UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
⌧ | PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE ENDED JUNE 30, 2023
or
◻ | PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-36509
(Exact name of Registrant as specified in its charter)
| 33-0702205 | |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer |
11570 6th Street |
| |
Rancho Cucamonga, CA |
| 91730 |
(Address of principal executive offices) | (zip code) |
(909) 980-9484
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
⌧ | Accelerated filer | ◻ | ||||
Non-accelerated filer | ◻ | ◻ | ||||
Emerging growth company | ◻ | |||||
If an , indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ ⌧
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||
Common Stock, par value $0.0001 per share | AMPH | The NASDAQ Stock Market LLC | ||||
The number of shares outstanding of the registrant’s only class of common stock as of August 2, 2023 was 48,855,602.
AMPHASTAR PHARMACEUTICALS, INC.
TABLE OF CONTENTS
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023
Special Note About Forward-Looking Statements
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or Quarterly Report, contains “forward-looking statements” that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the following words: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. Forward-looking statements relate to future events or future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by the forward-looking statements. These forward-looking statements include, but are not limited to, statements about:
| ● | our expectations regarding the sales and marketing of our products; |
| ● | our expectations regarding our newly acquired product, BAQSIMI®, including with respect to our ability to increase our revenues and derive certain benefits as a result of our acquisition of BAQSIMI®; |
| ● | our ability to successfully acquire and integrate assets, including our ability to integrate BAQSIMI®; |
| ● | our expectations regarding our manufacturing and production and the integrity of our supply chain for our products, including the risks associated with our single source suppliers; |
| ● | our business and operations in general, including: any resurgence of the COVID-19 pandemic, adverse impacts of the Russia-Ukraine conflict and related macroeconomic conditions on our business, financial condition, operations, cash flows and liquidity; |
| ● | our ability to attract, hire, and retain highly skilled personnel; |
| ● | interruptions to our manufacturing and production as a result of natural catastrophic events or other causes beyond our control such as power disruptions or widespread disease outbreaks, such as any resurgence of the COVID-19 pandemic and the Russia-Ukraine conflict; |
| ● | global, national and local economic and market conditions, specifically with respect to geopolitical uncertainty, including the Russia-Ukraine conflict, inflation and rising interest rates; |
| ● | the timing and likelihood of U.S. Food and Drug Administration, or FDA, approvals and regulatory actions on our product candidates, manufacturing activities and product marketing activities; |
| ● | our ability to advance product candidates in our platforms into successful and completed clinical trials and our subsequent ability to successfully commercialize our product candidates; |
| ● | cost and delays resulting from the extensive pharmaceutical regulations to which we are subject; |
| ● | our ability to compete in the development and marketing of our products and product candidates; |
| ● | our expectations regarding the business of our Chinese subsidiary, Amphastar Nanjing Pharmaceuticals, Ltd., or ANP; |
| ● | the potential for adverse application of environmental, health and safety and other laws and regulations on our operations; |
| ● | our expectations for market acceptance of our new products and proprietary drug delivery technologies, as well as those of our active pharmaceutical ingredient, or API, customers; |
| ● | the effects of reforms in healthcare regulations and reductions in pharmaceutical pricing, reimbursement and coverage; |
| ● | our expectations in obtaining insurance coverage and adequate reimbursement for our products from third-party payers; |
| ● | the amount of price concessions or exclusion of suppliers adversely affecting our business; |
| ● | variations in intellectual property laws, our ability to establish and maintain intellectual property protection for our products and our ability to successfully defend our intellectual property in cases of alleged infringement; |
| ● | the implementation of our business strategies, product development strategies and technology utilization; |
| ● | the potential for exposure to product liability claims; |
| ● | our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions, divestitures or investments, including the anticipated benefits of such acquisitions, divestitures or investments; |
| ● | our ability to expand internationally; |
| ● | economic and industry trends and trend analysis; |
| ● | our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally; |
| ● | the impact of trade tariffs, export or import restrictions, or other trade barriers; |
| ● | the impact of Patient Protection and Affordable Care Act (as amended) and other legislative and regulatory healthcare reforms in the countries in which we operate including the potential for drug price controls; |
| ● | the impact of global and domestic tax reforms; |
| ● | the timing for completion and the validation of the new construction at our ANP and Amphastar facilities; |
| ● | the timing and extent of share buybacks; and |
| ● | our financial performance expectations, including our expectations regarding our backlog, revenue, cost of revenue, gross profit or gross margin, operating expenses, including changes in research and development, sales and marketing and general and administrative expenses, and our ability to achieve and maintain future profitability. |
You should read this Quarterly Report and the documents that we reference elsewhere in this Quarterly Report completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. In light of the significant risks and uncertainties to which our forward-looking statements are subject, you should not place undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. We discuss many of these risks and uncertainties in greater detail in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2022, particularly in Item 1A. “Risk Factors.” These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report regardless of the time of delivery of this Quarterly Report, and such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report.
Unless expressly indicated or the context requires otherwise, references in this Quarterly Report to “Amphastar,” “the Company,” “we,” “our,” and “us” refer to Amphastar Pharmaceuticals, Inc. and our subsidiaries.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| June 30, |
| December 31, | |||
2023 | 2022 | |||||
(unaudited) | ||||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 148,595 | $ | 156,098 | ||
Restricted cash | 2,685 | 235 | ||||
Short-term investments | 14,541 | 19,664 | ||||
Restricted short-term investments |
| 2,200 |
| 2,200 | ||
Accounts receivable, net |
| 104,715 |
| 88,804 | ||
Inventories |
| 104,617 |
| 103,584 | ||
Income tax refunds and deposits |
| 1,329 |
| 171 | ||
Prepaid expenses and other assets |
| 5,872 |
| 7,563 | ||
Total current assets |
| 384,554 |
| 378,319 | ||
Property, plant, and equipment, net |
| 278,526 |
| 238,266 | ||
Finance lease right-of-use assets | 657 | 753 | ||||
Operating lease right-of-use assets | 26,327 | 25,554 | ||||
Investment in unconsolidated affiliate | 1,462 | 2,414 | ||||
Goodwill and intangible assets, net |
| 625,603 |
| 37,298 | ||
Other assets |
| 20,269 |
| 20,856 | ||
Deferred tax assets |
| 40,868 |
| 38,527 | ||
Total assets | $ | 1,378,266 | $ | 741,987 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 217,536 | $ | 84,242 | ||
Income taxes payable |
| 17,696 |
| 4,571 | ||
Current portion of long-term debt |
| 12,920 |
| 3,046 | ||
Current portion of operating lease liabilities | 3,133 | 3,003 | ||||
Total current liabilities |
| 251,285 |
| 94,862 | ||
Long-term reserve for income tax liabilities |
| 7,225 |
| 7,225 | ||
Long-term debt, net of current portion and unamortized debt issuance costs |
| 488,280 |
| 72,839 | ||
Long-term operating lease liabilities, net of current portion | 24,407 | 23,694 | ||||
Deferred tax liabilities |
| 201 |
| 144 | ||
Other long-term liabilities |
| 17,633 |
| 14,565 | ||
Total liabilities |
| 789,031 |
| 213,329 | ||
Commitments and contingencies | ||||||
Stockholders’ equity: | ||||||
Preferred stock: par value $0.0001; 20,000,000 shares authorized; no shares issued and outstanding |
|
| ||||
Common stock: par value $0.0001; 300,000,000 shares authorized; 59,068,477 and 48,818,806 shares issued and outstanding as of June 30, 2023 and 58,110,231 and 48,112,069 shares issued and outstanding as of December 31, 2022, respectively |
| 6 |
| 6 | ||
Additional paid-in capital |
| 471,110 |
| 455,077 | ||
Retained earnings |
| 323,880 |
| 271,723 | ||
Accumulated other comprehensive loss |
| (8,324) |
| (8,624) | ||
Treasury stock |
| (197,437) |
| (189,524) | ||
Total equity | 589,235 | 528,658 | ||||
Total liabilities and stockholders’ equity | $ | 1,378,266 | $ | 741,987 | ||
See Accompanying Notes to Condensed Consolidated Financial Statements.
-1-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)
Three Months Ended | Six Months Ended |
| |||||||||||
June 30, | June 30, | ||||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| |||||
Net revenues | $ | 145,712 | $ | 123,467 | $ | 285,734 | $ | 243,835 | |||||
Cost of revenues |
| 72,974 |
| 60,111 |
| 139,156 |
| 124,653 | |||||
Gross profit |
| 72,738 |
| 63,356 |
| 146,578 |
| 119,182 | |||||
Operating expenses: | |||||||||||||
Selling, distribution, and marketing |
| 6,718 |
| 5,756 |
| 13,827 | 11,275 | ||||||
General and administrative |
| 12,281 |
| 9,979 |
| 25,764 | 22,449 | ||||||
Research and development |
| 16,843 |
| 22,798 |
| 36,658 | 39,021 | ||||||
Total operating expenses |
| 35,842 |
| 38,533 |
| 76,249 |
| 72,745 | |||||
Income from operations |
| 36,896 |
| 24,823 |
| 70,329 |
| 46,437 | |||||
Non-operating income (expenses): | |||||||||||||
Interest income |
| 1,030 |
| 229 |
| 1,954 | 410 | ||||||
Interest expense |
| (3,602) |
| (397) |
| (4,000) | (752) | ||||||
Other income (expenses), net |
| (1,516) |
| (1,504) |
| (1,906) | 6,089 | ||||||
Total non-operating income (expenses), net |
| (4,088) |
| (1,672) |
| (3,952) |
| 5,747 | |||||
Income before income taxes |
| 32,808 |
| 23,151 |
| 66,377 |
| 52,184 | |||||
Income tax provision |
| 6,383 |
| 5,551 |
| 13,135 | 9,628 | ||||||
Income before equity in losses of unconsolidated affiliate | 26,425 | 17,600 | 53,242 | 42,556 | |||||||||
Equity in losses of unconsolidated affiliate | (301) | (254) | (1,086) | (957) | |||||||||
Net income | $ | 26,124 | $ | 17,346 | $ | 52,156 | $ | 41,599 | |||||
Net income per share: | |||||||||||||
Basic | $ | 0.54 | $ | 0.35 | $ | 1.08 | $ | 0.86 | |||||
Diluted | $ | 0.49 | $ | 0.33 | $ | 0.99 | $ | 0.79 | |||||
Weighted-average shares used to compute net income per share: | |||||||||||||
Basic |
| 48,404 |
| 48,864 |
| 48,202 | 48,501 | ||||||
Diluted |
| 53,102 |
| 53,227 |
| 52,536 | 52,603 | ||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
-2-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in thousands)
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| |||||
Net income | $ | 26,124 | $ | 17,346 | $ | 52,156 | $ | 41,599 | |||||
Other comprehensive income (loss), net of income taxes | |||||||||||||
Foreign currency translation adjustment |
| (56) |
| (1,464) |
| 300 | (1,944) | ||||||
Total other comprehensive income (loss) |
| (56) |
| (1,464) |
| 300 |
| (1,944) | |||||
Total comprehensive income | $ | 26,068 | $ | 15,882 | $ | 52,456 | $ | 39,655 | |||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
-3-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited; in thousands, except share data)
Common Stock | Accumulated | Treasury Stock | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Paid-in | Retained | Comprehensive | ||||||||||||||||||||
Shares | Amount | Capital | Earnings | loss | Shares | Amount | Total | |||||||||||||||
Balance as of December 31, 2022 |
| 58,110,231 | $ | 6 | $ | 455,077 | $ | 271,723 | $ | (8,624) |
| (9,998,162) | $ | (189,524) | $ | 528,658 | ||||||
Net income |
| — |
| — |
| — |
| 26,032 |
| — |
| — |
| — |
| 26,032 | ||||||
Other comprehensive income |
| — |
| — |
| — |
| — |
| 356 |
| — |
| — |
| 356 | ||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| (263,131) | (8,015) |
| (8,015) | |||||||
Issuance of common stock in connection with the Company's equity plans |
| 330,300 |
| — |
| (4,565) |
| — |
| — |
| — |
| — |
| (4,565) | ||||||
Share-based compensation expense |
| — |
| — |
| 6,111 |
| — |
| — |
| — |
| — |
| 6,111 | ||||||
Balance as of March 31, 2023 |
| 58,440,531 | $ | 6 | $ | 456,623 | $ | 297,755 | $ | (8,268) |
| (10,261,293) | $ | (197,539) | $ | 548,577 | ||||||
Net income |
| — |
| — |
| — |
| 26,124 |
| — |
| — |
| — |
| 26,124 | ||||||
Other comprehensive loss |
| — |
| — |
| — |
| — |
| (56) |
| — |
| — |
| (56) | ||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| (3,585) | (129) |
| (129) | |||||||
Issuance of treasury stock in connection with the Company's equity plans | — |
| — |
| (231) |
| — |
| — |
| 15,207 | 231 |
| — | ||||||||
Issuance of common stock in connection with the Company's equity plans |
| 627,946 |
| — |
| 9,853 |
| — |
| — |
| — |
| — |
| 9,853 | ||||||
Share-based compensation expense |
| — |
| — |
| 4,865 |
| — |
| — |
| — |
| — |
| 4,865 | ||||||
Balance as of June 30, 2023 |
| 59,068,477 | $ | 6 | $ | 471,110 | $ | 323,880 | $ | (8,324) |
| (10,249,671) | $ | (197,437) | $ | 589,235 | ||||||
Common Stock | Accumulated | Treasury Stock | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||||
Paid-in | Retained | Comprehensive | ||||||||||||||||||||
Shares | Amount | Capital | Earnings | loss | Shares | Amount | Total | |||||||||||||||
Balance as of December 31, 2021 |
| 56,440,202 | $ | 6 | $ | 422,423 | $ | 180,337 | $ | (6,765) |
| (8,725,290) | $ | (150,479) | $ | 445,522 | ||||||
Net income |
| — |
| — |
| — |
| 24,253 |
| — |
| — |
| — |
| 24,253 | ||||||
Other comprehensive loss |
| — |
| — |
| — |
| — |
| (480) |
| — |
| — |
| (480) | ||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| (51,168) | (1,229) |
| (1,229) | |||||||
Issuance of treasury stock in connection with the Company's equity plans | — | — | (428) | — | — | 33,231 | 428 | — | ||||||||||||||
Issuance of common stock in connection with the Company's equity plans |
| 1,055,200 |
| — |
| 6,437 |
| — |
| — |
| — |
| — |
| 6,437 | ||||||
Share-based compensation expense |
| — |
| — |
| 5,022 |
| — |
| — |
| — |
| — |
| 5,022 | ||||||
Balance as of March 31, 2022 |
| 57,495,402 | $ | 6 | $ | 433,454 | $ | 204,590 | $ | (7,245) |
| (8,743,227) | $ | (151,280) | $ | 479,525 | ||||||
Net income |
| — |
| — |
| — |
| 17,346 |
| — |
| — |
| — |
| 17,346 | ||||||
Other comprehensive loss |
| — |
| — |
| — |
| — |
| (1,464) |
| — |
| — |
| (1,464) | ||||||
Purchase of treasury stock |
| — |
| — |
| — |
| — |
| — |
| (189,840) | (6,118) |
| (6,118) | |||||||
Issuance of treasury stock in connection with the Company's equity plans | — |
| — |
| (430) |
| — |
| — |
| 29,019 | 430 |
| — | ||||||||
Issuance of common stock in connection with the Company's equity plans |
| 400,935 |
| — |
| 5,783 |
| — |
| — |
| — |
| — |
| 5,783 | ||||||
Share-based compensation expense |
| — |
| — |
| 4,235 |
| — |
| — |
| — |
| — |
| 4,235 | ||||||
Balance as of June 30, 2022 |
| 57,896,337 | $ | 6 | $ | 443,042 | $ | 221,936 | $ | (8,709) |
| (8,904,048) | $ | (156,968) | $ | 499,307 | ||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
-4-
AMPHASTAR PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months Ended | ||||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Cash Flows From Operating Activities: | ||||||
Net income | $ | 52,156 | $ | 41,599 | ||
Reconciliation to net cash provided by operating activities: | ||||||
Loss on disposal of assets |
| 7 |
| (58) | ||
Impairment of long-lived assets | 2,700 | — | ||||
Loss (gain) on interest rate swaps and foreign currency transactions, net | 2,434 | (298) | ||||
Depreciation of property, plant, and equipment |
| 12,121 |
| 11,411 | ||
Amortization of product rights, trademarks, and patents |
| 471 |
| 504 | ||
Operating lease right-of-use asset amortization | 1,825 | 1,709 | ||||
Amortization of debt issuance costs and debt modification costs | 3,249 | 192 | ||||
Equity in losses of unconsolidated affiliate | 1,086 | 957 | ||||
Share-based compensation expense |
| 10,976 |
| 9,257 | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable, net |
| (10,533) |
| (2,178) | ||
Inventories |
| (767) |
| (7,422) | ||
Prepaid expenses and other assets |
| 740 |
| 468 | ||
Income tax refunds, deposits, and payable, net |
| 11,967 |
| (14,235) | ||
Operating lease liabilities | (1,750) | (1,468) | ||||
Accounts payable and accrued liabilities |
| 8,623 |
| 13,142 | ||
Net cash provided by operating activities |
| 95,305 |
| 53,580 | ||
Cash Flows From Investing Activities: | ||||||
BAQSIMI® acquisition |
| (500,829) |
| — | ||
Purchases and construction of property, plant, and equipment |
| (18,531) |
| (12,101) | ||
Proceeds from the sale of property, plant and equipment |
| — |
| 421 | ||
Purchase of investments | (19,774) | (12,004) | ||||
Maturity of investments | 25,151 | 6,391 | ||||
Deposits and other assets |
| (932) |
| 3 | ||
Net cash used in investing activities |
| (514,915) |
| (17,290) | ||
Cash Flows From Financing Activities: | ||||||
Proceeds from equity plans, net of withholding tax payments |
| 5,288 |
| 12,220 | ||
Purchase of treasury stock |
| (8,143) |
| (7,346) | ||
Debt issuance costs | (14,150) | (89) | ||||
Proceeds from issuance of long-term debt |
| 500,000 |
| — | ||
Principal payments on long-term debt |
| (68,432) |
| (1,131) | ||
Net cash provided by financing activities |
| 414,563 |
| 3,654 | ||
Effect of exchange rate changes on cash |
| (6) | (140) | |||
Net (decrease) increase in cash, cash equivalents, and restricted cash |
| (5,053) |
| 39,804 | ||
Cash, cash equivalents, and restricted cash at beginning of period |
| 156,333 | 126,588 | |||
Cash, cash equivalents, and restricted cash at end of period | $ | 151,280 | $ | 166,392 | ||
Noncash Investing and Financing Activities: | ||||||
Deferred payment for BAQSIMI® acquisition | $ | 127,276 | $ | — | ||
Capital expenditures included in accounts payable | $ | 3,681 | $ | 5,539 | ||
Operating lease right-of-use assets in exchange for operating lease liabilities | $ | 2,598 | $ | 1,777 | ||
Supplemental Disclosures of Cash Flow Information: | ||||||
Interest paid, net of capitalized interest | $ | 2,772 | $ | 1,167 | ||
Income taxes paid | $ | 1,322 | $ | 23,964 | ||
See Accompanying Notes to Condensed Consolidated Financial Statements.
-5-
Note 1. General
Amphastar Pharmaceuticals, Inc., a Delaware corporation (together with its subsidiaries, hereinafter referred to as the “Company”) is a bio-pharmaceutical company that focuses primarily on developing, manufacturing, marketing, and selling technically challenging generic and proprietary injectable, inhalation, and intranasal products, including products with high technical barriers to market entry. Additionally, the Company sells insulin active pharmaceutical ingredient, or API, products. Most of the Company’s products are used in hospital or urgent care clinical settings and are primarily contracted and distributed through group purchasing organizations and drug wholesalers. The Company’s insulin API products are sold to other pharmaceutical companies for use in their own products and are being used by the Company in the development of injectable finished pharmaceutical products. The Company’s inhalation product, Primatene MIST®, is primarily distributed through drug retailers.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2022 and the notes thereto as filed with the Securities and Exchange Commission, or SEC, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles, or GAAP, have been condensed or omitted from the accompanying condensed consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from the audited financial statements. The accompanying interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the Company’s consolidated financial position, results of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the periods presented. Unless otherwise noted, all such adjustments are of a normal, recurring nature. The Company’s results of operations, comprehensive income (loss) and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and are prepared in accordance with GAAP. Certain prior period amounts have been reclassified within the operating activities of the condensed consolidated statements of cash flows to conform to the current period presentation. All intercompany activity has been eliminated in the preparation of the condensed consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the consolidated financial position, results of operations, and cash flows of the Company.
The Company’s subsidiaries include: (1) International Medication Systems, Limited, or IMS, (2) Armstrong Pharmaceuticals, Inc., or Armstrong, (3) Amphastar Nanjing Pharmaceuticals Inc., or ANP, (4) Amphastar France Pharmaceuticals, S.A.S., or AFP, (5) Amphastar UK Ltd., or AUK, (6) International Medication Systems (UK) Limited, or IMS UK, and (7) Amphastar Medication Co., LLC, or Amphastar Medication.
Investments in Unconsolidated Affiliate
The Company applies the equity method of accounting for investments when it has significant influence, but not controlling interest in the investee. Judgment regarding the level of influence over each equity method investment includes key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The Company’s proportionate share of the earnings or losses resulting from these investments is reported as “Equity in losses of unconsolidated affiliate” in the accompanying consolidated
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
statements of operations. Investments accounted for using the equity method may be reported on a lag of up to three months if financial statements of the investee are not available in sufficient time for the investor to apply the equity method as of the current reporting date. The determination of whether an investee’s results are recorded on a lag is made on an investment-by-investment basis.
The carrying value of equity method investments is reported as “Investment in unconsolidated affiliate” in the accompanying consolidated balance sheets. The Company’s equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s earnings or losses and dividends paid, if any.
The Company assesses equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment. No such impairment was identified for any of the periods presented.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The principal accounting estimates include: fair value of acquired assets, determination of allowances for credit losses, fair value of financial instruments, allowance for discounts, provision for chargebacks and rebates, provision for product returns, adjustment of inventory to its net realizable value, impairment of investments, long-lived and intangible assets and goodwill, accrual for workers’ compensation liabilities, litigation reserves, stock price volatility for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.
Foreign Currency
The functional currency of the Company, its domestic subsidiaries, its Chinese subsidiary ANP, and its U.K. subsidiary, AUK, is the U.S. Dollar, or USD. ANP maintains its books of record in Chinese yuan. These books are remeasured into the functional currency of USD using the current or historical exchange rates. The resulting currency remeasurement adjustments and other transactional foreign currency exchange gains and losses are reflected in the Company’s condensed consolidated statements of operations.
The Company’s French subsidiary, AFP, maintains its book of record in euros. AUK’s subsidiary, IMS UK, maintains its book of record in British pounds. These local currencies have been determined to be the subsidiaries’ respective functional currencies. Activities in the statements of operations are translated to USD using average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transactions. Translation adjustments are reflected in stockholders’ equity and are included as a component of other accumulated comprehensive income (loss). The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other accumulated comprehensive income (loss).
The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature were a $0.1 million loss and a $0.5 million gain for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2022, the unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature were a $2.1 million loss and a $2.7 million loss, respectively.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Comprehensive Income
The Company’s comprehensive income includes its foreign currency translation gains and losses as well as its share of other comprehensive income from its equity method investments.
Acquisitions
The Company evaluates acquisitions and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and substantive processes that have the ability to create outputs, which would meet the definition of a business.
Acquisitions meeting the definition of business combinations are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. In a business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition. Direct transaction costs are recognized as part of the cost of an asset acquisition. The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis, with the exception of non-qualifying assets. Goodwill is not recognized in an asset acquisition. When a transaction accounted for as an asset acquisition includes an in-process research and development, or IPR&D, asset, the IPR&D asset is only capitalized if it has an alternative future use other than in a particular research and development project. Asset acquisitions may include contingent consideration arrangements that encompass obligations to make future payments to sellers contingent upon the achievement of future financial targets. Contingent consideration, including assumed contingent considerations, is not recognized until all contingencies are resolved and the consideration is paid or becomes payable (unless contingent considerations meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired), at which point the consideration is allocated to the assets acquired based on their relative fair values at the acquisition date, with the exception of non-qualifying assets.
Judgments are used in determining estimates of useful lives of long-lived assets. Useful life estimates are based on, among other factors, estimates of expected future net cash flows, the assessment of each asset’s life cycle, and the impact of competitive trends on each asset’s life cycle and other factors. These judgments can materially impact the estimates used to allocate purchase consideration to assets acquired and liabilities assumed, and the resulting timing and amounts charged to or recognized in current and future operating results. For these and other reasons, actual results may vary significantly from estimated results.
Advertising Expense
Advertising expenses, primarily associated with Primatene MIST®, are recorded as they are incurred, except for expenses related to the development of a major commercial or media campaign, which are expensed in the period in which the commercial or campaign is first presented, and are reflected as a component of selling, distribution and marketing in the Company’s condensed consolidated statements of operations. For the three and six months ended June 30, 2023, advertising expenses were $2.9 million and $6.2 million, respectively. For the three and six months ended June 30, 2022, advertising expenses were $2.5 million and $4.9 million, respectively.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Financial Instruments
The carrying amounts of cash and cash equivalents, short-term investments, restricted cash and short-term investments, accounts receivable, accounts payable, accrued expenses, and short-term borrowings approximate fair value due to the short maturity of these items. The majority of the Company’s long-term obligations consist of variable rate debt, and their carrying value approximates fair value as the stated borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities. The Company at times enters into interest rate swap contracts to manage its exposure to interest rate changes and its overall cost of long-term debt. The Company’s interest rate swap contracts exchange the variable interest rates for fixed interest rates.
From time to time, the Company may enter into forward currency contracts to lock in currency exchange rates to manage its foreign currency exchange rate exposure. The Company’s interest rate swaps and forward currency contracts have not been designated as hedging instruments and, therefore are recorded at their fair values at the end of each reporting period with changes in fair value recorded in other income (expenses) on the condensed consolidated statements of operations. As of June 30, 2023, the Company did have any unsettled forward currency contracts to purchase foreign currency. As of December 31, 2022, the Company had an unsettled forward currency contract to purchase foreign currency with a fair value of approximately $0.2 million, based on Level 2 inputs, which was recorded as a liability in the accounts payable and accrued liabilities line in the condensed consolidated balance sheets.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and highly liquid investments with original maturities of three months or less.
Investments
Investments as of June 30, 2023 and December 31, 2022 consisted of certificates of deposit and investment grade corporate and municipal bonds with original maturity dates between three and fifteen months.
Restricted Cash
Restricted cash is collateral required for the Company to guarantee certain vendor payments in France and China. As of June 30, 2023 and December 31, 2022, the restricted cash balance was $2.7 million and $0.2 million, respectively.
Restricted Short-Term Investments
Restricted short-term investments consist of certificates of deposit that are collateral for standby letters of credit to qualify for workers’ compensation self-insurance. The certificates of deposit have original maturities greater than three months, but less than one year. As of June 30, 2023 and December 31, 2022, the balance of restricted short-term investments was $2.2 million.
Deferred Income Taxes
The Company utilizes the liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statements and the tax basis of assets and liabilities using enacted tax rates. A valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Debt Issuance Costs
Debt issuance costs related to non-revolving debt are recognized as a reduction to the related debt balance in the accompanying condensed consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method. Debt issuance costs associated with revolving debt are capitalized within other long-term assets on the condensed consolidated balance sheets and are amortized to interest expense over the term of the related revolving debt.
Impairment of Long Lived Assets, including Identifiable Definite-Lived Intangible Assets
The Company assesses long-term and identifiable definite-lived intangible assets or asset groups for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset or an asset group, further impairment analysis is performed. An impairment loss is measured as the amount by which the carrying amount of the asset or asset groups exceeds the fair value (assets to be held and used) or fair value less cost to sell (assets to be disposed of). The Company also assesses the useful lives of its assets periodically to determine whether events and circumstances warrant a revision to the remaining useful life. Changes in the useful life are adjusted prospectively by revising the remaining period over which the asset is amortized.
Litigation, Commitments and Contingencies
Litigation, commitments and contingencies are accrued when management, after considering the facts and circumstances of each matter as then known to management, has determined it is probable a liability will be found to have been incurred and the amount of the loss can be reasonably estimated. When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is recorded. Legal fees are expensed as incurred. Due to the inherent uncertainties surrounding gain contingencies, the Company generally does not recognize potential gains until they are realized.
Recent Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.
Note 3. BAQSIMI® Acquisition
On June 30, 2023, the Company completed its acquisition of BAQSIMI® glucagon nasal powder, or BAQSIMI® pursuant to an asset purchase agreement, or the Purchase Agreement, with Eli Lilly & Company, or Lilly, dated April 21, 2023. In connection with the closing of the transaction, or the Closing, the Company paid Lilly $500.0 million in cash. In addition, the Company is required to pay Lilly a $125.0 million guaranteed payment on the first anniversary of the closing. The Company is also required to pay Lilly $4.0 million upon the assignment of certain contracts to the Company after the first anniversary of the Closing, but no later than 18 months after the Closing. The Company may also be required to pay additional contingent consideration of up to $450.0 million to Lilly based on the achievement of certain milestones. In addition, the Company assumed certain contingent consideration of Lilly, which would require the Company to pay up to an aggregate of $125.0 million based on the achievement of annual net sales milestones of $350.0 million, $400.0 million and $600.0 million.
The Purchase Agreement provides that the contingent consideration that may become payable to Lilly would be achieved as follows: (i) a one-time payment of $100.0 million if the Company achieves annual net sales of $175.0 million or more of BAQSIMI® and certain related products, or the Milestone Products, in any one year during the first five years after the Closing; (ii) up to two payments of $100 million each if the Company achieves annual net sales of $200.0 million or
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
more of Milestone Products in any one year during the first five years after the Closing; and (iii) a one-time payment of $150.0 million if the Company achieves total cumulative net sales of $950.0 million or more of the Milestone Products for the first five years after the Closing.
The Company has accounted for the BAQSIMI® acquisition as an asset acquisition in accordance with Accounting Standard Codification, or ASC, 805, Business Combinations, as substantially all the fair value of the assets acquired is concentrated in a single identifiable asset, BAQSIMI® product rights. The BAQSIMI® product rights include the license for the BAQSIMI® intellectual property, regulatory documentation, marketing authorizations, and domain names, which are considered a single asset as they are inextricably linked. As an asset acquisition, the cost to acquire the group of assets, including transaction costs, is allocated to the individual assets acquired based on their relative fair values, with the exception of non-qualifying assets.
The relative fair values of identifiable assets from the acquisition of BAQSIMI® are based on estimates of fair value using assumptions that the Company believes are reasonable.
Manufacturing Services Agreement
In connection with the Closing, the Company entered into a Manufacturing Services Agreement, or the MSA, with Lilly, pursuant to which Lilly has agreed, for a period of time not to exceed 18 months, to provide certain manufacturing, packaging, labeling and supply services for BAQSIMI® directly or through third-party contractors to the Company in connection with its operation of the development, manufacture, and commercialization of BAQSIMI®. Upon termination of the MSA, the Company will be obligated to purchase all API, components, and finished goods on hand at prices agreed upon in the MSA.
Transition Services Agreement
In connection with the Closing, the Company entered into a Transition Services Agreement, or the TSA, with Lilly pursuant to which Lilly has agreed, for a period of time not to exceed 18 months, to provide certain services to the Company to support the transition of BAQSIMI® operations to the Company, including with respect to the conduct of certain clinical, regulatory, medical affairs, and commercial sales channel activities.
The following table summarizes the aggregate amount paid for the assets acquired by the Company in connection with the acquisition of BAQSIMI®:
Fair Value | |||
(in thousands) | |||
Cash payment |
| $ | 500,000 |
Fair value of deferred cash payment | 121,699 | ||
Transaction costs | 6,406 | ||
Total purchase price | $ | 628,105 | |
The total purchase price was allocated to the acquired assets based on their relative fair values, as follow:
Fair Value | |||
(in thousands) | |||
Property, plant, and equipment |
| $ | 34,426 |
BAQSIMI® product rights |
| 591,338 | |
Deferred tax assets | 2,341 | ||
Total assets acquired | $ | 628,105 | |
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company is amortizing the acquired intangible asset on a straight line basis over its estimated useful life of 24 years (See Note 10 for additional information).
The fair value of the deferred cash payment is being accreted to the full $129.0 million amount over a one-year period through interest expense.
Credit Agreement
On June 30, 2023, in conjunction with the Company’s acquisition of BAQSIMI®, the Company entered into a $700.0 million syndicated credit agreement, or the Credit Agreement, by and among the Company, certain subsidiaries of the Company, as guarantors, certain lenders, and Wells Fargo Bank, National Association, or Wells Fargo, as Administrative Agent (in such capacity, “Agent”).
The Credit Agreement provides for a senior secured term loan in an aggregate principal amount of $500.0 million, or the Term Loan. The Term Loan matures on the June 30, 2028.
The Credit Agreement also provides a senior secured revolving credit facility, or the Revolving Credit Facility, in an aggregate principal amount of $200.0 million, with a $15.0 million letter of credit sublimit and a $15.0 million swingline loan sublimit. The Revolving Credit Facility matures on June 30, 2028. As of June 30, 2023, the Company had no borrowings outstanding under the Revolving Credit Facility.
Proceeds from the Term Loan were used to finance the acquisition of BAQSIMI®.
Note 4. Revenue Recognition
In accordance with ASC 606 Revenue from Contracts with Customers, revenue is recognized at the time that the Company’s customers obtain control of the promised goods.
Generally, revenue is recognized at the time of product delivery to the Company’s customers. In some cases, revenue is recognized at the time of shipment when stipulated by the terms of the sale agreements.
The consideration the Company receives in exchange for its goods or services is only recognized when it is probable that a significant reversal will not occur. The consideration to which the Company expects to be entitled includes a stated list price, less various forms of variable consideration. The Company makes significant estimates for related variable consideration at the point of sale, including chargebacks, rebates, product returns, other discounts and allowances.
The Company’s payment terms vary by types and locations of customers and the products or services offered. Payment terms differ by jurisdiction and customers, but payment is generally required in a term ranging from 30 to 75 days from date of shipment or satisfaction of the performance obligation. For certain products or services and certain customer types, the Company may require payment before products are delivered or services are rendered to customers.
Provisions for estimated chargebacks, rebates, discounts, product returns and credit losses are made at the time of sale and are analyzed and adjusted, if necessary, at each balance sheet date.
Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers.
The Company’s accounting policy is to review each agreement involving contract development and manufacturing services to determine if there are multiple revenue-generating activities that constitute more than one unit of accounting.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Revenues are recognized for each unit of accounting based on revenue recognition criteria relevant to that unit. The Company does not have any revenue arrangements with multiple performance obligations.
Service revenues derived from research and development contracts are recognized over time based on progress toward satisfaction of the performance obligation. For each performance obligation satisfied over time, the Company assesses the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation. For the three and six months ended June 30, 2023, revenues from research and development services at ANP were $1.2 million and $1.3 million, respectively. For the three and six months ended June 30, 2022, revenues from research and development services at ANP were $0.7 million and $1.3 million, respectively.
Provision for Chargebacks and Rebates
The provision for chargebacks and rebates is a significant estimate used in the recognition of revenue. Wholesaler chargebacks relate to sales terms under which the Company agrees to reimburse wholesalers for differences between the gross sales prices at which the Company sells its products to wholesalers and the actual prices of such products that wholesalers resell under the Company’s various contractual arrangements with third parties such as hospitals and group purchasing organizations in the United States. Rebates include primarily amounts paid to retailers, payers, and providers in the United States, including those paid to state Medicaid programs, and are based on contractual arrangements or statutory requirements. The Company estimates chargebacks and rebates using the expected value method at the time of sale to wholesalers based on wholesaler inventory stocking levels, historic chargeback and rebate rates, and current contract pricing.
The provision for chargebacks and rebates is reflected as a component of net revenues. The following table is an analysis of the chargeback and rebate provision:
Changes in the provision for chargebacks from period to period are primarily dependent on the Company’s sales to its wholesalers, the level of inventory held by wholesalers, and the wholesalers’ customer mix. Changes in the provision for rebates from period to period are primarily dependent on retailer’s and other indirect customers’ purchases. The approach that the Company uses to estimate chargebacks has been consistently applied for all periods presented. Variations in estimates have been historically small. The Company continually monitors the provision for chargebacks and rebates and makes adjustments when it believes that the actual chargebacks and rebates may differ from the estimates. The settlement of chargebacks and rebates generally occurs within 20 days to 60 days after the sale to wholesalers. The provision for chargebacks and rebates is recorded within accounts receivable and/or accounts payable and accrued liabilities depending on whether the Company has the right to offset with the customer.
Of the provision for chargebacks and rebates as of June 30, 2023 and December 31, 2022, $21.8 million and $20.5 million were included as a reduction to accounts receivable, net, on the condensed consolidated balance sheets, respectively. The remaining provision as of June 30, 2023 and December 31, 2022 of $7.0 million and $6.1 million, respectively, which were included in accounts payable and accrued liabilities in the condensed consolidated balance sheets.
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accrual for Product Returns
The Company offers most customers the right to return qualified excess or expired inventory for partial credit; however, API product sales are generally non-returnable. The Company’s product returns primarily consist of the returns of expired products from sales made in prior periods. Returned products cannot be resold. At the time product revenue is recognized, the Company records an accrual for product returns estimated using the expected value method. The accrual is based, in part, upon the historical relationship of product returns to sales and customer contract terms. The Company also assesses other factors that could affect product returns including market conditions, product obsolescence, and new competition. Although these factors do not normally give the Company’s customers the right to return products outside of the regular return policy, the Company realizes that such factors could ultimately lead to increased returns. The Company analyzes these situations on a case-by-case basis and makes adjustments to the product return reserve as appropriate.
The provision for product returns is reflected as a component of net revenues. The following table is an analysis of the product return liability:
Of the provision for product returns as of June 30, 2023 and December 31, 2022, $13.8 million and $14.9 million, were included in accounts payable and accrued liabilities on the condensed consolidated balance sheets, respectively. The remaining provision as of June 30, 2023 and December 31, 2022 of $5.0 million and $4.6 million, were included in other long-term liabilities, respectively. For the six months ended June 30, 2023 and 2022, the Company’s aggregate product return rate was 1.2% and 1.6% of qualified sales, respectively.
Note 5. Net Income per Share
Basic net income per share is calculated based upon the weighted-average number of shares outstanding during the period. Diluted net income per share gives effect to all potentially dilutive shares outstanding during the period, such as stock options, non-vested restricted stock units and shares issuable under the Company’s Employee Stock Purchase Plan, or ESPP.
For the three and six months ended June 30, 2023, options to purchase 45,464 shares of stock, with a weighted-average exercise price of $46.01 per share, were excluded in the computation of diluted net income per share because the effect would be anti-dilutive.
For the three and six months ended June 30, 2022, options to purchase 12,296 and 706,411 shares of stock, respectively, with a weighted-average exercise price of $37.41 per share and $34.79 per share, respectively, were excluded in the computation of diluted net income per share because the effect would be anti-dilutive.
-14-
The following table provides the calculation of basic and diluted net income per share for each of the periods presented:
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
(in thousands, except per share data) | |||||||||||||
Basic and dilutive numerator: |
|
|
|
|
|
|
|
|
| ||||
Net income | $ | 26,124 | $ | 17,346 | $ | 52,156 | $ | 41,599 | |||||
Denominator: | |||||||||||||
Weighted-average shares outstanding — basic |
| 48,404 | 48,864 | 48,202 | 48,501 | ||||||||
Net effect of dilutive securities: | |||||||||||||
Incremental shares from equity awards |
| 4,698 | 4,363 | 4,334 | 4,102 | ||||||||
Weighted-average shares outstanding — diluted |
| 53,102 |
| 53,227 |
| 52,536 |
| 52,603 | |||||
Net income per share — basic | $ | 0.54 | $ | 0.35 | $ | 1.08 | $ | 0.86 | |||||
Net income per share — diluted | $ | 0.49 | $ | 0.33 | $ | 0.99 | $ | 0.79 | |||||
Note 6. Segment Reporting
The Company’s business is the development, manufacture, and marketing of pharmaceutical products. The Company has identified two reporting segments that each report to the Chief Operating Decision Maker, or CODM, as defined in ASC 280, Segment Reporting. The Company’s performance is assessed and resources are allocated by the CODM based on the following two reportable segments:
| ● | Finished pharmaceutical products |
| ● | APIs |
The finished pharmaceutical products segment manufactures, markets and distributes Primatene MIST®, glucagon, enoxaparin, naloxone, phytonadione, lidocaine, epinephrine, various critical and non-critical care drugs, as well as certain contract manufacturing and contract research revenues. The API segment manufactures and distributes recombinant human insulin API and porcine insulin API for external customers and internal product development.
BAQSIMI® related revenues and cost of sales will be accounted for as a component of the finished pharmaceutical products segment, but as the transaction closed on June 30, 2023, no amounts were recorded in revenue or cost of sales in the three and six months ended June 30, 2023.
-15-
Selected financial information by reporting segment is presented below:
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
(in thousands) | |||||||||||||
Net revenues: |
|
|
|
|
|
|
|
|
| ||||
Finished pharmaceutical products | $ | 142,866 | $ | 120,123 | $ | 278,876 | $ | 236,669 | |||||
API |
| 2,846 | 3,344 | 6,858 | 7,166 | ||||||||
Total net revenues |
| 145,712 |
| 123,467 |
| 285,734 |
| 243,835 | |||||
Gross profit (loss): | |||||||||||||
Finished pharmaceutical products |
| 77,067 |
| 67,084 |
| 153,243 |
| 124,023 | |||||
API |
| (4,329) | (3,728) | (6,665) | (4,841) | ||||||||
Total gross profit |
| 72,738 |
| 63,356 |
| 146,578 |
| 119,182 | |||||
Operating expenses |
| 35,842 |
| 38,533 |
| 76,249 |
| 72,745 | |||||
Income from operations |
| 36,896 |
| 24,823 |
| 70,329 |
| 46,437 | |||||
Non-operating income |
| (4,088) |
| (1,672) |
| (3,952) |
| 5,747 | |||||
Income before income taxes | $ | 32,808 | $ | 23,151 | $ | 66,377 | $ | 52,184 | |||||
The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis. The Company does not identify total assets by segment for internal purposes, as the Company’s CODM does not assess performance, make strategic decisions, or allocate resources based on assets.
The amount of net revenues in the finished pharmaceutical product segment is presented below:
-16-
The amount of depreciation and amortization expense included in cost of revenues, by reporting segment, is presented below:
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
(in thousands) | |||||||||||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
| ||||
Finished pharmaceutical products | $ | 2,081 | $ | 2,059 | $ | 4,527 | $ | 3,853 | |||||
API |
| 982 |
| 937 |
| 1,935 | 1,885 | ||||||
Total depreciation and amortization expense | $ | 3,063 | $ | 2,996 | $ | 6,462 | $ | 5,738 | |||||
Net revenues and carrying values of long-lived assets by geographic regions are as follows:
Note 7. Customer and Supplier Concentration
Customer Concentrations
Three large wholesale drug distributors, AmerisourceBergen Corporation, or AmerisourceBergen, Cardinal Health, Inc., or Cardinal, and McKesson Corporation, or McKesson, are all distributors of the Company’s products, as well as suppliers of a broad range of health care products. The Company considers these three customers to be its major customers, as each individually, and these customers collectively, represented a significant percentage of the Company’s net revenue for the three and six months ended June 30, 2023 and 2022, and accounts receivable as of June 30, 2023 and December 31, 2022, respectively. The following table provides accounts receivable and net revenue information for these major customers:
Supplier Concentrations
The Company depends on suppliers for raw materials, APIs, and other components that are subject to stringent FDA requirements. Some of these materials may only be available from one or a limited number of sources. Establishing additional or replacement suppliers for these materials may take a substantial period of time, as suppliers must be approved by the FDA. Furthermore, a significant portion of raw materials may only be available from foreign sources. If the Company is unable to secure, on a timely basis, sufficient quantities of the materials it depends on to manufacture
-17-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and market its products, it could have a materially adverse effect on the Company’s business, financial condition, and results of operations.
Note 8. Fair Value Measurements
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the measurement date (an exit price). These standards also establish a hierarchy that prioritizes observable and unobservable inputs used in measuring fair value of an asset or liability, as described below:
| ● | Level 1 – Inputs to measure fair value are based on quoted prices (unadjusted) in active markets on identical assets or liabilities; |
| ● | Level 2 – Inputs to measure fair value are based on the following: a) quoted prices in active markets on similar assets or liabilities, b) quoted prices for identical or similar instruments in inactive markets, or c) observable (other than quoted prices) or collaborated observable market data used in a pricing model from which the fair value is derived; and |
| ● | Level 3 – Inputs to measure fair value are unobservable and the assets or liabilities have little, if any, market activity; these inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities based on best information available in the circumstances. |
As of June 30, 2023, cash equivalents include money market accounts and corporate and municipal bonds with original maturities of less than three months. Investments consist of certificates of deposit as well as investment-grade corporate, agency and municipal bonds with original maturity dates between three and twelve months. The certificates of deposit are carried at amortized cost in the Company’s condensed consolidated balance sheets, which approximates their fair value determined based on Level 2 inputs. The corporate, agency and municipal bonds are classified as held-to-maturity and are carried at amortized cost net of allowance for credit losses, which approximates their fair value determined based on Level 2 inputs. The restrictions on restricted cash and investments have an immaterial effect on the fair value of these financial assets.
The fair value of the Company’s financial assets and liabilities measured on a recurring basis as of June 30, 2023 and December 31, 2022, are as follows:
-18-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company does not hold any Level 3 instruments that are measured at fair value on a recurring basis.
Nonfinancial assets and liabilities are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances. These items primarily include investments in unconsolidated affiliates, long-lived assets, goodwill, and intangible assets for which the fair value is determined as part of an impairment test. As of June 30, 2023, and December 31, 2022, there were no significant adjustments to fair value for nonfinancial assets or liabilities.
The Company’s deferred compensation plan assets are valued using the cash surrender value of the life insurance policies and are not included in the table above.
Note 9. Investments
A summary of the Company’s investments that are classified as held-to-maturity are as follows:
Gross | Gross | |||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
| Cost |
| Gains |
| Losses |
| Value | |||||
(in thousands) | ||||||||||||
Corporate and agency bonds (due within 1 year) | $ | 14,239 | $ | — | $ | (11) | $ | 14,228 | ||||
Municipal bonds (due within 1 year) | 205 | — | — | 205 | ||||||||
Total investments as of June 30, 2023 | $ | 14,444 | $ | — | $ | (11) | $ | 14,433 | ||||
Corporate and agency bonds (due within 1 year) | $ | 21,612 | $ | — | $ | (60) | $ | 21,552 | ||||
Municipal bonds (due within 1 year) | 1,903 | — | (2) | 1,901 | ||||||||
Total investments as of December 31, 2022 | $ | 23,515 | $ | — | $ | (62) | $ | 23,453 | ||||
At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, identifying neither a significant deterioration since purchase nor any other factors that would indicate a material credit loss.
The Company measures expected credit losses on held-to-maturity investments on a collective basis. All the Company’s held-to-maturity investments were considered to be one pool. The estimate for credit losses considers historical loss information that is adjusted for current conditions and reasonable and supportable forecasts. Expected credit losses on held-to-maturity investments were not material to the condensed consolidated financial statements.
Investment in unconsolidated affiliate
The Company accounts for its share of the earnings or losses of its unconsolidated affiliate (Nanjing Hanxin Biomedical Testing Service Co., Ltd., or Hanxin) with a reporting lag of three months, as the financial statements of Hanxin are not completed on a basis that is sufficient for the Company to apply the equity method on a current basis. The Company’s share of Hanxin’s losses for the three and six months ended June 30, 2023 was $0.3 million and $1.1 million, respectively, which was recorded in the “Equity in losses of unconsolidated affiliate” line on the condensed consolidated statement of operations. The Company’s share of Hanxin’s losses for the three and six months ended June 30, 2022, was $0.3 million and $1.0 million, respectively, which was recorded in the “Equity in losses of unconsolidated affiliate” line on the condensed consolidated statement of operations.
-19-
Note 10. Goodwill and Intangible Assets
The table below shows the weighted-average life, original cost, accumulated amortization, and net book value by major intangible asset classification:
Weighted-Average | Accumulated |
| ||||||||||
| Life (Years) |
| Original Cost |
| Amortization |
| Net Book Value |
| ||||
(in thousands) |
| |||||||||||
Definite-lived intangible assets | ||||||||||||
BAQSIMI® product rights(1) | 24 | $ | 591,338 | $ | — | $ | 591,338 | |||||
IMS (UK) international product rights(2) | 10 | 8,462 | 8,462 | — | ||||||||
Patents |
| 12 |
| 486 | 369 |
| 117 | |||||
Land-use rights |
| 39 |
| 2,540 | 782 |
| 1,758 | |||||
Subtotal |
| 23 |
| 602,826 |
| 9,613 |
| 593,213 | ||||
Indefinite-lived intangible assets | ||||||||||||
Trademark |
| * |
| 29,225 |
| — |
| 29,225 | ||||
Goodwill - Finished pharmaceutical products |
| * |
| 3,165 |
| — |
| 3,165 | ||||
Subtotal |
| * |
| 32,390 |
| — |
| 32,390 | ||||
As of June 30, 2023 |
| * | $ | 635,216 | $ | 9,613 | $ | 625,603 | ||||
Weighted-Average | Accumulated |
| ||||||||||
| Life (Years) |
| Original Cost |
| Amortization |
| Net Book Value |
| ||||
(in thousands) |
| |||||||||||
Definite-lived intangible assets | ||||||||||||
IMS (UK) international product rights(2) | 10 | $ | 8,462 | $ | 5,430 | $ | 3,032 | |||||
Patents |
| 12 |
| 486 | 362 |
| 124 | |||||
Land-use rights |
| 39 |
| 2,540 | 749 |
| 1,791 | |||||
Subtotal |
| 11 |
| 11,488 |
| 6,541 |
| 4,947 | ||||
Indefinite-lived intangible assets | ||||||||||||
Trademark |
| * |
| 29,225 |
| — |
| 29,225 | ||||
Goodwill - Finished pharmaceutical products |
| * |
| 3,126 |
| — |
| 3,126 | ||||
Subtotal |
| * |
| 32,351 |
| — |
| 32,351 | ||||
As of December 31, 2022 |
| * | $ | 43,839 | $ | 6,541 | $ | 37,298 | ||||
* Intangible assets with indefinite lives have an indeterminable average life.
(1) | See Note 3. |
(2) | In June 2023, the Company recorded an impairment related to its IMS (UK) international product rights in the amount of $2.7 million. The Company recorded the impairment in the cost of revenue line in its condensed consolidated statement of operations for the three and six months ended June 30, 2023 |
Goodwill
The changes in the carrying amounts of goodwill are as follows:
June 30, | December 31, |
| |||||
2023 | 2022 |
| |||||
(in thousands) |
| ||||||
Beginning balance |
| $ | 3,126 |
| $ | 3,313 | |
Currency translation |
| 39 |
| (187) | |||
Ending balance | $ | 3,165 | $ | 3,126 | |||
-20-
Amortization
As of June 30, 2023, the expected amortization expense for all intangible assets during the next five fiscal years ended December 31 and thereafter is as follows:
| (in thousands) |
| ||
2023 | $ | 12,359 | ||
2024 |
| 24,718 | ||
2025 |
| 24,718 | ||
2026 |
| 24,718 | ||
2027 |
| 24,718 | ||
Thereafter |
| 481,982 | ||
Total amortizable intangible assets |
| 593,213 | ||
Indefinite-lived intangibles |
| 32,390 | ||
Total intangibles (net of accumulated amortization) | $ | 625,603 | ||
Primatene® Trademark
In January 2009, the Company acquired the exclusive rights to the trademark, domain name, website and domestic marketing, distribution and selling rights related to Primatene MIST®, an over-the-counter bronchodilator product, recorded at the allocated fair value of $29.2 million, which is its carrying value as of June 30, 2023.
The trademark was determined to have an indefinite life. In determining its indefinite life, the Company considered the following: the expected use of the intangible; the longevity of the brand; the legal, regulatory and contractual provisions that affect their maximum useful life; the Company’s ability to renew or extend the asset’s legal or contractual life without substantial costs; effects of the regulatory environment; expected changes in distribution channels; maintenance expenditures required to obtain the expected future cash flows from the asset; and considerations for obsolescence, demand, competition and other economic factors.
BAQSIMI® Product Rights
As discussed in Note 3, in June 2023, the Company acquired the BAQSIMI® product rights. BAQSIMI® is an emergency nasal spray used to treat severe hypoglycemia. The BAQSIMI® product rights intangible asset is amortized over its estimated useful life of 24 years.
In determining the BAQSIMI® product rights’ useful life, the Company considered the following: the expected use of the intangible asset; the longevity of the brand; the legal, regulatory and contractual provisions that affect their maximum useful life; the Company’s ability to renew or extend the asset’s legal or contractual life without substantial costs; effects of the regulatory environment; expected changes in distribution channels; maintenance expenditures required to obtain the expected future cash flows from the asset; and considerations for obsolescence, demand, competition and other economic factors.
-21-
Note 11. Inventories
Inventories consist of the following:
June 30, | December 31, |
| |||||
2023 | 2022 |
| |||||
(in thousands) |
| ||||||
Raw materials and supplies |
| $ | 44,630 |
| $ | 47,607 | |
Work in process |
| 31,771 |
| 37,090 | |||
Finished goods |
| 28,216 |
| 18,887 | |||
Total inventories | $ | 104,617 | $ | 103,584 | |||
Charges of $8.3 million and $10.2 million were included in the cost of revenues in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2023, respectively, to adjust the Company’s inventory and related firm purchase commitments to their net realizable value. For the three and six months ended June 30, 2022, charges of $0.6 million and $8.6 million were included in the cost of revenues, respectively, to adjust the Company’s inventory and related firm purchase commitments to their net realizable value.
Losses on firm purchase commitments related to raw materials on order as of June 30, 2023 and December 31, 2022 were $4.5 million and $2.7 million, respectively, which are recorded in cost of revenues in the Company’s condensed consolidated statement of operations.
Note 12. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
June 30, | December 31, |
| |||||
2023 | 2022 |
| |||||
(in thousands) |
| ||||||
Buildings |
| $ | 131,438 |
| $ | 130,726 | |
Leasehold improvements |
| 31,535 |
| 31,535 | |||
Land |
| 7,465 |
| 7,451 | |||
Machinery and equipment |
| 257,722 |
| 208,068 | |||
Furniture, fixtures, and automobiles |
| 30,693 |
| 29,674 | |||
Construction in progress |
| 52,024 |
| 50,842 | |||
Total property, plant, and equipment |
| 510,877 |
| 458,296 | |||
Less accumulated depreciation |
| (232,351) |
| (220,030) | |||
Total property, plant, and equipment, net | $ | 278,526 | $ | 238,266 | |||
-22-
Note 13. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following:
June 30, | December 31, | ||||
2023 | 2022 | ||||
(in thousands) | |||||
Accrued customer fees and rebates | $ | 17,764 | $ | 14,198 | |
Accrued payroll and related benefits | 24,912 | 22,847 | |||
Accrued product returns, current portion | 13,845 | 14,867 | |||
Accrued loss on firm purchase commitments | 5,187 | 2,686 | |||
Accrued payments for BAQSIMI® | 126,760 | — | |||
Other accrued liabilities | 10,236 | 9,143 | |||
Total accrued liabilities |
| 198,704 |
| 63,741 | |
Accounts payable |
| 18,832 |
| 20,501 | |
Total accounts payable and accrued liabilities | $ | 217,536 | $ | 84,242 | |
Note 14. Debt
Debt consists of the following:
June 30, | December 31, | |||||
2023 | 2022 | |||||
(in thousands) | ||||||
Term Loan | ||||||
Wells Fargo Bank Term Loan due June 2028 | $ | 500,000 | $ | — | ||
Capital One N.A. Term Loan paid off June 2023 | — | 68,250 | ||||
Mortgage Loans | ||||||
Mortgage payable with East West Bank due June 2027 | 8,104 | 8,188 | ||||
Other Loans and Payment Obligations | ||||||
French government loans due December 2026 | 212 | 204 | ||||
Line of Credit Facilities |
|
|
|
| ||
Line of credit facility with China Merchant Bank expired April 2023 |
|
| ||||
Wells Fargo Bank Revolving line of credit facility due June 2028 | — | — | ||||
Capital One N.A. Revolving line of credit facility closed in June 2023 | ||||||
| 692 |
| 790 | |||
Total debt |
| 509,008 |
| 77,432 | ||
Less current portion of long-term debt |
| 12,920 |
| 3,046 | ||
Less: Loan issuance costs | 7,808 | 1,547 | ||||
Long-term debt, net of current portion and unamortized debt issuance costs | $ | 488,280 | $ | 72,839 | ||
-23-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Credit Agreements
Syndicated Credit Agreement with Wells Fargo Bank, National Association - Due June 2028
In June 2023, in connection with the BAQSIMI® acquisition, the Company entered into a $700.0 million syndicated credit agreement with Wells Fargo acting as administrative agent. Under the terms of the Credit Agreement, the Company borrowed $500.0 million in the form of a term loan, or the Wells Fargo Bank Term Loan. Proceeds from the loan were used to finance the acquisition of BAQSIMI®. The interest rate on the term loan is based on a variable interest rate at the one-month Secured Overnight Financing Rate, or SOFR, rate, plus an applicable margin rate ranging between 0.5% and 2.5%, determined based on the Company’s net leverage ratio as defined by the terms of the agreement. The loan matures in June 2028.
The loan requires principal payments of $12.5 million for the first year, which increases to $25.0 million during the second year, and $37.5 million during the third, fourth and fifth years, with the remaining balance due at maturity. The loan is secured by substantially all of the Company’s U.S. assets.
The Credit Agreement provides for a $200.0 million revolving credit facility, or the Wells Fargo Bank Revolving line of credit facility, with a $15.0 million letter of credit sublimit and a $15.0 million swingline loan sublimit, which bears the same interest rate as the term loan.
In conjunction with the new credit agreement, the Company entered into an interest rate swap agreement with Wells Fargo, with a notional amount of $250.0 million to exchange the variable interest rate on the new term for a fixed rate of 4.04%. The interest swap agreement had a fair value of $1.8 million loss as of June 30, 2023.
For lenders that were part of the previous credit agreement with Capital One N.A. as well as the new Credit Agreement, the transaction was accounted for as a modification under ASC 470-50, Debt Modifications and Extinguishments, based on a comparison of the present value of the cash flows for each lender under the terms of the debt immediately before and after the transaction, which resulted in a change of less than 10%.
The Company incurred approximately $14.3 million in issuance costs in connection with this Credit Agreement, of which $3.0 million represented debt modification costs and were charged to interest expense in the Company’s condensed consolidated statement of operations for the three and six months ended June 30, 2023.
Debt issuance costs associated with the Credit Agreement (other than its Revolving Credit Facility component) are presented as a reduction to the carrying value of the related debt, while debt issuance costs associated with the Revolving Credit Facility are capitalized within other long-term assets on the condensed consolidated balance sheets.
Total unamortized debt issuance costs as of June 30, 2023 were $12.5 million which is being amortized over the term of the Credit Agreement using the effective interest rate method.
Syndicated Credit Agreement with Capital One N.A. – Paid off June 2023
In August 2021, the Company entered into a $140.0 million credit agreement with Capital One N.A. acting as a lender and as agent for other lenders. Under the terms of the credit agreement, the Company borrowed $70.0 million in the form of a term loan, or the Capital One N.A. Term Loan. Proceeds from the loan were used to pay down certain of the Company’s outstanding loans and revolving lines of credit with Cathay Bank and East West Bank. The interest rate on the term loan was based on a variable interest rate, plus an applicable margin rate ranging between 0.5% and 2.5%, determined based on the Company’s net leverage ratio as defined by the terms of the agreement. As a result of the credit agreement that the Company entered into with Wells Fargo in June 2023, the Company repaid all outstanding amounts under this loan.
-24-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amortization of debt issuance costs totaled $0.1 million and $0.2 million for the three and six months ended June 30, 2023, respectively. Amortization of debt issuance costs totaled $0.1 million and $0.2 million for the three and six months ended June 30, 2022, respectively.
Interest Rate Swap Contracts
As of June 30, 2023, the fair value of the loans listed above approximated their carrying amount. The interest rate used in the fair value estimation was determined to be a Level 2 input. For the mortgage loan with East West Bank, as well as the term loan with Wells Fargo Bank, the Company has entered into fixed interest rate swap contracts to exchange the variable interest rates for fixed interest rates. The interest rate swap contracts are recorded at fair value in the other assets line in the condensed consolidated balance sheets. Changes in the fair values of interest rate swaps were $1.2 million loss and $2.2 million loss for the three and six months ended June 30, 2023, respectively. Changes in the fair values of interest rate swaps were $0.9 million gain and $3.9 million gain for the three and six months ended June 30, 2022, respectively.
Covenants
At June 30, 2023 and December 31, 2022, the Company was in compliance with all of its debt covenants.
Note 15. Income Taxes
The following table sets forth the Company’s income tax provision for the periods indicated:
Three Months Ended | Six Months Ended |
| |||||||||||
June 30, | June 30, |
| |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| |||||
(in thousands) |
| ||||||||||||
Income before taxes | $ | 32,808 | $ | 23,151 | $ | 66,377 | $ | 52,184 | |||||
Income tax provision | 6,383 |
| 5,551 | 13,135 |
| 9,628 | |||||||
Income before equity in losses of unconsolidated affiliate | $ | 26,425 | $ | 17,600 | $ | 53,242 | $ | 42,556 | |||||
Income tax provision as a percentage of income before income taxes | 19.5 | % |
| 24.0 | % | 19.8 | % |
| 18.5 | % | |||
The change in the Company’s effective tax rate for the three and six months ended June 30, 2023, was primarily due to differences in pre-tax income positions and timing of discrete tax items.
In connection with the purchase accounting for its acquisition of BAQSIMI®, the Company recorded a deferred tax asset of $2.3 million.
Valuation Allowance
In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. Ultimately, realization depends on the existence of future taxable income. Management considers sources of taxable income such as income in prior carryback periods, future reversal of existing deferred taxable temporary differences, tax-planning strategies, and projected future taxable income.
During the three months ended June 30, 2023, the Company determined its U.K. subsidiaries, AUK and IMS UK, more likely than not would not realize the benefits of their deferred tax assets. Therefore, the Company recorded a valuation allowance expense of an immaterial amount and will discontinue recognizing income tax benefits until sufficient taxable income is generated to realize their deferred tax assets.
-25-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company continues to record a full valuation allowance on AFP’s net deferred income tax assets and will continue to do so until AFP generates sufficient taxable income to realize its deferred income tax assets.
The Company records a valuation allowance on net deferred income tax assets in states where it files separately and will continue to do so until sufficient taxable income is generated to realize these state deferred income tax assets.
Note 16. Stockholders' Equity
Share Buyback Program
Pursuant to the Company’s existing share buyback program, the Company purchased 3,585 and 266,716 shares of its common stock during the three and six months ended June 30, 2023, for total consideration of $0.1 million and $8.1 million, respectively. The Company purchased 189,840 and 241,008 shares of its common stock during the three and six months ended June 30, 2022, for total consideration of $6.1 million and $7.3 million, respectively.
In November 2022, the Company’s Board of Directors authorized a $50.0 million increase to the Company’s share buyback program, which is expected to continue for an indefinite period of time. Since the inception of the program, the Company’s Board of Directors have authorized a total of $235.0 million in the share buyback program. The primary goal of the program is to offset dilution created by the Company’s equity compensation programs.
Purchases are made through open market and private block transactions pursuant to Rule 10b5-1 plans, privately negotiated transactions or other means as determined by the Company’s management and in accordance with the requirements of the SEC and applicable laws. The timing and actual number of treasury share purchases will depend on a variety of factors including price, corporate and regulatory requirements, and other conditions. These treasury share purchases are accounted for under the cost method and are included as a component of treasury stock in the Company’s condensed consolidated balance sheets.
Amended and Restated 2015 Equity Incentive Plan
As of June 30, 2023, the Company reserved an aggregate of 6,774,598 shares of common stock for future issuance under the Amended and Restated 2015 Equity Incentive Plan, or the 2015 Plan, including 1,202,802 shares, which were reserved in January 2023 pursuant to the evergreen provision in the 2015 Plan.
2014 Employee Stock Purchase Plan
As of June 30, 2023, the Company has issued 1,155,478 shares of common stock under the ESPP and 844,522 shares of its common stock remain available for issuance under the ESPP.
In May 2023, the Company issued 65,933 shares at a purchase price of $25.52 per share under the ESPP. For the three and six months ended June 30, 2023, the Company recorded ESPP expense of $0.3 million and $0.6 million, respectively. For the three and six months ended June 30, 2022, the Company recorded ESPP expense of $0.2 million and $0.4 million, respectively.
Share-Based Award Activity and Balances
The Company accounts for share-based compensation payments in accordance with ASC 718, which requires measurement and recognition of compensation expense at fair value for all share-based payment awards made to employees and directors. Under these standards, the fair value of option awards and the option components of the ESPP awards are estimated at the grant date using the Black-Scholes option-pricing model. The fair value of RSUs is estimated at the grant date using the Company’s common share price. Compensation cost for all share-based payments granted
-26-
AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
with service-based graded vesting schedules is recognized using the straight-line method over the requisite service period.
The weighted-averages for key assumptions used in determining the fair value of options granted during the three and six months ended June 30, 2023 and 2022, are as follows:
A summary of option activity under all plans for the six months ended June 30, 2023, is presented below:
| (1) | The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the estimated fair value of the Company’s stock for those awards that have an exercise price below the estimated fair value at June 30, 2023. |
For the three and six months ended June 30, 2023, the Company recorded expense of $2.3 million and $5.3 million, respectively, related to stock options granted under all plans. For the three and six months ended June 30, 2022, the Company recorded expense of $2.0 million and $4.5 million, respectively, related to stock options granted under all plans.
Information relating to option grants and exercises is as follows:
-27-
A summary of the status of the Company’s non-vested options as of June 30, 2023, and changes during the six months ended June 30, 2023, are presented below:
|
| Weighted-Average |
| |||
Grant Date |
| |||||
Options | Fair Value |
| ||||
Non-vested as of December 31, 2022 | 2,378,453 | $ | 9.48 | |||
Options granted |
| 759,350 | 16.76 | |||
Options vested |
| (1,036,878) | 8.41 | |||
Options forfeited |
| (4,526) | 13.40 | |||
Non-vested as of June 30, 2023 |
| 2,096,399 |
| 12.64 | ||
As of June 30, 2023, there was $20.6 million of total unrecognized compensation cost, net of forfeitures, related to non-vested stock option based compensation arrangements granted under all plans. The cost is expected to be recognized over a weighted-average period of 2.9 years and will be adjusted for future changes in estimated forfeitures.
Restricted Stock Units
The Company grants restricted stock units, or RSUs, to certain employees and members of the Board of Directors with a vesting period of up to five years. The grantee receives one share of common stock at a specified future date for each RSU awarded. The RSUs may not be sold or otherwise transferred until vested. The RSUs do not have any voting or dividend rights prior to the issuance of certificates of the underlying common stock. The share-based expense associated with these grants was based on the Company’s common stock fair value at the time of grant and is amortized over the requisite service period, which generally is the vesting period using the straight-line method. For the three and six months ended June 30, 2023, the Company recorded total expenses of $2.2 million and $5.1 million, respectively, related to RSU awards granted under all plans. For the three and six months ended June 30, 2022, the Company recorded expenses of $2.0 million and $4.4 million, respectively, related to RSU awards granted under all plans.
As of June 30, 2023, there was $21.8 million of total unrecognized compensation cost, net of forfeitures, related to non-vested RSU-based compensation arrangements granted under all plans. The cost is expected to be recognized over a weighted-average period of 2.8 years and will be adjusted for future changes in estimated forfeitures.
Information relating to RSU grants and deliveries is as follows:
| (1) | The total fair market value is derived from the number of RSUs granted times the current stock price on the date of grant. |
| (2) | Of the vested RSUs, 165,215 shares of common stock were surrendered to fulfill tax withholding obligations. |
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Share-based Compensation Expense
The Company recorded share-based compensation expense, which is included in the Company’s condensed consolidated statement of operations as follows:
Three Months Ended | Six Months Ended |
| |||||||||||
June 30, | June 30, | ||||||||||||
2023 | 2022 | 2023 |
| 2022 |
| ||||||||
(in thousands) |
| ||||||||||||
Cost of revenues |
| $ | 1,158 |
| $ | 938 |
| $ | 2,864 |
| $ | 2,323 | |
Operating expenses: | |||||||||||||
Selling, distribution, and marketing |
| 227 |
| 194 |
| 436 |
| 362 | |||||
General and administrative |
| 2,991 |
| 2,718 |
| 6,348 |
| 5,579 | |||||
Research and development |
| 489 |
| 385 |
| 1,328 |
| 993 | |||||
Total share-based compensation | $ | 4,865 | $ | 4,235 | $ | 10,976 | $ | 9,257 | |||||
Note 17. Employee Benefits
401(k) Plan
The Company has a defined contribution 401(k) plan, or the Plan, whereby eligible employees voluntarily contribute up to a defined percentage of their annual compensation. The Company matches contributions at a rate of 50% on the first 6% of employee contributions, and pays the administrative costs of the Plan. Total employer contributions for the three and six months ended June 30, 2023 were approximately $0.6 million and $1.2 million, respectively, compared to the prior year expense of $0.5 million and $1.1 million for the three and six months ended June 30, 2022, respectively.
Defined Benefit Pension Plan
The Company’s subsidiary, AFP, has an obligation associated with a defined-benefit plan for its eligible employees. This plan provides benefits to the employees from the date of retirement and is based on the employee’s length of time employed by the Company. The calculation is based on a statistical calculation combining a number of factors that include the employee’s age, length of service, and AFP employee turnover rate.
The liability under the plan is based on a discount rate of 3.8% as of June 30, 2023 and December 31, 2022. The liability is included in other long-term liabilities in the accompanying condensed consolidated balance sheets. The plan is currently unfunded, and the benefit obligation under the plan was $2.3 million and $2.2 million at June 30, 2023 and December 31, 2022, respectively. The Company recorded an immaterial amount of expense under the plan for each of the three and six months ended June 30, 2023 and 2022.
Non-qualified Deferred Compensation Plan
In December 2019, the Company established a non-qualified deferred compensation plan. The plan allows certain eligible participants to defer a portion of their cash compensation and provides a matching contribution at the discretion of the Company. The plan obligations are payable upon retirement, termination of employment and/or certain other times in a lump-sum distribution or in installments, as elected by the participant in accordance with the plan. Participants can allocate their deferred compensation amongst various investment options with earnings accruing to the participant. The Company has established a Rabbi Trust to fund the plan obligations and to hold the plan assets. Eligible participants began contributing to the plan in January 2020. The plan assets were valued at approximately $5.4 million and $4.5 million as of June 30, 2023 and December 31, 2022, respectively. The plan liabilities were valued at approximately $5.6
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
million and $4.6 million as of June 30, 2023, and December 31, 2022, respectively. The plan assets and liabilities are included in other long-term assets and other long-term liabilities, respectively, on the Company’s condensed consolidated balance sheets.
Note 18. Commitments and Contingencies
Purchase Commitments
As of June 30, 2023, the Company has entered into commitments to purchase equipment and raw materials for an aggregate amount of approximately $75.2 million.
Note 19. Related Party Transactions
Investment in Hanxin
The Company has a 14% ownership in Hanxin that is accounted for as an equity method investment. The Company maintains a seat on Hanxin’s board of directors, and Henry Zhang, the son of Dr. Jack Zhang is an equity holder, the general manager, and the chairman of the board of directors of Hanxin. Additionally, Dr. Mary Luo and Dr. Jack Zhang, have an ownership interest in Hanxin through an affiliated entity. As a result, Hanxin is a related party.
Contract manufacturing agreement with Hanxin
In April 2022, ANP, entered into a contract manufacturing agreement with Hanxin, whereby Hanxin will develop several active pharmaceutical ingredients and finished products for the Chinese market and will engage ANP to manufacture the products on a cost-plus basis. Hanxin will commit to purchase certain quantities from ANP subject to the terms and conditions set forth in the agreement, including Hanxin filing for and obtaining any required marketing authorizations.
During the three and six months ended June 30, 2023, the Company recognized an immaterial amount of revenue from manufacturing services provided to Hanxin. As of June 30, 2023, the Company had an amount of receivables from Hanxin.
Contract Research Agreement with Hanxin
In July 2022, the Company entered into a three-year contract research agreement with Hanxin, a related party, whereby Hanxin will develop Recombinant Human Insulin Research Cell Banks, or RCBs, for the Company and license the RCBs to the Company subject to a fully paid, exclusive, perpetual, transferable, sub-licensable worldwide license. The RCBs will be used by the Company to make Master Cell Banks for one of its product candidates. Per the terms of the agreement with Hanxin, all title to the RCBs developed, prepared and produced by Hanxin in conducting research and development will belong to the Company. The Company will also own any confidential and proprietary information, technology regarding development and manufacturing of the RCBs, which shall include engineering, scientific and practical information and formula, research data, design, and procedures and others to develop and manufacture the RCBs, in use or developed by Hanxin. The total cost of the agreement to the Company shall not exceed approximately $2.2 million, with payments adjusted based on the then current exchange rates. Any additional work or changes to the scope of work requested by the Company will be charged by Hanxin to the Company on a cost plus basis, plus any applicable taxes.
In March 2023, the Company amended the agreement with Hanxin, whereby Hanxin will perform scale-up manufacturing process development using the RCBs for the Company. Per the terms of the amended agreement the Company will own any confidential and proprietary information and technology produced during the scale-up manufacturing, which shall include engineering, scientific and practical information and formula, research data design and procedures and others to develop and manufacture the RCBs. The amendment agreement will remain in full force
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AMPHASTAR PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and effect until July 5, 2025. The total cost of the amended agreement to the Company shall not exceed approximately $0.5 million in additional payments beyond the $2.2 million in payments under the contract research agreement, with payments adjusted based on actual currency exchange rates. Any additional work or changes to the scope of work requested by the Company will be charged by Hanxin to the Company on a cost-plus basis, plus any applicable taxes.
During the three and six months ended June 30, 2023, the Company paid $0.4 million and $1.0 million, respectively, under this agreement and has accrued an additional $0.2 million payable to Hanxin as of June 30, 2023.
Supply Agreement with Letop
In November 2022, ANP, entered in to a supply agreement with Nanjing Letop Biotechnology Co., Ltd., or Letop, a subsidiary of Hanxin, whereby Letop will manufacture and deliver chemical intermediates for ANP on a cost-plus basis. The agreement is effective for three years and the total cost of the agreement shall not exceed approximately $1.5 million, with payments adjusted based on the then current exchange rates.
During the three months ended June 30, 2023, ANP paid an amount under this agreement. During the six months ended June 30, 2023, ANP paid $0.7 million, under this agreement. As of June 30, 2023, the Company did have any amounts payable to Letop.
Note 20. Litigation
Hatch-Waxman Litigation
Regadenoson (0.4 mg/5 mL, 0.08 mg/mL) Patent Litigation
On February 25, 2020, Astellas US LLC, Astellas Pharma US, Inc., and Gilead Sciences, Inc. (collectively, “Astellas-Gilead”) filed a Complaint in the United States District Court for the District of Delaware against IMS for infringement of U.S. Patent Nos. 8,106,183 (the “‘183 patent”), RE47,301 (the “‘301 patent”), and 8,524,883 (the “‘883 patent”) (collectively, “Astellas-Gilead Patents”) with regard to IMS’s ANDA No. 214,252 for approval to manufacture and sell 0.4 mg/5 mL (0.08 mg/mL) intravenous solution of Regadenoson. On January 26, 2022, the Company and Astellas-Gilead reached an agreement to resolve the lawsuit. Under the terms of the agreement, the Company received $5.4 million from Astellas constituting saved litigation expenses. The Company recorded the settlement amount in the other income (expenses) line in its condensed consolidated statement of operations for the six months ended June 30, 2022.
Other Litigation
The Company is also subject to various other claims, arbitrations, investigations, and lawsuits from time to time arising in the ordinary course of business. In addition, third parties may, from time to time, assert claims against the Company in the forms of letters and other communications.
The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In the opinion of management, the ultimate resolution of any such matters is not expected to have a material adverse effect on its financial position, results of operations, or cash flows; however, the results of litigation and claims are inherently unpredictable and the Company’s view of these matters may change in the future. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the “Condensed Consolidated Financial Statements” and the related notes thereto included in this Quarterly Report on Form 10-Q, or Quarterly Report. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements. These risks, uncertainties, and other factors include, among others, those identified under the “Special Note About Forward-Looking Statements,” above and described in greater detail elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2022, particularly in Item 1A. “Risk Factors”.
Overview
We are a bio-pharmaceutical company focusing primarily on developing, manufacturing, marketing and selling technically challenging generic and proprietary injectable, inhalation, and intranasal products, as well as insulin API products. We currently manufacture and sell over 20 products.
Our largest products by net revenues currently include Primatene MIST®, glucagon, epinephrine, lidocaine, enoxaparin sodium, and phytonadione. In April 2022, the FDA approved our ganirelix acetate injection 250mg/0.5mL prefilled syringe, which we launched in June 2022. In July 2022, the FDA approved our vasopressin injection, USP 20 Units/mL, 1 mL single-dose vial, which we launched in August 2022. In May 2022, the FDA approved our regadenoson injection, 0.08mg/mL, 5mL, single-dose prefilled syringe, which we launched in April 2023.
In March 2023, the FDA approved our naloxone hydrochloride nasal spray 4mg, which we plan to launch in the second half of 2023.
We are currently developing a portfolio of generic abbreviated new drug applications, or ANDAs, biosimilar insulin product candidates and proprietary product candidates, which are in various stages of development and target a variety of indications. Three of the ANDAs are currently on file with the FDA.
To complement our internal growth and expertise, we have made several strategic acquisitions of companies, products and technologies. These acquisitions collectively have strengthened our core injectable and inhalation product technology infrastructure by providing additional manufacturing, marketing, and research and development capabilities, including the ability to manufacture raw materials, API, and other components for our products.
Macroeconomic Trends and Uncertainties
The Russia-Ukraine conflict and resulting sanctions and other actions against Russia have led to uncertainty and disruption in the global economy. Although the conflict has not had a direct material adverse impact on our revenues or other financial results, one of our insulin API customers in Western Europe, that previously bought our product and resold it into Russia, did not purchase API from us in 2022 and has not purchased from us in 2023. We are closely monitoring the events of the Russia-Ukraine conflict and its impact on Europe and throughout the rest of the world. It is not clear at this time how long the conflict will endure, or if it will escalate further, which could further compound the adverse impact to the global economy and consequently affect our results of operations.
Certain other worldwide events and macroeconomic factors, such as international trade relations, new legislation and regulations, taxation or monetary policy changes, political and civil unrest, supply chain disruptions, inflationary pressures, and rising interest rates, among other factors, also increase volatility in the global economy. For example, the United States has recently experienced historically high levels of inflation. The existence of inflation in the United States, and global economy has and may continue to result in higher interest rates and capital costs, increased costs of labor, weakening exchange rates and other similar effects.
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See the “Risk Factors” section for further discussion of the possible impact of the Russia-Ukraine conflict and other macroeconomic factors on our business.
Recent Developments
BAQSIMI® Acquisition
On June 30, 2023, we completed our acquisition of BAQSIMI® glucagon nasal powder, or BAQSIMI® pursuant to an Asset Purchase Agreement, or the Purchase Agreement, with Eli Lilly & Company, or Lilly, and Amphastar Medication Co., LLC, a wholly owned subsidiary of Amphastar, dated April 21, 2023. In connection with the closing of the transaction, or the Closing, we paid Lilly $500.0 million in cash. In addition, we are required to pay Lilly a $125.0 million guaranteed payment on the first anniversary of the closing. We may also be required to pay additional contingent consideration of up to $450.0 million to Lilly based on the achievement of certain milestones.
On June 30, 2023, in conjunction with our acquisition of BAQSIMI®, we entered into a Credit Agreement, or the Credit Agreement with Wells Fargo Bank, National Association, as Administrative Agent, in such capacity, Agent.
The Credit Agreement provides for a senior secured term loan in an aggregate principal amount of $500.0 million, or the Term Loan. The Term Loan matures on June 30, 2028. The Term Loan was fully funded on June 30, 2023.
The Credit Agreement provides for a senior secured revolving credit facility, or the Revolving Credit Facility, in an aggregate principal amount of $200.0 million, with a $15.0 million letter of credit sublimit and a $15.0 million swingline loan sublimit. The Revolving Credit Facility matures on June 30, 2028. As of June 30, 2023, we had no borrowings outstanding under the Revolving Credit Facility.
For more information regarding our acquisition of BAQSIMI®, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 3. BAQSIMI® Acquisition.”
Business Segments
As of June 30, 2023, our performance is assessed and resources are allocated based on the following two reportable segments: (1) finished pharmaceutical products and (2) API products. The finished pharmaceutical products segment manufactures, markets and distributes Primatene MIST®, epinephrine, glucagon, phytonadione, lidocaine, enoxaparin, naloxone, as well as various other critical and non-critical care drugs. The API segment manufactures and distributes RHI API and porcine insulin API for external customers and internal product development. Information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker. Factors used to identify our segments include markets, customers and products.
For more information regarding our segments, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 6. Segment Reporting.”
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Results of Operations
Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022
Net revenues
Three Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
| 2023 |
| 2022 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Net revenues | |||||||||||||
Finished pharmaceutical products | $ | 142,866 | $ | 120,123 | $ | 22,743 | 19 | % | |||||
API |
| 2,846 |
| 3,344 |
| (498) |
| (15) | % | ||||
Total net revenues | $ | 145,712 | $ | 123,467 | $ | 22,245 |
| 18 | % | ||||
Cost of revenues | |||||||||||||
Finished pharmaceutical products | $ | 65,799 | $ | 53,039 | $ | 12,760 |
| 24 | % | ||||
API |
| 7,175 |
| 7,072 |
| 103 |
| 1 | % | ||||
Total cost of revenues | $ | 72,974 | $ | 60,111 | $ | 12,863 |
| 21 | % | ||||
Gross profit | $ | 72,738 | $ | 63,356 | $ | 9,382 | 15 | % | |||||
as % of net revenues |
| 50 | % |
| 51 | % | |||||||
The increase in net revenues of the finished pharmaceutical products for the three months ended June 30, 2023 was due to the following changes:
The increase in sales of glucagon was primarily due to an increase in unit volumes, as a result of two suppliers discontinuing their glucagon injection products at the end of 2022. The increase in sales of phytonadione was due to an increase in unit volumes, as a result of supplier shortages. Primatene MIST® sales decreased due to a decrease in unit volumes, as a result of inventory drawdowns by retailers. The decrease in sales of epinephrine and lidocaine was primarily due to a decrease in unit volumes, due to suppliers returning to their historical distribution levels. The decrease in sales of enoxaparin and naloxone was primarily due to a decrease in unit volumes. The increase in other finished pharmaceutical products was primarily due to higher unit volumes of dextrose, atropine, calcium chloride, and sodium bicarbonate, due to increased demand caused by supplier shortages during the quarter, as well as a full quarter of sales for ganirelix and vasopressin, which were launched in June 2022 and August 2022, respectively, and the launch of regadenoson in April 2023.
We anticipate that sales of naloxone and enoxaparin will continue to fluctuate in the future due to competitive dynamics. We also anticipate that sales of epinephrine and other finished pharmaceutical products will continue to fluctuate depending on the ability of our competitors to supply market demands. Sales of medroxyprogesterone will temporarily be halted in the third quarter as our API supplier has discontinued making this product. We are currently in the process of
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qualifying our subsidiary ANP to make this API. However, we do not know when the Drug Master File, or DMF, to approve this as our new API supply will be approved by the FDA. Therefore, we are not sure when we will be able to return to selling this product. Sales of medroxyprogesterone totaled $4.6 million in the three months ended June 30, 2023.
Sales of API primarily depend on the timing of customer purchases.
A significant portion of our customer shipments in any period relate to orders received and shipped in the same period, generally resulting in low product backlog relative to total shipments at any time. However, as of June 30, 2023, we experienced a backlog of approximately $6.5 million for various products, partially as a result of competitor shortages and supplier constraints. Historically, our backlog has not been a meaningful indicator in any given period of our ability to achieve any particular level of overall revenue or financial performance.
Gross margins
The increase in sales of glucagon and epinephrine, which are higher-margin products, the sales of ganirelix and vasopressin, both of which we launched last year, as well as the sales of regadenoson, which we launched in April 2023, helped increase our gross margins for the three months ended June 30, 2023. These increases in gross margins were partially offset by an impairment charge of $2.7 million related to the impairment of the IMS (UK) international product rights, as well as charges included in cost of revenues to adjust our inventory and related purchase commitments to their net realizable value.
We are experiencing increased costs for labor and certain purchased components. Additionally, the cost of heparin may fluctuate, which could put downward pressure on our gross margins. However, we believe that this trend will be offset by increased sales of our higher-margin products, including glucagon, vasopressin, ganirelix, regadenoson and new products we anticipate launching in 2023.
Selling, distribution and marketing, and general and administrative
Three Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
2023 | 2022 | Dollars | % |
| |||||||||
(in thousands) |
| ||||||||||||
Selling, distribution, and marketing |
| $ | 6,718 |
| $ | 5,756 |
| $ | 962 |
| 17 | % | |
General and administrative | $ | 12,281 | $ | 9,979 | $ | 2,302 |
| 23 | % | ||||
The increase in selling, distribution and marketing expenses was primarily due to an increase in advertising spending for Primatene MIST®. The increase in general and administrative expense was primarily due to an increase in salary and personnel-related expenses, as well as costs related to the acquisition of BAQSIMI®.
Legal fees may fluctuate from period to period due to the timing of patent challenges and other litigation matters.
Research and development
Three Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
| 2023 |
| 2022 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Salaries and personnel-related expenses | $ | 6,918 | $ | 6,066 | $ | 852 |
| 14 | % | ||||
Clinical trials |
| 1,483 |
| 1,074 |
| 409 |
| 38 | % | ||||
FDA fees |
| 72 |
| 28 |
| 44 |
| 157 | % | ||||
Materials and supplies |
| 3,735 |
| 11,129 |
| (7,394) |
| (66) | % | ||||
Depreciation |
| 2,388 |
| 2,548 |
| (160) |
| (6) | % | ||||
Other expenses |
| 2,247 |
| 1,953 |
| 294 |
| 15 | % | ||||
Total research and development expenses | $ | 16,843 | $ | 22,798 | $ | (5,955) | (26) | % | |||||
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The decrease in research and development expenses is primarily due to a decrease in materials and supply expense, as a result of a ramp-up of expense in 2022 for AMP-018 and our insulin pipeline products. This was partially offset by an increase in salary and personnel-related expenses, as well as, an increase in clinical trial expense related to our insulin and inhalation product pipeline.
Research and development costs consist primarily of costs associated with the research and development of our product candidates including the cost of developing APIs. We expense research and development costs as incurred.
We have made, and expect to continue to make, substantial investments in research and development to expand our product portfolio and grow our business. We expect that research and development expenses will increase on an annual basis due to increased clinical trial costs related to our insulin and inhalation product candidates. These expenditures will include costs of APIs developed internally as well as APIs purchased externally, the cost of purchasing reference listed drugs and the costs of performing the clinical trials. As we undertake new and challenging research and development projects, we anticipate that the associated costs will increase significantly over the next several quarters and years. Over the past year, some of our ongoing clinical trials experienced short term interruptions in the recruitment of patients due to the COVID-19 pandemic, as trial sites changed their operating protocols to protect participants from COVID-19. These conditions may occur in the future which may increase the costs of clinical trials and also delay spending and results of these trials.
Other income (expenses), net
Three Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
2023 | 2022 | Dollars | % |
| |||||||||
(in thousands) |
| ||||||||||||
Other income (expenses), net |
| $ | (1,516) |
| $ | (1,504) |
| $ | (12) |
| 1 | % | |
Other income (expenses), net is primarily a result of foreign currency fluctuation, as well as the mark-to-market adjustments relating to our interest rate swap contracts during the three months ended June 30, 2023.
Income tax provision
Three Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
| 2023 |
| 2022 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Income tax provision | $ | 6,383 | $ | 5,551 | $ | 832 | 15 | % | |||||
Effective tax rate | 19 | % |
| 24 | % | ||||||||
Our effective tax rate for the three months ended June 30, 2023 decreased in comparison to the three months ended June 30, 2022, primarily due to differences in pre-tax income positions and timing of discrete tax items. For more information regarding our income taxes, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 15. Income Taxes”.
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Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Net revenues
Six Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
| 2023 |
| 2022 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Net revenues | |||||||||||||
Finished pharmaceutical products | $ | 278,876 | $ | 236,669 | $ | 42,207 |
| 18 | % | ||||
API |
| 6,858 |
| 7,166 |
| (308) |
| (4) | % | ||||
Total net revenues | $ | 285,734 | $ | 243,835 | $ | 41,899 |
| 17 | % | ||||
Cost of revenues | |||||||||||||
Finished pharmaceutical products | $ | 125,633 | $ | 112,646 | $ | 12,987 |
| 12 | % | ||||
API |
| 13,523 |
| 12,007 |
| 1,516 |
| 13 | % | ||||
Total cost of revenues | $ | 139,156 | $ | 124,653 | $ | 14,503 |
| 12 | % | ||||
Gross profit | $ | 146,578 | $ | 119,182 | $ | 27,396 | 23 | % | |||||
as % of net revenues |
| 51 | % |
| 49 | % | |||||||
The increase in net revenues of the finished pharmaceutical products for the six months ended June 30, 2023, was due to the following changes:
The increase in sales of glucagon was primarily due to an increase in unit volumes, as a result of two suppliers discontinuing their glucagon injection products at the end of 2022. Primatene MIST® sales decreased due to reduced unit volume, as a result of inventory drawdowns by retailers, amounting to $6.5 million, which was partially offset by an increase in average selling price contributing $2.8 million. The increase in sales of epinephrine was primarily due to an increase in unit volumes, due to an increase in demand caused by supplier shortages. The increase in sales of phytonadione was due to an increase in unit volumes, as a result of supplier shortages. The decrease in sales of enoxaparin was primarily due to a decrease in unit volumes. The decrease in sales of naloxone was due to both a decrease in unit volumes, as well as a lower average selling price. The increase in other finished pharmaceutical products was primarily due to higher unit volumes of dextrose and atropine, due to increased demand caused by supplier shortages, as well as a full period of sales for ganirelix and vasopressin, which were launched in June 2022 and August 2022, respectively, and the launch of regadenoson in April 2023.
We anticipate that sales of naloxone and enoxaparin will continue to fluctuate in the future due to competitive dynamics. We also anticipate that sales of epinephrine and other finished pharmaceutical products will continue to fluctuate depending on the ability of our competitors to supply market demands. Sales of medroxyprogesterone will temporarily be halted in the third quarter as our API supplier has discontinued making this product. We are currently in the process of qualifying our subsidiary ANP to make this API. However, we do not know when the Drug Master File, or DMF, to
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approve this as our new API supply will be approved by the FDA. Therefore, we are not sure when we will be able to return to selling this product. Sales of medroxyprogesterone totaled $10.0 million in the six months ended June 30, 2023.
Sales of API primarily depend on the timing of customer purchases.
A significant portion of our customer shipments in any period relate to orders received and shipped in the same period, generally resulting in low product backlog relative to total shipments at any time. However, as of June 30, 2023, we experienced a backlog of approximately $6.5 million for various products, partially as a result of competitor shortages and supplier constraints. Historically, our backlog has not been a meaningful indicator in any given period of our ability to achieve any particular level of overall revenue or financial performance.
Gross margins
The increase in sales of glucagon and epinephrine, which are higher-margin products, the sales of ganirelix and vasopressin, both of which we launched last year, as well as the sales of regadenoson, which we launched in April 2023, helped increase our gross margins for the six months ended June 30, 2023. These increases in gross margins were partially offset by an impairment charge of $2.7 million related to the impairment of the IMS (UK) international product rights, as well as charges included in cost of revenue to adjust our inventory and related purchase commitments to their net realizable value.
We are experiencing increased costs for labor and certain purchased components. Additionally, the cost of heparin may fluctuate, which could put downward pressure on our gross margins. However, we believe that this trend will be offset by increased sales of our higher-margin products, including glucagon, vasopressin, ganirelix, regadenoson and new products we anticipate launching in 2023.
Selling, distribution and marketing, and general and administrative
Six Months Ended |
|
| |||||||||||
June 30, | Change | ||||||||||||
| 2023 |
| 2022 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Selling, distribution, and marketing | $ | 13,827 | $ | 11,275 | $ | 2,552 |
| 23 | % | ||||
General and administrative | $ | 25,764 | $ | 22,449 | $ | 3,315 |
| 15 | % | ||||
The increase in selling, distribution and marketing expenses was primarily due to an increase in advertising spending for Primatene MIST®. The increase in general and administrative expense was primarily due to an increase in salary and personnel-related expenses, as well as costs related to the acquisition of BAQSIMI®.
We expect that selling, distribution and marketing expenses will continue to increase due to the increase in marketing expenditures for Primatene MIST®. Legal fees may fluctuate from period to period due to the timing of patent challenges and other litigation matters.
Research and development
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The decrease in research and development expenses is primarily due to a decrease in materials and supply expense, as a result of a ramp-up of expenses in 2022 for AMP-018 and other insulin pipeline products. This was partially offset by an increase in salary and personnel-related expenses, as well as, an increase in clinical trial expense related to our insulin and inhalation product pipeline.
Research and development costs consist primarily of costs associated with the research and development of our product candidates including the cost of developing APIs. We expense research and development costs as incurred.
We have made, and expect to continue to make, substantial investments in research and development to expand our product portfolio and grow our business. We expect that research and development expenses will increase on an annual basis due to increased clinical trial costs related to our insulin and inhalation product candidates. These expenditures will include costs of APIs developed internally as well as APIs purchased externally, the cost of purchasing reference listed drugs and the costs of performing the clinical trials. As we undertake new and challenging research and development projects, we anticipate that the associated costs will increase significantly over the next several quarters and years. Over the past year, some of our ongoing clinical trials experienced short term interruptions in the recruitment of patients due to the COVID-19 pandemic, as trial sites changed their operating protocols to protect participants from COVID-19. These conditions may occur in the future which may increase the costs of clinical trials and also delay spending and results of these trials.
Other income (expenses), net
Six Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
| 2023 |
| 2022 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Other income (expenses), net | $ | (1,906) | $ | 6,089 | $ | (7,995) |
| NM | |||||
Other income (expenses), net is primarily a result of foreign currency fluctuation, as well as the mark-to-market adjustments relating to our interest rate swap contracts during the six months ended June 30, 2023. For the six months ended June 30, 2023, we received a settlement of $5.4 million in connection with the Regadenoson patent litigation. For more information regarding our litigation matters, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 20. Litigation”.
Income tax provision
Six Months Ended |
| ||||||||||||
June 30, | Change | ||||||||||||
| 2023 |
| 2022 |
| Dollars |
| % |
| |||||
(in thousands) |
| ||||||||||||
Income tax provision | $ | 13,135 | $ | 9,628 | $ | 3,507 | 36 | % | |||||
Effective tax rate |
| 20 | % |
| 18 | % | |||||||
Our effective tax rate for the six months ended June 30, 2023 increased in comparison to the six months ended June 30, 2022, primarily due to differences in pre-tax income positions. For more information regarding our income taxes, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 15. Income Taxes”.
Liquidity and Capital Resources
Cash Requirements and Sources
We need capital resources to maintain and expand our business. We expect our cash requirements to increase significantly in the foreseeable future as we sponsor clinical trials for, seek regulatory approvals of, and develop, manufacture and market our current development stage product candidates and pursue strategic acquisitions of
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businesses or assets. Our future capital expenditures include projects to upgrade, expand, and improve our manufacturing facilities in the United States and China, including a significant increase in capital expenditures over the next few years. We plan to fund this facility expansion with cash flows from operations. Our cash obligations include the principal and interest payments due on our existing loans and lease payments, as described below and throughout this Quarterly Report.
As of June 30, 2023, our foreign subsidiaries collectively held $11.9 million in cash and cash equivalents. Cash or cash equivalents held at foreign subsidiaries are not available to fund the parent company’s operations in the United States. We believe that our cash reserves, operating cash flows, and borrowing availability under our credit facilities will be sufficient to fund our operations for at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q. We expect additional cash flows to be generated in the longer term from future product introductions, including from sales of BAQSIMI®, although there can be no assurance as to the receipt of regulatory approval for any product candidates that we are developing or the timing of any product introductions, which could be lengthy or ultimately unsuccessful.
We maintain a shelf registration statement on Form S-3 pursuant to which we may, from time to time, sell up to an aggregate of $250 million of our common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts, or units. If we require or elect to seek additional capital through debt or equity financing in the future, we may not be able to raise capital on terms acceptable to us or at all. To the extent we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to our stockholders. If we are required and unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.
Working capital decreased by $150.2 million to $133.3 million at June 30, 2023, compared to $283.5 million at December 31, 2022.
Cash Flows from Operations
The following table summarizes our cash flows used in operating, investing, and financing activities for the six months ended June 30, 2023 and 2022:
Six Months Ended June 30, |
| |||||||
| 2023 | 2022 |
| |||||
(in thousands) |
| |||||||
Statement of Cash Flow Data: | ||||||||
Net cash provided by (used in) | ||||||||
Operating activities | $ | 95,305 | $ | 53,580 | ||||
Investing activities |
| (514,915) |
| (17,290) | ||||
Financing activities |
| 414,563 |
| 3,654 | ||||
Effect of exchange rate changes on cash |
| (6) |
| (140) | ||||
Net increase in cash, cash equivalents, and restricted cash | $ | (5,053) | $ | 39,804 | ||||
Sources and Use of Cash
Operating Activities
Net cash provided by operating activities was $95.3 million for the six months ended June 30, 2023, which included net income of $52.2 million. Non-cash items comprised primarily of $14.4 million of depreciation and amortization, $11.0 million of share-based compensation expense, and an impairment charge of $2.7 million relating to the impairment of the IMS (UK) international product rights.
Additionally, for the six months ended June 30, 2023, there was a net cash inflow from changes in operating assets and liabilities of $8.3 million, which resulted from an increase in accounts payable and accrued liabilities, which was
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partially offset by an increase in accounts receivables. Accounts payable and accrued liabilities increased primarily due to the timing of payments. The increase in accounts receivables was due to both increases in sales and timing of sales.
Net cash provided by operating activities was $53.6 million for the six months ended June 30, 2022, which included net income of $41.6 million. Non-cash items comprised primarily of $13.8 million of depreciation and amortization and $9.3 million of share-based compensation expense. Additionally, for the six months ended June 30, 2022, there was a net cash outflow from changes in operating assets and liabilities of $11.7 million, which resulted from an increase in accounts receivables as well as an increase in inventories, which was partially offset by an increase in accounts payable and accrued liabilities. Accounts payable and accrued liabilities increased primarily due to the timing of payments. The increase in accounts receivable was due to both increases in sales and the timing of sales.
Investing Activities
Net cash used in investing activities was $514.9 million for the six months ended June 30, 2023, primarily as a result of $500.8 million relating to the BAQSIMI® acquisition, $18.5 million in purchases of property, plant, and equipment, which included $13.5 million incurred in the United States, $0.6 million in France, and $4.4 million in China. This was partially offset by a net cash inflows from purchases and sales of short-term investments during the period of $5.4 million.
Net cash used in investing activities was $17.3 million for the six months ended June 30, 2022, primarily as a result of $12.1 million in purchases of property, plant, and equipment, which included $8.4 million incurred in the United States, $0.6 million in France, and $3.1 million in China. Additionally, cash outflow from short-term investing activities during the period was $5.6 million.
Financing Activities
Net cash provided by financing activities was $414.6 million for the six months ended June 30, 2023, primarily due to our entry into the Credit Agreement, which was partially offset by $68.4 million in principal payments of our long-term debt and $14.2 million in debt issuance cost. Additionally, we received $5.3 million in net proceeds from the settlement of share-based compensation awards under our equity plan, which was partially offset by the $8.1 million used to purchase treasury stock.
Net cash provided by financing activities was $3.7 million for the six months ended June 30, 2022, primarily as a result of $12.2 million in net proceeds from the settlement of share-based compensation awards under our equity plan, which was partially offset by the use of $7.3 million to purchase treasury stock. Additionally, we also made $1.1 million in principal payments on our long-term debt.
Indebtedness
For more information regarding our outstanding indebtedness, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 14. Debt”.
Critical Accounting Policies
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and notes to the financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to our critical accounting policies as compared to the critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2022.
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Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 2. Summary of Significant Accounting Policies”.
Government Regulation
Our products and facilities are subject to regulation by a number of federal and state governmental agencies. The FDA, in particular, maintains oversight of the formulation, manufacture, distribution, packaging, and labeling of all of our products. The Drug Enforcement Administration, or DEA, maintains oversight over our products that are considered controlled substances.
From February 6 through February 16, 2023, our IMS facility in South El Monte, California was subject to pre-approval inspection by the FDA. The inspection included a review of compliance with FDA regulations to support one of our pending applications. The inspection resulted in two observations on Form 483. We responded to those observations. We believe that our response to the observations will satisfy the requirements of the FDA and that no significant further actions will be necessary.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Except for the broad, ongoing macroeconomic challenges facing the global economy and financial markets, there have been no material changes in market risk from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2022. We are exposed to market risk in the ordinary course of business. Market risk represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings. We are exposed to market risk for changes in the market values of our investments (Investment Risk), the impact of interest rate changes (Interest Rate Risk), and the impact of foreign currency exchange changes (Foreign Currency Exchange Risk).
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, our principal executive and principal financial officers, respectively, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective (a) to ensure that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (b) to include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Inherent Limitations of Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management overriding of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding legal proceedings, see “Part I – Item 1. Financial Statements – Notes to Condensed Consolidated Financial Statements – Note 20. Litigation.”
ITEM 1A. RISK FACTORS
Except as noted below, there were no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 1, 2023.
Our actual financial and operating results could differ materially from any expectations or guidance provided by us concerning future results with respect to the Acquisition.
Although we currently expect to realize increased revenues as a result of our Acquisition, the expectations and guidance we have provided, with respect to the potential financial impact of the Acquisition, are subject to numerous assumptions including assumptions derived from our diligence efforts concerning the status of and prospects for BAQSIMI® business, which we did not control at the time such assumptions were made, and assumptions relating to the near-term prospects for glucagon products generally and the markets for BAQSIMI® in particular. Additional assumptions we have made relate to numerous matters, including (without limitation) the following:
• | projections of BAQSIMI®’s future revenues; |
• | the amount of intangibles that will result from the Acquisition; |
• | certain other purchase accounting adjustments that we expect to record in our financial statements in connection with the Acquisition; |
• | Acquisition costs, including transaction costs payable to our financial, legal, and accounting advisors; |
• | our ability to maintain, develop, and deepen relationships with BAQSIMI® customers and suppliers; |
• | other financial and strategic risks of the Acquisition, including the possible impact of our reduced liquidity resulting from deal-related cash outlays, the credit risk associated from the debt facility described below, and continued uncertainty arising from the global economic downturn; and |
• | the FDA approval process is time-consuming and complicated, and we may not obtain the FDA approval required for a product within the timeline we desire, or at all. |
We cannot provide any assurances with respect to the accuracy of our assumptions, including our assumptions with respect to future revenues or revenue growth rates, if any, of BAQSIMI®, and we cannot provide assurances with respect to our ability to realize the cost savings that we currently anticipate. There are a variety of risks and uncertainties, some of which are outside of our control, which could cause our actual financial and operating results to differ materially from any expectations or guidance provided by us, concerning our future results with respect to the Acquisition.
We may fail to realize the projected revenue and other benefits expected from the Acquisition, which could adversely affect the value of our common stock.
Our ability to realize the projected revenue and other benefits from the Acquisition will depend, in part, on our ability to integrate BAQSIMI® into our current business. If we are not able to achieve the projected revenue or other benefits within the anticipated time frame, or at all, or if the projected revenue or other benefits take longer to realize than expected, then the value of our common stock may be adversely affected.
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It is possible that the integration process following the Acquisition could result in the disruption of our business or ongoing business associated with BAQSIMI®. We may also identify inconsistencies in standards, controls, procedures and policies between the two businesses that could adversely affect our ability to maintain relationships with our customers, suppliers, distributors, creditors, lessors, clinical trial investigators or managers or to achieve the anticipated benefits of BAQSIMI®.
Specifically, in order to realize the anticipated benefits of the Acquisition, we will:
• | rely on Lilly for manufacturing services and transition services, including for performance of clinical and commercial activities, relating to BAQSIMI® and transfer of the corresponding activities to Amphastar; |
• | be required to enter into our own arrangements with certain suppliers/manufacturers in the supply chain; |
• | be required to set up distribution and sales arrangements for BAQSIMI® including payor and other agreements; and |
• | transfer regulatory approvals relating to BAQSIMI® to us following the closing of the Acquisition. |
Integration efforts between us and the business associated with BAQSIMI® will also divert management attention and resources. In addition, the actual integration of BAQSIMI® may result in additional and unforeseen expenses or liabilities (including those that may be assumed in connection with the Acquisition), and any anticipated benefits of the integration plan may not be realized. If we are not able to adequately address these challenges, we may be unable to successfully integrate BAQSIMI® into our business, or to realize some or any of the anticipated benefits of the Acquisition.
Delays encountered in the integration process could have a material adverse effect on our revenues, expenses, operating results and financial condition. Although we expect significant benefits, such as increased sales revenues, from the Acquisition, there can be no assurance that we will realize these or any other anticipated benefits.
The Debt Financing and the use of a portion of our cash resources in connection with the Acquisition has resulted in a material increase to our indebtedness, which has and may continue to adversely affect our operating results and cash flows.
The Acquisition was financed with the Debt Financing, which provides for funding for term loan and revolving credit facilities in an aggregate principal amount of up to $700.0 million. The material increase in our indebtedness as a result of the Debt Financing has and may continue to adversely affect our operating results, cash-flows and our ability to use cash generated from operations as we satisfy our materially increased underlying interest and principal payment obligations and our operating expenses under the term loan facility and revolving credit facility, as applicable.
Specifically, our materially increased indebtedness could have important consequences to investors in our common stock, including any or all of the following:
• | we could be subject to substantial variable interest rate risk because our interest rate under term loans typically vary based on a fixed margin over an indexed rate or an adjusted base rate. If interest rates were to further increase substantially, particularly with respect to our debt associated with the Acquisition, it would have a material adverse effect our operating results and could affect our ability to service the indebtedness; |
• | our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes may be limited or financing may be unavailable; |
• | a substantial portion of our cash flows must be dedicated to the payment of principal and interest on our indebtedness and other obligations and will not be available for use in our business; |
• | our level of indebtedness could limit our flexibility in planning for, or reacting to, changes in our business and |
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the markets in which we operate; and
• | our high degree of indebtedness will make us more vulnerable to changes in general economic conditions and/or a downturn in our business, thereby making it more difficult for us to satisfy our obligations. |
Our ability to make scheduled payments of the principal and interest when due, or to refinance our borrowings under the Debt Financing, will depend on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.
Our business may not continue to generate cash flow from operations in the future sufficient to satisfy our obligations under our indebtedness, and any future indebtedness we may incur and to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our existing or future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the Debt Financing or future indebtedness.
If we fail to make required debt payments we would be in default under the terms of these agreements. Subject to customary cure rights, any default would permit the holders of the indebtedness to accelerate repayment of this debt and could cause defaults under other indebtedness that we have, any of which could have a material adverse effect on the trading price of our common stock.
Our outstanding loan agreements contain restrictive covenants that may limit our operating flexibility.
Our loan agreements are collateralized by substantially all of our presently existing and subsequently acquired personal property assets and subject us to certain affirmative and negative covenants, including limitations on our ability to transfer or dispose of assets, merge with or acquire other companies, make investments, pay dividends, incur additional indebtedness and liens and conduct transactions with affiliates. For example, the definitive documentation governing the Debt Financing contains financial and operational covenants that may adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.
We are also subject to certain covenants that require us to maintain certain financial ratios and are required under certain conditions to make mandatory prepayments of outstanding principal. As a result of these covenants and ratios, we have certain limitations on the manner in which we can conduct our business, and we may be restricted from engaging in favorable business activities or financing future operations or capital needs until our current debt obligations are paid in full or we obtain the consent of our lenders, which we may not be able to obtain. For example, the definitive documentation governing the Debt Financing contains financial and operational covenants that may adversely affect our ability to engage in certain activities, including certain financing and acquisition transactions, stock repurchases, guarantees, and similar transactions, without obtaining the consent of the lenders, which may or may not be forthcoming including without limitation, covenants requiring compliance with a maximum consolidated net leverage ratio test and a minimum consolidated interest coverage ratio test.
We may not be able to generate sufficient cash flow or revenue to meet the financial covenants or pay the principal and interest on our debt. In addition, upon the occurrence of an event of default, our lenders, among other things, can declare all indebtedness due and payable immediately, which would adversely impact our liquidity and reduce the availability of our cash flows to fund working capital needs, capital expenditures and other general corporate purposes. An event of default includes our failure to pay any amount due and payable under the loan agreements, the occurrence of a material adverse change in our business as defined in the loan agreements, our breach of any covenant in the loan agreements, or an involuntary insolvency proceeding. Additionally, a lender could exercise its lien on substantially all of our assets and our future working capital, borrowings or equity financing may not be available to repay or refinance any such debt.
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Our business relationships, including customer relationships, and those of the business related to BAQSIMI® may be subject to disruption due to uncertainty associated with the Acquisition.
Suppliers, vendors, and other third parties with whom we or the business related to BAQSIMI® do business or otherwise have relationships may experience uncertainty associated with the Acquisition, and this uncertainty could materially affect their decisions with respect to existing or future business relationships with us. As a result, we are currently unable to predict the effect of the Acquisition on certain assumed contractual rights and obligations, including intellectual property rights.
Contracts, agreements, licenses, permits, authorizations and other arrangements related to the BAQSIMI® business that contain provisions giving counterparties certain rights (including, in some cases, termination rights) in the event of an “assignment” of such agreement or a “change in control” of Lilly or its subsidiaries. The definitions of “assignment” and “change in control” vary from contract to contract and, in some cases, the “assignment” or “change in control” provisions may be implicated by the Acquisition. If an “assignment” or “change in control” occurs, a counterparty may be permitted to terminate its contract with respect to BAQSIMI®.
We cannot predict the effects, if any, if the Acquisition is deemed to constitute an assignment or change in control under certain of the contracts and other arrangements related to BAQSIMI®, including the extent to which cancellation rights or other rights would be exercised, if at all, or the effect on our financial condition, results of operations or cash flows.
Our business may be adversely affected by resurgence of COVID-19 cases or other public health outbreaks that result in business disruptions or related challenging macroeconomic conditions globally.
While the U.S. government ended the COVID-19 public health emergency on May 11, 2023, any resurgence of COVID-19 cases or other public health outbreaks or disruptions could continue to impact worldwide economic activity and financial markets and present challenges to our business. Mass and rapid production of the vaccines, for example, has placed increased pressure on the availability of supplies that are also used in our products, such as glass vials and needles. Such outbreaks may also disrupt the operations of our customers, suppliers and partners for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns, all of which could negatively impact our business and results of operations, including cash flows. Disruptions to our manufacturing partners and suppliers could result in disruption to the production of our products and failure to satisfy demand. More generally, any extended public health outbreaks or emergencies could adversely affect economies and financial markets globally and nationally, including inflationary pressures and changes in interest rates, which have and could continue to decrease spending and adversely affect demand for our products and harm our business and results of operations. To the extent macroeconomic uncertainty persists or if a resurgence of COVID-19 cases or macroeconomic conditions worsen, we may experience a continuing adverse effect on the demand for some of our products. The degree of impact of any pandemic and the related challenging macroeconomic conditions globally on our business will depend on several factors, such as the duration and the extent of the pandemic, as well as actions taken by governments, businesses, and consumers in response to the pandemic and the challenging macroeconomic conditions globally, all of which continue to evolve and remain uncertain at this time.
During the COVID-19 pandemic, FDA has issued various COVID-19 related guidance documents applicable to biopharmaceutical manufacturers and clinical trial sponsors many of which have expired or were withdrawn with the expiration of the COVID-19 public health emergency declaration in May 2023, although some COVID-19 related guidance documents continue in effect. These and future guidance documents and regulatory requirements, including future legislation, have and may continue to require us to develop and implement new policies and procedures, make significant adjustments to our clinical trials, or increase the amount time and resources needed for regulatory compliance, which may impact our clinical development plans and timelines.
Some of our ongoing clinical trials have experienced short term interruptions in the recruitment of patients due to the COVID-19 pandemic, as hospitals prioritized their resources toward the COVID-19 pandemic and governments imposed travel restrictions. Additionally, protocols at certain clinical sites have changed, which could slow down the pace of clinical trials while also increasing their cost. These conditions may in turn delay spending and delay the results of these trials. Additionally, certain suppliers delayed shipments to us in 2022. These delays may have been caused by
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manufacturing disruptions due to the COVID-19 pandemic. For example, in the first quarter of 2022, increases in COVID-19 cases in Shanghai, China, led to shutdowns and delays at the ports in Shanghai, which led to temporary delays in shipping certain APIs and starting materials. Future shutdowns could have an adverse impact on our operations.
Any of the negative impacts of any ongoing pandemic, including any resurgence of COVID-19 cases, and the related challenging macroeconomic conditions, including, among others, those described above, alone or in combination with others, may have a material adverse effect on our business and operations, results of operations, financial condition, and cash flows. It is not possible at this time to estimate the complete impact that the COVID-19 pandemic and the related challenging economic conditions could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.
Macroeconomic conditions may continue to worsen leading to changes in monetary policy and other responses from governmental bodies, infections may resurge or become more widespread and the limitation on our ability to travel and timely sell and distribute our products, as well as any closures or supply disruptions, may be enacted or extended for longer periods of time, each of which alone or in combination with others, would have a negative impact on our business, financial condition and operating results. We will continue to monitor the impact of the COVID-19 pandemic, any resurgence of COVID-19 cases, and related challenging macroeconomic conditions on all aspects of our business.
Because a portion of our manufacturing takes place in China, a significant disruption in the construction or operation of our manufacturing facility in China, political unrest in China, tariffs, impact of outbreaks of health epidemics, such as the COVID-19 pandemic, or changes in social, political, trade, health, economic, environmental, or climate-related conditions or in laws, regulations and policies governing foreign trade could materially and adversely affect our business, financial condition and results of operations.
We currently manufacture the starting material for Amphadase® and enoxaparin as well as the APIs for isoproterenol and nitroprusside at our manufacturing facility in China, and we plan to use this facility to manufacture several of the APIs for products in our pipeline. Additionally, we intend to continue to invest in the expansion of this manufacturing facility. Our manufacturing facility and operations in China involve significant risks, including:
| ● | disruptions in the construction of the manufacturing facility; |
| ● | interruptions to our operations in China or the inability of our manufacturing facility to produce adequate quantities of raw materials or APIs to meet our needs as a result of natural catastrophic events or other causes beyond our control such as power disruptions or widespread disease outbreaks, including the recent outbreaks that impact animal-derived products, such as the importation of pig-derived crude heparin from countries impacted by the African swine flu, and the ongoing COVID-19 pandemic, which has resulted in and may in the future result in, business closures, transportation restrictions, import and export complications, and otherwise cause shortages in the supply of raw materials or cause disruptions in our manufacturing capability; |
| ● | product supply disruptions and increased costs as a result of heightened exposure to changes in the policies of the Chinese government, political unrest or unstable economic conditions in China, including China’s policies with respect to COVID-19; |
| ● | the imposition of additional tariffs, export controls or other trade barriers as a result of changes in social, political, and economic conditions or in laws, regulations, and policies governing foreign trade, including U.S. and foreign export controls such as U.S. controls preventing the export of a wide-range of items to Russia, new controls impacting the ability to send certain products and technology, specifically related to semi-conductor manufacturing and supercomputing to China without an export license, and the addition of new China-based entities to certain U.S. restricted party lists including the Entity List and Unverified List, trade sanctions and import laws and regulations, the tariffs previously implemented and additional tariffs that have been proposed by the U.S. government on various imports from China and by the Chinese government on certain U.S. goods, the scope and duration of which, if implemented, remain uncertain; |
| ● | the nationalization or other expropriation of private enterprises or intellectual property by the Chinese government, which could result in the total loss of our investment in China; and |
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| ● | interruptions to our manufacturing or business operations resulting from geo-political actions, including war and terrorism such as the war in Ukraine, natural disasters including earthquakes, typhoons, floods, and fires, or outbreaks of health epidemics or outbreaks in livestock or animals that impact or restrict importation, use, or distribution of animal-derived products. |
Any of these matters could materially and adversely affect our business and results of operations. These interruptions or failures could impair our ability to operate our business, impede the commercialization of our product candidates or delay the introduction of new products, impact our product quality, or impair our competitive position.
We are actively monitoring and assessing the ongoing impact of the COVID-19 pandemic on our business. This includes evaluating the impact on our employees, suppliers, and logistics providers as well as evaluating governmental actions being taken to curtail the spread of the virus. For example, in the first quarter of 2022, increases in COVID-19 cases in Shanghai, China, led to shutdowns and delays at the ports in Shanghai. However, the extent of any future shutdown or delay is highly uncertain and difficult to predict. Any material adverse effect on our employees, suppliers, and logistics providers could have a material adverse effect on our manufacturing operations in China or the supply of raw materials or APIs originating from China.
The FDA approval process for changes to existing products (such as change of components or API supplier) is time-consuming and complicated, and we may not obtain the FDA approval required for a such changes within the timeline we desire, or at all.
The development, testing, manufacturing, marketing and sale of generic and proprietary pharmaceutical products and biological products are subject to extensive federal, state and local regulation in the U.S. and other countries. Satisfaction of all regulatory requirements, which typically takes years for drugs that require regulatory approval in ANDAs, NDAs, biological license applications, or BLAs, or biosimilar applications is dependent upon the type, complexity and novelty of the product candidate and requires the expenditure of substantial resources for research (including qualification of suppliers and their supplied materials), development, in vitro and in vivo (including nonclinical and clinical trials) studies, manufacturing process development and commercial scale up. Some of our products are drug-device combination products that are regulated as drug products by the FDA, with consultation from the FDA’s Center for Device and Radiological Health. These combination products require the submission of drug applications to the FDA. All of our products are subject to compliance with the FFDCA and/or the Public Health Service Act, or PHSA, and with the FDA’s implementing regulations. Failure to adhere to applicable statutory or regulatory requirements by us or our business partners would have a material adverse effect on our operations and financial condition. In addition, in the event we are successful in developing product candidates for distribution and sale in other countries, we would become subject to regulation in such countries. Such foreign regulations and product approval requirements are expected to be time consuming and expensive as well.
We may encounter delays or agency rejections during any stage of the regulatory review and approval process based upon a variety of factors, including without limitation the failure to provide clinical data demonstrating compliance with the FDA’s requirements for safety, efficacy and quality. Those requirements may become more stringent prior to submission of our applications for approval or during the review of our applications due to changes in the law or changes in FDA policy or the adoption of new regulations. After submission of an application, the FDA may refuse to file the application, deny approval of the application or require additional testing or data. The FDA can convene an Advisory Committee to assist the FDA in examining specific issues related to the application. For example, we initially filed an NDA, for our Primatene MIST® product in July 2013, but FDA approval was not granted until November 2018 due to delays caused by the FDA’s requirement that we provide additional non-clinical information, label revision and follow-up studies (including label comprehension and behavioral/human factor studies), and that we make packaging and label revisions. Additionally, we received Complete Response Letters, or CRLs, from the FDA asking for more information before they could approve the ANDA for our epinephrine vial product. These CRLs have delayed the approval of this product.
Under various user fee enactments, the FDA has committed to timelines for its review of NDAs, ANDAs, BLAs and biosimilar applications. However, the FDA’s timelines described in its guidance on these statutes are flexible and subject to changes based on workload and other potential review issues that may delay the FDA’s review of an application.
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Further, the terms of approval of any applications may be more restrictive than our expectations and could affect the marketability of our products.
The FDA also has the authority to revoke or suspend approvals of previously approved products for cause, to debar companies and individuals from participating in the approval process for ANDAs, to request recalls of allegedly violative products, to seize allegedly violative products, to obtain injunctions that may, among other things, close manufacturing plants that are not operating in conformity with cGMP and stop shipments of potentially violative products and to prosecute companies and individuals for violations of the FFDCA.
We were informed that one of our API suppliers has discontinued manufacturing an API included in one of our commercial products. We are currently in the process of qualifying one of our subsidiaries to supply the necessary API, and are required to obtain FDA approval of our new API supply. In the event the FDA does not grant approval or any additional approvals for the new API supply are delayed, such actions would temporarily force us to stop manufacturing our impacted commercial product, potentially for a considerable period of time. If we are forced to stop manufacturing this commercial product or any of our commercial products in the future, for any length of time, it could have a material effect on our operating results and financial condition.
Our business may be affected by new sanctions and export controls targeting Russia and other responses to Russia’s invasion of Ukraine.
As a result of Russia's invasion of Ukraine, the U.S., the U.K. and the EU governments, among others, have developed coordinated sanctions and export-control measure packages.
Based on the public statements to date, these packages include:
| ● | comprehensive financial sanctions against major Russian banks (including SWIFT cut off); |
| ● | designations of individuals and entities involved in Russian military activities; |
| ● | additional designations of Russian individuals including but not limited to those with significant business interests and government connections; and |
| ● | enhanced export controls and trade sanctions targeting Russia’s imports of a wide range of goods as a whole, including potentially tighter controls on exports and reexports of items previously subject to only a low level of control, stricter licensing policy with respect to issuing export licenses, and/or increased use of “end-use” controls to block or impose licensing requirements on exports. |
Prior to Russia’s invasion of Ukraine, we sold APIs indirectly to Russian customers. The imposition of enhanced export controls and economic sanctions on transactions with Russia and Russian entities by the U.S., the U.K., and/or the EU could prevent us from selling our products to Russian customers. In addition, even if a Russian entity is not formally subject to sanctions, customers of such Russian entity may decide to reevaluate, or cancel projects with such entity, and such actions could have a similar impact on us as if sanctions were applied directly as described above. Depending on the extent and breadth of new sanctions or export controls that may be imposed against Russia, it is possible that our business, results of operations and financial condition could be adversely affected.
The Affordable Care Act and certain legislation and regulatory proposals may increase our costs of compliance and negatively impact our profitability over time.
In March 2010, former President Barack Obama signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, which we refer to collectively as the Affordable Care Act. The Affordable Care Act made extensive changes to the delivery of health care in the United States. We expect that the rebates, discounts, taxes and other costs resulting from the Affordable Care Act over time will have a negative effect on our expenses and profitability in the future. Furthermore, the Independent Payment Advisory Board created by the Affordable Care Act to reduce the per capita rate of growth in Medicare spending could potentially limit access to certain
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treatments or mandate price controls for our products. Moreover, expanded government investigative authority and increased disclosure obligations may increase the cost of compliance with new regulations and programs.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, or ACA. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA remains in effect in its current form. It is unclear how this Supreme Court decision, future litigation, or healthcare measures promulgated by the Biden administration will impact our business, financial condition and results of operations. Complying with any new legislation or changes in healthcare regulation could be time-intensive and expensive, resulting in material adverse effect on our business.
In addition, there have been a number of other legislative and regulatory proposals aimed at changing the pharmaceutical industry. For example, in November 2013, Congress passed the Drug Quality and Security Act, or the DQSA. The DQSA establishes federal pedigree tracking standards requiring drugs to be labeled and tracked at the lot level, preempts state drug pedigree requirements, and will eventually require all supply-chain stakeholders to participate in an electronic, interoperable prescription drug track and trace system. The DQSA also establishes new requirements for drug wholesale distributors and third-party logistics providers, including licensing requirements in states that had not previously licensed such entities. As a result of these and other new proposals, we may determine to change our current manner of operation, provide additional benefits or change our contract arrangements, any of which could have a material adverse effect on our business, financial condition and results of operations.
Former President Barack Obama also signed into law the Food and Drug Administration Safety and Innovation Act. The law and related agreements make several significant changes to the FFDCA and FDA’s processes for reviewing marketing applications that could have a significant impact on the pharmaceutical industry, including, among other things, the following:
| ● | reauthorizes the Prescription Drug User Fee Act, which increases the amount of associated user fees, and, for certain types of applications, increases the expected time frame for FDA review of new drug applications, or NDAs; |
| ● | permanently reauthorizes and makes some revisions to the Best Pharmaceuticals for Children Act and the Pediatric Research Equity Act, which provide for pediatric exclusivity and mandated pediatric assessments for certain types of applications, respectively; |
| ● | revises certain standards and requirements for FDA inspections of manufacturing facilities and the importation of drug products from foreign countries; |
| ● | creates incentives for the development of certain antibiotic drug products; |
| ● | modifies the standards for accelerated approval of certain new medical treatments; |
| ● | expands the reporting requirements for potential and actual drug shortages; |
| ● | requires the FDA to issue a report on, among other things, ensuring the safety of prescription drugs that have the potential for abuse; |
| ● | requires the FDA to hold a public meeting regarding the potential rescheduling of drug products containing hydrocodone, which was held in October 2012; and |
| ● | requires electronic submission of certain marketing applications following the issuance of final FDA regulations. |
The full impact of new laws and regulations and changes to any existing regulations by the Biden administration is uncertain; however, we anticipate that it will have an adverse effect on our results of operations.
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There has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at increasing competition for prescription drugs. In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes. Various industry stakeholders, including pharmaceutical companies, the U.S. Chamber of Commerce, the National Infusion Center Association, the Global Colon Cancer Association, and the Pharmaceutical Research and Manufactures of America, have initiated lawsuits against the federal government asserting that the price negotiation provision of the Inflation Reduction Act are unconstitutional. The impact of these judicial challenges, legislative, executive, and administrative actions and any future healthcare measures and agency rules implemented by the government on us and the pharmaceutical industry as a whole is unclear. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our approved products.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, in September 2020, the Governor of California signed legislation that brings California one step closer to establishing its own generic drug label, which could have significant impact on the generic drug industry and generic drug pricing. A number of states are also considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws.
Additionally, we encounter similar regulatory and legislative issues in most other countries. In the European Union, or EU, and some other international markets, the government provides health care at low cost to consumers and regulates pharmaceutical prices, patient eligibility or reimbursement levels to control costs for the government-sponsored health care system. This international system of price regulations may lead to inconsistent prices.
If significant additional reforms are made to the U.S. health care system, or to the health care systems of other markets in which we operate, those reforms could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASE OF EQUITY SECURITIES
(c)Issuer Purchases of Equity Securities
The table below provides information with respect to repurchases of our common stock.
|
|
| Total Number of Shares |
| Maximum Number of |
| ||||
Average | Purchased as Part of | Shares that May Yet Be |
| |||||||
Total Number of Shares | Price Paid | Publicly Announced Plans | Purchased Under the Plans |
| ||||||
Period | Purchased (1) | per Share | or Programs | or Programs |
| |||||
April 1 – April 30, 2023 |
| — |
| $ | — | — |
| — | ||
May 1 – May 31, 2023 |
| 3,585 | 35.95 |
| 3,585 |
| — | |||
June 1 – June 31, 2023 |
| — | — |
| — |
| — | |||
| (1) | On November 7, 2022, we announced that our Board of Directors authorized an increase of $50.0 million to our share buyback program. As of June 30, 2023, $35.5 million remained available for repurchase under such program. The share buyback program does not have an expiration date. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During our last fiscal quarter, the following directors and officers, as defined in Rule 16a-1(f), adopted a Rule 10b5-1 trading arrangement, as defined in Regulation S-K Item 408, as follows:
On May 19, 2023, Jacob Liawatidewi, our Executive Vice President of Sales and Marketing and Corporate Administration Center, President of Amphastar France Pharmaceuticals, S.A.S., Corporate Secretary, and Director, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 28,816 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until August 29, 2024, or earlier if all transactions under the trading arrangement are completed.
On June 5, 2023, William J. Peters, our Chief Financial Officer, Executive Vice President of Finance, and Treasurer, President of International Medication Systems, Limited, and Director, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 138,129 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until August 15, 2024, or earlier if all transactions under the trading arrangement are completed.
On June 9, 2023, Mary Z. Luo, our Chief Operating Officer, Chief Scientist and Chairman of the Board of Directors, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 351,186 shares of our common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until June 9, 2024, or earlier if all transactions under the trading arrangement are completed.
On June 13, 2023, Floyd F. Petersen, a member of our Board of Directors, adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 4,500 shares of our common stock. The trading
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arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until June 4, 2024, or earlier if all transactions under the trading arrangement are completed.
No other officers or directors, as defined in Rule 16a-1(f), adopted or terminated a Rule 10b5-1 trading arrangement as defined in Regulation S-K Item 408, during the last fiscal quarter.
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ITEM 6. EXHIBITS
Exhibit |
| Description |
10.1* | ||
10.2* | ||
10.3* | ||
10.4 | ||
31.1 | ||
31.2 | ||
32.1# | ||
32.2# | ||
|
| |
101.INS | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document | |
104 | Cover Page Interactive File (Formatted as Inline XBRL and contained in Exhibit 101) | |
# | The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act (including this Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference. |
* | Certain confidential information contained in this Exhibit was omitted by means of marking such portions with brackets because the identified confidential information (i) is not material and (ii) would be competitively harmful if publicly disclosed. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMPHASTAR PHARMACEUTICALS, INC. | |
By: | /s/ JACK Y. ZHANG |
Jack Y. Zhang | |
Chief Executive Officer |
Date: August 9, 2023
AMPHASTAR PHARMACEUTICALS, INC. | |
By: | /s/ WILLIAM J. PETERS |
William J. Peters | |
Chief Financial Officer |
Date: August 9, 2023
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Exhibit 10.1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS ([***]), HAS BEEN OMITTED BECAUSE
THE INFORMATION (I) IS NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED
ii
iii
EXHIBITS
Exhibit ABill of Sale and Assignment and Assumption Agreement
Exhibit BIntellectual Property License Agreement
Exhibit CIP Assignment Agreement
Exhibit DManufacturing Services Agreement
Exhibit ELocemia Assumption Agreement
Exhibit FTransition Services Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of April 21, 2023, is made by and among Amphastar Medication Co., LLC, a Delaware limited liability company (“Buyer”), Eli Lilly and Company, an Indiana corporation (“Seller”), and, solely for the purpose of Section 7.6 and Section 12.15 (and any provision of Article I or Article XII to give effect thereto), Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Buyer Guarantor”).
WHEREAS, Seller sells the pharmaceutical product that currently is marketed for sale to consumers under the trademark BAQSIMI®, and in connection therewith, operates the Business; and
WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller the Transferred Assets and assume the Assumed Liabilities, in each case, upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:
“Accounting Firm” has the meaning set forth in Section 3.2(k).
“Affiliate” means, with respect to any Person, any other Person that controls, is controlled by or is under common control with such Person (and for this purpose, the term control means the power to direct the management and policies of a Person (directly or indirectly), whether through ownership of voting securities, by Contract or otherwise (and the terms controlling and controlled have meanings correlative to the foregoing)).
“Aggregate Net Sales Earnout” has the meaning set forth in Section 3.2(c).
“Aggregate Net Sales Milestone” has the meaning set forth in Section 3.2(c).
“Agreement” has the meaning set forth in the preamble.
“Allocation” means an allocation of the Purchase Price and the absolute value of the Assumed Liabilities among the Transferred Assets prepared by Seller in accordance with Section 1060 of the Code and the Treasury Regulations thereunder.
“Allocation Statement” has the meaning set forth in Section 3.4(a).
“Ancillary Agreements” means the Bill of Sale and Assignment and Assumption Agreement, the IP Assignment Agreement, the Manufacturing Services Agreement, the Locemia
Assumption Agreement, the Transition Services Agreement, the Confidentiality Agreement, the Intellectual Property License Agreement and the other documents, instruments, exhibits, annexes, schedules or certificates contemplated hereby and thereby.
“Annual Net Sales Earnout” has the meaning set forth in Section 3.2(b).
“Annual Net Sales Milestone” has the meaning set forth in Section 3.2(b).
“Anti-Corruption Laws” means the United States Foreign Corrupt Practices Act and similar anti-corruption or anti-bribery laws of any other jurisdiction (national, state or local) where Seller operates concerning or relating to public sector or private sector bribery or corruption and applicable to the Historical Business or the Product.
“Assumed Liabilities” has the meaning set forth in Section 2.3(a).
“Audit” has the meaning set forth in Section 8.8(a).
“Audit Firm” has the meaning set forth in Section 8.8(a).
“Bill of Sale and Assignment and Assumption Agreement” means the Bill of Sale and Assignment and Assumption Agreement, in the form attached hereto as Exhibit A.
“Business” means any and all of the following activities as conducted by Seller or any of its Subsidiaries, as of the date hereof or as of the Closing Date, with respect to the Product: development, manufacturing, researching (including non-clinical and clinical research), testing, and commercialization (including marketing, promotion, pricing, selling, importing and exporting).
“Business Counterparties” has the meaning set forth in Section 7.3.
“Business Day” means any day other than a Saturday, Sunday or other day on which banks in New York City, New York or Indianapolis, Indiana are permitted or required to close by applicable Law.
“Business Financials” has the meaning set forth in Section 5.6.
“Business Sale” has the meaning set forth in Section 12.7.
“Buyer” has the meaning set forth in the preamble.
“Buyer Business” means any and all of the following activities as conducted by or on behalf of Buyer or any of its Affiliates, following the Closing, with respect to the Product: development, manufacturing, researching (including non-clinical and clinical research), testing, and commercialization (including marketing, promotion, pricing, selling, importing and exporting).
“Buyer Credit Agreement” has the meaning set forth in Section 3.2(l).
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“Buyer Fundamental Representations” means the representations and warranties made in Section 6.1 (Buyer’s Organization; Good Standing), Section 6.2 (Authority; Enforceability) and Section 6.7 (Brokers).
“Buyer Guarantor” has the meaning set forth in the preamble.
“Buyer Indemnified Parties” has the meaning set forth in Section 11.2.
“Buyer Officer’s Certificate” has the meaning set forth in Section 9.3(c).
“Closing” and “Closing Date” have the respective meanings set forth in Section 4.1.
“Closing Payment” has the meaning set forth in Section 3.1.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Commercially Reasonable Efforts” means, with respect to performance by or on behalf of Buyer or any of its Affiliates of any applicable activities hereunder with respect to the Product or any other Milestone Product, the expenditure of efforts and resources consistent with those expended by a similarly situated pharmaceutical company (taken as a whole and after giving effect to the transactions contemplated by this Agreement) to develop, manufacture, commercialize, sell and otherwise exploit pharmaceutical products owned by such company or to which such company has exclusive rights and that are at a similar stage of development or product life and with similar market potential taking into account issues of safety and efficacy, the competitiveness of third-party products in development and in the marketplace, the proprietary position of the product (including with respect to patent or regulatory exclusivity), the regulatory approval status and the profitability of the applicable product, and other relevant legal, medical or commercial factors, in each case, without taking into account the requirement to make any payment under this Agreement with respect to the Earnout Consideration. Commercially Reasonable Efforts does not require that Buyer or any of its Affiliates develop, manufacture, commercialize, or sell Buyer Guarantor’s injectable glucagon product in an identical manner as the Product, so long as the efforts used and employed to develop, manufacture, commercialize, sell and otherwise exploit the Product is at least comparable in the aggregate to the efforts used with respect to Buyer Guarantor’s injectable glucagon product, taking into account the factors set forth in the preceding sentence.
“Commitment Letter” has the meaning set forth in Section 6.10(a).
“Confidentiality Agreement” has the meaning set forth in Section 7.4.
“Contract” means any legally binding contract, agreement, instrument, license, lease, or understanding of any kind to which a Person is a party to or by which a Person or its assets is bound, whether oral or written, together with amendments, supplements and other modifications thereto.
“Contract Year” means the twelve (12) consecutive calendar months period starting on the first day of the first calendar month following the Closing Date (unless the Closing Date occurs on the first day of a calendar month, in which case the twelve (12) consecutive calendar months period
3
shall start on the Closing Date) and each subsequent twelve (12) consecutive calendar month period commencing on the anniversary of such date.
“Control” means, with respect to any asset or property, including Intellectual Property, a Person’s possession, whether by ownership, license, or otherwise, of the legal right to grant the right to access or use, or to grant a license or a sublicense to, such asset or property, including Intellectual Property, without violating the rights of any Third Party or any terms of any Contract between such Person (or any of its Affiliates) and any Third Party, or any applicable Law.
“Controlling Party” has the meaning set forth in Section 11.5(b).
“Copyright” means rights in works of authorship (including advertisements and publications), copyrights (including in software), and database rights.
“Covered Material Contracts” has the meaning set forth in Section 5.19(b).
“COVID-19” means COVID-19 or SARS-COV-2, including any future resurgence, evolutions, mutations or variants thereof and/or any related or associated disease outbreaks, epidemics and/or pandemics.
“COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, safety or similar Law, binding directive or guidelines promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including any Law passed by any Governmental Authority in response to COVID-19.
“Data Room” means the electronic data room entitled “Brockhouse”, hosted by Datasite and located at https://datasite.com.
“De Minimis Threshold” has the meaning set forth in Section 11.4(e).
“Debt Commitment Letter” has the meaning set forth in Section 6.10(a).
“Debt Financing Parties” has the meaning set forth in Section 8.9(a).
“Deductible” has the meaning set forth in Section 11.4(e).
“Deferred Payment” has the meaning set forth in Section 3.3(a).
“Definitive Financing Agreements” has the meaning set forth in Section 8.9(a).
“Demo Version” means the demonstration version of the device relating to the Product that is provided by Seller or any of its Subsidiaries to Third Parties for training purposes.
“Direct Claim” has the meaning set forth in Section 11.5(d).
“Earnout Consideration” means the Annual Net Sales Earnouts and the Aggregate Net Sales Earnout.
4
“Earnout Consideration Dispute Notice” has the meaning set forth in Section 3.2(j).
“Earnout Dispute Period” has the meaning set forth in Section 3.2(j).
“Earnout Expiration Date” has the meaning set forth in Section 3.2(a).
“Employee” means any current or former employee, consultant or director of Seller or any of its Subsidiaries.
“Employee Benefit Plan” means any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written or unwritten or otherwise, funded or unfunded, including each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is maintained, contributed to, or required to be contributed to, by Seller or any of its Subsidiaries for the benefit of any Employee, or with respect to which Seller or any of its Subsidiaries has any liability or obligation, and, in each case, other than any such plan or arrangement maintained or to which contributions are required by any Governmental Authority.
“Employment Agreement” means each management, employment, severance, consulting, relocation, repatriation, expatriation, visa, work permit or other agreement, contract or understanding between Seller or any of its Subsidiaries and any Employee.
“Employment Liabilities” means any and all Liabilities of any kind relating to any Employee Benefit Plan, Employment Agreement or otherwise relating to an Employee and his or her employment with Seller or any of its Subsidiaries.
“Encumbrance” means any mortgage, charge, lien, license, claim, option, right of first refusal, first offer or first negotiation, security interest, easement, right of way, pledge or encumbrance of any kind or character whatsoever.
“Enforceability Exceptions” has the meaning set forth in Section 5.2.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Excluded Actions” has the meaning set forth in Section 2.2(b)(xii).
“Excluded Assets” has the meaning set forth in Section 2.2(b).
“Excluded Liabilities” has the meaning set forth in Section 2.3(b).
“Excluded Taxes” means without duplication, (a) all Taxes of Seller and its Subsidiaries for any Tax period, (b) all Taxes relating to the Historical Business, the Transferred Assets or the Assumed Liabilities for any Pre-Closing Tax Period (determined in the case of a Proration Period in accordance with Section 8.4(b)) and (c) Seller’s allocable share of Transfer Taxes pursuant to Section 8.4(a).
“Exhibits” means, collectively, the Exhibits referred to throughout this Agreement.
5
“Expiration Date” has the meaning set forth in Section 11.1.
“FDA” means the U.S. Food and Drug Administration.
“Fee Letters” has the meaning set forth in Section 6.10(a).
“Financing” means the debt financing incurred or intended to be incurred pursuant to the Commitment Letter, including the borrowing of loans contemplated by the Commitment Letter.
“Financing Conditions” has the meaning set forth in Section 6.10(a).
“Financing Sources” means the agents, arrangers, lenders and other entities that have committed to provide or arrange the Financing, including the parties to the Commitment Letter or any related engagement letter in respect of the Financing or to any joinder agreements, credit agreements, indentures, notes, purchase agreements or other agreements entered pursuant thereto, together with their Affiliates’ and their and their Affiliates’ current, former or future officers, directors, employees, partners, trustees, shareholders, equityholders, managers, members, limited partners, controlling persons, agents and Representatives of each of them and the successors and assigns of the foregoing Persons (but in each case excluding Buyer and any of its Affiliates), in each case, in their capacities as such.
“Fraud” means an act, committed by a Party in relation to this Agreement or the transactions contemplated by this Agreement, with intent to deceive another Party, or to induce such other Party to enter into this Agreement and requires: (a) a false representation in Article V or Article VI of this Agreement, (b) actual knowledge that such representation is false or the Person making such representation believes it is false, (c) the intention to induce the other Person to whom such representation is made to enter into this Agreement or otherwise act or refrain from acting in reliance upon it, (d) causing that other Person, in reliance upon such false representation to enter into this Agreement or otherwise take or refrain from taking action and (e) causing such other Person to suffer damage by reason of such reliance. For the avoidance of doubt, “Fraud” does not include, and no claim may be made by any Person in relation to this Agreement or the transactions contemplated by this Agreement for, constructive fraud or other claims based on constructive knowledge, negligence, recklessness, misrepresentation, equitable fraud or similar theories.
“General Cap” has the meaning set forth in Section 11.4(a)(i).
“Governmental Authority” means any supra-national, federal, foreign, national, state, county, local, municipal or other governmental, regulatory or administrative authority, agency, commission or other instrumentality, any court, tribunal or arbitral body with competent jurisdiction.
“Governmental Official” means any (a) officer, agent, or employee of a Governmental Authority, (b) person acting in an official capacity for or on behalf of a Governmental Authority, (c) candidate for government or political office, (d) director, officer, employee or agent of a government-owned or mixed-capital company or (e) member of a royal family.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by any Governmental Authority.
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“Guaranteed Obligations” has the meaning set forth in Section 12.15.
“Health Care Laws” means all health care Laws applicable to the Product or the Historical Business, including research (including non-clinical and clinical research), development, testing, production, processing, manufacture, packaging, transfer, storage, distribution, approval, labeling, marketing, promotion, pricing, selling, importing, or exporting of the Product or any drug substance, active ingredient, delivery device or component thereof, including licensing, accreditation, and certification, establishment registration, product listing, good manufacturing practices, record-keeping, adverse event reporting, reporting of corrections, removals, and recalls, reimbursement and sale of Product, including: the Federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); any criminal laws relating to health care fraud and abuse, including to 18 U.S.C. Sections 286 and 287 and the health care fraud criminal provisions under HIPAA; the Civil Monetary Penalties Law, 42 U.S.C. §§ 1320a-7a and 1320a-7b; the Exclusion Statute, 42 U.S.C. § 1320a-7; HIPAA; the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq. and applicable implementing regulations and final guidance issued by the FDA (collectively, the “FDCA”), including those requirements relating to current good manufacturing practices, good laboratory practices, good clinical practices and investigational use; the Public Health Service Act, 42 U.S.C. §§ 201 et seq.; the Federal Trade Commission Act; the Controlled Substances Act; the Patient Protection and Affordable Care Act, Pub. L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. 111-152; Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395lll (Medicare); Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396w-5 (Medicaid); 10 U.S.C. § 1071 et seq (TRICARE); the Sunshine Act, 42 U.S.C. § 1320a-7h, and similar state and foreign laws related to transparency and reporting of payments and transfers of value to healthcare professionals and teaching hospitals; all implementing rules and regulations promulgated pursuant to the foregoing laws; and similar foreign, federal, state and local laws and regulations.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (Title XIII of the American Recovery and Reinvestment Act of 2009), as the same may be amended, modified or supplemented from time to time and any successor statute thereto, and together with any and all Laws promulgated from time to time thereunder.
“Historical Business” means any and all of the following activities as conducted by Seller or any of its Subsidiaries historically, as of the date hereof or as of the Closing (unless the relevant provision of this Agreement expressly refers to the conduct of the Historical Business at some other specific time, in which case “Historical Business” shall refer to such business as conducted by Seller or any of its Subsidiaries at such time), with respect to the Product: development, manufacturing, researching (including non-clinical and clinical research), testing, and commercialization (including marketing, promotion, pricing, selling, importing and exporting).
“Historical Business Financials” has the meaning set forth in Section 8.8(a).
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.
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“IND” means an investigational new drug application or clinical trial application filed in accordance with 21 C.F.R. Part 312, as amended, with the FDA or any comparable foreign Governmental Authority, including all documents, data and other information concerning the applicable drug that are contained in such application.
“Indemnified Party” has the meaning set forth in Section 11.5(a).
“Indemnifying Party” has the meaning set forth in Section 11.5(a).
“Industry Codes” means all applicable rules of non-governmental bodies such as pharmaceutical industry trade associations and self-regulatory organizations that are generally accepted as “good practice” within the research based pharmaceutical industry, including those relating to good marketing practices and the relationship of pharmaceutical companies with health care providers and patients.
“Intellectual Property” means (a) Patents; (b) Know-How; (c) Trademarks and Domain Names and (d) Copyrights.
“Intellectual Property License Agreement” means the Intellectual Property License Agreement, in the form attached hereto as Exhibit B.
“Internal Compliance Codes” means Seller’s internal policies and procedures intended to ensure that the Seller complies with applicable Laws, Industry Codes, and Seller’s internal ethical, medical and similar standards.
“IP Assignment Agreement” means the IP assignment agreement, in the form attached hereto as Exhibit C.
“Know-How” means all technical information, know-how and data, including inventions (whether patentable or not), patent disclosures, discoveries, trade secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data.
“Knowledge” of Seller means all such facts, circumstances or other information of which the applicable Person set forth on Section 1.1(a) of the Seller Schedules is actually aware after having performed a reasonable inquiry of such Person’s direct reports.
“Law” means any applicable law, judgment, order, decree, statute, ordinance, rule, code, regulation, directive or other requirement or rule of law enacted, issued or promulgated by any Governmental Authority.
“Liability” means any debt, liability, claim, expense, commitment, duty, cost, fee, loss, damage, guarantee, endorsement or obligation of whatever kind, whether direct or indirect, accrued or fixed, absolute or contingent, matured or not, known or unknown, asserted or unasserted, liquidated or unliquidated, incurred or consequential, due or to become due, on or off balance sheet or determined or determinable (including liabilities as guarantor or otherwise with respect to obligations of others, and contingent liabilities, regardless of whether claims in respect
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thereof have been asserted), including those arising under any Contract, applicable Law or Proceeding, accounts payable and royalties payable.
“Locemia Assumption Agreement” means the Locemia Assumption Agreement, in the form attached hereto as Exhibit E.
“Locemia Purchase Agreement” means that certain Asset Purchase Agreement, dated as of October 9, 2015, by and between Locemia Solutions ULC and Seller, including any amendments, supplements and other modifications thereto.
“Losses” means any and all damages, losses, liabilities, judgments, Taxes, penalties, costs and expenses (including reasonable out-of-pocket legal fees and expenses incurred in investigating, defending against, settling and/or prosecuting any of the foregoing); provided, that “Losses” shall not include (i) any diminution in value, punitive or exemplary damages, in each case except to the extent such damages are determined to be payable to a Third Party in a final non-appealable judgment by a Governmental Authority made with respect to such Third Party’s claim, or (ii) damages calculated on multiples of earnings or other similar metric approaches.
“Manufacturing Services Agreement” means that Manufacturing Services Agreement to be entered into at the Closing, substantially in the form attached hereto as Exhibit D, with such changes as may be mutually agreed upon between the parties hereto.
“Material Adverse Effect” means any event, development, occurrence, change or effect that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on the Transferred Assets or the financial condition, assets, liabilities or results of operations of the Business, taken as a whole; provided, however, that any event, development, change or effect arising out of, resulting from or attributable to (a) any event, development, occurrence or change or series of events, developments, occurrences or changes affecting (i) the U.S. (or any other country or jurisdiction in which the Business operates or in which products or services of the Business are used or distributed) economy or the global economy generally or capital, financial, banking, credit or securities markets generally, including changes in interest or exchange rates, (ii) political conditions generally of the U.S. or any other country or jurisdiction in which the Business operates or in which products or services of the Business are used or distributed or (iii) any industry generally in which the Business operates or in which products or services of the Business are used or distributed, (b) the negotiation, pendency, announcement or consummation of the transactions contemplated by, or the performance of obligations under, this Agreement or any other Transaction Agreement, including adverse effects related to (i) the identity of Buyer or its Affiliates, (ii) threatened or actual loss of, or disruption in, any customer, employee or landlord relationships or (iii) loss of any personnel, (c) any changes in applicable Law or U.S. GAAP, or accounting principles, practices or policies that Seller required to adopt, or the enforcement or interpretation thereof, (d) actions taken or omitted following the date hereof at the written request or with the written consent of Buyer, or taken by Buyer or its Affiliates with respect to the transactions contemplated hereby, (e) the occurrence of any act of God or other calamity or force majeure events (whether or not declared as such), including any strike, labor dispute, civil disturbance, embargo, pandemic (including the COVID-19 pandemic, and any future resurgence, or evolutions or mutations, of COVID-19 or related disease outbreaks, epidemics or pandemics), natural disaster, fire, flood, hurricane, tornado, or other similar weather event, (f) any hostilities,
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acts of war (whether or not declared), sabotage, terrorism, military actions, cyber-attacks or malware attacks or any escalation or worsening of any such hostilities, act of war, sabotage, terrorism, military actions, or cyber-attacks or malware attacks, (g) any failure to meet internal or published projections, estimates or forecasts of revenues, earnings, or other measures of financial or operating performance for any period (provided, that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded) or (h) Excluded Assets or Excluded Liabilities shall not, in any such case, either alone or in combination constitute or be deemed to contribute to a Material Adverse Effect, and otherwise shall not be taken into account in determining whether a Material Adverse Effect has occurred or would be reasonably likely to occur; provided, further, that, in the case of clauses (a), (c), (e) or (f), the event, development, occurrence, change or effect referred to therein does not disproportionately adversely affect the Transferred Assets or the Business, taken as a whole, as compared to other comparable companies in the industries in which the Business operates (in which case only the incremental disproportionate adverse effect may be taken into account in determining whether a Material Adverse Effect has occurred).
“Material Business Contracts” has the meaning set forth in Section 5.19(a).
“Milestone Event” means an Annual Net Sales Milestone or the Aggregate Net Sales Milestone.
“Milestone Payment Date” has the meaning set forth in Section 3.2(d).
“Milestone Product” means (a) any product consisting of a formulation containing glucagon for nasal administration (including the Product), (b) any reformulation, improvement, enhancement, combination, refinement, supplement, or modification of or to any of the foregoing products in (a) (including any change, modification, or improvement to or replacement of the delivery device) ((a) and (b), collectively, the “Nasal Glucagon Products”), in each case of this clause (b) containing glucagon for nasal administration, and (c), solely for determining Net Sales with respect to the Earnout Consideration, any Other Milestone Product.
“NDA” means a new drug application for a drug submitted in accordance with 505(b) of the FDCA and 21 C.F.R. Part 314, and all amendments and supplements, including all documents, non-clinical and clinical data, chemistry, manufacturing and control information, reports, submissions, communications with any Regulatory Authority, and other information concerning the applicable drug and contained within or referenced by the new drug application in the U.S., and any comparable marketing application submitted to any comparable foreign Governmental Authority, and all amendments and supplements thereto.
“Net Sales” means the gross amount invoiced by a Product Party to any other Person for a Milestone Product (or a combination product containing a Milestone Product) in the Territory less the following items (but only to the extent attributable to a Milestone Product and to the extent actually incurred, given, accrued or specifically allocated for): (a) trade, quantity and cash discounts allowed; (b) discounts, refunds, rebates, chargebacks, retroactive price adjustments (including adjustments arising from consumer discount programs or other similar programs), and any other similar allowances or adjustments which effectively reduce the net selling price of a Milestone Product, (c) Milestone Product returns and allowances, (d) wholesaler distribution fees,
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and (e) any other customary adjustments in accordance with U.S. GAAP as generally and consistently applied by Buyer Guarantor in the preparation of its financial statements filed with the SEC to determine “net sales.”
With respect to a particular country and reporting period, if any Milestone Product is sold as part of a combination product with any other active ingredient(s), then the Parties will determine in good faith the appropriate allocation percentage of Net Sales of the combination product to the applicable Milestone Product (by determining the relative value of the Milestone Product to the combination product) for the purposes of calculating any Earnout Consideration (and agreement to such determination will not be unreasonably withheld by either Party). For greater certainty, (x) the combination of the Product with any device(s) or other functional component(s) shall not be deemed a sale of a combination product and (y) the Product is not a combination product.
Such amounts shall be determined from the books and records of the Product Parties maintained in accordance with U.S. GAAP consistently applied. Buyer further agrees in determining such amounts, it will use Buyer’s then-current standard procedures and methodology, including Buyer’s then-current standard exchange rate methodology for the translation of foreign currency sales into U.S. Dollars. Notwithstanding the foregoing, for any Product Party that is not Buyer or its Affiliates, such books and records may be maintained in accordance with the accounting standards, consistently applied, of such Product Party, and Buyer’s determinations of such amounts may be made based on reports provided by such Product Party to Buyer.
Sales or commercial dispositions of Milestone Products between or among Product Parties and their Affiliates shall be excluded from the computation of Net Sales (except where such Product Parties or Affiliates are end users of a Milestone Product), but Net Sales shall include the subsequent final sales to Third Parties by Product Parties or their Affiliates. Notwithstanding the foregoing, if a Milestone Product is sold or otherwise commercially disposed of for consideration other than cash or in a transaction that is not at arm’s length between buyer and seller, then the gross amount to be included in the calculation of Net Sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s length and for cash. Such amount that would have been invoiced shall be determined, wherever possible, by reference to the average selling price of a Milestone Product in arm’s length transactions in the relevant country. For the avoidance of doubt, (i) any royalties owed by the Product Parties to Third Parties resulting from sales of Milestone Products shall not be a deduction from the gross amount invoiced in the calculation of Net Sales as described in the first sentence of this definition (and for the further avoidance of doubt, Seller shall not be required to share with or reimburse Buyer for any royalties or other payments payable by the Product Parties to Third Parties, which shall be borne entirely by Buyer) and (ii) costs and Liabilities associated with any claim that a Milestone Product does not comply with all applicable Laws with respect to all Milestone Products sold after the Closing Date shall not be a deduction from the gross amount invoiced in the calculation of Net Sales as described in the first sentence of this definition. In no event shall any particular amount of deduction identified above be deducted more than once in calculating Net Sales (i.e., no “double counting” of deductions).
Without limiting the foregoing, the definition of “Net Sales” shall also include, for purposes of this Agreement, the “Net Sales” (as defined in Exhibit B (Net Economic Benefit) to
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the Transition Services Agreement) of Seller or any of its Affiliates or any contractor or agent acting on behalf of Seller or any of its Affiliates.
“Non-Controlling Party” has the meaning set forth in Section 11.5(b).
“Non-Transferable Asset” has the meaning set forth in Section 2.4(a).
“Other Milestone Product” means any product (other than a Nasal Glucagon Product) that (a) infringes a valid claim of a Patent included in the definition of Seller Product Intellectual Property or (b) is manufactured using any Restricted Manufacturing Know-How. The Parties agree that none of Buyer’s products as of the Closing Date, whether in clinical development or commercialization stage, are Other Milestone Products until and unless such product infringes a valid claim of a Buyer Licensed Patent (as defined in the Intellectual Property License Agreement) or is manufactured using the Restricted Manufacturing Know-How.
“Outside Date” has the meaning set forth in Section 10.1(d).
“Party” or “Parties” means Buyer and Seller, and solely for the purpose of Section 7.6 and Section 12.15 (and any provision of Article I or Article XII to give effect thereto), Buyer Guarantor.
“Patents” means patents and patent applications, including any utility models and design patents, and any continuations, continuations-in-part, divisionals, substitutions, reexaminations, reissues, registrations, corrections, additions, confirmation patents, revivals, or any similar modifications of any such patents, and any extensions or restorations of such patents, and any equivalent rights, whether domestic, international, or foreign.
“Permits” means all consents, approvals, authorizations, certificates, filings, notices, permits, concessions, registrations, franchises, licenses or rights of or issued by any Regulatory Authority or other Governmental Authority, including Regulatory Approvals.
“Permitted Business Transfer” has the meaning set forth in Section 3.2(m).
“Permitted Encumbrances” means: (a) Encumbrances for Taxes, assessments and charges or levies of any Governmental Authority not yet due and payable or that may thereafter be paid without penalty or that are being contested in good faith; (b) Encumbrances imposed by statutory or common law materialmen’s, mechanics’, carriers’, workmens’ and repairmen’s liens and transfer restrictions imposed by national, federal or state securities laws; (c) Encumbrances imposed in the ordinary course of business that are not yet due and payable or that may thereafter be paid without penalty or that are being contested in good faith; (d) pledges or deposits to secure obligations under applicable Law to secure public or statutory obligations; (e) liens, title retention arrangements or deposits to secure the performance of bids, trade contracts (other than for borrowed money), conditional sales contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) non-exclusive licenses of Intellectual Property granted by Seller or its Subsidiaries to a service provider or supplier in the ordinary course of business and (g) other Encumbrances that do not impair, and are not reasonably expected to impair, the continued use and operation of the
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assets to which they relate in the conduct of the Business or the Buyer Business in any material respect.
“Permitted License” has the meaning set forth in Section 3.2(m).
“Permitted Licensee” has the meaning set forth in Section 3.2(m).
“Permitted Transferee” has the meaning set forth in Section 3.2(m).
“Person” means any individual, corporation, partnership, limited liability company, joint venture, trust, business association, organization, Governmental Authority or other entity.
“Personal Information” means, in addition to any definition for any similar term (e.g., “personal data” or “personally identifiable information”) provided by applicable Laws, all information that identifies, could be used to identify or is otherwise associated with an individual person (including employees), whether or not such information is directly associated with an identified individual person. For the avoidance of doubt, the definition of “Personal Information” does not include “protected health information,” as defined in HIPAA (as defined herein).
“Post-Closing Audit” has the meaning set forth in Section 8.8(b).
“Post-Closing Business Financials” has the meaning set forth in Section 8.8(b).
“Pre-Closing Tax Period” means (a) any taxable period ending on or before the Closing Date and (b) with respect to any Straddle Period, the portion of such taxable period ending on and including the Closing Date.
“Pricing and Tender Agreements” means the Contracts listed on Section 1.1(e) of the Seller Schedules.
“Proceeding” means any civil, criminal, judicial, administrative or arbitral action, suit, hearing, litigation, proceeding (public or private), claim, cause of action, complaint, audit, mediation, arbitration, investigation or other similar dispute, in each case, by or before any Governmental Authority.
“Product” means any powdered formulation containing glucagon for nasal administration and the related unit dose system for powder marketed for sale (a) by or under the authority of Seller or any of its Subsidiaries to consumers, or (b) for which an application for Regulatory Approval has been submitted to a Regulatory Authority by or under the authority of Seller or any of its Subsidiaries, including the formulation and dose system marketed for sale by or under the authority of Seller of any of its Subsidiaries to consumers as of the date hereof as BAQSIMI®.
“Product Copyrights” means Copyrights Controlled by Seller or its Affiliates as of the date hereof and primarily related to the Product or the Demo Version.
“Product Intellectual Property” means (a) Product Patents, (b) Product Trademark and Domain Names, (c) Product Copyrights and (d) Product Know-How; provided, that Intellectual
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Property owned by the Persons listed in Section 1.1(b) of the Seller Schedules will not be deemed to be Controlled by Seller or any of its Subsidiaries for the purposes of this definition.
“Product Know-How” means Know-How Controlled by Seller or its Affiliates as of the date hereof or the Closing and primarily related to the Product or the Demo Version.
“Product Liabilities” means all claims, Liabilities and Proceedings related to or arising from actual or alleged harm, injury, damage or death to Persons, or damage to property or businesses, including the Historical Business, irrespective of the legal theory asserted, and resulting from or alleged to result from the use, sale or manufacture of any of the Product.
“Product Parties” means collectively, Buyer, its Affiliates or its or their respective assignees or successors-in-interest with respect to a Milestone Product or Product Intellectual Property or any Third Party to whom any of the foregoing has granted a license or sublicense or other rights to commercialize, market or sell any Milestone Product, including any Permitted Transferee or Permitted Licensee, and each, a “Product Party.”
“Product Patents” means (a) the Patents listed in Section 1.1(c) of the Seller Schedules; (b) any continuations, continuations-in-part, divisionals, or other patent applications that claim priority to any of the patent applications or patents referenced in clause (a) or that share a common claim of priority therewith and any foreign counterparts of the foregoing; (c) any patents issuing on any such patent applications (of either clause (a) or clause (b)); (d) any substitutions, reexaminations, reissues, registrations, corrections, additions, confirmation patents, revivals, and/or any similar modifications of any such patents referenced in clauses (a)-(c); and (e) any extensions (including pediatric exclusivity, patent term extension, and supplementary patent certificate extensions), or restorations of such patents (referenced in clauses (a)-(d)), in each case, whether domestic or foreign, including all rights of priority, rights to file and prosecute, and the like.
“Product Trademark and Domain Names” means Trademark and Domain Names on Section 1.1(c) of the Seller Schedules.
“Promotional Materials” has the meaning set forth in Section 2.2(a)(vi).
“Proration Period” has the meaning set forth in Section 8.4(b).
“Purchase Price” has the meaning set forth in Section 3.1.
“Purchaser Termination Fee” has the meaning set forth in Section 10.3(b).
“Records” has the meaning set forth in Section 2.2(a)(i).
“Registered Intellectual Property” has the meaning set forth in Section 5.17(a).
“Regulatory Actions” has the meaning set forth in Section 7.6(d).
“Regulatory Approvals” means with respect to the Product in the applicable regulatory jurisdiction, all permits, licenses, certificates, approvals, clearances, or other authorizations of or
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recognized by the applicable Regulatory Authority necessary to conduct clinical trials of, manufacture, distribute, market, sell or use such Product in such regulatory jurisdiction in accordance with applicable Law (including NDAs or other equivalent applications in the United States or any other jurisdiction, INDs or their foreign equivalents, and pricing and reimbursement approvals, and all supplements and amendments to any of the foregoing).
“Regulatory Authority” means any applicable supranational, federal, foreign, national, regional, state, provincial, local or municipal regulatory agencies, departments, bureaus, commissions, councils, notified body, competent authority, institutional review board or ethics committee, or other Governmental Authority (including the FDA, Federal Trade Commission, Office of Inspector General, Centers for Medicare & Medicaid Services, and similar authorities in any state or foreign jurisdiction) regulating or otherwise exercising authority with respect to the Product.
“Regulatory Laws” shall mean, collectively, any Laws that are designed or intended to prohibit, restrict or regulate actions with respect to a Product or having the purpose or effect of monopolization or lessening of competition through merger or acquisition or restraint of trade or that affect foreign investment, national security or national interest of any jurisdiction.
“Related Party” means any officer or director of Seller or any of its Subsidiaries (or any immediate family member of any of such Person, or any trust, partnership or corporation in which any such Person has or has had an interest).
“Representatives” means the directors, officers, employees, agents, Subsidiaries or advisors (including attorneys, accountants, investment bankers, financial advisers and other consultants and advisors) of the specified Party and such specified Party’s Affiliates.
“Required Business Financials” has the meaning set forth in Section 8.8(a).
“Restricted Business” means the initiation or conduct of a phase 3 clinical trial for, the submission of an NDA for, or the commercialization of a nasal glucagon product for the treatment of hypoglycemia.
“Restricted Business Acquisition” means the ownership, license or obtaining by Seller or any of its Subsidiaries of an interest or right otherwise prohibited by Section 7.9 if (a) no more than 20% of such Person’s revenues were derived from a Restricted Business (measured by the most current annual financial statements published or prepared by the acquired Person in the ordinary course of business) or (b) more than 20% of such Person’s revenues were derived from a Restricted Business (measured by the most current annual financial statements published or prepared by the acquired Person in the ordinary course of business) and within eighteen months after the closing of such acquisition Seller or its Subsidiaries discontinues or enters into a definitive agreement to divest a portion of such Restricted Business such that Seller would otherwise be in compliance with clause (a) of this definition.
“Restricted Manufacturing Know-How” has the meaning set forth in the Intellectual Property License Agreement.
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“Right of Reference or Use” means a “Right of Reference or Use” as such term is defined in 21 C.F.R. §314.3(b), and any non-United States equivalents.
“Schedules” means the Seller Schedules.
“SEC” means the United States Securities and Exchange Commission.
“Seller” has the meaning set forth in the preamble.
“Seller Fundamental Representations” means the representations and warranties of Seller set forth in Section 5.1 (Seller Organization; Good Standing), Section 5.2 (Authority; Enforceability), Section 5.5(a) (Title to Transferred Assets) and Section 5.14 (Brokers).
“Seller Indemnified Parties” has the meaning set forth in Section 11.3.
“Seller IP Sufficiency Representations” means the representations and warranties of Seller set forth in Section 5.17(b).
“Seller Licensed Intellectual Property” has the meaning set forth in the Intellectual Property License Agreement.
“Seller Officer’s Certificate” has the meaning set forth in Section 9.2(d).
“Seller Product Intellectual Property” means all Product Intellectual Property that is owned by Seller or any of its Affiliates as of the date hereof.
“Seller Schedules” means, collectively, the disclosure schedules, dated as of the date hereof, delivered by Seller to Buyer, as amended in accordance with this Agreement, which forms a part of this Agreement.
“Seller SEC Document” means each report, schedule, form, statement, prospectus, registration or other document filed with or furnished to the SEC by Seller during the period beginning on January 1, 2022 and ending as of the date hereof.
“Significant Customer” has the meaning set forth in Section 5.20(a).
“Significant Supplier” has the meaning set forth in Section 5.20(b).
“Specified Letter” means a pre-consummation letter from the Federal Trade Commission in similar form to that set forth in its blog post dated August 3, 2021 and posted at this link: https://www.ftc.gov/system/files/attachments/blog_posts/Adjusting%20merger%20review%20to%20deal%20with%20the%20surge%20in%20merger%20filings/sample_pre-consummation_warning_letter.pdf.
“Straddle Period” means any taxable period that begins on or before and ends after the Closing Date.
“Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, partnership, association, trust or other entity or organization, of which (a) such first
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Person directly or indirectly owns or controls at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions or (b) such first Person is the general partner or managing member.
“Substitute Debt Financing” has the meaning set forth in Section 8.9(b).
“Tax Contest” means any audit, examination, voluntary disclosure or other administrative or judicial proceeding, contest, assessment, notice of deficiency, or other adjustment or proposed adjustment with respect to Taxes of Seller, or its operation of the Historical Business or the Transferred Assets.
“Tax Return” means any report, return, information statement, election, and other forms and documents (including all amendments thereof) relating to and filed or required to be filed with a taxing authority in connection with any Taxes.
“Tax(es)” means (a) all U.S. federal, state, local and non-U.S. taxes, including income, gross receipts, license, excise, sales, use, transfer, registration, value added, severance, stamp, environmental, customs duties, franchise, profits, withholding, escheat, unclaimed property, real property, personal property or other taxes of any kind whatsoever that may be imposed by any Governmental Authority together with all interest, penalties, fines, additions to tax or additional amounts or charges imposed by any Governmental Authority in connection therewith, (b) any Liability for the payment of any amounts of the type described in clause (a) of this definition as a result of being or having been a member of an affiliated, consolidated, combined, unitary or similar group for any period (including any arrangement for group or consortium relief or similar arrangement), and (c) any Liability for the payment of any amounts of the type described in clauses (a) or (b) of this definition as a transferee or successor or as a result of any express or implied obligation to indemnify any other Person or as a result of any obligation under any agreement or arrangement with any other Person with respect to such amounts and including any Liability for taxes of a predecessor or transferor or otherwise by operation of Law.
“Third Party” means any Person, other than the Parties and their respective Affiliates.
“Third Party Claim” has the meaning set forth in Section 11.5(a).
“Third Party Consents” has the meaning set forth in Section 7.7.
“Trademarks and Domain Names” means all trademarks, service marks, trade names, certification marks, service names, industrial designs, brand marks, trade dress rights, identifying symbols, logos, emblems, signs, insignia and domain names and other indicia of origin, all applications and registrations for any of the foregoing, and all goodwill associated therewith.
“Transaction Agreements” means this Agreement and the Ancillary Agreements.
“Transaction Amounts” has the meaning set forth in Section 6.10(d).
“Transaction Dispute” has the meaning set forth in Section 12.11(a).
“Transfer Taxes” has the meaning set forth in Section 8.4(a).
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“Transferred Actions” has the meaning set forth in Section 2.2(a)(viii).
“Transferred Assets” has the meaning set forth in Section 2.2(a).
“Transferred Contracts” has the meaning set forth in Section 2.2(a)(ix).
“Transferred Personal Property” has the meaning set forth in Section 2.2(a)(v).
“Transferred Records” has the meaning set forth in Section 2.2(a)(i).
“Transferred Regulatory Documentation” has the meaning set forth in Section 2.2(a)(ii).
“Transition Services Agreement” means the Transition Services Agreement, in the form attached hereto as Exhibit F.
“U.S.” means the United States of America.
“U.S. GAAP” means U. S. Generally Accepted Accounting Principles.
“Update Report” has the meaning set forth in Section 3.2(j).
“Willful Breach” means, with respect to any breaches or failures by a Party to perform any of the covenants or other agreements contained in this Agreement, a deliberate and intentional act or a deliberate and intentional failure to act, which act or failure to act constitutes in and of itself a material breach of this Agreement inasmuch as the resulting material breach was the conscious object of the act or failure to act.
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For the avoidance of doubt and notwithstanding anything to the contrary in this Section 2.3(a), in no event shall any Liability of Seller under the Manufacturing Services Agreement or Transition Services Agreement be considered an Assumed Liability.
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Annual Net Sales Milestone |
|---|
$175,000,000 |
$200,000,000 |
$200,000,000 |
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Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing Date (other than any representations and warranties made as of a specific date, which representations and warranties shall be as of such date) that, except as set forth in the Seller Schedules or as expressly disclosed in any Seller SEC Document (other than any cautionary or forward-looking information contained in the “Risk Factors” or “Forward-Looking Statements” of any such Seller SEC Documents) to the extent that such disclosure references BAQSIMI or the relevance of such disclosure would be apparent on its face to a reader of such Seller SEC Document:
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by Seller, and assuming the due authorization, execution and delivery of this Agreement by Buyer, this Agreement constitutes, and upon the due authorization, execution and delivery thereof by Buyer, the other Transaction Agreements will constitute the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with the terms hereof, subject to the effect of any applicable Laws relating to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar applicable Laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles of equity, regardless of whether considered in a Proceeding in equity or at law (the “Enforceability Exceptions”).
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(3) years, in violation in any material respect of any Laws or Governmental Orders applicable to the conduct of the Historical Business, any Transferred Asset or the Product except, in each case, as would not, individually or in the aggregate, be material to the Business as a whole.
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NEITHER SELLER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO SELLER OR ITS AFFILIATES, THE BUSINESS OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND ANY RIGHTS OR OBLIGATIONS (INCLUDING THE ASSUMED LIABILITIES) TO BE TRANSFERRED HEREUNDER AND THEREUNDER OR PURSUANT HERETO OR THERETO, AND SELLER DISCLAIMS (ON BEHALF OF ITSELF AND ITS AFFILIATES) ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER MADE BY SELLER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN THIS Article V (AS MODIFIED BY THE SELLER SCHEDULES) AND THE ANCILLARY AGREEMENTS, SELLER HEREBY DISCLAIMS (ON BEHALF OF ITSELF AND ITS AFFILIATES) ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT, OR INFORMATION MADE, COMMUNICATED, OR FURNISHED (ORALLY OR IN WRITING) TO BUYER OR ITS AFFILIATES OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO BUYER BY ANY REPRESENTATIVE OF SELLER OR ANY OF ITS AFFILIATES). WITHOUT LIMITING THE FOREGOING, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES TO BUYER REGARDING THE PROBABLE SUCCESS, VALUE OR PROFITABILITY OF THE PRODUCT. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 5.26 OR ANY OTHER TERM HEREIN OR IN ANY ANCILLARY AGREEMENT, NOTHING IN THIS SECTION 5.26 OR IN ANY SUCH TERM SHALL LIMIT ANY RECOURSE SELLER OR ANY OF ITS AFFILIATES WOULD HAVE IN THE CASE OF FRAUD.
Buyer hereby represents and warrants to Seller as follows as of the date hereof and as of the Closing Date (other than any representations and warranties made as of a specific date, which representations and warranties shall be as of such date):
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Article VI, Section 3.2(l), Section 3.3(d) and Section 12.15 hereof AND THE ANCILLARY AGREEMENTS, NEITHER BUYER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO BUYER OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS AND BUYER DISCLAIMS (ON BEHALF OF ITSELF AND ITS AFFILIATES) ANY OTHER REPRESENTATIONS AND WARRANTIES, WHETHER MADE BY BUYER OR ANY OF ITS AFFILIATES OR REPRESENTATIVES.
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confidentiality obligations under the Confidentiality Agreement shall terminate; provided, however, that Buyer’s confidentiality obligations shall terminate only in respect of that portion of the “Confidential Information” (as defined in the Confidentiality Agreement) exclusively relating to the Historical Business or otherwise constituting a Transferred Asset, and for all other “Confidential Information”, the Confidentiality Agreement shall continue in full force and effect in accordance with its terms. If, for any reason, the Closing does not occur, then the Confidentiality Agreement shall continue in full force and effect following the termination of this Agreement in accordance with its terms. Upon Closing, all Confidential Information to the extent it constitutes Transferred Assets shall solely and exclusively vest with Buyer and notwithstanding any conflicting provision of the Confidentiality Agreement, except in connection with the performance of Seller’s obligations under any of the Transaction Agreements, Seller and its Subsidiaries and their respective Representatives will be obligated to maintain the confidentiality of such Confidential Information and to not use such Confidential Information after the Closing without the express written consent of Buyer for a period of seven (7) years after the Closing; provided, that, with respect to any such Confidential Information that constitutes a trade secret under applicable Law such confidentiality obligations shall continue so long as the Confidential Information maintains its status as a trade secret. Notwithstanding anything to the contrary in the Confidentiality Agreement, the terms of this Agreement shall be deemed the “Confidential Information” of both Parties, and each Party shall maintain the confidentiality of such information in accordance with the terms of the Confidentiality Agreement and this Section 7.4. Notwithstanding anything in this Section 7.4 to the contrary, each Party shall have the right to disclose Confidential Information or the terms of this Agreement or any other Transaction Agreement (a) as may be required by Law (including any disclosure obligations under the federal securities Laws or applicable accounting principles), the rules and regulations of any national securities exchange upon which the securities of Seller, Buyer or their respective Affiliates are listed or to any Governmental Authority (including federal, state, or foreign taxing authorities) with jurisdiction over such Party upon request by such Governmental Authority or (b) to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating or carrying out an actual or potential investment, acquisition or other business relationship, in each case, involving the Product, the Transferred Assets or the Assumed Liabilities; provided, that in connection with such disclosure, such Party shall inform each disclosee of the confidential nature of such information and require each disclosee to execute a customary non-disclosure agreement pursuant to which such disclosee agrees to treat such information as confidential.
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loss, net of any expenses (including any deductibles retained by Seller) incurred in connection with the receipt of such proceeds, to be applied to restore or replace such Transferred Asset.
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required to compensate any Third Party, commence or participate in any Proceeding or offer or grant any accommodation (financial or otherwise, including any accommodation or arrangement to remain secondarily liable or contingently liable for any Assumed Liability) to any Third Party (a) to obtain any Third Party Consent or (b) in connection with Seller’s or Buyer’s obligations under Section 2.4 or Section 8.1.
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terms, is required to be performed after the Closing shall survive the Closing and will remain in full force and effect thereafter until fully performed.
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| |
| if to Seller, to: |
| Eli Lilly and Company |
| Lilly Corporate Center |
| Indianapolis, Indiana 46285 |
| Telephone: (317) 276-2000 |
| Attention: Senior Vice President and Head of Corporate Business Development |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Eli Lilly and Company |
| Lilly Corporate Center |
| Indianapolis, IN 46285 |
| Telephone: (317) 276-2000 |
| Email: [***] |
| Attention: Senior Vice President - Transactions and Contracting |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Kirkland & Ellis LLP |
| 601 Lexington Avenue |
| New York, NY 10022 |
| Telephone: (212) 446-4800 |
| Attention: |
| [***] |
| [***] |
| Email: [***] |
| [***] |
| |
| |
| if to Buyer, to: |
| Amphastar Pharmaceuticals, Inc. |
| 11570 Sixth Street |
| Rancho Cucamonga, CA 91730 |
| Telephone: (800) 423-4136 |
| Email: [***] |
| Attention: Chief Financial Officer |
| |
| with a copy to: |
| |
| Amphastar Pharmaceuticals, Inc. |
| 11570 Sixth Street |
| Rancho Cucamonga, CA 91730 |
| Telephone: (800) 423-4136 |
| Email: [***] |
| Attention: EVP Corporate Administration Center |
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| |
| with a copy (which shall not constitute notice) to: |
| |
| Wilson Sonsini Goodrich & Rosati |
| One Market Plaza |
| Spear Tower, Suite 3300 |
| San Francisco, CA 94105 |
| Attention: [***] |
| [***] |
| Email: [***] |
| [***] |
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understanding of Seller and Buyer with respect to the subject matter hereof and thereof and supersede all prior negotiations, correspondence, understandings, agreements and contracts, whether written or oral, among the Parties and thereto respecting the subject matter hereof and thereof.
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Transaction Agreement except as expressly set forth in this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Person preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Notwithstanding anything to the contrary set forth above, this Section 12.9, Section 12.7, Section 12.8, Section 12.11(b), Section 12.11(d), Section 12.11(f), Section 12.12(b) and Section 12.16 (and any provision of this Agreement to the extent an amendment, modification, waiver or termination of such provision would modify the substance of any such section, and any related definitions insofar as they affect such sections) shall not be amended, waived or otherwise modified in a manner that is adverse to the interests of any Financing Source without the prior written consent of such Financing Source.
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headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (j) Seller and Buyer have each participated in the negotiation and drafting of this Agreement and if an ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or burdening any Party by virtue of the authorship of any of the provisions in this Agreement; (k) a reference to any Person includes such Person’s permitted successors and permitted assigns; (l) any reference to “days” means calendar days unless Business Days are expressly specified; (m) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and, if the last day of such period is not a Business Day, the period shall end on the next succeeding Business Day; (n) prior drafts of this Agreement or the other Transaction Agreements or the fact that any clauses have been added, deleted or otherwise modified from any prior drafts of this Agreement or any of the other Transaction Agreements shall not be used as an aid of construction or otherwise constitute evidence of the intent of the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of such prior drafts and (o) “will” and “shall” are to be interpreted to have the same meaning.
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at any time and from time to time, without notice to or further consent of Buyer Guarantor, reduce or waive any of the Guaranteed Obligations, and may also make any agreement with Buyer for the extension, renewal, payment, compromise, discharge or release thereof, in whole or in part, without in any way impairing or affecting Buyer Guarantor’s obligations under this Section 12.15 or affecting the validity or enforceability of this Section 12.15 (except to the extent the Guaranteed Obligations are increased thereby). Buyer Guarantor hereby agrees that the obligations of Buyer Guarantor hereunder shall not be released or discharged, in whole or in part, in each case, or otherwise affected by: (a) the failure or delay on the part of Seller to assert any claim or demand or to enforce any right or remedy against Buyer or Buyer Guarantor; (b) any change in the time, place or manner of payment of any of the Guaranteed Obligations, or any rescission, waiver, compromise, consolidation or other amendment or modification of any of the terms or provisions of this Agreement or any other agreement entered in connection with the Guaranteed Obligations or (c) any insolvency, bankruptcy, reorganization or other similar proceeding instituted by or against Buyer or any other Person now or hereafter liable with respect to the Guaranteed Obligations. Buyer Guarantor hereby waives promptness, diligence, presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of any Guaranteed Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any stay, moratorium or other similar law now or hereafter in effect or any right to require the marshaling of assets of Buyer or any other Person now or hereafter liable with respect to the Guaranteed Obligations. To the fullest extent permitted by Law, Buyer Guarantor hereby irrevocably and unconditionally waives any and all rights or defenses arising by reason of any Law which would otherwise require any election of remedies by Seller. Buyer Guarantor represents and warrants to Seller that the guarantee hereunder constitutes the legal, valid and binding agreement of Buyer Guarantor enforceable against Buyer Guarantor in accordance with the terms of this Section 12.15, subject to the Enforceability Exceptions. Buyer Guarantor is a legal entity duly organized, validly existing and in good standing under the laws of Delaware. Buyer Guarantor has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Buyer Guarantor has taken all actions or proceedings required to be taken by or on the part of Buyer Guarantor to authorize and permit the execution and delivery by Buyer Guarantor of this Agreement and the performance by Buyer Guarantor of its obligations hereunder. This Agreement has been duly executed and delivered by Buyer Guarantor. Assuming that (i) the parties to the Commitment Letter (other than Buyer or any of its Affiliates) perform their obligations in accordance with the terms of the Commitment Letter and (ii) the satisfaction or waiver of the conditions set forth in Section 9.2(a), Buyer Guarantor will have at the Closing sufficient funds to satisfy all of Buyer’s obligations under this Agreement to be satisfied at the Closing, including the payment in full of the Closing Payment and all other amounts to be paid by Buyer pursuant to this Agreement on the Closing Date.
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each of its Affiliates and each of its and its Affiliates’ respective shareholders, partners, members, directors, officers, employees, agents, trustees, advisors, administrators, managers, representatives and successors and assigns) agrees not to commence (and if commenced agrees to dismiss or otherwise terminate) any Proceeding against any Financing Source in connection with this Agreement, the Financing, the Commitment Letter or any transaction contemplated hereby or thereby (including any Proceeding relating to the Financing or the Commitment Letter). In furtherance of and not in limitation of the foregoing waiver, it is agreed that no Financing Source shall have any liability for any claims, losses, settlements, liabilities, damages, costs, expenses, fines or penalties to Seller (or any of its Affiliates or any of its or its Affiliates’ respective shareholders, partners, members, directors, officers, employees, agents, trustees, advisors, administrators, managers, representatives and successors and assigns) in connection with this Agreement or any transaction contemplated hereby or thereby (including any Proceeding relating to the Financing or the Commitment Letter). Nothing in this Section 12.16 shall in any way limit or qualify the rights of Buyer in respect of the Financing under the express terms of the Commitment Letter. Without limiting the foregoing, no Financing Source shall be subject to any special, consequential, punitive or indirect damages or damages of a tortious nature to Seller (or any of its Affiliates or any of its or its Affiliates’ respective its shareholders, partners, members, directors, officers, employees, agents, trustees, advisors, administrators, managers, representatives and successors and assigns).
[signature page follows]
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IN WITNESS WHEREOF, the Parties have caused this Asset Purchase Agreement to be signed by their respective representatives thereunto duly authorized, all as of the date first written above.
| | |
| ELI LILLY AND COMPANY | |
| | |
| By: | /s/ David A. Ricks |
| | Name: David A. Ricks |
| | Title: Chair and Chief Executive Officer |
| | |
| | |
| AMPHASTAR MEDICATION CO., LLC | |
| | |
| By: | /s/ Jacob Liawatidewi |
| | Name: Jacob Liawatidewi-Amph |
| | Title: Authorized Signatory |
| | |
| | |
| AMPHASTAR PHARMACEUTICALS, INC., | |
| | |
| By: | /s/ Bill Peters |
| | Name: Bill Peters |
| | Title: Authorized Signatory |
[Signature Page to Asset Purchase Agreement]
Exhibit 10.2
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS ([***]), HAS BEEN OMITTED BECAUSE
THE INFORMATION (I) IS NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED
MANUFACTURING SERVICES AGREEMENT
BETWEEN
ELI LILLY AND COMPANY
AND
AMPHASTAR PHARMACEUTICALS, INC.
DATED AS OF
June 30, 2023
| | |
TABLE OF CONTENTS
Page
2.1.General Sales Terms and Conditions9
2.2.Forecasting, Ordering and Supply of Product11
2.3.Exclusive Purchase and Supply12
2.8.Change Requests and Changes13
2.9.Delivery of Product and Delivery Location15
2.11.Storage and Distribution; Rights of Inspection16
3.2.Buyer Rights and Obligations18
3.3.Buyer’s Covenants to Continue to Distribute Product19
3.7.Promotional Materials and Educational Materials19
3.8.Compliance with Applicable Laws20
4.1.Migration of Supply Chain20
4.2.Sale of Lilly Labeled Products.22
4.3.Transfers of Marketing Authorizations.23
i
7.1.Compliance with Applicable Laws27
7.2.Compliance with Anti-Corruption Laws28
7.4.Compliance with Trade Sanctions Laws.28
7.7.Requests for Information30
7.9.Compliance with Internal Compliance Codes30
7.12.Subcontractors and Agents31
8.2.Transitional Trademark License to Buyer33
8.3.Limited Non-Exclusive License to Lilly33
9.1.Obligation of Confidentiality33
9.2.Employee and Agent Confidentiality34
9.3.Return or Destruction of Confidential Information34
9.4.Term of Covenant not to Disclose34
10.1.General Terms Relating to Breach35
10.2.Specific Breaches and Remedies35
ii
12.6.No Third Party Beneficiaries40
12.7.Relationship of the Parties40
12.12.Incorporation from Asset Purchase Agreement42
iii
EXHIBITS
Exhibit ASupply Territory
Exhibit BManufacturing Technology Transfer Plan
Exhibit CMarketing Authorization Transfer Plan
Exhibit D Lilly Initial Forecast
Exhibit E Lilly Contractors, Lead Time and Lilly Facilities
Exhibit F Product Supply Price
Exhibit GCompliance Requirements
Exhibit H Information Security Standards
Exhibit I Pharmacovigilance Agreement
Exhibit J Quality Agreement
Exhibit K Supplier Privacy Standard
Exhibit L CMO Supply Agreements
Exhibit MProduct SKUs and Description
Exhibit NOption
Exhibit O CMC Changes
Exhibit PLilly Retained Names and Marks
Exhibit QAdditional Definitions
iv
MANUFACTURING SERVICES AGREEMENT
THIS MANUFACTURING SERVICES AGREEMENT (this “Agreement”) is made on June 30, 2023 (the “Closing Date”), by and between Eli Lilly and Company, an Indiana corporation (“Lilly”); and Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Buyer”). Lilly and Buyer are hereinafter collectively referred to as the “Parties” and individually referred to as a “Party”.
WHEREAS, Lilly and Buyer have entered into that certain Asset Purchase Agreement dated April 21, 2023 (the “Asset Purchase Agreement”), and Lilly and Buyer have entered into that certain Transition Services Agreement effective as of the Closing Date (the “Transition Services Agreement”), pursuant to which Buyer is obtaining certain transitional services related to the Product (as defined below).
WHEREAS, in connection with the transactions contemplated under the Asset Purchase Agreement, the Parties have agreed to enter into this Agreement for the manufacture and supply of commercial Product during the Term, as more fully set forth herein.
NOW, THEREFORE, the Parties agree as follows:
“Adverse Event and Other Reportable Events” has the meaning given in the Pharmacovigilance Agreement attached hereto as Exhibit I (Pharmacovigilance Agreement).
“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such first Person. For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” mean (a) the possession, directly or indirectly, of the power to direct the management or policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity).
“Agreement” has the meaning as defined in the preamble.
“Ancillary Agreement(s)” has the meaning set forth in the Asset Purchase Agreement.
“API” means the active pharmaceutical ingredient of the Product, i.e., glucagon.
“Applicable Laws” means any domestic or foreign, federal, state or local statute, law, treaty, rule, code, ordinance, regulation, permit, interpretation, certificate, judgment, decree, injunction, writ, order, subpoena, or like action of a Governmental Authority, including the U.S. Foreign Corrupt Practices Act of 1977, the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.), the Anti-Kickback Statute (42 U.S.C. § 1320a-7b), Civil Monetary
| 1 | |
Penalty Statute (42 U.S.C. § 1320a-7a), the False Claims Act (31 U.S.C. § 3729 et seq.), any and all applicable privacy and security laws inclusive (as applicable) of Regulation (EU) 2016/679 of the European Parliament and of the Council of the European Union (the “General Data Protection Regulation”) and any implementing, derivative or related national legislation, rule, or regulation enacted thereunder by any EU Member State subject to its jurisdiction; the California Consumer Privacy Act of 2018 (“CCPA”) and the Personal Information Protection Law of the People’s Republic of China, comparable state statutes, the regulations promulgated under all such statutes, each as amended and any laws enacted to implement the Organization of Economic Cooperation and Development Convention on Combating Bribery of Foreign Officials in International Business Transactions, Industry Codes dealing with government procurement, conflicts of interest, corruption or bribery, cGMP, GDP and GSP.
“Asset Purchase Agreement” has the meaning given in the recitals.
“Assigned Manufacturing Know-How” has the meaning given in the Intellectual Property License Agreement.
“Background Intellectual Property Rights” means, with respect to a Party, all Intellectual Property Rights owned or controlled by such Party either (a) prior to the Closing Date or (b) at any time after the Closing Date if such Intellectual Property Rights are invented, conceived, discovered, created, developed, or otherwise obtained or acquired outside of the scope of activities contemplated by this Agreement. For clarity, Buyer’s Background Intellectual Property Rights include the Intellectual Property Rights assigned to Buyer under the Asset Purchase Agreement.
“Binding Forecast” has the meaning given in Section 2.2(a).
“Business Day” means any Day other than Saturday, Sunday or a Day on which banking institutions in New York, New York or Indianapolis, Indiana are permitted or obligated by Applicable Law to remain closed.
“Buyer” has the meaning as defined in the preamble.
“Buyer Indemnified Party(ies)” has the meaning given in Section 6.4(b).
“Buyer Labeled Products” has the meaning given in Section 4.2(a).
“Buyer NDC Number” has the meaning given in Section 4.3(f).
“Buyer Transitional Trademark License” has the meaning given in Section 8.2.
“Buyer’s Supply Chain Transfer Completion” has the meaning given in Exhibit N.
[***]
[***]
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“Clinical Study” means any clinical study (for clarity, including any clinical trial, post-approval study or post-marketing surveillance study) with respect to the Product for which Lilly or its Affiliate(s) remains the sponsor following the Closing Date.
“Closing Date” has the meaning given in the preamble.
“CMO Supply Agreement” means any contract manufacturing and services agreement listed on Exhibit L (CMO Supply Agreements) hereto.
“CMO Supply Agreement Assignment Date” has the meaning set forth in Section 4.1(e).
“Commercially Reasonable Efforts” means with respect to the performance by or on behalf of Lilly or any of its Affiliates of any applicable manufacturing and supply activities hereunder with respect to the Product, or with respect to either Party in performing other activities as set forth under this Agreement, the carrying out of such activities using efforts and resources comparable to the efforts and resources commonly used by such Party for products with similar market potential for use in the Supply Territory, at a similar stage in their development or product life, taking into account issues of safety and efficacy, the competitiveness of Third Party products in development and in the marketplace, supply chain management considerations, the proprietary position of the compound, product or therapy (including with respect to patent or regulatory exclusivity), the regulatory structure involved, the profitability of the applicable compound, product or therapy (including pricing and reimbursement status achieved), and other relevant technical, legal, commercial, scientific or medical factors.
“Compliance Requirements” means the relevant compliance requirements to be met by Buyer (including its Affiliates, licensees and sublicensees, and their respective contractors and subcontractors) in performing under this Agreement or the Transition Services Agreement (as applicable) as further specified in Exhibit G (Compliance Requirements) hereto.
“Confidential Information” has the meaning as defined in Section 9.1.
“Current Good Manufacturing Practices” or “cGMP” means the applicable current standards for conducting manufacturing activities for pharmaceutical products (or active pharmaceutical ingredients), medical devices, and combination products, as applicable, as are required by any applicable Governmental Authority in the Supply Territory.
“Current Practices” means substantially the same level of effort and quality, with respect to the manufacture of Product, as was exercised by or on behalf of Lilly in the [***] period immediately prior to the Closing Date.
“Day” means a calendar day, unless otherwise specified.
“Delivery” means the delivery of the Product to the designated delivery location in accordance with Section 2.9(b), and the terms “Deliver,” “Delivery” and “Delivered” will be construed accordingly.
“Demo Version” has the meaning set forth in the Asset Purchase Agreement. Buyer acknowledges that this Agreement does not cover manufacturing, supply or other services with respect to the Demo Version.
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“Detail” or “Detailing” means, in relation to a Product, to disseminate scientific and medical information about such Product in a person-to-person meeting between a medical representative and a health care provider (“HCP”) or other appropriate professionals during which a presentation on approved medical uses, efficacy, safety, or costs is made in order to promote the use of the Product for appropriate patients.
“Dispute” has the meaning given in Section 12.4(a).
“Distribute” means importing, selling, reselling, distributing, exporting, taking or transferring title to, handling, storing, or transporting the Product in the Supply Territory, and other activities associated with the foregoing listed activities, including inventory management and control, warehousing and distribution, invoicing, collection of sales proceeds, and the handling of returns. “Distribution” or “Distribution” will be construed accordingly.
“Educational Materials” means all informational materials, developed in the scope of this Agreement, the intent of which is to educate HCPs or patients regarding the Product. This includes materials used for Scientific Exchange with HCPs.
“Equipment” means any equipment that Buyer acquired under the Asset Purchase Agreement and that is being used by [***] in connection with the manufacture and supply of Product under this Agreement.
“Equipment Transfer Date” has the meaning given in Section 4.1(d).
“Excess Percentage” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Excess Purchase Order” has the meaning given in Section 2.2(c).
“Excluded Territory” means any country specified in Exhibit A (Supply Territory) hereto as an “Excluded Territory.”
“FDA” has the meaning set forth in the Asset Purchase Agreement.
“Fee” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Force Majeure” has the meaning given in Section 12.1.
“Forecast” has the meaning given in Section 2.2(a).
“Foreign Affiliate” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Global Patient Safety Database” has the meaning given in the Pharmacovigilance Agreement attached hereto as Exhibit I (Pharmacovigilance Agreement).
“Good Distribution Practices” or “Good Supply Practices” (“GDP” or “GSP”) means all applicable current Good Distribution or Supply Practices including, as applicable, WHO TRS 957 Annex 5 and the equivalent Applicable Laws and Industry Codes in any relevant country, each as may be amended and applicable from time to time.
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“Governmental Authority” means any international, regional, national, federal, state, or local government entity, authority, agency, instrumentality, court, tribunal, regulatory commission or other body, either foreign or domestic, whether legislative, judicial, administrative or executive.
“Indirect Tax” means any value added, goods and services, sales, use, consumption, service, or similar tax of any kind whatsoever, including VAT, imposed by any Governmental Authority in any country at any level.
“Industry Codes” means all applicable rules of non-governmental bodies such as pharmaceutical industry trade associations and self-regulatory organizations that are generally accepted as “good practice” within the research based pharmaceutical industry, including those relating to good marketing practices (e.g., cGMP, GDP and GSP) and the relationship of pharmaceutical companies with health care providers and patients (e.g., dealing with government procurement, conflicts of interest and corruption or bribery).
“Initial Term” has the meaning given in Section 11.1.
“Inspection” has the meaning given in Section 2.11(c).
“Intellectual Property Rights” means all trademarks, patents, trade dress, service marks, domain names, business names, copyrights (or rights in any of the foregoing, as applicable) and any other intangible property, and all applications and registrations therefor, and all inventions, know-how, trade secrets, and other intellectual property and proprietary rights arising under any jurisdiction.
“Interest Rate” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Internal Compliance Codes” means a Party’s internal policies and procedures intended to ensure that a Party complies with Applicable Laws, Industry Codes, Party Specific Regulations, and such Party’s internal ethical, medical and similar standards.
“Inventories” has the meaning given in Section 11.3(b).
“Lead Time” mean the minimum lead time for a Product set forth on Exhibit E (Lilly Contractors, Lead Time and Lilly Facilities) hereto.
“Liability” has the meaning set forth in the Asset Purchase Agreement.
“Liability Cap” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Lilly” has the meaning given in the preamble.
“Lilly Agreement” has the meaning given in Section 2.1(b).
“Lilly Contractor” means each Third Party listed in Section 1 of Exhibit E (Lilly Contractors, Lead Time and Lilly Facilities) hereto.
“Lilly Facility” mean the facilities set forth in Section 3 of Exhibit E (Lilly Contractors, Lead Time and Lilly Facilities) hereto.
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“Lilly Indemnified Party(ies)” has the meaning given in Section 6.4(a).
“Lilly Initial Forecast” means Lilly’s good faith estimate of Product required to meet demand for the [***] months following the Closing Date, on a month-by-month and SKU-by-SKU basis, as set forth on Exhibit D (Lilly Initial Forecast) hereto, which Exhibit may be updated by Lilly prior to or on the Closing Date and, after the Closing Date, may be modified by mutual agreement of the Project Leaders in writing (including by electronic transmission such as email) in accordance with Section 7.13.
“Lilly Labeled Products” has the meaning given in Section 4.2(a).
“Lilly MSA License” has the meaning given in Section 8.3.
“Local Net End Selling Price” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Management Representative(s)” has the meaning giving in Section 12.4(a).
“Manufacturing Technology Transfer Plan” has the meaning given in Section 4.1(a) and as set forth in Exhibit B (Manufacturing Technology Transfer Plan) hereto.
“Marketing Authorization” means the licenses for pharmaceutical products or medical device products issued by the relevant Governmental Authority and any supplements or amendments to such government authorizations in a country or jurisdiction that authorize the holder of such licenses to manufacture or import (as the case may be), market, sell, or Distribute the Product in such country or jurisdiction.
“Marketing Authorization Transfer Plan” has the meaning given in Section 4.3(b) and as set forth in Exhibit C (Marketing Authorization Transfer Plan) hereto.
“Minimum Order Quantity” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Minor Excess Purchase Order” has the meaning given in Section 2.2(c).
“MSA Product Intellectual Property Rights” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“NDC” means a national drug code as issued by the FDA.
“Nonconforming Product” means a Product received by Buyer from Lilly that does not conform to the Product Warranties.
“Non-Performing Party” has the meaning given in Section 12.2.
“Party” or “Parties” has the meaning given in the preamble.
“Party Specific Regulations” means all judgments, decrees, orders or similar decisions issued by any Governmental Authority specific to a Party; and all consent decrees, corporate integrity agreements, or other agreements or undertakings of any kind by a Party with any Governmental Authority, in each case as the same may be in effect from time to time and applicable to a Party’s activities contemplated by this Agreement.
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“Pending Application” means any pending applications for Marketing Authorization that have been submitted by Lilly or its Affiliate to, but not been approved by, the applicable Governmental Authority in a country or jurisdiction (and that have not been withdrawn) as of the Closing Date.
“Percentage Cap” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Percentage Range” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Permitted Buyer Label Change” has the meaning set forth in Section 2.8(a).
“Performance Records” has the meaning given in Section 7.5(a).
“Person” means any individual, partnership, limited partnership, limited liability company, joint venture, syndicate, sole proprietorship, corporation, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, or any other legal entity, including a Governmental Authority.
“Pharmacovigilance Agreement” means that certain Pharmacovigilance Agreement consistent with the terms of this Agreement to outline the responsibilities for safety and regulatory management for the Products including exchange of safety information, labeling responsibilities, safety surveillance, signal detection and reporting to Governmental Authorities, attached hereto as Exhibit I (Pharmacovigilance Agreement), executed as of the Closing Date, as may be amended or updated by the Parties from time to time independently from this Agreement in accordance with the terms and conditions set forth therein.
“Post-Marketing Authorization Period” means, on a country-by-country basis, the period starting upon the transfer of the applicable Marketing Authorization to Buyer or its designated Affiliate until the expiration of the Term.
“Pre-Marketing Authorization Period” means, on a country-by-country basis for the applicable Marketing Authorization, the period starting on the Closing Date until the earlier of (a) the transfer of the applicable Marketing Authorization to Buyer or its designated Affiliate, and (b) the expiration of the Term.
“Product” means the powdered formulation containing glucagon for nasal administration and the related unit dose system for powder marketed for sale to consumers as of the Closing Date as BAQSIMI®. As of the Closing Date, the Product is available in the form of a one-pack Product or, in the case of the United States of America and Germany only, optionally a two-pack Product. For clarity, the Demo Version does not constitute the Product. Lilly’s SKUs and corresponding descriptions for the Product are set forth in Exhibit M (Product SKUs and Description) hereto.
“Product Complaint” has the meaning given in the Quality Agreement.
“Product Supply Price” means, with respect to the applicable Product or Inventory, the price set forth in Exhibit F (Product Supply Price) hereto, as may be updated pursuant to this Agreement (including any permitted price increases in accordance with Section 2.4 or Section 2.8(a)).
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“Product Warranties” has the meaning given in Section 2.12.
“Project Leader” has the meaning given in Section 7.13.
“Promote” means any activity undertaken, organized or sponsored by Buyer in the Supply Territory directed at HCPs, patients, (or any other subject, always in compliance with the prevailing Applicable Laws) to promote the prescription, recommendation, supply, administration, or consumption of the Product in the Supply Territory through all methods of communications, including the internet or social media, including: (a) conducting Promotional Activities; and (b) organizing promotional meetings for HCPs on proper uses of the Product. “Promoting” and “Promotion” will have their correlative meanings.
“Promotional Activities” means all informational and persuasive activities, including Detailing and distribution of select Promotional Materials and Educational Materials, the intent of which is to encourage (a) the prescribing or dispensing of Product by HCPs to patients, (b) the supply, purchase, or use of Product to or by an institution or government customer, or (c) patients to request a specific Product (where acceptable under Applicable Law).
“Promotional Materials” means all informational and persuasive materials, including materials for Detailing, developed in the scope of this Agreement, the intent of which is to (a) encourage the prescribing or dispensing of Product by healthcare professionals to patients, (b) encourage the supply, purchase, or use of Product by an institution or government customer, or (c) encourage patients to request a specific Product (where acceptable under Applicable Law).
“PV Countries” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Quality Agreement” means that certain Quality Agreement attached hereto as Exhibit J (Quality Agreement), executed as of the Closing Date.
“Recall” means the recovery from the market of any lot or batch of a known or suspected defective Product that has any issues as to safety and efficacy or as otherwise required by Applicable Laws or Governmental Authorities in the Supply Territory.
“Regulatory Approval(s)” has the meaning given in Section 2.15(a).
“Regulatory Transfer Date” has the meaning given in Section 4.3(d).
“Renewal Term” has the meaning given in Section 11.1.
“Requirements” has the meaning set forth in Exhibit Q (Additional Definitions) hereto.
“Restricted Person” has the meaning given in Section 7.4(b).
“Sanctioned Person” has the meaning given in Section 7.4(b).
“Sanctioned Territory” has the meaning given in Section 7.4(b).
“Scientific Exchange” means scientific and educational activities not intended to promote any product or service, including but not limited to educational grants, the provision
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of accurate and balanced medical information in response to unsolicited inquiries from HCP with respect to the Product, non-promotional scientific press releases, and non-branded and non-promotional disease awareness communications.
“Services Agreement” has the meaning given in Exhibit N.
“SKU” means a stock-keeping unit or other similar alphanumeric identification of Product. The Parties acknowledge that there may be more than one unique SKU for a Product.
“Specifications” has the meaning given in the Quality Agreement.
“Supply Territory” means those countries and jurisdictions in which Lilly holds a Marketing Authorization for the Product and has commercially launched the Product as of the Closing Date. The Supply Territory includes the countries set forth on Exhibit A (Supply Territory) hereto. For clarity, the Supply Territory does not include any Excluded Territory.
“Support and Reimbursement Activities” means (a) providing support services to patients, and (b) obtaining hospital, community health center, or retail pharmacy listings, managing pricing, bidding, and reimbursement activities.
“Tax” means all taxes, levies, duties, imposts, charges and withholdings of any nature whatsoever together with all penalties, charges and interest relating to any of them or to any failure to file any return required for the purposes of any of them.
“Term” has the meaning given in Section 11.1.
“Transition Services Agreement” has the meaning given in the recitals.
“VAT” means value-added Tax.
“Wind-Down Period” has the meaning given in Section 4.2(a).
“Withdrawal Territory” means each of Australia, Qatar, Lebanon, Kuwait and Taiwan.
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negotiate and enter into its own agreements with Lilly Contractors after the Closing Date; provided that Buyer shall, in accordance with the Transition Services Agreement, be responsible for all costs and expenses (including for FTEs) incurred by Lilly or any of its Affiliates or the Lilly Contractors in assisting Buyer pursuant to the foregoing, subject to the limitations and conditions with respect to the Service Charge as set forth in the Transition Services Agreement.
Invoices and Payment. For Product that will be sold by or on behalf of Buyer (and not by Lilly under the Transition Services Agreement), Lilly shall issue invoices to Buyer upon Lilly’s shipping of the Product for amounts payable (including any VAT, if applicable) for such Product, and Buyer shall make payments in U.S. Dollars to Lilly via wire transfer in no later than [***] Days from the date of the invoice. For avoidance of doubt, certain of the Parties’ respective financial rights and obligations with respect to Product sold by Lilly or its Affiliates for the benefit of Buyer under the Transition Services Agreement, such as Service Charges for the distribution or sales of such Product and payments for recalls of such Product, shall be governed by the terms thereof, including Exhibit B (Net Economic Benefit) thereto.
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(d) conform to the Requirements, (e) have been manufactured at facilities using equipment that, in each case, meet all applicable regulatory requirements, and (f) be supplied to Buyer free and clear of any security interest, lien, or other encumbrance (collectively, the “Product Warranties”).
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| 18 | |
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Promotional Materials and Educational Materials for accuracy and completeness of Product-related information and the appropriate use of Lilly’s name, brand and trademarks on the Promotional Materials and Educational Materials. Buyer will not be required to obtain Lilly’s or Lilly’s designee’s approval of the same Promotional Materials and Educational Materials for any subsequent usage of approved Promotional Materials and Educational Materials. Buyer may include its own trademarks, trade names and logo in the Promotional Materials and Educational Materials, subject, during the Pre-Marketing Authorization Period and for so long as Buyer is selling Lilly Labeled Products, any applicable Wind-Down Period, to Lilly’s consent to the final format, which will not be unreasonably withheld or delayed.
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[***]. To the extent the Recall is caused by (a) breach of the Transition Services Agreement or this Agreement or an agreement with a Lilly Contractor, or (b) gross negligence or willful misconduct, in each case ((a) or (b)), by Lilly, its Affiliate or a Lilly Contractor, Lilly shall be responsible for all costs and expenses of any such Recall. Lilly and Buyer shall consult and cooperate on any Recall decision in accordance with the Quality Agreement. For the avoidance of doubt, the financial liability of either Party to the other with respect to any Recalls for Product sold by Lilly or its Affiliates under the Transition Services Agreement shall be governed by the terms thereof.
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activities contemplated by this Agreement. The Project Leaders will (a) review, consider for modification, and if so agreed, modify any Exhibits hereto in writing (including by electronic transmission such as email) during the Term and (b) serve as the primary contact points for the resolution of any issues or potential disputes that may arise during the performance of this Agreement, with the intent of avoiding the need for the escalation of such issues or potential disputes. The Project Leaders may refer matters that may arise during the performance of this Agreement to the Transition Steering Committee pursuant to Section 2.14 of the Transition Services Agreement. A Project Leader shall not serve, at the same time, on the Transition Steering Committee or as a Transition Manager.
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Notwithstanding anything in this Agreement to the contrary, to the extent any of Lilly’s Confidential Information is included in any MSA Product Intellectual Property Rights, Buyer and its Affiliates and (sub)licensees shall have the right to retain, disclose, and use such Confidential Information for the purposes of exercising Buyer’s rights and licenses with respect to the MSA Product Intellectual Property Rights, the operation of the Business (as defined in the Asset Purchase Agreement), and the development, manufacture, and commercialization of Milestone Products (as defined in the Asset Purchase Agreement), including after termination or expiration of this Agreement; provided, however, that Buyer shall maintain the confidentiality of all such information in a manner consistent with how Buyer protects its own Confidential Information and shall not disclose such information to Third Parties except under reasonable obligations of confidentiality appropriate for the nature of such disclosure (i.e., without first entering into a binding non-disclosure agreement containing reasonable protections for such Confidential Information where appropriate). For clarity, no such agreement shall be required for a disclosure to a Regulatory Authority.
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determines are necessary or desirable to such Party and its Affiliates, provided that, in the case of a disclosure required under Applicable Law or court order, the receiving Party shall promptly notify the disclosing Party of such requirement (to the extent permitted under Applicable Law or court order) and shall cooperate with the disclosing Party, upon the request of the disclosing Party, to obtain a protective order or to otherwise prevent or limit the required disclosure. Confidential Information will not include information that the receiving Party can demonstrate:
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defaulting Party may terminate this Agreement upon notice to the defaulting Party of such breach if such breach remains uncured for [***]-Days following such notice, with immediate effect:
Upon any termination or expiration of this Agreement, Buyer shall purchase, in accordance with this Section 11.3(b), from Lilly (i) all finished Product (in any form), (ii) all inventory of APIs and (iii) all inventory of device components, in each case of (ii) and (iii), that are specific to the manufacture of the Product then in the possession of Lilly or any of its Affiliates, or any Lilly Contractor or in transit, in each case that do not bear any Lilly trademark or name (all the
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foregoing Product and inventories, collectively, “Inventories”), at the applicable Product Supply Price for finished Product and for all other Inventories, provided that the Inventories were purchased or produced and maintained by Lilly in accordance with its ordinary practices not inconsistent with the most recent Forecasts (based on the then-applicable Lead Time) and was reasonably expected to be utilized to meet such Forecasts. With respect to any intermediates or work-in-progress (WIP) inventories that are in the possession of Lilly, its Affiliate(s) or Lilly Contractor(s) or in transit at the time of termination or expiration of this Agreement and have been prepared, processed or produced by Lilly, its Affiliate(s) or Lilly
Contractor(s) in reasonable expectation to be utilized to meet the most recent Forecasts (based on the then-applicable Lead Time), Lilly shall have the right to finish, or cause to be finished, the production activities with respect to such inventories into finished Product; and Buyer shall purchase all such Product pursuant to the first sentence of this Section 11.3(b). Within [***] Days of such expiration or termination, Lilly shall provide Buyer with an invoice for the amount determined in accordance with this Section 11.3(b), and Buyer shall pay such amount in accordance with Section 2.7 (Payment Terms).
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Notwithstanding the foregoing, under no circumstance will an event of Force Majeure excuse a Party’s obligations to make payments when due under this Agreement.
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| |
| if to Lilly, to: |
| Eli Lilly and Company |
| Lilly Corporate Center |
| Indianapolis, Indiana 46285 |
| Telephone: (317) 276-2000 |
| Attention: Senior Vice President and Head of Corporate Business Development |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Eli Lilly and Company |
| Lilly Corporate Center |
| Indianapolis, IN 46285 |
| Telephone: (317) 276-2000 |
| |
| Attention: Senior Vice President - Transactions and Contracting |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Kirkland & Ellis LLP |
| 601 Lexington Avenue |
| New York, NY 10022 |
| Telephone: (212) 446-4800 |
| Attention: [***] |
| [***] |
| Email: [***] |
| [***] |
| |
| if to Buyer, to: |
| Amphastar Pharmaceuticals, Inc. |
| 11570 Sixth Street |
| Rancho Cucamonga, CA 91730 |
| Attention: Jacob Liawatidewi |
| EVP Corporate Administration Center |
| Email: *** |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Wilson Sonsini Goodrich & Rosati |
| One Market Plaza |
| Spear Tower, Suite 3300 |
| San Francisco, CA 94105 |
| Attention:[***] |
| [***] |
| Email: [***] |
| [***] |
Notice so given will (in the case of notice so given by mail) be deemed to be given when received and (in the case of notice so given by courier or hand delivery) on the date of actual transmission or (as the case may be) personal delivery.
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[Signature Page Follows.]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the Closing Date.
| ELI LILLY AND COMPANY | | |
| By: | /s/ Edgardo Hernandez | |
| | Name: Edgardo Hernandez | |
| | Title: Executive Vice President and President, Manufacturing Operations | |
| AMPHASTAR PHARMACEUTICALS, INC. | | |
| By: | /s/ Bill Peters | |
| | Name: Bill Peters | |
| | Title: Authorized Signatory | |
[Signature Page to Manufacturing Services Agreement]
Page 1
Manufacturing Technology Transfer Plan
Exhibit B
BAQSIMI® Manufactuirng Technology Transfer Plan
[***]
Page 1
Manufacturing Technology Transfer Plan
Page 1
Lilly Contractors, Lead Time and Lilly Facilities
Product Supply Price
Subject to the terms and conditions of this Agreement and of any other Ancillary Agreements, including (i) any [***] in accordance with Section 2.4 and Section 2.8(a), (ii) any payment to Lilly’s Affiliate in [***] in accordance with Section 2.5 and Buyer’s receipt of [***] under this Agreement and (iii) the requirement that all deliveries be made [***] (Incoterms 2020) at the applicable Lilly Facility in accordance with Section 2.9(b), the per unit supply price is $[***] USD for a one-pack Product or $[***] USD for a two-pack Product, [***].
In the event of the sale of Inventory upon any termination or expiration of this Agreement pursuant to Section 11.3(b) or at Buyer’s request pursuant to Exhibit N upon Buyer’s Supply Chain Transfer Completion, the supply price in the case of API is $[***] USD [***] for sale from Lilly to Buyer or any of its Affiliates or sublicensees.
Subject to the terms and conditions of this Agreement, in the event of the sale of Inventory upon any termination or expiration of this Agreement pursuant to Section 11.3(b) or at Buyer’s request pursuant to Exhibit N upon Buyer’s Supply Chain Transfer Completion, the supply price in the case of device components is $[***] USD per set for sale from Lilly to Buyer or any of its Affiliates or sublicensees.
Page 1
Product Supply Price
Additional Definitions
[***]
Excess Percentage Definition
“Excess Percentage” means [***].
Foreign Affiliate Definition
“Foreign Affiliate” means Lilly’s Affiliate in [***] (i.e., Eli Lilly [***]). The country of the Foreign Affiliate is [***].
[***]
[***]
Page 1
Additional Definitions
Local Net End Selling Price Definition
“Local Net End Selling Price” means the selling price at which Lilly’s Affiliate in [***] would sell the Product to local [***] customers at the time of delivery.
Minimum Order Quantity Definition
“Minimum Order Quantity” means, for each SKU, [***] units (i.e., a [***]-pack Product or, in the case of the [***] and [***] only, optionally, a [***]-pack Product) of finished Product (where a different label constitutes a different SKU).
MSA Product Intellectual Property Rights Definition
“MSA Product Intellectual Property Rights” means all Intellectual Property Rights primarily related to the Product, excluding all trademarks, trade dress, service marks, domain names, business names, or other sources of indicia or origin, that are generated in connection with activities under this Agreement by either Party, solely or jointly with others.
Percentage Cap Definition
“Percentage Cap” means [***]% of the amounts set forth in Exhibit F hereto.
Percentage Range Definition
“Percentage Range” means [***]% to [***]%.
PV Countries Definition
“PV Countries” means the [***].
Requirements Definition
“Requirements” means having a remaining shelf-life, at the time of such Delivery, of [***] months or at least [***]% of the approved shelf-life then applicable in the Supply Territory, whichever is greater.
Page 2
Additional Definitions
Exhibit 10.3
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS ([***]), HAS BEEN OMITTED BECAUSE
THE INFORMATION (I) IS NOT MATERIAL AND
(II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED
TRANSITION SERVICES AGREEMENT
BETWEEN
ELI LILLY AND COMPANY
AND
AMPHASTAR PHARMACEUTICALS, INC.
DATED AS OF
June 30, 2023
TABLE OF CONTENTS
Page
i
ii
EXHIBITS
Exhibit A1Services
Exhibit A2Excluded Services
Exhibit BNet Economic Benefit
Exhibit CRebates, Chargebacks and Other Financial Matters
Exhibit D Distribution End Date
Exhibit EAdditional Definitions
Exhibit FPrice Mechanics
iii
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of June 30, 2023 (the “Closing Date”), is by and between Eli Lilly and Company, an Indiana corporation (“Lilly”), and Amphastar Pharmaceuticals, Inc., a Delaware corporation (“Recipient”). Each of Lilly and Recipient may be referred to individually as a “Party” and collectively as the “Parties.”
WHEREAS, Lilly and Recipient have entered into that certain Asset Purchase Agreement dated as of April 21, 2023 (the “Asset Purchase Agreement”); and
WHEREAS, following the consummation of the transactions contemplated by the Asset Purchase Agreement, as an accommodation to Recipient, Lilly has agreed to perform (and where applicable, procure the performance of) certain Services (as defined below) for the benefit of Recipient, subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing, the covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:
Capitalized terms used but not defined herein will have the meanings set forth in the Asset Purchase Agreement, as applicable. In addition to those terms defined above and elsewhere in this Agreement, for purposes of this Agreement, the following terms will have the meanings set forth below.
“Confidential Information” means all nonpublic information or materials received or otherwise obtained or observed by or on behalf of a Party or its Affiliates (“Receiving Party”) by or on behalf of the other Party or its Affiliates (“Disclosing Party”) in connection with this Agreement, including technical and non-technical data, know-how, methods, operational information, procedures, and processes, in each case regardless of whether such information is identified as confidential, but excluding any information that is (i) generally available to and known by the public, other than as a result of a breach of this Agreement by the Receiving Party, (ii) the Receiving Party acquires from a Third Party without any duty of confidentiality to the Disclosing Party, (iii) is independently developed or acquired, without reference to or use of the Disclosing Party’s Confidential Information, or (iv) is already known by the Receiving Party at the time of disclosure, without duty of confidentiality to the Disclosing Party.
“Disability” has the meaning set forth in Section 2.19.
“Dispute” has the meaning set forth in Section 12.3.1.
“Distribution End Date” means, with respect to each country in the Supply Territory, the date set forth for such country on Exhibit D (Distribution End Date) hereto, as such date may be modified by the Transition Managers in accordance with Section 2.13.
“Distribution Period” means, with respect to each country in the Supply Territory, the period that commences on the Closing Date and ends on the applicable Distribution End Date for such country.
1
“Entity” means any corporation (including any nonprofit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust or company (including any limited liability company or joint stock company) or other similar entity.
“Excluded Services” means any services of the nature described in Exhibit A2 (Excluded Services) hereto.
“Good Industry Practice” means the exercise of reasonable skill, care, prudence, efficiency, foresight and timeliness which would be expected from a prudent and experienced Person providing services in the nature of the relevant Services.
“Intellectual Property Rights” means all trademarks, patents, trade dress, service marks, domain names, business names, copyrights (or rights in any of the foregoing, as applicable) and any other intangible property, and all applications and registrations therefor, and all inventions, know-how, trade secrets, and other intellectual property and proprietary rights arising under any jurisdiction.
“Interest Rate” has the meaning set forth in Exhibit E (Additional Definitions) hereto.
“Internal Compliance Codes” means a Party’s internal policies and procedures intended to ensure that a Party complies with applicable Laws and such Party’s internal ethical, medical, and similar standards.
“IT Systems” means Recipient’s IT Systems or Lilly’s IT Systems, as the context requires.
“Liability Cap” has the meaning set forth in Exhibit E (Additional Definitions) hereto.
“Lilly Indemnified Party(ies)” has the meaning set forth in Section 11.4.1.
“Lilly Sold Product” has the meaning set forth in Section 2.8.
“Lilly TSA License” has the meaning set forth in Section 8.2.
“Lilly’s IT Systems” means all communication systems and computer systems used by Lilly (or any of Lilly’s Affiliates) including all hardware and software and elements of the systems that are used (or shared) by Lilly or its Affiliates, but excluding networks generally available to the public.
“Management Representative(s)” has the meaning set forth in Section 12.3.1.
“Marketing Authorization” has the meaning set forth in the Manufacturing Services Agreement.
“Marketing Authorization Transfer Date” means, on a country-by-country basis, the effective date of transfer of the applicable Marketing Authorization(s) as specified in Exhibit C (Marketing Authorization Transfer Plan) to the Manufacturing Services Agreement, with respect to Product for the applicable country, to Recipient or its designated Affiliate.
“Payment Currency” means United States Dollars or U.S. Dollars.
2
“Person” means any individual, Entity or Governmental Authority.
“Proceeding” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation that is, has been or may in the future be commenced, brought, conducted or heard at law or in equity or before any Governmental Authority.
“Product” means a powdered formulation (containing glucagon for nasal administration and the related unit dose system for powder) marketed for sale to consumers as of the Closing Date as BAQSIMI® of a SKU set forth on Exhibit M (Product SKUs and Description) to the Manufacturing Services Agreement. For clarity, the Demo Version (as defined in the Asset Purchase Agreement) does not constitute Product.
“Recall Adjustment” has the meaning set forth in Section 3.1.
“Recipient Dependent Element” has the meaning set forth in Section 2.16.1.
“Recipient Indemnified Party(ies)” has the meaning set forth in Section 11.4.2.
“Recipient’s IT Systems” means all communication systems and computer systems used by Recipient (or any of Recipient’s Affiliates) including all hardware, software and websites and elements of the systems that are used (or shared) by Recipient or its Affiliates, but excluding networks generally available to the public.
“Regulatory Services” has the meaning set forth in Section 2.11.1.
“Sales Taxes” has the meaning set forth in Section 6.2.
“Service Charge(s)” means the service charge(s) set forth in respect of each Service or group of Services set forth on any Exhibit (including Exhibit A1 (Services) hereto), for clarity, which may include hourly fees (such as FTE fees), flat fees (such as monthly fixed fee), percentage of Net Sales fees, or out of pocket pass-through of direct costs, as applicable.
“Services” means the transitional services to be provided by Lilly, whether itself or through its Affiliates, under this Agreement (including Exhibit A1 (Services) hereto) including the arrangements set forth on Exhibit A1 hereto, which Exhibit may be modified by mutual agreement of the Transition Managers in accordance with Section 2.13, but in all cases excluding the Excluded Services.
“Services Standard” has the meaning set forth in Section 2.2.
“Subpoena” has the meaning set forth in Section 10.2.1.
“Supply Territory” has the meaning set forth in the Manufacturing Services Agreement.
“Tax” means all taxes, levies, duties, imposts, charges and withholdings of any nature whatsoever together with all penalties, charges and interest relating to any of them or to any failure to file any return required for the purposes of any of them.
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“Tax Authority” means any taxing or other authority competent to impose any liability in respect of Tax or responsible for the administration or collection of Tax or enforcement of any law in relation to Tax.
“Third Party Agreement” means any Third Party agreement or license, which Lilly or any of its Affiliates is a party to or has the benefit of, and which is required to enable Lilly to deliver, or is otherwise used by Lilly in the delivery of, the Services.
“Third Party Consent” has the meaning set forth in Section 2.4.1.
“Third Party Dependent Element” has the meaning set forth in Section 2.4.2.
“Transition Manager” has the meaning set forth in Section 2.13.
“Transition Period” has the meaning set forth in Section 5.1, as may be extended, on a Service-by-Service basis, in accordance with Section 5.2.
“Transition Steering Committee” or “TSC” has the meaning set forth in Section 2.14.
“TSA Product Intellectual Property Rights” means all Intellectual Property Rights primarily related to the Product, excluding all trademarks, trade dress, service marks, domain names, business names, or other sources of indicia or origin, that are generated in connection with activities under this Agreement by either Party, solely or jointly with others.
“VAT” means value-added Tax.
“Withholding Agent” has the meaning set forth in Section 7.2.
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5
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Recipient (such Product, “Lilly Sold Product”), subject to the terms of this Section 2.8 and Section 9.3.2.
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(including all Exhibits hereto). The Transition Managers will (a) review, consider for modification, and if so agreed, modify any Exhibits hereto, in writing (including by electronic transmission such as email), during the term of this Agreement and (b) serve as the primary contact points for the resolution of any issues or potential disputes that may arise during the performance of this Agreement, with the intent of averting the escalation of such issues or potential disputes. The Transition Managers will meet at least monthly during the term of this Agreement in person or virtually in order to discuss the quality of the Services and the status of the transition and to manage open issues. These meetings may take place in person, by telephone, via a web-based meeting service, or otherwise as agreed by the Parties. For the avoidance of doubt, pursuant to the terms of this Agreement including its Exhibits, the Transition Managers may, on behalf of the respective Parties, agree in writing (including by electronic transmission such as email) in accordance with Section 2.13 to the provision and receipt of additional or extended Services for a Service Charge that may be different from the corresponding Service Charge set forth on Exhibit A1 (Services) hereto for the applicable Services during the applicable Transition Period. The Transition Managers may have additional responsibilities as mutually agreed to by the Parties.
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part of the Services required under this Agreement is rendered invalid as a result of such Disability, then Lilly will, upon written request from Recipient, and at Recipient’s expense, use commercially reasonable efforts to repeat that part of the Services affected by the Disability as soon as reasonably practicable in light of the existence of such Disability.
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may be different from the corresponding Service Charge set forth on Exhibit A1 hereto for the applicable Services during the applicable Transition Period. If Lilly agrees (pursuant to this Section 5.2) to provide such Service for any extended Transition Period, then such Service will remain a Service and be subject in all respects to the provisions of this Agreement during the extended Transition Period, and the extended Transition Period will be deemed the Transition Period for purposes of this Agreement.
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day basis) monthly Service Charge for such partial calendar month (for clarity, which proration will be based on the actual number of business days in the calendar month for which Lilly was providing the applicable Service relative to the total number of business days in such calendar month).
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will make its personnel available upon reasonable advance notice and during normal business hours to answer such questions as Recipient may reasonably ask for such purpose.
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reason in accordance with the terms hereof, the Parties will cooperate in the orderly termination of the relevant Service(s) hereunder, including Section 9.3.1 and Section 9.3.2:
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remedies under applicable Law, including claims for damages or indemnification for the losses incurred by reason of such breach of this Agreement.
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| 12.9.1. if to Lilly: |
| Eli Lilly and Company |
| Lilly Corporate Center |
| Indianapolis, IN 46285 |
| Attention: Vice President, Corporate Business Development |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Eli Lilly and Company |
| Lilly Corporate Center |
| Indianapolis, IN 46285 |
| Attention: General Counsel |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Kirkland & Ellis LLP |
| 601 Lexington Avenue |
| New York, NY 10022 |
| Attention: [***] |
| [***] |
| [***] |
| |
| |
| 12.9.2. if to Recipient: |
| Amphastar Pharmaceuticals, Inc. |
| 11570 Sixth Street |
| Rancho Cucamonga, CA 91730 |
| Attention: Jacob Liawatidewi |
| EVP Corporate Administration Center |
| Email: [***] |
| |
| |
| with a copy (which shall not constitute notice) to: |
| |
| Wilson Sonsini Goodrich & Rosati |
| One Market Plaza |
| Spear Tower, Suite 3300 |
| San Francisco, CA 94105 |
| Attention:[***] |
| [***] |
| Email: [***] |
| [***] |
Notice so given will (in the case of notice so given by mail) be deemed to be given when received and (in the case of notice so given by courier or hand delivery) on the date of actual transmission or (as the case may be) personal delivery.
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Agreement and shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration. Notwithstanding anything to the contrary in this Agreement, the Parties’ respective obligations under Section 2.8.3 (with respect to Lilly Sold Product), Section 2.10 (Distribution Activities) (to the extent of any surviving obligations to process customer order and distribute finished Product), Section 2.15 (Data Privacy), Section 2.19 (Force Majeure), Section 3.1 (Recalls), Section 6.5 (Interest on Late Payments), Section 9.3 (Rights and Duties of Parties Upon Termination or Expiration), Article VII (Withholding and VAT), Article VIII (Ownership of Assets; Intellectual Property), Article X (Confidentiality), Article XI (Limitation of Liability; Indemnification) and Article XII (Other Provisions) and under the heading “Pharmacovigilance and Global Patient Safety” of Exhibit A1 (Services) hereto, and Recipient’s obligations under Section 2.11 (Regulatory) and Section 2.12.2 (Recipient’s Covenants) and under the headings “Commercial Operations,” “Sales and Marketing” and “Medical Affairs” of Exhibit A1 (Services) hereto will survive the expiration or termination of this Agreement. Section 6.1.1, Section 6.2 (Sales Taxes), Section 6.3 (Statement of Services Charges and Reimbursable Costs) and Section 6.4 (Payments) and Section 2 of Exhibit B (Net Economic Benefit) hereto will survive to the extent of any unpaid amounts due thereunder or any payments made or other activities conducted in accordance with the surviving provisions hereof.
[The remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the Closing Date.
| ELI LILLY AND COMPANY | | |
| By: | /s/ Michael B. Mason | |
| | Name: Michael B. Mason | |
| | Title: Executive Vice President and President, Lilly Diabetes and Obesity | |
| AMPHASTAR PHARMACEUTICALS, INC. | | |
| By: | /s/ Bill Peters | |
| | Name: Bill Peters | |
| | Title: Authorized Signatory | |
[Signature Page to Manufacturing Services Agreement]
Exhibit A1
Services
Service Charge:
The Monthly Fee is [***] Percent ([***]%) of the Net Sales (as defined in Exhibit B (Net Economic Benefit) to the Transition Services Agreement) for each calendar month during the term of the Transition Services Agreement, which Monthly Fee (with respect to the applicable calendar month) will include the applicable Services as provided in this Exhibit below as subject to the Monthly Fee, unless otherwise agreed by the Parties in writing.
For Services included within the Monthly Fee, no additional amounts will be due unless, and except to the extent that, for any Services, Recipient agrees to and shall be responsible for other Service Charge(s) as specifically set forth below for the applicable Service(s); provided that, for Services that are subject to a cap on the number of hours included in the Monthly Fee, any Services in excess of the applicable cap set forth below will be charged as FTE Fees at the applicable rate set forth below.
For Services not included within the Monthly Fee, the applicable Service Charges are specified below in this Exhibit.
The FTE Fees, unless otherwise specified in this Exhibit or agreed by the Parties in writing, shall be billed at $[***] U.S. Dollars per FTE hour. With respect to any Services relating to [***], the FTE Fees shall be billed at $[***] U.S. Dollars per FTE hour with a monthly cap of [***] hours for the aggregate of applicable Services. [***].
1
Excluded Services
[***]
2
Excluded Services
Exhibit B
Net Economic benefit
[***]
1
Net Economic Benefit
Exhibit C
Rebates, Chargebacks and Other Financial Matters
[***]
2
Rebates, Chargebacks and Other Financial Matters
Exhibit E
Additional Definitions
[***]
1
Additional Definitions
Exhibit F
Price Mechanics
[***]
1
Price Mechanics
Exhibit 10.4
CREDIT AGREEMENT
among
AMPHASTAR PHARMACEUTICALS, INC.,
as Borrower,
The Subsidiaries of Borrower Party Hereto,
as Guarantors,
The Financial Institutions Party Hereto,
as Lenders,
and
Wells Fargo Bank, National Association,
as Administrative Agent, Swing Line Lender and L/C Issuer
WELLS FARGO SECURITIES, LLC,
CAPITAL ONE, NATIONAL ASSOCIATION,
JPMORGAN CHASE BANK, N.A.,
EAST WEST BANK,
CATHAY BANK
and
FIFTH THIRD BANK, NATIONAL ASSOCIATION,
as Joint Lead Arrangers and Joint Bookrunners
CAPITAL ONE, NATIONAL ASSOCIATION
and
JPMORGAN CHASE BANK, N.A.,
as a Syndication Agent
CIBC BANK USA,
as Senior Managing Agent
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Table of Contents
(continued)
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Table of Contents
(continued)
Page
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Table of Contents
(continued)
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(continued)
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2.01Lenders; Commitments; Percentage Shares
6.15Post-Closing Matters
10.02Administrative Agent’s Office; Certain Addresses for Notices
EXHIBITS
AForm of Assignment and Assumption
BForm of Compliance Certificate
CForm of Joinder Agreement
DForm of Loan Notice
E-1Form of Revolving Loan Note
E-2Form of Swing Line Loan Note
E-3Form of Term Loan Note
FForm of Swing Line Loan Notice
G-1Form of U.S. Tax Compliance Certificate
G-2Form of U.S. Tax Compliance Certificate
G-3Form of U.S. Tax Compliance Certificate
G-4Form of U.S. Tax Compliance Certificate
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CREDIT AGREEMENT
This CREDIT AGREEMENT (this “Agreement”), dated as of June 30, 2023, is entered among AMPHASTAR PHARMACEUTICALS, INC., a Delaware corporation, as borrower (“Borrower”), the Guarantors party hereto (including for the purposes of Section 10.15), the several financial institutions party to this Agreement as Lenders, and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, in its separate capacities as Swing Line Lender and L/C Issuer and as Administrative Agent, for the benefit of the Credit Parties.
Recitals
Now, Therefore, in consideration of the mutual agreements, provisions and covenants contained herein and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties agree as follows:
Agreement
“Acquisition” means any transaction or series of related transactions resulting, directly or indirectly, in (a) the acquisition by any Loan Party or any Subsidiary of any Loan Party of (i) all or substantially all of the assets of another Person or (ii) any business unit or division of another Person, (b) the acquisition by any Loan Party or any Subsidiary of any Loan Party of the Equity Interests of another Person resulting in the acquiring Person having the ability to Control the acquired Person, or otherwise causing any other Person to become a Subsidiary of such Person or (c) a merger or consolidation, or any other combination, of any Loan Party or any Subsidiary of any Loan Party with another Person (other than a Person that is a wholly-owned Subsidiary) in which any Loan Party or any Subsidiary of a Loan Party is the surviving Person.
“Acquisition Consideration” has the meaning given such term in clause (e)(i) of the definition of “Permitted Acquisition” set forth in this Section 1.01.
“Additional Commitment Documentation” has the meaning given such term in Section 2.14(d).
“Additional Commitments Effective Date” has the meaning given such term in Section 2.14(b).
“Additional Revolving Credit Commitment” means the commitment of an Additional Revolving Credit Lender to make Additional Revolving Credit Loans pursuant to Section 2.14.
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“Additional Revolving Credit Lender” means, at any time, any lender providing an Additional Revolving Credit Commitment, other than any such Person that thereafter ceases to be a party hereto pursuant to an Assignment and Assumption.
“Additional Revolving Credit Loans” means any loans made in respect of Additional Revolving Credit Commitments.
“Adjusted Term SOFR” means, for purposes of any calculation, the rate per annum equal to (a) Term SOFR for such calculation plus (b) 0.10%; provided that if Adjusted Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
“Administrative Agent” means, at any time, the administrative agent for the Credit Parties under the Loan Documents as appointed pursuant to Article IX (which, initially, will be Wells Fargo).
“Administrative Agent’s Office” means Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as Administrative Agent may from time to time notify Borrower and each Lending Party.
“Administrative Detail Form” means an administrative detail form in a form supplied by, or otherwise acceptable to, Administrative Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified (excluding any trustee under, or any committee with responsibility for administering, any Employee Benefit Plan).
“Aggregate Commitments” means, at any time, the sum of: (a) the Aggregate Revolving Credit Commitments plus (b) the Aggregate Initial Term Loan Commitments plus (c) if applicable, the Aggregate Incremental Term Loan Commitments.
“Aggregate Incremental Term Loan Commitments” means, at any time, the combined Incremental Term Loan Commitments of all Incremental Term Loan Lenders.
“Aggregate Initial Term Loan Commitments” means at any time, the combined Initial Term Loan Commitments of all Lenders. As of the Closing Date, the Aggregate Initial Term Loan Commitments of all Lenders is $500,000,000.
“Aggregate Revolving Credit Commitments” means, at any time, the combined Revolving Credit Commitments of all Lenders. As of the Closing Date, the Aggregate Revolving Credit Commitments of all Lenders is $200,000,000.
“Agreement” has the meaning given such term in the Preamble.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977 and the rules and regulations thereunder and the U.K. Bribery Act 2010 and the rules and regulations thereunder.
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“Anti-Money Laundering Laws” means any and all laws, statutes, regulations or obligatory government orders, decrees, ordinances or rules applicable to Borrower or its Subsidiaries related to terrorism financing, money laundering, any predicate crime to money laundering or any financial record keeping, including any applicable provision of the PATRIOT Act and The Currency and Foreign Transactions Reporting Act (also known as the “Bank Secrecy Act,” 31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959).
“Applicable Margin” means, at any time with respect to, and as included in the computation of the rate of interest for Term SOFR Loans or Base Rate Loans, or in the computation of Letter of Credit Fees, or in the computation of Revolving Credit Facility Fees, as the context requires and as otherwise provided in this Agreement, the applicable rate percentage per annum set forth in the applicable grid below, each such percentage being based, subject to Section 2.08(d), upon the corresponding Consolidated Net Leverage Ratio maintained by Borrower, measured as of the end of the most recent Fiscal Period for which Borrower has furnished a Compliance Certificate to Administrative Agent and the Lenders pursuant to Section 6.01(c):
Pricing Level (Tier) | Consolidated Net Leverage Ratio | Applicable Margin for Term SOFR Loans | Applicable Margin for Base Rate Loans | Applicable Margin for Revolving Credit Facility Fee |
I | Less than 1.50:1.00 | 1.50% | 0.50% | 0.15% |
II | Equal to or greater than 1.50:1.00 and less than 2.00:1.00 | 1.75% | 0.75% | 0.20% |
III | Equal to or greater than 2.00:1.00 and less than 2.50:1.00 | 2.00% | 1.00% | 0.25% |
IV | Equal to or greater than 2.50:1.00 and less than 3.00:1.00 | 2.25% | 1.25% | 0.30% |
V | Equal to or greater than 3.00:1.00 | 2.50% | 1.50% | 0.35% |
The Applicable Margin with respect to any Incremental Term Loans shall be the rate per annum set forth in the relevant Additional Commitment Documentation.
Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Margin for any period and at any time will be subject to the provisions of Section 2.08(d).
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Arrangers” means, collectively, the Left Lead Arranger, Capital One, National Association, JPMorgan Chase Bank, N.A., East West Bank, Cathay Bank and Fifth Third Bank, National Association, as the joint lead arrangers for the transactions contemplated by the Loan Documents.
“Assignment and Assumption” means an assignment and assumption entered into by a Lending Party and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by Administrative Agent, in substantially the form of Exhibit A or any other form approved by Administrative Agent.
“Attributable Debt” means, on any date of determination, (a) in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP and (b) in respect of any Synthetic Lease Obligation, the
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capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capitalized Lease.
“Automatic Extension Letter of Credit” means a Letter of Credit that has automatic extension provisions.
“Availability Period” means the period from the Closing Date to the date that is (a) for Revolving Credit Loans, five (5) Business Days, and (b) for Swing Line Loans, one Business Day, in each case prior to the Revolving Credit Maturity Date.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, (a) if the then-current Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an Interest Period pursuant to this Agreement or (b) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining the length of an Interest Period pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 3.03(c)(iv).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101 et seq.), and the Bankruptcy Rules promulgated thereunder.
“Base Rate” means, for any day, the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate for such day plus one half of one percent (0.50%) or (c) Adjusted Term SOFR for a one-month Interest Period in effect on such day plus one percent (1.00%); each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate, the Federal Funds Rate, or Adjusted Term SOFR, as the case may be (provided that the foregoing clause (c) shall not be applicable during any period in which Adjusted Term SOFR is unavailable or unascertainable). Notwithstanding the foregoing, in no event shall the Base Rate be less than one percent (1.0%).
“Base Rate Loan” means a Loan that bears interest based upon the Base Rate.
“Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means, with respect to such Obligations, interest, fees, commissions or other amounts, the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.03(c)(i).
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“Benchmark Replacement” means with respect to any Benchmark Transition Event for any then-current Benchmark, the sum of: (a) the alternate benchmark rate that has been selected by Administrative Agent and Borrower as the replacement for such Benchmark giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities and (b) the related Benchmark Replacement Adjustment; provided that, if such Benchmark Replacement as so determined would be less than the Floor, such Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Available Tenor (if applicable), the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities.
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
For the avoidance of doubt, if the applicable then-current Benchmark has any Available Tenors, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
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For the avoidance of doubt, if the applicable then-current Benchmark has any Available Tenors, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the ninetieth (90th) day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than ninety (90) days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time that a Benchmark Replacement Date with respect to such Benchmark has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.03(c)(i) and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.03(c)(i).
“Beneficial Ownership Certification” means a certification regarding beneficial ownership of Borrower as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 CFR § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
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“Board of Directors” means, as to any Person, the board of directors (or comparable managers), members or similar governing body of such Person, or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers), members or similar governing body.
“Borrower” has the meaning given such term in the Preamble.
“Borrowing” means a Revolving Credit Borrowing, a Swing Line Borrowing, an Initial Term Loan Borrowing or an Incremental Term Loan Borrowing, as the context may require.
“Business Day” means any day other than (a) a Saturday, Sunday or other day on which the Federal Reserve Bank of New York is closed and (b) a day on which commercial banks in New York, New York or San Francisco, California are closed.
“Capitalized Leases” means, subject in all respects to Section 1.02(i)(ii), all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.
“Cash” means money, currency or a credit balance in a deposit account.
“Cash Collateralize” means to pledge and deposit with or deliver to Administrative Agent, for the benefit of Administrative Agent or L/C Issuer (as applicable) and the Lenders, as collateral for Letter of Credit Obligations, Obligations or obligations of Lenders to fund participations in respect of either thereof (as the context may require), Cash or, if L/C Issuer (in the case of Letter of Credit Obligations) will agree in its sole discretion, other credit support, in each case to be received and held or maintained under the control and dominion of Administrative Agent within the United States pursuant to documentation in form and substance satisfactory to (a) Administrative Agent and (b) L/C Issuer (as applicable). “Cash Collateral” will have a meaning correlative to the foregoing and will include the proceeds of such cash collateral and other credit support.
“Cash Equivalents” means, as to any Person, any of the following: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s; (c) investments in certificates of deposit, banker’s acceptances, money market deposits and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any state thereof which has a combined capital and surplus and undivided profits of not less than $250,000,000; (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; (e) money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $4,000,000,000; (f) other short-term investments utilized by Borrower and its Subsidiaries organized under the laws of a jurisdiction outside the United States in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing; (g) other investments made in compliance with Borrower’s investment policy in effect as of the Closing Date and delivered to the Administrative Agent; (h) cash balances in bank accounts deposited in the United States maintained with any Lender, which cash balances are (i) invested overnight in an account maintained by a branch or affiliate of such financial institution located outside of the United States, and (ii) returned to such account at the start of business each Business Day; and (i) solely with respect to any Subsidiary domiciled outside the
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United States, substantially equivalent investments to those outlined in clauses (a) through (f) above which are reasonably comparable in tenor and credit quality (taking into account the jurisdiction where such Subsidiary conducts business) and customarily used in the ordinary course of business by similar companies for cash management purposes in any jurisdictions in which such Person conducts business (it being understood that such investments may be denominated in the currency of any jurisdiction in which such Person conducts business).
“Cash Management Agreement” means any agreement to provide cash management services, including credit, debit and purchase cards and the processing thereof, treasury, depository and overdraft services, electronic funds transfers (including Automated Clearing House processing thereof through the direct Federal Reserve Fedline system) and other cash management services and arrangements.
“Cash Management Bank” means any Person that, (a) with respect to any Cash Management Agreement in effect on the Closing Date, is (i) a Lender, (ii) the Administrative Agent or (iii) an Affiliate of a Lender or the Administrative Agent, in its capacity as a party to such Cash Management Agreement and (b) with respect to any Cash Management Agreement entered into after the Closing Date, at the time it enters into such Cash Management Agreement, is (i) a Lender, (ii) the Administrative Agent or (iii) an Affiliate of a Lender or the Administrative Agent, in its capacity as a party to such Cash Management Agreement.
“Cash Management Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by any Loan Party or any of its Subsidiaries to any Cash Management Bank pursuant to or evidenced by a Cash Management Agreement, irrespective of whether for the payment of money, direct or indirect, absolute or contingent, due or to become due.
“Casualty Event” means the receipt by any Loan Party or any of its Subsidiaries of any cash insurance proceeds or condemnation award payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective property.
“CFC” means a Foreign Subsidiary that is a “controlled foreign corporation” under Section 957 of the Code and any Subsidiary owned directly or indirectly by such Foreign Subsidiary.
“CFC Holdco” means a Subsidiary substantially all the assets of which consist of Equity Interests in Foreign Subsidiaries that each constitute a CFC and/or Indebtedness or accounts receivable owed by Foreign Subsidiaries that each constitute a CFC or are treated as owed by any such Foreign Subsidiaries for U.S. federal income tax purposes.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority, or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof and (ii) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, implemented or issued.
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“Change of Control” means any of the following occurs:
“Class” means, when used in reference to any Loan, whether such Loan is a Revolving Credit Loan, Extended Revolving Credit Loan, Swing Line Loan, Initial Term Loan, Extended Term Loan or an Incremental Term Loan.
“Closing Date” means the date of this Agreement.
“Closing Date Acquisition” means the acquisition by Borrower of certain assets pursuant to the Closing Date Acquisition Agreement.
“Closing Date Acquisition Agreement” means the Asset Purchase Agreement, dated as of April 21, 2023, among Amphastar Medication Co., LLC, Borrower and Seller, including all exhibits and schedules thereto, as assigned by Amphastar Medication Co., LLC to Borrower pursuant to that certain Assignment Agreement dated as of June 30, 2023, by and between Amphastar Medication Co., LLC and Borrower.
“Closing Date Acquisition Closing Date” means the date on which the Closing Date Acquisition is consummated.
“Code” means the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder.
“Collateral” means the collateral security for the Obligations pledged or granted pursuant to the Security Documents.
“Collateral Agreement” means the Collateral Agreement of even date herewith, executed by the Loan Parties in favor of Administrative Agent for the ratable benefit of the Credit Parties.
“Commitment” means, as to any Lender, such Lender’s Revolving Credit Commitment, Additional Revolving Credit Commitment, Initial Term Loan Commitment or Incremental Term Loan Commitment, as applicable.
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“Communications” means any Specified Materials distributed to Administrative Agent or any Lending Party by means of electronic communications pursuant to Section 10.02(b), including through a Platform.
“Compliance Certificate” means a certificate substantially in the form of Exhibit B.
“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate”, the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 3.03 and other technical, administrative or operational matters) that the Administrative Agent decides, in its Reasonable Discretion and in consultation with Borrower, may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated” refers, with respect to any Person, to the consolidation of accounts of such Person and its Subsidiaries in accordance with GAAP.
“Consolidated EBITDA” means, as calculated in accordance with GAAP for Borrower and its Subsidiaries on a Consolidated basis for any period, Consolidated Net Income for such period, plus
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“Consolidated Funded Debt” means, as calculated in accordance with GAAP for Borrower and its Subsidiaries on a Consolidated basis as of any date of determination, the sum of (without duplication) the outstanding amount of (i) all Indebtedness of a type described in clauses (a) (other than deposits or advances received or held), (b), (f), (g) and (h) of the definition of “Indebtedness” (and all Guaranties of such Indebtedness), (ii) the Specified Guaranteed Payment, (iii) all earnout payments arising under the Closing Date Acquisition Agreement, to the extent such amounts have not been paid within ten (10) Business Days following the date such amounts become due and payable pursuant to the Closing Date Acquisition Agreement, (iv) solely to the extent drawn and unreimbursed, all Indebtedness of a type described in clauses (c) and (d) of the definition of “Indebtedness” (and all Guaranties of such Indebtedness) and (v) solely to the extent such obligations have not been paid within ten (10) Business Days following the date such amounts become due and payable, all Indebtedness of a type described in clause (e) of the definition of “Indebtedness” (and all Guaranties of such Indebtedness).
“Consolidated Interest Coverage Ratio” means, as determined as of the last day of any Test Period, calculated for Borrower and its Subsidiaries on a Consolidated basis for such Test Period, the ratio of (a) Consolidated EBITDA for such Test Period to (b) Consolidated Interest Expense (other than any bank and/or letter of credit fees, letter of guarantee and/or bankers’ acceptance fees and costs of surety bonds) paid in Cash for such Test Period.
“Consolidated Interest Expense” means, as calculated in accordance with GAAP for Borrower and its Subsidiaries on a Consolidated basis for any period, the sum of (without duplication) (a) all interest in respect of Indebtedness (including the interest component of any payments in respect of Capitalized Leases), plus (b) cash dividends paid during such period in respect of Disqualified Equity Interests, plus (c) bank and letter of credit fees, letter of guarantee and bankers’ acceptance fees and costs of surety bonds in connection with financing activities, plus (d) all accrued losses paid or payable to an applicable counterparty under interest rate Swap Contracts during such period (other than in connection with the early termination thereof) to the extent not included in clause (a) of this definition, minus (e) all accrued gains received or receivable from an applicable counterparty under interest rate Swap Contracts during such period (other than in connection with the early termination thereof).
“Consolidated Net Income” means, as calculated in accordance with GAAP for Borrower and its Subsidiaries on a Consolidated basis for any period, the sum of net income (or loss) for such period, but excluding, without duplication, (a) any income of any Person if such Person is not a Subsidiary, except that Borrower’s direct or indirect equity in the net income of any such Person for such period will be included in such Consolidated Net Income up to the aggregate amount of Cash actually distributed by such Person during such period to Borrower or any Subsidiary as a dividend or other distribution, (b) the income of any Subsidiary that is not a Loan Party to the extent that the declaration or payment of dividends or similar distributions by the Subsidiary of that income is prohibited by operation of the terms of its charter or any
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agreement, instrument, judgment, decree, statute, rule or governmental regulation applicable to such Subsidiary, (c) the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies during such period whether effected through a cumulative effect adjustment or a retroactive application, in each case in accordance with GAAP, (d) any gain (loss) on asset sales, disposals or abandonments (other than asset sales, disposals or abandonments in the ordinary course of business), (e) effects of adjustments (including the effects of such adjustments pushed down to any Subsidiary) related to the application of recapitalization accounting or purchase accounting (including in the inventory, property and equipment, software, goodwill, intangible assets, in process research and development, deferred revenue and debt line items), (f) income (loss) from the early extinguishment or conversion of (i) Indebtedness, (ii) Hedging Obligations or (iii) other derivative instruments, (g) any impairment charges or asset write-off or write-down in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP, (h) any non-cash gain (loss) attributable to the mark to market movement in the valuation of Hedging Obligations or other derivative instruments pursuant to FASB Accounting Standards Codification Topic 815—Derivatives and Hedging or mark to market movement of other financial instruments pursuant to FASB Accounting Standards Codification Topic 825—Financial Instruments, and (i) any net realized or unrealized gain or loss (after any offset) resulting in such period from currency transaction or translation gains or losses, including those related to currency remeasurements of Indebtedness (including any net loss or gain resulting from (i) Hedging Obligations for currency exchange risk and (ii) resulting from intercompany indebtedness) and any other foreign currency transaction or translation gains and losses.
“Consolidated Net Leverage Ratio” means, as determined as of the last day of any Test Period, calculated for Borrower and its Subsidiaries on a Consolidated basis, the ratio of (a) (i) Consolidated Funded Debt as of such date of determination minus (ii) all Unrestricted Cash and Cash Equivalents on such date to (b) Consolidated EBITDA for such Test Period.
“Consolidated Total Assets” means, as calculated as of any date of determination in accordance with GAAP, total assets of Borrower and its Consolidated Subsidiaries.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlled” has the meaning correlative thereto.
“Covered Entity” means any of the following:
“Credit Extension” means each of the following: (a) a Borrowing, (b) a continuation of any Term SOFR Loan (or portion thereof) into a new Term SOFR Loan of a new Interest Period, (c) a conversion of any Base Rate Loan (or portion thereof) into a Term SOFR Loan of a new Interest Period or a conversion of any Term SOFR Loan (or portion thereof) into a Base Rate Loan or (d) an L/C Credit Extension.
“Credit Parties” means, collectively, Administrative Agent, the Lending Parties, the Hedge Banks and the Cash Management Banks.
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“Debt Issuance” means the issuance of any Indebtedness for borrowed money by any Loan Party or any of its Subsidiaries.
“Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“Default” means any event or condition that, with the giving of notice, the passage of time, or both, would (unless cured or waived in accordance with this Agreement) constitute an Event of Default.
“Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, a per annum interest rate equal to the sum of (i) the Base Rate, plus (ii) the Applicable Margin, if any, applicable to Base Rate Loans, plus (iii) 2.0% per annum; provided that, with respect to a Term SOFR Loan, the Default Rate will be a per annum interest rate equal to the sum of (A) the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus (B) 2.0%; and (b) when used with respect to Letter of Credit Fees, a per annum interest rate equal to the sum of (1) the Applicable Margin plus (2) 2.0% per annum.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means, subject to Section 3.07(b), any Lender that (a) has failed to (i) fund all or any portion of its funding obligations hereunder, including in respect of its Loans or participations in respect of Letters of Credit, within two (2) Business Days of the date any such funding obligation was required to be funded hereunder unless such Lender notifies Administrative Agent and Borrower in writing that such failure is the result of such Lender’s reasonable, good faith determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to Administrative Agent or any Lending Party any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit) within two (2) Business Days of the date when due, (b) has notified Borrower, Administrative Agent or any Lending Party in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s reasonable, good faith determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after written request by Administrative Agent or Borrower, to confirm in writing to Administrative Agent and Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by Administrative Agent and Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) become the subject of a Bail-In Action; provided that a Lender will not be deemed a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any
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determination by Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above will be conclusive and binding absent manifest error, and such Lender will be deemed to be a Defaulting Lender (subject to Section 3.07(b)) upon delivery of written notice of such determination to Borrower and each Lending Party.
“Deferred Purchase Price Obligations” means obligations of a Loan Party or any of its Subsidiaries to a seller or its designee in connection with an Acquisition for the payment of (a) obligations evidenced by a seller note, (b) non-contingent installment payments of part or all of the purchase price after the closing of the Acquisition, and (c) amounts determined by reference to the operational results of a Target after the closing of the Acquisition, in each case solely to the extent such obligations are included or characterized as indebtedness or a liability in accordance with GAAP.
“Disclosure Letter” means the disclosure letter, dated as of the Closing Date, as may be supplemented from time to time by Borrower in accordance with the terms of this Agreement and the other Loan Documents, delivered by Borrower and the other Loan Parties to Administrative Agent for the benefit of the Lenders.
“Disposition” means the sale, assignment, transfer, conveyance, license (other than on a non-exclusive basis), lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer, conveyance or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. The term “Dispose” has a meaning correlative thereto. For purposes of clarification, the issuance, sale, assignment, transfer or other disposition by any Person of Equity Interests in itself (or rights with respect thereto) will not be deemed a Disposition by such Person. For the avoidance of doubt, none of (w) the issuance or sale of any Permitted Convertible Indebtedness by Borrower, (x) the sale of any Permitted Warrant Transaction by Borrower, (y) the purchase or early termination or unwind (whether pursuant to its terms or otherwise) of any Permitted Bond Hedge Transaction nor (z) the performance by Borrower and/or any Subsidiary thereof of Borrower’s or such Subsidiary’s obligations under any Permitted Convertible Indebtedness, any Permitted Warrant Transaction or any Permitted Bond Hedge Transaction, shall constitute a “Disposition”.
“Disqualified Equity Interest” means any Equity Interest of any Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof) or upon the happening of any event (a) matures or is mandatorily redeemable at the option of the holder in Cash (other than cash in lieu of fractional shares) pursuant to a sinking fund obligation or otherwise, (b) is redeemable in Cash at the option of the holder thereof, or (c) requires or mandates the purchase, redemption, retirement, defeasance or other similar payment (other than dividends and/or distributions) for Cash (other than cash in lieu of fractional shares), in each case (A) on or prior to the Revolving Credit Maturity Date and the Initial Term Loan Maturity Date then in effect, and (B) except as a result of a change of control, asset sale, fundamental change or other similar event; provided that only the portion of Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Equity Interests. The term “Disqualified Equity Interest” will also include any options, warrants or other rights that are convertible into any Disqualified Equity Interest or that are redeemable at the option of the holder, or required to be redeemed, prior to the Revolving Credit Maturity Date and the Initial Term Loan Maturity Date then in effect (except as a result of a change of control, asset sale, fundamental change or other similar event). Notwithstanding the foregoing: (i) any Equity Interests issued to any employee or to any plan for the benefit of employees of the Borrower or any of its Subsidiaries or by any such plan to such employees shall not constitute Disqualified Equity Interests solely because they may be required to be repurchased by the Borrower or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employees’ termination, death or disability and (ii) any class of Equity Interests of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by
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delivery of Equity Interests (other than Disqualified Equity Interests) shall not be deemed to be Disqualified Equity Interests.
“Dollar” and “$” mean lawful money of the United States.
“Domestic Subsidiary” means a Subsidiary incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any credit institution or investment firm established in any EEA Member Country.
“Electronic Record” has the meaning given such term in, and shall be interpreted in accordance with, 15 U.S.C. 7006.
“Electronic Signature” has the meaning given such term in, and shall be interpreted in accordance with, 15 U.S.C. 7006.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).
“Employee Benefit Plan” means any employee benefit plan, as defined in Section 3(1) of ERISA, that is maintained for the employees of any Person or any ERISA Affiliate of such Person.
“Environmental Claims” means all written claims, complaints, notices or inquiries, however asserted, by any Governmental Authority or other Person alleging Environmental Liabilities.
“Environmental Laws” means any and all Laws relating to the protection of human health (with respect to exposure to Hazardous Materials) or the environment, including all Laws regulating or relating to the presence, use, production, generation, distribution, use, storage, labeling, testing, processing, treatment, transport, recycling, reporting, disposal, Release or threatened Release (“Release” being herein defined to mean the release, spill, emission, leaking, pumping pouring, injection, deposit, discharge, disposal, dispersal, leaching, or migration into the indoor or outdoor environment, of any Hazardous Materials into or through the soil, surface or subsurface water or indoor or outdoor air), investigation, control, removal, remediation or cleanup of, or exposure to, any Hazardous Materials.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Loan Party or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law,
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(b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the actual or alleged presence of or release or threatened release of any Hazardous Materials into the environment on or from any property owned or operated by any Loan Party or any of its Subsidiaries or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination; provided that no Permitted Convertible Indebtedness, nor any Permitted Bond Hedge Transaction or Permitted Warrant Transaction, in each case, shall constitute Equity Interests of Borrower or any of its Subsidiaries.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with any Loan Party within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such Person was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; (h) the imposition of any liability under Title IV of ERISA, other than for required, timely-made plan contributions and PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate; or (i) any Foreign Benefit Event.
“Erroneous Payment” has the meaning given such term in Section 9.13(a).
“Erroneous Payment Deficiency Assignment” has the meaning given such term in Section 9.13(d).
“Erroneous Payment Impacted Class” has the meaning given such term in Section 9.13(d).
“Erroneous Payment Return Deficiency” has the meaning given such term in Section 9.13(d).
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor thereto), as in effect from time to time.
“Event of Default” has the meaning given such term in Section 8.01.
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“Exchange Act” means the Securities Exchange Act of 1934.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Revolving Credit Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Revolving Credit Commitment (other than pursuant to an assignment request by Borrower under Section 3.08) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 3.01, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.01(f) and (d) any Taxes imposed under FATCA.
“Extended Revolving Credit Commitment” means any Class of Revolving Credit Commitments the maturity of which shall have been extended pursuant to Section 2.16.
“Extended Revolving Credit Loans” means any Revolving Credit Loans made pursuant to the Extended Revolving Credit Commitments.
“Extended Term Loans” means any Class of Term Loans the maturity of which shall have been extended pursuant to Section 2.16.
“Extension” has the meaning assigned thereto in Section 2.16(a).
“Extension Amendment” means an amendment to this Agreement (which may, at the option of Administrative Agent and Borrower, be in the form of an amendment and restatement of this Agreement) among the Loan Parties, the applicable extending Lenders, Administrative Agent and, to the extent required by Section 2.16, the L/C Issuer and/or the Swing Line Lender implementing an Extension in accordance with Section 2.16.
“Extension Offer” has the meaning assigned thereto in Section 2.16(a).
“Facility” means the Revolving Credit Facility, Initial Term Loan Facility or any Incremental Term Loan Facility, as the context requires.
“FASB ASC” means the Accounting Standards Codification of the Financial Accounting Standards Board.
“FATCA” means Sections 1471 through 1474 of the Code (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or official practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities implementing such Sections of the Code.
“FDA” means the United States Food and Drug Administration and any successor thereto.
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“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that, if such rate is not so published for any day which is a Business Day, the Federal Funds Rate for such day shall be the average of the quotation for such day on such transactions received by Administrative Agent from three (3) federal funds brokers of recognized standing selected by Administrative Agent. Notwithstanding the foregoing, if the Federal Funds Rate shall be less than zero percent (0%), such rate shall be deemed to be zero percent (0%) for purposes of this Agreement.
“Fee Letters” means, collectively, (a) the letter agreement dated April 21, 2023 among Borrower, the Left Lead Arranger and Wells Fargo and (b) each letter agreement dated April 21, 2023 between Borrower and each Arranger or senior managing agent, as applicable, in each case, regarding certain fees to be paid by Borrower in connection with the transactions contemplated by the Loan Documents.
“First Tier Foreign Subsidiary” means any Foreign Subsidiary, the Equity Interests of which are owned directly by one or more Loan Parties.
“Fiscal Period” means, as of any date of determination with respect to Borrower or any Subsidiary thereof, each fiscal quarter of Borrower ending on March 31, June 30, September 30 and December 31 of each applicable Fiscal Year.
“Fiscal Year” means each fiscal year of Borrower ending December 31 of each calendar year.
“Floor” means a rate of interest equal to 0.00%.
“Foreign Benefit Event” means, with respect to any Foreign Pension Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority or other Person authorized to grant a waiver, (b) the failure to make the required contributions or payments, under any applicable law, on or before the due date for such contributions or payments, (c) the receipt of a notice by a Governmental Authority relating to the intention to terminate any such Foreign Pension Plan or to appoint a trustee or similar official to administer any such Foreign Pension Plan, or alleging the insolvency of any such Foreign Pension Plan and (d) the incurrence of any liability in excess of the Threshold Amount by Borrower or any of its Subsidiaries under applicable Law on account of the complete or partial termination of such Foreign Pension Plan or the complete or partial withdrawal of any participating employer therein, or (e) the occurrence of any transaction that is prohibited under any applicable law and could reasonably be expected to result in the incurrence of any liability by Borrower or any of its Subsidiaries, or the imposition on Borrower or any of its Subsidiaries of any fine, excise tax or penalty resulting from any noncompliance with any applicable law, in each case in excess of the Threshold Amount.
“Foreign Lender” means a Lender that is not a U.S. Person.
“Foreign Pension Plan” means any benefit plan that is maintained or is contributed to outside the jurisdiction of the United States by Borrower or any of its Subsidiaries and which under applicable law is required to be funded through a trust or other funding vehicle other than a trust or funding vehicle maintained exclusively by a Governmental Authority.
“Foreign Subsidiary” means any Subsidiary of Borrower that is not a Domestic Subsidiary.
“FRB” means the Board of Governors of the Federal Reserve System of the United States.
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“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to L/C Issuer, such Defaulting Lender’s Revolving Credit Percentage Share of the outstanding Letter of Credit Obligations other than Letter of Credit Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to Swing Line Lender, such Defaulting Lender’s Revolving Credit Percentage Share of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities.
“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.
“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank). Governmental Authority shall include the FDA, European Medicines Agency, any other competent authority or notified body, and any comparable state or foreign government entities or authorities or entity with defined authority to oversee Regulatory Matters.
“Guaranteed Obligations” has the meaning given such term in Section 10.15(a).
“Guarantor Applicable Insolvency Laws” has the meaning given such term in Section 10.15(c)(i)(a).
“Guarantor Specified Lien” has the meaning given such term in Section 10.15(c)(i)(b).
“Guarantor Subordinated Indebtedness” has the meaning given such term in Section 10.15(k).
“Guarantor Subordinated Indebtedness Payments” has the meaning given such term in Section 10.15(j).
“Guarantors” means, collectively, (a) (i) Borrower (with respect to Obligations of Subsidiaries of Borrower), Amphastar Medication Co., LLC, International Medication Systems, Limited, and Armstrong Pharmaceuticals, Inc., as of the Closing Date, and (ii) each other Person that is party to this Agreement and named herein as a Guarantor for the purposes of Section 10.15 (including each Subsidiary of Borrower that at a date subsequent to the Closing Date executes a Joinder Agreement following the date hereof pursuant to Section 6.10 in order to become a Guarantor hereunder for purposes of Section 10.15 following the date hereof) and (b) each other Person who, at a date subsequent to the Closing Date, becomes a guarantor of all or any portion of the Obligations.
“Guaranty” means, as to any Person, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and
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including any obligation of such Person, direct or indirect: (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation; (b) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation; (c) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation; or (d) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), and will include the guaranty set forth in Section 10.15. The amount of any Guaranty will be deemed to be the amount recognized as a guaranty and shown on the guaranteeing Person’s financial statements in accordance with GAAP; provided that if such financial statements of the guaranteeing Person are not reasonably available to Administrative Agent at its reasonable request, the amount of such Guaranty will be deemed to be the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.
“Hazardous Materials” means any chemical, substance, compound or material (i) which is defined as or included in the definition(s) of “hazardous materials,” “hazardous substances,” “hazardous wastes,” “toxic substances,” “toxic wastes” or words of similar meaning or import under any applicable Environmental Laws, including any petroleum, petroleum products, derivatives or wastes, radioactive materials, asbestos or asbestos-containing materials, infectious or medical wastes, radon gas, and electrical transformers or other equipment containing polychlorinated biphenyls, or (ii) the use, handling, storage and disposal of, or exposure to which, is regulated or prohibited pursuant to any Environmental Law.
“Hedge Bank” means any Person that, (a) with respect to any Swap Contract permitted under Section 7.03(e) and in effect on the Closing Date, is (i) a Lender, (ii) the Administrative Agent or (iii) an Affiliate of a Lender or the Administrative Agent, in its capacity as a counterparty under such Swap Contract and (b) with respect to any Swap Contract permitted under Section 7.03(e) and entered into after the Closing Date, at the time it enters into such Swap Contract, (i) a Lender, (ii) the Administrative Agent or (iii) an Affiliate of a Lender or the Administrative Agent, in its capacity as a counterparty under such Swap Contract.
“Hedging Obligations” means, with respect to the Loan Parties and their Subsidiaries, all liabilities of any Loan Party under Swap Contracts entered into with any Hedge Bank and permitted under Section 7.03(e); provided that (a) such liabilities under any Swap Contract with Hedge Bank that is an Affiliate of a Lender will not constitute “Hedging Obligations” hereunder unless and until such liabilities are certified as such in writing to Administrative Agent by the Lender or its Affiliate as is the counterparty under such Swap Contract and (b) liabilities resulting from the purchase of Equity Interests or Indebtedness (including securities convertible into Equity Interests) of the Borrower pursuant to delayed delivery contracts, accelerated stock repurchase agreements, prepaid put options, forward contracts or other similar agreements will not constitute “Hedging Obligations” hereunder.
“Honor Date” means, with respect to any Letter of Credit, the date of any payment by L/C Issuer in respect of any draw thereunder.
“Incremental Cap” means, as of any date of determination, the amount equal to the sum of:
(a) (i) the greater of (A) $250,000,000 and (B) an amount equal to 100% of Consolidated EBITDA, as calculated on a pro forma basis for the most recently ended Test Period, after giving effect to the Borrowing of the full amount of any Additional Revolving Credit Commitment or Incremental Term Loan Commitment requested pursuant to Section 2.14 and any Incremental Equivalent Debt then
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outstanding and other appropriate pro forma adjustment events in accordance with Section 1.02(i), including Acquisitions and Dispositions, occurring or consummated after the end of the relevant Test Period but prior to or substantially concurrently with the Borrowing of such Additional Revolving Credit Commitment, Incremental Term Loan Commitment or Incremental Equivalent Debt, as applicable, plus (ii) an amount equal to the aggregate amount of all voluntary prepayments of the Initial Term Loans, Incremental Term Loans, Revolving Credit Loans (solely to the extent accompanied by a corresponding dollar-for-dollar permanent reduction in related commitments), or Incremental Equivalent Debt made on or prior to the date of any such incurrence, in each case, except to the extent financed with the proceeds of long-term Indebtedness (other than revolving Indebtedness), minus (iii) the amount of all prior Additional Revolving Credit Commitments, Incremental Term Loan Commitments (including any Incremental Term Loans made thereunder), and Incremental Equivalent Debt incurred under this clause (a) prior to such date; plus
(b)an amount which, after giving pro forma effect to the incurrence of such Additional Revolving Credit Commitments, Incremental Term Loan Commitment (including any Incremental Term Loans made thereunder), or Incremental Equivalent Debt for the most recently ended Test Period, after giving effect to the Borrowing of the full amount of any Additional Revolving Credit Commitment or Incremental Term Loan Commitment requested pursuant to Section 2.14 or Incremental Equivalent Debt then outstanding and other appropriate pro forma adjustment events in accordance with Section 1.02(i), including Acquisitions and Dispositions, occurring or consummated after the end of the relevant Test Period but prior to or substantially concurrently with the Borrowing of such Additional Revolving Credit Commitment, Incremental Term Loan Commitment or Incremental Equivalent Debt, as applicable, would not cause the Consolidated Net Leverage Ratio to exceed a ratio that is 0.50 to 1.00 inside the maximum Consolidated Net Leverage Ratio level required pursuant to Section 7.14(a).
Unless the Borrower otherwise notifies the Administrative Agent, if all or any portion of any Additional Revolving Credit Commitment, Incremental Term Loan Commitment or Incremental Equivalent Debt would be permitted under clause (b) above on the applicable date of incurrence, such Additional Revolving Credit Commitment, Incremental Term Loan Commitment or Incremental Equivalent Debt (or the relevant portion thereof) shall be deemed to have been incurred in reliance on clause (b) above prior to the utilization of any amount available under clause (a) above. In the event the basket in clause (a) is intended to be utilized together with the basket in clause (b) in a single transaction or series of related transactions, compliance with or satisfaction of the Consolidated Net Leverage Ratio under clause (b) shall first be calculated without giving effect to amounts being incurred pursuant to the basket in clause (a), and thereafter incurrence of the portion of such Indebtedness to be incurred in such single transaction or series of related transactions pursuant to the basket in clause (a) shall be calculated; provided that any Indebtedness originally designated as incurred pursuant to clause (a) shall be automatically reclassified as incurred under clause (b) at such time as the Borrower would meet the applicable leverage or coverage-based incurrence test at such time on a pro forma basis, unless otherwise elected by the Borrower.
“Incremental Equivalent Debt” means Indebtedness issued, incurred or otherwise obtained by any Loan Party in respect of one or more series of notes (in each case issued in a public offering, Rule 144A or other private placement in lieu of the foregoing), bridge financings or loans that, in each case, if secured, will be secured by Liens on the Collateral on a junior priority or pari passu basis to the Liens on Collateral securing the Obligations, and that are issued or made in lieu of Incremental Term Loans; provided that:
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“Incremental Term Loan” has the meaning given such term in Section 2.01(c).
“Incremental Term Loan Borrowing” means a borrowing consisting of simultaneous Incremental Term Loans of the same Type and, in the case of Term SOFR Loans, having the same Interest Period made by each Incremental Term Loan Lender pursuant to Section 2.01(c).
“Incremental Term Loan Commitments” means the commitment of an Incremental Term Loan Lender to make Incremental Term Loans pursuant to Section 2.14.
“Incremental Term Loan Facility” means, at any time, the aggregate principal amount of the Incremental Term Loans of all Incremental Term Loan Lenders outstanding at such time.
“Incremental Term Loan Lender” means, at any time, a lender providing Incremental Term Loans, other than any such Person that thereafter ceases to be a party hereto pursuant to an Assignment and Assumption.
“Incremental Term Loan Maturity Date” means the earlier of (a) the Incremental Term Loan Stated Maturity Date and (b) the acceleration of the Incremental Term Loans pursuant to Section 8.03; provided, that the date set forth in clause (a) above applicable to Extended Term Loans shall be the final maturity date specified in the relevant documentation for such Extended Term Loans.
“Incremental Term Loan Percentage Share” means as to any Incremental Term Loan Lender at any time, the percentage (expressed as a decimal carried out to the ninth decimal place) of (a) on or prior to the Additional Commitment Effective Date of any Incremental Term Loans, the Aggregate Incremental Term Loan Commitments represented by such Incremental Term Loan Lender’s Incremental Term Loan Commitment, subject to adjustment as provided in Section 3.07; (b) following the Additional Commitment Effective Date of any Incremental Term Loans so long as any Incremental Term Loans are outstanding, the Outstanding Amount of all Incremental Term Loans represented by the Outstanding Amount of all Incremental Term Loans owing to such Incremental Term Loan Lender; and (c) following the Additional Commitment Effective Date of any Incremental Term Loans if all Incremental Term Loans have been repaid in full, the Outstanding Amount of all Incremental Term Loans represented by the Outstanding Amount of all Incremental Term Loans owing to such Incremental Term Loan Lender immediately prior to such repayment in full, giving effect to any subsequent assignments. The Incremental Term Loan Percentage Share of each Incremental Term Loan Lender will be set forth in the Additional Commitment Documentation or the Assignment and Assumption pursuant to which such Incremental Term Loan Lender became a party hereto, as applicable.
“Incremental Term Loan Stated Maturity Date” means the maturity date specified for Incremental Term Loans pursuant to the applicable Additional Commitment Documentation.
“Indebtedness” means, as to any Person as of any date of determination, without duplication, all of the following, whether or not included or characterized as indebtedness or a liability in accordance with
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GAAP: (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind received or held by such Person; (b) all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (c) all direct or contingent obligations of such Person arising under letters of credit, bank undertakings, letters of guaranty, surety bonds and similar instruments (including, for each of the foregoing, the stated or available amount that is undrawn or that has been drawn but is unreimbursed); (d) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances; (e) all obligations of such Person to pay the deferred purchase price of property or services (including Deferred Purchase Price Obligations); (f) Indebtedness (excluding prepaid interest thereon) of a third Person secured by a Lien on property owned or being purchased by such first Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such Indebtedness will have been assumed by such Person or is limited in recourse; provided that the amount of such Indebtedness will be the lesser of (i) the fair market value of such assets at the date of determination and (ii) the amount of such Indebtedness of such third Person; (g) all Attributable Debt in respect of all Capitalized Leases and Synthetic Lease Obligations of such Person; (h) all obligations of such Person to purchase, redeem, retire, defease or make other similar payments (other than dividends) in respect of Disqualified Equity Interests in Cash valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; (i) all Guarantees of such Person in respect of any of the foregoing; and (j) the Swap Termination Value under all Swap Contracts to which such Person is a party. The Indebtedness of any Person will include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding the foregoing, none of the following will constitute Indebtedness for purposes of this Agreement: (i) trade or other accounts payable incurred in the ordinary course of such Person’s business, (ii) bonuses or other deferred compensation arrangements with respect to officers, directors, employees or agents of such Person, (iii) customer accounts and deposits, accrued employee compensation and other liabilities in the nature of employee compensation accrued, (iv) rebates, credits for returned products, discounts, refunds, allowances for customers and credits against receivables, in each case in this clause (iv) in the ordinary course of such Person’s business, and (v) earn-outs and other deferred payment obligations incurred in connection with an Acquisition to the extent not constituting Deferred Purchase Price Obligations.
Notwithstanding the foregoing, the obligations of Borrower under any Permitted Warrant Transaction shall not constitute Indebtedness so long as the terms of such Permitted Warrant Transaction provide for “net share settlement” (or substantially equivalent term) as the default “settlement method” (or substantially equivalent term) thereunder. For purposes hereof, the amount of any Permitted Convertible Indebtedness shall be the aggregate stated principal amount thereof without giving effect to any obligation to pay cash or deliver shares with value in excess of such principal amount, and without giving effect to any integration thereof with any Permitted Bond Hedge Transaction pursuant to U.S. Treasury Regulation § 1.1275-6.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in the preceding clause (a), Other Taxes.
“Indemnitees” means, collectively, Administrative Agent (and any sub-agent thereof), each Arranger, each Lending Party and each Related Party of any of the foregoing Persons.
“Information” has the meaning given such term in Section 10.07.
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“Initial Term Loan Borrowing” means the borrowing of the Initial Term Loans pursuant to Section 2.01(b).
“Initial Term Loan Commitment” means, as to each Initial Term Loan Lender at any time, its obligation to make a portion of the Initial Term Loan to Borrower hereunder on the Closing Date; all in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as such amount may be adjusted from time to time in accordance with this Agreement.
“Initial Term Loan Facility” means the term loan facility established pursuant to Section 2.01(b).
“Initial Term Loan Lender” means any Lender with an Initial Term Loan Commitment and/or outstanding Initial Term Loans.
“Initial Term Loan Maturity Date” means the earliest of (a) June 30, 2028 and (b) the date of the acceleration of the Initial Term Loans pursuant to Section 8.03; provided, that the date set forth in clause (a) above applicable to Extended Term Loans shall be the final maturity date specified in the relevant documentation for such Extended Term Loans.
“Initial Term Loan Percentage Share” means as to any Initial Term Loan Lender at any time, the percentage (expressed as a decimal carried out to the ninth decimal place) of the total outstanding principal balance of the Initial Term Loans represented by the outstanding principal balance of such Initial Term Loan Lender’s Initial Term Loans. The Initial Term Loan Percentage Share of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as applicable.
“Initial Term Loans” has the meaning given such term in Section 2.01(b).
“Insolvency Proceeding” means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in the cases of each of the foregoing clauses (a) and (b) undertaken under Federal, state or foreign Law, including the Bankruptcy Code.
“Intercompany Note” means that certain Intercompany Note dated as of the Closing Date by and among the Borrower and the Subsidiaries of Borrower party thereto from time to time.
“Interest Payment Date” means (a) with respect to (i) any Term SOFR Loan, the last day of each Interest Period applicable thereto and, in the case of a Term SOFR Loan with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period, (ii) any Base Rate Loan (other than a Swing Line Loan), the last Business Day of each calendar month, and (iii) any Swing Line Loan, the last Business Day of each calendar month; and (b) (i) in the case of Revolving Credit Loans and Swing Line Loans, the Revolving Credit Maturity Date, (ii) in the case of Initial Term Loans, the Initial Term Loan Maturity Date and (iii) in the case of Incremental Term Loans, the applicable Incremental Term Loan Maturity Date.
“Interest Period” means, as to each Term SOFR Loan, the period commencing on the date such Term SOFR Loan is disbursed or converted to or continued as a Term SOFR Loan, and ending on the date
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one, three or six months thereafter, as selected by Borrower in the related Loan Notice; provided that (a) any Interest Period that would otherwise end on a day that is not a Business Day will be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period will end on the next preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) will end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period for (i) any Revolving Credit Loan will extend beyond the Revolving Credit Stated Maturity Date, (ii) any Initial Term Loan will extend beyond the Initial Term Loan Maturity Date and (iii) any Incremental Term Loan will extend beyond the applicable Incremental Term Loan Stated Maturity Date. No tenor that has been removed from this definition pursuant to Section 3.03(c)(iv) shall be available for specification in any notice for a Borrowing, conversion or continuation of a Term SOFR Loan pursuant to Section 2.02(a).
“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person in another Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or limited liability company interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitutes a business unit, or all or a substantial part of the business of, such Person. For purposes of calculating compliance with Section 7.02, the amount of any Investment will be the original principal or capital amount thereof without adjustment for subsequent increases or decreases in the value of such Investment, but less all returns of principal or equity thereon and distributions or dividends thereon, and will, if made by the transfer or exchange of property other than Cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property.
“IRS” means the United States Internal Revenue Service.
“ISP” means, with respect to any standby Letter of Credit, the “International Standby Practices 1998” (exclusive of Rule 3.14 thereof) published by the Institute of International Banking Law & Practice (or, if L/C Issuer agrees at the time of issuance, such later version thereof as may be in effect at the time of issuance of such Letter of Credit).
“Issuer Documents” means, with respect to any Letter of Credit, the Letter of Credit Application relating thereto and any other document entered into by L/C Issuer and Borrower as account party or its permitted designee or otherwise delivered by Borrower or its permitted designee to or for the benefit of L/C Issuer, in each case relating to such Letter of Credit.
“Joinder Agreement” means an agreement entered into by a Subsidiary of Borrower following the date hereof to join in the Guaranty set forth in Section 10.15, in substantially the form of Exhibit C or any other form approved by Administrative Agent.
“Joint Venture” means a joint venture, partnership, alliance, consortium or similar arrangement, whether in corporate, partnership or other legal form; provided that, as to any such arrangement in corporate form, such corporation will not, as to any Person of which such corporation is a subsidiary, be considered to be a Joint Venture to which such Person is a party.
“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, regulations, ordinances, codes and binding administrative or judicial precedents or authorities, including the binding interpretation or administration thereof by any Governmental Authority charged with
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the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, concessions, grants, franchises, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case having the force of law, and including all Debtor Relief Laws, Environmental Laws and anti-terrorism Laws.
“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof, the extension of the expiry date thereof or the increase of the amount thereof.
“L/C Issuer” means Wells Fargo, Capital One, National Association, JPMorgan Chase Bank, N.A., East West Bank, Cathay Bank and CIBC Bank USA, each in its capacity as issuer of Letters of Credit hereunder, or such other Lender as Borrower may from time to time select as an L/C Issuer hereunder pursuant to Section 2.03; provided that such Lender has agreed to be an L/C Issuer.
“LCT Test Date” has the meaning given such term in Section 1.02(s)(i).
“Left Lead Arranger” means Wells Fargo Securities, LLC as the left lead arranger and bookrunner for the transactions contemplated by the Loan Documents.
“Lender” means, collectively, (a) initially, each Person designated on Schedule 2.01 as a “Lender” and (b) each Person that assumes a Revolving Credit Commitment, an Additional Revolving Credit Commitment, an Initial Term Loan Commitment and/or an Incremental Term Loan Commitment pursuant to an Assignment and Assumption or pursuant to the applicable Additional Commitment Documentation or which otherwise holds a Revolving Credit Commitment, a Revolving Credit Loan, an Additional Revolving Credit Commitment, an Additional Revolving Credit Loan, an Initial Term Loan Commitment, the Initial Term Loan, an Incremental Term Loan Commitment, an Incremental Term Loan, a risk participation in a Swing Line Loan or a participation in a Letter of Credit or a Letter of Credit Borrowing (in each case, for so long as such Person holds Commitments or Loans).
“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Detail Form, or such other office or offices as a Lender may from time to time notify Borrower, Administrative Agent and the Lending Parties.
“Lending Parties” means, collectively, Lenders, Swing Line Lender and L/C Issuer.
“Letter of Credit” means any standby or commercial letter of credit issued hereunder. Letters of Credit shall be issued in Dollars.
“Letter of Credit Advance” means a Lender’s funding of its participation in a Letter of Credit Borrowing in accordance with its Revolving Credit Percentage Share.
“Letter of Credit Application” means an application and agreement (including any related reimbursement agreement) for the issuance or amendment of a Letter of Credit in the form from time to time in use by L/C Issuer.
“Letter of Credit Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit that has not been reimbursed on the date when made or refinanced as a Revolving Credit Borrowing. All Letter of Credit Borrowings will be denominated in Dollars.
“Letter of Credit Expiration Date” means the day that is five (5) Business Days prior to the Revolving Credit Stated Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).
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“Letter of Credit Fee” has the meaning given such term in Section 2.03(i).
“Letter of Credit Obligations” means, as determined at any time, the sum of (a) the aggregate amount available to be drawn under all outstanding Letters of Credit and (b) the aggregate of all Unreimbursed Amounts, including all Letter of Credit Borrowings. For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit will be determined in accordance with Section 1.02(j).
“Letter of Credit Sublimit” means an amount equal to $15,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Revolving Credit Commitments.
“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any easement, right of way or other encumbrance on title to real property).
“Limited Condition Transaction” means any Acquisition or similar Investment (including the repayment, redemption or other discharge of any Indebtedness of the Target or any of its Subsidiaries or other Affiliates being acquired as part of such Acquisition or similar Investment), unconditional and irrevocable permitted repayment or redemption of, or offer to purchase, any Indebtedness or Restricted Payment (including the incurrence of any Indebtedness in connection with any of the foregoing) that Borrower or any one or more of its Subsidiaries is contractually committed to consummate (it being understood that such commitment may be subject to conditions precedent, which conditions precedent may be amended, satisfied or waived in accordance with the terms of the applicable agreement) whose consummation is not conditioned upon the availability of, or on obtaining, third-party financing.
“Loan” means any Revolving Credit Loan, Swing Line Loan, Additional Revolving Credit Loan or Incremental Term Loan or Initial Term Loans.
“Loan Documents” means this Agreement, the Disclosure Letter, the Notes, the Security Documents, the Letters of Credit and related Issuer Documents, any agreement creating or perfecting rights in Cash Collateral pursuant to the provisions of Section 2.15, the Fee Letters and any and all other agreements, documents and instruments executed and/or delivered by or on behalf of or in support of any Loan Party to Administrative Agent or any Credit Party or their respective authorized designee evidencing or otherwise relating to the Loans or the Letter of Credit Borrowings made or the Letters of Credit issued hereunder.
“Loan Notice” means a notice, pursuant to Section 2.02(a), of (a) a borrowing of Loans, (b) a conversion of Loans from one Type to the other or (c) a continuation of Term SOFR Loans, which notice, if in writing, will be substantially in the form of Exhibit D.
“Loan Parties” means, collectively, Borrower and all Guarantors.
“Margin Stock” means “margin stock” as defined in Regulation U adopted by the FRB (12 C.F.R. Part 221).
“Material Adverse Effect” means any of the following: (a) a material adverse change in, or material adverse effect upon, the business, assets, operations or financial condition either of Borrower individually or the Loan Parties, taken as a whole; (b) a material impairment of the ability of Borrower or any other Loan Party to perform any of its payment or other obligations under this Agreement or any other Loan
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Document; or (c) a material adverse effect upon the rights or benefits or remedies available to Administrative Agent or any Lending Party under or in respect of this Agreement or any other Loan Document.
“Material Contract” means any written contract, license or other written arrangement to which any Loan Party is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have or result in a Material Adverse Effect.
“Material Subsidiary” means as at any date of determination, any Domestic Subsidiary of Borrower which either (a) owns assets with a book value of 5% or more of the book value of the Consolidated Total Assets of Borrower and its Subsidiaries or (b) generates revenues of 5% or more of the net revenue as calculated on a Consolidated basis for Borrower and its Subsidiaries, in each case as measured on a pro forma basis for the most recent Test Period; provided that, if at any time, Domestic Subsidiaries that are not Material Subsidiaries have, in the aggregate (i) assets with a book value of 10% or more of the book value of the Consolidated Total Assets of Borrower and its Subsidiaries or (ii) revenues of 10% or more of the net revenue as calculated on a Consolidated basis for Borrower and its Subsidiaries, in each case as measured on a pro forma basis for the most recent Test Period, then Borrower shall, on the date on which financial statements for such Test Period are delivered pursuant to this Agreement, designate in writing to the Administrative Agent one or more of such Subsidiaries as “Material Subsidiaries”. For purposes of this definition of “Material Subsidiary,” measurement on a pro forma basis will mean that credit will be given for a Domestic Subsidiary’s unconsolidated portion of Consolidated Total Assets or gross revenue, as the case may be, as if owned on the first day of the applicable Test Period.
“Minimum Collateral Amount” means, at any time, (a) with respect to Cash Collateral consisting of Cash, an amount equal to 105% of the Fronting Exposure of L/C Issuer with respect to Letters of Credit issued and outstanding at such time and (b) otherwise, an amount determined by Administrative Agent and L/C Issuer in their sole discretion.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA and subject to Title IV of ERISA to which any Loan Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five (5) plan years, has made or been obligated to make contributions.
“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including any Loan Party or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA, to which any Loan Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five (5) plan years, has made or been obligated to make contributions.
“Net Cash Proceeds” means, as applicable, (a) with respect to any Disposition or Casualty Event, all cash and Cash Equivalents received by any Loan Party or any of its Subsidiaries therefrom (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when received) less the sum of (i) all income taxes and other taxes assessed by, or reasonably estimated to be payable to, a Governmental Authority as a result of such transaction, (ii) all reasonable and customary out-of-pocket fees and expenses incurred in connection with such transaction or event (including with respect to legal, investment banking, brokerage, advisor and accounting and other professional fees, sales commissions and disbursements, survey costs, title insurance premiums and related search and recording charges, transfer taxes and deed or mortgage recording taxes or following a Casualty Event, restoration costs), (iii) the principal amount of, premium, if any, and interest
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on any Indebtedness (other than Indebtedness under the Loan Documents) secured by a Lien on the asset (or a portion thereof) disposed of, which Indebtedness is required to be repaid in connection with such transaction or event, (iv) in the case of any Disposition or Casualty Event by a non-wholly-owned Subsidiary, the pro rata portion of the Net Cash Proceeds thereof attributable to minority interests and not available for distribution to or for the account of Borrower as a result thereof and (v) all amounts that are set aside as a reserve (A) for adjustments in respect of the purchase price of such assets, (B) for any liabilities associated with such sale or casualty, to the extent such reserve is required by GAAP or as otherwise required pursuant to the documentation with respect to such Disposition or Casualty Event, (C) for the payment of unassumed liabilities relating to the assets sold or otherwise disposed of at the time of, or within 30 days after, the date of such sale or other disposition and (D) for the payment of indemnification obligations; provided that, to the extent and at the time any such amounts are released from such reserve and received by such Loan Party or any of its Subsidiaries, such amounts shall constitute Net Cash Proceeds, and (b) with respect to any Debt Issuance, the gross cash proceeds received by any Loan Party or any of its Subsidiaries therefrom less all reasonable and customary out-of-pocket legal, underwriting and other fees and expenses (including, without limitation, taxes) incurred in connection therewith.
“Net Stock Repurchases” means, for any period, the aggregate consideration paid by any Loan Party during such period to purchase Equity Interests of Borrower, minus the net cash proceeds received by any Loan Party during such period from employee stock compensation plans of Borrower (excluding amounts constituting withholding tax payments).
“Non-Consenting Lender” means any Lender that does not (as determined by Administrative Agent in its Reasonable Discretion) approve any consent, waiver or amendment that (a) requires the approval of all affected Lenders in accordance with the terms of Section 10.01 and (b) has been approved by Required Lenders (to the extent such consent, waiver or amendment requires the approval of all Lenders) or Required Revolving Credit Lenders or Required Initial Term Loan Lenders or Required Incremental Term Loan Lenders (to the extent such consent, waiver or amendment requires the consent of all Revolving Credit Lenders, Initial Term Loan Lenders or Incremental Term Loan Lenders, as applicable).
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.
“Note” means a Revolving Credit Note, a Swing Line Note or a Term Loan Note.
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit or constituting Hedging Obligations or Cash Management Obligations, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. For the avoidance of doubt, any obligation under any Permitted Bond Hedge Transaction or any Permitted Warrant Transaction shall not constitute Obligations.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Organizational Documents” means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-United States jurisdiction) of such Person; (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement of such Person; and (c) with
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respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization of such Person and any agreement, instrument, filing or notice with respect thereto filed in connection with such Person’s formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such Person.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.08).
“Outstanding Amount” means, as determined as of any date, (a) with respect to any Loans, the aggregate outstanding principal amount thereof after giving effect to any Borrowings and prepayments or repayments of such Loans, as the case may be, occurring on such date; and (b) with respect to any Letter of Credit Obligations on any date, the amount of such Letter of Credit Obligations after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the Letter of Credit Obligations as of such date, including as a result of any reimbursements by Borrower of Unreimbursed Amounts.
“Overnight Rate” means, for any day, the greater of (a) the Federal Funds Rate and (b) an overnight rate determined by Administrative Agent (or to the extent payable to an L/C Issuer, such L/C Issuer, as applicable, in each case, with notice to Administrative Agent) to be customary in the place of disbursement or payment for the settlement of banking transactions.
“Participant” has the meaning given to such term in Section 10.06(d).
“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
“Payment Recipient” has the meaning given such term in Section 9.13(a).
“PBGC” means the Pension Benefit Guaranty Corporation.
“Pension Act” means the Pension Protection Act of 2006.
“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.
“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by any Loan Party and any ERISA Affiliate
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and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.
“Percentage Share” means, as to any Lender, its Revolving Credit Percentage Share, Initial Term Loan Percentage Share or Incremental Term Loan Percentage Share, as applicable.
“Permits” means, with respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other contractual obligations with, any Governmental Authority, in each case having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including all Regulatory Permits.
“Permitted Acquisition” means (a) the Acquisition by Borrower or any Subsidiary of (i) all or substantially all of the assets of another Person, (ii) an identifiable business unit or division of another Person or (iii) Equity Interests of another Person resulting in the acquiring Person having the ability to Control the acquired Person or otherwise causing another Person to become a Subsidiary of such Person, or (b) the Acquisition of another Person or an identifiable business unit or division of another Person by Borrower or any Subsidiary in a merger, consolidation, amalgamation, reorganization or other similar transaction (in each case, the Person or identifiable business unit or division being so acquired is referred to as the “Target”); provided that, subject to Section 1.02(s) with respect to any Limited Condition Transaction:
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then in the case of clauses (e)(i) and (ii) above, Borrower has delivered to Administrative Agent, on or before the earlier to occur of (A) the fifteenth (15th) calendar day following the execution of the definitive acquisition (or similar) agreement for such Acquisition (or if such day is not a Business Day, the next succeeding Business Day) and (B) ten (10) calendar days preceding the closing of the Acquisition (or if such day is not a Business Day, the immediately preceding Business Day) (or, in each case, such later date as agreed to by the Administrative Agent in its sole discretion), each of the following:
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“Permitted Bond Hedge Transaction” means any bond hedge, call or capped call option (or substantively equivalent derivative transaction) relating to Borrower’s common stock (or other securities or property following a merger event, reclassification or other change of the common stock of Borrower) purchased by Borrower or a Subsidiary thereof in connection with the issuance of any Permitted Convertible Indebtedness and settled in common stock of Borrower (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of Borrower’s common stock or such other securities or property), and cash in lieu of fractional shares of common stock of Borrower, including as may be amended or replaced from time to time, including through a novation of the counterparty thereto; provided that the purchase of any such Permitted Bond Hedge Transaction is made with, and the purchase price thereof less the proceeds received by Borrower from the sale of any substantially concurrently executed Permitted Warrant Transaction, does not exceed, the net proceeds received by Borrower or a Subsidiary thereof in connection with the issuance of any Permitted Convertible Indebtedness; provided further that the other terms, conditions and covenants of each such transaction shall be such as are customary for transactions of such type (as determined by Borrower in good faith).
“Permitted Convertible Indebtedness” means (a) unsecured Indebtedness of Borrower or a Subsidiary thereof that (i) as of the date of issuance thereof contains customary conversion or exchange rights and customary offer to repurchase rights for transactions of such type (in each case, as determined by Borrower in good faith) and (ii) is convertible into or exchangeable for shares of common stock of Borrower (or other securities or property following a merger event, reclassification or other change of the common stock of Borrower), cash or a combination thereof (such amount of cash determined by reference to the price of Borrower common stock or such other securities or property), and cash in lieu of fractional shares of common stock of Borrower and (b) any unsecured guarantee by any Loan Party of Indebtedness of Borrower or a Subsidiary thereof described in clause (a); provided that such Indebtedness is permitted to be incurred under Section 7.03(a)(ii) or (o).
“Permitted Encumbrances” means any Cash Collateral or other credit support provided to L/C Issuer in respect of a Defaulting Lender pursuant to clause (D) of Section 2.03(a)(iv).
“Permitted First Lien Intercreditor Agreement” means, with respect to any Liens on Collateral that are intended to be equal in right of priority to the Liens securing the Obligations, one or more intercreditor agreements, each of which shall be on terms which are consistent with market terms governing security arrangements for the sharing of liens on a pari passu basis at the time such intercreditor agreement is proposed to be established, as determined by the Borrower and the Administrative Agent in the exercise of reasonable judgment, and reasonably satisfactory to the Borrower and the Administrative Agent.
“Permitted Junior Intercreditor Agreement” means, with respect to any Liens on Collateral that are intended to be junior to any Liens securing the Obligations, one or more intercreditor agreements, each of which shall be on terms which are consistent with market terms governing security arrangements for the sharing of liens on a junior basis at the time such intercreditor agreement is proposed to be established, as determined by the Borrower and the Administrative Agent in the exercise of reasonable judgment, and reasonably satisfactory to the Borrower and the Administrative Agent.
“Permitted Liens” has the meaning given such term in Section 7.01.
“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) relating to Borrower’s common stock (or other securities or property following a merger event, reclassification or other change of the common stock of Borrower) sold by Borrower substantially concurrently with any purchase by Borrower of a Permitted Bond Hedge Transaction and settled in common stock of Borrower (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of Borrower’s common
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stock or such other securities or property), and cash in lieu of fractional shares of common stock of Borrower; provided that the terms, conditions and covenants of each such transaction shall be such as are customary for transactions of such type (as determined by Borrower in good faith).
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Pharma Laws” means all applicable Law relating to the procurement, development, manufacture, production, clinical testing, distribution, dispensing, importation, exportation, use, handling, quality, sale, or promotion of any drug, medical device, or other medical products (including, without limitation, any ingredient or component of the foregoing products) subject to regulation under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.) and similar state and foreign laws, controlled substances laws, pharmacy laws, or consumer product safety laws.
“Plan” means any “employee benefit plan” within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of any Loan Party or any ERISA Affiliate or any such Plan to which any Loan Party or any ERISA Affiliate is required to contribute on behalf of any of its employees.
“Platform” means Debt Domain, Intralinks, SyndTrak or a substantially similar electronic transmission system.
“Prime Rate” means, at any time, the rate of interest per annum publicly announced from time to time by Administrative Agent as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs. The parties hereto acknowledge that the rate announced publicly by Administrative Agent as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.
“pro forma” and “pro forma basis” shall, in each case, mean, with respect to compliance with any test, covenant, calculation or ratio hereunder, the determination of such test, covenant, calculation or ratio in accordance with Section 1.02(i) of this Agreement.
“Proceeding” has the meaning given such term in Section 6.03(b).
“Products” means any medical product or product candidate of the Loan Parties or any of their Subsidiaries that are subject to regulation under Pharma Laws.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“Qualified ECP Guarantor” means, in respect of any Hedging Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant guarantee or grant of the relevant security interest becomes effective with respect to such Hedging Obligation or such other Person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
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“Reasonable Discretion” means, as to any Person, a determination or judgment made by such Person in the exercise of such Person’s reasonable (from the perspective of a commercial lender) business judgment.
“Recipient” means (a) Administrative Agent and (b) any Lending Party, as applicable.
“Record” means information that is inscribed on a tangible medium or which is stored on an electronic or other medium and is retrievable in perceived form.
“Register” means a register for the recordation of the names and addresses of Lenders and, as applicable, the Revolving Credit Commitments and Outstanding Amounts (including the principal amounts and stated interest) of the Loans and Letter of Credit Obligations owing to each Lender pursuant to the terms hereof from time to time.
“Regulatory Matters” means, collectively, activities and Products that are subject to Pharma Laws and Regulatory Permits.
“Regulatory Permits” means all Permits and exemptions pertaining to a Regulatory Matter and issued or allowed by any Governmental Authority (including but not limited to new drug applications, abbreviated new drug applications, biologics license applications, investigational new drug applications, over-the-counter drug monograph, device premarket approval applications, device pre-market notifications, investigational device exemptions, product recertifications, manufacturing approvals and authorizations, CE Marks, pricing and reimbursement approvals, labeling approvals or their foreign equivalent, controlled substance registrations, and wholesale distributor permits) to any Loan Party or any of its Subsidiaries, that are required for the research, development, manufacture, distribution, marketing, storage, transportation, use and sale of the Products that are subject to Pharma Laws.
“Related Business” means any business that is the same, similar or otherwise reasonably related, ancillary or complementary to the businesses of the Loan Parties or, to the extent that the Closing Date Acquisition Closing Date occurs, the Target (as determined in good faith by Borrower’s Board of Directors) on the Closing Date.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, members, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates, and specifically includes, in the case of (a) Wells Fargo, Wells Fargo in its separate capacities as Administrative Agent, as Swing Line Lender and as L/C Issuer, and (b) Wells Fargo Securities, LLC, in its capacity as the Left Lead Arranger.
“Relevant Governmental Body” means the FRB or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the FRB or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the thirty-day notice period has been waived.
“Request for Credit Extension” means (a) with respect to a Borrowing of Revolving Credit Loans, Initial Term Loans or Incremental Term Loans, a Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.
“Required Incremental Term Loan Lenders” means, as determined at any time, Lenders comprising Incremental Term Loan Lenders holding in excess of 50.0% of the Outstanding Amount of all Incremental
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Term Loans and Incremental Term Loan Commitments; provided that each determination of Required Incremental Term Loan Lenders will disregard the Outstanding Amount of all Incremental Term Loans and Incremental Term Loan Commitments held by any then Defaulting Lender.
“Required Initial Term Loan Lenders” means, as determined at any time, Lenders comprising Initial Term Loan Lenders holding in excess of 50.0% of the Outstanding Amount of all Initial Term Loans and Initial Term Loan Commitments; provided that each determination of Required Initial Term Loan Lenders will disregard the Outstanding Amount of all Initial Term Loans and Initial Term Loan Commitments held by any then Defaulting Lender.
“Required Lenders” means, as determined at any time, Lenders comprising Lenders holding in excess of 50.0% of the sum of (a) (i) the Revolving Credit Commitments then in effect or (ii) if the Aggregate Revolving Credit Commitments have been terminated in full, the Total Revolving Credit Outstandings at such time, plus (b) the Outstanding Amount of all Initial Term Loans and Initial Term Loan Commitments at such time plus (c) the Outstanding Amount of all Incremental Term Loans and Incremental Term Loan Commitments at such time; provided that each determination of Required Lenders will disregard the Revolving Credit Commitment of, the portion of the Total Revolving Credit Outstandings and the Outstanding Amount of all Initial Term Loans, Initial Term Loan Commitments, Incremental Term Loans and Incremental Term Loan Commitments, as the case may be, of any then Defaulting Lender.
“Required Revolving Credit Lenders” means, as determined at any time, (a) Lenders comprising Revolving Credit Lenders holding in excess of 50.0% of the Revolving Credit Commitments then in effect or (b) if the Aggregate Revolving Credit Commitments have been terminated following the occurrence of an Event of Default, Revolving Credit Lenders holding in excess of 50.0% of the Total Revolving Credit Outstandings at such time; provided that each determination of Required Revolving Credit Lenders will disregard the Revolving Credit Commitment of, and the portion of the Total Revolving Credit Outstandings held or deemed held, by any then Defaulting Lender.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means (a) with respect to Borrower in connection with any Request for Credit Extension to be delivered by Borrower hereunder, the chief executive officer, president, chief financial officer, treasurer or controller of Borrower; (b) with respect to Borrower in connection with any Compliance Certificate or any other certificate or notice pertaining to any financial information required to be delivery by Borrower hereunder or under any other Loan Document, the chief financial officer, treasurer, controller or other officer having primary responsibility for the financial affairs of such Person; and (c) otherwise, with respect to Borrower or any other Loan Party, the chief executive officer, president, chief operating officer, chief financial officer, treasurer or controller of such Person.
“Restricted Payment” means, as to any Person, (a) any dividend or other distribution by such Person (whether in Cash, securities and/or other property) with respect to any Equity Interest of such Person, (b) any payment (whether in Cash, securities and/or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of such Equity Interest or on account of any return of capital to any holder of any such Person’s Equity Interests, (c) the acquisition for value by such Person of any Equity Interests issued by such Person or any other Person that Controls such Person, and (d) with respect to the foregoing clauses (a) through (c) of this definition, any transaction that has a substantially similar effect. For the avoidance of doubt none of (x) any payments of cash and/or deliveries in shares of Equity Interests (or other securities and/or property following a merger event, reclassification or other change of the Equity Interests) (and cash in lieu of fractional shares) pursuant to the terms of, or otherwise in performance of its obligations under, or any
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repurchase and/or exchange of, any Permitted Convertible Indebtedness (including, without limitation, making payments of interest, principal or premium thereon, making payments due upon required repurchase thereof and/or making payments and deliveries upon conversion or settlement thereof), (y) the purchase of any Permitted Bond Hedge Transaction or any payment according to its terms or (z) any payments of cash and/or deliveries of Equity Interests (or other securities or property following a merger event, reclassification or other change of the Equity Interests) (and cash in lieu of fractional shares) in connection with any Permitted Warrant Transaction (including in connection with any exercise and/or early unwind or settlement thereof whether according to the terms of such Permitted Warrant Transaction or otherwise) shall constitute a “Restricted Payment”.
“Revolving Credit Borrowing” means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Term SOFR Loans, having the same Interest Period made by each Lender pursuant to Section 2.01(a).
“Revolving Credit Commitment” means, as to each Lender at any time, its obligation to do the following pursuant to the terms hereof: (a) make Revolving Credit Loans to Borrower; (b) purchase participations in Letter of Credit Obligations; and (c) purchase participations in Swing Line Loans; all in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender became a party hereto or pursuant to the applicable Additional Commitment Documentation, as such amount may be adjusted from time to time in accordance with this Agreement. The Revolving Credit Commitment of any Revolving Credit Lender shall include the Extended Revolving Credit Commitment of such Revolving Credit Lender.
“Revolving Credit Exposure” means, as to any Lender at any time, the aggregate principal amount at such time of its outstanding Revolving Credit Loans and such Lender’s participation in Letter of Credit Obligations and Swing Line Loans at such time.
“Revolving Credit Facility” means, at any time, the aggregate amount of the Lenders’ Revolving Credit Commitments at such time.
“Revolving Credit Facility Fee” has the meaning given such term in Section 2.09(a).
“Revolving Credit Lender” means, collectively, (a) initially, each Lender designated on Schedule 2.01 as a Lender having a Revolving Credit Commitment as of the Closing Date and (b) each Lender that assumes a Revolving Credit Commitment pursuant to an Assignment and Assumption or pursuant to the applicable Additional Commitment Documentation or which otherwise holds a Revolving Credit Commitment, a Revolving Credit Loan, a risk participation in a Swing Line Loan or a participation in a Letter of Credit or a Letter of Credit Borrowing, other than any such Person that ceases to be a party hereto or ceases to hold any Revolving Credit Commitments or Revolving Credit Loans nor any such risk participations pursuant to an Assignment and Assumption.
“Revolving Credit Loan” has the meaning given such term in Section 2.01(a).
“Revolving Credit Maturity Date” means the earliest of (a) the Revolving Credit Stated Maturity Date, (b) the date of the termination of the Aggregate Revolving Credit Commitments pursuant to Section 2.06 and (c) the date of the termination of the Aggregate Revolving Credit Commitments and of the obligation of L/C Issuer to make L/C Credit Extensions and the acceleration of the Revolving Credit Loans pursuant to Section 8.03; provided, that the date set forth in clause (a) above applicable to Extended Revolving Credit Commitments shall be the final maturity date specified in the relevant documentation for such Extended Revolving Credit Commitments.
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“Revolving Credit Percentage Share” means as to any Revolving Credit Lender at any time, the percentage (expressed as a decimal carried out to the ninth decimal place) of the Aggregate Revolving Credit Commitments represented by such Lender’s Revolving Credit Commitment at such time, subject to adjustment as provided in Section 3.07; provided that, if the commitment of each Lender to make Revolving Credit Loans and the obligation of L/C Issuer to issue L/C Credit Extensions have been terminated pursuant to Section 8.03 or if the Aggregate Revolving Credit Commitments have expired, then the Revolving Credit Percentage Share of each Lender will be determined based upon such Lender’s Revolving Credit Percentage Share most recently in effect, giving effect to any subsequent assignments. The initial Revolving Credit Percentage Share of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption or pursuant to the applicable Additional Commitment Documentation pursuant to which such Lender became a party hereto, as applicable.
“Revolving Credit Stated Maturity Date” means June 30, 2028.
“S&P” means Standard & Poor’s Ratings Services, a division of S&P Global Inc. and any successor thereto.
“Sanctioned Country” means at any time, a country, region or territory which is itself (or whose government is) the subject or target of any Sanctions (including, as of the Closing Date, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, the Crimea, Zaporizhzhia and Kherson Regions of Ukraine, Cuba, Iran, North Korea and Syria (for the avoidance of doubt, the preceding list is intended to be illustrative only as of the Closing Date; the comprehensive list of Sanctioned Countries is subject to change from time to time in accordance with the Sanctions then in effect)).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC (including OFAC’s Specially Designated Nationals and Blocked Persons List and OFAC’s Consolidated Non-SDN List), the U.S. Department of State, the United Nations Security Council, the European Union, any European member state, His Majesty’s Treasury, or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any Person owned or controlled by, or acting or purporting to act for or on behalf of, directly or indirectly, any such Person or Persons described in the preceding clauses (a) and (b), including a Person that is deemed by OFAC to be a Sanctions target based on the ownership of such legal entity by Sanctioned Person(s) or (d) any Person otherwise a target of Sanctions, including vessels and aircraft, that are designated under any Sanctions program.
“Sanctions” means any and all economic or financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes and restrictions and anti-terrorism laws, including but not limited to those imposed, administered or enforced from time to time by the U.S. government (including those administered by OFAC or the U.S. Department of State), the United Nations Security Council, the European Union, any European member state, His Majesty’s Treasury, the Office of the Superintendent of Financial Institutions (Canada) or other relevant sanctions authority in any jurisdiction in which (a) Borrower or any of its Subsidiaries or Affiliates is located or conducts business, (b) in which any of the proceeds of the Credit Extensions will be used, or (c) from which repayment of the Credit Extensions will be derived.
“SEC” means the Securities and Exchange Commission and any successor thereto.
“Security Documents” means the collective reference to the Collateral Agreement, and each other agreement or writing pursuant to which any Loan Party pledges or grants a security interest in any property or assets securing the Obligations.
“Seller” means Eli Lilly and Company.
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“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“Solvent” means, as to any Person at any time, that (a) the fair value of the property of such Person on a going concern basis is greater than the amount of such Person’s liabilities (including contingent liabilities), as such value is established and such liabilities are evaluated for purposes of Section 101(32) of the Bankruptcy Code and, in the alternative, for purposes of the Uniform Fraudulent Transfer Act or any similar state statute applicable to Borrower or any Subsidiary thereof; (b) the present fair salable value of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its property and pay its debts and other liabilities (including contingent liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital. For the purposes of the foregoing, the amount of contingent liabilities at any time will be computed as the amount that, in light of all facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“Specified Event of Default” means any Event of Default occurring under Section 8.01(a) or, in the case of Borrower only, Sections 8.01 (f) or (g).
“Specified Guaranteed Payment” means the obligation of the Borrower to make the $125,000,000 guaranteed payment required to be paid on the first anniversary of the Closing Date pursuant to the Closing Date Acquisition Agreement.
“Specified Lender” means, at any time, any Lender that (a) has (i) requested compensation under Section 3.04 and has not rescinded such request within five (5) Business Days of the making thereof or (ii) to whom Borrower must pay an additional amount (or on whose behalf Borrower must pay an additional amount to a Governmental Authority) pursuant to Section 3.01, and in the case of either of clauses (i) or (ii), such Lender has declined or is unable to designate a different Lending Office in accordance with Section 3.06(a); (b) gives a notice pursuant to Section 3.02; (c) is a Defaulting Lender; or (d) is a Non-Consenting Lender.
“Specified Materials” means, collectively, all notices, demands, communications, documents and other materials or information provided by or on behalf of Borrower or any other Loan Party or any of their respective Subsidiaries or Affiliates, as well as documents and other written materials relating to Borrower or any other Loan Party or any of their respective Subsidiaries or Affiliates or any other materials or matters relating to this Agreement or any of the other Loan Documents (including any amendments or waivers of the terms thereof or supplements thereto) or the transactions contemplated herein or therein.
“Specified Representations” means the representations and warranties of Borrower and, to the extent applicable, the other Loan Parties set forth in Section 5.01(a), Section 5.02(a) (with respect to entering into and performance of the Loan Documents), Section 5.01(b)(ii), Section 5.03(b) (solely with respect to the PATRIOT Act), Section 5.05, Section 5.13, Section 5.17, and Section 5.18(d) (solely with respect to Section 7.09(a)(i), (ii) and (iii) and (b)) of this Agreement and Section 3.1(a), (b) and (e) (in the case of Section 3.1(e), solely with respect to delivery original stock certificates or other certificates
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evidencing the certificated Equity Interests of Domestic Subsidiaries pledged pursuant to the Security Documents) of the Collateral Agreement.
“Specified Transaction” means, with respect to any period, any Investment, Disposition of assets, incurrence or repayment of Indebtedness, Restricted Payment, subsidiary designation or other event that by the terms of this Agreement requires “pro forma” compliance with a test or covenant hereunder or requires such test or covenant to be calculated on a “pro forma basis” or after giving “pro forma” effect thereto.
“Subordinated Debt” means any unsecured Indebtedness of Borrower or any Subsidiary that (a) is subordinated by its terms in right of payment to the Loans pursuant to provisions reasonably acceptable to the Administrative Agent, (b) is subject to such financial and other covenants and events of defaults as may be reasonably acceptable to the Administrative Agent and (c) is subject to such customary interest blockage and delayed acceleration provisions as may be reasonably acceptable to the Administrative Agent.
“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of Equity Interests having ordinary voting power for the election of directors or other governing body (other than Equity Interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise Controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” will refer to a Subsidiary or Subsidiaries of Borrower.
“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, interest rate or foreign exchange cap or floor or collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement; and (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement including any such obligations or liabilities under any such master agreement (in each case, together with any related schedules); provided that neither any Permitted Bond Hedge Transaction nor any Permitted Warrant Transaction shall be deemed a Swap Contract.
“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (b) for any date prior to the date referenced in clause (a) of this definition, the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
“Swing Line” means the revolving credit facility made available by Swing Line Lender pursuant to Section 2.04.
“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.
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“Swing Line Lender” means, at any time, the provider of the Swing Line hereunder (which, initially, will be Wells Fargo).
“Swing Line Loan” has the meaning given such term in Section 2.04(a).
“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, will be substantially in the form of Exhibit F.
“Swing Line Sublimit” means, as determined as of any date, an amount equal to the lesser of (a) $15,000,000 and (b) the Aggregate Revolving Credit Commitments. The Swing Line Sublimit is a part of, but is not in addition to, the Aggregate Revolving Credit Commitments.
“Synthetic Lease Obligation” means the principal balance outstanding under any lease, funding agreement or other arrangement with respect to any real or personal property pursuant to which the lessor is treated as the owner of such property for accounting purposes and the lessee is treated as the owner of such property for federal income tax purposes, or any tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP.
“Target” has the meaning given such term in the first sentence of the definition of “Permitted Acquisition” set forth in this Section 1.01.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholdings), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Loans” means the Initial Term Loans and, if applicable, the Incremental Term Loans and “Term Loan” means any of such Term Loan.
“Term SOFR” means,
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provided, further, that if Term SOFR determined as provided above (including pursuant to the proviso under clause (a) or clause (b) above) shall ever be less than the Floor, then Term SOFR shall be deemed to be the Floor.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its Reasonable Discretion).
“Term SOFR Loan” means any Loan that bears interest at a rate based on Adjusted Term SOFR.
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Test Period” means each period of four consecutive Fiscal Periods then last ended, in each case taken as one accounting period, in respect of which Consolidated financial statements of Borrower and its Subsidiaries have most recently been filed with the SEC or delivered (or were required to be delivered) to Administrative Agent pursuant to Section 6.01(a) or (b), as the case may be.
“Threshold Amount” means $35,000,000.
“Total Revolving Credit Outstandings” means, as determined as at any time, the sum of (a) the aggregate Outstanding Amount of all Revolving Credit Loans, plus (b) the Outstanding Amount of all Letter of Credit Obligations and plus (c) the Outstanding Amount of all Swing Line Loans.
“Transactions” means collectively, the Closing Date Acquisition, the funding of the Initial Term Loan and the payment of fees, commissions and expenses in connection with each of the foregoing.
“Type” means, with respect to any Loan, its character as a Base Rate Loan or a Term SOFR Loan.
“UCC” means the Uniform Commercial Code as in effect in the State of New York.
“UCP” means, with respect to any commercial Letter of Credit, the Uniform Customs and Practice for Documentary Credits 2007 Revision, UCP 600, published by the International Chamber of Commerce (or, if L/C Issuer will agree at the time of issuance, such later version thereof as may be in effect immediately prior to the issuance of such Letters of Credit, the extension of the expiry date thereof or any increase of the amount thereof).
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
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“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement, excluding the related Benchmark Replacement Adjustment.
“Unreimbursed Amount” means, with respect to any Letter of Credit, any amount drawn thereunder that Borrower has failed to reimburse to L/C Issuer by 11:00 a.m. on the related Honor Date.
“Unrestricted Cash and Cash Equivalents” means, as determined as of any date, an amount equal to the lesser of (a) $100,000,000 and (b) 100% of all cash and Cash Equivalents of Borrower and its Domestic Subsidiaries that are held in bank accounts or securities accounts located in the United States, in each case that (i) would not appear as “restricted” on the Consolidated balance sheet of the Borrower and its Subsidiaries (other than any restriction resulting from this Agreement or the other Loan Documents (or the Liens created thereunder)) and (ii) is not subject to any Lien (other than Liens permitted under Sections 7.01(c), (n), (q) and (w)); provided that for the purpose of the calculating the Consolidated Net Leverage Ratio as of any date of determination, Unrestricted Cash and Cash Equivalents as calculated for such date shall specifically exclude the proceeds of any Consolidated Funded Debt incurred substantially concurrently therewith other than any proceeds that will be used within thirty (30) days following such date solely to refinance or otherwise satisfy (in whole or in part) other Consolidated Funded Debt included in the numerator of such calculation of the Consolidated Net Leverage Ratio.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities; provided, that for purposes of notice requirements in Sections 2.02(a) and 2.05(b), in each case, such day is also a Business Day.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 3.01(f).
“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness, in each case of clauses (a) and (b), without giving effect to the application of any prior prepayment to such installment, sinking fund, serial maturity or other required payment of principal.
“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.
“Withholding Agent” means any Loan Party and the Administrative Agent.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised
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under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
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Borrower will promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and will notify L/C Issuer in writing of any claim of noncompliance with Borrower’s instructions or other irregularity. Borrower will be conclusively deemed to have waived any such claim against L/C Issuer and its correspondents unless Borrower will have given written notice thereof to L/C Issuer within three (3) Business Days of L/C Issuer’s delivery to Borrower of a copy of the such Letter of Credit or amendment thereto, as applicable.
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PAYMENT DATE | PRINCIPAL INSTALLMENT |
September 30, 2023 | $3,125,000 |
December 31, 2023 | $3,125,000 |
March 31, 2024 | $3,125,000 |
June 30, 2024 | $3,125,000 |
September 30, 2024 | $6,250,000 |
December 31, 2024 | $6,250,000 |
March 31, 2025 | $6,250,000 |
June 30, 2025 | $6,250,000 |
September 30, 2025 | $9,375,000 |
December 31, 2025 | $9,375,000 |
March 31, 2026 | $9,375,000 |
June 30, 2026 | $9,375,000 |
September 30, 2026 | $9,375,000 |
December 31, 2026 | $9,375,000 |
March 31, 2027 | $9,375,000 |
June 30, 2027 | $9,375,000 |
September 30, 2027 | $12,500,000 |
December 31, 2027 | $12,500,000 |
March 31, 2028 | $12,500,000 |
Initial Term Loan Maturity Date | The aggregate outstanding principal amount of all Initial Term Loans |
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$1,000,000 in excess thereof; (c) Borrower will not terminate or reduce the Aggregate Revolving Credit Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Revolving Credit Outstandings would exceed the Aggregate Revolving Credit Commitments; and (d) if, after giving effect to any reduction of the Aggregate Revolving Credit Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Revolving Credit Commitments, such sublimit(s) will be automatically reduced by the amount of such excess. Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate Revolving Credit Commitments. Any reduction of the Aggregate Revolving Credit Commitments will be applied to the commitment of each Lender according to its Revolving Credit Percentage Share thereof. All Revolving Credit Facility Fees accrued until the effective date of any termination of the Aggregate Revolving Credit Commitments will be paid on the effective date of such termination.
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Notwithstanding the foregoing and for the avoidance of doubt, if, as a result of any restatement of or other adjustment to the financial statements of Borrower or for any other reason, Borrower or Administrative Agent (which may be at the direction of Required Lenders) determine that (A) the Consolidated Net Leverage Ratio as calculated by Borrower as of any applicable date was inaccurate and (B) a proper calculation of the Consolidated Net Leverage Ratio would have resulted in higher pricing for such period, Borrower will immediately and retroactively be obligated to pay to Administrative Agent for the account of the applicable Lenders or the L/C Issuer, as the case may be, promptly on demand by Administrative Agent accompanied by calculations supporting Administrative Agent’s determination (or, after the occurrence of an actual or deemed entry of an order for relief with respect to Borrower under the Bankruptcy Code, automatically and without further action by Administrative Agent, any Lender or L/C Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period; provided that, if such corrected calculations would have led to the application of a higher interest rate in one (1) or more periods and lower interest rate in one (1) or more periods due to the shifting of revenue, Borrower shall only be liable for the
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positive difference over all such affected periods. The foregoing will in no way limit the rights of Administrative Agent to impose the Default Rate of interest pursuant to Section 2.08(b) or to exercise any other remedy available at law or as provided hereunder or under any of the other Loan Documents.
In addition to certain fees described in Sections 2.03(i) and (j):
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Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.
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On each Additional Commitments Effective Date, each applicable Lender, Eligible Assignee or other Person who is providing an Additional Revolving Credit Commitment or an Incremental Term Loan Commitment: (I) in the case of any Additional Revolving Credit Commitment, will become a “Revolving Credit Lender” for all purposes of this Agreement and the other Loan Documents; and (II) in the case of any Incremental Term Loan Commitment, will make an Incremental Term Loan to Borrower in a principal amount equal to such Incremental Term Loan Commitment. Any Additional Revolving Credit Loan will be a “Revolving Credit Loan” for all purposes of this Agreement and the other Loan Documents. In furtherance of the foregoing, on any Additional Commitments Effective Date on which Additional Revolving Credit Commitments are made, subject to the satisfaction of the other terms and conditions contained in this Section 2.14, (x) each of the existing Revolving Credit Lenders will assign to each Person providing an Additional Revolving Credit Commitment, and each such Person will purchase from each of the existing Revolving Credit Lenders, in an amount equal to the Outstanding Amount thereof (together with accrued but unpaid interest thereon), such interests in the Revolving Credit Loans outstanding on such date as will be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Credit Loans will be held by existing Revolving Credit Lenders and the Person making the Additional Revolving Credit Commitments ratably in accordance with their Revolving Credit Percentage Shares after giving effect to the addition of such Additional Revolving Credit Commitments to the existing Revolving Credit Commitments; and (y) each Person making an Additional Revolving Credit Commitment
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will be deemed for all purposes to have made a Revolving Credit Commitment and each Additional Revolving Credit Loan will be deemed, for all purposes, a Revolving Credit Loan.
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Any Additional Revolving Credit Commitments or Incremental Term Loans, as applicable, made or provided pursuant to this Section 2.14 will be evidenced by one or more entries in the Register maintained by Administrative Agent in accordance with the provisions set forth in Section 10.06(c).
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Each Lending Party agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it will update such form or certification or promptly notify Borrower and Administrative Agent in writing of its legal inability to do so.
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and the result of any of the foregoing will be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan the interest on which is determined by reference to the Term SOFR Reference Rate (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lending Party hereunder (whether of principal, interest or any other amount), then, upon request of such applicable Lending Party, Borrower will pay to such Lending Party such additional amount or amounts as will compensate such Lending Party for such additional costs incurred or reduction suffered.
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provided; however, that a Lender will not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require such assignment and delegation cease to apply.
Each party hereto agrees that (x) an assignment required pursuant to this Section 3.08(a) may be effected pursuant to an Assignment and Assumption executed by Borrower, Administrative Agent and the assignee and (y) the Lender required to make such assignment need not be a party thereto in order for such assignment to be effective and shall be deemed to have consented to and be bound by the terms thereof; provided that, following the effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such documents necessary to evidence such assignment as reasonably requested by the applicable Lender or Administrative Agent; provided, further that any such documents shall be without recourse to or warranty by the parties thereto. Each Lender hereby grants to Administrative Agent a power of attorney (which power of attorney, being coupled with an interest, is irrevocable) to execute and deliver, on behalf of such Lender, as assignor, any Assignment and Assumption necessary to effectuate any assignment of such Lender’s interests hereunder in circumstances contemplated by this Section 3.08(a).
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Administrative Agent will promptly notify each Borrower and each Lending Party of the occurrence of the Closing Date, and such notice will be conclusive and binding on all parties hereto. For purposes of determining compliance with the conditions specified in this Section 4.01 (but without limiting the generality of the provisions of Section 9.04), each (a) Lending Party that has signed this Agreement will be deemed to have consented to, approved or accepted or become satisfied with, each document or other
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matter required hereunder to be consented to or approved by or to be acceptable or satisfactory to a Lending Party unless Administrative Agent will have received written notice from such Lending Party prior to the proposed Closing Date specifying its objection thereto and (b) the making or issuance of the initial Credit Extension hereunder by a Lending Party being conclusively deemed to be its satisfaction or waiver of the conditions precedent set forth in this Section 4.01 with respect to such initial Credit Extension.
As of the Closing Date, each Loan Party, in order to induce Administrative Agent and each Lending Party to enter into this Agreement and the Lending Parties to make or issue the Credit Extensions hereunder, hereby represents and warrants to Administrative Agent and each Lending Party as follows, and will be deemed to have been brought down and to apply anew (other than representations and warranties made as of a specific date, which will be deemed to have been made as of such specified date) to the making or issuance of each Credit Extension hereunder.
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of each jurisdiction where its ownership, leasing or operation of property or the conduct of its business requires such qualification or license, except to the extent that the failure to do so could not reasonably be expected to have or result in a Material Adverse Effect.
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Subsidiaries, or against any of such Persons’ properties, at law or in equity, before any court, arbitrator, mediator or other Governmental Authority, and (b) to each Loan Party’s knowledge, there is no investigation by any Governmental Authority of any Loan Party’s or any such Subsidiary’s affairs or properties, except (in the cases of the preceding clauses (a) and (b)) for such claims, actions, suits, proceedings, litigation and investigations as (i) could not reasonably be expected to have or result in a Material Adverse Effect, and (ii) notwithstanding the preceding clause (i), as do not purport to affect or pertain to any Loan Document or any of the transactions contemplated thereby.
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appropriate proceedings and has adequately reserved all such amounts in the audited and unaudited Consolidated financial statements of Borrower, as the case may be delivered to Administrative Agent and the Lenders pursuant to Sections 6.01(a) and (b), respectively, except in each case where failure to do so could not reasonably be expected to have or result in a Material Adverse Effect.
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Each Loan Party hereby covenants that, until the Obligations have been paid in full and each of the Revolving Credit Commitments hereunder have terminated, it will, and will cause each of its Subsidiaries to:
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Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(a) or (g) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, will be deemed to have been delivered on the date (i) on which Borrower posts such documents, or provides a link thereto on Borrower’s website on the Internet at the website address listed on Schedule 10.02; (ii) on which such documents are posted on Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and Administrative Agent have access (whether a commercial, third-party website or whether sponsored by Administrative Agent); or (iii) on which such documents are posted to EDGAR; provided that Borrower will deliver paper copies of such documents to Administrative Agent upon its request to Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by Administrative Agent. Administrative Agent will have no obligation to request the delivery of or to maintain paper copies of the documents referred to above.
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Each notice pursuant to this Section 6.03 will be accompanied by a statement of a Responsible Officer of Borrower setting forth details of the occurrence referred to therein and stating what action, if any, Borrower (or the other applicable Person) has taken or proposes to take with respect thereto.
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respective material properties and equipment necessary to the operation of its respective businesses in good working order and condition, ordinary wear and tear excepted, and make all necessary repairs thereto and renewals and replacements thereof, in each case except where the failure to do so could not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.
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Governmental Authority. All Products developed, manufactured, tested, investigated, distributed, marketed, or sold by or on behalf of any Loan Party or any of its Subsidiaries that are subject to Pharma Laws and the jurisdiction of any Governmental Authority shall be developed, tested, manufactured, investigated, distributed, marketed, and sold in material compliance with applicable Pharma Laws and any other applicable Law, including, without limitation, product approval or premarket notification, good manufacturing practices, labeling, advertising, record-keeping, and adverse event reporting requirements.
Each Loan Party hereby covenants that, until the Obligations have been paid in full and each of the Revolving Credit Commitments hereunder have terminated, it will not, and will not permit any of its Subsidiaries, directly or indirectly, to:
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Notwithstanding the foregoing, Borrower will not, nor will it permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on or with respect to any of its fee-owned real property, whether now owned or hereafter acquired, other than Liens described above in clauses (a), (b), (c), (d), (f), (g), (h), (k), (l), (m), (n), (o), (r) and/or (s) of this Section 7.01, as applicable.
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The preceding restrictions in this Section 7.08 shall not apply to encumbrances or restrictions existing under or by reason of: (i) applicable law, rule, regulation or order; (ii) any instrument governing Indebtedness incurred pursuant to Section 7.03(f), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired and was not created in contemplation of or in connection with such acquisition; (iii) the Loan Documents; (iv) Swap Contracts permitted pursuant to Section 7.03(e); provided that such restrictions are no more restrictive on the Borrower and its Subsidiaries than those set forth in this Agreement; (v) restrictions solely on the transfer of assets subject to any Lien permitted under this Agreement imposed by the holder of such Lien; (vi) restrictions imposed by any agreement to sell assets or Equity Interests permitted under this Agreement to any Person pending the closing of such sale; (vii) asset sale agreements, stock sale agreements, purchase agreements and acquisition agreements (including by way of merger, acquisition or consolidation) entered into in connection with the entering into of such transaction, which limitation is applicable only to the assets that are the subject of those agreements; (viii) any agreement or instrument governing Equity Interests of any Person that is acquired, so long as the restrictions in such agreement or instrument were not imposed solely in contemplation of such Person being so acquired; (ix) secured Indebtedness otherwise permitted to be incurred pursuant to Sections 7.01 and 7.03 to the extent limiting the right of the debtor to dispose of the assets securing such Indebtedness; (x) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (xi) Indebtedness or Disqualified Equity Interests of the Borrower or any Subsidiary that is incurred subsequent to the Closing Date pursuant to Section 7.03; provided that such restrictions, taken as a whole, are no more restrictive on the Borrower and its Subsidiaries than those set forth in this Agreement (as determined by Borrower in good faith); (xii) customary provisions in joint venture and other similar agreements applicable solely to such joint venture and its subsidiaries; (xiii) customary provisions in leases and other similar agreements entered into in the ordinary course of business; provided that such restrictions are limited to the assets which are the subject of such lease or similar agreement; or (xiv) any encumbrances or restrictions of the type referred to in Section 7.08(a) and (b) imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (xiii); provided that such encumbrances and restrictions contained in any such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing are, in the good faith judgment of Borrower, not materially more restrictive, taken as a whole, than the encumbrances and restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.
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provided that the foregoing restrictions on the cancellation, forgiveness or making of prepayments on, or the redemption or acquisition for value (including by way of any deposit made with any trustee) of any Subordinated Debt, will not apply (A) to Deferred Purchase Price Obligations to the extent permitted by Section 7.03(k) and (B) to any such cancellation, forgiveness, prepayment, or redemption or acquisition for value if, at the time thereof, (1) no Default or Event of Default has occurred and is then continuing or would otherwise result therefrom and (2) the Consolidated Net Leverage Ratio, calculated on a pro forma basis for the most recent Test Period, is 2.75:1.00 or less; provided, further, that if such cancellation, forgiveness, prepayment, redemption or acquisition for value is made in connection with a Limited Condition Transaction, the foregoing test shall be subject to Section 1.02(s).
Nothing in this Section 7.13 shall prohibit the payment of the Specified Guaranteed Payment and/or any earnout payments arising under the Closing Date Acquisition Agreement.
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provided that upon the occurrence and continuation of an Event of Default under Section 8.01(f) or Section 8.01(g), the obligation of each Lender or Swing Line Lender to make or advance Loans and any obligation of L/C Issuer to make or issue L/C Credit Extensions will automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts and Obligations as aforesaid will automatically become due and payable, and the obligation of Borrower to Cash Collateralize the Letter of Credit Obligations in an amount equal to 105% of the then Outstanding Amount thereof will automatically become effective, in each case, without further act of Administrative Agent or any Lending Party.
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Subject to Section 2.03(c) and Section 2.15, amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to the foregoing clause Fourth will be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount will be applied to the other Obligations, if any, in the order set forth in this Section 8.04.
Notwithstanding the foregoing, Hedging Obligations arising under Swap Contracts and Cash Management Obligations under Cash Management Agreements will be excluded from the application described above if Administrative Agent has not received written notice thereof, together with such supporting documentation as Administrative Agent may reasonably request, from the applicable Hedge Bank or Cash Management Bank, as the case may be. Each Hedge Bank or Cash Management Bank that has given the notice contemplated by the preceding sentence will, by such notice, be deemed to have acknowledged and accepted the appointment of Administrative Agent pursuant to the terms of Article IX for itself and its Affiliates as if a “Lender” party hereto; it being understood and agreed that the rights and benefits of any such Hedge Bank or Cash Management Bank under the Loan Documents consist exclusively of such Hedge Bank’s or Cash Management Bank’s, as the case may be, right to share in payments and collections arising after the occurrence and during the continuation of an Event of Default as more fully set forth herein. In connection with any such distribution of payments and collections, Administrative Agent will be entitled to assume no amounts are due to any Hedge Bank or Cash Management Bank unless such Hedge Bank or Cash Management Bank has notified Administrative Agent in writing of the amount of any such liability owed to it prior to such distribution. Except as otherwise expressly set forth herein, no Person that obtains the benefit of the provisions of this Section 8.04 by virtue of the provisions hereof will have any right to notice of any action or to consent to, direct or object to any action hereunder or under any of the other Loan Documents other than in its capacity as a Lending Party and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any provision in Article IX to the contrary, Administrative Agent will be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Hedging Obligations and Cash Management Obligations only if and to the extent Administrative Agent has received written notice of such Obligations, together with such supporting documentation as Administrative Agent may request, from the applicable Hedge Bank or Cash Management Bank.
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attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
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Agent and any such sub-agent and will apply to their respective activities in connection with the syndication of the credit facilities provided for herein, as well as activities as Administrative Agent. Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
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Upon request by Administrative Agent at any time, the Required Lenders will confirm in writing Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10. In each case as specified in this Section 9.10, Administrative Agent will, at Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Security Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10 as certified by Borrower. In the case of any such sale, transfer or disposal of any property constituting Collateral in a transaction constituting a Disposition permitted pursuant to Section 7.04 to a Person other than a Loan Party, the Liens created by any of the Security Documents on such property shall be automatically released without need for further action by any person; provided that (i) such transaction is entered into for a bona fide business purpose (as determined in good faith by Borrower) and, for the avoidance of doubt, not for the primary purpose of causing such release and (ii) such assets were not transferred to an Affiliate of Borrower (other than for purposes of a bona fide joint venture arrangement on terms that are not less favorable than arm’s-length terms).
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In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, Administrative Agent and the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of Borrower or any other Loan Party, that none of Administrative Agent and the Arrangers and their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).
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and provided, further, that (i) no amendment, waiver or consent will, unless in writing and signed by L/C Issuer in addition to the Lenders required above, affect the rights or duties of L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent will, unless in writing and signed by Swing Line Lender in addition to the Lenders required above, affect the rights or duties of Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent will, unless in writing and signed by Administrative Agent in addition to the Lenders required above, affect the rights or duties of Administrative Agent under this Agreement or any other Loan Document or modify Section 10.02(b) or Section 10.20 or Article IX; (iv) each Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto; (v) each Issuer Document may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto; provided that a copy of such amended Issuer Document shall be promptly delivered to Administrative Agent upon such amendment or waiver; (vi) Administrative Agent and Borrower will be permitted to amend any provision of the Loan Documents (and such amendment shall become effective without any further action or consent of any other party to any Loan Document) if Administrative Agent and Borrower will have jointly identified an obvious error or any error, ambiguity, defect or inconsistency or omission of a technical or immaterial nature in any such provision; and (vii) Administrative Agent (and, if applicable, Borrower) may, without the consent of any Lender, enter into amendments or modifications to this Agreement or any of the other Loan Documents or to enter into additional Loan Documents in order to implement any Benchmark Replacement or any Conforming Changes or otherwise effectuate the terms of Section 3.03(c) in accordance with the terms of Section 3.03(c). Notwithstanding anything to the contrary herein, no Defaulting Lender will have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or
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consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (A) the Revolving Credit Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender, (B) the amount of principal and accrued fees and interest owing to the Defaulting Lender may not be reduced without the consent of such Lender and (C) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders will require the consent of such Defaulting Lender.
Notwithstanding anything in this Agreement to the contrary, each Lender hereby irrevocably authorizes Administrative Agent on its behalf, and without further consent of any Lender (but with the consent of Borrower and Administrative Agent), to (x) amend and restate this Agreement and the other Loan Documents if, upon giving effect to such amendment and restatement, such Lender shall no longer be a party to this Agreement (as so amended and restated), the Commitments of such Lender shall have terminated, such Lender shall have no other commitment or other obligation hereunder and shall have been paid in full all principal, interest and other amounts owing to it or accrued for its account under this Agreement and the other Loan Documents and (y) enter into amendments or modifications to this Agreement (including amendments to this Section 10.01) or any of the other Loan Documents or to enter into additional Loan Documents as Administrative Agent reasonably deems appropriate in order to effectuate the terms of Section 2.14 (including as applicable, (1) to permit any increases in the Aggregate Commitments to share ratably in the benefits of this Agreement and the other Loan Documents, (2) to include an increase in the Aggregate Commitments, as applicable, in any determination of (i) Required Lenders, Required Revolving Credit Lenders, Required Initial Term Loan Lenders or Required Incremental Term Loan Lenders, as applicable or (ii) similar required lender terms applicable thereto); provided that no amendment or modification shall result in any increase in the amount of any Lender’s Commitment(s) or any increase in any Lender’s Revolving Credit Percentage Share, Initial Term Loan Percentage Share or Percentage Share, in each case, without the written consent of such affected Lender, and (3) to make amendments to any outstanding tranche of Initial Term Loans or Incremental Term Loans to permit any proposed Incremental Term Loan Commitments and Incremental Term Loans to be “fungible” (including for purposes of the Code) with such tranche of Initial Term Loans or Incremental Term Loans, including increases in the Applicable Margin or any fees payable to such outstanding tranche of Initial Term Loans or Incremental Term Loans or providing such outstanding tranche of Initial Term Loans or Incremental Term Loans with the benefit of any call protection or covenants that are applicable to the proposed Incremental Term Loan Commitments or Incremental Term Loans; provided that any such amendments or modifications to such outstanding tranche of Initial Term Loans or Incremental Term Loans shall not directly adversely affect the Lenders holding such tranche of outstanding Initial Term Loans or Incremental Term Loans without their consent.
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Notices sent by hand or overnight courier service, or mailed by certified or registered mail, will be deemed to have been given when received, and notices sent by facsimile transmission or by means of approved electronic communication will be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, will be deemed to have been given at the opening of business on the next business day for the recipient); provided that notices delivered through electronic communications to the extent provided by Section 10.02(b) will be effective as provided in such subsection (b).
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Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against Borrower or any other Loan Party will be vested exclusively in, and all actions and proceedings at law in connection with such enforcement will be instituted and maintained exclusively by, Administrative Agent in accordance with Section 8.03 for the benefit of all the Lending Parties; provided, however, that the foregoing will not prohibit (a) Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) L/C Issuer or Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.13), or (d) any Lending Party from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) Required Lenders will have the rights otherwise ascribed to Administrative Agent pursuant to Section 8.03 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.13, any Lender may, with the consent of Required Lenders, enforce any rights and remedies available to it and as authorized by Required Lenders.
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severally agrees to pay to Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by Administrative Agent plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate. The obligations of each Lending Party under clause (b) of the preceding sentence will survive the payment in full of the Obligations and the termination of this Agreement.
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Subject to acceptance and recording thereof by Administrative Agent pursuant to Section 10.06(c), from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder will, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Article III and Section 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph will be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).
Any agreement, instrument or other document pursuant to which a Lender sells such a participation will provide that such Person will retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that such document may provide that such Person will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Borrower agrees that each Participant will be entitled
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to the benefits of Sections 3.01, 3.04 and 3.05 (subject to the requirements and limitations therein, including the requirements under Section 3.01(d) (it being understood that the documentation required under Section 3.01(d) will be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.06(b); provided that such Participant (A) agrees to be subject to the provisions of Sections 3.06 and 3.08 as if it were an assignee under Section 10.06(b), and (B) will not be entitled to receive any greater payment under Sections 3.01 and 3.04, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at Borrower’s request and expense, to use reasonable efforts to cooperate with Borrower to effectuate the provisions of Section 3.08 with respect to any Participant. To the extent permitted by applicable Law, each Participant also will be entitled to the benefits of Section 10.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a participation will, acting solely for this purpose as a non-fiduciary agent of Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender will have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Sections 163(f), 871(h)(2) and 881(c)(2) of the Code, Section 5f.103-1(c) of the United States Treasury Regulations or Section 1.163-5(b) of the proposed United States Treasury Regulations (or, in each case, any amended or successor version thereof). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender will treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, Administrative Agent (in its capacity as Administrative Agent) will have no responsibility for maintaining a Participant Register.
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information) received from Borrower or any other Loan Party or any of their respective Subsidiaries relating to Borrower or any such Loan Party or any of such Affiliates or their respective businesses, assets, operations or condition (financial or otherwise), other than any such information that is available to Administrative Agent or any Lending Party on a non-confidential basis, and not in contravention of this Section 10.07, prior to disclosure by Borrower or any other Loan Party or any of their respective Subsidiaries; provided that, in the case of information received from Borrower or any other Loan Party or any of their respective Subsidiaries after the date of this Agreement, such information is clearly identified at the time of delivery as confidential or should, because of its nature, reasonably be understood to be confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 10.07 will be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
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If any Guarantor Subordinated Indebtedness Payments will be received in contravention of this Section 10.15, such Guarantor Subordinated Indebtedness Payments will be held in trust for the benefit of Administrative Agent and the Lending Parties and will be paid over or delivered to Administrative Agent for application to the payment in full in Cash of all Guaranteed Obligations remaining unpaid to the extent necessary to give effect to this Section 10.15 after giving effect to any concurrent payments or distributions to Administrative Agent and the Lending Parties in respect of the Guaranteed Obligations.
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If, while any Guarantor Subordinated Indebtedness is outstanding, any proceeding under any Debtor Relief Law is commenced by or against Borrower or its property, Administrative Agent, when so instructed by L/C Issuer, Swing Line Lender and Required Lenders, is hereby irrevocably authorized and empowered (in the name of the Lending Parties or in the name of any Guarantor or otherwise), but will have no obligation, to demand, sue for, collect and receive every payment or distribution in respect of all Guarantor Subordinated Indebtedness and give acquittances therefor and to file claims and proofs of claim and take such other action (including voting the Guarantor Subordinated Indebtedness) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of Administrative Agent and the Lending Parties; and each such Guarantor will promptly take such action as Administrative Agent (on instruction from L/C Issuer, Swing Line Lender and Required Lenders) may reasonably request (A) to collect the Guarantor Subordinated Indebtedness for the account of the Lending Parties and to file appropriate claims or proofs of claim in respect of the Guarantor Subordinated Indebtedness; (B) to execute and deliver to Administrative Agent such powers of attorney, assignments and other instruments as it may request to enable it to enforce any and all claims with respect to the Guarantor Subordinated Indebtedness; and (C) to collect and receive any and all Guarantor Subordinated Indebtedness Payments.
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Agreement, pursuant to a cashless settlement mechanism approved in writing by Borrower, Administrative Agent and such Lender.
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subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
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[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed as of the date first written above.
| BORROWER: | | |
| AMPHASTAR PHARMACEUTICALS, INC. | | |
| By: | /s/ William J. Peters | |
| Name: | William J. Peters | |
| Title: | Chief Financial Officer | |
| GUARANTORS: | | |
| INTERNATIONAL MEDICATION SYSTEMS, LIMITED | | |
| By: | /s/ William J. Peters | |
| Name: | William J. Peters | |
| Title: | President | |
| ARMSTRONG PHARMACEUTICALS, INC. | | |
| By: | /s/ William J. Peters | |
| Name: | William J. Peters | |
| Title: | Chief Financial Officer | |
| AMPHASTAR MEDICATION CO., LLC | | |
| By: | Amphastar Pharmaceuticals, Inc., its sole member | |
| By: | /s/ William J. Peters | |
| Name: | William J. Peters | |
| Title: | Chief Financial Officer | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| ADMINISTRATIVE AGENT AND LENDERS: | | |
| WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, Swing Line Lender, L/C Issuer and Lender | | |
| By: | /s/ Brandon Moss | |
| Name: | Brandon Moss | |
| Title: | Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| CAPITAL ONE, NATIONAL ASSOCIATION, | | |
| as Lender | | |
| By: | /s/ Terrence Knapp | |
| Name: | Terrence Knapp | |
| Title: | Duly Authorized Signatory | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| JPMORGAN CHASE BANK, N.A., | | |
| as Lender | | |
| By: | /s/ Ling Li | |
| Name: | Ling Li | |
| Title: | Executive Director | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| EAST WEST BANK, | | |
| as Lender | | |
| By: | /s/ Rebecca Lee | |
| Name: | Rebecca Lee | |
| Title: | Senior Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| CATHAY BANK, | | |
| as Lender | | |
| By: | /s/ David W. Lee | |
| Name: | David W. Lee | |
| Title: | Senior Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| FIFTH THIRD BANK, NATIONAL ASSOCIATION, | | |
| as Lender | | |
| By: | /s/ James Kordas | |
| Name: | James Kordas | |
| Title: | Senior Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| CIBC BANK USA, | | |
| as Lender | | |
| By: | /s/ Anne Mulock Westbrook | |
| Name: | Anne Mulock Westbrook | |
| Title: | Managing Director | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| PNC BANK, NATIONAL ASSOCIATION, | | |
| as Lender | | |
| By: | /s/ Leslie Light | |
| Name: | Leslie Light | |
| Title: | Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| U.S. BANK NATIONAL ASSOCIATION, | | |
| as Lender | | |
| By: | /s/ David Rofsky | |
| Name: | David Rofsky | |
| Title: | Senior Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| BANK OF AMERICA, N.A., | | |
| as Lender | | |
| By: | /s/ Kenneth Wong | |
| Name: | Kenneth Wong | |
| Title: | Senior Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| HUNTINGTON BANK, | | |
| as Lender | | |
| By: | /s/ Michael J. Kinnick | |
| Name: | Michael J. Kinnick | |
| Title: | Managing Director | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| TD BANK, N.A., | | |
| as Lender | | |
| By: | /s/ Nicholas Rizzo | |
| Name: | Nicholas Rizzo | |
| Title: | Vice President | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
| HSBC BANK USA, NATIONAL ASSOCIATION | | |
| as Lender | | |
| By: | /s/ Paul M. Weeks | |
| Name: | Paul M. Weeks | |
| Title: | Regional Head | |
Amphastar Pharmaceuticals, Inc.
Credit Agreement
Signature Page
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14a OF
THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES OXLEY ACT OF 2002
I, Jack Y. Zhang, Ph.D., certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Amphastar Pharmaceuticals, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 9, 2023 | By: | /s/ JACK Y. ZHANG | |
| | Jack Y. Zhang | |
| | Chief Executive Officer | |
| | (Principal Executive Officer) | |
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14a OF
THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES OXLEY ACT OF 2002
I, William J. Peters, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Amphastar Pharmaceuticals, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 9, 2023 | By: | /s/ WILLIAM J. PETERS | |
| | William J. Peters | |
| | Chief Financial Officer | |
| | (Principal Financial and Accounting Officer) | |
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of Amphastar Pharmaceuticals, Inc. (the “Company”), hereby certifies, to the best of such officer’s knowledge, that:
(i) the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: August 9, 2023 | By: | /s/ JACK Y. ZHANG | |
| | Jack Y. Zhang | |
| | Chief Executive Officer | |
| | (Principal Executive Officer) | |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of Amphastar Pharmaceuticals, Inc. (the “Company”), hereby certifies, to the best of such officer’s knowledge, that:
(i) the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: August 9, 2023 | By: | /s/ WILLIAM J. PETERS | |
| | William J. Peters | |
| | Chief Financial Officer | |
| | (Principal Financial and Accounting Officer) | |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.