to purchase, transfer the economic risk of ownership in,
make any short sale of, pledge or otherwise transfer or dispose of any Atrix
Common Stock (including Atrix Common Stock received upon the conversion,
exercise or exchange of any Securities owned by EIS, or as the case may be, its
affiliates) or any securities convertible into or exchangeable or exercisable
for, or any other rights to purchase or acquire, Atrix Common Stock, including
the Securities, for a period of two years after the Closing Date.
(f) Further Assurances. From and after the date hereof, each
of the parties hereto agree to do or cause to be done such further acts and
things and deliver or cause to be delivered to each other such additional
assignments, agreements, powers and instruments, as each
<PAGE> 14
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may reasonably require or deem advisable to carry into effect the purposes of
this Agreement and the other Transaction Documents.
SECTION 5. Certain Rights of EIS.
(a) Preemptive Right. Until the [**] anniversary of the
Closing Date, EIS shall have the right (but not the obligation) to participate
in any equity financing, or any financing involving securities convertible or
exchangeable for equity, consummated by the Company, on the same terms and
conditions offered to the other proposed investors in such financing, in order
for EIS to maintain its pro rata interest in the Company, based on the number of
shares of Atrix Common Stock owned by EIS and its affiliates including any
special purpose financing vehicle transferees, assuming the conversion or
exercise of all Securities (other than the Series A Preferred Stock, the Note
and the Warrant) and the actual number of shares of Atrix Common Stock
outstanding on the date such financing is consummated; provided, however, that
such right shall not apply to any (i) public offering under the Securities Act,
(ii) offering under an incentive stock or similar plan for the benefit of its
officers, directors, employees and consultants, (iii) acquisition (of stock or
assets) paid for, in whole or in part, in shares of Atrix Common Stock, or (iv)
transaction in which the Company offers or sells the Company's securities as
part of a strategic alliance, joint venture or any other transaction which is
not primarily a non-public offering of securities. Such right shall be exercised
by EIS within 10 days of receipt of notice of such financing from the Company,
which notice shall be provided by the Company at least 15 days prior to such
financing. Such right shall terminate and be of no further force and effect at
such time as EIS' ownership interest in Atrix Common Stock (or securities
convertible, exchangeable or exercisable into Atrix Common Stock) falls below
5%, on a fully diluted basis.
(b) Company Board of Directors. For so long as EIS or its
affiliates, directly or indirectly, collectively own at least 10.0% of the Atrix
Common Stock (or securities convertible, exchangeable or exercisable for or into
the Atrix Common Stock which, with such owned Atrix Common Stock represents at
least 10.0% ownership, assuming the exercise, conversion or exchange thereof by
EIS and its affiliates but not of any other Atrix Common Stock equivalents) on a
fully diluted basis, EIS shall be entitled to appoint one director (the "EIS
Director") for election to the Company's board of directors. The EIS Director
shall not have more than 15.0% of the votes on the Company's board of directors,
irrespective of the actual number of directors thereon. In connection with the
foregoing, the Company will take all necessary and/or appropriate steps to
effect such appointment, including the inclusion of the designated EIS Director
as part of the management recommended slate of directors presented at any
regular or special meeting of the stockholders of the Company at which directors
of the Company are to be elected. Prior to such election, the designated EIS
Director shall be entitled to be an observer at the meetings of the Company's
board of directors.
<PAGE> 15
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(c) Conversion and Exchange Rights. The Company acknowledges
that the Certificate of Designations sets forth certain rights of the holders of
shares of Series A Preferred Stock to convert such shares of Series A Preferred
Stock into newly issued shares of Atrix Common Stock or successor securities of
Atrix Common Stock, or to exchange such shares of Series A Preferred Stock (or
shares of Atrix Common Stock into which such shares of Series A Preferred Stock
were converted pursuant to a Required Conversion (as such term is defined in the
Certificate of Designations)) for certain shares of Newco Stock (the "EIS
Exchange Right"), and agrees that it will not take any action which would impair
such rights other than as otherwise permitted by the provisions thereof or the
other Transaction Documents.
In the event that EIS shall exercise the EIS Exchange Right,
EIS shall cause to be paid to Atrix within 30 days of such exercise, an amount
equal to 30.1% of the aggregate amount of the Development Funding through the
date of such exercise provided by each of the parties to Newco in accordance
with the terms hereof (excluding accrued and unpaid interest on the applicable
portion of the Note), from and after the date hereof and until the date of such
payment. EIS may pay such amount, at its option, either (i) in cash by wire
transfer, (ii) by offset against the amount payable under the Note, or (iii) a
combination of (i) and (ii).
SECTION 6. Pledge of Newco Stock. In order to secure the
Company's obligations pursuant to the EIS Exchange Right, the Company hereby
pledges, assigns and sets over to EIS, all of the Company's right, title and
interest in and to all shares of Newco Stock deliverable by the Company upon
exercise of the EIS Exchange Right (including stock distributions and dividends
thereon) for such period of time as the EIS Exchange Right shall be exercisable.
The Company shall cause to be delivered to EIS all of the certificates together
with duly executed stock power in favor of EIS evidencing such shares. Upon
exercise of the EIS Exchange Right, EIS shall be entitled to keep and retain
such share certificates, which shall then be owned by EIS in accordance with the
terms thereof. Until EIS exercises the EIS Exchange Right, the Company shall
retain all rights in and to the pledged Newco Stock (including without
limitation all voting, dividend, liquidation and other rights), subject only to
this pledge and the JDOA.
SECTION 7. Survival and Indemnification. (a) Survival. For the
purposes of this Section, the representations and warranties of the Company and
EIS contained herein shall survive for a period of 12 months from and after the
date hereof.
(b) Indemnification. In addition to all rights and remedies
available to the parties hereto at law or in equity,[**], and save and hold each
Indemnified Person harmless from and against and pay on behalf of or reimburse
each such Indemnified Person, as and when incurred, for any and all loss,
liability, demand, claim, action, cause of action, cost, damage, deficiency,
tax, penalty, fine or expense, whether or not arising out of any claims by or on
behalf of such Indemnified Person or any third party, including interest,
penalties, reasonable attorneys'
<PAGE> 16
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fees and expenses and all amounts paid in investigation, defense or settlement
of any of the foregoing (collectively, "Losses"), that any such Indemnified
Person may suffer, sustain incur or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of:
(i) any misrepresentation or breach of warranty on the part
of the Indemnifying Party under Section 2 of this Agreement or any of
the other Transaction Documents (as limited thereby) (it being
understood that the Company shall not be responsible for any such
misrepresentation or breach of warranty by Newco); or
(ii) any nonfulfillment, default or breach of any covenant or
agreement on the part of the Indemnifying Party under Section 4 of this
Agreement.
(c) Maximum Recovery. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Indemnifying Parties be liable
for indemnification under this Section 7 in an amount in excess of [**]. No
Indemnified Person shall assert any such claim unless Losses in respect thereof
incurred by any Indemnified Person, when aggregated with all previous Losses
hereunder, equal or exceed [**], but at such time that an Indemnified Person is
entitled to assert a claim, such claim shall include all Losses covered by this
Section 7.
(d) Exception. Notwithstanding the foregoing, upon judicial
determination that is final and no longer appealable, that the act or omission
giving rise to the indemnification set forth above resulted primarily out of or
was based primarily upon the Indemnified Person's negligence (unless such
Indemnified Person's negligence was based upon the Indemnified Person's reliance
in good faith upon any of the representations, warranties, covenants or promises
made by the Indemnifying Party herein) the Indemnifying Party shall not be
responsible for any Losses sought to be indemnified in connection therewith, and
the Indemnifying Party shall be entitled to recover from the Indemnified Person
all amounts previously paid in full or partial satisfaction of such indemnity,
together with all costs and expenses (including reasonable attorneys fees) of
the Indemnifying Party reasonably incurred in connection with the Indemnified
Persons claim for indemnity, together with interest at the rate per annum
publicly announced by Morgan Guaranty Trust Company as its prime rate from the
time of payment of such amounts to the Indemnified Person until repayment to the
Indemnifying Party.
(e) Investigation. All indemnification rights hereunder shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, irrespective of any investigation, inquiry or
examination made for or on behalf of, or any knowledge of the Indemnified Person
or the acceptance of any certificate or opinion.
(f) Contribution. If the indemnity provided for in this
Section 7 shall be, in whole or in part, unavailable to any Indemnified Person,
due to Section 7(b) being declared unenforceable by a court of competent
jurisdiction based upon reasons of public policy, so that
<PAGE> 17
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Section 7(b) shall be insufficient to hold each such Indemnified Person harmless
from Losses which would otherwise be indemnified hereunder, then the
Indemnifying Party and the Indemnified Person shall each contribute to the
amount paid or payable for such Loss in such proportion as is appropriate to
reflect not only the relative benefits received by the Indemnifying Party on the
one hand and the Indemnified Person on the other, but also the relative fault of
the Indemnifying Party and be in addition to any liability that the Indemnifying
Party may otherwise have. The indemnity, contribution and expense reimbursement
obligations that the Indemnifying Party has under this Section 7 shall survive
the expiration of the Transaction Documents. The parties hereto further agree
that the indemnification and reimbursement commitments set forth in this
Agreement shall apply whether or not the Indemnified Person is a formal party to
any such lawsuit, claims or other proceedings.
(g) Limitation. This Section 7 is not intended to limit the
rights or remedies otherwise available to any party hereto with respect to this
Agreement or the Transaction Documents.
SECTION 8. Notices. All notices, demands and requests of any
kind to be delivered to any party in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if personally or hand
delivered or if sent by an internationally-recognized overnight delivery courier
or by registered or certified mail, return receipt requested and postage
prepaid, or by facsimile transmission addressed as follows:
If to the Company, to:
Atrix Laboratories, Inc.
2579 Midpoint Drive
Fort Collins, CO 80525-4417
Attention: Chief Executive Officer
Facsimile: (970) 482-9735
with a copy to:
Morrison & Foerster LLP
5200 Republic Plaza
370 17th Street
Denver, CO 80202-5638
Attention: Warren L. Troupe, Esq.
Facsimile: (303) 592-1510
<PAGE> 18
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If to EIS, to:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish
Bermuda FL 04
Attention: Chief Executive Officer
Facsimile: (441) 292-2224
with a copy to:
Brock Silverstein LLC
800 Third Avenue
21st Floor
New York, NY 10022
Attention: David Robbins, Esq.
Facsimile: (212) 371-5500
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 8. Any such notice or communication shall be deemed to have been
effectively given (i) in the case of personal or hand delivery, on the date of
such delivery, (ii) in the case of an internationally-recognized overnight
delivery courier, on the second business day after the date when sent, (iii) in
the case of mailing, on the fifth business day following that day on which the
piece of mail containing such communication is posted and (iv) in the case of
facsimile transmission, the next business day following the date of transmission
as evidenced by confirmation receipt.
SECTION 9. Entire Agreement. This Agreement and the other
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties with respect thereto.
SECTION 10. Amendments and Waiver. This Agreement may not be
modified or amended, or any of the provisions hereof waived, except by written
agreement of the Company and EIS dated after the date hereof.
SECTION 11. Counterparts and Facsimile. The Transaction
Documents may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement. Each of the Transaction
Documents may be signed and delivered to the other party by facsimile
transmission; such transmission shall be deemed a valid signature.
<PAGE> 19
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SECTION 12. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of the Agreement.
SECTION 13. Governing Law; Disputes. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to principles of conflicts of laws. Any dispute
under the Transaction Documents that is not settled by mutual consent shall be
finally adjudicated by any federal or state court sitting in the City, County
and State of New York, and each party consents to the exclusive jurisdiction of
such courts (or any appellate court therefrom) over any such dispute.
SECTION 14. Expenses. Each of the parties shall be responsible
for its own costs and expenses incurred in connection with the transactions
contemplated hereby and by the other Transaction Documents.
SECTION 15. Assignments and Transfers. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. All or any
part of this Agreement may be assigned or transferred by EIS and its permitted
assigns and transferees to their respective affiliates and subsidiaries,
including any special purpose financing or similar vehicle established by EIS;
provided, that EIS shall remain liable for its obligations hereunder following
any such assignment or transfer. Other than as set forth above, no party shall
assign or transfer all or any part of this Agreement, without the prior written
consent of the other party which consent shall not be unreasonably withheld or
delayed.
SECTION 16. Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be in any way affected or
impaired thereby.
[Signature page follows]
<PAGE> 20
IN WITNESS WHEREOF, each of the undersigned has duly executed
this Agreement as of the date first written above.
ATRIX LABORATORIES, INC.
By: /s/ DAVID R. BETHUNE
-------------------------------
Name: David R. Bethune
Title: Chairman and CEO
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ KEVIN INSLEY
-------------------------------
Name: Kevin Insley
Title: President and Chief
Financial Officer
