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EXHIBIT 10.1
ASCENT PEDIATRICS, INC.
SECOND SUPPLEMENTAL AGREEMENT
DATE: OCTOBER 15, 1999
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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.
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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
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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
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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), ..."
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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
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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
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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".
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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;".
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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: /s/ Emmett Clemente
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Name: Emmett Clemente
Title: Chairman
ALPHARMA USPD INC.
By: /s/ Thomas L. Anderson
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Name: Thomas L. Anderson
Title: President-USPD
ALPHARMA INC.
By: /s/ Jeffrey E. Smith
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Name: Jeffrey E. Smith
Title: Vice President Finance
and CFO
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STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles Rossi
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Name: Charles Rossi
Title: Vice President
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