| Item 1.01 | Entry into a Material Definitive Agreement. |
On January 2, 2019, Aradigm Corporation (the “Company”) completed the second and final closing (the “Second Closing”) under the senior note purchase agreement (the “Purchase Agreement”), dated as of October 25, 2018, between the Company and Grifols Worldwide Operations Ltd. (the “Lender”). As previously announced, the Company completed the first closing under the Purchase Agreement on October 25, 2018, at which time the Company issued and sold $2 million aggregate principal amount of the Company’s 9.0% senior promissory notes due 2021 to the Lender. At the Second Closing, the Company issued and sold an additional $2 million aggregate principal amount of the Company’s 9.0% senior promissory notes due 2021 (with the notes issued on October 25, 2018, the “Notes”) to the Lender.
Unless the Company elects otherwise, accrued interest payable on each outstanding Note will be capitalized on the applicable interest payment date by adding such accrued interest to the principal balance of such Note, at which time such interest will be deemed to have been paid. The Notes were sold in a private placement conducted pursuant to Regulation D under the Securities Act of 1933, as amended.
The Notes are senior unsecured obligations of the Company and bear interest at a fixed rate of 9.0% per annum, payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2018 in the case of Notes issued on October 25, 2018, and on May 1, 2019, in the case of Notes issued on January 2, 2019, unless earlier redeemed or cancelled in accordance with the terms of the Notes. The Notes are the Company’s senior unsecured obligations and rank (i) senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes, (ii) equal in right of payment to any of the Company’s indebtedness that is not so subordinated, including the Company’s 9.0% Convertible Senior Notes due 2021, issued pursuant to that certain Indenture, dated as of April 25, 2016, between the Company and U.S. Bank National Association, as trustee, and the Company’s 9.0% Senior Promissory Notes due 2021, issued pursuant to that certain Senior Note Purchase Agreement, dated April 13, 2018, by and among the Company, Grifols Worldwide Operations Ltd., 21 April Fund, Ltd., 21 April Fund, LP and First Eagle Value in Biotechnology Master Fund, Ltd., (iii) effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, and (iv) structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
The Company may, at its option, redeem for cash all or any portion of the outstanding Notes (on a pro rata basis) at any time in whole or from time to time in part. There is no sinking fund provided for the Notes. The redemption price for the Notes will equal 100% of the aggregate principal amount being redeemedplus accrued and unpaid interest to, but excluding, the redemption date.
The events of default, which may result in the acceleration of the maturity of each Note, include:
(i) default in any payment of interest on such Note when due and payable and the default continues for a period of thirty calendar days;
(ii) default in the payment of principal of such Note, including capitalized interest, when due and payable at its stated maturity, upon redemption, upon declaration of acceleration or otherwise;
(iii) the Company’s failure to comply with its obligations under the covenant in such Note relating to the consolidation or merger of the Company or the sale of its assets;
(iv) the Company’s failure for sixty days after written notice from the holder of such Note is received to comply with any of the Company’s other agreements contained in such Note;
(v) default by the Company or any of its significant subsidiaries with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of $500,000 (or its foreign currency equivalent) in the aggregate of the Company and/or any such significant subsidiary, whether such indebtedness existed at the time of issuance or where thereafter created (i) resulting in such indebtedness becoming or being declared due and payable or (ii) constituting a failure to pay the principal or interest of any such indebtedness when due and payable at its stated maturity, upon declaration of acceleration or otherwise if such default is not cured or waived, or such acceleration is not rescinded within thirty calendar days;
- 2 -
