Fifth Amendment
Dated December 29, 2000
to the
Securities Purchase Agreement
Dated May 13, 1998
by and among
Furman Selz Investors II L.P.
FS Employee Investors LLC
FS Parallel Fund L.P.
Bancboston Ventures Inc.
Flynn Partners
FS Ascent Investments LLC
and
Ascent Pediatrics, Inc.
FIFTH AMENDMENT dated as of the 29th day of December, 2000 (this "Fifth
Amendment") among Ascent Pediatrics, Inc. (the "Company"), Furman Selz Investors
II L.P. ("Investors"), FS Employee Investors LLC ("Employee"), FS Parallel Fund
L.P. ("Parallel," together with Investors and Employee, the "Furman Selz
Entities"), BancBoston Ventures Inc. ("BancBoston"), Flynn Partners ("Flynn")
and FS Ascent Investments LLC ("Investments") (each of Investors, Employee,
Parallel, BancBoston, Flynn and Investments are herein referred to individually
as a "Purchaser", and collectively, as the "Purchasers").
WHEREAS, the Company, the Furman Selz Entities, BancBoston and Flynn
are parties to a Securities Purchase Agreement dated as of May 13, 1998, as
amended September 30, 1998, February 16, 1999, July 1, 1999 and October 15, 1999
(the "Series G Purchase Agreement");
WHEREAS, Investments wishes to purchase from the Company, and the
Company wishes to issue and sell to Investments, up to four hundred thousand
(400,000) shares of Series H Convertible Preferred Stock, par value $.01 per
share (the "Series H Preferred Stock"), of the Company, the terms of which shall
be substantially as set forth on Exhibit A attached hereto (the "Series H
Certificate of Designation"), and the Company wishes to issue to Investments
warrants substantially in the form attached hereto as Exhibit B (the "Fifth
Amendment Warrants") to purchase up to 10,950,000 depositary shares of the
Company ("Depositary Shares") (subject to appropriate adjustments for stock
splits, stock dividends, reclassifications or similar recapitalizations
affecting the Depositary Shares), each Depositary Share representing one share
of Common Stock of the Company subject to a call option and represented by a
depositary receipt;
WHEREAS, Investments and the Company desire to provide for such
purchase and sale and issuance and to establish various rights and obligations
in connection therewith; and
WHEREAS, in connection with such purchase and sale and issuance, the
Purchasers and the Company desire to amend certain provisions of the Series G
Purchase Agreement.
NOW THEREFORE, in consideration of these premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions and Interpretation.
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(a) All capitalized terms used herein which are not otherwise specifically
defined herein shall have the respective meaning as ascribed thereto in the
Series G Purchase Agreement.
(b) Unless otherwise expressly indicated, all references contained herein to
SECTIONS or other subdivisions or SCHEDULES refer to the corresponding SECTIONS
and other subdivisions or SCHEDULES of the Series G Purchase Agreement.
(c) The sections and the headings in the sections in this Fifth Amendment
are for convenience only. Said sections and headings shall not be deemed to be
part of this Fifth Amendment and in no way define, limit, extend or describe the
scope or intent of its provisions.
ARTICLE II
SALE AND PURCHASE OF SERIES H PREFERRED
STOCK AND FIFTH AMENDMENT WARRANTS
Section 2.1. Series H Preferred Stock.
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(a) The Company agrees to issue and sell to Investments, and Investments
agrees to subscribe for and purchase from the Company one (1) share of the
Series H Preferred Stock on January 2, 2001 (the "Closing Date"). On the
Closing Date, the Company will deliver to Investments a certificate representing
one (1) share of Series H Preferred Stock registered in the name of Investments
and Investments will deliver one thousand dollars ($1,000) by wire transfer to
an account designated by the Company prior to the Closing Date.
(b) Investment agrees that, subject to the condition set forth in this
Fifth Amendment, it shall purchase up to an additional 3,999 shares (the
"Additional Shares") of Series H Preferred Stock from the Company at a purchase
price of $1,000 per share. Following the date on which the Company shall have
borrowed an aggregate principal amount of six million two hundred fifty thousand
dollars ($6,250,000) under the Loan Agreement dated December 29, 2000, by and
between the Company and Investments (the "Loan Agreement"), the Company has the
option to require Investments to purchase the Additional Shares pursuant to the
procedures and at the times set forth in Section 2.1(c). Notwithstanding
anything to the contrary herein, Investments shall have no obligation to
purchase any Additional Shares (i) on more than one (1) occasion in any calendar
month; or (ii) after December 31, 2001.
(c) In order to exercise its option to require Investments to Purchase
Additional Shares, the Company shall deliver to Investments from time to time a
notice in the form of Exhibit C (each, a "Notice of Purchase") specifying: (i)
the aggregate purchase price of the Additional Shares to be purchased by
Investments on the applicable Purchase Date (each, a "Purchase Price"), (ii) the
number of Additional Shares to be purchased on the Purchase Date and (iii) the
proposed purchase date (each, a "Purchase Date"). Such Notice of Purchase must
be delivered to Investments not later than 10:00 a.m. (New York time) on the
tenth (10th) Business Day prior to such Purchase Date. On each Purchase Date:
(i) the Purchasers shall make a sufficient and timely capital contributions to
Investments so that it has the funds necessary to purchase the Additional Shares
at such time or times required herein and shall cause Investments to deliver
immediately available funds in the amount of such Purchase Price to the account
of the Company in accordance with the bank wire instructions contained in the
Notice of Purchase, and (ii) the Company will deliver to Investments a
certificate registered in the name of Investments representing the number of
Additional Shares designated in such Notice of Purchase. Each Purchase Price
shall be in an aggregate amount of not less than five hundred thousand dollars
($500,000) or a multiple of one hundred thousand dollars ($100,000) in excess
thereof and not more than one million dollars ($1,000,000), except in one
instance an aggregate amount of not less than four hundred and ninety nine
thousand dollars ($499,000) and not more than nine hundred and ninety nine
thousand dollars ($999,000). Each Notice of Purchase shall be irrevocable and
binding upon the Company.
(d) The agreement of Investments to purchase any Additional Shares shall be
subject to its reasonable satisfaction, or the waiver by Investments, on or
prior to each Purchase Date that no event has occurred and is continuing which
constitutes a Default or an Event of Default.
Section 2.2. Warrants.
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(a) On the Closing Date, the Company will issue and deliver to Investments a
Fifth Amendment Warrant (an "Initial Fifth Amendment Warrant") to acquire one
million nine hundred fifty thousand (1,950,000) Depositary Shares (subject to
appropriate adjustments for stock splits, stock dividends, reclassifications or
similar recapitalizations affecting the Depositary Shares).
(b) The Company shall have the option to extend the then Demand Date, as
such term is defined in the Loan Agreement, to the last day of the month
immediately following the month in which the Demand Date would then occur by
providing written notice (the "Extension Notice") to the Holders (as defined in
the Loan Agreement) and to the holders of Series H Preferred Stock not less than
thirty five (35) days prior to the then Demand Date. As a condition to each
such extension, the Company shall be obligated to issue and deliver Fifth
Amendment Warrants (each, an "Additional Fifth Amendment Warrant") to
Investments according to the following schedule and in the following amounts
(for the avoidance of doubt, such amounts are cumulative):
(i) in the event that the Company wishes to extend the Demand Date to
July 31, 2001, an Additional Fifth Amendment Warrant to purchase one million
(1,000,000) Depositary Shares (subject to appropriate adjustments for stock
splits, stock dividends, reclassifications or similar recapitalizations
affecting the Depositary Shares) one (1) Business Day before the then Demand
Date, provided that, in the event that the Note (as such term is defined in the
Loan Agreement) is repaid in full before the then Demand Date, the Company shall
have no obligation to issue and deliver such Additional Fifth Amendment Warrant;
(ii) in the event that the Company wishes to extend the Demand Date to
August 31, 2001, an Additional Fifth Amendment Warrant to purchase one million
(1,000,000) Depositary Shares (subject to appropriate adjustments for stock
splits, stock dividends, reclassifications or similar recapitalizations
affecting the Depositary Shares) one (1) Business Day before the then Demand
Date, provided that, in the event that the Note is repaid in full before the
then Demand Date, the Company shall have no obligation to issue and deliver such
Additional Fifth Amendment Warrant;
(iii) in the event that the Company wishes to extend the Demand Date to
September 30, 2001, an Additional Fifth Amendment Warrant to purchase one
million (1,000,000) Depositary Shares (subject to appropriate adjustments for
stock splits, stock dividends, reclassifications or similar recapitalizations
affecting the Depositary Shares) one (1) Business Day before the then Demand
Date, provided that, in the event that the Note is repaid in full before the
then Demand Date, the Company shall have no obligation to issue and deliver such
Additional Fifth Amendment Warrant;
(iv) in the event that the Company wishes to extend the Demand Date to
October 31, 2001, an Additional Fifth Amendment Warrant to purchase two million
(2,000,000) Depositary Shares (subject to appropriate adjustments for stock
splits, stock dividends, reclassifications or similar recapitalizations
affecting the Depositary Shares) one (1) Business Day before the then Demand
Date, provided that, in the event that the Note is repaid in full before the
then Demand Date, the Company shall have no obligation to issue and deliver such
Additional Fifth Amendment Warrant;
(v) in the event that the Company wishes to extend the Demand Date to
November 30, 2001, an Additional Fifth Amendment Warrant to purchase two million
(2,000,000) Depositary Shares (subject to appropriate adjustments for stock
splits, stock dividends, reclassifications or similar recapitalizations
affecting the Depositary Shares) one (1) Business Day before the then Demand
Date, provided that, in the event that the Note is repaid in full before the
then Demand Date, the Company shall have no obligation to issue and deliver such
Additional Fifth Amendment Warrant; and
(vi) in the event that the Company wishes to extend the Demand Date to
December 31, 2001, an Additional Fifth Amendment Warrant to purchase two million
(2,000,000) Depositary Shares (subject to appropriate adjustments for stock
splits, stock dividends, reclassifications or similar recapitalizations
affecting the Depositary Shares) one (1) Business Day before the then Demand
Date, provided that, in the event that the Note is repaid in full before the
then Demand Date, the Company shall have no obligation to issue and deliver such
Additional Fifth Amendment Warrant.
(c) Notwithstanding the foregoing, if prior to the then Demand Date (i)
the Board of Directors of the Company approves a transaction involving the sale
of the Company (through a merger, consolidation, sale, conveyance or lease of
all or substantially all of its assets, or otherwise), (ii) the consideration
from such transaction that would be paid to the holders of the Company's
Depositary Shares for each Depositary Share (whether directly from the Acquiror
or by distribution by the Company) would exceed $.10 per Depositary Share
(subject to appropriate adjustments for stock splits, stock dividends,
reclassifications or similar recapitalizations affecting the Depositary Shares),
(iii) the Company is prohibited from engaging in such transaction without the
approval of the Purchasers in accordance with the Series G Purchase Agreement,
as amended by this Fifth Amendment, or Investments in accordance with the Loan
Agreement, and (iv) such required approval is not given by the Purchasers and
Investments within 10 days after such approval is requested in writing by the
Company (such events being referred to as a "Company Sale Rejection"), then the
Company may extend the Demand Date to December 31, 2000 without any obligation
to issue Additional Fifth Amendment Warrants to Investments pursuant to Section
2.2(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investments as follows:
Section 3.1. Organization and Existence, etc. The Company (a) is duly
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incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite power and authority to carry on its business
as now conducted and as proposed to be conducted, and (b) is duly qualified to
do business as a foreign corporation and is in good standing (or the equivalent
thereof under applicable law) in each jurisdiction in which the conduct of its
business requires such qualification by reason of the ownership or leasing of
property or otherwise (except for those jurisdictions in which the failure so to
qualify does not have a Material Adverse Effect). "Material Adverse Effect"
means, when used in connection with the Company, any development, change or
effect that is materially adverse to the business, properties, assets, net
worth, financial condition, results of operations or future prospects (including
without limitation, future equity value) of the Company and its Subsidiaries
taken as a whole.
Section 3.2. Capitalization of the Company.
--------------------------------
(a) After giving effect to the Fifth Amendment, on the date hereof (i) the
Company's authorized capital stock consists of: (A) 60,000,000 shares of Common
Stock, of which 9,781,814 shares are issued and outstanding and (B) 5,000,000
shares of "blank check" preferred stock, $.01 par value per share, of which (1)
7,000 shares have been designated Series G Convertible Exchangeable Preferred
Stock, all of which shares were exchanged for 8% convertible subordinated notes
of the Company on July 23, 1999 and (2) 4,000 shares have been designated Series
H Convertible Preferred Stock and (ii) the Company has outstanding the
securities set forth on Schedule 3.2 attached hereto which are convertible into
or exercisable or exchangeable for Depositary Shares (the "Derivative
Securities").
(b) All the issued and outstanding shares of capital stock of the Company
are validly issued, fully paid, non-assessable, free of preemptive and similar
rights and have been offered, issued, sold and delivered by the Company in
transactions in compliance with the applicable federal, state and foreign
securities laws. Other than as set forth in Schedule 3.2 attached hereto, there
are no outstanding agreements or commitments requiring the Company to issue
capital stock or Derivative Securities as of the date hereof.
Section 3.3. Authorization; Binding Obligations.
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(a) The Company has full power and authority to execute and deliver this
Fifth Amendment, the Series H Preferred Stock, the Fifth Amendment Warrants and
such other documents furnished or to be furnished by the Company hereunder.
This Fifth Amendment has been duly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
The issuance, offering and sale of the Series H Preferred Stock and the Fifth
Amendment Warrants pursuant to this Fifth Amendment and the compliance by the
Company with the provisions of this Fifth Amendment, the Series H Preferred
Stock and the Fifth Amendment Warrants, and the consummation of the other
transactions herein contemplated, will not result in the creation or imposition
of any lien, charge, security interest or encumbrance upon any of the assets of
the Company pursuant to the terms or provisions of, or result in a breach or
violation of or conflict with any of the terms or provisions of, or constitute a
default under, or give any other party a right to terminate any of its
obligations under, or result in the acceleration of any obligation under, (i)
the Certificate of Incorporation and Bylaws of the Company, (ii) any contract or
other agreement to which the Company is a party or by which the Company or any
of its properties is bound (other than agreements with Alpharma which shall
terminate on the date hereof) or (iii) any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or body,
domestic or foreign, applicable to the business or properties of the Company,
except, with respect to clauses (ii) and (iii), circumstances that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) All of the shares of Series H Preferred Stock to be issued under
this Fifth Amendment have been duly authorized and when issued and delivered in
accordance with the Fifth amendment will be validly issued, fully paid,
non-assessable, free of preemptive and similar rights and will be offered,
issued, sold and delivered by the Company in transactions in compliance with the
applicable federal, state and foreign securities laws.
(c) The Fifth Amendment Warrants have been duly authorized for issuance and
the Depositary Shares issuable upon exercise of the Fifth Amendment Warrants
have been duly authorized and reserved for issuance and (i) the Initial Fifth
Amendment Warrants being delivered on the date hereof have been, and the
Additional Fifth Amendment Warrants being delivered after the date hereof, when
delivered, will have been, duly executed and delivered by the Company in
accordance with this Fifth Amendment and will constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity, (ii) the Fifth Amendment Warrants
will be exercisable for Depositary Shares in accordance with their terms, and
(iii) the Depositary Shares issuable upon exercise of the Fifth Amendment
Warrants, when issued and delivered in accordance with the provisions of the
Fifth Amendment Warrants, will be duly authorized, validly issued, fully paid,
nonassessable and free of preemptive and similar rights.
Section 3.4. Compliance with Instruments, etc. Except as set forth on
-----------------------------------
Schedule 3.4 hereto, the Company is not in breach or violation of, or in default
under, any term or provision of (i) its Certificate of Incorporation and Bylaws,
(ii) any indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note agreement, debt instrument or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
property is subject, the effect of which breach, violation or default,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect other than agreements with Alpharma which shall
terminate on the date hereof, or (iii) any statute, judgment, decree, order,
rule or regulation applicable to the Company or of any arbitrator, court,
regulatory body, administrative agency or any other governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
respective activities or properties and the effect of which breach, violation or
default, individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect.
Section 3.5. Litigation. Except as set forth on Schedule 3.5 hereto, there
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are no actions, suits, proceedings or investigations pending, or, to the
knowledge of the Company, threatened, against the Company before or by any
court, regulatory body or administrative agency or any other governmental agency
or body, domestic or foreign, which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, or any actions, suits,
proceedings or investigations pending, or, to the knowledge of the Company,
threatened, which challenge the validity of any action taken or to be taken
pursuant to or in connection with this Fifth Amendment or the issuance of the
Series H Preferred Stock or the Fifth Amendment Warrants and the Depositary
Shares issuable upon the conversion or exercise thereof which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. As it pertains to the Company, when used herein, the phrases
"to the knowledge of" or derivatives thereof shall mean the actual knowledge of
the Chief Executive Officer of the Company.
Section 3.6. Offering. Subject to the Purchasers' representations and
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warranties in Article IV of this Fifth Amendment, the offer, sale and issuance
of the Series H Preferred Stock and the Fifth Amendment Warrants as contemplated
by this Fifth Amendment are not subject to the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and neither the
Company nor anyone acting on its behalf, has taken or will take any action that
would cause such registration requirements to be applicable.
Section 3.7. Permits; Governmental and Other Approvals. Other than pursuant
-----------------------------------------
to agreements with Alpharma which shall terminate on the date hereof, no
approval, consent, authorization or other order of, and no designation, filing,
registration, qualification or recording with, any governmental authority,
domestic or foreign, is required for the Company's performance of this Fifth
Amendment or the consummation by the Company of the transactions contemplated
hereby except for the filing of a Form D under the Securities Act and the filing
of a Form 8-K under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
Section 3.8. Subsidiaries. The Company has no subsidiaries and owns no
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securities of other corporations or entities other than short-term money market
investments.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers hereby represents and warrants to the Company that
(i) it is an "accredited investor" as that term is defined in Rule 501(a)
promulgated under the Securities Act, (ii) it has the requisite knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks of an investment in the Company, (iii) it has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management, (iv) it is acquiring, directly or indirectly, the
Series H Preferred Stock and the Fifth Amendment Warrants and the Depositary
Shares issuable upon the exercise thereof for investment for its own account and
not with a view to, or for resale in connection with, any distribution thereof;
nor with any present intention of distributing or selling the same; and, except
as contemplated by the Series G Purchase Agreement or this Fifth Amendment or
the Series H Certificate of Designation, Investments has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof, (v) it is not in material
breach or violation of, or in default under, any term or provision of (A) its
organizational and governing documents, (B) any indenture, mortgage, deed of
trust, voting trust agreement, stockholders, partners or members agreement, note
agreement or other agreement or instrument to which it is a party or by which it
is or may be bound or to which any of its property is or may be subject, or (C)
any statute, judgment, decree, order, rule or regulation applicable to
Investments or of any arbitrator, court, regulatory body, administrative agency
or any other governmental agency or body, domestic or foreign, having
jurisdiction over Investments or any of its activities or properties, (vi) it
understands that the Series H Preferred Stock and the Fifth Amendment Warrants
and the Depositary Shares issuable upon the exercise thereof have not been
registered under the Securities Act and it will not, directly or indirectly,
offer, sell, transfer, pledge, hypothecate or otherwise dispose of any of the
Series H Preferred Stock or the Fifth Amendment Warrants or the Depositary
Shares issuable upon the exercise thereof except pursuant to an exemption from,
or otherwise in a transaction not subject to, the registration requirements of
the Securities Act or pursuant to an effective registration statement under the
Securities Act, and, in each case, in accordance with any applicable state
securities or "blue sky" laws and (viii) it understands that the Series H
Preferred Stock and the Fifth Amendment Warrants and any certificates
representing the Depositary Shares issuable upon the exercise thereof and any
other securities issued in respect of such securities upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required under other applicable securities
laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Investments further represents that (i) it has full power and authority to
execute, deliver and perform this Fifth Amendment, (ii) the person executing
this Fifth Amendment on behalf of Investments has the appropriate authority to
act on behalf of Investments, (iii) this Fifth Amendment has been duly
authorized, executed and delivered by Investments and constitutes a legal, valid
and binding agreement of Investments, enforceable against Investments in
accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general principles of equity, and (iv) it has not employed any broker or
finder in connection with the transactions contemplated by this Fifth Amendment.
To the best of its knowledge, Investments acknowledges receipt of, and the
opportunity to review, the information that it believes necessary to make an
investment in the Series H Preferred Stock and the Fifth Amendment Warrants and
the Depositary Shares issuable upon the exercise thereof.
ARTICLE V
AMENDMENTS TO THE SERIES G PURCHASE AGREEMENT
Section 5.1. Agreement of Furman Selz Entities. Investments, by its
-----------------------------------
execution of this Fifth Amendment, hereby joins in and agrees to be bound by and
subject to the provisions of Articles VII, VIII, X, XI, XIV, XV, XVI and XVII of
the Series G Purchase Agreement, all as amended from time to time in accordance
with Article XIV of the Series G Purchase Agreement, as a Purchaser or a Holder
thereunder, with respect to the Series H Preferred Stock and the Fifth Amendment
Warrants issued or issuable to Investments and the Depositary Shares issued or
issuable upon exercise thereof.
Section 5.2. Definitions. For purposes of Articles VII, VIII, X, XI, XIV,
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XV, XVI and XVII of the Series G Purchase Agreement: (a) the term "Preferred
Stock" shall hereby be amended to include the Series H Preferred Stock; (b) the
term "Warrants" shall hereby be amended to include the Fifth Amendment Warrants;
(c) the term "Warrant Shares" shall hereby be amended to include the Depositary
Shares issued or issuable upon exercise of the Fifth Amendment Warrants; and (d)
the term "Securities" shall hereby be amended to include the Series H Preferred
Stock and the Fifth Amendment Warrants.
Section 5.3 Amendments to the Negative Covenants. Effective from the date
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hereof, until such time as no indebtedness is outstanding under the Loan
Agreement and no shares of Series H Preferred Stock are outstanding, (i)
Sections 8.1 through Section 8.13 of the Series G Purchase Agreement are hereby
amended by deleting in its entirety the text thereof and inserting in lieu
thereof Sections 7.1 through 7.13 of the Loan Agreement renumbered as Section
8.1 through Section 8.13 accordingly and (ii) Section 8.15 of the Series G
Purchase Agreement is hereby amended by deleting in their entirety the text of
all defined terms set forth therein and inserting in lieu thereof the
definitions contained in Section 1.1 of the Loan Agreement as necessary for the
interpretation of Sections 8.1 through 8.13 of the Loan Agreement included in
the Fifth Amendment. Upon repayment of all outstanding indebtedness under the
Loan Agreement and redemption of all shares of Series H Preferred Stock, Article
VIII of the Series G Purchase Agreement shall be amended in its entirety by
deleting the text thereof and inserting in lieu thereof the text of Article VIII
of the Series G Purchase Agreement as of May 13, 1998.
Section 5.4 Amendments to Events of Defaults. Effective from the date
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hereof until such time as no indebtedness is outstanding under the Loan
Agreement and no shares of Series H Preferred Stock are outstanding, Section
13.1 of the Series G Purchase Agreement is amended by deleting the text thereof
and inserting in lieu thereof the following:
13.1 EVENTS OF DEFAULT8.1 Events of Default. An "Event of Default"
occurs if:
(a) the Company defaults in the payment of interest on the Note when the
same becomes due and payable and such default continues for a period of 5
Business Days;
(b) the Company defaults in the payment of the principal of the Note when
the same becomes due and payable at the Maturity Date, upon acceleration or
otherwise or the Company defaults in the payment of the Redemption Price of the
Series H Preferred Stock when due in accordance with the Series H Certificate of
Designations;
(c) the Company defaults in the performance of any covenants under Article
VIII of this Agreement;
(d) the Company fails to comply with any of the provisions of this Agreement
(other than Article VIII) and such failure continues for 20 Business Days after
notice specified in the penultimate paragraph of this Section 13.1 (the "Default
Notice") without cure (the Company to give forthwith to all other holders of the
Notes at the time outstanding written notice of receipt of such Default Notice
specifying the default referred to therein);
(e) the Company defaults in payment on Borrowed Money Indebtedness (giving
effect to any applicable grace periods and any extensions thereof) of at least
$700,000 principal amount;
(f) there has been an acceleration of the final stated maturity of any
Borrowed Money Indebtedness of the Company (which acceleration shall not have
been cured, waived, rescinded or annulled for 10 Business Days) if the aggregate
principal amount of such Borrowed Money Indebtedness, together with the
principal amount of any other such Borrowed Money Indebtedness in default for
failure to pay principal at maturity or which has been accelerated, aggregates
$700,000 or more at any time;
(g) any representation or warranty of the Company under this Agreement shall
prove to have been incorrect in any material respect when made;
(h) there exists an outstanding unsatisfied final judgment which, either
alone or together with other outstanding unsatisfied final judgments against the
Company, exceeds an aggregate of $200,000 (to the extent not covered by
insurance) and such judgment shall have continued undischarged or unstayed for
20 Business Days after entry thereof;
(i) the Company, pursuant to or within the meaning of any Bankruptcy
Law:
(i) commenced a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case;
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property; or
(iv) makes a general assignment for the benefit of its creditors; or
(j) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company in an involuntary case;
(ii) appoints a custodian of the Company for all or substantially all of its
property; or
(iii) orders the liquidation of the Company, and the order or decree remains
unstayed and in effect for 90 consecutive days.
A default under paragraph (d) of this Section 13.1 is not a default unless the
holders of at least eighty percent (80%) of the aggregate principal amount then
outstanding under the Notes notify the Company of the default and the Company
does not cure the default within twenty (20) days after receipt of such notice.
The notice must specify the default and demand that it be remedied.
A "Business Day" means any day which is neither a Saturday nor a Sunday nor a
legal holiday on which banks are authorized or required to close in Boston,
Massachusetts or New York, New York. A "Default" means any of the events
specified in this Section 13.1, regardless of whether there shall have occurred
any passage of time or giving notice or both that would be necessary in order to
constitute such Event of Default.
Upon repayment of all outstanding indebtedness under the Loan Agreement and
redemption of all shares of Series H Preferred Stock, Section 13.1 of the Series
G Purchase Agreement shall be amended in its entirety by deleting the text
thereof and inserting in lieu thereof the text of Section 13.1 of the Series G
Purchase Agreement as of May 13, 1998.
Section 5.5. Effectiveness of Amendments.
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(a) Section 3.13 of the Fourth Amendment is amended by deleting the text
thereof.
(b) Upon repayment of all outstanding indebtedness under the Loan Agreement
and redemption of all shares of Series H Preferred Stock, any Default or Event
of Default due to the existence of circumstances which would not have
constituted a Default or Event of Default immediately prior to such repayment
and redemption are hereby waived.
Section 5.6. Conversion. Section 12.4 of Article XII is hereby amended by
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(i) deleting the word "and" following clause (iv), (ii) deleting the period
following clause (v) and inserting in lieu thereof a semicolon followed by the
word "and" and (iii) adding as a new clause (vi) the following:
"(v) the Fifth Amendment Warrants and the securities issued or issuable upon
conversion or exercise thereof."
ARTICLE VI
OTHER AGREEMENTS, WAIVERS AND CONSENTS
Section 6.1 Consent to Issuance of the Fifth Amendment Warrants. The
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Purchasers hereby consent, in all respects under the Series G Purchase
Agreement, including, without limitation, under Sections 8.1 and 8.7, to the
consummation of the transactions contemplated by this Fifth Amendment,
including, without limitation: (i) the issuance of the Fifth Amendment Warrants
and (ii) the shares of Series H Preferred Stock issuable under this Fifth
Amendment.
Section 6.2. Rights of First Refusal. The Purchasers hereby waive any
--------------------------
rights of first refusal held by the Purchasers under Section 7.7 of the Series G
Purchase Agreement which were, are or may be applicable to (i) the issuance of
the Fifth Amendment Warrants and the Depositary Shares issuable upon the
exercise thereof and (ii) the shares of Series H Preferred Stock issuable under
this Fifth Amendment, and Investments hereby confirms its agreement to the
waivers of rights of first refusal previously made by the Purchasers.
Section 6.3. Antidilution Adjustment. (a) The Purchasers hereby agree that
-----------------------
no adjustment shall be made to the Conversion Price of the Convertible Notes
under Section 12.4 of the Purchase Agreement with respect to the issuance of the
Fifth Amendment Warrants and the Depositary Shares issuable upon the exercise
thereof.
(b) The Warrant Price of the Warrants, (as defined in such Warrants) shall
be reduced from $3.00 per share to five cents ($0.05) per Warrant Share, subject
to further adjustment in accordance with the terms of the Warrants.
Section 6.4 Strategic Transaction. Promptly following the date hereof, the
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Company shall seek to engage an investment bank to assist the Company in
consummating a strategic transaction with a third party. Such investment bank
shall be subject to the approval of the Furman Selz Entities, which approval
shall not be unreasonably withheld. In consideration for the assistance of the
Furman Selz Entities in consummating such a strategic transaction, at the time
Ascent pays the investment bank its success fee in connection with the
consummation of the strategic transaction, it shall pay to the Furman Selz
Entities $3,000,000.
ARTICLE VII
MISCELLANEOUS
Section 7.1. The Series G Purchase Agreement. Except as amended by
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this Fifth Amendment, the Series G Purchase Agreement shall remain in full force
and effect in accordance with its terms. This Fifth Amendment shall be deemed
to be included in the Series G Purchase Agreement as defined above.
Section 7.2. Governing Law. The rights and obligations of the parties
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under or pursuant to this Fifth Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
Section 7.3. Expenses. The Company will pay all reasonable legal fees and
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disbursements of counsel for Investments incurred with respect to the
negotiation, execution and consummation of this Fourth Amendment and the
transactions contemplated by this Fifth Amendment.
Section 7.4. References to Series G Purchase Agreement. Whenever in any
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certificate, letter, notice or other instrument reference is made to the Series
G Purchase Agreement, such reference without more shall include this Fifth
Amendment.
Section 7.5. Amendments to Alpharma Agreements. The Purchasers (and
------------------------------------
permitted assignees of the Purchasers) in accordance with Article XIV of the
Series G Purchase Agreement hereby consent to the terms of the Termination
Agreement by and between Alpharma and the Company dated December 29, 2000,
including, without limitation, the termination or amendment of the Alpharma Loan
Document and the Ancillary Agreements as set forth therein.
Section 7.6. Counterparts. This Fifth Amendment may be executed
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simultaneously in counterparts, each of which shall be deemed an original, and
it shall not be necessary in making proof of the contents of this Fifth
Amendment to produce or account for more than one such counterpart.
Section 7.7. Effectiveness. This Fifth Amendment to the Series G Purchase
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Agreement shall be effective on the date hereof.
IN WITNESS WHEREOF this Fifth Amendment has been executed by duly authorized
representatives of the parties hereto on the day, month and year first above
written.
ASCENT PEDIATRICS, INC.
By: /s/ Emmett Clemente
---------------------
Name: Emmett Clemente
Title: Chief Executive Officer
FURMAN SELZ INVESTORS II L.P.
FS EMPLOYEE INVESTORS LLC
FS PARALLEL FUND L.P.
By: FS PRIVATE INVESTMENTS LLC,
MANAGER
By: /s/ James Luikart
--------------------
Name: James L. Luikart
Title: Managing Member
BANCBOSTON VENTURES INC.
By: /s/ Marcia T. Bates
Name: Marcia T. Bates
Title: Managing Director
FLYNN PARTNERS
By: /s/ James E. Flynn
----------------------
Name: James E. Flynn, General Partner
Flynn Partners
FS ASCENT INVESTMENTS LLC
By: FS PRIVATE INVESTMENTS, LLC,
MANAGER
/s/ James Luikart
- --------------------
Name: James L. Luikart
Title: Managing Member
EXHIBIT A
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Series H Certificate of Designation
EXHIBIT B
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Form of Fifth Amendment Warrant
EXHIBIT C
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FORM OF NOTICE OF PURCHASE
Reference is made to Fifth Amendment dated as December ___, 2000 by and
among Ascent Pediatrics, Inc. (the "Company") and the Purchasers named therein
(including all annexes, exhibits and schedules thereto, and as from time to time
amended, restated, supplemented or otherwise modified, the "Fifth Amendment").
Capitalized terms used herein without definition are so used as defined in the
Fifth Amendment.
The Company hereby gives irrevocable notice, pursuant to Section 2.1(c) of the
Fifth Amendment, that it requests that Investments purchase Additional Shares
under the Fifth Amendment and in that connection sets forth below the terms on
which such purchase is requested to be made:
(A) Purchase Date
(which is a Business Day)
__________________________________________________
(B) Purchase Price
___________________________________________________________
(C) Number of Additional Shares to be Purchased
__________________________________
(D) Funds are requested to be disbursed
to the Company account with _______________________________________________
Account No. _________________________