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Exhibit 10.2
EXECUTION COPY
AMENDED AND RESTATED SUBORDINATION AGREEMENT
This AMENDED AND RESTATED SUBORDINATION AGREEMENT (this
"Agreement") is dated as of October 15, 1999 and made among ASCENT PEDIATRICS,
INC., a Delaware corporation (the "Company"), the original lenders named on the
signature pages hereto (the "Original Lenders"), and ALPHARMA USPD, INC., a
Maryland corporation ("Alpharma").
WHEREAS, the Original Lenders have entered into a Series G
Securities Purchase Agreement dated as of May 13, 1998, with the Company,
pursuant to which they purchased 7,000 shares of Series G Preferred Stock of the
Company (the "Series G Preferred") and $9,000,000 principal amount of 8%
Subordinated Notes of the Company (the "Subordinated Notes");
WHEREAS, the Original Lenders have exchanged all outstanding
shares of the Series G Preferred for 8% Convertible Subordinated Notes (the "8%
Convertible Notes");
WHEREAS, the Series G Securities Purchase Agreement has been
further amended by the third and fourth amendments thereto, which provided for
the issuance from time to time of 7.5% Convertible Subordinated Notes of the
Company (the "7.5% Convertible Notes" and, together with the 8% Convertible
Notes and the Subordinated Notes, the "Xxxxxx Notes");
WHEREAS, Alpharma has entered into a Loan Agreement (the "Loan
Agreement") with the Company, as amended to date, pursuant to which Alpharma
will make a First Loan and Unrestricted Loans to the Company in the maximum
principal amount of up to $12,000,000 (the "Alpharma Note") and Project Loans
and Screened Project Loans to the Company in the maximum principal amount of
$28,000,000 (the "Secured Loans"); and
WHEREAS, the extension of credit by Alpharma to the Company
will benefit the Original Lenders, and in extending such credit, Alpharma has
relied on the subordination of the Original Lenders as hereinafter set forth;
WHEREAS, the parties hereto have entered into a Subordination
Agreement dated February 16, 1999 (the "Subordination Agreement");
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby mutually acknowledged, the parties hereby amend and restate the
Subordination Agreement in its entirety as follows:
1. Definitions. Capitalized terms used but not defined herein
shall have the meanings set forth in the Loan Agreement. The following
definitions shall for all purposes apply to the respective terms used in this
Agreement.
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"Officers' Certificate" means the certificate signed by two
Officers or by an Officer and an Assistant Treasurer or an Assistant Secretary
of the Company.
"Senior Indebtedness" means the principal, premium, if any,
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-filing interest is allowed in such proceeding), fees,
charges, expenses, reimbursement and indemnification obligations, and all other
amounts payable under or in respect of Secured Loans and Borrowed Money
Indebtedness in an aggregate principal amount not greater than $50,000,000
(which in the case of clause (C) (i) prior to or on the Option Expiration Date,
must consist solely of Screened Project Indebtedness and (ii) thereafter, may
include up to $10,000,000 of Borrowed Money Indebtedness that is not Screened
Project Indebtedness), which in the case of clause (C) is designated by the
Company as Senior Indebtedness.
2. Subordination.
2.1 Agreement to Subordinate. The Company, Alpharma and the
Original Lenders agree, that (a) the Indebtedness evidenced by the Alpharma Note
and the Xxxxxx Notes and the payment of principal thereof will be subordinated
in right of payment to the prior payment in full of the Senior Indebtedness and
(b) such portion of the Xxxxxx Notes equal in principal amount to the amount of
any Negative Equity Position existing as the result of or at the time of a
payment will be subordinate in right of payment to the Alpharma Note, all as
provided in this Section 2. To the extent not subordinate in right of payment
pursuant to clause (b) of the immediately preceding sentence, the Xxxxxx Notes
will rank pari passu with the Alpharma Note.
2.2 Liquidation; Dissolution; Bankruptcy. Upon any
distribution of assets to creditors of the Company in a liquidation, winding up
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(1) holders of Senior Indebtedness shall be
entitled to receive payment in full in cash
of the principal of and interest (including
interest accruing after the commencement of
any such proceeding) to the date of payment
on the Senior Indebtedness before holders of
the Alpharma Note or the Xxxxxx Notes shall
be entitled to receive any payment of
principal of or interest on the Alpharma
Note and the Xxxxxx Notes, respectively;
(2) holders of the Alpharma Note and the Xxxxxx
Notes shall be entitled to receive payment
in full in cash (or to share ratably in any
payment if payment is full is not possible)
of the principal and interest (including
interest accruing after the commencement of
any such proceeding) to the date of payment;
provided, however, that if the Company has a
Negative Equity Position as a result of or
at the time of the payment contemplated
hereby, holders of the Alpharma Note shall
be entitled to receive payment in cash of
principal and interest (including interest
accruing after the commencement of any such
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proceeding) to the date of payment on the
Alpharma Note in an amount equal to the
amount of such Negative Equity Position,
before holders of the Xxxxxx Notes shall be
entitled to receive any payment of principal
of or interest on the Xxxxxx Notes; and
(3) until the Senior Indebtedness is paid in
full in cash, any distribution to which
Alpharma or the Original Lenders would be
entitled but for this Section shall be made
to holders of Senior Indebtedness as their
interests may appear.
(4) until the portion of the Alpharma Note equal
in principal amount to the amount of any
Negative Equity Position existing as the
result of or at the time of a payment is
paid in full in cash, any distribution to
which holders of the Xxxxxx Notes would be
entitled but for this Section shall be made
to holders of the Alpharma Note as their
interests may appear.
2.3 Company Not to Make Payments with Respect to Securities in
Certain Circumstances.
(1) Under any circumstances,
(1) No payment of principal of, or premium, if
any, or interest may be made by the Company,
directly or indirectly, on the Alpharma Note
or Xxxxxx Notes at any time if a default in
payment or interest on Senior Indebtedness
exists, and (A) such default is subject to
judicial proceedings or (B) notice of such
default has been received by the Company
from a holder of Senior Indebtedness, unless
and until such default shall have been cured
or waived or shall have ceased to exist.
During the continuance of any event of
default with respect to any Senior
Indebtedness, as such event of default is
defined under any such Senior Indebtedness
or in any agreement pursuant to which any
Senior Indebtedness has been issued (other
than default in payment of the principal of,
or premium, if any, or interest on any
Senior Indebtedness), permitting the holders
of such Senior Indebtedness to accelerate
the maturity thereof, no payment may be made
by the Company, directly or indirectly, with
respect to principal of, or premium, if any,
or interest on the Alpharma Note or Xxxxxx
Notes for 183 days following written notice
to the Company, from any holder or holders
of such Senior Indebtedness or their
representative or representatives or the
trustee or trustees under any indenture
under which any instrument evidencing any
such Senior Indebtedness may have been
issued, that such an event of default has
occurred and is continuing. However, if the
maturity of such Senior Indebtedness is
accelerated, no payment may be made on the
Alpharma Note or Xxxxxx Notes until such
Senior Indebtedness that has matured has
been paid or such acceleration has been
cured or waived.
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(2) In the event that, notwithstanding the
foregoing, any payment by the Company of any
kind or character, whether in cash, property
or securities, prohibited by the foregoing,
shall be received by holders of the Alpharma
Note or the Xxxxxx Notes before all Senior
Indebtedness is paid in full, in cash, or
provision is made for such payment to the
satisfaction of the holders thereof, and if
such fact shall then have been or thereafter
be made known to such holders, then and in
such event such payment shall be paid over
or delivered to the holders of Senior
Indebtedness or their representative or
representatives, or to the trustee or
trustees under any indenture pursuant to
which any instruments evidencing any Senior
Indebtedness may have been issued, as their
respective interests may appear, for
application to the payment of all Senior
Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent
payment to or for the holders of such Senior
Indebtedness, and, until so delivered, the
same shall be held in trust by holders of
the Alpharma Note or the Xxxxxx Note as the
property of the holders of Senior
Indebtedness.
(3) The holders of Senior Indebtedness may, at
any time and from time to time, without the
consent of or notice to holders of the
Alpharma Note or the Xxxxxx Notes, without
incurring responsibility to holders of the
Alpharma Note or the Xxxxxx Notes and
without impairing or releasing the
obligations of holders of the Alpharma Note
or the Xxxxxx Notes hereunder to the holders
of Senior Indebtedness: (A) change the
manner, place or terms of payment or change
or extend the time of payment of, or renew
or alter, Senior Indebtedness, or otherwise
amend in any manner Senior Indebtedness or
any instrument evidencing the same or any
agreement under which Senior Indebtedness is
outstanding; (B) sell, exchange, release or
otherwise deal with any Property pledged,
mortgaged or otherwise securing Senior
Indebtedness; (C) release any Person liable
in any manner for the collection of Senior
Indebtedness; and/or (D) exercise or refrain
from exercising any rights against the
Company and any other Person.
(2) In the event there is a Negative Equity Position at the
time of or as a result of any payment
(1) No payment of principal of, or premium, if
any, or interest may be made by the Company,
directly or indirectly, on such portion of
the Xxxxxx Notes equal in principal amount
to the amount of such Negative Equity
Position at any time if a default in payment
or interest on the Alpharma Note exists, and
(A) such default is subject to judicial
proceedings or (B) notice of such default
has been received by the Company from a
holder of the Alpharma Note, unless and
until such default shall have been cured or
waived or shall have ceased to exist. During
the continuance of any event of default with
respect to the Alpharma Note, as such event
of default is defined under the Alpharma
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Note or in the Loan Agreement as amended
from time to time (other than default in
payment of the principal of, or premium, if
any, or interest on the Alpharma Note),
permitting the holders of the Alpharma Note
to accelerate the maturity thereof, no
payment may be made by the Company, directly
or indirectly, with respect to principal of,
or premium, if any, or interest on such
portion of the Xxxxxx Notes equal in
principal amount to the amount of such
Negative Equity Position for 183 days
following written notice to the Company,
from any holder or holders of the Alpharma
Note or their representative or
representatives, that such an event of
default has occurred and is continuing.
However, if the maturity of the Alpharma
Note is accelerated, no payment may be made
on such portion of the Xxxxxx Notes equal in
principal amount to the amount of such
Negative Equity Position until the Alpharma
Note has been paid to the extent it has
matured or such acceleration has been cured
or waived.
(2) In the event that, notwithstanding the
foregoing, any payment by the Company of any
kind or character, whether in cash, property
or securities, prohibited by the foregoing,
shall be received by holders of the Xxxxxx
Notes before such portion of the Alpharma
Note equal in principal amount to the amount
of such Negative Equity Position is paid in
full, in cash, or provision is made for such
payment to the satisfaction of the holders
thereof, and if such fact shall then have
been or thereafter be made known to such
holders, then and in such event such payment
shall be paid over or delivered to the
holders of the Alpharma Note or their
representative or representatives, as their
respective interests may appear, for
application to the payment of any portion of
the Alpharma Note remaining unpaid to the
extent necessary to pay such portion of the
Alpharma Note equal in principal amount to
the amount of such Negative Equity Position
in full, after giving effect to any
concurrent payment to or for the holders of
the Alpharma Note, and, until so delivered,
the same shall be held in trust by holders
of the Xxxxxx Notes as the property of the
holders of the Alpharma Note.
(3) The holders of the Alpharma Note may, at any
time and from time to time, without the
consent of or notice to holders of the
Xxxxxx Notes, without incurring
responsibility to holders of the Xxxxxx
Notes and without impairing or releasing the
obligations of holders of the Xxxxxx Notes
hereunder to the holders of the Alpharma
Note: (A) change the manner, place or terms
of payment or change or extend the time of
payment of, or renew or alter, the Alpharma
Note, or otherwise amend in any manner the
Alpharma Note or any instrument evidencing
the same or any agreement under which the
Alpharma Note is outstanding; (B) sell,
exchange, release or otherwise deal with any
Property pledged, mortgaged or otherwise
securing the Alpharma Note; (C) release any
Person liable in any manner for the
collection of the Alpharma
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Note; and/or (D) exercise or refrain from
exercising any rights against the Company
and any other Person.
Nothing contained in this Section 2 will limit the right of holders of
the Alpharma Note or the Xxxxxx Notes to take any action to accelerate
the maturity of Senior Indebtedness, the Alpharma Note or the Xxxxxx
Notes or to pursue any rights or remedies hereunder.
2.4 Acceleration of Securities. If payment of the Alpharma
Note or Xxxxxx Notes is accelerated because of an event of default, the Company
shall promptly notify holders of Senior Indebtedness of the acceleration. If
payment of the Xxxxxx Notes is accelerated because of an event of default, the
Company shall promptly notify Alpharma.
2.5 Notice by Company. The Company shall promptly notify (a)
holders of the Alpharma Note or the Xxxxxx Notes, as applicable, in writing of
any facts known to the Company that would cause a payment of principal of or
interest on the Alpharma Note or the Xxxxxx Notes, as applicable, to violate
this Section, but failure to give such notice shall not affect the subordination
of the Alpharma Note and the Xxxxxx Notes, as applicable, to the Senior
Indebtedness as provided in this Section or the subordination of the Xxxxxx
Notes to the Alpharma Note as provided in this Section.
2.6 Subrogation. (1) After all Senior Indebtedness is paid in
full in cash and until the Alpharma Note and the Xxxxxx Notes are paid in full
in cash, holders of the Alpharma Note and the Xxxxxx Notes shall be subrogated
to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to holders of the Alpharma Note and the Xxxxxx Notes have been applied
to the payment of Senior Indebtedness. A distribution made under this Section to
holders of Senior Indebtedness which otherwise would have been made to holders
of the Alpharma Note and the Xxxxxx Notes is not, as between the Company and
holders of the Alpharma Note and the Xxxxxx Notes, a payment by the Company on
Senior Indebtedness.
(2) In the event of a Negative Equity Position, after such
portion of the Alpharma Note equal in principal amount to the amount of such
Negative Equity Position is paid in full in cash and until the Xxxxxx Notes are
paid in full in cash, holders of the Xxxxxx Notes shall be subrogated to the
rights of holders of the Alpharma Note to receive distributions applicable to
the Alpharma Note to the extent that distributions otherwise payable to holders
of the Xxxxxx Notes have been applied to the payment of the Alpharma Note. A
distribution made under this Section to holders of the Alpharma Note which
otherwise would have been made to holders of the Xxxxxx Notes is not, as between
the Company and such holders, a payment by the Company on the Alpharma Note.
2.7 Relative Rights. This Section 2 defines the relative
rights of Alpharma, the Original Lenders and holders of Senior Indebtedness.
Nothing in this Agreement shall:
(1) affect the relative rights of Alpharma, the
Original Lenders and creditors of the
Company other than holders of Senior
Indebtedness; or
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(2) prevent Alpharma or the Original Lenders
from exercising their available remedies
upon a Default or Event of Default, subject
to the rights of holders of Senior
Indebtedness and, where applicable, holders
of the Alpharma Note to receive
distributions otherwise payable to holders
of the Alpharma Note or the Xxxxxx Notes.
If the Company fails because of this Section to pay principal of or
interest on the Alpharma Note or the Xxxxxx Notes on the due date, the
failure is still a default or event of default.
2.8 Subordination May Not Be Impaired by Company. No right of
any holder of Senior Indebtedness to enforce the subordination of the
indebtedness evidenced by the Alpharma Notes or the Xxxxxx Notes shall be
impaired by any act or failure to act by the Company or by its failure to comply
with this Agreement. No right of any holder of the Alpharma Note to enforce the
subordination of the indebtedness evidenced by the Xxxxxx Notes shall be
impaired by any act or failure to act by the Company or by its failure to comply
with this Agreement.
2.9 Officers' Certificate. If there occurs an event referred
to in Section 2.2 or 2.3 the Company shall promptly give to Alpharma and the
Original Lenders an Officers' Certificate (on which Alpharma and the Original
Lenders may conclusively rely) identifying all holders of Senior Indebtedness
and the principal amount of Senior Indebtedness then outstanding held by each
such holder and stating the reasons why such Officers' Certificate is being
delivered to Alpharma or the Original Lenders.
2.10 Obligation of Company Unconditional. Nothing contained in
this Section 2 or elsewhere in this Agreement, the Loan Agreement, the May 1998
Securities Purchase Agreement, the Alpharma Note or the Xxxxxx Notes is intended
to or shall impair, as between the Company, its creditors other than holders of
Senior Indebtedness and Alpharma and the Original Lenders, the obligation of the
Company, which is absolute and unconditional, to pay to Alpharma and the
Original Lenders the principal of and interest on the Project Loans, Screened
Project Loans, Alpharma Note and the Xxxxxx Notes, as applicable, as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of Alpharma and the Original
Lenders and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent Alpharma and the
Original Lenders from exercising all remedies otherwise permitted by applicable
law upon default under this Agreement, subject to the rights, if any, under this
Section 2 of the holders of Senior Indebtedness and holders of the Alpharma
Note, in respect of cash, property or securities of the Company received upon
the exercise of any such remedy. Upon any distribution of assets of the Company
referred to in this Section 2, Alpharma and the Original Lenders are entitled to
rely upon any order or decree by any court of competent jurisdiction in which
such dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the liquidating trustee or agent or other Person
making any distribution to Alpharma and the Original Lenders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section 2. Nothing
contained in this Section 2 or
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elsewhere in this Agreement, Project Loans, Screened Project Loans, the Alpharma
Note or the Xxxxxx Notes is intended to or shall affect the obligation of the
Company to make, or prevent the Company from making, at any time except during
the pendency of any dissolution, winding up, liquidation or reorganization
proceeding, and except during the continuance of any default specified in
Section 2.3 (not cured or waived), payments at any time of the principal or of
interest on the Securities.
2.11 This Agreement Not To Prevent Events of Default. The
failure to make a payment of principal of or interest on the Alpharma Note or
the Xxxxxx Notes by reason of any of the provisions of this Section 2 shall not
be construed as preventing the occurrence of an Event of Default or an event of
default under the Alpharma Note or the Xxxxxx Notes.
3. Effect of Failure to Pay. The failure to make any payment
on account of the Alpharma Note or the Xxxxxx Notes by reason of the operation
of any provision of this Agreement shall not be construed as preventing the
occurrence of an event of default under the applicable documents.
4. No Disposition. No holder of the Alpharma Note or the
Xxxxxx Notes will sell, assign, pledge, encumber or otherwise dispose of any of
the Alpharma Note or the Xxxxxx Notes, as the case may be, unless such sale,
assignment pledge, encumbrance or disposition is made expressly subject to this
Agreement.
5. Legends. The Company and the holders of the Alpharma Note
and the Xxxxxx Notes shall cause each instrument or document which now or
hereafter evidences all or any portion of the Alpharma Note and the Xxxxxx Notes
to be conspicuously marked with the following legend:
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF AN AMENDED AND
RESTATED SUBORDINATION AGREEMENT DATED AS OF OCTOBER 15, 1999,
AMONG ASCENT PEDIATRICS, INC., ALPHARMA USPD, INC. AND THE
ORIGINAL LENDERS NAMED THEREIN, WHICH AGREEMENT IS
INCORPORATED HEREIN BY REFERENCE. NOTWITHSTANDING ANY
STATEMENT TO THE CONTRARY CONTAINED IN THIS INSTRUMENT, NO
PAYMENT OF ANY NATURE ON ACCOUNT OF THE OBLIGATIONS HEREUNDER,
WHETHER PRINCIPAL OR INTEREST, SHALL BE MADE, PAID, RECEIVED
OR ACCEPTED EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS OF
SUCH AGREEMENT.
6. Enforcement. The holders of the Alpharma Note and the
Xxxxxx Notes hereby acknowledge that the provisions of this Agreement are
intended to be enforceable at all times,
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whether before or after the commencement of a proceeding in connection with or
premised on the occurrence of a Bankruptcy Event.
7. Successors and Assigns. This Agreement shall be binding
upon the Company, Alpharma and the Original Lenders. This Agreement shall be
freely assignable at any time by Alpharma or the Original Lenders provided any
such assignment is in conjunction with the assignment of the related Alpharma
Note or Xxxxxx Notes.
8. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, EXCEPT FOR ITS RULES RELATING TO THE CONFLICTS OF LAW.
9. Amendments and Waivers. Except as otherwise provided
herein, this Agreement may be changed, modified or waived only by a writing
signed by the Company, Alpharma and the Original Lenders.
10. Further Assurances. The Company, Alpharma and the Original
Lenders each will, at the Company's expense and at any time and from time to
time, promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that the any of
them may request, in order to protect any right or interest granted or purported
to be granted by this Agreement or to enable the holders of the Alpharma Note or
the Xxxxxx Notes to exercise and enforce their rights and remedies hereunder.
11. Notices. All notices, requests, 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:
Notices shall be addressed as follows: (i) if to the Company
or Alpharma, to the addresses set forth in the Loan Agreement; (ii) if to the
Original Lenders, to the addresses set forth in the May 1998 Securities Purchase
Agreement; and (iii) to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 11. A notice not given as provided above shall, if
it is in writing, be deemed given if and when actually received by the party to
whom given.
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IN WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ASCENT PEDIATRICS, INC.
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: Chairman
ALPHARMA USPD, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President-USPD
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. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Managing Director
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XXXXX PARTNERS
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx, General Partner
Xxxxx Partners
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