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EXECUTION COPY
ASCENT PEDIATRICS, INC.
SUPPLEMENTAL AGREEMENT
DATE: JULY 1, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS, ETC................................................... 2
ARTICLE II
AMOUNT AND TERMS OF SECURITIES..................................... 3
ARTICLE III
ADDITIONAL CONDITIONS OF OBLIGATIONS OF THE LENDER................. 3
ARTICLE IV
COVENANTS OF THE COMPANY........................................... 4
ARTICLE V
ADDITIONAL REPRESENTATIONS OF THE COMPANY.......................... 5
ARTICLE VI
OTHER AMENDMENTS................................................... 5
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SUPPLEMENTAL AGREEMENT (the "Agreement") dated as of July 1, 1999 among
Ascent Pediatrics, Inc., a Delaware corporation (the "Company"), Alpharma USPD
Inc., a Maryland corporation (the "Lender"), and Alpharma Inc., a Delaware
corporation (the "Parent"), State Street 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;
WHEREAS, the Lender, the Company and the Depositary are parties to a
Depositary Agreement dated February 16, 1999 (the "Depositary Agreement");
WHEREAS, the Lender, the Company and the Original Purchasers named therein
are parties to a Subordination Agreement dated February 16, 1999 (the
"Subordination Agreement");
WHEREAS, the Company, the Lender and the Parent are parties to a Master
Agreement dated February 16, 1999 (the "Master Agreement");
WHEREAS, the parties wish to supplement and amend the Loan Agreement, the
Depositary Agreement, the Master Agreement and the Subordination 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 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 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:
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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 and
the Master 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 or the Master 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 and the Master Agreement shall remain in full force and
effect. Without limiting the foregoing, (a) the conditions set forth in Article
III hereof shall for all purposes be considered part of Section 4.2 or 4.3 of
the Loan Agreement, as applicable; (b) the representations set forth in Article
V hereof shall for all purposes be considered part of Article III of the Loan
Agreement; and (c) the covenants set forth in Sections 6.5 and 6.7 and Article
IV hereof shall for all purposes (including defining Defaults and Events of
Default) be considered part of Article VI of the Loan Agreement. Any reference
in the Loan Agreement, the Depositary Agreement, the Master Agreement, the
Guaranty Agreement or the Subordination Agreement to 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 principles of conflicts of laws, shall govern this Agreement
to the extent it modifies the Depositary Agreement or the Master Agreement.
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ARTICLE II
AMOUNT AND TERMS OF SECURITIES
2.1 In addition to its obligations under Section 2.3(a) of the Loan
Agreement, with respect to any Project Loan or Screened Project Loan, the
Company shall, on the date required by such Section, deliver a Notice of
Borrowing to each member of the Screening Committee (as defined herein) and to
the Lender.
2.2 In addition to the requirements under 2.3(b) of the Loan Agreement,
each Notice of Borrowing shall describe the proposed use of proceeds, and shall
provide sufficient information to allow the Lender and the Screening Committee
to reasonably determine that the proceeds of the requested Loan will be used as
required by Section 4.1 or 4.3 of this Agreement.
ARTICLE III
ADDITIONAL CONDITIONS OF OBLIGATIONS OF THE LENDER
The obligation of the Lender to make any Loans on or after the date
hereof, including the first Unrestricted Loan, 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 Third Amendment to the May 1998 Securities Purchase
Agreement in the form attached hereto as Exhibit A (the "Investment Agreement")
shall be in full force and effect.
(b) The Xxxxxx Xxxx Entities (as defined in the Investment
Agreement) shall have invested $2,000,000 in the Company in exchange for 7.5%
Convertible Subordinated Notes due July 1, 2004 (the "New Notes") as required by
the Investment Agreement and such other amounts as may be required from time to
time pursuant to the Investment Agreement; the Company and each Xxxxxx Xxxx
Entity shall have performed in all material respects all of their respective
obligations under the Investment Agreement.
(c) The Lender shall be reasonably satisfied that the proceeds of
any Unrestricted Loans being made will be used as set forth in Section 4.1 of
this Agreement and that the proceeds of any Project Loans or Screened Project
Loans will be used for the purposes approved by the Screening Committee pursuant
to Section 4.3 of this Agreement.
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ARTICLE IV
COVENANTS OF THE COMPANY
Subject to Section 6.10 of the Loan Agreement, the Company hereby
covenants and agrees that prior to the Option Expiration Date:
4.1 The Lender agrees that the Company delivered to the Lender on or about
May 19, 1999 a detailed operating plan (designated the 1999 P-1 plan) covering
the period ending December 31, 2001 (the "Plan"). Not later than the first day
of each calendar month, the Company shall notify the Lender in writing of any
material changes to the Plan or to the assumptions underlying the Plan (each
such notification, an "Update"). 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 or any Update; provided, however that the Company
shall not make any expenditures that are (in the aggregate) materially in excess
of those contemplated by the Plan (or by any Update that has previously received
Screening Committee Approval (as defined below)) unless such expenditures shall
have received Screening Committee Approval. Prior to the date (the "Final Launch
Date") on which (i) the FDA has granted marketing approval to the Company for
both Primsol and the Orapred refrigerated product and (ii) both of such products
have been commercially launched by the Company, the Plan and any Updates, shall
contemplate only normal operating expenses of the Company, and expenses related
to Primsol and the Orapred refrigerated product and any other purpose that
receives Screening Committee Approval. Prior to the Final Launch Date, the
Company shall not use the proceeds of Unrestricted Loans, any amounts received
pursuant to the Investment Agreement or any other available funds (other than
Project Loans or Screened Project Loans that receive Screening Committee
Approval) for any other purpose, including, without limitation, any purpose
related to Pediavent or the Orapred non-refrigerated product (other than as
reflected in the Plan but not any Update).
4.2 The Company and the Lender hereby form a committee under this
agreement (the "Screening Committee"), consisting of two nominees of the Company
(who together shall have one vote), one nominee of the Lender (who shall have
one vote) and one nominee of the Xxxxxx Xxxx Entities as a group (who shall have
one vote). The initial nominees of the Company shall be the Chairman and the
President and Chief Executive Officer of the Company. Vacancies on the Screening
Committee shall be filled by the Company, the Lender or the Xxxxxx Xxxx
Entities, as applicable. The Screening Committee is not a committee of the
Company or of the Board of Directors. The nominee of Alpharma shall have no duty
to protect the interests of the Company, its stockholders or any of its
creditors other than the Lender. The nominees of the Company and the Xxxxxx Xxxx
Entities shall have no duty to protect the interests of the Lender.
4.3 Except as provided in Section 4.1, the Company shall not (a) use any
funds for any Project or (b) enter into commitments or agreements with respect
to any Project, unless in each case such action has received Screening Committee
Approval. Notwithstanding Section 6.6 of the Loan Agreement, the Company shall
use the proceeds of any Project Loan or Screened Project Loan only for purposes
that have received Screening Committee Approval. Prior to the
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Final Launch Date, "Screening Committee Approval" means approval by all three
votes on the Screening Committee. On and after the Final Launch Date, "Screening
Committee Approval" means approval by two of the three votes on the Screening
Committee. The Screening Committee may, in its discretion, refuse to give
Screening Committee Approval to any Project or other action.
ARTICLE V
ADDITIONAL REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Lender that the Plan, each
operating budget or business plan required by the Loan Agreement to be delivered
and each Update required by this Agreement to be delivered is or will be based
on underlying assumptions of the Company which provide a reasonable basis for
the projections contained therein and which the Company reasonably believes are
fair and reasonable in light of the historical financial performance of the
Company and of current and reasonably foreseeable business conditions (based
upon the good faith best judgment in respect thereof of the Chief Executive
Officer of the Company).
ARTICLE VI
OTHER AMENDMENTS
6.1 The definition of the term "Option Expiration Date" in the Depositary
Agreement is amended by adding the following text to the end of such definition:
"or Article III of the Supplemental Agreement dated as of July 1,
1999 among the Company, Alpharma, Alpharma Inc., State Street Bank
and Trust Company and the other parties named on the signature pages
thereof (including, without limitation, the failure of such
condition due to the lack of Screening Committee Approval (as
defined in such agreement))."
6.2 Clause (Y) of the proviso in the definition of the term "Option
Exercise Price" in the Depositary Agreement is amended and restated in its
entirety as follows:
"(Y) with respect to each Depositary Share (the "Series G Shares")
issued or issuable upon conversion of the (I) the Series G
Preferred, (II) any convertible notes issuable upon exchange of the
Series G Preferred or (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 third
amendment thereto, dated as of July 1, 1999 (to the extent any such
shares continue to be held as of the Option Closing Date by one of
the purchasers set forth on Schedule
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1 to the Series G Agreement as so amended or an Affiliate of any
such purchasers), the Original Option Exercise Price; and"
6.3 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 shall be considered to be equity for purposes of this clause
only;"
6.4 The Loan Agreement is hereby amended to amend and restate the
definition of "Negative Equity Position" in its entirety as follows:
"'Negative Equity Position' means the existence of a stockholders'
deficit on the Company's balance sheet, determined in accordance
with GAAP, as of (i) the last day of any monthly fiscal period or
(ii) if so requested by the Lender or the Original Lenders (as
defined in the Subordination Agreement) at any time when the maximum
amount of Unrestricted Loans is outstanding, the latest practicable
date."
6.5 The Lender consents to the Company entering into the Investment
Agreement and consummating the transactions contemplated thereby. Subject to
Section 6.10 of the Loan Agreement, the Company hereby covenants and agrees that
any amendment to the Investment Agreement or the New Notes shall require the
consent of the Lender.
6.6 Section 7.1 of the Loan Agreement is hereby amended to add a new
subsection (i) to read as follows:
"(i) Indebtedness incurred pursuant to the Third Amendment to the
May 1998 Securities Purchase Agreement."
6.7 Subject to Section 6.10 of the Loan Agreement, the Company hereby
covenants and agrees that (a) all amounts required to be invested in the Company
from time to time pursuant to the Investment Agreement shall be so invested, (b)
the Company shall not make any payments on the 8% Subordinated Notes, the
convertible notes issuable pursuant to the May 1998 Securities Purchase
Agreement or the New Notes except pursuant to their terms on the date hereof.
6.8 The Subordination Agreement is hereby amended to include the New Notes
in the definition of "Xxxxxx Notes."
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6.9 The Subordination Agreement is hereby amended to add the following
sentence to the end of Section 2.1:
"To the extent the Company makes any payment of principal or
interest on the Xxxxxx Notes in contravention of this paragraph, the
Original Lenders shall promptly repay such amounts to the Company."
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above set forth.
ASCENT PEDIATRICS, INC.
By: /s/ Xxxx X. Xxx
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Name: Xxxx X. Xxx
Title: President and Chief Executive
Officer
ALPHARMA USPD INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: President
ALPHARMA INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Vice President, Finance
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title: Vice President
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ORIGINAL LENDERS:
XXXXXX XXXX INVESTORS II L.P.
FS EMPLOYEE INVESTORS L.L.C.
FS PARALLEL FUND L.P.
By: FS PRIVATE INVESTMENTS LLC
MANAGER
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Managing Member
BANCBOSTON VENTURES INC.
By:
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Name:
Title:
XXXXX PARTNERS
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: General Partner
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