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Ex 10.12
EXECUTION COPY
THIS CONVERTIBLE PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SECURITIES LAWS OF A STATE
OR OTHER JURISDICTION AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF (OTHER THAN TO AN AFFILIATE OR AS OTHERWISE PERMITTED
BY THIS NOTE PURSUANT TO WHICH THEY WERE ISSUED) EXCEPT PURSUANT TO (I) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS, OR (II) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE SECURITIES ACT (OR ANY SIMILAR RULE UNDER THE SECURITIES ACT RELATING
TO THE DISPOSITION OF SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAWS.
DOV PHARMACEUTICAL, INC.
CONVERTIBLE PROMISSORY NOTE
MAXIMUM U.S. $7,008,750 JANUARY 21, 1999
NEW YORK, NEW YORK
The undersigned, DOV PHARMACEUTICAL, INC., a New Jersey corporation with
offices at One Parker Place, Fort Lee, New Jersey 07024 ("DOV"), unconditionally
promises to pay to ELAN INTERNATIONAL SERVICES, LTD., a Bermuda corporation
("EIS"), or its permitted assigns, transferees and successors as provided herein
(collectively, the "HOLDER"), on January __, 2005 (the "MATURITY DATE"), at such
place as may be designated by the Holder to DOV, the principal amount
outstanding hereunder (not to exceed U.S.$7,008,750) together with interest on
the outstanding principal hereunder accrued at a rate PER ANNUM equal to the
lesser of (x) 10% and (y) the maximum rate of interest permitted by applicable
law, from and after the date of the Original Issue Date (as hereinafter
defined), compounded on a semi-annual basis, the initial such compounding to
take place on the date which is six months from and after the Original Issue
Date (each such date, a "COMPOUNDING DATE").
SECTION 1. SECURITIES PURCHASE AND JOINT DEVELOPMENT AND OPERATING
AGREEMENTS; DISBURSEMENTS.
(a) This Note is issued pursuant to a securities purchase agreement
dated as of the date hereof by and between DOV and EIS (as amended at any time,
the "SECURITIES PURCHASE AGREEMENT"). This Note is the Convertible Note referred
to in the Securities Purchase Agreement and DOV and Holder are intended to be
afforded the benefits thereof, including the representations and warranties set
forth therein. DOV shall use the proceeds of the issuance and sale of this Note
solely in accordance with the provisions set forth in that certain Joint
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Development and Operating Agreement, dated as of the date hereof, by and among
Elan Corporation, plc, an Irish public limited company and parent corporation of
EIS, EIS, DOV, DOV Newco, Ltd., a Bermuda private limited company ("BERMUDA
Newco"), and Nascime Limited, an Irish private limited company ("IRELAND NEWCO")
(as amended at any time, the "JOINT DEVELOPMENT AND OPERATING AGREEMENT"), and
as described in Section 5 below.
(b) The Holder shall make the initial disbursement of funds
hereunder in accordance with and upon delivery of a notice to the Holder in the
form of EXHIBIT A attached hereto (the "DISBURSEMENT NOTICE") (such date the
"ORIGINAL ISSUE DATE"). For a period of 30 months from and after the Original
Issue Date, disbursements shall be made to DOV hereunder in minimum increments
of U.S.$500,000 (except in the event that an amount less than U.S.$500,000
remains available for funding hereunder, in which case such lesser amount may be
funded hereunder), upon delivery of the Disbursement Notice. The Holder, shall,
subject to the terms and conditions hereof, fund such amounts within five
business days of the receipt of the Disbursement Notice. A "BUSINESS DAY" is any
day that commercial banks are open for the transaction of business in the City
of New York.
(c) The Holder shall not be obliged to disburse more than an
aggregate principal amount of U.S.$7,008,750.
SECTION 2. PAYMENTS.
(a) Unless earlier converted in accordance with the terns 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) Accrued interest hereon shall not be paid in cash, but shall be
capitalized and added to principal amount outstanding hereunder on each
Compounding Date.
(c) This Note may not be prepaid by DOV without EIS's prior written
consent.
SECTION 3. CONVERSION.
(a) CONVERSION RIGHT. (i) From and after the Original Issue Date and
until this Note is repaid in full, the Holder shall have the right from time to
time, in its sole discretion to convert the outstanding principal amount and
accrued and unpaid interest then-outstanding hereunder into that number of
shares of the common stock of DOV, par value $.0001 per share (the "COMMON
STOCK"), that shall be obtained by dividing such sum of the outstanding
principal amount and accrued interest thereon by the price ("BENCHMARK PRICE")
equal to the lesser of (A) U.S.$5.52 and (B) the product of (x) 1.5 and (y) the
per share price, in the case of Common Stock, or the initial per share
conversion price, in the case of equity securities convertible, exchangeable or
exercisable for or into shares of Common Stock, in the next BONA FIDE financing
after the date hereof that is consummated by DOV after the closing of the
Securities Purchase Agreement (the "CLOSING") and within 18 months thereof;
provided, that if a transaction giving rise to the calculation in (B) shall not
have occurred, then, in such event, the Benchmark Price shall be the amount set
forth in (A). In the event that within 18 months of the Closing and after
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conversion in whole or in part of this Note, DOV issues any equity securities
(or rights, options, warrants or other securities exchangeable, convertible or
exercisable for or into equity securities) at an effective price per share that
is less than the Benchmark Price, DOV shall have the obligation (to be
implemented at the request of EIS at any time during the six year term of this
Note), from and after the date that is the date of closing of such offering, to
issue to EIS, for no additional consideration, pro-rata additional shares of
voting and non-voting Common Stock so that such additional shares, when added to
the Common Stock issued upon conversion, causes the aggregate number of shares
of such Common Stock issued upon such conversion to be issued as if the
denominator in such formula were the Benchmark Price.
(ii) EIS shall notify DOV in writing of its intention to exercise
the conversion. Upon 10 days of receipt of the notice, DOV shall issue stock
certificates to EIS representing the aggregate number of shares of Common Stock
EIS shall own after the conversion. Upon such exercise, EIS shall, if necessary,
exchange with DOV, the Common Stock certificates currently in its possession for
the Common Stock certificates which reflect the aggregate number of shares of
Common Stock transferable or issuable to EIS after EIS exercises the conversion.
(b) RECLASSIFICATION ETC. In case of any reclassification,
reorganization, change or conversion of securities of the class issuable upon
conversion of the outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder (other than a change in par value, or from par value
to no par value) of other shares or securities of DOV, or (ii) any consolidation
of DOV with or into another entity (other than a merger or consolidation with
another entity in which DOV is the acquiring and the surviving entity and that
does not result in any reclassification or change of outstanding securities
issuable upon conversion of the outstanding principal amount and accrued and
unpaid interest then-outstanding hereunder), or (iii) any sale of all or
substantially all the assets of DOV, then DOV, or such successor or purchasing
entity, as the case may be, shall duly execute and deliver to the Holder a new
Note or a supplement hereto (in form and substance reasonably satisfactory to
the Holder), so that the Holder shall have the right to receive, at a total
purchase price not to exceed that payable upon the conversion of the outstanding
principal amount and accrued and unpaid interest then outstanding hereunder, and
in lieu of the shares of Common Stock theretofore issuable upon the conversion
of the outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder, the kind and amount of shares of stock and other
securities, receivable upon such reclassification, reorganization, change or
conversion by a holder of the number of shares of Common Stock then issuable
under this Note. Such new Note shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 3. The provisions of this Section 3(b) shall similarly attach to
successive reclassifications, reorganizations, changes, and conversions.
(c) SUBDIVISION OR COMBINATION OF SHARES. If DOV at any time during
which there is any outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder shall subdivide or combine its Common Stock, (i) in
the case of a subdivision, the Benchmark Price shall be proportionately
decreased and the number of Shares issuable hereunder shall be proportionately
increased, and (ii) in the case of a combination, the Benchmark Price shall be
proportionately increased and the number of Shares issuable hereunder shall be
proportionately decreased.
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(d) NO IMPAIRMENT. DOV will not, by amendment of its certificate of
incorporation or bylaws or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by DOV,
but will at all times in good faith assist in the carrying out of all the
provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against
impairment.
(e) NOTICE OF ADJUSTMENTS. Whenever the Benchmark Price or the
number of Shares issuable hereunder shall be adjusted pursuant to this Section
3, DOV shall prepare a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated. Such certificate shall be signed by its
chief financial officer and shall be delivered to the holder of this Note.
(f) FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares DOV shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as reasonably determined in good faith
by DOV's Board of Directors.
(g) CUMULATIVE ADJUSTMENTS. No adjustment in the Benchmark Price
shall be required under this Section 3 until cumulative adjustments result in a
concomitant change of 1% or more of the Benchmark Price or in the number of
shares of Common Stock issuable upon conversion of this Note as in effect prior
to the last such adjustment; provided, however, that any adjustments which by
reason of this Section 3 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 3 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(h) NOTICE OF CONVERSION. The Holder shall be entitled to exercise
the rights of conversion as described in this Section 3 upon 30 days notice to
DOV, such notice to be in the form attached hereto as EXHIBIT B.
SECTION 4. CONDITIONS OF FUNDING.
(a) It shall be a condition of the Holder's funding obligations
hereunder that at any time DOV shall present a Disbursement Notice to the
Holder, DOV shall not be in default or breach in any material respect under (a)
within six months of the issuance hereof, Section 6 hereof, (b) Sections 2, 4
and 5 of the Securities Purchase Agreement or (c) within six months of the
issuance hereof, the representations and warranties of the license agreement
dated as of the date hereof between DOV and Bermuda Newco.
(b) It shall be a condition of the Holder's funding obligations
hereunder that the Holder receive written notice from the board of directors of
Bermuda Newco that the board of directors of Bermuda Newco has determined that
such funding is necessary to continue the business objectives of Bermuda Newco
as provided in the Business Plan and Joint Development and Operating Agreement.
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SECTION 5. USE OF PROCEEDS.
DOV shall use the proceeds of this Note solely to fund its
obligations to Bermuda Newco in accordance with a duly authorized Business Plan
approved by Bermuda Newco's board of directors pursuant to the Joint Development
and Operating Agreement.
SECTION 6. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an
event of default (an "EVENT OF DEFAULT"):
(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
this 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 DOV contained in this Note, and continuance of such default or
breach for a period of 10 business days after the Holder has notified DOV of its
occurrence;
(d) a default or breach of any covenant of DOV contained in this
Note, or any other Transaction Document (as defined in the Securities Purchase
Agreement), and continuance of such default or breach for a period of 10 days
after the Holder has notified DOV of its occurrence;
(e) any representation, warranty or certification made by DOV
pursuant to this Note, or any other Transaction Document shall prove to have
been false or misleading as of the date made in any material respect and EIS has
rightfully submitted a claim for indemnity in respect thereof in accordance with
the Securities Purchase Agreement;
(f) (i) the entry of a decree or order by a court having
jurisdiction adjudging DOV bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of DOV, 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 120 days; (ii) the commencement by DOV of a voluntary
case under United States bankruptcy law, as now or hereafter constituted, or the
consent by DOV to the institution of bankruptcy or insolvency proceedings
against it; (iii) the filing by DOV 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 DOV or of
any substantial part of its property which is not discharged within 120 days;
(vi) the making by DOV 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 DOV in furtherance of any such
action; or
(g) a material default by DOV under any of the Transaction Documents
and continuance of such default for a period of 30 days after the Holder has
notified DOV of its occurrence.
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SECTION 7. REMEDIES IN THE EVENT OF DEFAULT.
(a) In the case of any Event of Default by DOV, the Holder, may in
its sole discretion, demand that the aggregate amount of funds advanced to DOV
under this Note and outstanding hereunder 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 the Holder to DOV. Notwithstanding the
preceding sentence, the rights of the Holder as set forth in Section 3 shall
survive.
(b) DOV 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
DOV 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. MISCELLANEOUS.
(a) This Note may be transferred or assigned, in whole or in part,
(a) by EIS to its affiliates and/or subsidiaries or other entities in which EIS
or its affiliates may have an interest, by contract, ownership of securities or
otherwise, and that are in the nature of financing vehicles or similar entities
for EIS or its affiliates or (b) by DOV to its affiliates and/or subsidiaries;
provided, that in each case, the transferor shall continue to be liable and
obligated for its obligations hereunder. Subject to the foregoing, 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 permitted assigns. Other
than as set forth above, this Note may not be transferred or assigned by either
party without the prior written consent of the other party.
(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 DOV:
DOV Pharmaceutical, Inc.
One Parker Plaza
Fort Lee, New Jersey 07024
Attn: Dr. Arnold Lippa
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with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
20th Floor
New York, New York 10022
Attention: J. Robert Horton, Esq.
(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
153 East 53rd Street
New York, New York 10022
Attention: David Robbins, Esq.
Each party, by written notice given to the other in accordance with this
Section 8(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 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 modified or amended, or any of the
provisions hereof waived, except by written agreement of DOV and EIS.
(d) This Note shall be governed by and construed in accordance with
the substantive (as opposed to procedural) laws of the State of New York,
without giving effect to the principles thereof relating to conflicts of laws.
(e) This Note may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute one note. This Note may be
signed and delivered to the other party by a facsimile transmission; such
transmission shall be deemed a valid signature.
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(f) Each of the parties shall be responsible for its own costs and
expenses incurred in connection with the transactions contemplated hereby.
[Signature page follows]
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IN WITNESS WHEREOF, DOV and EIS have executed this Note on the date
first above written.
DOV PHARMACEUTICAL, INC.
By: /s/ Arnold Lippa
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Name: Arnold Lippa
Title: CEO
ELAN INTERNATIONAL SERVICES, LTD.
By:
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Name:
Title:
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IN WITNESS WHEREOF, DOV and EIS have executed this Note on the date first
above written.
DOV PHARMACEUTICAL, INC.
By:
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Name:
Title:
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
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Name: Kevin Insley
Title: President and CFO
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EXHIBIT A
NOTICE OF REQUEST FOR DISBURSEMENT
Date:
To: Elan International Services, Ltd.
From: DOV Pharmaceutical, Inc.
Re: Disbursement Request
Pursuant to the terms of the Convertible Promissory Note issued by DOV
Pharmaceutical, Inc. ("DOV") to Elan International Services, Ltd. ("EIS"), dated
_______________, DOV hereby notifies EIS of its request for a disbursement
thereunder in the amount of U.S.$______________. Please provide funding in the
requested amount to DOV in accordance with the following wire instructions:
[
]
Sincerely,
DOV PHARMACEUTICAL, INC.
By:
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Name:
Title:
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EXHIBIT B
NOTICE OF ELECTION TO EXERCISE THE CONVERSION RIGHT
Date:
To: DOV Pharmaceutical, Inc.
From: Elan International Services, Ltd.
Re: Exercise of the Conversion Right
Pursuant to the terms of the Convertible Promissory Note (the "Note")
issued by DOV Pharmaceutical, Inc. ("DOV") to Elan International Services, Ltd.
("EIS"), dated _______________, specifically Section 3 thereof, EIS hereby
notifies DOV of its intention to exercise its right of conversion.
Pursuant to Section 3 of the Note, EIS hereby elects to convert the
principal and all accrued and unpaid interest on the Note for shares of the
common stock of DOV, par value $.0001 per, share, or such portion thereof
specified below, based upon a conversion rate of U.S.$5.52 per share.
We have instructed our attorneys to contact DOV to discuss the timing and
documentation of the conversion.
Sincerely,
ELAN INTERNATIONAL SERVICES, LTD.
By:
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Name:
Title: