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Item 1.01
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Entry into a Material Definitive Agreement.
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On October 1, 2021 (the “Effective Date”), the Company,
Osmotica Pharmaceutical Corp. (the “Issuer”) and Osmotica Holdings US LLC (“Intermediate Holdings”) entered into
a Note Purchase Agreement (the “Note Purchase Agreement”) with, among others, Athyrium Opportunities IV Acquisition LP, as
administrative agent, and Athyrium Opportunities IV Acquisition 2 LP (including its successors and assigns), as purchaser (the “Purchaser”).
Subject to the satisfaction of certain conditions, the Note Purchase Agreement provides for the issuance of senior secured notes (the
“Notes”) to Purchaser in an aggregate principal amount of up to $100 million in three separate tranches. Upon the satisfaction
of certain funding conditions, the first tranche of Notes shall be issued in an aggregate principle amount equal to $55,000,000. At any
time after the issuance of the first tranche Notes but prior to the first anniversary thereof, upon the satisfaction of certain conditions,
including a minimum net product sales target for Upneeq over a specified period of time, the Company may request the issuance of second
tranche Notes in an aggregate principal amount of up to $20,000,000. At any time after the issuance of the first tranche Notes but prior
to the second anniversary thereof, the Company may request the issuance of third tranche Notes in an aggregate principal amount of up
to $25,000,000, which shall be funded in the sole discretion of the Purchaser.
The net proceeds from the sale of the Notes are expected to be used
to repay in full the Issuer’s remaining term loans, pay related fees and expenses in connection with the transactions contemplated
by the Note Purchase Agreement and for general corporate purposes.
The Notes will be guaranteed on a senior secured basis by the Company
and certain of its subsidiaries. The Notes and guarantees will be secured by substantially all of the assets of the Company and its U.S.
subsidiaries, including a security interest in, substantially all of the tangible and intangible assets of the Issuer and each guarantor,
including intellectual property rights and personal property consisting of inventory, related accounts, cash and deposit accounts, but
excluding Excluded Property (as defined in the Note Purchase Agreement), which includes, but is not limited to, any fee owned real property
of any credit party with a fair market value of less than $3 million, any leasehold interest of such credit party in real property and
the proceeds of any issuance of qualified capital stock by the Company.
The Notes will bear interest at a rate of 9.0% plus adjusted three-month
LIBOR, with a LIBOR floor of 1.50% and LIBOR cap of 3.00%, payable in cash quarterly arrears, and will mature five (5) years following
the date of issuance of the first tranche of Notes.
The Notes may be voluntarily prepaid upon the satisfaction of certain
conditions and with each such prepayment being accompanied by, as applicable, (1) a make-whole premium, (2) an exit fee of 2%
of the principal amount of the Notes prepaid, (3) certain other fees, indemnities and expenses and (4) all accrued interest
on the principal amount of the Notes being so prepaid. The exit fee described in (2) above is payable on the principal amount of
all Notes prepaid or repaid, including upon the repayment of the Notes upon maturity.
Subject to certain exceptions and qualifications, the Note Purchase
Agreement contains covenants that, among other things, limit the Issuer’s ability and the ability of its restricted subsidiaries,
including the guarantors, to:
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incur additional indebtedness or issue certain disqualified capital stock;
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transfer or sell assets;
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make certain investments, loans, advances and acquisitions;
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engage in consolidations, amalgamations or mergers, or sell, transfer or otherwise dispose of all or substantially all of their assets;
and
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enter into certain transactions with affiliates.
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The Note Purchase Agreement also provides for events of default which,
if any of them occurs and is continuing, would require or permit (x) the principal of, premium, if any, exit fee and accrued interest
on the Notes to become or to be declared due and payable and (y) the termination of the commitments (if any) of each purchaser to
purchase Notes.
As a condition to the issuance of the first tranche of the Notes pursuant
to the Note Purchase Agreement, the Company shall have received at least $25,000,000 in cash proceeds from an issuance of its Qualified
Capital Stock (as defined in the Note Purchase Agreement).
As a condition to the effectiveness of the Note Purchase Agreement,
on October 1, 2021, the Company entered into a share subscription agreement with the Purchaser (the “Share Subscription Agreement”)
for the issuance and sale of 4,448,646 of the Company’s ordinary shares, nominal value $0.01 per share (the “Ordinary Shares”),
to the Purchaser for a price of $0.01 per share or an aggregate price of $44,486.46 (the “Private Placement”). The Share Subscription
Agreement also provides the Purchaser with certain registration rights.
The foregoing descriptions of the Notes and of the Share Subscription
Agreement are qualified in their entirety by reference to the Note Purchase Agreement and to the Share Subscription Agreement, copies
of which are filed as Exhibit 10.1 and Exhibit 10.2 to this Current Report on Form 8-K.