14
ASCENT PEDIATRICS, INC.
SECOND SUPPLEMENTAL AGREEMENT
Date: October 15, 1999
SECOND SUPPLEMENTAL AGREEMENT (the
"Agreement") dated as of October 15, 1999 among Ascent
Pediatrics, Inc., a Delaware corporation (the "Company"),
Alpharma USPD Inc., a Maryland corporation (the "Lender"),
Alpharma Inc., a Delaware corporation (the "Parent"), State
Street Trust Bank and Trust Company (the "Depositary") and
each of the Original Lenders named in the Subordination
Agreement described below.
WHEREAS, pursuant to the Loan Agreement dated as of
February 16, 1999 among the Company, the Lender and the
Parent (the "Loan Agreement"), the Lender has agreed to loan
to the Company an aggregate of up to $40 million from time
to time upon the terms and conditions set forth therein, as
amended as described below;
WHEREAS, the Lender, the Company and the Depositary are
parties to a Depositary Agreement dated February 16, 1999,
as amended as described below (the "Depositary Agreement"):
WHEREAS, the Lender, the Company and the Original
Lenders named therein are parties to a Subordination
Agreement dated February 16, 1999, as amended as described
below (the "Subordination Agreement"):
WHEREAS, the Company, the Lender and the Parent are
parties to a Master Agreement dated February 16, 1999, as
amended as described below (the "Master Agreement");
WHEREAS, the Loan Agreement, Depositary Agreement,
Subordination Agreement and the Master Agreement were
amended pursuant to the terms of the Supplemental Agreement
dated July 1, 1999 between the parties hereto (the
"Supplemental Agreement"):
WHEREAS, the parties hereto wish to further supplement
and amend the Loan Agreement, the Depositary Agreement, the
Master Agreement, the Subordination Agreement and the
Supplemental Agreement upon the terms and conditions set
forth herein;
WHEREAS, the Lender is the sole holder of the Note (as
defined in the Loan Agreement) and the parties are entering
into this Second Supplemental Agreement (to the extent it
modifies the Loan Agreement) pursuant to Section 12.1 of the
Loan Agreement;
WHEREAS, on or prior to the date hereof, this Second
Supplemental Agreement has been approved by a majority of
the Non-Alpharma Directors pursuant to Section 9.01 of the
Depositary Agreement and Section 8.5 of the Master
Agreement;
NOW, THEREFORE, in consideration of the premises, it
is agreed by and among the parties hereto as follows:
ARTICLE I
DEFINITIONS, ETC.
1.1 Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Loan
Agreement or in the Ancillary Agreements (as defined in the
Loan Agreement).
1.2 Unless the context otherwise requires:
a. a term has the meaning assigned to it;
b. an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
c. "or" is not exclusive;
d. words in the singular include the plural and in the
plural include the singular;
e. provisions apply to successive events and transactions;
and
f. "herein", "hereof" and other words of similar import
refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
1.3 This Agreement amends and supplements the Loan
Agreement, the Depositary Agreement, the Subordination
Agreement, the Guaranty Agreement, the Master Agreement
and the Supplemental Agreement. In case of any
inconsistency between the terms of this Agreement and
the Loan Agreement, the Depositary Agreement, the
Subordination Agreement, the Guaranty Agreement, the
Master Agreement, or the Supplemental Agreement, the
terms of this Agreement shall govern. In the absence of
such inconsistency, all provisions of the Loan
Agreement, the Depositary Agreement, the Subordination
Agreement, the Guaranty Agreement, the Master Agreement
and the Supplemental Agreement shall remain in full
force and effect. Without limiting the foregoing, the
conditions set forth in Article II hereof shall for all
purposes be considered part of the Loan Agreement. Any
reference to the Loan Agreement, the Depositary
Agreement, the Master Agreement, the Guaranty Agreement,
the Subordination Agreement or the Supplemental
Agreement in any such agreement or to the Ancillary
Agreements shall be deemed to be a reference to such
agreement as modified hereby. Any reference in any such
agreement to approval or adoption of the Merger
Agreement and the transactions contemplated thereby
shall be deemed to be a reference to the Merger
Agreement and such transactions as modified hereby.
1.4 The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original and
may be signed in counterparts, but all of them together
represent the same agreement.
1.5 The laws of the State of New York, without regard to
principles of conflicts of law, shall govern this
Agreement to the extent it modifies the Loan Agreement
or the Subordination Agreement. The laws of the State
of Delaware, without regard to principals of conflict of
laws, shall govern this Agreement to the extent it
modifies the Depositary Agreement or the Master
Agreement.
ARTICLE II
ADDITIONAL CONDITIONS AND OBLIGATIONS OF THE LENDER
2.1 The obligation of the Lender to make any Loans on or
after the date hereof is subject to the fulfillment to
its reasonable satisfaction, or the waiver by the
Lender, on or prior to the applicable Loan Date, of
each of the following additional conditions:
(a) The Fourth Amendment to the May 1998 Securities
Purchase Agreement in the form attached hereto as Exhibit A
(the "Fourth Amendment to the Securities Purchase
Agreement") shall be in full force and effect and
(b) The Company and each of the Furman Selz Entities
shall have performed in all material respects all of
their respective obligations under the Fourth
Amendment to the Securities Purchase Agreement
including, without limitation, the satisfaction of
the conditions set forth in Section 2.2(b) thereof.
2.2 The obligation of the Lender to make any Secured
Loans (as defined in the Loan Agreement (as amended)) on
or after the date hereof is subject to the fulfillment
to its reasonable satisfaction, or the waiver by Lender,
on or prior to the applicable Loan Date, of each of
the following conditions:
(a) The Lender shall be reasonably satisfied
that the
security interest required by Section 13.10
of the Loan
Agreement (as amended) has attached to the
Collateral (as defined in the Loan
Agreement) and
(b) The Amendment to the Subordination
Agreement, in the form attached hereto as
Exhibit B shall be in full force and
effect.
ARTICLE III
AGREEMENTS AND AMENDMENTS
The Plan Update
3.1 The Lender agrees that the Company delivered to the
Lender, on or about September 21, 1999, a detailed
operating plan covering the periods through December
31, 2001 which includes, on an annual basis, $1.4
million in research and development and sales force
expenditure reductions from the previously approved Plan
and reflects the immediate commercial introduction of
the Primsol product. The representatives of the Company
and the Lender agree to cause their respective
representatives to the Screening Committee to take all
action necessary to approve said September 21, 1999 plan
as an Update, as that term is used in Section 4.1 of
the Supplemental Agreement.
The Secured Loan
3.2 The Loan Agreement (as amended) is further amended by
adding
the following definitions to Section 1.1 thereof:
"Secured Loans" means all Project Loans and
Screened Project Loans.
"Collateral" means all assets, properties,
contract rights
and other intangibles and choses in action
purchased,
licensed or otherwise acquired by the Company
with the
proceeds of a Secured Loan.
3.3 The Loan Agreement (as amended) is further amended by
adding the following clause to Article XIII of the Loan
Agreement:
13.10 Security.
As security for the full and timely payment of
all Secured Loans and the performance of all
obligations contained herein in connection
with the Secured Loans, the Company covenants
that it will, on or before each Loan Date for
a Secured Loan, do or cause to be done, all
things necessary in the reasonable opinion of
the Lender and, its counsel, to grant to the
Lender a duly perfected first priority
purchase money security interest in all of the
Collateral acquired by Company with the
proceeds of said Secured Loan. At the request
of the Lender, the Company will cause its duly
authorized officers to execute on its behalf,
any certificate, instrument, statement or
document, or to procure any such certificate,
instrument, statement or document, or to take
such other action which the Lender's counsel
reasonably deems necessary, from time to time,
to create, continue or preserve Lender's
security interest in and to the Collateral
(and the perfection and priority thereof) as
contemplated hereby, specifically including
the execution of such security agreement and
the filing of such financing statements in the
form reasonably requested by Lender's counsel.
3.4 Section 7.2 of the Loan Agreement is hereby
amended by adding the following clause to the
beginning of the first sentence thereof:
"Except for any security interest in the
Collateral with respect to Secured Loans and
Fourth Amendment Advances (as defined in the
Fourth Amendment to the Securities Purchase
Agreement), ..."
The Option Exercise Period
3.5 The definition of the term "2001 Audited Financial
Statements" in
Article I of the Depositary Agreement (as amended by
the Supplemental Agreement) is hereby amended by
changing (a) the term "2001 Audited Financial
Statements" to the term "2002 Audited Financial
Statements" in said definition and in each other
place where the term "2001 Audited Financial
Statements" appears in the Depositary Agreement and
(b) the date "December 31, 2001" to "December 31,
2002" in each of the two places it appears in said
definition.
3.6 The definition of the term "Adjusted 2001 Operating
Income" in
Article I of the Depositary Agreement (as amended by
the Supplemental Agreement) is hereby amended by
changing (a) the term "Adjusted 2001 Operating
Income" to the term "2002 Operating Income" in said
definition and in each other place where the term
"Adjusted 2001 Operating Income" appears in the
Depositary Agreement and (b) the date "December 31,
2001" to "December 31, 2002 in each of the five
places it appears in said definition.
3.7 The definition of the term "Excluded Interest
Expense" in Article I of the
Depositary Agreement (as amended by the Supplemental
Agreement) is hereby amended by changing the date
"December 31, 2001" each time it appears to
"December 31, 2002.
3.8 The definition of the term "GAAP Adjustments" in
Article I of the Depositary Agreement (as amended by
the Supplemental Agreement) is hereby amended by
changing (a) all references to "2000" and "2001" to
"2001" and "2002", respectively and (b) all
references to "December 31, 2001" and "December 31,
2002" to "December 31, 2002" and "December 31,
2003", respectively.
3.9 The definition of the term "Option Expiration Date"
in Article I of the Depositary Agreement (as amended
by the Supplemental Agreement) is hereby amended by
changing the term "December 31, 2002" to "December
31, 2003".
3.10 Section 3.01 of the Depositary Agreement (as
amended by the
Supplemental Agreement) is hereby amended by (a)
restating the last sentence of subsection (a) as
follows:
"The Company may elect to exercise the Call
Option by
delivery of the Call Option Exercise Notice to
the
Depositary at any time during the period (the
"Call Period") commencing February 1, 2003 and
continuing until December 31, 2003."
and (b) changing the two references to "January 15,
2003" in
subsection (b) to "January 15, 2004".
3.11 Section 4.01 of the Depositary Agreement (as
amended by the
Supplemental Agreement) is hereby amended by (a)
restating the first sentence of subsection (a) as
follows:
"The Company shall deliver the Option Exercise
Deliverables to Alpharma on or before March
30, 2003."
and (b) changing the reference to "January 1, 2002"
in subsection (b) (v) to "January 1, 2003".
3.12 Section 4.03 (c) (i) of the Depositary Agreement
(as amended by
the Supplemental Agreement) is hereby amended by
changing the reference to "September 30, 2001" to
"September 30, 2002".
3.13 Section 5.02 (b) of the Depositary Agreement (as
amended by the
Supplemental Agreement) is hereby amended by
changing the reference in the second paragraph
thereof from "January 15, 2003" to "January 15,
2004".
3.14. Section 2.6 of the Loan Agreement (as amended) is
hereby
amended by (a) changing the reference to "December
31, 2002" to "December 31, 2003" and (b) changing
the reference to "February 28, 2003" to "February
28, 2004".
3.15 Section 2.7 of the Loan Agreement (as amended) is
hereby amended by changing the reference to
"December 31, 2002" to "December 31,2003".
3.16 Section 6.8 of the Loan Agreement (as amended) is
hereby amended by changing the reference to the
"2001 fiscal year" to the "2002 fiscal year".
3.17 It is recognized that the stockholders of Ascent
must approve
the amendments contained in Sections 3.5 through
3.16 of this
Agreement (the "Option Extension Provisions") in
order for such
provisions to be effective. The parties therefore
agree that the
Option Extension Provisions shall have no force and
effect unless and until approved by the holders of
a majority of the Depositary Shares (the "Favorable
Shareholder Vote") and that, at all times prior to
a Favorable Shareholder Vote, the Depositary
Agreement shall continue to be in full force and
effect in the form existing without considering the
Option Extension Provisions. A Favorable
Shareholder Vote shall be deemed to have taken
place (and the Option Extension Provisions shall
thereupon be effective as amendments to the
Depositary Agreement) upon the delivery to the
Lender and the Depositary of an opinion of the
Company's counsel to the effect that a Favorable
Shareholder Vote has taken place and that each of
the Agreements referred to in Section 1.3 of this
Agreement (as amended hereby) are valid, binding
and enforceable against the Company.. The failure
to obtain a Favorable Shareholder Vote shall not
effect any of the amendments or terms of this
Agreement other than the Option Extension
Provisions.
The Minimum Purchase Price
3.18 Subclause (i) of Clause (A) of the
definition of "Option Exercise Price" in Article I
of the Depositary Agreement (as amended by the
Supplemental Agreement) is amended and restated in
its entirety as follows:
"$140,000,000 plus an amount equal to all funds
actually advanced to the Company under the Fourth
Amendment to the Securities Purchase Agreement
and which have not been repaid as of the date of
delivery of the Option Exercise Deliverables."
Conditions for Unrestricted Loans
3.19 The Lender agrees that the existence of a Plan or
Update
approved by the Screening Committee (as those terms
are defined in the Supplemental Agreement) is not a
condition precedent to the Lender's obligation to
fund an Unrestricted Loan, and that Article III,
Section (c) of the Supplemental Agreement is hereby
amended and restated as follows:
"The Lender shall be reasonably satisfied that
the proceeds of any Project Loans or Screened
Loans will be used for the purposes approved
by the Screening Committee pursuant to Section
4.3 of this Agreement."
3.20 Section 4.1 of the Supplemental Agreement is
hereby amended by
deleting the entire third sentence of such Section
which begins as
follows:
"Notwithstanding Section 6.6 of the Loan
Agreement, the Company shall use the
proceeds of Unrestricted Loans only for the
purposes specified in the Plan..."
General
3.21 The definition of the term "Option Expiration Date"
in the Depositary Agreement (as amended by the
Supplemental Agreement) is amended by adding the
following text to the end of such definition:
"or Article II of the Second Supplemental
Agreement dated October 13, 1999 between the same
parties".
3.22 Subclause III of Clause Y of the provision in the
definition of the term "Option Exercise Price" in
the Depositary Agreement (as amended by the
Supplemental Agreement) is amended and restated in
its entirety as follows:
"(III) the 7.5% Convertible Subordinated Notes due
July 1, 2004, in each case outstanding as of the
Option Closing Date, or issued or issuable upon
exercise of the warrants issued pursuant to the
Series G Agreement, as amended by the fourth
amendment hereto, dated as of October 1, 1999 (to
the extent any shares continue to be held as of
the Option Closing Date by one of the purchasers
set forth on Schedule 1 to the Series G Agreement
as so amended or an Affiliate of any such
purchaser), the Original Option Exercise Price,
and"
3.23 Section 7.1(i) of the Loan Agreement is hereby
amended and restated as follows:
(i) Indebtedness incurred pursuant to the Third and Fourth
Amendments to the May 1998 Securities Purchase Agreement."
3.24 The Loan Agreement is hereby amended to amend
and restate clause (i) of the definition of
"Impairment Event" in its entirety as follows:
"(i) the existence of a Negative Equity Position,
provided, however, that notwithstanding the
requirements of GAAP, (A) any amounts
outstanding under the 8% Subordinated Notes,
(B) any amounts outstanding under any debt
securities issued upon conversion or exchange
of the Series G Preferred and (C) any amounts
outstanding under the Company's 7.5%
Convertible Subordinated Notes due July 1,
2004 (including, without limitation, any Notes
issued under the Fourth Amendment to the
Securities Purchase Agreement) shall be
considered to be equity for purposes of this
clause only;".
3.25 The Lender consents to the Company entering
into the Fourth Amendment to the Securities Purchase
Agreement and consummating the transactions contemplated
thereby including, without limitation, for the purpose of
Sections 7.7 and 7.12 of the Loan Agreement, as amended.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first set
forth above.
ASCENT PEDIATRICS, INC.
By:
Name:
Title:
ALPHARMA USPD INC.
By:
Name:
Title:
ALPHARMA INC.
By:
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By:
Name:
Title: