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EXHIBIT 99(b)(1)
[NATIONAL BANK FINANCIAL LOGO]
Montreal, April 9, 2003
AXCAN PHARMA INC.
597 Laurier Blvd
Mont Saint-Hilaire, Quebec
J3H 6C4
Attention: Jean Vezina
Vice-President Finance
Dear Sirs:
Re: US$150,000,000 Credit Facilities
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ARRANGEMENT LETTER
You have informed us of your proposed direct or indirect acquisition of all
outstanding shares of SALIX Pharmaceuticals Ltd. ("Target") through a public
offer for a price payable in cash. You have advised us that the offer will be
conditional upon the tendering of sufficient shares to permit Axcan Pharma Inc.
("Axcan") or one of its Canadian or U.S. wholly-owned subsidiary to become owner
of all remaining shares of Target by way of a merger with Target under terms
whereby the resulting entity will be a wholly-owned subsidiary of Axcan. The
proposed acquisition is referred to herein as the "Transaction".
In connection with the Transaction, you have requested US$150,000,000 in credit
facilities to be made available to Axcan in order to provide a portion of the
financing for the Transaction and to repay and replace Axcan's existing credit
facilities.
National Bank of Canada is pleased to confirm to Axcan its commitment to
underwrite (the "Underwriter") the Credit Facilities described in the attached
term sheet (the "Term Sheet"), subject to the terms and conditions provided in
this letter and the Term Sheet and to act as administrative agent (the "Agent")
for the Lenders with respect to the Credit Facilities. National Bank Financial
Inc. is also pleased to confirm its willingness to act as Lead Arranger (the
"Arranger") and Sole Bookrunner in connection with the Credit Facilities. This
letter is referred to herein and in the Term Sheet, at times, as the
"Arrangement Letter" or, when referred to collectively with the Term Sheet, as
the "Commitment".
As consideration for the Commitment and the agreement of the Agent and the
Arranger to perform the services described herein with respect to the Credit
Facilities, you agree to pay the fees contemplated in the Fee Letter delivered
to you concurrently herewith and abide by the terms of such Fee Letter.
You agree that no other agent or arranger will be appointed, no other titles
will be awarded and no compensation other than contemplated by the Term Sheet or
the Arrangement Letter will be paid in connection with the Credit Facilities
unless you and the Arranger agree.
The Exchange Tower
130 King Street West, Suite 3200, P.O. Box 21
Toronto, Ontario M5X 1J9
(416) 869-3707
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The Arranger intends to solicit commitments for the Credit Facilities from other
financial institutions in amounts sufficient to allow the Underwriter to achieve
its desired hold level of US $40,000,000 in the Credit Facilities. The Arranger
intends to commence such syndication efforts promptly upon the Transaction being
publicly announced. You agree to assist the Arranger in its efforts to syndicate
the Credit Facilities. Such assistance will include (i) provision of all
financial and other information reasonably deemed necessary by the Arranger to
successfully complete the syndication efforts, (ii) assistance in the
preparation of a syndication memorandum and all other marketing materials to be
used in connection with the syndication, and (iii) as requested by the Arranger,
meetings and other direct contacts between the prospective lenders and senior
management and advisors of Axcan and, to the extent possible, Target.
The Commitment is also subject to: (i) there being no facts, events or
circumstances, now existing or hereafter arising, which come to the Arranger's
attention and which, in the Arranger's good faith determination, materially
adversely affect the business, assets, financial condition, operations or
prospects of Axcan or your ability to consummate the Transaction; (ii) there not
having occurred a material disruption of or material adverse change in
financial, banking or capital market conditions that, in the Arranger's
judgment, could materially impair the syndication of the Credit Facilities; and
(iii) the Arranger's satisfaction that prior to and during the syndication of
the Credit Facilities, there shall be no competing offering, placement or
arrangement of any debt securities or bank financing by you or on your behalf.
Upon the occurrence of any of such events, the Arranger and the Underwriter may
terminate the Commitment and will have no further obligation hereunder or in
connection with the Credit Facilities.
It is understood and agreed that the Underwriter shall be entitled, after
consultation with the Borrower at any time before, on or after execution of the
definitive documentation in respect of the Credit Facilities to change the
pricing and structure of the Credit Facilities if the Underwriter determines
that such changes are necessary to ensure a successful syndication of the Credit
Facilities as determined by the Underwriter in a timely manner (provided that
the aggregate amount of the Credit Facilities remains unchanged from that
outlined in this Arrangement Letter).
You hereby represent and covenant that:
(a) all information provided to the Arranger and the Underwriter (the
"Information") that has been or will be made available by you or any of
your representatives is or will be, when furnished, complete and correct in
all material respects (provided that the information concerning Target is
limited to publicly available information) and does not or will not, when
furnished, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein
not materially misleading in light of the circumstances under which such
statements are made; and
(b) all financial projections that have been or will be submitted will be
prepared in good faith based upon reasonable assumptions. You understand
that in arranging and syndicating the Credit Facilities, we may use and
rely on the Information and all such financial projections without
independent verification thereof.
You agree to reimburse and indemnify the Arranger, the Agent and the Lenders
committing to participate in the Credit Facilities in respect of their
reasonable expenses as set forth in the Term Sheet, whether or not definitive
credit documentation (collectively, the "Credit Documentation") is executed and
delivered or the Transaction is consummated.
The Exchange Tower
130 King Street West, Suite 3200, P.O. Box 21
Toronto, Ontario M5X 1J9
(416) 869-3707
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This Commitment is delivered to you with the understanding that neither this
letter or the Term Sheet not their substance shall be disclosed to any third
party without our prior written consent, except those in confidential
relationship to you, such as legal counsel or accountants, or as required by law
or any court or governmental agency (and in each such event of permitted
disclosure you agree promptly to inform us).
If you agree with the contents of this letter and the Term Sheet, please sign
and return to us the enclosed copy of this letter no later than 5:00 p.m.
Eastern Time on April 10, 2003. Our Commitment will terminate at such time
unless: (i) an executed copy of this letter signed by you has been delivered to
us, and (ii) you have made payment of the portions of the Commitment Fee to be
paid on delivery and acceptance of our Commitment. Moreover, our Commitment will
also terminate at 5:00 p.m. on the earlier of (y) the date you confirm your
intention not to proceed with the Credit Facilities or the Transaction, and (z)
July 9, 2003 if the Credit Documentation has not been executed and the
conditions precedent to the initial drawdown have not been fulfilled prior to
such date, or such later date as may be agreed on between the Borrower and the
Arranger as a result of an extension of the initial expiry date of the
Transaction bid.
We look forward to working with you.
Sincerely,
NATIONAL BANK FINANCIAL INC., NATIONAL BANK OF CANADA,
as Arranger as Underwriter and Agent
By: /s/ Laura Dottori By: /s/ Laura Dottori
---------------------------- ----------------------------
By: /s/ Brian Smith By: /s/ Brian Smith
---------------------------- ----------------------------
AGREED TO AND ACCEPTED THIS 9TH DAY OF APRIL 2003.
AXCAN PHARMA INC.
By: /s/ Jean Vezina
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Name: Jean Vezina
-------------------------
Title: V.P. Fin. & CFO
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The Exchange Tower
130 King Street West, Suite 3200, P.O. Box 21
Toronto, Ontario M5X 1J9
(416) 869-3707
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SUMMARY OF TERMS AND CONDITIONS
(All dollar amounts in US dollars)
THIS SUMMARY OF TERMS AND CONDITIONS IS NOT MEANT TO BE, NOR SHOULD IT BE
CONSTRUED AS, AN ATTEMPT TO DEFINE ALL OF THE TERMS AND CONDITIONS OF THE
TRANSACTION CONTEMPLATED HEREIN, NOR IS IT INTENDED TO REFLECT SPECIFIC DOCUMENT
PHRASING THAT COULD EXIST IN A FINAL CREDIT AGREEMENT. IT IS INTENDED ONLY TO
OUTLINE THE BASIC BUSINESS POINTS AGREED TO BY THE PARTIES BASED UPON WHICH
LEGAL DOCUMENTATION MIGHT BE STRUCTURED.
ALL CAPITALIZED TERMS AND EXPRESSIONS USED HEREIN SHALL BE DEFINED IN THE CREDIT
AGREEMENT, IF NOT OTHERWISE DEFINED HEREIN.
1 BORROWER
Axcan Pharma Inc. (THE "BORROWER").
2 GUARANTORS
The Borrower's Material Subsidiaries (collectively, the "GUARANTORS").
3 AMOUNT
Credit facilities totaling up to an aggregate of $150,000,000 (The
"COMMITMENTS" or the "CREDIT FACILITIES").
4 LEAD ARRANGER & SOLE BOOKRUNNER
National Bank Financial Inc. ("NBF").
5 UNDERWRITER AND ADMINISTRATIVE AGENT
National Bank of Canada ("NBC").
6 LENDERS
NBC and a group of Lenders to be determined in consultation with the
Borrower.
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7 CREDIT FACILITIES
FACILITY 1: Up to $75,000,000 Revolving Credit Facility.
FACILITY 2: Up to $75,000,000 Non-Revolving Term Facility.
8 PURPOSE
The Credit Facilities can be utilized by the Borrower as follows:
FACILITY 1: To finance a portion of the purchase price to be paid for
the Shares in connection with the Acquisition, the
refinancing of existing credit facilities, to pay fees and
expenses associated therewith and for general corporate
purposes.
FACILITY 2: To finance a portion of the purchase price to be paid for
the Shares in connection with the Acquisition, the
refinancing of existing credit facilities, to pay fees and
expenses associated therewith.
9 CLOSING DATE
The date when Phase I is completed and the initial drawdown under the
Credit Facilities is made, which shall be no later than July 9, 2003 or
such later date as may be agreed on between the Borrower and the Arranger
as a result of an extension of the initial expiry date of the Bid (the
"Closing Date").
10 TERM
FACILITY 1: Initially, three (3) years from the Closing Date. Available
as follows:
364-DAY REVOLVING PERIOD
Available on a fully revolving basis (the "REVOLVING
PERIOD"). The Borrower may, prior to the end of the
Revolving Period, request an extension of the Revolving
Period for an additional 364 days.
2-YEAR TERM PERIOD
In the event the Lenders elect not to extend the Revolving
Period, the Borrower shall have the option of converting the
amounts then outstanding under the Revolving Term Facility
to a non-revolving credit with a final maturity date (the
"TERM PERIOD MATURITY DATE") which is two
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(2) years from the then current Revolving Period Maturity
Date (the "TERM PERIOD").
FACILITY 2: Three (3) years from the Closing Date.
11 DRAW DOWN AVAILABILITY
Upon completion of all documentation and satisfaction of Conditions
Precedent to initial drawdown, availability will be as follows:
Subsequent to the Borrower having utilized its cash and cash equivalents,
for up to an aggregate amount satisfactory to the Arranger, drawdowns under
the Credit Facilities will occur firstly under Facility 2, and then under
Facility 1.
One drawing may be made under the Credit Facilities on the Closing Date to
purchase Shares in connection with the Bid and permit completion of Phase
I. In addition, additional drawings may be made after the date of initial
drawing for the purpose of funding the take up of Shares tendered during
Phase II. A final drawing may be made on the date of completion of Phase II
(which shall occur no later than 90 days after the Closing Date) to pay
that portion of the consideration for the Shares and related fees and
expenses that become due and payable upon completion of Phase II. No
additional drawings may be made under Facility 2 after the completion of
Phase II.
Following completion of Phase I, drawdowns may be made under Facility 1 at
the Borrower's option, on a revolving basis.
12 CAPITAL REPAYMENTS
FACILITY 1: During the Term Period, quarterly repayments with a maximum
bullet payment not to exceed 50% of the loan amount.
FACILITY 2: No repayments during the first year following the Closing
Date. Quarterly repayments of 12.5% of the loan amount
during year 2 and 3.
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13 MANDATORY PREPAYMENTS
FACILITY 2: (A) ASSET TRANSACTIONS: Prepayments in the amount of all of
the net after-tax cash proceeds of the sale or other
disposition of, or insurance on account of any loss of,
any property or assets of the Borrower or any Guarantor
(including, after completion of Phase II, Target and
its subsidiaries), payable no later than thirty (30)
days following the date of receipt, other than (i) net
cash proceeds of sales or other dispositions of
accounts receivable and inventory in the ordinary
course of business and (ii) disposition of property in
an aggregate net amount (i.e. net of property purchased
in replacement) not exceeding in any fiscal year 5% of
the Borrower's consolidated assets as at the end of the
previous fiscal year.
(B) EQUITY OFFERINGS: Prepayments in an amount equal to
100% of the net cash proceeds received from the
issuance of any equity (other than through the exercise
of options), hybrid equity, income trust or similar
securities of the Borrower and its Material
Subsidiaries, payable no later than the first Business
Day following the date of receipt, unless the Lenders
have consented to such net proceeds being reserved for
an acquisition to take place within 12 months from the
receipt of such proceeds.
(C) INCURRENCE OF INDEBTEDNESS: Prepayments in an amount
equal to 100% of the net cash proceeds received from
the incurrence of Debt by the Borrower and its Material
Subsidiaries other than Permitted Debt.
(D) CASH FLOW SWEEP: Prepayments in an amount equal to 50%
of the Excess Cash Flow.
FACILITY 1: During Term Period, items (A), (B) and (C) of the above will
also apply.
Any Mandatory Prepayments will be applied in inverse order of maturity.
14 VOLUNTARY PREPAYMENTS
The Credit Facilities may be prepaid, in whole or in part, without premium
or penalty, subject to customary breakage costs.
15 TYPE OF ADVANCES
Drawings under the Credit Facilities may be done by way of:
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FACILITY 1: Canadian Prime Rate Loans, U.S. Base Rate Loans, Banker's
Acceptances ("BA"), Libor loans, Letters of Credit ("LC") or
Letters of Guarantee ("LG") or any combination thereof. LC's
and LG's will be limited to $7,500,000.
FACILITY 2: U.S Base Rate Loans or Libor loans or any combination
thereof.
16 INTEREST RATES AND FEES
Refer to Schedule A.
17 SECURITY
The Credit Facilities and each Guaranty will be secured by fully perfected
first priority security interests in all assets, including without
limitation, all personal, real and mixed property of the Borrower and the
Guarantors, subject to exceptions to be agreed on based on constraints
resulting from applicable law (except for Permitted Liens).
For greater certainty, the Security will include a pledge of the stock of
each Material Subsidiary and a security interest in all inter-company debt
owed to the Borrower or a Guarantor.
It is understood that, at the time of and after completion of the Bid but
prior to the completion of Phase II, the pledge with respect to the Shares
will be limited to the Shares acquired pursuant to the Bid and shall charge
such Shares as and when they are acquired.
As the foregoing Security relating to Target and its subsidiaries will not
be available until Target is 100% owned by the Borrower, the Borrower will
undertake to cause Target and its Material Subsidiaries to provide the same
Security as outlined above upon completion of Phase II.
(collectively, the "SECURITY DOCUMENTS").
18 CONDITIONS PRECEDENT TO INITIAL DRAWDOWN
Customary for this type of transaction including but not limited to the
following which shall be, in form and substance, satisfactory to the
Lenders and their counsel:
1. A credit agreement (the "Credit Agreement") articulating in greater
detail the terms and conditions contained herein and all other such
provisions as the parties hereto and their counsel consider
appropriate;
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2. Execution and publication / perfection of registration of Security
Documents;
3. The structure utilized to consummate the Acquisition, the terms
thereof, the pro forma capitalization of the Borrower after giving
effect to the Acquisition, the Bid and the definitive documentation
relating thereto (the "Definitive Acquisition Documents") shall be in
form and substance reasonably satisfactory to the Arranger (it being
understood that the structure and terms of the documentation relating
to the Bid in the form delivered to the Arranger prior to the date
hereof is satisfactory to the Arranger). Without limiting the
generality of the foregoing, (i) the Definitive Acquisition Documents
(other than with respect to Phase II) shall be in full force and
effect on the Closing Date, and no material provision thereof
(including conditions to the Bid) shall have been amended,
supplemented, or otherwise modified in any material respect (except as
required by the SEC, but provided same does not materially adversely
affect the credit risk of the Lenders) or waived, (other than to
extend the Bid expiry date through a date no later than 120 days
following the original commencement of the Bid) without the prior
written consent of the Arranger and (ii) there shall have been validly
deposited under the Bid and not withdrawn such Shares constituting the
Minimum Shares.
4. Prior to the initial borrowing under the Credit Facilities or
simultaneously therewith, (i) the Bid shall have been completed with
respect to the Minimum Shares pursuant to the Definitive Acquisition
Documents (and none of such Minimum Shares will have been withdrawn)
and the Borrower or Acquisition Co shall be the owner of a number of
Shares at least equal to the Minimum Shares and (ii) the cash or cash
equivalent in the Borrower and the initial borrowing under the Credit
Facilities on the Closing Date shall be sufficient to pay the purchase
price for the Shares tendered pursuant to the Bid, to pay fees and
expenses of the Borrower due and payable on the Closing Date and
anticipated to become due and payable during the immediately
succeeding 90 days;
5. A satisfactory opinion from counsel to the Lenders and counsel to the
Borrower on all matters incident to the transactions contemplated
herein, as the Lenders may reasonably require;
6. There shall not exist, in the judgment of the Arranger, any action,
suit, investigation, litigation or proceeding pending or threatened in
any court or before any regulatory or governmental authority that
materially impairs the Bid, Phase II, or the financing thereof, or
that would have a material adverse effect on the Borrower, its
Material Subsidiaries, and on Target and its Subsidiaries, taken as a
whole, the Bid, Phase II, the financing thereof or any of the
transactions contemplated hereby;
7. Satisfactory evidence that all amounts due by the Borrower pursuant to
the terms of the Existing Credit Facilities shall be repaid
concurrently with the completion of Phase I and that such Existing
Credit Facilities shall be cancelled and an undertaking to do so with
respect to Target's existing credit facilities if same are not paid
out as at the completion of Phase II;
8. Satisfactory evidence that the Existing Liens and all other Liens
charging the property or assets of the Borrower and its subsidiaries
have been released and discharged, to the exclusion, however, of any
Permitted Liens;
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9. Delivery of all other documents, declarations, certificates,
agreements and notices that the Lenders and their counsel may
reasonably require and which shall be referred to in the Credit
Agreement;
10. Satisfactory evidence that all necessary material regulatory and
governmental approvals required in order to effect and complete the
Acquisition have been obtained;
11. Payment of all fees (including reasonable legal fees of Lenders'
counsel);
12. Absence of a Default or Event of Default.
19. CONDITIONS PRECEDENT TO FINAL FUNDING AND PHASE II
As of the date of completion of Phase II and as a condition precedent to
the final funding under the Credit Facilities (if any), the following shall
be satisfied (or the Arranger shall be reasonably satisfied that same will
be satisfied immediately after such advance):
1. CONTINUED SATISFACTION OF CONDITIONS PRECEDENT TO INITIAL FUNDING.
Each of the conditions precedent described under Conditions Precedent
to Initial Draw down, above, shall be satisfied as of such date.
2. COMPLETION OF PHASE II. Phase II shall have been completed pursuant to
the Definitive Acquisition Documents, no material provision of which
shall have been amended, supplemented, waived or otherwise modified in
any material respect without the prior written consent of the Arranger
(except as contemplated above and including any extensions of the
Bid).
3. SECURITY. The Arranger, for the benefit of the Lenders, shall have
been granted perfected first priority security interests in all assets
described above under the heading "Security," in each case to the
extent such security interests shall not previously have been granted;
together with such legal opinions, title insurance and other related
documents and materials as the Arranger may reasonably request.
However, it is understood that with respect to Target and its Material
Subsidiaries, the Borrower shall have undertaken to cause Target and
its Material Subsidiaries to provide such Security within 30 days of
completion of Phase II.
20. CONDITIONS PRECEDENT TO EACH SUBSEQUENT DRAWDOWN
Customary for this type of transaction, including, but not limited to
1. All representations and warranties are true and accurate in all
material respects as at each draw down date;
2. Absence of a Default or Event of Default; and
3. Delivery of required draw down notices.
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21. REPRESENTATIONS AND WARRANTIES
Those representations and warranties relating to the Borrower and the
Guarantors (exceptions to be provided in some specified circumstances for
non Material Subsidiaries) which are usual and customary for this type of
financing, but not limited to: accuracy of financial statements, absence of
undisclosed liabilities, corporate existence, no Material Adverse Change,
enforceability of credit documentation, compliance with laws, payment of
taxes, absence of material litigation, environmental compliance, insurance
etc.
22. COVENANTS
The Credit Agreement shall contain all affirmative and negative covenants
which are customary for financings of this nature and magnitude and all
other affirmative and negative covenants that the Lenders may reasonably
require, including but not limited to:
1. Completion of Phase II (which shall occur no later than 90 days after
the Closing Date) Within 30 days of such completion, the Borrower will
cause Security over Target assets and its subsidiaries to be delivered
to the Lenders;
2. Restrictions on liens and indebtedness subject to (i) a threshold of
$10,000,000; (ii) Permitted Liens; and (iii) Permitted Debt;
3. Restrictions on asset sales or economic equivalent thereof in an
aggregate net amount (i.e. net of property purchased in replacement)
in excess of 5% of total consolidated assets of the Borrower subject
to exceptions (i) for cash sales at fair market value where proceeds
pay down Lenders and (ii) for sales to which Lenders consent;
4. Restrictions on amalgamations and subsidiary formations;
5. Restrictions on capital expenditures to a maximum annual aggregate
amount not to exceed $7,500,000;
6. No acquisitions and investments other than (i) the Acquisition; (ii)
acquisitions and investments not exceeding in any fiscal year
$10,000,000 in the aggregate; and (iii) acquisitions satisfying
certain criteria as to the type of industry, the location of assets,
capability of assets being subject to the Security, environmental
liability as well as absence of Default and Material Adverse Change as
a result of such acquisition;
7. No distribution if (i) the Total Debt to EBITDA ratio is greater than
3.0x; and (ii) the aggregate amount of distributions in any fiscal
year were to exceed 10% of the consolidated net income of the Borrower
for the previous fiscal year;
8. If the Total Debt to EBITDA ratio is greater than 3.0x, the aggregate
amount of research and development expenses in any fiscal year (other
than those required to
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be accounted for as a result of the Acquisition) shall not exceed 10%
of the consolidated sales of the Borrower for such fiscal year;
9. Restrictions limiting related party transactions to fair market value
transactions;
10. With respect to the property and business of the Borrower and its
Material Subsidiaries, the Borrower and its Material Subsidiaries will
maintain insurance for full insurable value, as well as satisfactory
civil liability insurance and upon completion of Phase II the Borrower
will do same for target and its Material Subsidiaries;
11. Financial information customary for this type of transaction.
23. FINANCIAL COVENANTS
Refer to Schedule B.
24. EVENTS OF DEFAULT
Customary for this type of transaction, including but not limited to:
1. Non-payment of principal, interest, fees and other amounts;
2. Violation of covenants;
3. Failure of any representations or warranties to be true;
4. Cross default to all debt and debt equivalents;
5. Material unsatisfied judgements;
6. Invalidity of credit documentation;
7. Insolvency events;
8. Material Adverse Change.
25. SYNDICATION AND OTHER PROVISIONS
ASSIGNMENT: Lenders will have the right to assign all or a part of their
Loans or Commitments in minimum amounts of $5,000,000 and self
participations in all or part of their Loans or Commitments.
MAJORITY LENDERS: Any amendments other than rate, repayments, amortization,
term and security for which the unanimous consent of the Lenders is
required shall require the consent of Lenders representing at least 51% of
the total Commitment amount of the Credit Facilities.
EXPENSES: All reasonable legal and out-of-pocket expenses incurred by the
Lenders for the preparation, negotiation, execution and administration of
the Arrangement Letter and the Credit Documents, are for the account of the
Borrower whether or not the definitive credit documentation is executed or
the Acquisition or Closing occurs.
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LAW: The Credit Agreement, its interpretation and its enforcement shall be
governed by the laws in force in the Province of Quebec.
LEGAL COUNSEL TO NBC AND NBF: McCarthy Tefrault LLP
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D DEFINITIONS
Acquisition The acquisition of all Shares, either directly or
through a wholly-owned Subsidiary of the Borrower
("Acquisition Co"), by way of a public offer (the
"Bid") for a price payable in cash or in
securities or any combination thereof and a
subsequent merger whereby the shares not
previously acquired will be acquired for a price
in cash not less than the price payable pursuant
to the Bid.
Debt With respect to a person, and without duplication,
all obligations that under GAAP should be
classified on such person's balance sheet as
liabilities or to which reference should be made
by footnotes thereto, (i) including, whether or
not so classified, guarantees and liens granted in
respect of Debt of another person, but (ii)
excluding deferred taxes, trade accounts payable,
obligations under operating leases and other
accrued obligations incurred in the ordinary
course of business, but deducting cash and cash
equivalents.
EBITDA In respect of any person for any period, an amount
equal to net Income for such period, plus, without
duplication and to the extend reflected as a
charge in the calculation of net income; (i) any
provision for current or deferred income taxes;
(ii) Interest Expense; (iii) losses from
extraordinary, unusual or non-recurring items
approved by the Agent (which approval shall not be
unreasonably withheld); (iv) in process R&D write
offs; (v) any aggregate net loss arising from the
sale, exchange or other disposition of capital
assets by such person (including any fixed assets,
whether tangible or intangible, all inventory sold
in conjunction with the disposition of fixed
assets and all securities); (vi) net losses of
affiliates and any other losses in respect of
investments which are accounted for on an equity
basis; (vii) amount in respect of non-controlling
interest, if any; (viii) amortized debt discount;
(ix) depreciation and amortization expense; (x)
the amount of any deduction as a result of any
grant to members of management of the person of
any capital stock; and (xi) any other non-cash
losses approved by the Agent (which approval shall
not be unreasonably withheld) which have been
deducted in determining net
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income, LESS, without duplication and to the
extent reflected as a credit in the calculation of
net income; (a) income tax credits (other than R&D
tax credits) or reductions in deferred taxes; (b)
gains from extraordinary, unusual or non-recurring
items; (c) any aggregate net gain arising from the
sale, exchange or other disposition or capital
assets by such person (including any fixed assets,
whether tangible or intangible, all inventory sold
in conjunction with the disposition of fixed
assets and all securities); (d) net profits (other
than dividends received and retained) of
affiliates and any other profits in respect of
Investments which are accounted for on an equity
basis; (e) amounts in respect of non-controlling
interests, if any; and (f) any other non-cash
gains which have been added in determining net
income.
Excess Cash Flow In respect of any period, EBITDA for such fiscal
year minus cash Interest Expense, cash taxes,
permitted cash dividends, principal repayments on
Debt and unfunded capital expenditures, in each
case for the said period.
GAAP The generally accepted accounting principles which
are in effect from time to time and approved by
the American Institute of Certified Public
Accountants and included in its handbook
concerning accounting treatment or statement of
presentation.
Interest Coverage Ratio In respect of the Borrower at any time, the amount
determined in accordance with the formula A/B
where:
A is EBITDA of the Borrower, and
B is Interest Expense.
Interest Expense In respect of any person for any period, without
duplication, gross interest, as reflected in the
financial statements of such person (including
that attributable to the interest component of
payments under capital leases) including all
commissions, discounts and other fees paid or
accrued during such period and all charges paid or
accrued during such period with respect to letters
of credit and letters of guarantee, all as
determined in accordance with GAAP; provided that
Interest Expense shall exclude unrealized
translation gains and losses on foreign exchange
and non-cash expenses relative to financial
instruments required to be accounted for as
interest under GAAP.
Material Adverse Change Any fact, event or circumstance which, in the
Arranger's
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good faith determination, would materially
adversely affect the financial condition,
business, assets, operations or prospects of the
Borrower and its Subsidiaries and, upon completion
of Phase II, Target and its subsidiaries (taken as
a whole).
Material Subsidiary (i) any Subsidiary of the Borrower and Target
whose unconsolidated assets or revenues at the end
of any fiscal quarter are greater than 2.5% of the
consolidated assets or revenues, as applicable, of
the Borrower at such time (with revenues being
determined on the basis of the four-quarter period
ending at such time) provided that the combined
assets or revenues of all Non Material
Subsidiaries shall not in the aggregate exceed 5%
of the consolidated assets or revenues (as
applicable) of the Borrower; and (ii) any
Subsidiary of the Borrower which at the end of any
fiscal quarter owns a patent, trademark or other
intellectual property that is material to the
operations of the Borrower and its Subsidiaries
taken as a whole.
Minimum Shares A number of Shares sufficient to permit Phase II
to occur, but greater than 50.0% of the
outstanding Shares of Target on a fully diluted
basis
Permitted Debt (i) $125,000,000 Convertible Subordinated Notes
due in 2008, (ii) indebtedness secured by a
Permitted Lien, and (iii) Debt to which Lenders
consent.
Permitted Liens (i) liens arising by operation of law, to the
extent they have not become enforceable, (ii)
liens securing obligations incurred to finance the
acquisition or use of assets, up to an aggregate
outstanding amount not exceeding $10,000,000 and
(iii) first ranking liens securing intercompany
loans provided such loans are fully and
effectively subject to the Security.
Phase I The acquisition by the Borrower or Acquisition Co
of the Minimum Shares
Phase II (i) the acquisition by the Borrower or Acquisition
Co of Shares during an extension period of the
initial expiry date of the Bid or a subsequent
offering period; and (ii) the acquisition of all
the remaining outstanding Shares of Target by way
of (a) a "short form" merger If Borrower or
Acquisition Co acquires at least 90% of Shares
pursuant to the Bid or (b) a "long form" merger of
the acquiror with Target.
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Senior Debt Debt excluding the $125,000,000 Convertible
Subordinated Notes due in 2008.
Shareholder's Equity In respect of the Borrower at any time, the
aggregate amount of (i) the stated capital of all
of the outstanding shares of the Borrower, (ii)
accumulated retained earnings, and (iii) the
amount, without duplication, of any contributed
surplus.
Shares All outstanding Shares of Target together with the
associated rights to purchase junior participating
preferred shares.
Target SALIX Pharmaceuticals Ltd.
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