Item 2.01 Completion of Acquisition or Disposition of Assets.
Share Purchase
On July 11, 2016 (the “
Closing
Date
”), Albany Molecular Research, Inc., a Delaware corporation (“
AMRI
”) completed its previously
announced acquisition of Prime European Therapeuticals S.p.A. – Euticals, a company organized under the laws of Italy (“
Euticals
”),
pursuant to a Share Purchase Agreement with Lauro Cinquantasette S.p.A., a company organized under the laws of Italy (the “
Seller
”)
dated as of May 5, 2016 (the “
Share Purchase Agreement
”). Pursuant to the Share Purchase Agreement,
AMRI, through its subsidiary, purchased 100% of the capital stock of Euticals (the “
Transaction
”). Euticals
is a privately-held company headquartered in Lodi, Italy, specializing in custom synthesis and the manufacture of active pharmaceutical
ingredients with a network of active pharmaceutical ingredient facilities primarily in Italy, Germany, the U.S. and France.
Upon the closing of the Transaction (the
“
Closing
”) and as consideration for its acquisition of Euticals, AMRI (i) paid approximately €164 million
in cash, subject to certain working capital, net debt and transaction expenses adjustments (the “
Cash Consideration
”),
(ii) issued 7,051,295 unregistered shares of common stock, $0.01 par value of AMRI (the “
Consideration Shares
”),
and (iii) paid approximately €55 million in deferred cash consideration payable to the Seller in the form of two seller notes.
At the Closing, €10 million of the Cash Consideration was contributed into an escrow fund to secure the Seller’s payment
obligations with respect to (i) those certain working capital, net debt and transaction expenses adjustments and (ii) obligations
to indemnify AMRI for certain matters described below.
As noted above, €55 million of the
purchase price was financed through two unsecured promissory notes, which were issued by Albany Molecular Luxembourg
S.à.r.l. to the Seller (the “
Seller Notes
”). The Seller Notes are guaranteed by AMRI (the
“
Guarantee
”) and are subject to customary representations and warranties and events of default. The Seller
Notes are to be repaid in three equal annual installments to be paid on the third, fourth and fifth anniversaries of the
Closing Date, a portion of which payments are subject to AMRI’s set off rights as described herein. For so long as the
Seller has indemnification obligations as described below, one of the Seller Notes with a principal amount equal to the
then-applicable cap will be available for AMRI to set off against in order to satisfy certain indemnification obligations of
the Seller described below. The principal amount of the Seller Notes that exceeds the indemnification caps described below is
not subject to set off.
The Seller is required to indemnify AMRI,
subject to certain exceptions and limitations set forth in the Share Purchase Agreement, with respect to breaches of representations,
warranties and covenants (up to the amount available in the escrow account, or available with respect to the right of setoff described
above). The representations and warranties set forth in the Share Purchase Agreement generally survive for 24 months after the
Closing, with longer survival periods with respect to certain fundamental representations and warranties, which survive for 48
months. The Seller’s indemnification obligations are subject to a deductible of €500,000, with an indemnity cap of €31
million for the first two years and a reduced cap for the two years thereafter equal to the greater of (i) €15 million and
(ii) the sum of €15 million and the amount of any pending claims. However, such deductible and cap do not apply with respect
to breaches of Seller’s representation as to title to Euticals shares.
The parties to the Share Purchase Agreement
have made certain customary representations, warranties and covenants, which survive the Closing, including, among others: (i)
representations by the Seller, and Euticals and its subsidiaries (collectively, the “
Group Companies
”) with
respect to the Group Companies’ business, operations and financial condition; (ii) covenants by the Seller to keep information
relating to the Group Companies’ and AMRI’s business confidential; and (iii) covenants by the Seller to not compete
with the Group Companies’ business and to not solicit employees from the Group Companies.
As previously disclosed, concurrent with
the execution and delivery of the Share Purchase Agreement, AMRI and the Seller entered into a Subscription Agreement (the “
Subscription
Agreement
”), pursuant to which the Seller agreed to subscribe for the Consideration Shares at the Closing of the Transaction,
subject to certain conditions. The Consideration Shares were offered and sold outside the United States to an eligible investor
pursuant to Regulation S of the Securities Act of 1933, as amended (the “
Securities Act
”). The Consideration
Shares have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered
or sold in the United States absent registration under or an applicable exemption from such registration requirements. This Current
Report on Form 8-K does not constitute an offer to sell, or a solicitation of an offer to purchase, the shares in any jurisdiction
in which such offer or solicitation would be unlawful.
For further information regarding
the Subscription Agreement, including a filed copy thereof, reference is made to the Current Report on Form 8-K filed by AMRI with
the U.S. Securities and Exchange Commission (the “
SEC
”) on May 6, 2016.
As also previously disclosed, concurrent
with the execution and delivery of the Share Purchase Agreement, AMRI and the Seller entered into a Registration Rights and Lock-Up
Agreement (the “
Registration Rights and Lock-Up Agreement
”). The Registration Rights and Lock-Up Agreement
provides that, as soon as practicable after the Closing, AMRI shall file a “shelf registration statement” with the
SEC for the resale of the Consideration Shares. The Registration Rights and Lock-Up Agreement also provides for demand registration
rights and piggyback registration rights under certain circumstances for the Seller or any Participating Holders (as defined in
the Registration Rights and Lock-Up Agreement) who will own a portion of the Consideration Shares. Moreover, the Registration
Rights and Lock-Up Agreement imposes a 180-day lockup period (the “
Lock-Up Period
”) on any sales, transfers,
hedges or similar dispositions of the Consideration Shares.
The foregoing description of the Share Purchase
Agreement, Seller Notes and Guarantee does not purport to be complete and is qualified in its entirety by reference to the full
text of such agreements, copies of which are attached hereto as Exhibits 2.1 (by reference to Exhibit 2.1 to AMRI’s Current
Report on Form 8-K filed with the SEC on May 6, 2016), 10.1, 10.2 and 10.3, respectively, and are incorporated herein by reference.
For further information regarding the Subscription Agreement and the Registration Rights
and Lock-Up Agreement, including filed copies thereof, reference is made to the Current Report on Form 8-K filed by AMRI with the
SEC on May 6, 2016.
Stockholders Agreement
On the Closing Date, in connection with
the Transaction, AMRI and the stockholders identified therein (the “
Stockholders
”) entered into a Stockholders
Agreement (the “
Stockholders Agreement
”). The Stockholders Agreement provides that the Seller shall have the
right to select a designee to be elected to the board of directors of AMRI (the “
Board
”) as a Class II director
(the “
Seller Designee
”), subject to certain director qualifications set forth in AMRI’s organizational
documents. Thereafter, among other conditions, for so long as: (i) the Seller beneficially owns at least 5% of AMRI; (ii) within
two years from the date of the Closing, the Seller’s Stockholders together or individually own more than 50% of the equity
interest in the Seller; and (iii) such time after the two-year period from the date of the Closing, the Seller’s Stockholders
together or individually own more than 35% of the equity interest in the Seller and have control (as such term is used in the definition
of “Affiliate” as defined in the Stockholders Agreement) of the board of directors of the Seller, the Board shall include
the Seller Designee as a Class II Board nominee. The Stockholders Agreement will terminate if the Seller no longer meets the requirements
described above, or if there is a company sale.
The Stockholders Agreement also provides
that, from and after the Closing, each AMRI Stockholder agrees to vote all AMRI shares owned by such Stockholder in favor of the
Seller Designee in any election of Class II board members. Additionally, for so long as the Seller has the right to designate the
Seller Designee, the Seller agrees to vote all AMRI shares owned by the Seller or its affiliates in favor of any director nominees
recommended for election by the Board at any special or annual meeting. Moreover, the Stockholders Agreement provides for certain
“standstill” restrictions that prevent the Seller from (i) proposing certain business combinations and (ii) acquiring
additional beneficial ownership of AMRI so that the Seller’s beneficial ownership of AMRI will be more than 19.99%, which
restrictions will last for the longer of three years or such time as the Seller has the right to appoint the Seller Designee.
A copy of the Stockholders Agreement is
attached hereto as Exhibit 4.1 and is incorporated herein by reference. The foregoing summary of the Stockholders Agreement does
not purport to be complete and is qualified in its entirety by reference to the full text of the Stockholders Agreement.
Credit Agreement
On July 7, 2016, AMRI entered into
(i) the Amendment No. 1 to Second Amended and Restated Credit Agreement, by and among AMRI, each other loan party party
thereto, Barclays Bank PLC, as administrative agent and collateral agent (“
Agent
”), and the lenders party
thereto (the “
Amendment
”) and (ii) the Third Amended and Restated Credit Agreement by and among AMRI,
Agent, and the other lenders party thereto (the “
Third Amended and Restated Credit Agreement
”). The
Amendment amends the Second Amended and Restated Credit Agreement, dated as of August 19, 2015, by and among AMRI, the Agent
and the lenders party thereto (the “
Existing Credit Agreement
”) in the form of the Third Amended and
Restated Credit Agreement. The Third Amended and Restated Credit Agreemen
t
amends the Existing Credit Agreement by (i)
providing incremental senior secured first lien term loans in an aggregate principal amount of $230.0 million which increases
the aggregate principal amount of senior secured first lien term loans under the Third Amended and Restated Credit Agreement
to $428.5 million and (ii) increasing the first lien revolving credit facility commitments by $5 million to $35 million. AMRI
will use the proceeds of the Third Amended and Restated Credit Agreement to: (i) pay a portion of the Cash
Consideration; (ii) pay various fees and expenses incurred in connection with the Share Purchase Agreement, the Amendment and
the Third Amended and Restated Credit Agreement; and (iii) repay certain indebtedness of AMRI, Euticals and their
subsidiaries.
At AMRI’s election, loans made under
the Third Amended and Restated Credit Agreement bear interest at (a) the one-month, three-month or six-month LIBOR rate subject
to a floor of 1.0% (the “
LIBOR Rate
”) or (b) a base rate determined by reference to the highest of (i) the United
States federal funds rate plus 0.50%, (ii) the rate of interest quoted by The Wall Street Journal as the “Prime Rate”,
and (iii) a daily rate equal to the one-month LIBOR Rate plus 1.0%, subject to a floor of 2.0% (the “
Base Rate
”),
plus an applicable margin of 4.75% per annum for LIBOR Rate loans and 3.75% per annum for Base Rate loans.
The term loans under the Third Amended and
Restated Credit Agreement mature and are payable on July 16, 2021 and the revolving credit facility commitments thereunder terminate
and all amounts then outstanding thereunder are payable on July 16, 2020, subject, in each case, to earlier acceleration (i) to
six months prior to the scheduled maturity date of AMRI’s 2.25% Cash Convertible Senior Notes (the “
Convertible
Senior Notes
”) if on such date both (x) more than $25.0 million of the Convertible Senior Notes shall remain outstanding
and (y) the ratio the secured debt of AMRI and its subsidiaries to the EBITDA of AMRI and its subsidiaries exceeds 1.50:1.00 and
(ii) to April 7, 2019, April 7, 2020 or April 7, 2021, respectively, in each case to the extent that at any such date AMRI has
not (x) prepaid or otherwise satisfied the amortization or final maturity payment amounts to next come due under each Seller Note
then outstanding or (y) refinanced such amortization or final maturity payment amount to next come due under each Seller Note then
outstanding in a manner permitted by the Third Amended and Restated Credit Agreement.
The borrowings under the Third Amended and
Restated Credit Agreement are prepayable at the option of AMRI without premium or penalty (other than customary breakage costs
for LIBOR Rate loans). Amounts prepaid are available for reborrowing, subject to the terms and conditions of the Third Amended
and Restated Credit Agreement.
The obligations under the Third Amended
and Restated Credit Agreement are guaranteed by each material domestic subsidiary of AMRI (each a “
Guarantor
”)
and are secured by first priority liens on, and security interests in, substantially all of the present and after-acquired assets
of AMRI and each Guarantor subject to certain customary exceptions.
The Third Amended and Restated Credit Agreement
contains customary representations and warranties relating to AMRI and its subsidiaries. The Third Amended and Restated Credit
Agreement also contains certain affirmative and negative covenants including negative covenants that limit or restrict, among other
things, liens, indebtedness, investments and acquisitions, mergers and fundamental changes, asset sales, restricted payments, changes
in the nature of the business, transactions with affiliates and other matters customarily restricted in such agreements.
If an event of default shall occur and be
continuing under the Third Amended and Restated Credit Agreement, the commitments under the Third Amended and Restated Credit Agreement
may be terminated and the principal amounts outstanding under the Third Amended and Restated Credit Agreement, together with all
accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable.
Copies of the Amendment and the Third Amended and Restated Credit Agreement are attached hereto as Exhibits
10.4 and 10.5, respectively, and are incorporated into this Item 2.01 by reference. The foregoing summary of the Amendment and
Third Amended and Restated Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the
full text of the Amendment and the Third Amended and Restated Credit Agreement.
The Share Purchase Agreement and the
other agreements and instruments described in and filed with this report and the Current Report on Form 8-K filed with the
SEC on May 6, 2016 (the “
Transaction Documents
”) have been filed to provide investors with information regarding
their respective terms. They are not intended to provide any other factual information about AMRI, the Seller or the Group Companies.
In particular, the assertions embodied in the representations and warranties in the Transaction Documents were made as of a specified
date, are modified or qualified by information in confidential disclosure letters provided by each party to the other in connection
with the signing of the Share Purchase Agreement (and the other Transaction Documents), and may be subject to contractual standards
of materiality different from what might be viewed as material to stockholders or may have been used for the purpose of allocating
risk between the parties. Accordingly, the representations and warranties in the Transaction Documents are not necessarily characterizations
of the actual state of facts about AMRI, the Seller or the Group Companies (or other parties thereto) at the time they were made
or otherwise and should only be read in conjunction with the other information that AMRI makes publicly available in reports, statements
and other documents filed with the SEC.