Ascent Pediatrics, Inc.
Maximum $6,250,000
7.5% Notes Due December 31, 2001
Loan Agreement
Date: December 29, 2000
ii
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 Definitions
1.2 Rules of Construction
ARTICLE II
AMOUNT AND TERMS OF NOTES
2.1 Commitment to Lend; Loans
2.2 Evidence of Debt
2.3 Making of Loans
2.4 Interest and Principal Payments
2.5 Mandatory Prepayment upon Change in Control
2.6 Mandatory Prepayment Upon Demand
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Existence, etc.
3.2 Capitalization
3.3 Authorization; Binding Obligations
3.4 Compliance with Instruments, etc.
3.5 Litigation
3.6 Offering
3.7 Permits; Governmental and Other Approvals
3.8 Form 10-K and 10-Q
3.9 Priority
ARTICLE IV
CONDITIONS OF OBLIGATIONS OF THE LENDER
4.1 Conditions to Lender's Obligations on the First Loan Date
4.2 Conditions Precedent to Each Loan
4.3 Cooperation
ARTICLE V
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE COMPANY
6.1 Use of Proceeds
6.2 Further Assurances
6.3 Termination
6.4 Strategic Transaction
ARTICLE VII
NEGATIVE COVENANTS
7.1 Borrowed Money Indebtedness
7.2 Liens
7.3 Contingent Liabilities
7.4 Mergers, Consolidations and Dispositions and Acquisitions of Assets
7.5 Redemption, Dividends and Distributions
7.6 Nature of Business
7.7 Transactions with Related Parties
7.8 Loans and Investments
7.9 Organizational Documents
7.10 Lease Expenses; Purchase Money Indebtedness
7.11 Sale/Leasebacks
7.12 Issuance of Stock
7.13 Subsidiaries
7.14 Termination
ARTICLE VIII
DEFAULTS AND REMEDIES
8.1 Events of Default
8.2 Acceleration
8.3 Other Remedies
8.4 Waiver of Past Defaults
ARTICLE IX
RESTRICTIONS ON TRANSFER
9.1 Securities Laws Restrictions on Transfer
9.2 Restrictive Legend
9.3 Additional Restrictions
ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
10.1 With Consent of Holders of the Note
ARTICLE XI
MISCELLANEOUS
11.1 Notices
11.2 Duplicate Originals
11.3 Governing Law
11.4 No Adverse Interpretation of Other Agreements
11.5 Successors and Assigns
11.6 Separability
11.7 Headings, etc.
11.8 Confidentiality
11.9 Lender Representations and Warranties
LOAN AGREEMENT (the "Agreement") dated as of December 29, 2000 among ASCENT
PEDIATRICS, Inc., a Delaware corporation (the "Company"), and FS ASCENT
INVESTMENTS LLC, a Delaware limited liability company (the "Lender").
WHEREAS, the Lender has agreed to loan to the Company an aggregate of up to
$6,250,000 from time to time upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, it is agreed by and among
the parties hereto as follows:
ARTICLE IARTICLE I1DEFINITIONS AND INCORPORATION BY REFERENCEDEFINITIONS AND
INCORPORATION BY REFERENCE
1.1 DEFINITIONS1.1 Definitions .
"Affiliate" shall have the meaning ascribed to it in Rule 405 promulgated under
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the Securities Act.
"Alpharma" means Alpharma USPD Inc., a Maryland corporation.
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"Approved Accounting Firm" shall have the meaning set forth in Section 6.1(a) of
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this Agreement.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or State law
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for the relief of debtors. The term "Custodian" means any receiver trustee,
assignee, liquidator or similar official under any Bankruptcy Law.
"Board of Directors" means the Board of Directors of the Company or any
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committee of the Board authorized to act for it hereunder.
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"Borrowed Money Indebtedness" means, with respect to any Person, without
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duplication:
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(a) all obligations of such Person for borrowed money;
(b) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments;
(c) all obligations of such Person under conditional sale or other title
retention agreements relating to Property purchased by such Person;
(d) all obligations of such Person issued or assumed as the deferred
purchase price of Property or services (excluding obligations of such Person to
creditors for raw materials, inventory, services and supplies and deferred
payment for services to employees and former employees incurred in the ordinary
course of such Person's business);
(e) all capital lease obligations;
(f) all obligations of others secured by any Lien on Property or assets
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed;
(g) all outstanding letters of credit, surety bonds and currency swap or
similar agreements issued for the account of such Person; and
(h) all guarantees of such Person for obligations of the type described
above.
"Business Day" means any day which is neither a Saturday nor a Sunday nor a
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legal holiday on which banks are authorized or required to be closed in Boston,
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Massachusetts or New York, New York.
"Capital Stock" means any and all shares, interests, participations or other
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equivalents of or interests in (however designated) equity of the Company,
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including any preferred stock, but excluding any debt securities convertible
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into such equity prior to such conversion.
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"Change in Control or Sale" of the Company means:
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(a) the acquisition by any Person or "group" within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding, for this purpose,
the Company or its Subsidiaries, any employee benefit plan of the Company or its
Subsidiaries which acquires beneficial ownership of voting securities of the
Company, or the Lender or its Affiliates) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of
the aggregate voting power of all classes of outstanding Voting Capital Stock
that are then outstanding or that are issuable upon the conversion or exercise
of convertible securities, options, warrants or rights of the Company that are
then outstanding; provided that any voting securities acquired directly from the
Company by an underwriter of the Company as part of an underwritten public
offering of Capital Stock of the Company shall not be deemed to be beneficially
owned by such underwriter for purposes of determining whether a Change in
Control or Sale has occurred;
(b) Persons who constitute all of the Directors of the Company, as of the
Closing Date, cease, for any reason, to constitute at least a majority of
Directors then in office, provided that any Person becoming a director
subsequent to the Closing Date whose election or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
incumbent Directors shall be considered as though such Person were one of the
incumbent Directors as of the Closing Date, provided, however, that there shall
be excluded from this clause (b) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of Directors or other actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents, by or on behalf of a
Person other than the Board of Directors;
(c) the consummation of a reorganization, merger or consolidation involving
the Company, if the stockholders of the Company beneficially owning 100% of the
aggregate voting power of all classes of Voting Capital Stock that are then
outstanding or that are issuable upon conversion or exercise of convertible
securities, options, warrants or rights that are then outstanding immediately
prior to such reorganization, merger, or consolidation do not, immediately
thereafter, beneficially own more than 50% of the aggregate voting power of all
classes of Voting Capital Stock that are then outstanding or issuable upon
conversion or exercise of convertible securities, options, warrants or rights
that are then outstanding; or
(d) a liquidation or dissolution of the Company (other than pursuant to the
United States Bankruptcy Code) or the conveyance, transfer or leasing of all or
substantially all of the assets of the Company to any Person (it being
understood that any conveyance, transfer or leasing of assets of the Company
which is submitted for the approval of the stockholders of the Company shall be
deemed to be of all or substantially all of the assets of the Company).
"Closing Date" means January 2, 2001.
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"Collateral" has the meaning set forth in the Security Agreement.
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"Common Stock" means the New Common Stock.
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"Company" means the party named as such in the recitals until a successor
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replaces it pursuant to the applicable provision hereof and thereafter means the
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successor to such party.
"Default" means any event which is, or after notice or passage of time or both
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would be, an Event of Default (as defined in Article VIII of this Agreement).
"Demand Date" means June 30, 2001, subject to extension in accordance with
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Section 2.2 of the Fifth Amendment.
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"Depositary Agreement" means the Depositary Agreement dated as of February 16,
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1999 by and among the Company, Alpharma USPD Inc. and State Street Bank and
Trust Company, as Depositary, as amended.
"Derivative Securities" has the meaning set forth in Section 3.3(a) of this
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Agreement.
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"Encumbrance" has the meaning set forth in Section 3.4(a) of this Agreement.
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"Event of Default" has the meaning set forth in Section 8.1 of this Agreement.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"FDA" means the United States Food and Drug Administration.
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"Fifth Amendment" means the Fifth Amendment dated the date hereof to the May
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1998 Securities Purchase Agreement.
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"Financial Statements" has the meaning set forth in Section 3.7(a) of this
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Agreement.
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"First Loan" has the meaning set forth in Section 2.3 of this Agreement.
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"First Loan Date" has the meaning set forth in Section 2.3 of this Agreement.
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"FS Investments/Alpharma Loan Agreement" shall mean the Loan Agreement dated the
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date hereof, by and between Lender and Alpharma.
"GAAP" means U.S. generally accepted accounting principles as in effect from
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time to time.
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"Historical Financial Statements" has the meaning set forth in Section 3.7(a) of
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this Agreement.
"Holder" means the Lender and any other Person to whom all or a portion of the
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Note is transferred in accordance with Article IX of this Agreement.
"Indebtedness" means and includes:
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(a) all items which in accordance with GAAP would be included on the
liability side of a balance sheet on the date as of which Indebtedness is to be
determined (excluding capital stock, surplus reserves and deferred credits);
(b) all guaranties, letter of credit, contingent reimbursement
obligations and other contingent obligations in respect of, or any obligations
to purchase or otherwise acquire, indebtedness of others; and
(c) all indebtedness secured by any Lien existing on any interest of the
Person with respect to which indebtedness is being determined in Property owned
subject to such Lien whether or not the indebtedness secured thereby shall been
assumed.
"Investment" means the purchase or other acquisition of any Indebtedness of, or
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the making of any loan, advance or capital contribution to, or the incurring of
any liability, contingent or otherwise, in respect of the Indebtedness of, any
Person.
"Lien" means any mortgage, pledge, charge, encumbrance, security interest,
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collateral assignment or other lien or restriction of any kind, whether based on
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common law, constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions and other title exceptions.
"Loan" means any borrowing by the Company from the Lender of up to a maximum
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principal amount of $6,250,000 pursuant to Section 2.1 and the other terms and
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conditions of this Agreement.
"Loan Date" has the meaning set forth in Section 2.3 of this Agreement.
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"Material Adverse Effect" means, when used in connection with the Company, any
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development, change or effect that is materially adverse to the business,
Properties (including, without limitation, Intellectual Property), 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.
"Maturity Date" means December 31, 2001, provided, however, that the Lender, in
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its sole discretion, may extend such date one or more times, further, however,
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in no event shall the Maturity Date be later than June 30, 2002.
"May 1998 Securities Purchase Agreement" means the Series G Securities Purchase
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Agreement dated as of May 13, 1998 by and among the Company and the Purchasers
named in Schedule I thereto.
"New Common Stock" has the meaning set forth in the Depositary Agreement.
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"Note" means the note to be issued by the Company to the Lender pursuant to
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Section 2.2(a) of this Agreement, substantially in the form attached hereto as
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Exhibit A, evidencing the maximum principal amount of the Loans; provided
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however, that in the event that the Lender transfers all or a portion of the
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Note in accordance with Article XI, all references to the Note in this Agreement
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shall be deemed to include the Notes issued by the Company upon such exchange or
transfer.
"Notice of Borrowing" has the meaning set forth in Section 2.3 of this
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Agreement.
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"Officer" means the Chairman of the Board, the President, any Vice President,
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the Treasurer or the Secretary of the Company.
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"Permitted Investments" means:
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(a) readily marketable securities issued or fully guaranteed by the
United States of America with maturities of not more than one year;
(b) commercial paper rated "Prime 1" by Xxxxx'x Investors Services,
Inc. or "A-1" by Standard and Poor's Rating Services with maturities of not more
than 180 days;
(c) certificates of deposit or repurchase obligations issued by any bank
organized under the laws of the United States of America or any state thereof
having capital surplus of at least $100,000,000 or by any other financial
institution acceptable to the Requisite Holders, all of the foregoing not having
a maturity of more than one year from the date of issuance thereof; and
(d) other Investments not exceeding, in the aggregate, $50,000 in any fiscal
year.
"Permitted Liens" means each of the following:
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(a) artisans' or mechanics' Liens arising in the ordinary course of
business, and Liens for taxes, but only to the extent that payment thereof shall
not at the time be due or if due, the payment thereof is being diligently
contested in good faith and adequate reserves computed in accordance with GAAP
have been set aside therefor;
(b) Liens in effect on the First Loan Date and disclosed to the Lender in
the Financial Statements, provided that neither the Borrowed Money Indebtedness
secured thereby nor the Property covered thereby shall increase after the First
Loan Date without the prior written consent of the Requisite Holders, provided
that, for purposes of this clause (b), the accrual of interest on such Borrowed
Money Indebtedness, so long as it is not converted to principal, shall not be
deemed to increase such Borrowed Money Indebtedness;
(c) normal encumbrances and restrictions on title which do not secure
Borrowed Money Indebtedness and which do not have a material adverse affect on
the value or utility of the applicable Property;
(d) Liens incurred or deposits made in the ordinary course of business (i)
in connection with workmen's compensation, unemployment insurance, social
security and other like laws, or (ii) to secure insurance in the ordinary course
of business, the performance of bids, tenders, contracts, leases, licenses,
statutory obligations, surety, appeal and performance bonds and other similar
obligations incurred in the ordinary course of business, but not, in any of the
cases specified in this clause (ii), incurred in connection with the borrowing
of money, the obtaining of advances or the payment of the deferred purchase of
Property;
(e) Liens in connection with or to secure Borrowed Money Indebtedness
permitted under Section 7.1(c);
(f) attachments, judgments and other similar Liens arising in connection
with the court proceedings, provided that the execution and enforcement of such
Liens are effectively stayed and the claims secured thereby are being actively
contested in good faith with adequate reserve made therefor in accordance with
GAAP;
(g) Liens imposed by law, such as carriers', warehousemen's, mechanics',
materialmen's and vendors' liens incurred in good faith in the ordinary course
of business and securing obligations which are not yet due or which are being
contested in good faith by appropriate proceedings if adequate reserves with
respect thereto are maintained in accordance with GAAP;
(h) zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, and restrictions on the use of Property, and
which do not in any case singly or in the aggregate materially impair the
present use or value of Property subject to any such restriction or materially
interfere with the ordinary conduct of the business of the Company and its
Subsidiaries, if any;
(i) Liens securing purchase money Indebtedness permitted under Section 7.1
hereof and covering only the Property so purchased;
(j) capital leases and sale/leaseback transactions permitted under the other
provisions of this Agreement;
(k) extensions, renewals and replacements of Liens referred to in paragraphs
(a) through (j) of this Section; provided that any such extension, renewal or
replacement Lien shall be limited to the Property or assets (and, in the case of
clause (e), categories of Property or assets) covered by the Lien extended,
renewed or replaced and that the Borrowed Money Indebtedness secured by any such
extension, renewal or replacement Lien shall be in an amount not greater than
the amount of the Indebtedness secured by the Lien extended, renewed or
replaced; and
(l) the Liens created by the Security Agreement.
"Person" means any individual, corporation, association, company, business
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trust, partnership, joint venture, joint-stock company, limited liability
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company, trust, unincorporated organization or association or government or any
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agency or political subdivision thereof.
"Property" means any interest in any kind of property or asset, whether real,
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personal or mixed, tangible or intangible.
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"Requisite Holders" means Holders of more than 50% of the aggregate principal
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amount of the Note outstanding at any time.
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"SEC" means the United States Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Security Agreement" means the Security Agreement dated the date hereof between
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the Company and the Lender.
"Series G Preferred" means the Series G Convertible Exchangeable Preferred Stock
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of the Company.
"Series H Preferred" means the Series H Preferred Stock of the Company.
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"Subsidiary" of a Person means any corporation, association, partnership, joint
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venture or other business entity of which more than fifty percent (50%) of the
voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof.
The term "to the knowledge of" or derivatives thereof shall mean the actual
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knowledge of the Chief Executive Officer of the Company.
"Voting Capital Stock" means the Capital Stock entitled to vote generally in the
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election of directors.
"Warrants" means the Warrants to purchase Depositary Shares (as such term is
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defined in the Depositary Agreement) issued or to be issued to the Lender
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pursuant to the Fifth Amendment.
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"1934 Act Filings" means the Annual Report on Form 10-K of the Company for the
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fiscal year ended December 31, 1999, the Quarterly Reports of the Company on
Form 10-Q for each of the three months ended March 31, 2000, June 30, 2000 and
September 30, 2000 and any other reports or other documents filed by the Company
with the SEC since December 31, 1999 pursuant to the Exchange Act.
"2000 Financial Statements" has the meaning set forth in Section 3.7(a) of this
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Agreement.
"8% Subordinated Notes" means the Company's 8% Subordinated Notes in the
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aggregate principal amount of $9,000,000 issued pursuant to the May 1998
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Securities Purchase Agreement.
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1.2 Rules of Construction1.2 Rules of Construction.
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.
ARTICLE IIARTICLE II1AMOUNT AND TERMS OF NOTESAMOUNT AND TERMS OF NOTES
2.1 COMMITMENT TO LEND; LOANS2.1 Commitment to Lend; Loans. On the
terms and subject to the conditions contained in this Agreement (including,
without limitation, Section 2.3(b) of this Agreement), the Lender agrees to make
one or more Loans to the Company from time to time on any Business Day or after
January 2, 2001 and on or prior to December 31, 2001. The maximum principal
amount of Loans outstanding at any time shall not exceed $6,250,000 at any time.
Amounts repaid pursuant to Sections 2.4(b), 2.5 or 2.6 may not be reborrowed by
the Company. The Lender shall (i) have no obligation to make more than one Loan
in any one calendar month and (ii) have no obligation to make any Loans to the
Company prior to January 2, 2001 or after December 31, 2001.
2.2 EVIDENCE OF DEBT2.2 Evidence of Debt.
(a) On the First Loan Date (as defined in Section 2.3(a)), Lender shall
receive from the Company the Note evidencing the maximum aggregate principal
amount of the Loans.
(b) There shall be attached to the Note, and maintained by the Company, a
register in which the Company shall, from time to time, record (i) the date and
amount of each Loan under the Note, (ii) the date and amount of any interest
payments due under the Note and (iii) the date and amount of any principal and
interest payments made by the Company under the Note. The entries made in the
register by the Company shall be conclusive and binding for all purposes, absent
manifest error.
2.3 MAKING OF LOANS2.3 Making of Loans.
(a) The Lender agrees to make each Loan upon receipt of a notice of
borrowing in the form of Exhibit B attached hereto (a "Notice of Borrowing")
specifying the amount of the proposed Loan given by the Company to the Lender
not later than 10:00 am (New York time) on the tenth Business Day prior to the
date of the proposed Loan, except with respect to the first Loan hereunder which
shall be in the principal amount of $2,000,000 (the "First Loan") and which
shall be made by the Lender to the Company on January 2, 2001 (the "First Loan
Date") and shall be made without any requirement that the Company deliver a
Notice of Borrowing. Subject to the terms and conditions of this Agreement,
upon the date of a proposed Loan (a "Loan Date"), the Lender shall make
available for the account of the Company in accordance with the bank wire
instructions contained in such Notice of Borrowing, immediately available funds
in the amount of the Loan. Each Loan shall be in an aggregate amount of not
less than $500,000 or a multiple of $100,000 in excess thereof and not more than
$1,000,000; provided, however, the Loans requested in the months of February,
2001 and March, 2001 may be in an aggregate amount of not more than $1,500,000
per month. Each Notice of Borrowing shall be irrevocable and binding upon the
Company. The Company shall indemnify the Lender against any loss, cost or
expense including, without limitation, the cost of Lender funds on its credit
facilities, incurred by the Lender if a proposed Loan requested in a Notice of
Borrowing is not made by the Lender because the conditions precedent to such
Loan as set forth in Section 4.1 or 4.2 of this Agreement, as applicable, were
not satisfied or waived.
(b) Each Notice of Borrowing shall describe the proposed use of proceeds,
and shall provide sufficient information to allow the Lender to reasonably
determine that the proceeds of the requested Loan will be used as required by
Section 6.1. The Lender shall have the reasonable opportunity to discuss the
proposed use of proceeds with the Company.
2.4 INTEREST AND PRINCIPAL PAYMENTS2.4 Interest and Principal Payments.
(a) The Company shall accrue interest on the unpaid principal amount of each
Loan from the date of the making thereof until the principal amount thereof
shall be paid in full at a rate of 7.5% per annum. Interest shall be due and
payable by the Company with respect to each Loan quarterly, in arrears on the
last day of each of March, June, September and December. All amounts paid shall
first be applied to any accrued but unpaid interest. All payments required to
be made by the Company under this Agreement shall be paid to the Lender to an
account of the Lender designated to the Company in writing.
(b) On or prior to the Maturity Date, the Company may prepay all or a
portion of the outstanding principal amount of the Note, together with any
accrued and unpaid interest thereon to the date of such prepayment, in its sole
discretion. Unless payment is required prior to the Maturity Date pursuant to
the terms hereof, the Company shall repay the outstanding aggregate principal
amount of the Note , together with any accrued and unpaid interest thereon, on
the Maturity Date.
(c) If any required payment of principal or interest is not paid when due,
whether at stated maturity, by acceleration or otherwise, the interest rate
applicable to the amount of any such payment shall be the 7.5% per annum
provided above plus an additional 2% per annum, all payable on demand.
2.5 MANDATORY PREPAYMENT UPON CHANGE IN CONTROL OR SALE2.5 Mandatory
Prepayment upon Change in Control. The Company shall give all Holders notice of
any Change in Control or Sale with respect to the Company within 10 days after
the earlier of (i) the date of such Change in Control or Sale, (ii) the date on
which the Company becomes aware of such Change in Control or Sale and (iii)
approval by the Board of Directors of, or execution of any executory contract or
binding or non-binding letter of intent with respect to, a Change in Control or
Sale. Upon any such Change in Control or Sale, any Holder shall have the right
at its option exercisable upon written notice to the Company within 15 days
after the Holder receives notice of such Change in Control or Sale, to require
the Company to prepay all of the outstanding amounts of principal and accrued
and unpaid interest under the Note held by such Holder. The payment required by
the preceding sentence shall be made on the later of (i) the consummation of the
Change in Control or Sale or (ii) first Business Day after the date of such
notice from such Holder. Following a Change in Control or Sale with respect to
the Company, the Lender shall have no further obligations to make Loans.
2.6 MANDATORY PREPAYMENT UPON DEMAND2.6 Mandatory Prepayment Upon
Demand
(a) On or at any time after the Demand Date, Holders of at least 80% of the
outstanding Notes may, at their option exercisable upon 30 days' prior written
notice (which may be given prior to the Demand Date), require the Company to
prepay all of the outstanding amounts of principal and accrued and unpaid
interest under the Notes.
(b) The Demand Date may be extended at the option of the Company in
accordance with Section 2.2 of the Fifth Amendment.
2.7 FS INVESTMENTS/ALPHARMA LOAN AGREEMENT.
(a) In the event that (i) the Company completes the procedures enumerated in
Article 2 hereof to request a Loan and has fulfilled all conditions to such Loan
and (ii) the Lender fails to request a Loan for the corresponding amount
pursuant to the terms of the FS Investments/Alpharma Loan Agreement within five
Business Days thereof, the Company may submit a Notice of Borrowing pursuant to
Section 2.5 of the FS Investments/Alpharma Loan Agreement and shall have the
option to enforce any remedies possessed by the Lender (as defined in this
Agreement) under the FS Investments/Alpharma Loan Agreement.
(b) In the event that (i) the Lender completes the procedures enumerated in
Article 2 of the FS Invesments/Alpharma Loan Agreement to request a Loan and has
fulfilled all conditions to such Loan and (ii) Alpharma fails to deliver such
Loan on the Loan Date (as defined in the FS Investments/Alpharma Loan
Agreement), then the Company shall have the option to enforce any remedies
possessed by the Lender (as defined in this Agreement) under the FS
Investments/Alpharma Loan Agreement.
ARTICLE IIIARTICLE III1REPRESENTATIONS AND WARRANTIES OF THE
COMPANYREPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Lender as follows:
3.1 ORGANIZATION AND EXISTENCE, ETC.3.1 Organization and Existence,
etc. The Company (a) is duly 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).
3.2 CAPITALIZATION3.2 Capitalization.
(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 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.
3.3 AUTHORIZATION; BINDING OBLIGATIONS3.3 Authorization; Binding
Obligations.
(a) The Company has full power and authority to execute and deliver this
Agreement, the Note and the Security Agreement and such other documents
furnished or to be furnished by the Company hereunder. This Agreement, the Note
and the Security Agreement have been duly authorized, executed and delivered by
the Company and each constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its respective
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 Notes pursuant to
this Agreement and the compliance by the Company with the provisions of this
Agreement and the Note, and the consummation of the other transactions
contemplated hereby or thereby (except as contemplated by the Security
Agreement), will not result in the creation or imposition of any Lien, charge,
security interest or encumbrance (collectively, "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 the Loan Agreement dated
February 16, 1999 among the Company, Alpharma and Alpharma Inc., 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) The Note has been duly authorized for issuance. When the Note has been
duly executed and delivered by the Company in accordance with this Agreement,
the Note will constitute the valid and legally binding obligation 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.
3.4 COMPLIANCE WITH INSTRUMENTS, ETC.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, 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.
3.5 LITIGATION3.5 Litigation. Except as set forth on Schedule 3.5
hereto, there 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 challenges the validity of any action taken or to
be taken pursuant to or in connection with this Agreement or the issuance of the
Note which would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
3.6 OFFERING3.6 Offering. Subject to Xxxxxx's representations and
warranties in Section 11.9, the offer, sale and issuance of the Note to the
Lender as contemplated by this Agreement is not subject to the registration
requirements of 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.
3.7 PERMITS; GOVERNMENTAL AND OTHER APPROVALS3.7 Permits; Governmental
and Other Approvals. Except as set forth in Schedule 3.7 hereto, the Company
has such licenses, permits, consents, orders, approvals and other authorizations
necessary for the conduct of its business as now being conducted, except where
the absence of such authorizations would not have a Material Adverse Effect.
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 Agreement or the consummation by the Company of the
transactions contemplated hereby except for the filing of a Certificate of
Designation with respect to the Series H Preferred Stock, the filing of a Form D
under the Securities Act, the filing of one or more Reports on Form 8-K under
the Exchange Act and the filing of a UCC-1 concerning the Collateral under the
Security Agreement.
3.8 FORM 10-K AND 10-Q3.8 Form 10-K and 10-Q. The Annual Report on
Form 10-K of the Company for the fiscal year ended December 31, 1999, the
Quarterly Reports on Form 10-Q for each of the three months ended March 31,
2000, June 30, 2000 and September 30, 2000, complied or will comply as to form
in all material respects with the applicable requirements of the Exchange Act
and did not, as of the date of such filing, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
3.9 PRIORITY3.9 Priority. The security interest under the Security
Agreement is a valid and perfected security interest in the Collateral referred
to therein, securing the obligations secured thereby, and such security interest
is subject to no Liens that are prior to, on a parity with or junior to such
Security Interest other than Permitted Liens , and the Security Agreement is
enforceable as security for the obligations secured thereby in accordance with
its terms against the Company, subject to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
ARTICLE IVARTICLE IV1CONDITIONS OF OBLIGATIONS OF THE LENDERCONDITIONS OF
OBLIGATIONS OF THE LENDER
4.1 CONDITIONS TO XXXXXX'S OBLIGATIONS ON THE FIRST LOAN DATE4.1
Conditions to Xxxxxx's Obligations on the First Loan Date. The obligation of
the Lender to make the First Loan is subject to the fulfillment to its
reasonable satisfaction, or the waiver in writing by the Lender, on the First
Loan Date of each of the following conditions:
(a) Representations and Warranties Correct. The representations and
-----------------------------------------
warranties of the Company in Article III hereof shall be (x) true and correct on
and as of the date hereof and (y) true and correct in all material respects on
and as of the First Loan Date with the same force and effect as if they had been
made on and as of the First Loan Date, except in the case of clause (y) for (i)
those representations and warranties which address matters only as of a
particular date (which shall be true and correct as of such date) and (ii)
circumstances in which the failure of such representations and warranties to be
true and correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) Compliance Certificate. The Company shall have delivered to the Lender
-----------------------
a certificate of the Company's President, dated the First Loan Date, certifying
to the fulfillment of the conditions specified in subsections (a) and (e) of
this Section 4.1.
(c) No Impediments. No statute, judgment, order or decree of any court,
---------------
regulatory body, administrative agency or any other governmental agency or body
shall be in effect which would impose any material limitation on the ability of
the Lender to exercise full rights of ownership of the Notes.
(d) No Defaults. The Company shall not be in default under any indenture,
------------
mortgage, agreement, instrument or commitment evidencing or under which there is
at the time outstanding any Indebtedness of the Company or any Subsidiary, in
excess of $200,000, or which results in such Indebtedness, in an aggregate
amount (with other defaulted Indebtedness) in excess of $200,000 becoming due
and payable prior to its due date.
(e) No Material Adverse Events. Except as set forth in the schedules
-----------------------------
attached hereto pursuant to Article III hereof, as disclosed in the 1934 Act
Filings filed with the SEC prior to the date hereof or as set forth in Schedule
4.1(e) hereto, since September 30, 2000, there shall have been no Material
Adverse Effect with respect to the Company (other than the continued incurrence
of losses in the ordinary course of business).
(f) Legal Investment. The purchase of the Note by the Lender hereunder
-----------------
shall be legally permitted by all statutes, rules and regulations to which the
Lender and the Company are subject.
(g) Qualifications. All authorizations, approvals or permits, if any, of
--------------
any governmental authority or regulatory body that are now required in
connection with the lawful issuance and sale of the Note pursuant to this
Agreement shall have been duly obtained and shall be in full force and effect.
(h) Issuance Taxes. All taxes imposed by law in connection with the initial
--------------
issuance, sale and delivery of the Note shall have been fully paid by the
Company, and all laws imposing such taxes shall have been fully complied with at
the time of such issuance.
(i) Proceedings and Other Documents. All corporate and other proceedings in
-------------------------------
connection with the transactions contemplated by this Agreement shall have been
taken, and the Lender shall have received such other documents and instruments
in form and substance reasonably satisfactory to it and its counsel, as to such
other matters incident to the transaction contemplated hereby as it may
reasonably request.
(j) Opinion of Counsel. The Lender shall have received the opinion of Xxxx
-------------------
and Xxxx LLP, counsel for the Company, dated the First Loan Date, substantially
with respect to the matters set forth on Exhibit C attached hereto.
(k) Consents, Waivers, Etc. The Company shall have obtained all consents or
----------------------
waivers necessary to execute and deliver this Agreement, issue the Note and
carry out the transactions contemplated hereby and thereby, and all such
consents and waivers shall be in full force and effect except for shareholder
approval.
(l) Alpharma Arrangements. The following events shall have occurred:
----------------------
(A) each of the Company and Alpharma shall have executed and delivered a
Product Purchase Agreement relating to the Feverall product, in form and
substance satisfactory to the Lender, and Alpharma shall have acquired the
Feverall product pursuant to such Product Purchase Agreement; and
(B) Each of the Company and Alpharma shall have executed and delivered a
Termination Agreement, in form of substance satisfactory to the Lender.
(m) Delivery. The Company shall have delivered to the Lender (i) the Note,
--------
(ii) the Security Agreement, (iii) and the following:
(A) a certified copy of the Company's Certificate of Incorporation and all
amendments thereto, certified as being true by a principal Officer of the
Company;
(B) a copy of the Company's Bylaws, as amended to date, certified as being
true by a principal Officer of the Company; and
(C) a certificate of good standing of the Company as a foreign corporation
certified as of a recent date by the Secretary of State of the Commonwealth of
Massachusetts, and from every jurisdiction in which the Company is qualified to
do business.
(D) a signed UCC-1 covering the Collateral (as such term is defined in the
Security Agreement)
4.2 CONDITIONS PRECEDENT TO EACH LOAN4.2 Conditions Precedent to Each
Loan. The obligation of the Lender to make any Loan other than the First 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
conditions:
(a) The conditions set forth in subsections (c), (d), (f) and (g) of Section
4.1 remain fulfilled or waived by Lender.
(b) No event has occurred and is continuing, or would result from the Loan
being made on such date, which constitutes a Default or an Event of Default.
(c) The Lender shall be reasonably satisfied that the proceeds of the Loan
being made will be used as set forth in Section 6.1.
4.3 COOPERATION4.3 Cooperation. The Lender shall take all reasonable
steps and use all reasonable efforts necessary or desirable, and shall cooperate
with the Company to enable it, to obtain, as promptly as practicable, all
approvals, authorizations, certificates, consents and clearances required to
consummate the transactions contemplated hereby and satisfy the conditions set
forth in Sections 4.1 and 4.2.
ARTICLE V
ARTICLE V1[Intentionally Omitted]
ARTICLE VIARTICLE VI1AFFIRMATIVE COVENANTS OF THE COMPANYAFFIRMATIVE COVENANTS
OF THE COMPANY
Subject to Section 6.3 hereof, the Company hereby covenants and agrees:
6.1 USE OF PROCEEDS6.1 Use of Proceeds. The Company shall use all the
proceeds received from the Loans for (a) general working capital purposes or (b)
the payment of legal fees and disbursements, accounting fees and investment
banking fees and other fees and expenses incurred in connection with the
transactions contemplated by this Agreement. Pending the Company's use of the
proceeds as set forth herein, the Company shall invest all Loan proceeds in
Permitted Investments consisting exclusively of such proceeds.
6.2 FURTHER ASSURANCES6.2 Further Assurances. From time to time the
Company shall execute and deliver to Lender such other instruments,
certificates, agreements and documents and take such other action and do all
other things as may be reasonably requested by Xxxxxx in order to implement or
effectuate the terms and provisions of this Agreement.
6.3 TERMINATION6.3 Termination. The covenants and agreements of the
Company set forth in this Article VI shall terminate and be of no further force
or effect at such time as no principal or interest on the Note is outstanding or
payable (whether as a result of the payment of all outstanding principal and
accrued interest on the Note) and no amounts may be borrowed pursuant to this
Agreement.
6.4 STRATEGIC TRANSACTION6.4 Strategic Transaction. Promptly following
the date hereof, the Company shall seek to engage an investment bank, commercial
bank, business broker or comparable entity to assist the Company in consummating
a strategic transaction with a third party, it being understood that the
consummation of any strategic transaction shall be in the sole discretion of the
Company.
ARTICLE VIIARTICLE VII1NEGATIVE COVENANTSNEGATIVE COVENANTS
Subject to Section 7.14 hereof, the Company hereby covenants and agrees
that it will not, will not agree to and will not suffer or permit any Subsidiary
of the Company to, do any of the following without the consent of the Requisite
Holders:
7.1 BORROWED MONEY INDEBTEDNESS7.1 Borrowed Money Indebtedness.
Create, incur, suffer or permit to exist, or assume or guarantee, or become or
remain liable with respect to any Borrowed Money Indebtedness, except the
following:
(a) the Note;
(b) the Borrowed Money Indebtedness existing on the date of this Agreement
and disclosed in the Financial Statements, and all renewals, extensions and
replacements (but not increases) of any of the foregoing, provided that the
accrual of interest on such liabilities, so long as it is not converted to
principal, shall not be deemed to increase such liabilities;
(c) purchase money Indebtedness permitted by Section 7.10 to the extent
liens securing the same are allowed by the other provisions of this Agreement;
(d) capitalized lease obligations to the extent leases with respect thereto
are allowed by the other provisions of this Agreement; and
(e) the convertible notes issued pursuant to the May 1998 Securities
Purchase Agreement.
(f) additional principal of up to $500,000 of Borrowed Money Indebtedness in
the aggregate outstanding at any time;
7.2 LIENS7.2 Liens. Create or suffer to exist any Lien upon any of its
Property now owned or hereafter acquired, or acquire any Property upon any
conditional sale or other title retention device or arrangement or any purchase
money security agreement; provided, however, that the Company any Subsidiaries
of the Company may create or suffer to exist Permitted Liens.
7.3 CONTINGENT LIABILITIES7.3 Contingent Liabilities. Directly or
indirectly guarantee the performance or payment or, or purchase or agree to
purchase, or assume or contingently agree to become or be secondarily liable in
respect of, any obligation or liability of any other Person except for:
(a) the endorsement of checks or other negotiable instruments in the
ordinary course of business;
(b) obligations disclosed to Lender in the Financial Statements (but not
increases of such obligations after the First Loan Date, provided that the
accrual of interest on such obligations, so long as it is not converted to
principal, shall not be deemed to increase such obligations);
(c) obligations in respect of employees for continued service as evidenced
by written agreements with the Company as of the date of this Agreement; and
(d) those liabilities permitted under Section 7.1 hereof; and
(e) customary contractual indemnity obligations in the ordinary course of
business.
7.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF ASSETS7.4
Mergers, Consolidations and Dispositions and Acquisitions of Assets. In any
single transaction or series of related transactions, directly or indirectly:
(a) liquidate or dissolve;
(b) be a party to any merger or consolidation unless (i) no Default or Event
of Default has occurred that is then continuing; (ii) immediately thereafter and
giving effect thereto, no event will occur and be continuing which constitutes a
Default; (iii) the Company, or the Subsidiary, if any, is the surviving Person;
and (iv) the Holders are given at least twenty (20) days prior notice of such
merger or consolidation or such lesser number of days as is practicable;
(c) sell, convey or lease all or substantially all of its assets, except for
the sale of property in the ordinary course of business; or
(d) pledge, transfer or otherwise dispose of any equity interest in any of
its Subsidiaries, if any exist, or issue or permit any of its Subsidiaries, if
any exist, to issue any additional equity interests except to the Company or
another of its Subsidiaries.
Notwithstanding the foregoing, (i) nothing in this Agreement shall prohibit the
Company from selling obsolete equipment or from replacing used equipment in the
ordinary course of business and (ii) the Company may undertake a transaction of
the character contemplated by clauses (b) or (c) if, after giving effect
thereto, 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).
7.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS7.5 Redemption, Dividends
and Distributions. At any time, except as contemplated by this Agreement, the
terms of the Note, by the Series H Preferred: (a) redeem, retire or otherwise
acquire, directly or indirectly, any equity interest of the Company or any of
its Subsidiaries (other than $250,000 in any fiscal year to be used to
effectuate the repurchase of restricted stock issued to employees, directors or
consultants of the Company pursuant to a restricted stock agreement) or (b) make
any distributions of any property or cash in respect of any of its Capital
Stock.
7.6 NATURE OF XXXXXXXX0.6 Nature of Business. Change the nature of its
business or enter into any business which is substantially different from the
development, manufacture and sale of pharmaceuticals principally for the
pediatric market.
7.7 TRANSACTIONS WITH RELATED PARTIES7.7 Transactions with Related
Parties. Enter into any transaction or agreement with any Officer, director or
beneficial owner of five percent (5%) or more of the outstanding Capital Stock
in the Company or any of its Subsidiaries (or any Affiliate of any such Person)
unless the transaction is upon no less favorable terms than those that are
obtainable from wholly unrelated sources. The provisions of this Section 7.7
shall not apply to (a) fees and compensation (including options and equity
compensation) paid to or indemnity provided on behalf of Officers, directors,
employees or consultants of the Company and any of its Subsidiaries, as
determined by the Board of Directors of the Company or any of such Subsidiaries
or the Chief Executive Officer thereof in good faith and (b) transactions
exclusively between or among the Company's Subsidiaries, provided such
transactions are not otherwise prohibited by this Agreement. Notwithstanding
the prior two sentences, the Company may not pay management or consulting fees
to such related parties in excess of an aggregate of $50,000 per year.
7.8 LOANS AND INVESTMENTS7.8 Loans and Investments. Make any loan,
advance, extension of credit or capital contribution to, or make or have any
Investment in, any Person, or make any commitment to make any such extension of
credit or investment, except (a) Permitted Investments, (b) normal and
reasonable advances in the ordinary course of business to Officers and
employees.
7.9 ORGANIZATIONAL DOCUMENTS7.9 Organizational Documents. Amend,
modify, restate or supplement its Certificate of Incorporation or Bylaws if such
action could reasonably be expected to adversely affect the rights of the Lender
under this Agreement.
7.10 LEASE EXPENSES; PURCHASE MONEY INDEBTEDNESS7.10 Lease Expenses;
Purchase Money Indebtedness. Permit aggregate operating lease expenses
(excluding lease payments under capital leases), for the Company and its
Subsidiaries in the aggregate in any fiscal year, to exceed $500,000. Incur or
create new capital lease obligations or purchase money Indebtedness in any
fiscal year in excess of $200,000 in the aggregate for the Company and its
Subsidiaries. Permit aggregate capital lease obligations and purchase money
Indebtedness outstanding at any one time to exceed $2,000,000 in the aggregate
for the Company and its Subsidiaries.
7.11 SALE/LEASEBACKS7.11 Sale/Leasebacks. Enter into any
sale/leaseback transactions except as permitted under the provisions of Section
7.10.
7.12 ISSUANCE OF STOCK7.12 Issuance of Stock. On or prior to the
Maturity Date, issue, or become obligated to issue shares of Capital Stock or
securities convertible into Capital Stock, except for (i) shares of Common
Stock, (ii) rights, warrants or options to purchase shares of Common Stock and
(iii) Series H Preferred. Prior to the Maturity Date, establish a "Shareholders
Rights Plan" or "Poison Pill" or issue any securities in connection therewith.
7.13 SUBSIDIARIES7.13 Subsidiaries. Form, create or acquire any
Subsidiary.
7.14 TERMINATION7.14 Termination. The covenants and agreements of the
Company set forth in this Article VII shall terminate and be of no further force
or effect at such time as no principal or interest on the Note is outstanding or
payable (whether a result of the payment of all outstanding principal and
accrued interest on the Note or the conversion of the Note) and no amounts may
be borrowed pursuant to this Agreement.
ARTICLE VIIIARTICLE VIII1DEFAULTS AND REMEDIESDEFAULTS AND REMEDIES
8.1 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;
(c) the Company defaults in the performance of any covenants under Article
VII of this Agreement;
(d) the Company fails to comply with any of the provisions of this Agreement
(other than Article VII) or the Security Agreement or breaches a representation
or warranty in the Security Agreement and such failure or breach continues for
20 Business Days after notice from Holders of at least eighty percent (80%) of
the aggregate principal amount outstanding under the Notes;
(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 or the
representations and warranties contained in Section 3.9 shall be incorrect at
any time during the term of this Agreement;
(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.
8.2 ACCELERATION8.2 Acceleration. If an Event of Default occurs and is
continuing, the Holders of at least eighty percent (80%) of the aggregate
principal amount outstanding under the Notes by notice to the Company, may
declare the principal of and any accrued interest on the Note to be due and
payable. Upon such declaration such principal and interest shall be due and
payable immediately. If an Event of Default specified in Section 8.1(i) or (j)
occurs, all unpaid principal and accrued interest on the Note then outstanding
shall ipso facto become and be immediately due and payable without any
---- -----
declaration or other act on the part of any Holder.
---
8.3 OTHER XXXXXXXX0.3 Other Remedies. Notwithstanding any other
provision of this Agreement, if an Event of Default occurs and is continuing,
Holders of at least eighty percent (80%) of the aggregate principal amount
outstanding under the Notes may pursue any available remedy by proceeding at law
or in equity to collect the principal of or interest then due on the Note held
by such Holders. Without limiting the foregoing, the Company, the Lender and
any other Holder acknowledge and agree that the respective remedies of the
Company, the Lender and any other Holder at law for a breach or threatened
breach of any of the provisions of this Agreement would be inadequate and, in
recognition of that fact, agree that, in the event of a breach or threatened
breach by the Company of any of the provisions of this Agreement, in addition to
any remedies specified herein, at law or otherwise, Holders of at least eighty
percent (80%) of the aggregate principal amount outstanding under the Notes,
without posting any bond, shall be entitled to seek equitable relief in the form
of specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.
A delay or omission by any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative.
8.4 WAIVER OF PAST DEFAULTS8.4 Waiver of Past Defaults. Any past
Default or Event of Default and its consequences may be waived in accordance
with Section 10.1. When a Default or an Event of Default is waived, it is cured
and ceases.
ARTICLE IXARTICLE IX1RESTRICTIONS ON TRANSFERRESTRICTIONS ON TRANSFER
9.1 SECURITIES LAWS RESTRICTIONS ON TRANSFER9.1 Securities Laws
Restrictions on Transfer. The Note shall not be sold or transferred unless
either (a) they first shall have been registered under the Securities Act or (b)
the Company shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such a transfer is
exempt from the registration requirements of the Securities Act.
9.2 RESTRICTIVE LEGEND9.2 Restrictive Legend. Each Note shall be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
"THIS NOTE HAS 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 NOTE 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."
The foregoing legend may be removed after the second anniversary of the later of
the last date upon which the Company or any Affiliate of the Company was the
owner of such Security (or such shorter period of time as permitted by Rule
144(k) under the Securities Act or any successor provision).
9.3 ADDITIONAL RESTRICTIONS9.3 Additional Restrictions.
(a) This Agreement, the Note and the rights and obligations hereunder and
thereunder may be transferred or assigned by a Holder to an Affiliate of such
Holder, to another Holder, if any, or to any Person acquiring a Note having a
principal amount equal to at least 25% of the aggregate principal amount of the
Note or Notes then outstanding; provided, however, that the transferee provides
written notice of such assignment to the Company stating its name and address
and the principal amount of the Note with respect to which such rights are being
assigned; and provided further, that the Company receives the written instrument
provided in subparagraph (b) below. Any transferee to whom a transfer is made
in accordance with the immediately preceding sentence shall be deemed a Holder
for purposes of this Agreement.
(b) Any transferee (other than a Holder) to whom rights hereunder are
transferred shall, as a condition to such transfer, deliver to the Company a
written instrument by which such transferee agrees to be bound by the
obligations imposed upon Holders under this Agreement to the same extent as if
such transferee were a party hereto, including without limitation the
obligations imposed upon Holders pursuant to Section 11.8.
(c) A transferee to whom such rights are transferred pursuant to this
Section 9.3 may not again transfer such rights to any other Person, other than
as provided in this Section 9.3.
ARTICLE XARTICLE X1AMENDMENT, SUPPLEMENT AND WAIVERAMENDMENT, SUPPLEMENT AND
WAIVER
10.1 WITH CONSENT OF HOLDERS OF THE NOTE10.1 With Consent of Holders of
the Note. Except as provided below in this Section 10.1, no provision of this
Agreement or the Note may be amended, supplemented or waived without the consent
of Holders of at least eighty percent (80%) of the aggregate principal amount
outstanding under the Note voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Note) and the Company, and no existing Default or Event of Default (other than a
Default or Event of Default in the payment of the principal of, premium, if any,
or interest on the Note, other than a payment default resulting from an
acceleration that has been rescinded) and no compliance with any provision of
this Agreement or the Note may be waived without the consent of the Holders of
at least eighty percent (80%) of the aggregate principal amount outstanding
under the Note voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase, of the Note).
Except as provided below in this Section 10.1, without the consent of the
Holders holding at least 80% in principal amount of the Note then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, such Note) and the Company, no provisions of Article II
hereof may be amended, supplemented or waived in a manner that adversely affects
the rights of any Holder.
It shall not be necessary for the consent of the Holders of the Note under this
Section 10.1 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes effective,
the Company shall mail to the Holders of the Note a notice briefly describing
the amendment, supplement or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amendment, supplement or waiver. Notwithstanding the
foregoing, without the consent of each Holder affected, an amendment, supplement
or waiver under this Section 10.1 may not (with respect to the Note held by a
non-consenting Holder):
(a) reduce the principal amount of the Note;
(b) reduce the principal of or change the fixed maturity of the Note;
(c) reduce the rate of or change the time for payment of interest, including
default interest, on the Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Note (except a rescission of acceleration of
the Note by the Requisite Holders and a waiver of the payment default that
resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Note;
(f) make any change in the provisions of this Agreement relating to waivers
of past Defaults or the rights of the Holders of the Note to receive payments of
principal of or interest on the Note; or
(g) make any changes in the foregoing amendment and waiver provisions.
ARTICLE XIARTICLE XI1MISCELLANEOUSMISCELLANEOUS
11.1 NOTICES11.1 Notices. All notices, requests, demands, claims, and
other communications to any party hereunder or pursuant to the terms hereof
shall be in writing. Any such notice, request, demand, claim, or other
communication to any party hereunder shall be deemed duly delivered three
Business Days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one Business Day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
if to the Lender, to:
FS Ascent Investments LLC
c/o FS Private Investments LLC
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
with a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
and
Alpharma Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attention: Chief Legal Officer
If to the Company, to:
Ascent Pediatrics, Inc.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx X000
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx
with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to a Holder other than the Lender, to the address provided to the Company
pursuant to Section 9.3.
Any party may give any such notice, request, demand, claim, or other
communication using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by the
party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.2 DUPLICATE ORIGINALS11.2 Duplicate Originals. The parties may sign
any number of copies of this Agreement. Each signed copy shall be an original,
but all of them together represent the same agreement.
11.3 GOVERNING LAW11.3 Governing Law. The laws of the State of New
York, without regard to principles of conflicts of law, shall govern this
Agreement and the Securities.
11.4 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS11.4 No Adverse
Interpretation of Other Agreements. This Agreement may not be used to interpret
another indenture, loan or debt agreement of the Company or a subsidiary. Any
such indenture, loan or debt agreement may not be used to interpret this
Agreement.
11.5 SUCCESSORS AND ASSIGNS11.5 Successors and Assigns. All agreements
of the Company in this Agreement and the Securities shall bind its successors
and assigns. All agreements of the Lender in this Agreement shall bind its
successors and assigns.
11.6 SEPARABILITY11.6 Separability. In case any provision in this
Agreement or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
11.7 HEADINGS, ETC.11.7 Headings, etc. The Headings of the Articles
and Sections of this Agreement have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
11.8 CONFIDENTIALITY11.8 Confidentiality. The Lender and each other
Holder agree that he, she or it will keep confidential and will not disclose,
divulge or use for any purpose other than to monitor his, her or its investment
in the Company any confidential, proprietary or secret information which such
Holder may obtain from the Company pursuant to financial statements, reports and
other materials submitted by the Company to such Holder pursuant to this
Agreement, or pursuant to visitation or inspection rights granted hereunder,
unless such information is known, or until such information becomes known, to
the public (other than as a result of a breach of this Section 11.8 by such
Holder); provided, however that a Holder may disclose such information if
required by law, provided that the Holder provides prior written notice to the
Company of such proposed disclosure and takes reasonable steps to avoid and/or
minimize the extent of any such required disclosure. The Lender and each other
Holder further acknowledge and agree that certain of the confidential,
proprietary or secret information which it may obtain hereunder may be material
non-public information and that neither it nor any of its Affiliates shall
engage in any acquisition, disposition or other similar transaction involving
the Company's securities on the basis of, or at such time as such Holder
possesses, such material non-public information.
11.9 LENDER REPRESENTATIONS AND WARRANTIES11.9
LenderRepresentationsandWarranties 3 . Xxxxxx xxxxxx represents and warrants to
the Company that (i) it and each of its members is an "accredited investor" as
that term is defined in Rule 501(a) promulgated under the Securities Act, (ii)
it and each of its members 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 and each of its members has had an
opportunity to discuss the Company's business, management and financial affairs
with the Company's management, (iv) it and each of its members is acquiring the
Note 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 has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof, (v) it and each of its members understands that the
Note has not been registered under the Securities Act and it will not offer,
sell, transfer, pledge, hypothecate or otherwise dispose of any of the Notes
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.
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/ Xxxxxx Xxxxxxxx
----------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
FS ASCENT INVESTMENTS LLC
By: FS PRIVATE INVESTMENTS, LLC,
MANAGER
By: /s/ Xxxxx Xxxxxxx
--------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
EXHIBIT A
NOTE
Wilmington, Massachusetts
January 2, 2001
Up to $6,250,000
FOR VALUE RECEIVED, the undersigned, ASCENT PEDIATRICS, INC., a Delaware
corporation (the "Company"), HEREBY PROMISES TO PAY to the order of FS ASCENT
INVESTMENTS LLC, a Delaware limited liability company (the "Lender"), in lawful
money of the United States of America in immediately available funds, the amount
of $6,250,000 or, if less, the aggregate unpaid amount of all Loans made to the
undersigned under the "Loan Agreement" (as hereinafter defined). Schedule A
attached hereto and incorporated herein by reference records (i) the date and
amount of each Loan hereunder, (ii) the date and amount of any interest payments
due hereunder and (iii) the date and amount of any principal and interest
payments made by the Company hereunder; provided , however, that any failure to
endorse such information on such schedule or continuation thereof shall not in
any manner affect the obligation of the Company to make payments of principal
and interest in accordance with the terms of this Note. All capitalized terms
used but not otherwise defined herein have the meanings given to them in the
Loan Agreement.
The Note is issued pursuant to that certain Loan Agreement dated as of December
29, 2000 by and between the Company and the Lender (including all annexes,
exhibits and schedules thereto and as amended, modified, restated or
supplemented from time to time (the "Loan Agreement")), and is entitled to the
benefit and security of the Loan Agreement. Reference is hereby made to the
Loan Agreement for a statement of all of the terms and conditions under which
the Loans evidenced hereby are made and are to be repaid.
1. Interest and Principal Payments. The principal amount of the
indebtedness evidenced hereby shall be payable in the amounts and on the dates
specified in the Loan Agreement, the terms of which are hereby incorporated
herein by reference. Interest thereon shall be paid until such principal amount
is paid in full at such interest rates and at such times, and pursuant to such
calculations, as are specified in the Loan Agreement.
2. Default and Remedies. Subject to the requirements of Section 8.2 of the
Loan Agreement, upon and after the occurrence of any Event of Default, this Note
may, as provided in the Loan Agreement, be declared, and immediately shall
become, due and payable.
3. Legends.
"THIS NOTE HAS 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 THIS NOTE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY STATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
The foregoing legend may be removed after the second anniversary of the
last date upon which the Company or any Affiliate of the Company was the owner
of such Security (or such shorter period of time as permitted by Rule 144(k)
under the Securities Act or any successor provision).
4. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN THAT STATE.
ASCENT PEDIATRICS, INC.
By:
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
Schedule A to the Note of
Ascent Pediatrics, Inc.
Dated January 2, 2001
EXHIBIT B
FORM OF NOTICE OF BORROWING
Reference is made to that certain Loan Agreement dated as December 29, 2000
by and among Ascent Pediatrics, Inc. (the "Company") and FS Ascent Investments
LLC (the "Lender") (including all annexes, exhibits and schedules thereto, and
as from time to time amended, restated, supplemented or otherwise modified, the
"Loan Agreement"). Capitalized terms used herein without definition are so used
as defined in the Loan Agreement.
The Company hereby gives irrevocable notice, pursuant to Section 2.3(a) of the
Loan Agreement, that it requests a Loan under the Loan Agreement and in that
connection sets forth below the terms on which such Loan is requested to be
made:
(A) Date of Borrowing
(which is a Business Day)
__________________________________________________
(B) Principal Amount of Loan
________________________________________________
(C) Funds are requested to be disbursed
to the Company account with
________________________________________________
Account No. _________________________
(D) Use of Proceeds:
The Company shall indemnify the Lender against any loss, cost or expense
including, without limitation, the cost of Lender funds on its credit
facilities, incurred by the Lender as a result of the Loan requested in this
Notice of Borrowing not being made if such Loan is not made by the Lender
because the conditions precedent to such Loan as set forth in Section 4.1 or 4.2
of the Loan Agreement were not satisfied or waived.
IN WITNESS WHEREOF, the Company has caused this Notice of Borrowing to be
executed and delivered by its duly authorized officer as of the date first set
above.
ASCENT PEDIATRICS, INC.
By:_________________________________
Title:_______________________________
EXHIBIT C
OPINION OF XXXX AND XXXX LLP
1. The Company is a corporation existing and in good standing under the
General Corporation Law of the State of Delaware.
2. The Certificate of Designations, in substantially the form of Exhibit A
attached to the Fifth Amendment, has been duly authorized, approved and filed by
the Company with Secretary of State of the State of Delaware as of December __,
2000 and is effective as of such date.
3. The Company has the requisite corporate power and authority to execute,
deliver and perform the Loan Agreement, the Security Agreement and the Fifth
Amendment.
4. The Board of Directors of the Company has adopted by requisite vote the
resolutions necessary to authorize the execution, delivery and performance by
the Company of the Loan Agreement the Security Agreement and the Fifth
Amendment.
5. The Company has duly executed and delivered the Loan Agreement, the
Security Agreement and the Fifth Amendment.
6. The Loan Agreement, the Security Agreement and the Fifth Amendment are a
valid and binding obligations of the Company and are enforceable against the
Company in accordance with their respective terms (subject to customary
exceptions).
7. The Note has been duly authorized, executed, issued and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms (subject to
customary exceptions).
8. The Series H Preferred Stock to be issued under the Fifth Amendment has
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.
9. The execution and delivery by the Company of the Loan Agreement, the
Security Agreement and the Fifth Amendment and the performance of its
obligations thereunder will not (a) constitute a violation of the certificate of
incorporation or bylaws of the Company, (b) constitute a material violation by
the Company of any statutory law or governmental regulation covered by this
Opinion, or (c) breach, or result in a default under any existing obligation of
the Company under any of its Other Specified Agreements. The term Other
Specified Agreements means those agreements set forth on Schedule A attached
hereto.
10. Except as provided on the schedule of Governmental Filings attached
hereto as Schedule B, to our knowledge and based in part upon the
representations of the Lender in the Loan Agreement, the Company was not
required to obtain any consent, approval, authorization or order of, or make any
filings or registrations with, any United States federal court or governmental
agency in order to obtain the right to enter into or perform under the Loan
Agreement, the Security Agreement and the Fifth Amendment or to take any of the
actions taken by it on or prior to this date to consummate the transactions
contemplated thereby, except for (i) such consents, authorizations, approvals,
orders, registrations or filings as have been obtained or made prior to the date
hereof, or as permitted to be made or obtained on or after the date hereof
pursuant to the Loan Agreement, the Security Agreement and the Fifth Amendment
and the exhibits and schedules thereto, respectively; and (ii) such consents,
authorizations, approvals, orders, registrations or filings as could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
11. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
12. The provisions of the Loan Agreement and the Security Agreement are
effective to create, in favor of the Lender to secure the payment to the Lender
of the Loan, a valid security interest in the Collateral to the extent that such
Collateral is property of a type subject to Article 9 of the UCC.
