EXHIBIT 10.4
CYTOGEN CORPORATION
CONVERTIBLE PROMISSORY NOTE
U.S. $2,000,000 August 12, 1998
New York, New York
The undersigned, Cytogen Corporation, a Delaware
corporation with offices at 600 College Road East, Princeton,
New Jersey 08540 ("Cytogen"), unconditionally promises to pay
to Elan International Services, Ltd., a Bermuda corporation
("EIS") or any of its successors or assigns or any other
holder of this Note (collectively, the "Holder"), on August
12, 2005 (the "Maturity Date"), at such place as may be
designated by the Holder to Cytogen, the principal amount of
$2,000,000, together with interest thereon accrued from and
after the date hereof, at a rate per annum equal to the lesser
of (x) 7%, and (y) the maximum rate of interest permitted by
applicable law, compounded on a semi-annual basis, such
compounding to commence as of the first cash interest payment
date as provided in Section 2(b) below.
SECTION 1. REORGANISATION AGREEMENT
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(a) This Note is issued pursuant to an unwind
agreement dated as of the date hereof by and between Cytogen
and EIS (the "Reorganisation Agreement"). This Note is the
Convertible Promissory Note referred to in the Reorganisation
Agreement and the Holder is intended to be afforded the
benefits thereof, including the Representations and Warranties
set forth by Cytogen therein.
SECTION 2. PAYMENTS
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(a) Unless earlier converted in accordance with the
terms of Section 3 below or prepaid in accordance with the
terms hereof, the entire outstanding principal amount of this
Note, together with any accrued and unpaid interest thereon,
shall be due and payable on the Maturity Date.
(b) During the initial 24-month period from and
after the date hereof, Cytogen shall not be required to pay
accrued interest hereon in cash; such accrued interest shall
be capitalized and added to the principal amount outstanding
hereunder. Thereafter, Cytogen shall pay all accrued interest
to the Holder in cash.
(c) Principal outstanding hereunder, together with
accrued and unpaid interest thereon, may be prepaid by Cytogen
at any time, in whole or in part, upon five-days written
Notice to the Holder; such payments shall be due and payable
on the last business day of each of the second and fourth
calendar quarters of each year, commencing with the calendar
quarter ending in December 2000.
SECTION 3. CONVERSION
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(a) From and after the date hereof and until this
Note is repaid in full, the Holder shall have the right, in
its sole discretion, to convert all principal and accrued
interest then-outstanding hereunder for shares of the common
stock of Cytogen, par value $.01 per share (the "Common
Stock"), at a conversion price of $2.80 per share (the
"Conversion Price"), subject to adjustment as described
herein.
(c) The Holder shall be entitled to exercise the
rights of conversion as described in this Section 3 upon 30
days Notice to Cytogen, such Notice to be in the form attached
hereto as Exhibit A.
SECTION 4. CERTAIN COVENANTS
-----------------
Cytogen covenants and agrees with the Holder
that, so long as any amount remains unpaid on the Note, unless
the consent of the Holder is obtained, Cytogen:
(a) shall not, prior to the payment in full of the
outstanding principal, and accrued and unpaid interest on, the
Note, create, incur, or suffer to exist any indebtedness or
other obligation senior hereto, other than in the ordinary
course of business;
(b) shall not change its primary line of business;
(c) shall not (i) enter into any merger or
consolidation, (ii) liquidate, wind up its affairs or
dissolve, or (iii) except in the ordinary course of business,
convey, sell, lease, transfer or otherwise dispose of, or
purchase or acquire, any business, assets, or other property;
(d) shall not, directly or indirectly, enter into any
transaction with, or for the benefit of, an affiliate (other
than for reasonable compensation);
(e) shall deliver to Holder:
(i) promptly after Cytogen shall obtain knowledge
of the occurrence of any Event of Default (as hereinafter
defined) or any event which with notice or lapse of time or
both would become an Event of Default (an Event of Default or
such other event being a "Default"), a notice specifying that
such notice is a "Notice of Default" and describing such
Default in reasonable detail, and, in such Notice of Default
or as soon thereafter as practicable, a description of the
action Cytogen has taken or proposes to take with respect
thereto; and
(ii) promptly after Cytogen shall obtain knowledge
of such, provide written notice of all legal or arbitral
proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, and each
material development in respect of such legal or other
proceedings, affecting Cytogen and its subsidiaries; except,
proceedings which, if adversely determined, would not have a
material adverse effect on Cytogen and its subsidiaries taken
as a whole.
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SECTION 5. ADJUSTMENT TO CONVERSION PRICE
------------------------------
The Conversion Price shall be subject to adjustment from
time to time as follows:
(a) (i) If Cytogen shall issue, after the date
hereof, any Additional Stock (as defined below) without
consideration or for a consideration per share less than the
greater of (X) the Conversion Price for such series in effect
immediately prior to the issuance of such Additional Stock and
(Y) the Closing Price on such date, the Conversion Price for
such series in effect immediately prior to each such issuance
shall forthwith (except as otherwise provided in this clause
(i)) be adjusted to a price equal to a price determined by
multiplying such Conversion Price by a fraction, the numerator
of which shall be the sum of (w) the number of shares of
Common Stock outstanding immediately prior to such issuance
and (x) the number of shares of Common Stock that the
aggregate consideration received by the Corporation for such
issuance would purchase at such Conversion Price; and the
denominator of which shall be the sum of (y) the number of
shares of Common Stock outstanding immediately prior to such
issuance and (z) the number of shares of such Additional
Stock. In the event that the the Conversion Price is
adjusted, as set forth above, the number of shares of Common
Stock issuable upon exercise of the conversion right herein
shall be increased by the reciprocal of such Conversion Price
adjustment.
(ii) No adjustment of the Conversion Price
shall be made in an amount less than one cent per share,
provided that any adjustments which are not required to be
made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent
adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or
shall be made at the end of three years from the date of the
event giving rise to the adjustment being carried forward. No
adjustment of such Conversion Price pursuant to this
subsection 5(a)(ii) shall have the effect of increasing the
Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
(iii) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the
amount of cash paid therefor before deducting any reasonable
discounts, commissions or other expenses allowed, paid or
incurred by Cytogen for any underwriting or otherwise in
connection with the issuance and sale thereof.
(iv) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the
fair value thereof as determined by Cytogen's board of
directors irrespective of any accounting treatment.
(v) In the event that Cytogen causes its
Common Stock to be combined, split or effects other capital
reorganisation that has the effect of changing the number of
outstanding shares of Common Stock, the number of shares of
Common Stock issuable upon exercise of the conversion right
herein shall be adjusted accordingly.
(b) "Additional Stock" shall mean any shares of
Common Stock issued by Cytogen after the Purchase Date to its
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Affiliates or directors, officers, employees or agents of such
Affiliates, other than shares of Common Stock issuable or
issued to employees, consultants or directors of Cytogen
directly or pursuant to a stock option plan, stock purchase
plan, restricted stock plan or contractual obligation
approved by the Board of Directors of Cytogen (provided that
the sum of such number of shares of Common Stock issuable or
issued pursuant to such stock option plan or restricted stock
plan shall in no event represent more than 20% of the
authorized number of shares of Common Stock). "Affiliates"
shall mean, with respect to any party, any entity that,
directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with
such party. For purposes of this definition, "control" means
the power to direct or cause the direction of the management
and policies of an entity, whether through the ownership of
voting securities, by contract or otherwise.
(c) In the event Cytogen should at any time or from
time to time after the date hereof fix a record date for the
effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of
Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common
Stock Equivalents") without payment of any consideration by
such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof),
then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is
fixed), the Conversion Price shall be appropriately decreased
so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of
Common Stock outstanding and those issuable with respect to
such Common Stock Equivalents.
(d) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by
a combination of the outstanding shares of Common Stock, then,
following the record date of such combination, the Conversion
Price shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each share of
such series shall be decreased in proportion to such decrease
in outstanding shares.
SECTION 6. EVENTS OF DEFAULT
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The occurrence of any of the following events shall
constitute an event of default (an "Event of Default"):
(a) A default in the payment of the principal
amount of this Note, when and as the same shall become due and
payable;
(b) a default in the payment of any accrued and
unpaid interest on any Note, when and as the same shall become
due and payable;
(c) a default in the performance, or a breach of
any other covenant or agreement of Cytogen in this Note, and
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continuance of such default or breach for a period of 10 days
after the Holder has notified Cytogen of its occurrence;
(d) any representation, warranty, or certification
made by Cytogen pursuant to this Note or the Reorganisation
Agreement shall prove to have been false or misleading as of
the date made in any material respect;
(e) (i) the entry of a decree or order by a court
having jurisdiction adjudging Cytogen bankrupt or insolvent,
or approving a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of Cytogen, under
United States bankruptcy or insolvency law, as now or
hereafter constituted, and the continuance of any such decree
or order unstayed and in effect for a period of 60 days; (ii)
the commencement by Cytogen of a voluntary case under United
States bankruptcy law, as now or hereafter constituted, or the
consent by Cytogen to the institution of bankruptcy or
insolvency proceedings against it; (iii) the filing by Cytogen
of a petition or answer or consent seeking reorganization or
relief under United States bankruptcy law; (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar
official of Cytogen or of any substantial part of its property
which is not discharged within 60 days; (vi) the making by
Cytogen of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate
action by Cytogen in furtherance of any such action; or
(f) a material default by Cytogen under the
Reorganisation Agreement.
SECTION 7. REMEDIES IN THE EVENT OF DEFAULT
--------------------------------
(a) In the case of any Event of Default by Cytogen,
the amount of outstanding principal under this Note and
accrued and unpaid interest thereon shall, in addition to all
other rights and remedies of the Holder hereunder and under
applicable law, be and become immediately due and payable upon
written notice delivered by Holder to Cytogen.
(b) Cytogen hereby waives demand and presentment for
payment, notice of nonpayment, protest and notice of protest,
diligence, filing suit, and all other notice and promises to
pay the Holder its costs of collection of all amounts due
hereunder, including reasonable attorneys' fees.
(c) In the case of any Event of Default or breach of
this Note by Cytogen this Note shall continue to bear interest
after such default or breach at the interest rate otherwise in
effect hereunder plus 3% per annum (but in any event not in
excess of the maximum rate of interest permitted by applicable
law).
SECTION 8. RANK
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This Note shall be subordinated to currently
existing senior indebtedness of Cytogen; provided, that from
and after the date hereof, and for anytime that principal or
accrued interest shall be outstanding hereunder, Cytogen shall
not incur any indebtedness for money borrowed which shall rank
senior to, or pari passu with, this Note without the prior
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consent of the Holder. Nothing contained herein shall be
construed as to prevent Cytogen from incurring and paying
obligations in the ordinary course of business, in accordance
with past practice.
SECTION 9. MISCELLANEOUS
(a) EIS may assign this Note to its affiliates.
This Note and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that EIS
and Cytogen shall remain liable for their respective
obligations hereunder after any such assignment.
(b) All notices, demands and requests of any kind to
be delivered to any party in connection with this Agreement
shall be in writing and shall be deemed to have been duly
given if personally delivered or if sent by nationally-
recognized overnight courier or by registered or certified
airmail, return receipt requested and postage prepaid,
addressed as follows:
(i) if to Cytogen:
Cytogen Corporation
600 College Road East
Princeton, NJ 08540-5308
Attn: President
(ii) if to EIS, to:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish
Bermuda SL04
Attention: Director
with a copy to:
Brock Silverstein McAuliffe LLC
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: David Robbins
Each party, by written notice given to the other in
accordance with this Section 9(b) may change the address to
which notices, other communication or documents are to be sent
to such party. All notices, other communications or documents
shall be deemed to have been duly given when received. Any
such notice or communication shall be deemed to have been
received (iv) in the case of personal delivery, on the date of
such delivery, (v) in the case of nationally-recognized
overnight courier, on the second business day after the date
when sent and (vi) in the case of mailing, on the fifth
business day following that day on which the piece of mail
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containing such communication is posted. Notice hereunder may
be given on behalf of the parties by their respective
attorneys.
(c) This Note may not be changed or terminated
orally and shall be governed by and construed in accordance
with the laws of the state of New York, without reference to
the principles of conflicts of laws thereof.
[Signature page follows]
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IN WITNESS WHEREOF, Cytogen and EIS have executed
this Note on the date first above written.
CYTOGEN CORPORATION
By: /s/ John E. Bagalay, Jr.
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Name: John E. Bagalay, Jr.
Title: President and Chief Executive Officer
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
---------------------------
Name: Kevin Insley
Title: President
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EXHIBIT A
NOTICE OF ELECTION TO EXERCISE THE CONVERSION RIGHT
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Date:
To: Cytogen Corporation
From: The Holder of the Convertible Promissory Note
dated as of August 12, 1998
Re: Exercise of the Conversion Right
Pursuant to the terms of the Convertible Promissory Note
(the "Note") issued by Cytogen Corporation ("Cytogen") to Elan
International Services, Ltd. ("EIS") as of August 12, 1998,
specifically Section 3 thereof, the Holder hereby notifies
Cytogen of its intention to exercise its right of conversion.
Pursuant to Section 3 of the Note, the Holder hereby
elects to convert the principal and all accrued and unpaid
interest on the Note for shares of the common stock of
Cytogen, par value $.01 per share, based upon a conversion
rate of $2.80 per share.
We have instructed our attorneys to contact Cytogen to
discuss the timing and documentation of the exchange.
Sincerely,
The Holder
______________________________
By:___________________________
Name:
Title:
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