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EXHIBIT 10.2
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
ARTICLS 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
Depository 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 part 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:
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ARTICLE I
DEFINITIONS, ETC.
1.1 Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement or in the
Ancillary Agreements (as defined in the Loan Agreement).
1 .2 Unless the context otherwise requires:
a a term has the meaning assigned to it;
b. an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
c. "or" is not exclusive;
d. words in the singular include the plural and in the
plural include the singular;
e. provisions apply to successive events and transactions;
and
f. "herein", "hereof" and other words of similar import
refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
1.3 This Agreement amends and supplements the Loan Agreement, the
Depositary Agreement, the Subordination Agreement, the Guaranty Agreement 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 II 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.
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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.
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;
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(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.
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-I 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.
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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 ease 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 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 C Preferred, (II) any convertible notes issuable upon
exchange of the Series G Preferred or (III) the 7.5% Convertible
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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 June __,
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 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.
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6.8 The Subordination Agreement is hereby amended to include the New
Notes in the definition of "Xxxxxx Notes."
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: V.P. Finance
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title:
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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: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
Title: Managing Director
XXXXX PARTNERS
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: General Partner/Xxxxx Partners
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