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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 16, 1999 Commission File No. 000-22347
(Date of earliest event reported)
ASCENT PEDIATRICS, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 04-3047405
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
187 Ballardvale Street, Wilmington, Massachusetts 01887
(Address of principal executive offices) (Zip Code)
(978) 658-2500
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On February 16, 1999, Ascent Pediatrics, Inc. ("Ascent") entered into a
series of agreements with Alpharma, Inc. ("Alpharma") and Alpharma USPD Inc., a
wholly-owned subsidiary of Alpharma ("Alpharma USPD"). Under these agreements
Alpharma USPD will provide up to $40 million in financing to Ascent through a
7.5% convertible subordinated note due in 2004 and 2005. Up to $12 million of
the proceeds can be used for general corporate purposes, with $28 million
reserved for projects and acquisitions intended to enhance the growth of Ascent.
Under these agreements, Alpharma USPD will have the option during a
specified period during the first half of year 2002 to acquire the then
outstanding shares of Ascent for cash at a price to be determined by an
earnings-based formula. Consequently, Ascent has entered into a merger agreement
with one of Ascent's subsidiaries in which the subsidiary will merge with Ascent
(the "Merger") and each share of Ascent's common stock will be converted into
one depositary receipt which will become subject to Alpharma USPD's purchase
option. Ascent intends to apply to have these depositary receipts quoted on the
Nasdaq National Market under its current symbol, ASCT.
The merger agreement and other related transactions, including the
authorization of the purchase option, are subject to the approval of Ascent's
stockholders at a meeting expected to be held in the second quarter of 1999.
Certain shareholders of Ascent represented on the Board of Directors, holding
approximately 43% of the voting capital stock, have agreed to vote their shares
in favor of these agreements.
On or prior to the effectiveness of the Merger, Thomas L. Anderson,
President of Alpharma USPD, will be appointed as a member of the Board of
Directors of Ascent.
Alpharma USPD's option to acquire Ascent for cash in 2002 is at the
higher of $140 million or a price equal to 12.2 times Ascent's 2001 pre-tax
operating income, adjusted to exclude any research and development expense in
excess of $1.5 million and interest on selected securities.
The financing from Alpharma USPD will be in the form of 7.5%
subordinated notes due in 2004 and 2005. Alpharma USPD has agreed to loan $4.0
million of the $40.0 million to Ascent immediately upon the execution of the
agreements. Alpharma USPD's obligation to loan the balance of the $40.0 million
is subject to the approval of Ascent's stockholders of the Merger and additional
conditions. If Alpharma USPD does not exercise its 2002 purchase option, Ascent
will be required to repay the debt in installments from 2004 into 2005. Ascent
will also have the right to repurchase such debt following the expiration of the
purchase option until December 31, 2002 at
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125% of outstanding principal on December 31, 2001 plus accrued interest. If
this right is not exercised, the debt becomes convertible into shares of Ascent
common stock at a conversion price of $7.125 per share.
In connection with the Alpharma-Ascent agreements, funds affiliated
with Furman Selz Investments and BancBoston Ventures have agreed to amend
certain terms and rights held by them relating to the shares of Series G
Convertible Exchangeable Preferred Stock of Ascent, 8% seven-year subordinated
notes (the "Subordinated Notes") and warrants (the "Warrants") to purchase
2,116,958 shares of common stock of Ascent which were acquired by such funds
from Ascent on June 1, 1998. In return, Ascent has agreed to reduce the exercise
price of the Warrants held by such funds to $3.00 from $4.75 per share and issue
an additional 300,000 shares at a price of $3.00 per share. These investors have
agreed to exercise all these Warrants and purchase the additional shares by
surrendering approximately $7.2 million in Subordinated Notes held by the
investors. The reduction in the exercise price of the Warrants and the issuance
of these shares are also subject to stockholder approval.
A copy of the press release announcing the Ascent-Alpharma agreements
have been filed with this Current Report on Form 8-K as Exhibit 99.1 and is
incorporated herein by reference.
ITEM 7. EXHIBITS
2.1 Agreement and Plan of Merger dated as of February 16, 1999 by
and between the Company and Bird Merger Corporation.
4.1 Form of Depositary Receipt (included in Exhibit 10.2).
4.2 Form of 7.5% Convertible Subordinated Note (included in
Exhibit 10.4).
10.2 Depositary Agreement dated as of February 16, 1999 by and
among the Company, Alpharma USPD Inc. ("Alpharma") and State
Street Bank and Trust Company (included in Exhibit 2.1).
10.3 Master Agreement dated as of February 16, 1999 by and among
the Company, Alpharma and Alpharma, Inc. ("Parent") (included
in Exhibit 2.1).
10.4 Loan Agreement dated as of February 16, 1999 by and among the
Company, Alpharma and Parent.
10.5 Guaranty Agreement dated as of February 16, 1999 by and
between the Company and Parent.
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10.6 Subordination Agreement dated as of February 16, 1999 by and
among the Company, Alpharma and the Original Lenders (as
defined therein).
10.7 Registration Rights Agreement dated as of February 16, 1999 by
and between the Company and Alpharma.
10.8 Second Amendment dated as of February 16, 1999 to the Series G
Securities Purchase Agreement dated as of May 14, 1998 by and
among the Company and the Purchasers named therein.
99.1 Press release dated February 16, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 22, 1999 ASCENT PEDIATRICS, INC.
/s/ John G. Bernardi
------------------------------------
John G. Bernardi
Vice President, Finance and Treasurer
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INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
--- -----------
2.1 Agreement and Plan of Merger dated as of February 16, 1999 by
and between the Company and Bird Merger Corporation.
4.1 Form of Depositary Receipt (included in Exhibit 10.2).
4.2 Form of 7.5% Convertible Subordinated Note (included in
Exhibit 10.4).
10.2 Depositary Agreement dated as of February 16, 1999 by and
among the Company, Alpharma USPD Inc. ("Alpharma") and State
Street Bank and Trust Company (included in Exhibit 2.1).
10.3 Master Agreement dated as of February 16, 1999 by and among
the Company, Alpharma and Alpharma, Inc. ("Parent") (included
in Exhibit 2.1).
10.4 Loan Agreement dated as of February 16, 1999 by and among the
Company, Alpharma and Parent.
10.5 Guaranty Agreement dated as of February 16, 1999 by and
between the Company and Parent.
10.6 Subordination Agreement dated as of February 16, 1999 by and
among the Company, Alpharma and the Original Lenders (as
defined therein).
10.7 Registration Rights Agreement dated as of February 16, 1999 by
and between the Company and Alpharma.
10.8 Second Amendment dated as of February 16, 1999 to the Series G
Securities Purchase Agreement dated as of May 14, 1998 by and
among the Company and the Purchasers named therein.
99.1 Press release dated February 16, 1999.
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
ASCENT PEDIATRICS, INC.
AND
BIRD MERGER CORPORATION
February 16, 1999
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of February 16, 1999 by and between Ascent
Pediatrics, Inc., a Delaware corporation (the "Company"), and Bird Merger
Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company
(the "Transitory Subsidiary"). The Company and the Transitory Subsidiary are
referred to collectively herein as the "Parties."
This Agreement has been entered into concurrently with and pursuant to
a Master Agreement, substantially in the form of Exhibit A attached hereto (the
"Master Agreement"), entered into between the Company, Alpharma, Inc., a
Delaware corporation ("Parent"), and Alpharma USPD Inc., a Maryland corporation
and wholly-owned subsidiary of Parent ("Alpharma").
This Agreement contemplates a tax-free merger of the Transitory
Subsidiary into the Company. In such merger, the stockholders of the Company
will receive the consideration set forth herein in exchange for their capital
stock of the Company.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary (which at all times shall have no assets or
business operations and shall exist solely for the purpose of effecting the
Merger) shall merge with and into the Company (with such merger referred to
herein as the "Merger") at the Effective Time (as defined below). From and after
the Effective Time, the separate corporate existence of the Transitory
Subsidiary shall cease and the Company shall continue as the surviving
corporation in the Merger (the "Surviving Corporation"). The "Effective Time"
shall be the time at which the Company and the Transitory Subsidiary file the
certificate of merger or other appropriate documents prepared and executed in
accordance with the relevant provisions of the Delaware General Corporation Law
with the Secretary of State of the State of Delaware (the "Certificate of
Merger").
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur concurrently with the Closing Date (as
defined in the Master Agreement) and shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, MA 02109, commencing at 9:00 a.m. local time
on such date as the Company, the Transitory Subsidiary and Alpharma shall agree
(or at such other
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place and/or time and/or on such other date as the Company, the Transitory
Subsidiary and Alpharma may agree).
1.3 Actions at the Closing. At the Closing, (a) the Company and the
Transitory Subsidiary shall file with the Secretary of State of the State of
Delaware the Certificate of Merger, and (b) the Depositary (as defined below)
shall deliver on the Company's behalf Depositary Receipts (as defined below) to
a bank or trust company or other entity appointed by the Company to act as the
exchange agent in accordance with Section 1.5.
1.4 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any Party or the holder of any of
the following securities:
(a) Each share of common stock, $.00004 par value per share,
of the Company ("Old Common Stock") issued and outstanding immediately prior to
the Effective Time (other than shares of Old Common Stock held in the Company's
treasury and Dissenting Shares (if applicable and as defined in Section 1.7))
shall be converted into and represent the right to receive one depositary share
(a "Depositary Share") issued pursuant to the Depositary Agreement (the
"Depositary Agreement") dated as of the date hereof by and among the Company,
Alpharma and State Street Bank and Trust Company (the "Depositary"),
substantially in the form of Exhibit B attached hereto (such Depositary Shares
being referred to herein as the "Merger Consideration"). Each Depositary Share
shall evidence one share of common stock, $.00004 par value per share, of the
Surviving Corporation ("New Common Stock"), subject to the Call Option (as such
term is defined in the Depositary Agreement), and shall be represented by a
depositary receipt (a "Depositary Receipt").
(b) Each share of Old Common Stock held in the Company's
treasury immediately prior to the Effective Time shall be cancelled and retired
without payment of any consideration therefor.
(c) Each share of common stock, $.01 par value per share, of
the Transitory Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and thereafter evidence the right to
receive $.01 per share.
1.5 Exchange of Shares
(a) Prior to the Effective Time, the Company shall appoint
State Street Bank and Trust Company or another mutually acceptable bank or trust
company as agent (the "Exchange Agent") for the purpose of exchanging
certificates representing shares of Old Common Stock outstanding prior to the
Effective Time for the Merger Consideration. At or prior to the Effective Time,
the Company shall deposit with the Depositary a number of shares of New Common
Stock equal to the
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number of shares of Old Common Stock outstanding immediately prior to the
Effective Time, and the Depositary shall, in turn, deposit with the Exchange
Agent Depositary Receipts representing the number of Depositary Shares
corresponding to the number of shares of New Common Stock so deposited. Promptly
after the Effective Time, the Surviving Corporation shall cause the Exchange
Agent to send to each holder of shares of Old Common Stock at the Effective Time
a letter of transmittal in customary form for use in such exchange (which shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the certificates representing shares of Old
Common Stock to the Exchange Agent).
(b) Each holder of shares of Old Common Stock that have been
converted into a right to receive the Merger Consideration, upon surrender to
the Exchange Agent of a certificate or certificates formerly representing such
shares of Old Common Stock together with a duly executed letter of transmittal
covering such shares of Old Common Stock, shall be entitled to receive the
Merger Consideration payable in respect of such shares of Old Common Stock.
After the Effective Time, each such certificate shall, until so surrendered,
represent for all purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be issued
to a person other than the registered holder of the shares of Old Common Stock
represented by the certificate or certificates surrendered in exchange therefor,
it shall be a condition to such issuance that the certificate or certificates so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such issuance shall pay the Exchange
Agent any transfer or other taxes required as a result of such issuance to a
person other than the registered holder of such shares of Old Common Stock or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Old Common Stock outstanding prior to the
Effective Time. If, after the Effective Time, certificates representing shares
of Old Common Stock outstanding prior to the Effective Time are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article I.
(e) Any portion of the Merger Consideration deposited with the
Exchange Agent in accordance with this Section 1.5 that remains unclaimed by the
holders of shares of Old Common Stock one year after the Effective Time shall be
returned upon demand to the Depositary, who shall return underlying shares of
New Common Stock to the Surviving Corporation in accordance with the Depositary
Agreement, and any such holder who has not exchanged his shares of Old Common
Stock for Depositary Shares in accordance with this Article I prior to that time
shall
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thereafter look only to the Surviving Corporation for payment of the Merger
Consideration in respect of his shares of Old Common Stock, but shall have no
greater rights against the Surviving Corporation than may be accorded to its
general creditors under applicable law. Notwithstanding the foregoing, the
Surviving Corporation shall not be liable to any holder of shares of Old Common
Stock for any shares of New Common Stock issued to a public official pursuant to
applicable abandoned property laws. Any portion of the Merger Consideration
remaining unclaimed by holders of shares of Old Common Stock as of a date which
is immediately prior to such time as such amounts would otherwise escheat to or
become property of any government entity shall, to the extent permitted by
applicable law, become property of the Surviving Corporation, free and clear of
any claims or interest of any person previously entitled thereto.
(f) No dividends, interest or other distributions with respect
to the Merger Consideration shall be paid to the holder of any unsurrendered
certificates representing shares of Old Common Stock outstanding prior to the
Effective Time until such certificates are surrendered as provided in this
Section. Upon such surrender, there shall be paid, without interest, to the
person in whose name the certificates representing the Merger Consideration into
which such shares of Old Common Stock were converted are registered, all
dividends, interest and other distributions payable in respect of such
securities on any date subsequent to, and in respect of a record date after, the
Effective Time.
(g) The Depositary Receipts and the share certificates
evidencing the shares of New Common Stock deposited with the Depositary shall
bear the following legend:
THE [SHARES OF COMMON STOCK EVIDENCED BY THE DEPOSITARY SHARES
REPRESENTED HEREBY/SHARES OF COMMON STOCK EVIDENCED HEREBY] ARE SUBJECT TO A
CALL OPTION PURSUANT TO A DEPOSITARY AGREEMENT DATED FEBRUARY 16, 1999 AMONG
ASCENT, ALPHARMA USPD INC. AND STATE STREET BANK AND TRUST COMPANY. A COPY OF
THIS AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF ASCENT.
1.6 Treatment of Convertible Securities, Warrants and Options.
(a) Effective as of the Effective Time, each convertible
security, warrant or option of the Company outstanding as of the Effective Time,
whether or not then vested, convertible or exercisable, shall (when vested,
convertible or exercisable in accordance with the terms thereof) be convertible
into or exercisable for a number of Depositary Shares or shares of New Common
Stock, as determined in accordance with Section 1.6(b), equal to the number of
shares of Old Common Stock
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issuable upon conversion or exercise of such convertible security, warrant or
option in accordance with the terms thereof.
(b) From and after the Effective Time until the Option
Determination Date (as defined in the Depositary Agreement), from time to time
upon the conversion or exercise of any convertible security, warrant or option
of the Surviving Corporation, the Surviving Corporation shall deposit with the
Depositary a number of shares of New Common Stock corresponding to the number of
Depositary Shares issuable upon conversion or exercise of such convertible
security, warrant or option, and the Surviving Corporation shall cause the
Depositary to issue to the holder of such convertible security, warrant or
option upon such conversion or exercise, Depositary Receipts representing the
number of Depositary Shares issuable upon conversion or exercise of such
convertible security, warrant or option. From and after the Option Closing Date
(as defined in the Depositary Agreement), holders of any outstanding convertible
securities, warrants or options of the Surviving Corporation shall have the
right to receive from the Surviving Corporation upon conversion or exercise
thereof (and the payment of any exercise or purchase price provided for under
the terms of such convertible security, warrant or option) cash in an amount
equal to the Option Exercise Price (as defined in the Depositary Agreement) for
each Depositary Share for which such convertible security, warrant or option is
convertible or exercisable. From and after the Option Expiration Date (as
defined in the Depositary Agreement), such holders shall have the right to
receive from the Surviving Corporation upon conversion or exercise of such
convertible securities, warrants or options shares of New Common Stock.
(c) Prior to the Effective Time, the Company shall make any
amendments to the respective terms of any convertible security, warrant or
option of the Company then outstanding or the Company's 1992 Stock Incentive
Plan, 1997 Director Stock Option Plan or 1997 Employee Stock Purchase Plan that
are necessary or advisable to give effect to the transactions contemplated by
this Section 1.6, including without limitation providing that all references
therein to Old Common Stock be deemed to be references to Depositary Shares.
1.7 Dissenting Shares. If appraisal rights are available under Section
262 of the Delaware General Corporation Law, shares of Old Common Stock held as
of the Effective Time by a stockholder of the Company who has not voted such
shares of Old Common Stock in favor of the adoption of this Agreement and the
Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Section 262 of the Delaware General Corporation Law
and not effectively withdrawn or forfeited prior to the Effective Time
("Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration, unless such stockholder shall have forfeited
his right to appraisal under the Delaware General Corporation Law or withdrawn,
with the consent of the Surviving Corporation, his demand for appraisal. If such
stockholder has so forfeited or
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withdrawn his right to appraisal of Dissenting Shares, then (a) as of the
occurrence of such event, such stockholder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Consideration issuable pursuant to Section 1.4(a) in respect of such
shares of Old Common Stock held by such stockholder, (b) promptly following the
occurrence of such event, the Surviving Corporation shall deposit with the
Depositary a number of shares of New Common Stock equal to the number of shares
of Old Common Stock held by such stockholder, and (c) the Depositary shall, in
turn, deposit with the Exchange Agent Depositary Receipts representing the
number of Depositary Shares corresponding to the number of shares of New Common
Stock so deposited.
1.8 Call Option. The shares of New Common Stock shall be subject to a
Call Option exercisable upon the terms and conditions set forth in the
Depositary Agreement.
1.9 No Further Rights. From and after the Effective Time, no shares of
Old Common Stock shall be deemed to be outstanding, and holders of shares of Old
Common Stock shall cease to have any rights with respect thereto, except as
provided herein or by law.
ARTICLE II
SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of
the Surviving Corporation shall be the same as the Certificate of Incorporation
of the Company, except that such Certificate of Incorporation shall be amended
in the Merger in the manner set forth in Exhibit C attached hereto.
2.2 By-laws. The By-laws of the Surviving Corporation shall be the same
as the By-laws of the Company.
2.3 Directors and Officers. The directors of the Company at the
Effective Time shall be the directors of the Surviving Corporation, until their
successors are duly elected or appointed and qualified in accordance with
applicable law, and the officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation.
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ARTICLE III
CONDITIONS TO CONSUMMATION OF MERGER
3.1 Conditions to Each Party's Obligations. The respective obligations
of each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) The Company's stockholders shall have approved and adopted
this Agreement (including the exhibits attached hereto) and the Merger; and
(b) A Registration Statement of the Company on Form S-4 (the
"Registration Statement") registering the Depositary Shares and the underlying
shares of New Common Stock shall have been filed with the Securities and
Exchange Commission (the "SEC") and become effective in accordance with the
provisions of the Securities Act of 1933, as amended, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect.
ARTICLE IV
MISCELLANEOUS
4.1 Succession. At the Effective Time, the Surviving Corporation shall
succeed to all of the rights, privileges, debts, liabilities, powers and
property of the Company and the Transitory Subsidiary in the manner of and as
more fully set forth in Section 259 of the Delaware General Corporation Law.
Without limiting the foregoing, at the Effective Time, all property, rights,
privileges, franchises, patents, trademarks, licenses, registrations and other
assets of every kind and description of the Company and the Transitory
Subsidiary shall be transferred to, vested in and devolved upon the Surviving
Corporation without further act or deed, and all property, rights and every
other interest of the Company and the Transitory Subsidiary shall be as
effectively the property of the Surviving Corporation as they were of the
Company and the Transitory Subsidiary, respectively. All rights of creditors of
the Company and the Transitory Subsidiary and all liens upon any property of the
Company and the Transitory Subsidiary shall be preserved unimpaired, and all
debts, liabilities and duties of the Company and the Transitory Subsidiary shall
attach to the Surviving Corporation and may be enforced against it to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by it.
4.2 Further Assurances. From time to time, as and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and
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delivered on behalf of the Company or the Transitory Subsidiary such deeds and
other instruments, and there shall be taken or caused to be taken by it such
further and other action, as shall be appropriate or necessary in order to vest
or perfect in or to confirm of record or otherwise in the Surviving Corporation
the title to and possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of the Company and the
Transitory Subsidiary, and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Company and the Transitory
Subsidiary are fully authorized in the name and on behalf of the Company or the
Transitory Subsidiary, as the case may be, or otherwise to take any and all such
action and to execute and deliver any and all such deeds and other instruments.
4.3 Abandonment. At any time prior to the Effective Time, if the Master
Agreement has been terminated, this Agreement may be terminated and the Merger
may be abandoned by the Board of Directors of either the Company or the
Transitory Subsidiary or both, notwithstanding approval of this Agreement by the
stockholders of the Company or the Transitory Subsidiary.
4.4 Amendment. This Agreement may be amended by the Boards of Directors
of the Company and the Transitory Subsidiary at any time prior to the Effective
Time, provided that such amendment shall have been consented to by Alpharma; and
provided further that an amendment made subsequent to the approval of this
Agreement by the stockholders of either the Company or the Transitory Subsidiary
shall not (i) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such corporation, (ii) alter
or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of the stock of such
corporation.
4.5 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Delaware, without giving effect to the principles of conflicts of law
thereof.
4.6 Counterparts. In order to facilitate the filing and recording of
this Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original.
[REMAINDER OF PAGE LEFT BLANK.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement and Plan of Merger to be executed and attested on its behalf of its
officers thereunto duly authorized, as of the date first above written.
ASCENT PEDIATRICS, INC.
By: /s/Emmett Clemente
---------------------------------
Chairman
BIRD MERGER CORPORATION
By: /s/Alan R. Fox
---------------------------------
President
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I, ___________________, Secretary of Ascent Pediatrics, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), hereby certify that the Agreement and Plan of Merger to which this
certificate is attached, after having been duly signed on behalf of the Company
and having been signed on behalf of Bird Merger Corporation, a corporation
organized and existing under the laws of the State of Delaware, was duly
submitted to the stockholders of the Company at a meeting of said stockholders
pursuant to Section 251 of the General Corporation Law of Delaware; and that the
Agreement and Plan of Merger was approved at said meeting by the affirmative
vote of stockholders representing at least a majority of the outstanding stock
of the Company entitled to vote thereon.
WITNESS my hand on this _____ day of ____________, 1999.
------------------------------------
Secretary
I, John G. Bernardi, Secretary of Bird Merger Corporation, a
corporation organized and existing under the laws of the State of Delaware
("Transitory Subsidiary"), hereby certify that the Agreement and Plan of Merger
to which this certificate is attached, after having been duly signed on behalf
of Transitory Subsidiary and having been signed on behalf of Ascent Pediatrics,
Inc., a corporation organized and existing under the laws of the State of
Delaware, was duly submitted to the sole stockholder of Transitory Subsidiary by
written action of said stockholder pursuant to Section 251 of the General
Corporation Law of Delaware and that by said written action the Agreement and
Plan of Merger was approved by the affirmative vote of the sole stockholder
representing at least a majority of the outstanding stock of Transitory
Subsidiary entitled to vote thereon.
WITNESS my hand on this ____ day of ________________, 1999.
------------------------------------
Secretary
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EXHIBIT A
MASTER AGREEMENT
BY AND AMONG
ASCENT PEDIATRICS, INC.,
ALPHARMA, INC.
AND
ALPHARMA USPD INC.
FEBRUARY 16, 1999
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MASTER AGREEMENT dated as of February 16, 1999 among Ascent Pediatrics,
Inc., a Delaware corporation (the "Company"), Alpharma, Inc., a Delaware
corporation ("Parent"), and Alpharma USPD Inc., a Maryland corporation and
wholly owned subsidiary of Parent ("Alpharma").
WHEREAS, the Company and Bird Merger Corporation, a Delaware corporation
and wholly owned subsidiary of the Company ("Transitory Subsidiary"), have
entered into an Agreement and Plan of Merger dated as of February 16, 1999 (the
"Merger Agreement"), pursuant to which, among other things:
(i) Transitory Subsidiary shall be merged (the "Merger")
with and into the Company;
(ii) each share of common stock, $.00004 par value per
share, of the Company issued and outstanding immediately prior to the
Effective Time (as defined in the Merger Agreement) (the "Old Common
Stock") (other than shares of Old Common Stock held in the Company's
treasury and shares of Old Common Stock as to which appraisal rights have
been perfected by the holders thereof (if such rights are available under
Section 262 of the Delaware General Corporation Law)) shall be converted
in the Merger into and represent the right to receive one depositary
share (a "Depositary Share") issued pursuant to the Depositary Agreement,
each Depositary Share evidencing one share of common stock, $.00004 par
value per share, of the Company following the Merger (the "New Common
Stock"), represented by a depositary receipt ("Depositary Receipt") and
subject to the right and option of the Company (the "Call Option"), upon
the terms and conditions set forth in the Depositary Agreement (as
defined below), to purchase all of the outstanding shares of New Common
Stock of the Company deposited with the Depositary (as defined below);
(iii) each share of common stock, $.01 par value per share,
of Transitory Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted in the Merger into and thereafter
evidence the right to receive $.01 per share; and
WHEREAS, Alpharma and the Company have entered into a Loan Agreement
dated as of February 16, 1999 (the "Loan Agreement") pursuant to which Alpharma
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, as a condition to, and as additional consideration for, Alpharma
agreeing to make Loans (as defined below), the Company desires to assign the
Call Option to Alpharma; and
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WHEREAS, the Company, Alpharma, and State Street Bank and Trust Company
(the "Depositary") have entered into a Depositary Agreement dated as of February
16, 1999 (the "Depositary Agreement") providing for (i) the terms and conditions
pursuant to which the Company may exercise the Call Option prior to the transfer
of the Call Option to Alpharma and (ii) the terms and conditions pursuant to
which Alpharma may exercise the Call Option from and after the transfer of the
Call Option to Alpharma;
NOW, THEREFORE, in consideration of the premises, it is agreed by and
among the parties hereto as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 DEFINITIONS.
"Affiliate" shall have the meaning ascribed to it in Rule 405 promulgated
under the Securities Act.
"Alpharma Director" has the meaning set forth in Section 6.5(a) of the
Loan Agreement.
"Ancillary Agreements" shall mean the Depositary Agreement, the Loan
Agreement, the Registration Rights Agreement and the Subordination
Agreement dated as of February 16, 1999 by and among the Company,
Alpharma and the Purchasers (as defined in the May 1998 Securities
Purchase
Agreement).
"Board of Directors" means the Board of Directors of the Company or any
committee of the Board of Directors authorized to act for it hereunder.
"Business Day" means any day which is neither a Saturday nor a Sunday nor
a legal holiday on which banks are authorized or required to be closed in
Boston, Massachusetts, New York, New York or in any other city in which
the Depositary's Office (as defined in the Depositary Agreement) is
located.
"Capital Stock" means any and all shares, interests, participations or
other equivalents of or interests in (however designated) equity of the
Company, including any preferred stock, but excluding any debt securities
convertible into such equity prior to such conversion.
"Change in Control" 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 Alpharma 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 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 has occurred;
(b) Persons who, as of the Closing Date constitute all of
the Non-Alpharma Directors (the "Non-Alpharma Incumbent
Directors") cease for any reason to constitute at least a majority
of the Non- Alpharma Directors then in office, provided that any
Person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
Non-Alpharma Incumbent Directors shall be considered as though
such Person were one of the Non-Alpharma 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 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 exchange
of convertible securities, options, warrants or rights that are
then outstanding; or
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(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.
"Closing" has the meaning set forth in Section 2.1 of this Agreement.
"Closing Date" has the meaning set forth in Section 2.1 of this
Agreement.
"Common Stock" means (i) prior to the Effective Time (as defined in the
Merger Agreement), the Old Common Stock, and (ii) at and after the
Effective Time, the New Common Stock.
"Company" means the party named as such above until a successor replaces
it pursuant to the applicable provision hereof and thereafter means the
successor to such party.
"Depositary Agreement" shall have the meaning ascribed to it in the
Preamble to this Master Agreement.
"Effective Time" shall have the meaning ascribed to it in the Merger
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning set forth in Section 3.7(a) of the
Loan Agreement.
"First Loan" has the meaning set forth in Section 2.3 of the Loan
Agreement.
"Forty Percent Limit" has the meaning set forth in Section 6.1 of this
Agreement.
"GAAP" means U.S. generally accepted accounting principles as in effect
from time to time.
"Guaranty Agreement" means the Guaranty Agreement dated as of February
16, 1999 between the Company and the Parent.
"Indebtedness" means and includes:
(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
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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.
"Intellectual Property" has the meaning set forth in Section 3.11(a) of
the Loan Agreement.
"Lien" means any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on 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 of up to a maximum principal
amount of $40,000,000 from Alpharma pursuant to Section 2.1 of the Loan
Agreement and the other terms and conditions of the Loan Agreement.
"Loan Agreement" shall have the meaning ascribed to it in the Preamble to
this Master Agreement.
"Material Adverse Effect" means any 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 or Alpharma, as the case
may be, and its Subsidiaries taken as a whole.
"May 1998 Securities Purchase Agreement" means the Series G Securities
Purchase Agreement dated as of May 13, 1998 by and among the Company and
the Purchasers named in Schedule I thereto, as amended.
"Merger" has the meaning set forth in the Preamble to this Agreement.
"Merger Agreement" has the meaning set forth in the Preamble to this
Agreement.
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"Merger Consideration" has the meaning set forth in Section 1.4(a) of the
Merger Agreement.
"New Common Stock" has the meaning set forth in the preamble to this
Agreement.
"Non-Alpharma Directors" has the meaning set forth in Section 6.3 of this
Agreement.
"Note" means the note to be issued by the Company to Alpharma pursuant to
Section 2.2(a) of the Loan Agreement, provided however, that in the event
that Alpharma exchanges all or a portion of the Note for one or more
Notes in accordance with Section 2.2(c) of the Loan Agreement or
transfers all or a portion of the Note in accordance with Article XII of
the Loan Agreement, all references to the Note in this Agreement shall be
deemed to include the Notes issued by the Company upon such exchange or
transfer.
"Note Conversion Shares" has the meaning set forth in Section 3.4(b) of
the Loan Agreement.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Old Common Stock" has the meaning set forth in the preamble to this
Agreement.
"Option Determination Date" has the meaning set forth in the Depositary
Agreement.
"Option Expiration Date" has the meaning set forth in the Depositary
Agreement.
"Person" means any individual, corporation, association, company,
business trust, partnership, joint venture, joint-stock company, limited
liability company, trust, unincorporated organization or association or
government or any agency or political subdivision thereof.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
"Proxy Statement/Prospectus" has the meaning set forth in Section 4.1 of
this Agreement.
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"Registration Rights Agreement" means the Registration Rights Agreement
dated as of February 16, 1999 between the Company and Alpharma.
"S-4 Registration Statement" has the meaning set forth in Section 4.2 of
this Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Second Amendment" shall mean the Second Amendment dated as of February
16, 1999 to the May 1998 Securities Purchase Agreement.
"Securities" means the Note and the Note Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Standstill Period" has the meaning set forth in Section 6.1 of this
Agreement.
"Stockholder Meeting" has the meaning set forth in Section 4.1 of this
Agreement.
"Subsidiary" of a Person means any corporation, association, partnership,
joint venture or other business entity of which more than fifty percent
(50%) of the Voting Capital 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.
"Voting Capital Stock" means the Capital Stock of the Company entitled to
vote generally in the election of directors.
The term "to the knowledge of" or derivatives thereof shall mean the
actual knowledge of the Chief Executive Officer or the Vice President,
Finance of the Company.
1.2 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;
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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 II
THE CLOSING
2.1 THE CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall occur within five days after the
satisfaction or waiver of all of the conditions to the obligations of the
parties hereunder, including without limitation the conditions set forth
in Article V hereof and in Section 4.2 of the Loan Agreement (the date of
such Closing being referred to as the "Closing Date").
2.2 ACTIONS AT THE CLOSING. At the Closing, (a) the Company shall deliver to
Alpharma the certificates, instruments and documents referred to in
Section 5.2(j), (b) the Company shall file with the Secretary of State of
the State of Delaware the Certificate of Merger and (c) following the
Effective Time of the Merger, Alpharma and the Company shall take such
other actions as are provided in this Agreement, the Merger Agreement and
the Ancillary Agreements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 COMPANY REPRESENTATIONS AND WARRANTIES. The Company has made certain
representations and warranties to Alpharma pursuant to Article III of the
Loan Agreement, which representations and warranties are incorporated
herein by reference. The Company hereby confirms that such
representations and warranties are true and correct in all respects as of
the date hereof as if included herein.
3.2 ALPHARMA REPRESENTATIONS AND WARRANTIES. Alpharma represents and
warrants to the Company that:
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(a) it is an "accredited investor" as that term is defined in Rule
501(a) promulgated under the Securities Act,
(b) it has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks
of an investment in the Company,
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management,
(d) it is acquiring the Securities 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 Alpharma has no present or
contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof,
(e) it is not in material breach or violation of, or in default under,
any term or provision of (i) its Certificate of Incorporation or
Bylaws, (ii) any indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note agreement 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 with respect to Alpharma, or (iii) any statute, judgment,
decree, order, rule or regulation applicable to Alpharma or of any
arbitrator, court, regulatory body, administrative agency or any
other governmental agency or body, domestic or foreign, having
jurisdiction over Alpharma or any of its 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 with respect to Alpharma,
(f) it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company,
(g) it understands that the Securities have not been registered under
the Securities Act and it will not offer, sell, transfer, pledge,
hypothecate or otherwise dispose of any Securities 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,
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(h) it has full power and authority to execute, deliver and perform
this Agreement and the Ancillary Agreements,
(i) the Person executing this Agreement and the Ancillary Agreements
on behalf of Alpharma has the appropriate authority to act on
behalf of Alpharma,
(j) it has full power and authority to execute and deliver this
Agreement, the Ancillary Agreements and such other documents
furnished or to be furnished by Alpharma hereunder, this Agreement
and the Ancillary Agreements have each been duly authorized,
executed and delivered by Alpharma and each constitutes a legal,
valid and binding agreement of Alpharma, enforceable against
Alpharma 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,
(k) the compliance by Alpharma with the provisions of this Agreement
and the Ancillary Agreements and the consummation of the other
transactions contemplated hereby or thereby will not result in the
creation or imposition of any lien, charge, security interest or
encumbrance upon any of the assets of Alpharma 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 Alpharma, (ii) any contract or other agreement to which
Alpharma is a party or by which Alpharma or any of its respective
properties is bound, 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 Alpharma, except, with respect to clauses (ii) and
(iii), in circumstances that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect with respect to Alpharma,
(l) it has not employed any broker or finder in connection with the
transactions contemplated by this Agreement or the Ancillary
Agreements,
(m) it acknowledges receipt of, and the opportunity to review, the
information that it believes necessary to make an investment in
the Securities, including, without limitation, the Financial
Statements and
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the other documents referenced in the Loan Agreement as having
been delivered to Alpharma by the Company,
(n) there is no action, suit, proceeding or investigation pending, or,
to the knowledge of Alpharma, threatened, against Alpharma before
or by any court, regulatory body or administrative agency or any
other governmental agency or body, domestic or foreign, or any
action, suit, proceeding or investigation pending, or, to the
knowledge of Alpharma, threatened, which challenges the validity
of any action taken or to be taken pursuant to or in connection
with this Agreement and the Ancillary Agreements or the issuance
of the Note or the Note Conversion Shares, which would not
reasonably be expected to have a Material Adverse Effect with
respect to Alpharma, and
(o) Alpharma (i) is duly incorporated, validly existing and in good
standing under the laws of the State of Maryland, and has all
requisite corporate power and authority to carry on its business
as now conducted and proposed to be conducted, and (ii) 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 with the
respect to Alpharma).
ARTICLE IV
STOCKHOLDER MEETING; PROXY MATERIAL;
REGISTRATION STATEMENT; STOCK LISTING; INDEMNIFICATION
4.1 Stockholder Meeting; Proxy Material. The Company shall cause a meeting of
its stockholders (the "Stockholder Meeting") to be duly called and held
as soon as reasonably practicable for the purpose of voting on the
approval and adoption of (i) the Merger Agreement (including the exhibits
attached thereto) and the transactions contemplated thereby, including
the Merger, and (ii) the Second Amendment and the transactions
contemplated thereby. The Board of Directors of the Company shall
recommend approval and adoption of (i) the Merger Agreement (including
the exhibits attached thereto) and the transactions contemplated thereby,
including the Merger, and (ii) the Second Amendment and the transactions
contemplated thereby, by the Company's stockholders. In connection with
the Stockholder Meeting, the Company (a) will promptly prepare and file
with the SEC, will use its best efforts to have cleared by the SEC and
will thereafter mail to its stockholders as promptly as
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practicable a proxy statement/prospectus and all other documents which
may be required to be filed or mailed in connection with the Stockholder
Meeting (collectively, the "Proxy Statement/Prospectus") and the
consummation of the transactions contemplated by (i) the Merger Agreement
and (ii) the Second Amendment, (b) will use its best efforts to obtain
the necessary approvals by its stockholders of (i) the Merger Agreement
(including the exhibits attached thereto) and the transactions
contemplated thereby, including the Merger, and (ii) the Second Amendment
and the transactions contemplated thereby, and (c) will otherwise comply
with all legal requirements applicable to the Stockholder Meeting.
4.2 S-4 Registration Statement. Promptly following the resolution to the
satisfaction of the SEC of all SEC comments on the Proxy
Statement/Prospectus (or the expiration of the ten-day period under Rule
14a- 6(a) under the Exchange Act if no SEC comments are received by such
date), the Company shall promptly prepare and file with the SEC, under
the Securities Act, a registration statement on Form S-4 with respect to
the Depositary Shares and the underlying shares of New Common Stock (the
"S-4 Registration Statement") and shall use its best efforts to cause the
S-4 Registration Statement to be declared effective as promptly as
practicable. The Company shall take any action required to be taken under
foreign or state securities or Blue Sky laws in connection with the
issuance of the Merger Consideration.
4.3 Cooperation. Alpharma will provide all information relating to Alpharma
and its Affiliates for use in preparation of the Proxy
Statement/Prospectus and the S-4 Registration Statement. The Company
shall give Alpharma and its counsel reasonable opportunity to review and
comment upon the Proxy Statement/Prospectus and the S-4 Registration
Statement and any amendments thereto prior to the filing thereof with the
SEC and prior to dissemination of the Proxy Statement/Prospectus to the
stockholders of the Company. The Company shall provide Alpharma and its
counsel with a copy of any written comments or telephonic notification of
any verbal comments the Company may receive from the SEC or its staff
with respect to the Proxy Statement/Prospectus and the S-4 Registration
Statement promptly after the receipt thereof, shall permit Alpharma and
its counsel to participate in the preparation of any written responses or
any verbal responses of the Company or its counsel and shall provide
Alpharma and its counsel with a copy of any written responses and
telephonic notification of any verbal responses of the Company or its
counsel. The Company agrees to use its best efforts, after consultation
with Alpharma, to respond promptly to all such comments of or requests by
the SEC and to cause the Proxy Statement/Prospectus and all required
amendments and supplements to be mailed to the stockholders entitled to
vote at the Stockholder Meeting at the earliest practicable time. The
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Proxy Statement/Prospectus shall contain the recommendations of the Board
of Directors of the Company referred to in Section 4.1.
4.4 Indemnification.
(a) The Company will indemnify and hold harmless Alpharma, each of its
directors and officers and each person, if any, who controls
Alpharma within the meaning of the Securities Act and the Exchange
Act against any losses, claims, damages or liabilities, joint or
several, to which Alpharma may become subject under the Securities
Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material
fact contained in the S-4 Registration Statement as of its
effective date or in the Proxy Statement/Prospectus as of the date
on which it is distributed to the Company's stockholders and as of
the date of the Stockholder Meeting, (ii) any omission or alleged
omission to state a material fact required to be stated in the S-4
Registration Statement or necessary to make the statements therein
not misleading as of its effective date or (iii) any omission or
alleged omission to state a material fact required to be stated in
the Proxy Statement/Prospectus or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading as of the date on which the Proxy
Statement/Prospectus is distributed to the Company's stockholders
and as of the date of the Stockholder Meeting, and the Company
will reimburse Alpharma for any legal or any other expenses
reasonably incurred by Alpharma in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any untrue statement or omission
made in the S-4 Registration Statement or the Proxy
Statement/Prospectus in reliance upon and in conformity with
information furnished to the Company, in writing, by or on behalf
of Alpharma specifically for use in the preparation thereof.
(b) Alpharma will indemnify and hold harmless the Company, each of its
directors and officers and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange
Act against any losses, claims, damages or liabilities, joint or
several, to which the Company, such directors and officers or
controlling persons may become subject under the Securities Act,
Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are
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based upon (i) any untrue statement or alleged untrue statement of
a material fact contained in the S-4 Registration Statement as of
its effective date or in the Proxy Statement/Prospectus as of the
date on which it is distributed to the Company's stockholders and
as of the date of the Stockholder Meeting, (ii) any omission or
alleged omission to state a material fact required to be stated in
the S-4 Registration Statement or necessary to make the statements
therein not misleading as of its effective date or (iii) any
omission or alleged omission to state a material fact required to
be stated in the Proxy Statement/Prospectus or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading as of the date on which it is
distributed to the Company's stockholders and as of the date of
the Stockholder Meeting if the statement or omission was made in
reliance upon and in conformity with information relating to
Alpharma furnished in writing to the Company by or on behalf of
Alpharma specifically for use in connection with the preparation
of the S-4 Registration Statement or the Proxy
Statement/Prospectus.
(c) Each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation
resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld); and, provided, further, that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under
this Section except to the extent that the Indemnifying Party is
adversely affected by such failure. The Indemnified Party may
participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expense if
representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or
potential conflicting interests between the Indemnified Party and
any other party represented by such counsel in such proceeding;
provided further that in no event shall the Indemnifying Party be
required to pay the expenses of more than one law firm per
jurisdiction as counsel for the Indemnified Party. The
Indemnifying Party also shall be responsible for the expenses of
such defense if the Indemnifying Party does not elect to assume
such defense. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into
any settlement which
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does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect of such claim or litigation, and no
Indemnified Party shall consent to entry of any judgment or settle
such claim or litigation without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably
withheld.
4.5 Stock Listing. The Company shall file a listing application with the
Nasdaq National Market to list the Depositary Shares to be issued in
connection with the Merger, and upon exercise or conversion of options,
warrants and convertible securities of the Company which are exercised or
converted after the Effective Time, on the Nasdaq National Market and
shall use reasonable efforts to cause such listing application to be
approved.
4.6 Fiduciary Duties. Neither the Company nor its Board of Directors shall be
obligated to make either of the recommendations set forth in Section 4.1
to the extent that the making of such recommendation would be
inconsistent with the fiduciary duties of the Board of Directors of the
Company, as determined in good faith by the Company's Board of Directors.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF
ALPHARMA AND THE COMPANY
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligation of the Company to
consummate the Merger and the other transactions contemplated by the
Merger Agreement, and the respective obligations of Alpharma and the
Company to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements (other than the obligation of Alpharma to make
the First Loan, which is subject to the fulfillment or waiver of the
conditions set forth in Section 4.1 of the Loan Agreement, and the
obligation of the Company to issue the Note, which is subject to the
fulfillment or waiver of the conditions set forth in Section 5.1 of the
Loan Agreement) are subject to the satisfaction of the following
conditions:
(a) Stockholder Approval. The Company's stockholders shall have
approved and adopted the Merger Agreement (including the exhibits
attached thereto) and transactions contemplated thereby, including
the Merger.
(b) S-4 Registration Statement. The S-4 Registration Statement shall
have become effective in accordance with the provisions of the
Securities Act,
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and no stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued by the SEC and
remain in effect.
(c) Litigation. No action, suit or proceeding shall be pending or
threatened by or before any court, regulatory body, administrative
agency or any other governmental agency or body wherein an
unfavorable judgment, order, decree, stipulation or injunction
would (i) prevent consummation of the Merger or any of the other
transactions contemplated by the Merger Agreement, this Agreement,
the Guaranty Agreement and the Ancillary Agreements or (ii) cause
the Merger or any of the other transactions contemplated by the
Merger Agreement, this Agreement, the Guaranty Agreement and the
Ancillary Agreements to be rescinded following consummation, and
no such judgment, order, decree, stipulation or injunction shall
be in effect.
(d) Second Amendment to May 1998 Securities Purchase Agreement
Amendment. The Second Amendment shall be in full force and effect.
The Second Amendment Closing Date (as defined in the Second
Amendment) shall have occurred and all the other transactions
required by the Second Amendment to have occurred at or prior to
the Closing Date shall have occurred.
5.2 CONDITIONS TO ALPHARMA'S OBLIGATIONS. The obligation of Alpharma to
consummate the transactions contemplated by this Agreement and the
Ancillary Agreements (other than the obligation of Alpharma to make the
First Loan, which is subject to the fulfillment or waiver of the
conditions set forth in Section 4.1 of the Loan Agreement) is subject to
the fulfillment to its reasonable satisfaction, or the waiver by
Alpharma, on or prior to the Closing Date, of each of the following
conditions:
(a) Representations and Warranties Correct. The representations and
warranties of the Company which are set forth in the Loan
Agreement and incorporated herein pursuant to Section 3.1 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 Closing
Date with the same force and effect as if they had been made on
and as of the Closing 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 with respect to the Company.
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(b) Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with on or prior to the
Closing Date by the Company shall have been performed or complied
with by the Company in all material respects on or prior to the
Closing Date.
(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 Alpharma to exercise
full rights of ownership of the Securities.
(d) No Defaults. The Company shall not be in default under an
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 to the Loan Agreement pursuant to Article III thereof, as
disclosed in the 1934 Act Filings (as defined in the Loan
Agreement) filed with the SEC prior to the date hereof or as set
forth in Schedule 4.1(e) to the Loan Agreement, since September
30, 1998, 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) Compliance Certificate. The Company shall have delivered to
Alpharma a certificate of the Company's President, dated the
Closing Date, certifying to the fulfillment of the conditions
specified in subsections (a), (b), (d) and (e) of this Section
5.2.
(g) Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated by
this Agreement, the Merger Agreement and the Ancillary Agreements
shall have been taken, and Alpharma 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. The Merger Agreement and the Ancillary
Agreements shall be in full force and effect. The Merger shall
have occurred and all the other transactions required by the
Merger Agreement and the Ancillary
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Agreements to have occurred at or prior to the Effective Time
shall have occurred.
(h) Opinion of Counsel. Alpharma shall have received the opinion of
Hale and Dorr LLP, counsel for the Company, dated the Closing
Date, substantially with respect to the matters set forth on
Exhibit A attached hereto.
(i) Consents, Waivers, Etc. The Company shall have obtained all
consents or waivers necessary to execute and deliver this
Agreement, the Merger Agreement and the Ancillary Agreements,
effect the Merger, issue the Securities and carry out the
transactions contemplated hereby and thereby, and all such
consents and waivers shall be in full force and effect.
(j) Delivery. The Company shall have delivered to Alpharma (i) the
Note (in accordance with Section 4.1(l) of the Loan Agreement) and
(ii) the following:
(A) A certified copy of the Company's certificate of
incorporation and all amendments thereto, appropriately
authenticated;
(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.
(k) Appraisal Rights. The number of shares as to which appraisal
rights have been asserted by stockholders of the Company in
connection with the Merger pursuant to Section 262 of the Delaware
General Corporation Law shall not exceed 5% of the number of
shares of Voting Capital Stock then outstanding.
(l) Board of Directors. The Board of Directors of the Company shall
have elected a nominee of Alpharma to serve as a Class I Director
of the Company immediately prior to, or concurrently with, the
Effective Time.
(m) Ancillary Agreements. The Merger Agreement and each of the
Ancillary Agreements shall have been executed and delivered by the
Company and the other parties thereto.
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(n) Call Option Transfer. Immediately following the Effective Time of
the Merger, the Company shall have transferred the Call Option to
Alpharma by executing the Call Option Assignment attached hereto
as Exhibit C.
5.3 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The Company's obligations to
consummate the Merger and the other transactions contemplated by this
Agreement, the Merger Agreement and the Ancillary Agreements (other than
the obligation of the Company to issue the Note, which is subject to the
fulfillment or waiver of the conditions set forth in Section 5.1 of the
Loan Agreement) are subject to the fulfillment to its reasonable
satisfaction, or the waiver by the Company, on or prior to the Closing
Date, of each of the following conditions:
(a) Representations and Warranties Correct. The representations and
warranties of Alpharma in Section 3.2 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 Closing Date with the same
force and effect as if they had been made on and as of the Closing
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 the 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 with respect to Alpharma.
(b) Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with on or prior to the
Closing Date by Alpharma shall have been performed or complied
with in all material respects on or prior to the Closing Date.
(c) Compliance Certificate. Alpharma shall have delivered to the
Company a certificate of Alpharma's President, dated the Closing
Date, certifying to the fulfillment of the conditions specified in
subsections (a) and (b) of this Section 5.3.
(d) 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 Company to exercise
its rights under this Agreement and the Ancillary Agreements.
(e) Opinion of Counsel. The Company shall have received the opinion of
Kirkland & Ellis, counsel for Parent and Alpharma, dated the
Closing
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Date, substantially with respect to the matters set forth on
Exhibit B attached hereto.
(f) Consents, Waivers, Etc. On or prior to the Closing Date, the
Company shall have obtained all consents or waivers necessary to
execute and deliver this Agreement, the Merger Agreement and the
Ancillary Agreements, effect the Merger, issue the Securities and
carry out the transactions contemplated hereby and thereby, and
all such consents and waivers shall be in full force and effect.
(g) Ancillary Agreements. Each of the Ancillary Agreements shall have
been executed and delivered by Alpharma and the other parties
thereto.
(h) Guaranty Agreement. The Guaranty Agreement shall have been
executed and delivered by Parent.
(i) Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated by
this Agreement, the Merger Agreement, the Guaranty Agreement and
the Ancillary Agreements required to be taken by Alpharma or
Parent shall have been taken, and the Company 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. The Guaranty Agreement and the Ancillary
Agreements shall be in full force and effect.
(j) First Loan. Alpharma shall have made the First Loan to the Company
under the Loan Agreement and any other Loan properly requested by
the Company to be made on or prior to the Closing Date.
5.4 COOPERATION. The Company and Alpharma shall each take all reasonable
steps and use all reasonable efforts necessary or desirable, and shall
cooperate with the other party to enable it, to obtain, as promptly as
practicable, all approvals, authorizations, certificates, consents and
clearances required to consummate the transactions contemplated by this
Agreement, the Merger Agreement and the Ancillary Agreements and satisfy
the conditions set forth in this Article V. Each of the Company and
Alpharma shall cooperate with the other party to agree, prior to the
Effective Time, upon a reasonable valuation of the Call Option.
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ARTICLE VI
COVENANTS OF ALPHARMA AND PARENT
6.1 STANDSTILL AGREEMENT. Each of the Parent and Alpharma agrees that, during
the period beginning on the date hereof and ending on (a) the date this
Agreement terminates (if this Agreement terminates pursuant to Section
8.8(a)(i) or (ii)) or (b) the seventh anniversary of the date this
Agreement terminates (if this Agreement terminates pursuant to Section
8.8(a)(iii)) (the "Standstill Period"), unless it has obtained the prior
written consent of the Company by vote of the majority of the
Non-Alpharma Directors of the Company then in office, it will not, and it
will cause its Affiliates to not:
(i) acquire, directly or indirectly, by purchase or otherwise, of
record or beneficially, any Voting Capital Stock (which for
purposes of this Agreement shall include without limitation New
Common Stock, Depositary Shares and Depositary Receipts), any
securities of the Company convertible into Voting Capital Stock
(which for purposes of this Agreement shall include without
limitation any convertible notes of the Company issued pursuant to
the Loan Agreement), or any rights, options or warrants to acquire
Voting Capital Stock of the Company, if after such acquisition
(and after giving effect to the conversion of any such convertible
securities and the exercise of any such rights, options or
warrants held by Parent, Alpharma and their respective Affiliates
(including an aggregate of 5,614,035 shares of Common Stock of the
Company issued or issuable upon conversion of the Note,
irrespective of whether the Note or any principal thereunder is
outstanding at such time)), Parent, Alpharma and their respective
Affiliates would together own of record or beneficially in the
aggregate more than forty percent (40%) 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 of the Company
that are then outstanding (the "Forty Percent Limit"); provided
that notwithstanding the provisions of this clause (i) the
foregoing restrictions shall not apply to voting securities
acquired (or deemed owned as provided above) in connection with
the existence or exercise of the Call Option. If the number of
shares of Voting Capital Stock that are then outstanding or that
are issuable upon conversion or exercise of convertible
securities, options, warrants or rights of the Company that are
then outstanding is reduced or if the aggregate ownership of
Parent, Alpharma and their respective Affiliates in the Company is
increased as a result of a recapitalization of the Company or as a
result of any other action taken by the Company, Parent, Alpharma
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and their respective Affiliates will not be required to dispose
of (and may continue to vote in accordance with Section 6.4) any
of its or their holdings of Voting Capital Stock even though
such action resulted in Parent's, Alpharma's and their
respective Affiliates' aggregate ownership exceeding the Forty
Percent Limit.
Except as otherwise explicitly provided above, if Parent,
Alpharma and their respective Affiliates shall at any time
during the Standstill Period own in the aggregate in excess of
the Forty Percent Limit, then:
(X) Parent and Alpharma shall (or shall cause their
respective Affiliates to) sell as promptly as
practicable under the circumstances sufficient
Voting Capital Stock so that after such sale Parent,
Alpharma and their respective Affiliates shall not
own in the aggregate more than the Forty Percent
Limit, and
(Y) notwithstanding Section 6.4 to the contrary, Parent
and Alpharma shall (and shall cause their respective
Affiliates to) refrain from voting on any matter as
to which the holders of all classes of Voting
Capital Stock shall have the right to vote with
respect to any such Voting Capital Stock held by
Parent, Alpharma and their respective Affiliates in
excess of the Forty Percent Limit (provided,
however, that the foregoing paragraph shall not be
deemed to limit the Company's remedies in the event
that the excess Voting Capital Stock were acquired
in violation of this Section);
(ii) "solicit" proxies with respect to voting securities of the
Company under any circumstances or become a "participant" in any
"election contest" relating to the election of directors of the
Company, as such terms are defined in Regulation 14A under the
Exchange Act;
(iii) deposit any voting securities of the Company in a voting trust
or subject them to a voting agreement or other agreement of
similar effect;
(iv) initiate, propose or otherwise solicit stockholders of the
Company for the approval of one or more stockholder proposals at
any time, or induce or attempt to induce any other person to
initiate any stockholder proposal;
(v) present, or propose to present, publicly or otherwise, to the
Company, the Board of Directors of the Company or the
stockholders of the
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Company any proposal or offer for a merger, tender or exchange
offer or other form of business combination involving the
Company, or effect, propose to effect or cause to occur any of
the foregoing; or
(vi) take any action individually or jointly with any partnership,
limited partnership, syndicate, or other group or assist any
other person, corporation, entity or group in taking any action
it could not take individually under the terms of this
Agreement.
6.2 RESIGNATION. Alpharma shall cause any director of the Company nominated
by Alpharma and appointed to the Board of Directors as contemplated by
Section 5.2(l) of this Agreement and Section 6.5 of the Loan Agreement,
and any successor or replacement thereof then in office who was elected
to the Board of Directors upon the nomination of Alpharma (the "Alpharma
Director"), to resign from the Board of Directors effective upon the
Option Expiration Date.
6.3 RECUSAL.
(a) Alpharma Director. Alpharma shall cause the Alpharma Director to
abstain from voting on and/or recuse himself from any matter to be
discussed, considered and/or acted upon at any meeting of the
Board of Directors of the Company or of a committee of the Board
of Directors of the Company with respect to which the Company and
Alpharma have a potential conflict of interest, if counsel to the
Company advises the Board of Directors of the Company or such
committee of the Board of Directors of the Company that such
abstention and/or recusal is appropriate given such potential
conflict of interest. The Company shall have the right by vote of
a majority of all directors of the Company then in office other
than the Alpharma Director (the "Non-Alpharma Directors") to
exclude the Alpharma Director from access to any documents or
other materials provided to the other members of the Board of
Directors of the Company which relate to any matter with respect
to which the Company and Alpharma have a potential conflict of
interest if counsel to the Company advises the Non-Alpharma
Directors that such exclusion is appropriate given such potential
conflict of interest.
(b) Non-Alpharma Directors. The Company shall request that any Non-
Alpharma Director abstain from voting and/or recuse himself from
any matter to be discussed, considered and/or acted upon at any
meeting of the Board of Directors of the Company or of a
Committee of the Board of Directors of the Company with respect
to which the Company and such Non-Alpharma Director (or an
Affiliate of such
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Non-Alpharma Director) have a potential conflict of interest, if
counsel to the Company advises the Board of Directors of the
Company or such committee of the Board of Directors of the
Company that such abstention and/or recusal is appropriate given
such potential conflict of interest.
6.4 VOTING OF CAPITAL STOCK. During the Standstill Period, subject to clause
(Y) of clause (i) of Section 6.1, in any election of directors and in any
other vote to be taken by the stockholders of the Company as to any
matter (whether taken at an annual or special meeting of stockholders or
by written action), Parent and Alpharma shall, and shall cause their
respective Affiliates to, vote any Depositary Shares (or shares of New
Common Stock following the Option Expiration Date), or other Voting
Capital Stock which Parent, Alpharma or their respective Affiliates hold,
in the same manner and in the same proportion as the votes cast by the
other holders of Depositary Shares (or shares of New Common Stock
following the Option Expiration Date) or such other Voting Capital Stock.
ARTICLE VII
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
7.1 GENERAL COMPANY COVENANTS. The Company shall perform and comply with the
covenants of the Company set forth in Sections 6.1 through 6.8 and
Sections 7.1 through 7.13 of the Loan Agreement (including the
definitions set forth in Section 1.1 of the Loan Agreement to the extent
applicable to such sections), which covenants are incorporated herein by
reference, whether or not the Loan Agreement is in effect or any amounts
are outstanding thereunder, as if such covenants (including the
definitions set forth in Section 1.1 of the Loan Agreement to the extent
applicable to such sections) were included herein. Any waiver by Alpharma
or any holder of the Note of any of such covenants under the terms of the
Loan Agreement shall not constitute a waiver of any covenant of the
Company under this Agreement unless Alpharma waives such covenant in
accordance with Section 8.5(a).
7.2 CALL OPTION TRANSFER. Immediately following the Effective Time of the
Merger, the Company shall transfer the Call Option to Alpharma by
executing the Call Option Assignment attached hereto as Exhibit C.
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7.3 FUTURE OPTION GRANTS. Any options to purchase shares of Common Stock
granted by the Company to officers, directors or employees of, or
consultants or advisors to, the Company from and after the date hereof
through the Option Expiration Date shall provide that such options may
not be exercised on the Option Closing Date (as defined in the Depositary
Agreement).
7.4 FURTHER ASSURANCES. From time to time the Company shall execute and
deliver to Alpharma such other instruments, certificates, agreements and
documents and take such other action and do all other things as may be
reasonably requested by Alpharma in order to implement or effectuate the
terms and provisions of this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 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 Alpharma, to:
Alpharma USPD Inc.
7205 Windsor Blvd.
Baltimore, MD 21244
Attention: President
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with a copy to:
Alpharma USPD Inc.
7205 Windsor Blvd.
Baltimore, MD 21244
Attention: Chief Legal Officer
If to Parent, to:
Alpharma, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: President
with a copy to:
Alpharma, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: Chief Legal Officer
If to the Company, to:
Ascent Pediatrics, Inc.
187 Ballardvale Street, Suite B125
Wilmington, Massachusetts 01887
Attention: Alan R. Fox
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
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.
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8.2 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.
8.3 PRESS RELEASES AND ANNOUNCEMENTS. Neither Parent or Alpharma, on the one
hand, nor the Company, on the other hand, shall issue any press release
or public disclosure relating to the existence of, or the subject matter
of this Agreement, the Merger Agreement or any of the Ancillary
Agreements without the prior written approval of the other party;
provided, however, that any party hereto may make any public disclosure
it believes in good faith is required by law or regulation (in which case
the disclosing party shall advise the other party and provide it with a
copy of the proposed disclosure prior to making the disclosure).
8.4 GOVERNING LAW. The laws of the State of Delaware, without regard to
principles of conflicts of law, shall govern this Agreement.
8.5 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in
case of an amendment, by Alpharma and the Company, or in the
case of a waiver, by the party against whom the waiver is to be
effective; provided that no such amendment or waiver on behalf
of the Company shall be effective without the approval of a
majority of the Non-Alpharma Directors.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as waiver thereof nor shall
any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies
provided by law.
8.6 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party hereto. Notwithstanding the
foregoing, Alpharma may assign, delegate or otherwise transfer all of its
rights and obligations under this Agreement to a transferee that acquires
all or substantially all of the business, assets or capital stock of
Alpharma; provided that (a) Alpharma also assigns, delegates or otherwise
transfers all of its rights and obligations under the Depositary
Agreement to such transferee and (b)
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such transferee agrees in writing to be bound by and subject to the
provisions of this Agreement and the Depositary Agreement.
8.7 SPECIFIC PERFORMANCE. The Company, Parent and Alpharma acknowledge and
agree that Alpharma's and the Company's respective remedies 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 Alpharma, Parent or the Company
of any of the provisions of this Agreement, in addition to any remedies
at law or otherwise, Alpharma and the Company, respectively, 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.
8.8 TERMINATION.
(a) This Agreement shall terminate upon the earliest of (i) September
30, 1999 if the Closing has not occurred prior to or on such date,
(ii) the Option Closing Date and (iii) the Option Expiration Date;
provided that, notwithstanding the foregoing, (A) the terms of
Sections 4.4 and 8.12 of this Agreement and the obligations
thereunder shall survive the termination contemplated by this
Section 8.8 in accordance with their respective terms, and (B) the
terms of Sections 6.1 and 6.4 of this Agreement and the
obligations thereunder shall survive the termination contemplated
by this Section 8.8 in accordance with their respective terms and
shall terminate upon the expiration of the Standstill Period.
(b) Notwithstanding the foregoing, (i) Alpharma may terminate this
Agreement upon written notice to the Company if (A) the Board of
Directors of the Company withdraws its recommendation of the
Merger or (B) the stockholders fail to approve the Merger
Agreement (including the exhibits thereto) and the transactions
contemplated thereby, including the Merger, at the Stockholder
Meeting, and (ii) the Company may terminate this Agreement upon
written notice to Alpharma if the Board of Directors withdraws its
recommendation of the Merger in accordance with its fiduciary
duties as provided in Section 4.6 of this Agreement. In either of
such events, the Company shall pay to Alpharma in cash a
termination fee in the amount of $1,200,000, such termination fee
to be payable within ten Business Days after such termination.
8.9 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein, including the Merger Agreement, the Ancillary Agreements and the
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Guaranty Agreement) constitutes the entire agreement among the parties
and supersedes any prior understanding, agreements or representations as
between the parties, written or oral, with respect to the subject matter
hereof.
8.10 SEPARABILITY. In case any provision in this Agreement 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.
8.11 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.
8.12 CONFIDENTIALITY. Each of Parent and Alpharma agree that it will keep
confidential and will not disclose, divulge or use for any purpose other
than to monitor Alpharma's investment in the Company any confidential,
proprietary or secret information which Parent or Alpharma may obtain
from the Company pursuant to financial statements, reports and other
materials submitted by the Company to Parent or Alpharma 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 8.12 by Parent or Alpharma); provided, however that Parent or
Alpharma, as the case may be, may disclose such information if required
by law, provided that Parent or Alpharma, as the case may be, 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. Each of Parent and Alpharma 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 Parent or Alpharma
possesses, such material non-public information.
[REMAINDER OF PAGE LEFT BLANK]
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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.
Attest: ASCENT PEDIATRICS, INC.
/s/ John G. Bernardi By: /s/ Alan R. Fox
- ----------------------------- ----------------------------
Secretary Title: President
Attest: ALPHARMA USPD INC.
By: /s/ Thomas L. Anderson
- ----------------------------- ----------------------------
Secretary Title: President
Attest: ALPHARMA, INC.
By: /s/ Jeffrey E. Smith
- ----------------------------- ----------------------------
Secretary Title: Vice President
Finance and Chief
Financial Officer
A-30
<PAGE> 43
Exhibit A
OPINION OF HALE AND DORR LLP
1. Each of the Company and Merger Sub is a corporation existing and in good
standing under the General Corporation Law of the State of Delaware.
2. The Company has the requisite corporate power and authority to execute,
deliver and perform the Merger Agreement and the Transaction Agreements.
The Merger Sub has the requisite corporate power and authority to
execute, deliver and perform the Merger Agreement.
3. 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 Merger Agreement and the Transaction
Agreements. The Board of Directors of the Merger Sub has adopted by
requisite vote the resolutions necessary to authorize the execution,
delivery and performance by the Merger Sub of the Merger Agreement.
4. The Company has duly executed and delivered the Merger Agreement and the
Transaction Agreements. The Merger Sub has duly executed and delivered
the Merger Agreement.
5. Each of the Merger Agreement and the Transaction Agreements is a valid
and binding obligation of the Company and is enforceable against the
Company in accordance with its respective terms. The Merger Agreement is
a valid and binding obligation of the Merger Sub and is enforceable
against the Merger Sub in accordance with its terms.
6. 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.
7. The execution and delivery by the Company of the Merger Agreement
and the Transaction Agreements 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 execution and delivery by the Merger Sub of
A-31
<PAGE> 44
the Merger Agreement and the performance of its obligations thereunder
will not (a) constitute a violation of the certificate of incorporation
or bylaws of the Merger Sub or (b) constitute a material violation by the
Merger Sub of any statutory law or governmental regulation covered by
this Opinion. The term Other Specified Agreements means those agreements
set forth on Schedule A attached hereto.
8. 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 Alpharma in the Master Agreement, neither the Company
nor Merger Sub was 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 Merger Agreement or, in the case
of the Company, any of the Transaction Agreements, 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 Merger Agreement,
the Transaction Agreements 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.
9. Neither the Company nor Merger Sub is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
A-32
<PAGE> 45
EXHIBIT B
Form of Kirkland & Ellis Opinion
- --------------------------------
1. Alpharma is a corporation existing and in good standing under the laws
of the State of Maryland. Parent is a corporation existing and in good
standing under the General Corporation Law of the State of Delaware.
2. Alpharma has the corporate power to enter into and perform its
obligations under the Transaction Agreements to which it is a party.
Parent has the corporate power to enter into and perform its
obligations under the Transaction Agreements to which it is a party.
3. The Board of Directors of Alpharma has adopted by requisite vote the
resolutions necessary to authorize the execution, delivery and
performance by Alpharma of the Transaction Agreements to which it is a
party. The Board of Directors of Parent has adopted by requisite vote
the resolutions necessary to authorize the execution, delivery and
performance by Parent of the Transaction Agreements to which it is a
party.
4. Alpharma has duly executed and delivered the Transaction Agreements to
which it is a party. Parent has duly executed and delivered the
Transaction Agreements to which it is a party.
5. Each of the Transaction Agreements to which Alpharma or Parent is a
party is a valid and binding obligation of Alpharma or Parent,
respectively, and is enforceable against Alpharma or Parent, as
applicable, in accordance with its respective terms.
6. The execution and delivery by each of Alpharma and Parent of the
Transaction Agreements to which it is a party and performance of its
obligations thereunder will not (a) constitute a violation of the
certificate of incorporation or bylaws of Alpharma or Parent,
respectively, (b) constitute a material violation by Alpharma or
Parent, respectively, of any applicable provision of statutory law or
governmental regulation covered by this Opinion or (c) breach, or
result in a default under any existing obligation of Alpharma or
Parent, respectively, under any of its Other Specified Agreements. Our
opinion in this paragraph does not address any impact the actions of
Alpharma or Parent may have under any financial covenants or tests, any
consequences a default by Alpharma or Parent under any of the
Transaction Agreements may have under any of the Other Specified
Agreements or any cross default provisions in the Other Specified
Agreements. The term Other Specified Agreements means those agreements
set forth on Schedule I attached hereto.
7. To our actual knowledge and based in part upon your representations in
the Master Agreement, neither Alpharma nor Parent was required to
obtain any consent, approval, authorization or order of, or make any
filings or registrations with, any United States
B-1
<PAGE> 46
federal court or governmental agency in order to obtain the right to
enter into or perform under any of the Transaction Agreements, 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
Transaction Agreements 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 be expected to have a Material Adverse Effect.
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<PAGE> 47
EXHIBIT C
CALL OPTION ASSIGNMENT
________________ __, 1999
Reference is hereby made to the Depositary Agreement (the "Depositary
Agreement") dated as of February 16, 1999 by and among Ascent Pediatrics, Inc.,
a Delaware corporation, Alpharma USPD Inc., a Maryland corporation, and State
Street Bank and Trust Company and to the Master Agreement (the "Master
Agreement") dated as of February 16, 1999 by and between the Company and
Alpharma.
In accordance with Sections 5.2(n) and 7.2 of the Master Agreement and
Section 10.09 of the Depositary Agreement, the Company hereby:
(i) assigns, transfers and otherwise delegates such of its rights
and obligations under the Call Option (as defined in the Depositary
Agreement) so that following such assignment, transfer and delegation,
Alpharma shall have the rights and obligations under the Call Option
specified in the Depositary Agreement;
(ii) agrees to undertake such other obligations and actions with
respect to Alpharma as are specified in the Depositary Agreement; and
(iii) relinquishes any and all rights to exercise the Call Option.
Executed as of the date set forth above.
ASCENT PEDIATRICS, INC.
By:
-------------------------------------
Its:
------------------------------------
Accepted:
ALPHARMA USPD INC.
By:
--------------------------
Its:
-------------------------
A-34
<PAGE> 48
EXHIBIT B
DEPOSITARY AGREEMENT
dated as of February 16, 1999
among
ALPHARMA USPD INC.,
ASCENT PEDIATRICS, INC.
and
STATE STREET BANK AND TRUST COMPANY
As Depositary
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - DEFINITIONS..........................................................................2
ARTICLE II - DEPOSIT OF NEW COMMON STOCK........................................................13
SECTION 2.01 Deposit of New Common Stock; Depositary Receipts..................13
ARTICLE III - COMPANY CALL OPTION...............................................................14
SECTION 3.01 Company Call Option...............................................14
SECTION 3.02 Effectiveness.....................................................14
ARTICLE IV - ALPHARMA CALL OPTION...............................................................15
SECTION 4.01 Alpharma Call Option..............................................15
SECTION 4.02 Option Closing Date...............................................17
SECTION 4.03 Covenants of the Company and Alpharma.............................18
SECTION 4.04 Effectiveness.....................................................19
ARTICLE V - THE CALL OPTION CLOSING.............................................................19
SECTION 5.01 Closing Shares............................................19
SECTION 5.02 Notice of Option Exercise; Delivery of Option
Exercise Price....................................................21
SECTION 5.03 Company Options, Etc..............................................23
ARTICLE VI - FORM OF DEPOSITARY RECEIPTS, DEPOSIT OF STOCK,
EXECUTION AND DELIVERY, TRANSFER, SURRENDER
AND REDEMPTION OF DEPOSITARY RECEIPTS...................................................24
SECTION 6.01 Form and Transferability of Depositary Receipts...................24
SECTION 6.02 Execution and Delivery of Depositary Receipts.....................25
SECTION 6.03 Transfer of Depositary Receipts...................................25
SECTION 6.04 Combinations and Split-ups of Depositary Receipts.................26
SECTION 6.05 Limitations on Execution and Delivery, Transfer,
Split-up, Combination, Surrender and Exchange of
Depositary Receipts. ............................................26
SECTION 6.06 Lost Depositary Receipts, etc.....................................26
SECTION 6.07 Cancellation and Destruction of Surrendered Depositary
Receipts..........................................................27
SECTION 6.08 Representations and Warranties as to Stock........................27
</TABLE>
(i)
<PAGE> 50
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII - THE DEPOSITED SECURITIES, NOTICES.................................................27
SECTION 7.01 Cash Distributions................................................27
SECTION 7.02 Distributions Other Than Cash.....................................28
SECTION 7.03 Fixing of Record Date for Holders of Depositary
Receipts..........................................................28
SECTION 7.04 Voting Rights.....................................................28
SECTION 7.05 Changes Affecting Deposited Securities and
Reclassifications, Recapitalizations, etc.........................29
SECTION 7.06 Reports...........................................................29
SECTION 7.07 Lists of Depositary Receipt Holders...............................29
ARTICLE VIII - THE DEPOSITARY, ALPHARMA AND THE COMPANY.........................................30
SECTION 8.01 Maintenance of Offices, Agencies, Transfer Books by
the Depositary Registrar..........................................30
SECTION 8.02 Prevention or Delay in Performance by the Depositary,
the Depositary's Agents or the Company............................31
SECTION 8.03 Obligations of the Depositary, the Depositary's Agents
and the Company...................................................31
SECTION 8.04 Resignation and Removal of the Depositary,
Appointment of Successor Depositary...............................33
SECTION 8.05 Corporate Notices and Reports.....................................34
SECTION 8.06 Deposit of New Common Stock by the Company........................34
SECTION 8.07 Indemnification...................................................34
SECTION 8.08 Charges and Expenses..............................................34
SECTION 8.09 Consequential Damages.............................................35
ARTICLE IX - AMENDMENT AND TERMINATION..........................................................35
SECTION 9.01 Amendment.........................................................35
SECTION 9.02 Termination.......................................................36
ARTICLE X - MISCELLANEOUS.......................................................................36
SECTION 10.01 Counterparts......................................................36
SECTION 10.02 Exclusive Benefits of Parties.....................................36
SECTION 10.03 Invalidity of Provisions..........................................36
SECTION 10.04 Notices...........................................................37
SECTION 10.05 Depositary's Agents...............................................38
SECTION 10.06 Holders of Depositary Receipts are Parties........................38
SECTION 10.07 Governing Law.....................................................39
SECTION 10.08 Headings..........................................................39
</TABLE>
(ii)
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C>
SECTION 10.09 Successors and Assigns............................................39
</TABLE>
(iii)
<PAGE> 52
DEPOSITARY AGREEMENT, dated as of February 16, 1999, among ALPHARMA USPD
INC., a Maryland corporation ("Alpharma"), ASCENT PEDIATRICS, INC., a Delaware
corporation (the "Company"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company, as depositary (the "Depositary").
WITNESSETH:
WHEREAS, Alpharma and the Company have entered into a Loan Agreement
dated as of February 16, 1999 (the "Loan Agreement") pursuant to which Alpharma
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 Company and Bird Merger Corporation, a Delaware corporation
and wholly-owned subsidiary of the Company ("Transitory Subsidiary"), have
entered into an Agreement and Plan of Merger dated as of February 16, 1999 (the
"Merger Agreement"), pursuant to which, among other things:
(i) Transitory Subsidiary shall be merged (the "Merger")
with and into the Company on the date hereof;
(ii) each share of common stock, $.00004 par value per
share, of the Company issued and outstanding immediately prior to the
Effective Time (as defined below) (the "Old Common Stock") (other than
shares of Old Common Stock held in the Company's treasury and shares of
Old Common Stock as to which appraisal rights have been perfected by the
holders thereof, (if such rights are available under Section 262 of the
Delaware General Corporation Law)) shall be converted in the Merger into
and represent the right to receive one depositary share (a "Depositary
Share") issued hereunder, each Depositary Share evidencing one share of
common stock, $.00004 par value per share, of the Company (the "New
Common Stock"), represented by a depositary receipt (a "Depositary
Receipt") and subject to the right and option of the Company, upon the
terms and conditions set forth in Article III hereof, to purchase all
outstanding shares of New Common Stock of the Company deposited with the
Depositary hereunder; and
(iii) each share of common stock, $.01 par value per
share, of Transitory Subsidiary issued and outstanding immediately prior
to the Effective Time shall be converted in the Merger into and
thereafter evidence the right to receive $.01 per share;
WHEREAS, it is desired to provide as hereinafter set forth in this
Depositary Agreement for the terms and conditions pursuant to which the Company
may exercise the Call Option (as defined below);
<PAGE> 53
WHEREAS, as a condition to, and as additional consideration for,
Alpharma agreeing to make Loans (as defined below), Alpharma, the Company and
Alpharma, Inc., a Delaware corporation, have entered into a Master Agreement
dated as of February 16, 1999 (the "Master Agreement"), pursuant to which the
Company has agreed to assign to Alpharma the Call Option;
WHEREAS, it is desired to provide as hereinafter set forth in this
Depositary Agreement for the terms and conditions pursuant to which Alpharma may
exercise the Call Option following the assignment by the Company to Alpharma of
the Call Option;
WHEREAS, it is desired to provide, as hereinafter set forth in this
Depositary Agreement, for the deposit on behalf of the holders of Old Common
Stock of the Depositary Shares with the Depositary for the purposes set forth in
this Depositary Agreement and for the issuance hereunder of Depositary Receipts
evidencing Depositary Shares or the proceeds received therefor upon exercise of
the Call Option described herein; and
WHEREAS, the Depositary Receipts are to be substantially in the form of
Exhibit A attached hereto, with appropriate insertions, modifications and
omissions, as hereinafter provided in this Depositary Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and
among the parties hereto as follows:
ARTICLE I
DEFINITIONS
The following definitions shall for all purposes, unless otherwise
clearly indicated, apply to the respective terms used in this Depositary
Agreement and the Depositary Receipts:
"2001 Audited Financial Statements" shall mean the audited balance sheet
of the Company as of December 31, 2001, and the related audited statements of
operations, changes in stockholders' equity and cash flows of the Company for
the fiscal year ended December 31, 2001, together with the notes thereto. These
financial statements shall be prepared in accordance with GAAP (as defined
below), shall be prepared on a consolidated basis (if the Company has any
subsidiaries) and shall be accompanied by a report on such statements by an
Approved Accounting Firm (as defined below) confirming that such statements were
prepared in all material respects in conformity with GAAP.
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<PAGE> 54
"90-Day Extension Date" shall have the meaning ascribed to it in Section
4.02(a) of this Depositary Agreement.
"180-Day Extension Date" shall have the meaning ascribed to it in
Section 4.02(a) of this Depositary Agreement.
"Adjusted 2001 Operating Income" shall mean the sum of:
(i) the Company's net income for the fiscal year ended
December 31, 2001 as reflected in the 2001 Audited Financial Statements,
(ii) the Excluded Interest Expense (as defined below),
(iii) the provision for income taxes for the fiscal year
ended December 31, 2001 as reflected in the 2001 Audited Financial
Statements, and
(iv) the amount by which the Company's research and
development expenses for the fiscal year ended December 31, 2001 as
reflected in the 2001 Audited Financial Statements exceeds $1.5 million,
as adjusted to (A) exclude Extraordinary Items (as defined below), (B) reflect
GAAP Adjustments (as defined below), (C) exclude the amount, if any, by which
the Company's research and development expenses for the fiscal year ended
December 31, 2001 as reflected in the 2001 Audited Financial Statements is less
than $1.5 million and (D) exclude any interest income earned in the fiscal year
ended December 31, 2001 on any Permitted Investment of the principal amount of
any Loan (as defined below).
"Affiliate" shall have the meaning ascribed to it in Rule 405
promulgated under the 1933 Act.
"Alpharma" shall have the meaning ascribed to it in the Introductory
Paragraph to this Depositary Agreement.
"Antitrust Approval Condition" shall have the meaning ascribed to it in
Section 4.02(a) of this Depositary Agreement.
"Approved Accounting Firm" shall mean one of the public accounting firms
currently known as the "Big Five"; provided, that following the Call Option
Transfer, such term shall also include any other public accounting firm
reasonably acceptable to Alpharma.
B-3
<PAGE> 55
"Business Day" shall mean any day which is neither a Saturday nor a
Sunday nor a legal holiday on which banks are authorized or required to be
closed in Boston, Massachusetts or in any other city in which the Depositary's
Office is located.
"Call Option" shall mean the right and option to purchase all but not
less than all of the outstanding shares of New Common Stock deposited with the
Depositary hereunder upon the terms and conditions set forth in this Depositary
Agreement.
"Call Option Exercise Notice" shall mean the written notice delivered to
the Depositary by the holder of the Call Option pursuant to Section 3.01(a) or
Section 4.01(a) (as applicable) indicating that the holder has elected to
exercise the Call Option.
"Call Option Rejection Notice" shall mean the written notice delivered
to the Depositary by the holder of the Call Option pursuant to Section 3.01(c)
or Section 4.01(d) (as applicable) indicating that the holder has elected not to
exercise the Call Option.
"Call Option Transfer" shall mean the transfer of the Call Option by the
Company to Alpharma in accordance with Sections 5.2(n) and 7.2 of the Master
Agreement and in accordance with Section 10.09 of this Depositary Agreement.
"Call Period" shall (i) prior to a Call Option Transfer, have the
meaning ascribed to it in Section 3.01(a) of this Depositary Agreement and (ii)
from and after a Call Option Transfer, have the meaning ascribed to it in
Section 4.01(a) of this Depositary Agreement.
"Certificate of Incorporation" shall mean the Amended and Restated
Certificate of Incorporation of the Company, as amended from time to time after
the date hereof.
"Company" shall have the meaning ascribed to it in the Introductory
Paragraph of this Depositary Agreement.
"Conflict of Law Condition" shall have the meaning ascribed to it in
Section 4.02(a) of this Depositary Agreement.
"Depositary" shall have the meaning ascribed to it in the Introductory
Paragraph of this Depositary Agreement and, as the context requires, any
successor appointed pursuant to the terms of this Depositary Agreement.
"Depositary's Agent" or "Depositary's Agents" shall mean an agent or
agents, as the case may be, appointed by the Depositary as provided, and for the
purposes specified, in Section 10.05 of this Depositary Agreement.
B-4
<PAGE> 56
"Depositary Bank Account" shall have the meaning ascribed to it in
Section 5.01(a) of this Depositary Agreement.
"Depositary's Office" shall mean the shareholder services office of the
Depositary at which at any particular time its shareholder services business
shall be administered, which at the date of this Depositary Agreement is located
at 150 Royall Street, Canton, Massachusetts 02021.
"Depositary Receipt" shall mean one or more of the depositary receipts
issued hereunder, substantially in the form of Exhibit A attached hereto.
"Depositary Share" shall have the meaning ascribed to it in the Preamble
to this Depositary Agreement.
"Depositary Share Consideration" shall mean (a) following the Option
Closing, the right to receive the Option Exercise Price, without interest, or
(b) following the Option Expiration Date, the right to receive one share of New
Common Stock (subject to adjustment for any stock dividend, stock split, reverse
stock split or similar event affecting the New Common Stock after the date
hereof), together with all declared but unpaid dividends thereon.
"Determination Date Notice" shall have the meaning ascribed to it in
Section 5.03 of this Depositary Agreement.
"Dispute Notice" shall have the meaning set forth in Section 4.01(b)(i)
of this Depositary Agreement.
"Dissenting Shares" shall have the meaning ascribed to it in the Merger
Agreement.
"Effective Time" shall have the meaning ascribed to it in Article I of
the Merger Agreement.
"Excluded Interest Expense" shall mean the sum of the Company's interest
expense (including without limitation the full effect of both cash and non-cash
accrued and accreted interest) for the fiscal year ended December 31, 2001 as
reflected in the 2001 Audited Financial Statements, in respect of or associated
with:
(i) the First Loan and any Unrestricted Loans (each as
defined in the Loan Agreement),
(ii) an amount of Project Loans equal to the lesser of
(a) $8.0 million and (b) the amount by which the sum of the Company's
research and
B-5
<PAGE> 57
development expenses for the three fiscal years ending December 31,
2001, as reflected in the Company's audited financial statements,
exceeds $4.5 million
(iii) any convertible subordinated notes of the Company
issued or issuable pursuant to the Series G Agreement,
(iv) any other loans to the Company that are convertible
into equity or other convertible securities of the Company, and
(v) any loans to the Company or debt securities of the
Company originally issued as a unit or together with warrants, or such
warrants;
other than, in the case of items (iii), (iv) and (v), such loans or securities
which will not have been converted into Depositary Shares as of the Option
Closing Date and which are not required by their terms to be converted into
Depositary Shares on or prior to the Option Closing Date.
"Exercising Party" shall have the meaning ascribed to it in Section
5.01(a) of this Depositary Agreement.
"Extraordinary Items" shall mean any events or transactions that are
distinguished by their unusual nature and by the infrequency of their occurrence
(as defined by Accounting Principle Board No. 30) as reflected in the 2001
Audited Financial Statements.
"Final Closing Shares" shall have the meaning ascribed to it in Section
5.01(b) of this Depositary Agreement.
"Final Extension Date" shall mean the latest date on which the Option
Closing may be held pursuant to Section 4.02 of this Depositary Agreement.
"Follow-up Depositary Notice" shall have the meaning ascribed to it in
Section 5.01(b) of this Depositary Agreement.
"GAAP" shall mean U.S. generally accepted accounting principles as in
effect from time to time.
"GAAP Adjustments" shall mean all adjustments to the 2001 Audited
Financial Statements required in connection with the calculation of the Adjusted
2001 Operating Income in order (i) to reflect GAAP and the other accounting
methods, treatments, principles and procedures in a manner consistent with the
preparation of the Company's audited financial statements for the fiscal year
ended December 31, 1998 and (ii) to account for any of the following actions to
the extent that such
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<PAGE> 58
actions are not consistent with the Company's ordinary course of business and
past practice and have the effect of increasing Adjusted 2001 Operating Income:
(a) deferring the fulfillment of orders placed in the calendar
year 2000 until the calendar year 2001;
(b) announcing any price increase, effective January, 2002, which
price increase results in an unusually large number of orders being
received and shipped in December 2001;
(c) announcing and implementing any unusual promotion during the
fiscal year ending December 31, 2001, including, for example, changes in
payment terms and significant discounts;
(d) selling intangible or other operating assets during the
fiscal year ending December 31, 2001 (except to the extent that such
sale constitutes an Extraordinary Item);
(e) deferring the incurrence of necessary expenses for staff,
regulatory compliance, quality control or maintenance and repairs with
the effect that operations after December 31, 2001 are burdened with
disproportionately higher expenses;
(f) prepaying and recognizing expenses in the fiscal year ending
December 31, 2000 that would otherwise have been recognized in the
fiscal year ending December 31, 2001;
(g) classifying selling, general and administrative expenses as
research and development expenses (except to the extent consistent with
the accounting methods, treatments, principles and procedures used in
the preparation of the Company's audited financial statements for prior
fiscal years);
(h) implementing unusual employee, customer or vendor incentive
programs that are inconsistent with industry practice and that have the
effect of increasing the Company's net income for the fiscal year ending
December 31, 2001 at the expense of the Company's net income for the
fiscal year ending December 31, 2002; and
(i) unreasonably allocating license fees, royalties or other
consideration to, or otherwise entering into agreements containing
front-loaded payment terms providing for payment in, the fiscal year
ending December 31, 2001, which fees, royalties, other consideration or
payments would otherwise be payable to the Company in another fiscal
year;
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<PAGE> 59
provided however, that no adjustment to the 2001 Audited Financial Statements
shall be made hereunder with respect to such adjustments as shall have been
waived by Alpharma in writing.
"HSR Act" shall have the meaning ascribed to it in Section 4.03(c) of
this Depositary Agreement.
"Initial Depositary Notice" shall have the meaning ascribed to it in
Section 5.01(a) of this Depositary Agreement.
"Letter of Transmittal" shall have the meaning ascribed to it in Section
4.03(c) of this Depositary Agreement.
"Loan" shall have the meaning ascribed to it in the Loan Agreement.
"Loan Agreement" shall have the meaning ascribed to it in the Preamble
to this Depositary Agreement.
"Master Agreement" shall have the meaning ascribed to it in the Preamble
to this Depositary Agreement.
"Material Adverse Effect" shall have the meaning ascribed to it in the
Master Agreement.
"Merger" shall have the meaning ascribed to it in the Preamble to this
Depositary Agreement.
"Merger Agreement" shall have the meaning ascribed to it in the Preamble
to this Depositary Agreement.
"Nasdaq" shall mean the Nasdaq National Market.
"New Common Stock" shall mean the New Common Stock as defined in the
Preamble to this Depositary Agreement or any security into which the New Common
Stock may be converted.
"Neutral Accountants" shall have the meaning ascribed to it in Section
4.01(a)(ii)(B) of this Depositary Agreement.
"Non-Alpharma Directors" shall have the meaning ascribed to it in
Section 6.3 of the Master Agreement.
"Old Common Stock" shall have the meaning ascribed to it in the Preamble
to this Depositary Agreement.
B-8
<PAGE> 60
"Option Closing" shall mean the closing of the exercise of the Call
Option.
"Option Closing Date" shall mean the date specified pursuant to Section
3.01(b) or Section 4.02(a) (as applicable) for the Option Closing.
"Option Determination Date" shall mean the first to occur of the Option
Closing Date and the Option Expiration Date.
"Option Exercise Deliverables" shall mean the 2001 Audited Financial
Statements and the Option Exercise Price Statement.
"Option Exercise Price" shall mean, for each share of New Common Stock,
the price determined by dividing:
(A) the greater of:
(i) $140,000,000 and
(ii) the sum of (a) the product of (x) 12.2 and
(y) the Adjusted 2001 Operating Income, and (b) the aggregate
exercise price of all options and warrants of the Company issued
by the Company after December 31, 1998 and either (I) exercised
prior to the Option Closing Date (to the extent that the Company
has cash and cash equivalents on the date immediately preceding
the Option Closing Date in an amount equal to or greater than the
aggregate exercise price of such options and warrants) or (II)
outstanding as of the date immediately preceding the Option
Closing Date, by
(B) the sum of (i) the number of shares of New Common
Stock outstanding as of the date immediately preceding the Option
Closing Date, and (ii) the number of shares of New Common Stock issuable
upon the exercise or conversion of any options, warrants, rights or
convertible securities of the Company outstanding as of the date
immediately preceding the Option Closing Date (excluding the shares of
New Common Stock issuable upon conversion of the convertible securities
issued to Alpharma pursuant to the Loan Agreement);
provided that, notwithstanding the foregoing, in the event that the Option
Exercise Price calculated in the manner set forth above (the "Original Option
Exercise Price") shall equal a price per share of New Common Stock that is less
than $11.76 per share (subject to appropriate adjustment in the event of any
stock split, stock dividend, reverse stock split or other similar
recapitalization affecting the New Common Stock) and warrants to purchase at
least 75,000 Depositary Shares (subject to appropriate adjustment in the event
of any stock split, stock dividend, reverse stock split or other
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similar recapitalization affecting the New Common Stock) issued pursuant to the
Triumph Agreement (the "Triumph Warrants") remain outstanding as of the Option
Closing Date, the Option Exercise Price shall mean:
(X) with respect to each Depositary Share that is
issuable upon exercise of the Triumph Warrants which are outstanding as
of the Option Closing Date ("Triumph Warrant Shares"), $11.76 (subject
to appropriate adjustment in the event of a stock split, stock dividend,
reverse stock split or other similar recapitalization affecting the New
Common Stock);
(Y) with respect to each Depositary Share (the "Series G
Shares") issued or issuable upon conversion of the Series G Preferred or
any convertible notes issuable upon exchange of the Series G Preferred
outstanding as of the Option Closing Date or issued or issuable upon
exercise of the warrants issued pursuant to the Series G Agreement (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 or an Affiliate of any of such purchasers), the Original
Option Exercise Price; and
(Z) with respect to any Depositary Shares outstanding as
of the Option Closing Date or issuable as of the Option Closing Date
upon conversion of securities of the Company convertible into Depositary
Shares of the Company or upon exercise of rights, options or warrants to
acquire Depositary Shares (other than Triumph Warrant Shares and the
Series G Shares) (all of such Depositary Shares being referred to as the
"Stockholder Shares"), the difference between (i) the Original Option
Exercise Price and (ii) the price determined by dividing (a) the product
of (I) the Triumph Warrant Shares and (II) the difference between $11.76
(subject to appropriate adjustment in the event of a stock split, stock
dividend, reverse stock split or other similar recapitalization
affecting the New Common Stock) and the Original Option Exercise Price,
by (b) the number of Stockholder Shares.
"Option Exercise Price Statement" shall mean a statement from the
Company (a) stating the Option Exercise Price as calculated by the Company and
setting forth in reasonable detail the manner in which such calculation was made
(which stated Option Exercise Price shall be calculated based upon the Company's
reasonable assumptions as to what the Option Exercise Price will be as of the
date immediately preceding the Option Closing Date), (b) stating the Adjusted
2001 Operating Income as calculated by the Company and setting forth the manner
in which such amount was calculated and (c) setting forth the GAAP Adjustments
used in the calculation of Adjusted 2001 Operating Income as calculated by the
Company.
"Option Expiration Date" shall mean December 31, 2002; provided, that
from and after a Call Option Transfer, the Option Expiration Date shall be the
first to occur
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of (i) the date on which the Call Option terminates in accordance with Section
4.01(a) of this Depositary Agreement, (ii) the date on which the Call Option
terminates in accordance with Section 4.02(c) of this Depositary Agreement and
(iii) the Final Extension Date, if Alpharma exercises the Call Option but the
Option Closing has not occurred on or before the Final Extension Date; provided
further that, notwithstanding the foregoing, in the event of a Call Option
Transfer, the Option Expiration Date shall occur immediately at 5:00 p.m.
(Boston, Massachusetts time) (the "Final Refusal Time") on the third Business
Day following the day on which the Company provides written notice to Alpharma
that Alpharma has refused or otherwise failed to make a Loan requested by the
Company pursuant to Section 2.3 of the Loan Agreement if prior to the Final
Refusal Time Alpharma has still not funded such Loan, unless Alpharma's failure
to fund such Loan is due to the Company's failure to satisfy the condition set
forth in Section 4.2(f) or Section 4.3(d) of the Loan Agreement.
"Original Option Exercise Price" shall have the meaning ascribed to it
in the definition of "Option Exercise Price.
"Permitted Investment" shall have the meaning ascribed to it in the Loan
Agreement.
"Person" means any corporation, association, company, business trust,
partnership, joint venture, joint-stock company, limited liability company,
trust, unincorporated organization or association or government or any agency or
political subdivision thereof.
"Preliminary Closing Shares" shall have the meaning ascribed to it in
Section 5.01(a) of this Depositary Agreement.
"Record Date" shall mean the date fixed pursuant to Section 7.03 of this
Depositary Agreement.
"Record Holder" with respect to a Depositary Receipt shall mean the
person in whose name a Depositary Receipt is registered on the books of the
Depositary maintained for such purpose as of a specified Record Date.
"Registrar" shall mean any bank or trust company which shall be
appointed to register Depositary Receipts as herein provided.
"Registration Statement" shall mean the Registration Statement on Form
S-4 of the Company relating to the offering of the New Common Stock and the
Depositary Shares in connection with the Merger.
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"Required Antitrust Approvals" shall have the meaning ascribed to it in
Section 4.03(c) of this Depositary Agreement.
"Series G Agreement" shall mean the Series G Securities Purchase
Agreement dated May 13, 1998 between the Company and the Purchasers (as defined
therein), as amended.
"Series G Preferred" shall mean the shares of Series G Convertible
Exchangeable Preferred Stock of the Company, par value $.01 per share, issued
pursuant to the Series G Agreement.
"Series G Shares" shall have the meaning ascribed to it in the
definition of Option Exercise Price.
"Stockholder Shares" shall have the meaning ascribed to it in the
definition of Option Exercise Price.
"Transitory Subsidiary" shall have the meaning ascribed to it in the
Preamble to this Depositary Agreement.
"Triumph Agreement" shall mean the Securities Purchase Agreement dated
as of January 31, 1997 among the Company, Triumph-Connecticut Limited
Partnership and the other Purchasers named therein, as amended.
"Triumph Warrants" shall have the meaning ascribed to it in the
definition of Option Exercise Price.
"Triumph Warrant Shares" shall have the meaning ascribed to it in the
definition of Option Exercise Price.
"1933 Act" shall mean the Securities Act of 1933 and the rules and
regulations promulgated thereunder, as amended from time to time.
References to any party hereto shall include such party's respective
successors and assigns.
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ARTICLE II
DEPOSIT OF NEW COMMON STOCK
SECTION 2.01 Deposit of New Common Stock; Depositary Receipts.
(a) At or prior to the Effective Time, the Company shall deposit with
the Depositary a number of shares of New Common Stock equal to the number of
shares of Old Common Stock outstanding immediately prior to the Effective Time
(excluding any Dissenting Shares and shares held in the Company's treasury). The
Company shall make such deposit by delivery of (i) a certificate or certificates
for the New Common Stock to be deposited, registered in the name of the
Depositary, (ii) all such certifications as may be required by the Depositary in
accordance with the provisions of this Depositary Agreement and (iii) a written
order directing the Depositary, in its capacity as Depositary hereunder, to
execute and deliver to or upon the written order of the person or persons stated
in such order a Depositary Receipt or Depositary Receipts representing the
number of Depositary Shares set forth in such order.
(b) All shares of New Common Stock to be issued by the Company from and
after the date hereof through the Option Determination Date (other than the Note
Conversion Shares (as defined in the Loan Agreement)) shall be deposited
hereunder by the Company in the manner prescribed by paragraph (a) above. In the
case of any conversion or exercise of any convertible security, warrant or
option (other than the Note (as defined in the Loan Agreement)) from and after
the date hereof and through the Option Determination Date, the Company shall
deposit with the Depositary in the manner prescribed in paragraph (a) above a
number of shares of New Common Stock corresponding to the number of Depositary
Shares issuable upon conversion or exercise of such convertible security,
warrant or option; provided that, following the Option Determination Date, the
Company's obligation to deposit shares of New Common Stock hereunder shall be
governed by and subject to Sections 5.02 and 5.03.
(c) Promptly following any deposit by the Company of shares of New
Common Stock with the Depositary pursuant to this Section 2.01, the Depositary
shall issue Depositary Receipts in the manner directed by the Company, such
Depositary Receipts representing a number of Depositary Shares corresponding to
the number of shares of New Common Stock so deposited by the Company with the
Depositary.
(d) Each Depositary Share shall, as provided herein, represent an
interest in one share of New Common Stock. Subject to the terms of this
Depositary Agreement, until the Option Determination Date, each share of New
Common Stock represented by a Depositary Share shall be held in custody by the
Depositary and
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each owner of a Depositary Share shall be entitled, proportionately, to all the
rights of the New Common Stock represented thereby, including the dividend,
voting and liquidation rights set forth in the Certificate of Incorporation.
Following the Option Determination Date, each owner of a Depositary Share shall
be entitled to receive the Depositary Share Consideration in respect of such
Depositary Share.
ARTICLE III
COMPANY CALL OPTION
SECTION 3.01 Company Call Option.
(a) Prior to a Call Option Transfer, the Company shall have the right,
at its sole option, to purchase all but not less than all of the outstanding
shares of New Common Stock deposited with the Depositary hereunder as of the
Option Closing Date at a price per share of New Common Stock equal to the Option
Exercise Price and on such other terms and conditions as are specified in this
Depositary Agreement. The Company may elect to exercise the Call Option by
delivery of the Call Option Exercise Notice to the Depositary at any time during
the period (the "Call Period") commencing February 1, 2002 and continuing until
December 31, 2002.
(b) The Call Option Exercise Notice shall specify a date for the Option
Closing (the "Option Closing Date"), which shall be a date not earlier than ten
Business Days after the date of the Call Option Exercise Notice nor later than
January 15, 2003; provided, that the Company, in its sole discretion, at any
time may postpone the Option Closing to a date no later than January 15, 2003.
The Option Closing shall take place at 10:00 a.m. (Boston time) on the Option
Closing Date at the offices of the Company's legal counsel in Boston,
Massachusetts.
(c) If, in lieu of the Call Option Exercise Notice, the Company delivers
to the Depositary the Call Option Rejection Notice or if the Call Period expires
without the Call Option Exercise Notice being provided to the Depositary, then,
effective as of the date of the Call Option Rejection Notice or as of the
expiration of the Call Period, as the case may be, the Call Option shall
terminate and become null and void and of no further force or effect.
SECTION 3.02 Effectiveness. This Article III, including without
limitation the Company's right to exercise the Call Option, shall be of no force
or effect from and after a Call Option Transfer.
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ARTICLE IV
ALPHARMA CALL OPTION
SECTION 4.01 Alpharma Call Option.
(a) The Company shall deliver the Option Exercise Deliverables to
Alpharma on or before March 30, 2002. Alpharma shall have the right, at its sole
option, to purchase all but not less than all of the outstanding shares of New
Common Stock deposited with the Depositary hereunder as of the Option Closing
Date at a price per share of New Common Stock equal to the Option Exercise Price
and on such other terms and conditions as are specified in this Depositary
Agreement. Alpharma may elect to exercise the Call Option by providing the Call
Option Exercise Notice to the Company and the Depositary at any time during the
period (the "Call Period") commencing upon the date the Company delivers to
Alpharma the Option Exercise Deliverables and continuing until the later of (A)
the date 20 days after the date of such delivery and (B) if Alpharma in good
faith disputes the Option Exercise Price pursuant to clause (b) of this Section
4.01, the date 10 days after the Option Exercise Price is determined pursuant to
clause (b) of this Section 4.01.
(b) (i) Following delivery of the Option Exercise Deliverables, if
Alpharma in good faith disputes the Option Exercise Price as shown on the Option
Exercise Price Statement prepared by the Company, Alpharma shall deliver to the
Company within 20 days after receiving the Option Exercise Deliverables a
statement (the "Dispute Notice") disputing the Company's calculation of and,
insofar as Alpharma is capable based upon the information available to it,
setting forth what Alpharma believes is the correct Option Exercise Price and
describing the basis for the determination of such different Option Exercise
Price. Alpharma and the Company shall use reasonable efforts to resolve such
differences regarding the determination of the Option Exercise Price for a
period of 10 days after Alpharma has given the Dispute Notice.
(ii) If Alpharma and the Company do not reach a final resolution
within 10 days after Alpharma has given the Dispute Notice, unless Alpharma and
the Company mutually agree to continue their efforts to resolve such
differences, Alpharma and the Company shall agree within five Business Days
thereafter upon one of the public accounting firms currently known as the "Big
Five" (other than one which has a then existing relationship with either
Alpharma or the Company) (the "Neutral Accountants") to resolve such differences
in the manner provided below. Alpharma and the Company shall each be entitled to
make a presentation to the Neutral Accountants, pursuant to procedures to be
determined by the Neutral Accountants, advocating the merits of the Option
Exercise Price espoused by such
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party, which presentations shall be made within 10 Business Days after Alpharma
and the Company agree on the Neutral Accountants; and the Neutral Accountants
shall be required to resolve the differences between Alpharma and the Company
and to determine the Option Exercise Price within 10 Business Days thereafter.
The Option Exercise Price determined by the Neutral Accountants shall be deemed
to be the Option Exercise Price. Such determination by the Neutral Accountants
shall be conclusive and binding upon Alpharma and the Company, absent fraud or
manifest error. Nothing herein shall be construed to authorize or permit the
Neutral Accountants (A) to determine any questions or matters whatsoever under
or in connection with this Depositary Agreement except for the resolution of
differences between Alpharma and the Company regarding the Option Exercise Price
and (B) to apply any accounting methods, treatments, principles or procedures
other than as set forth in the definitions of "2001 Audited Financial
Statements," "Adjusted 2001 Operating Income," "Excluded Interest Expense,"
"GAAP Adjustments" and "Option Exercise Price" in Article I of this Depositary
Agreement.
(iii) Alpharma, on the one hand, and the Company, on the other
hand, shall share equally the fees and expenses of the Neutral Accountants;
provided that if the Neutral Accountants determine that either Alpharma or the
Company has adopted a position or positions with respect to the Option Exercise
Price that is unreasonable, frivolous or clearly without merit, the Neutral
Accountants may, in their discretion, assign a greater portion of any such fees
and expenses to such party.
(iv) The failure of Alpharma to deliver a Dispute Notice within
20 days after receiving the Option Exercise Deliverables shall constitute
acceptance of the Option Exercise Price set forth on the Option Exercise Price
Statement, whereupon such Option Exercise Price shall be deemed to be conclusive
and the final determination of the Option Exercise Price.
(v) During the period commencing January 1, 2002 and continuing
until the earliest of (A) the date 20 days after such delivery of the Option
Exercise Deliverables, (B) the delivery to the Company of the Call Option
Exercise Notice and (C) the delivery to the Company of the Dispute Notice, the
Company will afford Alpharma, during regular business hours of the Company, upon
reasonable notice and as often as Alpharma may reasonably request, access to the
Company's books, accounts, records and work papers and to the Company's
employees and independent public accountants solely for the purpose of
evaluating the accuracy of the Option Exercise Price Statement; provided that
such access shall not interfere with or disrupt the business or operations of
the Company.
(c) The Call Option Exercise Notice shall specify a date not earlier
than ten Business Days nor later than 15 Business Days after the date of the
Call Option Exercise Notice for the closing of the exercise of the Call Option.
The closing of the exercise of the Call Option shall take place at 10:00 a.m.
(Boston time) on the date
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specified in the Call Option Exercise Notice (or such other date as may be
provided under Section 4.02) at the offices of the Company's legal counsel in
Boston, Massachusetts.
(d) If, in lieu of the Call Option Exercise Notice, Alpharma delivers
the Call Option Rejection Notice to the Company and the Depositary or if the
Call Period expires without the Call Option Exercise Notice being provided to
the Company or the Depositary, then, effective as of the date of the Call Option
Rejection Notice or as of the expiration of the Call Period, as the case may be,
the Call Option shall terminate and become null and void and of no further force
or effect.
SECTION 4.02 Option Closing Date.
(a) Subject to this Section 4.02(a) and Sections 4.02(b) and 4.02(c)
below, the Option Closing shall occur on the date specified in the Call Option
Exercise Notice (the "Option Closing Date"); provided that notwithstanding
anything in this Depositary Agreement to the contrary, the Option Closing shall
not occur on the scheduled Option Closing Date if either of the following
conditions are in existence as of the scheduled Option Closing Date:
(i) any provision of any applicable law or regulation or any
judgment, injunction, order or decree prohibits the Option Closing and
the failure to comply with such provision, judgment, injunction, order
or decree would have a material adverse effect on the Company or
Alpharma (the "Conflict of Law Condition"); or
(ii) any Required Antitrust Approval shall not have been obtained
(the "Antitrust Approval Condition").
If either of the closing conditions described above has not been
satisfied as of the scheduled Option Closing Date, then the Option Closing Date
shall be extended to the earlier of (x) the date which is five Business Days
after the date that both closing conditions have been satisfied and (y) the date
which is 90 days after the date of the Call Option Exercise Notice (the "90-Day
Extension Date").
If the Antitrust Approval Condition has not been satisfied as of the
90-Day Extension Date, the Option Closing Date shall be further extended to the
earlier of (I) the date which is five Business Days after the date that both
closing conditions have been satisfied and (II) the date which is 180 days after
the date of the Call Option Exercise Notice (the "180-Day Extension Date").
(b) If the Option Closing does not occur on or prior to the 90-Day
Extension Date or the 180-Day Extension Date, as applicable, because one or both
of the closing conditions set forth in Section 4.02(a) has not been satisfied,
then, effective as of such
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date, the Call Option shall terminate and become null and void and of no further
force or effect.
(c) Notwithstanding the foregoing, if any event shall occur during the
period commencing on the date on which Alpharma delivers the Call Option
Exercise Notice to the Company and ending on the Option Closing Date that has a
Material Adverse Effect with respect to the Company, Alpharma may, in its sole
discretion, elect not to proceed with the Option Closing and to terminate the
Call Option by providing written notice of such election and termination to the
Company and the Depositary within 10 days of becoming aware of such event (but
in no event after the Option Closing Date). Effective as of the date of such
notice, the Call Option shall terminate and become null and void and of no
further force or effect.
SECTION 4.03 Covenants of the Company and Alpharma.
(a) The Company and Alpharma shall (i) use all commercially
reasonable efforts to promptly take, or cause to be taken, all actions and do,
or cause to be done, all things necessary, proper or appropriate to satisfy the
conditions to the Option Closing set forth in Section 4.02(a) and to consummate
and make effective the transactions contemplated by this Depositary Agreement on
the terms and conditions set forth herein and (ii) not take any action which
might reasonably be expected to impair the ability of the parties to consummate
the transactions contemplated by this Depositary Agreement.
(b) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated by this
Depositary Agreement is commenced, whether before or after the exercise of the
Call Option, each of the Company and Alpharma agrees to fully cooperate and use
their respective best efforts to vigorously defend against and respond thereto
(including, without limitation and, to the extent applicable, seeking to remove
promptly any injunction or other legal barrier that may prevent the consummation
of the transactions contemplated by this Depositary Agreement).
(c) The Company and Alpharma shall each:
(i) take all actions necessary to make the filings
required of such party under the Hart Scott Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), relating to the
possible exercise of the Call Option by September 30, 2001, which
filings shall comply in all respects with the requirements of the HSR
Act;
(ii) comply at the earliest practicable date with any
formal or informal request for additional information received by such
party from the
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Federal Trade Commission or Antitrust Division of the Department of
Justice pursuant to the HSR Act;
(iii) consult and cooperate with the other party and
consider in good faith the views of the other party, in connection with
any analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party in
connection with proceedings under or relating to the Required Antitrust
Approvals;
(iv) request early termination of the applicable waiting
period under the HSR Act; and
(v) take any and all such other commercially reasonable
actions as are required in order to obtain the approval of the
governmental entity with the jurisdiction of enforcing applicable
antitrust laws (the "Required Antitrust Approvals"), including without
limitation complying with the HSR Act and obtaining termination or
expiration of the applicable waiting period under the HSR Act.
At any time and from time to time following the date of this Depositary
Agreement and prior to receipt of the Required Antitrust Approvals, each party
shall provide 30 days' prior written notice to the other party of any
transactions or other business activities in which such party is engaged which
such party reasonably believes could have an adverse impact on either party's
ability to obtain the Required Antitrust Approvals.
SECTION 4.04 Effectiveness. This Article IV, including without
limitation Alpharma's right to exercise the Call Option, shall be of no force or
effect prior to a Call Option Transfer.
ARTICLE V
THE CALL OPTION CLOSING
SECTION 5.01 Closing Shares.
(a) On or before the date three Business Days prior to the Option
Closing Date, (i) the Depositary shall provide the Company and, following a Call
Option Transfer, Alpharma with a written notice (the "Initial Depositary
Notice") specifying the total number of shares of New Common Stock deposited
hereunder as of the date five Business Days prior to the Option Closing Date
(the "Preliminary Closing Shares"), and (ii) the Company shall deliver to the
Depositary and, following a Call
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Option Transfer, Alpharma a written notice specifying as of the date five
Business Days prior to the Option Closing Date (I) the amounts specified in
clauses (A)(ii)(b) and (B)(ii) of the definition of Option Exercise Price and
(II) the number of outstanding Triumph Warrant Shares and Series G Shares, if
applicable. Following receipt of the Initial Depositary Notice and on or before
the Option Closing Date, the Company, if it shall have exercised the Call Option
pursuant to Section 3.01 of this Depositary Agreement, or Alpharma, if it shall
have exercised the Call Option pursuant to Section 4.01 of this Depositary
Agreement (the party exercising the Call Option being referred to herein as the
"Exercising Party"), shall pay to the Depositary an amount equal to the product
of (A) the Option Exercise Price and (B) the number of Preliminary Closing
Shares (if applicable, taking into account the proviso to the definition of
Option Exercise Price), by wire transfer to a bank account of the Depositary
(the "Depositary Bank Account") designated by the Depositary in writing prior to
the Option Closing in a bank having combined capital, surplus and undivided
profits aggregating at least $500,000,000.
(b) On the Option Closing Date, (i) the Depositary shall provide the
Company and, following a Call Option Transfer, Alpharma with a written notice
(the "Follow-up Depositary Notice") specifying the total number of shares of New
Common Stock deposited hereunder as of the Option Closing Date (the "Final
Closing Shares"), and (ii) the Company shall deliver to the Depositary and,
following a Call Option Transfer, Alpharma a written notice specifying the
number of Triumph Warrant Shares and Series G Shares, if applicable, outstanding
as of the Option Closing Date. On or prior to the first Business Day following
receipt of the Follow-up Depositary Notice, the Exercising Party shall pay to
the Depositary an amount equal to the product of (A) the Option Exercise Price
and (B) the difference between the number of Preliminary Closing Shares and the
number of Final Closing Shares (taking into account the proviso to the
definition of Option Exercise Price, if applicable) by wire transfer to the
Depositary Bank Account.
(c) Any payments hereunder shall be made for payment to the holders of
Depositary Shares, and the Depositary shall disburse the funds so deposited to
the holders of Depositary Shares in accordance with Section 5.02. At the Option
Closing, the Depositary shall deliver to the Exercising Party a certificate or
certificates evidencing all of the New Common Stock held by the Depositary for
which payment has been made by the Exercising Party accompanied by a duly
endorsed stock power or stock powers with respect thereto. Any certificates not
delivered at the Option Closing shall be delivered promptly upon receipt of
payment therefor in accordance with subsection (b) of this Section 5.01.
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SECTION 5.02 Notice of Option Exercise; Delivery of Option Exercise
Price.
(a) Promptly following the Option Determination Date, the Depositary
shall mail notice thereof, postage prepaid, to the holders of record of the
Depositary Shares at their respective addresses then appearing on the books of
the Depositary, but neither failure to mail such notice nor any defect therein
or in the mailing thereof shall affect the validity of any exercise of the Call
Option or the rights of the holders of Depositary Shares to receive the
Depositary Share Consideration. The Company shall provide the Depositary with
the form of such notice and each such notice shall state the form and amount of
the Depositary Share Consideration. Such notice shall be accompanied by a letter
of transmittal (the "Letter of Transmittal"), which the Company shall supply, in
customary form for use in the exchange of Depositary Receipts representing
Depositary Shares for cash or certificates representing shares of New Common
Stock, as the case may be (which Letter of Transmittal shall specify (i) the
place or places designated by the Depositary where Depositary Receipts
representing Depositary Shares are to be surrendered for payment of the
Depositary Share Consideration and (ii) that delivery of Depositary Receipts
shall be effected, and risk of loss shall pass, only upon proper delivery to the
Depositary).
(b) Each holder of Depositary Shares following the Option Determination
Date shall, upon surrender to the Depositary of a Depositary Receipt or
Depositary Receipts and a duly executed Letter of Transmittal, be entitled to
receive the Depositary Share Consideration attributable to the Depositary Shares
held of record by such holder. Upon receipt of a duly completed Letter of
Transmittal and a Depositary Receipt or Depositary Receipts, without
unreasonable delay, the Depositary shall deliver to such holder, or to the
person or persons designated by such holder as hereinafter provided, the number
of whole shares of New Common Stock or cash represented by the Depositary
Receipt or Depositary Receipts so surrendered. No holder of a Depositary Receipt
or Depositary Receipts shall be entitled to any distribution of shares of New
Common Stock held by the Depositary pursuant to the terms of this Depositary
Agreement except upon the occurrence of the Option Expiration Date and pursuant
to the provisions of this Article V. No holder of a Depositary Receipt or
Depositary Receipts shall be entitled to any distribution of cash held by the
Depositary pursuant to the terms of this Depositary Agreement except upon the
occurrence of the Option Closing and pursuant to the provisions of this Article
V. In no event will fractional shares of New Common Stock be distributed by the
Depositary. If fractional shares of New Common Stock would otherwise be required
to be issued to a holder of Depositary Shares, the Depositary shall pay to such
holder in cash an amount equal to such fraction multiplied by the fair market
value of one share of New Common Stock on the Option Expiration Date, as
determined by the Board of Directors of the Company in good faith, which
determination of fair market value shall promptly be provided in writing by the
Company to the Depositary. Delivery of the New Common Stock or the cash being
distributed by the Depositary hereunder shall be made by the delivery of such
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certificates, documents of title and other instruments as the Depositary may
deem appropriate, which, if required by law, shall be properly endorsed or
accompanied by proper instruments of transfer.
Delivery of the New Common Stock or the cash to be distributed by the
Depositary hereunder shall be made by the Depositary by first class mail under
the provisions of the Depositary's first class mail bond protecting the
Depositary from loss or liability arising out of the non-receipt or non-delivery
of such New Common Stock or cash or arising out of the replacement thereof, for
any deliveries where market value does not exceed the amount of the Depositary's
first class mail bond. Any mail delivery exceeding such amount shall be
delivered by registered mail or overnight mail and shall be insured separately
for the replacement value of its contents at the time of mailing. Any Depositary
Share Consideration remaining unclaimed at the expiration of two years after the
date of mailing of the notice specified in Section 5.02(a) to holders of
Depositary Receipts shall be returned to the Exercising Party, if such notice
relates to an Option Closing, or to the Company, if such notice relates to an
Option Expiration Date, after which return such holders shall have no claim
against the Depositary but shall either have a claim as an unsecured creditor
against the Exercising Party for the Option Exercise Price, without interest, or
against the Company for shares of New Common Stock (together with accrued and
unpaid dividends from the Option Expiration Date), as the case may be, but shall
have no greater rights against the Company or, following a Call Option Transfer,
against Alpharma than may be accorded such party's respective general creditors
under applicable law. Notwithstanding the foregoing, none of Alpharma, the
Company and the Depositary shall be liable to any holder of Depositary Shares
for any amount paid to any public official pursuant to abandoned property laws.
After an Option Closing, any portion of the Depositary Share Consideration
remaining unclaimed by holders of Depositary Shares as of the date which is
immediately prior to such time as such amounts would otherwise escheat to or
become property of any government entity shall, to the extent permitted by
applicable law, become property of the Exercising Party, free and clear of any
claims or interest of any person previously entitled thereto. If the Call Option
terminates without being exercised, or if such option is exercised but the
Option Closing does not occur on or before January 15, 2003 or, following a Call
Option Transfer, the Final Extension Date, any portion of the New Common Stock
remaining unclaimed by holders of Depositary Shares as of the date which is
immediately prior to such time as such New Common Stock would otherwise escheat
to or become property of any government entity shall, to the extent permitted by
applicable law, become property of the Company, free and clear of any claims or
interest of any person previously entitled thereto.
(c) If the New Common Stock or the cash being distributed are to be
delivered to a person or persons other than the Record Holder of the Depositary
Receipt or Depositary Receipts being surrendered, such holder shall execute and
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deliver to the Depositary a written order (accompanied by a signature guarantee
if required by the Depositary) so directing the Depositary and the Depositary
may require that the Depositary Receipt or Depositary Receipts surrendered by
such holder for withdrawal of such shares of New Common Stock be properly
endorsed in blank or accompanied by a properly executed instrument of transfer
in blank. It shall be a condition of such distribution that the person
requesting such distribution shall pay the Depositary any transfer or other
taxes required as a result of such payment to a person other than the registered
holder of such Depositary Shares or establish to the satisfaction of the
Exchange Agent (as defined in the Merger Agreement) that such tax has been paid
or is not payable.
(d) After the Option Determination Date, there shall be no further
registration of transfers of Depositary Shares outstanding prior to such date.
If, after such date, Depositary Receipts are presented to the Depositary they
shall be cancelled and exchanged for the Depositary Share Consideration.
(e) Any funds received by the Depositary pursuant to this Depositary
Agreement shall be held by the Depositary, in its capacity as Depositary, on
behalf of the holders of Depositary Receipts. No interest will accrue on such
funds.
SECTION 5.03 Company Options, Etc. The Company will make appropriate
provision to assure that any securities of the Company convertible into
Depositary Shares of the Company, or any rights, options or warrants to acquire
Depositary Shares outstanding on the Option Closing Date (whether or not
convertible, vested, exercisable or exchangeable on such date) are convertible
into or exercisable or exchangeable solely for the cash that the holders thereof
would have received had they converted, exercised or exchanged such convertible
securities, rights, options and warrants for Depositary Shares, immediately
prior to the Option Closing Date. Promptly after the Option Determination Date,
the Depositary shall give the holders of such convertible securities, rights,
options or warrants notice (a "Determination Date Notice") of the event giving
rise to the Option Determination Date (i.e., the Option Closing or Option
Expiration Date), which Determination Date Notice shall be in the form provided
by the Company to the Depositary. If the event giving rise to the Option
Determination Date was the Option Closing, then from and after the Option
Determination Date, holders of such convertible securities, rights, options or
warrants shall have the right to receive from the Exercising Party (and not the
Depositary or, if Alpharma is the Exercising Party, the Company) upon conversion
or exercise thereof (and the payment of any exercise or purchase price provided
for under the terms of such convertible security, right, warrant or option) cash
in an amount equal to the Option Exercise Price for each Depositary Share for
which such convertible security, right warrant or option is convertible or
exercisable. Upon any such conversion or exercise, the Exercising Party shall
promptly pay such holders the cash to which they would be entitled hereunder. If
the event giving rise to the Option Determination Date was the Option Expiration
Date, then, from and
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after the Option Determination Date, holders of such convertible securities,
rights, options or warrants shall have the right to receive from the Company
(and not Alpharma or the Depositary) upon conversion or exercise thereof (and
the payment of any exercise or purchase price provided for under the terms of
such convertible security, right, warrant or option) the number of shares of New
Common Stock for which such convertible security, right warrant or option is
convertible or exercisable. Nothing herein shall be deemed or construed as a
waiver of any other rights that a holder of any such securities may have.
ARTICLE VI
FORM OF DEPOSITARY RECEIPTS, DEPOSIT OF STOCK,
EXECUTION AND DELIVERY, TRANSFER, SURRENDER
AND REDEMPTION OF DEPOSITARY RECEIPTS
SECTION 6.01 Form and Transferability of Depositary Receipts.
(a) Depositary Receipts shall be engraved or printed or lithographed on
steel-engraved borders and shall be substantially in the form set forth in
Exhibit A annexed to this Depositary Agreement, with appropriate insertions,
modifications and omissions, as hereinafter provided. Depositary Receipts shall
be executed by the Depositary by the manual signature of a duly authorized
officer of the Depositary, provided that such signature may be a facsimile if a
Registrar for the Depositary Receipts (other than the Depositary) shall have
been appointed and such Depositary Receipts are countersigned by manual
signature of a duly authorized officer of the Registrar. No Depositary Receipt
shall be entitled to any benefits under this Depositary Agreement or be valid or
obligatory for any purpose, unless it shall have been executed manually by a
duly authorized officer of the Depositary or if a Registrar for the Depositary
Receipts (other than the Depositary) shall have been appointed, by facsimile
signature of a duly authorized officer of the Depositary and, if executed by
facsimile signature of the Depositary, shall have been countersigned manually by
a duly authorized officer of such Registrar. The Depositary shall record on its
books each Depositary Receipt so signed and delivered as hereinafter provided.
All Depositary Receipts shall be dated the date of their execution.
(b) Except as the Depositary may otherwise determine, Depositary
Receipts shall be in denominations of any number of whole Depositary Shares.
(c) Depositary Receipts may be endorsed with or have incorporated in the
text thereof such legends or recitals or changes not inconsistent with the
provisions of this Depositary Agreement as may be required by the Depositary or
required to comply with any applicable law or any regulation thereunder or with
the rules and regulations of any securities exchange upon which the Depositary
Shares or the
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Depositary Receipts, may be listed or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any
particular Depositary Receipts are subject by reason of the date of issuance of
the Deposit Shares or otherwise.
(d) Title to a Depositary Receipt which is properly endorsed or
accompanied by a properly executed instrument of transfer and to Depositary
Shares evidenced thereby shall be transferable by delivery with the same effect
as in the case of a negotiable instrument; provided, however, that until a
Depositary Receipt shall be transferred on the books of the Depositary as
provided in Section 4.03, the Depositary, each Depositary's Agent and the
Company may, notwithstanding any notice to the contrary, treat the Record Holder
thereof at such time as the absolute owner thereof for the purpose of
determining the person entitled to distribution of dividends or other
distributions or to any notice provided for in this Depositary Agreement and for
all other purposes.
SECTION 6.02 Execution and Delivery of Depositary Receipts.
(a) Upon each delivery to the Depositary of a certificate or
certificates for New Common Stock to be deposited hereunder, registered in its
name as provided above, the Depositary shall hold such shares in an account to
be established by the Depositary, at the Depositary's Office, or at such other
place or places as the Depositary shall determine.
(b) Upon receipt by the Depositary of a certificate or certificates for
New Common Stock deposited in accordance with the provisions of this Section
4.02, together with the other documents required as above specified, the
Depositary, subject to the terms and conditions of this Depositary Agreement,
shall execute and deliver a Depositary Receipt or Depositary Receipts evidencing
beneficial ownership of the number of Depositary Shares representing the New
Common Stock so deposited and registered in such name or names as may be
requested by the person or persons named in the written order delivered to the
Depositary in accordance with the first paragraph of this Section 6.02. The
Depositary shall execute and deliver such Depositary Receipt at the Depositary's
Office and at such other offices, if any, as it may designate. Delivery at other
offices shall be at the risk and expense of the Company. However, in each case,
subsequent to the initial deposit hereunder, such delivery shall be made only
upon payment to the Depositary of all taxes and governmental charges and fees
payable in connection with such deposit and the transfer of the deposited New
Common Stock.
SECTION 6.03 Transfer of Depositary Receipts. Subject to the terms and
conditions of this Depositary Agreement, the Depositary shall make transfers on
its books from time to time of Depositary Receipts upon any surrender thereof by
the holder in person or by duly authorized attorney, properly endorsed or
accompanied
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by a properly executed instrument of transfer, and duly stamped as may be
required by law. Thereupon the Depositary shall execute a new Depositary Receipt
or Depositary Receipts and deliver the same to or upon the order of the person
entitled thereto evidencing beneficial ownership of the same aggregate number of
Depositary Shares as those evidenced by the Depositary Receipt or Depositary
Receipts surrendered.
SECTION 6.04 Combinations and Split-ups of Depositary Receipts. Upon
surrender of a Depositary Receipt or Depositary Receipts at the Depositary's
Office or at such other offices as it may designate for the purpose of effecting
a split-up or combination of such Depositary Receipt or Depositary Receipts, by
the holder or by duly authorized attorney, properly endorsed or accompanied by a
properly executed instrument of transfer, together with written instructions
specifying the number of Depositary Receipts to be received upon such split-up
or combination, and subject to the terms and conditions of this Depositary
Agreement, the Depositary shall execute and deliver a new Depositary Receipt or
Depositary Receipts in the authorized denominations requested, evidencing the
same aggregate number of Depositary Shares evidenced by the Depositary Receipt
or Depositary Receipts surrendered.
SECTION 6.05 Limitations on Execution and Delivery, Transfer, Split-up,
Combination, Surrender and Exchange of Depositary Receipts.
(a) As a condition precedent to the execution and delivery, transfer,
split-up, combination, surrender, or exchange of any Depositary Receipt, the
Depositary, or any of the Depositary's Agents, or the Company, may require
payment to it of a sum sufficient for the payment (or, in the event that the
Depositary or the Company shall have made such payment, the reimbursement to it)
of any tax or other governmental charge with respect thereto, may require the
production of proof satisfactory to it as to the identity and genuineness of any
signature and may also require compliance with such regulations, if any, as the
Depositary or the Company may establish consistent with the provisions of this
Depositary Agreement.
(b) The transfer of Depositary Receipts may be refused, or the transfer,
split-up, combination, surrender or exchange of outstanding Depositary Receipts
may be suspended (i) during any period when the register of stockholders of the
Company is closed, or (ii) if any such action is deemed necessary or advisable
by the Depositary, any of the Depositary's Agents or the Company at any time or
from time to time because of any requirement of law or of any government or
governmental body or commission, or under any provision of this Depositary
Agreement.
SECTION 6.06 Lost Depositary Receipts, etc. In case any Depositary
Receipt shall be mutilated or destroyed or lost or stolen, the Depositary in its
discretion may execute and deliver a Depositary Receipt of like form and tenor
in exchange and substitution for such mutilated Depositary Receipt, or in lieu
of and in substitution
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for such destroyed, lost or stolen Depositary Receipt, upon receipt by the
Depositary of an appropriate affidavit of loss and a corporate bond of indemnity
which shall include indemnification of the Company and the Depositary for the
Depositary Shares evidenced by such Depositary Receipt by a surety all in such
form and substance as have been approved by the Depositary.
SECTION 6.07 Cancellation and Destruction of Surrendered Depositary
Receipts. All Depositary Receipts surrendered to the Depositary or any
Depositary's Agent shall be cancelled by the Depositary. Except as prohibited by
applicable law or regulation, the Depositary is authorized to destroy such
Depositary Receipts so cancelled.
SECTION 6.08 Representations and Warranties as to Stock. The Company
hereby represents and warrants that the New Common Stock deposited hereunder
upon consummation of the Merger is, and will be deemed to have represented and
warranted that any additional shares of New Common Stock which it deposits
hereunder from time to time in accordance with Section 2.01 will be, when
issued, validly issued, fully paid and nonassessable. Such representation and
warranty shall survive any deposit of shares of New Common Stock and the
issuance of Depositary Receipts.
ARTICLE VII
THE DEPOSITED SECURITIES, NOTICES
SECTION 7.01 Cash Distributions. Whenever the Depositary shall receive
any cash dividend or other cash distribution on the New Common Stock, the
Depositary shall, subject to Section 6.02, promptly distribute to Record Holders
of Depositary Receipts on the Record Date fixed pursuant to Section 7.03 hereof
such amounts of such sum as are, as nearly as practicable, in proportion to the
respective numbers of Depositary Shares evidenced by the Depositary Receipts
held by such holders; provided, that in case the Company or the Depositary shall
be required to withhold and does withhold from any cash dividend or other cash
distribution received by the Depositary in respect of the Stock an amount on
account of taxes, the amount made available for distribution or distributed in
respect of Depositary Shares shall be reduced accordingly. The Depositary shall
distribute or make available for distribution, as the case may be, only such
amount, however, as can be distributed without attributing to any owner of
Depositary Shares a fraction of one cent and any balance, not so distributable
shall be held by the Depositary (without liability for interest thereon) and
shall be added to and be treated as part of the next sum received by the
Depositary for distribution to Record Holders of Depositary Receipts then
outstanding.
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SECTION 7.02 Distributions Other Than Cash. Whenever the Depositary
shall receive any distribution other than cash upon the New Common Stock, the
Depositary shall, subject to Section 6.02, promptly distribute to Record Holders
of Depositary Receipts on the Record Date fixed pursuant to Section 7.03 hereof
such amount of the securities or property received by it as are, as nearly as
practicable, in proportion to the respective numbers of Depositary Shares
evidenced by the Depositary Receipts held by such holders.
SECTION 7.03 Fixing of Record Date for Holders of Depositary Receipts.
Whenever any cash dividend or other cash distribution shall become payable or
any distribution other than cash shall be made, or if rights, preferences or
privileges shall at any time be offered, with respect to New Common Stock, or
whenever the Depositary shall receive notice of any meeting at which holders of
New Common Stock are entitled to vote or of which holders of New Common Stock
are entitled to notice, the Depositary shall in each such instance fix a Record
Date for the determination of the Record Holders of Depositary Receipts who
shall be entitled to receive such dividend, distribution, rights, preferences or
privileges, or to give instructions for the exercise of voting rights at any
such meeting, or who shall be entitled to notice of such meeting. The Record
Date established by the Depositary shall be the same as the Record Date set by
the Company for the holders of its New Common Stock with respect to the
corresponding right or privilege.
SECTION 7.04 Voting Rights.
(a) Upon receipt of notice of any meeting at which the holders of New
Common Stock are entitled to vote, the Depositary shall, as soon as practicable
thereafter, mail to the Record Holders of Depositary Receipts a notice which
shall be provided by the Company and which shall contain (i) such information as
is contained in such notice of meeting, and (ii) a statement that the Record
Holders of Depositary Receipts at the close of business on a specified Record
Date will be entitled, subject to any applicable provision of law and of the
Company's Certificate of Incorporation, to instruct the Depositary as to the
exercise of the voting rights pertaining to the number of shares of New Common
Stock represented by their respective Depositary Shares, and a brief statement
as to the manner in which such instructions may be given. Upon the written
request of a Record Holder of a Depositary Receipt on such Record Date, the
Depositary shall vote or cause to be voted the number of shares of New Common
Stock represented by the Depositary Shares evidenced by such Depositary Receipt
in accordance with the instructions set forth in such request. The Company
hereby agrees to take all reasonable action which may be deemed necessary by the
Depositary in order to enable the Depositary to vote such New Common Stock or
cause such New Common Stock to be voted. In the absence of specific instructions
from the holder of a Depositary Receipt, the Depositary will abstain from voting
to the extent of the New Common Stock represented by the Depositary Shares
evidenced by such Depositary Receipt.
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(b) Record Holders of Depositary Shares shall also be entitled to vote
on certain amendments of this Depositary Agreement pursuant to Section 9.01.
SECTION 7.05 Changes Affecting Deposited Securities and
Reclassifications, Recapitalizations, etc. Upon any split-up, consolidation or
any other reclassification of New Common Stock, or upon any recapitalization,
reorganization, merger, amalgamation, consolidation or sale of all or
substantially all of the Company's assets affecting the Company or to which it
is a party, the Depositary shall, upon the instructions of the Company treat any
shares of stock or other securities, cash (including without limitation cash
paid in lieu of fractional shares) or property which shall be received by the
Depositary in exchange for or upon conversion of or in respect of the New Common
Stock as new deposited property under this Depositary Agreement, and Depositary
Receipts then outstanding shall, subject to Sections 3.01 and 4.01, thenceforth
represent the new deposited property so received in exchange for or upon
conversion or in respect of such New Common Stock. In any such case the
Depositary may in its discretion, with the approval of the Company, execute and
deliver additional Depositary Receipts, or may call for the surrender of all
outstanding Depositary Receipts to be exchanged for new Depositary Receipts
specifically describing such new deposited property.
SECTION 7.06 Reports. The Depositary shall make available for inspection
by holders of Depositary Receipts at the Depositary's Office, and at such other
places as it may from time to time deem advisable during normal business hours,
copies of this Depositary Agreement and any reports and communications received
from the Company which are both (a) received by the Depositary as the holder of
New Common Stock and (b) made generally available to the holders of New Common
Stock of the Company.
SECTION 7.07 Lists of Depositary Receipt Holders. Promptly upon request
from time to time of the Company or, from and after the Option Closing, Alpharma
(if Alpharma is the Exercising Party), the Depositary shall furnish to the
Company or Alpharma, as the case may be, a list, as of a recent date, of the
names, addresses and holdings of Depositary Shares by all persons in whose names
Depositary Receipts are registered on the books of the Depositary as Record
Holders.
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ARTICLE VIII
THE DEPOSITARY, ALPHARMA AND THE COMPANY
SECTION 8.01 Maintenance of Offices, Agencies, Transfer Books by the
Depositary Registrar.
(a) Upon execution of this Depositary Agreement in accordance with its
terms, the Depositary shall maintain at the Depositary's Office facilities for
the execution and delivery, transfer, surrender and exchange of Depositary
Receipts, and at the offices of the Depositary's Agents, if any, facilities for
the delivery, transfer, surrender and exchange of Depositary Receipts, all in
accordance with the provisions of this Depositary Agreement.
(b) The Depositary shall maintain, or cause one of the Depositary's
Agents to maintain, appropriate records which shall reflect registrations,
registrations of transfers, exchanges, split-ups and combinations and
conversions of Depositary Shares. Such records shall be open for inspection by
the Company, the Record Holders of Depositary Receipts and, from and after the
Option Closing, Alpharma (if Alpharma is the Exercising Party), to the same
extent and for the same purposes as a Record Holder of New Common Stock may
inspect books for the transfer of New Common Stock as provided by applicable
law. The Depositary shall, if requested by the Company or, from and after the
Option Closing, Alpharma (if Alpharma is the Exercising Party), consult with
such party upon its receipt of any request by a Record Holder for inspection.
The Depositary may close such books, at any time or from time to time, when
deemed expedient by it in connection with the performance of its duties
hereunder.
(c) If the Depositary Receipts or the Depositary Shares evidenced
thereby (or the New Common Stock represented by such Depositary Shares) are
quoted with NASDAQ, the Depositary may, with the approval of the Company,
appoint a Registrar for registry of such Depositary Receipts or Depositary
Shares in accordance with the requirements of NASDAQ. Such Registrar (which may
be the Depositary if so permitted by the requirements of NASDAQ) may be removed
and a substitute Registrar appointed by the Depositary upon the request or with
the approval of the Company. If the Depositary Receipts or the Depositary Shares
are (or the New Common Stock is) listed on one or more other stock exchanges or
quoted on a national trading market, the Depositary will, at the request of the
Company, arrange such facilities for the delivery, transfer, surrender and
exchange of such Depositary Receipts, Depositary Shares or New Common Stock as
may be required by law or applicable stock exchange or trading market
regulations.
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SECTION 8.02 Prevention or Delay in Performance by the Depositary, the
Depositary's Agents or the Company. None of the Depositary, any Depositary's
Agent or the Company shall incur any liability to any holder of any Depositary
Receipt, if by reason of any provision of any present or future law, or
regulation promulgated thereunder, of the United States of America, or of any
other governmental authority or, in the case of the Depositary or the
Depositary's Agent, by reason of any provision, present or future, of the
Company's Certificate of Incorporation or in the case of the Depositary, the
Depositary's Agent or the Company by reason of any act of God or war or other
circumstance beyond the control of the relevant party, the Depositary, any
Depositary's Agent or the Company shall be prevented or forbidden from doing or
performing any act or thing which the terms of this Depositary Agreement provide
shall be done or performed; nor shall the Depositary, any Depositary's Agent or
the Company incur any liability to any holder of a Depositary Receipt by reason
of any non-performance or delay, caused as aforesaid, in the performance of any
act or thing which the terms of this Depositary Agreement provide shall or may
be done or performed, or by reason of any exercise of, or failure to exercise,
any discretion provided for in this Depositary Agreement except, in case of any
such exercise or failure to exercise discretion not caused as aforesaid, if
caused by the negligence or willful misconduct of the party charged with such
exercise or failure to exercise.
SECTION 8.03 Obligations of the Depositary, the Depositary's Agents and
the Company.
(a) None of the Depositary, any Depositary's Agent or the Company
assumes any obligation or shall be subject to any liability under this
Depositary Agreement to holders of Depositary Receipts except that nothing
herein shall relieve the Depositary, the Depositary's Agent or the Company for
liability arising out of negligence or bad faith on the part of such person or
persons in the performance of such duties as are specifically set forth in this
Depositary Agreement.
(b) The Depositary agrees to comply with all information reporting and
withholding requirements with respect to any applicable law.
(c) None of the Depositary, any Depositary's Agent or the Company shall
be under any obligation to appear in, prosecute or defend any action, suit or
other proceeding with respect to New Common Stock, Depositary Shares or
Depositary Receipts, which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense and liability
be furnished as often as may be required.
(d) None of the Depositary, any Depositary's Agent or the Company shall
be liable for any action or any failure to act by it in reliance upon the advice
of or information from legal counsel, accountants, any person presenting New
Common
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Stock for deposit, any holder of a Depositary Receipt or any other person
believed by it in good faith to be competent to give such advice or information.
The Depositary, any Depositary's Agent and the Company may each rely and shall
each be protected in acting upon any written notice, request, direction or other
document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(e) The Depositary and the Depositary's Agents may own and deal in any
class of securities of the Company and its Affiliates and in Depositary Shares.
The Depositary may also act as transfer agent or registrar of any of the
securities of the Company and its Affiliates.
(f) Notwithstanding any other provision of this Depositary Agreement
that may be interpreted to the contrary, neither the Depositary nor any of the
Depositary's Agents is a trustee hereunder. It is intended that neither the
Depositary nor any Depositary's Agent shall be deemed to be an "issuer" of the
securities under the federal securities laws or applicable state securities
laws, it being expressly understood and agreed that the primary purpose of this
Depositary Agreement is to facilitate the implementation of the Call Option and
that the Depositary and the Depositary's Agents are acting only in a ministerial
custodial capacity as Depositary for the Depositary Shares and the Depositary
Share Consideration and have no obligation or right to exercise any discretion
regarding the preservation of any property held on behalf of the Record Holders
of outstanding Depositary Receipts.
(g) Neither the Depositary (or its officers, directors, employees or
agents) nor any Depositary's Agent makes any representation or has any
responsibility as to the validity of the Registration Statement filed by the
Company in connection with the Merger, the New Common Stock, the Depositary
Shares or any instruments referred to therein or herein, or as to the
correctness of any statement made therein or herein; provided, that the
Depositary is responsible for (i) its representations in this Depositary
Agreement and (ii) the validity of any action taken or required to be taken by
the Depositary in connection with this Depositary Agreement.
(h) The Depositary assumes no responsibility for the correctness of the
description of certain provisions of the Depositary Agreement which appears in
the Depositary Receipts. Notwithstanding any other provision herein or set forth
in the Depositary Receipts, the Depositary makes no warranties or
representations as to the validity, genuineness or sufficiency of any New Common
Stock at any time deposited with the Depositary hereunder or of the Depositary
Shares, as to the value of the Depositary Shares or as to any right, title or
interest of the Record Holders of the Depositary Receipts to the Depositary
Shares. The Depositary shall not be accountable for the use or application by
the Company of the Depositary Shares or Depositary Receipts or the proceeds of
either thereof.
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SECTION 8.04 Resignation and Removal of the Depositary, Appointment of
Successor Depositary.
(a) The Depositary may at any time resign as Depositary hereunder by
written notice of its election to do so delivered to the Company, such
resignation to take effect upon the appointment of a successor depositary and
its acceptance of such appointment as hereinafter provided.
(b) The Depositary may at any time be removed by the Company by written
notice of such removal delivered to the Depositary, such removal to take effect
upon the appointment of a successor depositary and its acceptance of such
appointment as hereinafter provided.
(c) In case at any time the Depositary acting hereunder shall resign or
be removed at any time prior to the termination of this Depositary Agreement,
the Company (with the prior written approval of Alpharma from and after a Call
Option Transfer, which shall not be unreasonably withheld or delayed) shall,
within 60 days after the delivery of the notice of resignation or removal, as
the case may be, appoint a successor depositary, which shall be a bank or trust
company having its principal office in the United States of America and having a
combined capital and surplus of at least $500,000,000. If a successor Depositary
shall not have been appointed in 90 days, the resigning Depositary may petition
a court of competent jurisdiction to appoint a successor depositary, and the
Company and Alpharma shall bear equally the expense of any such petition. Every
successor depositary shall execute and deliver to its predecessor and to
Alpharma and the Company an instrument in writing accepting its appointment
hereunder, and thereupon such successor depositary, without any further act or
deed, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor and for all purposes shall be the Depositary
under this Depositary Agreement, and such predecessor, upon payment of all sums
due it and on the written request of the Company, shall promptly execute and
deliver an instrument transferring to such successor all rights and powers of
such predecessor hereunder, shall duly assign, transfer and deliver all rights,
title and interest in the New Common Stock and any moneys or property held
hereunder to such successor, and shall deliver to such successor a list of the
Record Holders of all outstanding Depositary Receipts. Any successor depositary
shall promptly mail notice of its appointment to the Record Holders of
Depositary Receipts.
(d) Any corporation into or with which the Depositary may be merged,
consolidated or converted or any corporation to which the Depositary may
transfer all or substantially all of its shareholder services business shall be
the successor of such Depositary without the execution or filing of any document
or any further act. Such successor depositary may authenticate the Depositary
Receipts either in the name of the predecessor depositary or in the name of the
successor depositary.
B-33
<PAGE> 85
SECTION 8.05 Corporate Notices and Reports. The Company agrees that it
will deliver to the Depositary, and the Depositary will, promptly after receipt
thereof, transmit to the Record Holders of Depositary Receipts, in each case at
the address recorded in the Depositary's books, copies of all notices and
reports (including, without limitation, financial statements) required by law,
by the rules of NASDAQ or any national securities exchange upon which the New
Common Stock, the Depositary Shares or the Depositary Receipts are listed or by
the Company's Certificate of Incorporation to be furnished by the Company to
holders of New Common Stock. Such transmission will be at the Company's expense
and the Company will provide the Depositary with such number of copies of such
documents as the Depositary may reasonably request for such purpose. In
addition, the Depositary will transmit to the holders of Depositary Receipts (at
the Company's expense) such other documents as may be requested by the Company.
SECTION 8.06 Deposit of New Common Stock by the Company. The Company
shall instruct the Depositary upon the deposit of shares of New Common Stock
hereunder as to whether the shares of New Common Stock so deposited are
registered under the provisions of the 1933 Act, are covered by a then effective
registration statement under the 1933 Act or are restricted. The Depositary
agrees that, consistent with Section 6.01(c) of this Depositary Agreement, upon
the instruction of the Company, it shall incorporate into the Depositary
Receipts evidencing the Depositary Shares to be issued in respect of such New
Common Stock any legends or other stock transfer restrictions deemed appropriate
and requested by the Company.
SECTION 8.07 Indemnification. The Company agrees to indemnify the
Depositary, any Depositary's Agent and any Registrar against, and hold each of
them harmless from, any liability, costs and expenses (including reasonable
attorneys' fees) which may arise out of acts performed or omitted in accordance
with the provisions of this Depositary Agreement (as the same may be amended,
modified or supplemented from time to time) and the Depositary Receipts (i) by
the Depositary, any Registrar or any of their respective agents (including any
Depositary's Agent), except for any liability arising out of negligence or bad
faith on the part of any such person or persons, or (ii) by the Company or any
of its respective agents (other than the Depositary, the Depositary's Agents,
the Registrar, if any, or any of their agents).
SECTION 8.08 Charges and Expenses. No charges and expenses of the
Depositary or any Depositary's Agent hereunder, or those of any Registrar, shall
be payable by any person other than the Company, except for any taxes and other
governmental charges and except as provided in this Section 8.08. If the
Depositary incurs charges or expenses at the election of a holder for which it
is not otherwise liable hereunder, such holder will be liable for such charges
and expenses. All other charges and expenses of the Depositary and any
Depositary's Agent hereunder and
B-34
<PAGE> 86
of any Registrar (including, in each case, fees and expenses of counsel)
incident to the performance of their respective obligations hereunder will be
paid upon consultation and agreement between the Depositary and the Company as
to the amount and nature of such charges and expenses. The Depositary shall
present its statement for charges and expenses to the Company once every three
months or at such other intervals as the Company and the Depositary may agree.
SECTION 8.09 Consequential Damages. No party to this Depositary
Agreement shall be liable to the other parties for consequential damages under
any provision of this Depositary Agreement or any consequential damages arising
out of any act or failure to act hereunder.
ARTICLE IX
AMENDMENT AND TERMINATION
SECTION 9.01 Amendment. The form of the Depositary Receipts and any
provision of this Depositary Agreement may at any time and from time to time be
amended by written agreement between Alpharma, the Company and the Depositary in
any respect which they may deem necessary or desirable; provided that prior to
the Option Determination Date, no such amendment or waiver by the Company shall
be effective without the approval of a majority of the Non-Alpharma Directors;
provided, further, that if a Call Option Transfer to Alpharma does not occur on
or before the ninetieth day following the Effective Time of the Merger, Alpharma
shall reasonably cooperate with the Company and the Depositary in adopting any
amendment to this Agreement that the Company and the Depositary may request. Any
amendment which shall impose any fees, taxes or charges (other than taxes and
other governmental charges, fees and telegram, telex or delivery expenses
payable by owners of Depositary Shares) shall not become effective as to
outstanding Depositary Receipts until the expiration of three months after
notice of such amendment shall have been given to the Record Holders of
outstanding Depositary Receipts. If any such amendment shall materially and
adversely alter the rights of holders of Depositary Receipts, it shall not
become effective as to outstanding Depositary Receipts until the Record Holders
of Depositary Receipts representing not less than a majority of the number of
Depositary Shares then outstanding shall have consented thereto in writing or by
voting therefor in person or by proxy at a meeting held on notice for such
purpose or any adjournment or adjournments thereof. Every holder of an
outstanding Depositary Receipt at the time any such amendment so becomes
effective shall be deemed, by continuing to hold such Depositary Receipt, to
consent and agree to such amendment and to be bound by this Depositary Agreement
as amended thereby. In addition, in no event shall any amendment obligate or
empower the Depositary to act as a trustee with respect to Depositary Shares or
cash held by it on behalf of the Record Holders of outstanding Depositary
Receipts or
B-35
<PAGE> 87
otherwise result in the Depositary being treated as other than the mere
custodian of the New Common Stock on behalf of such Record Holders.
SECTION 9.02 Termination. This Depositary Agreement shall be of no
further force and effect from and after the earliest of:
(i) September 30, 1999 if the Effective Time has not occurred
prior to or on such date;
(ii) the later of (A) 24 months after the Option Determination
Date and (B) the date on which all securities of the Company convertible
into Depositary Shares of the Company, and any rights, options or
warrants to acquire Depositary Shares outstanding on the Option
Determination Date cease to be convertible into or exercisable or
exchangeable for the Depositary Share Consideration; and
(iii) the date that no Depositary Receipts remain outstanding.
Upon the termination of this Depositary Agreement, the Company shall be
discharged from all obligations under this Depositary Agreement except for its
obligations to the Depositary, any Depositary's Agent and any Registrar under
Sections 8.07 and 8.08.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Counterparts. This Depositary Agreement may be executed in
any number of counterparts, and by each of the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed an original, but all such counterparts taken together shall constitute
one and the same instrument. Copies of this Depositary Agreement shall be filed
with the Depositary and the Depositary's Agents and shall be open to inspection
during business hours at the Depositary's Corporate Trust Office and the
respective offices of the Depositary's Agents, if any, by any holder of a
Depositary Receipt.
SECTION 10.02 Exclusive Benefits of Parties. This Depositary Agreement
is for the exclusive benefit of the Depositary, Alpharma and the Company, and
their respective successors hereunder, and shall not be deemed to give any legal
or equitable right, remedy or claim to any other person whatsoever.
SECTION 10.03 Invalidity of Provisions. In case any one or more of the
provisions contained in this Depositary Agreement or in the Depositary Receipts
B-36
<PAGE> 88
should be or become invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall in no wise be affected, prejudiced or disturbed thereby.
SECTION 10.04 Notices.
(a) 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 Alpharma, to:
Alpharma USPD Inc.
7205 Windsor Blvd.
Baltimore, MD 21244
Attention: President
with a copy to:
Alpharma USPD Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: Chief Legal Officer
If to the Company, to:
Ascent Pediatrics, Inc.
187 Ballardvale Street, Suite B125
Wilmington, Massachusetts 01887
Attention: Alan R. Fox
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
B-37
<PAGE> 89
If to the Depositary, to:
State Street Bank and Trust Company
c/o EquiServe, L.P.
150 Royall Street
Canton, MA 02021
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.
(b) Any and all notices given to any Record Holder of a Depositary
Receipt hereunder or under the Depositary Receipts shall be in writing and shall
be deemed to have been duly given if personally delivered or sent by mail or by
telegram or telex confirmed by letter, addressed to such holder at the address
of such Record Holder as it appears on the books of the Registrar, or, if such
holder shall have filed with the Registrar a written request that notices
intended for such holder be mailed to some other address, at the address
designated in such request. Delivery of a notice sent by mail or by telegram or
telex shall be deemed to be effected at the time when a duly addressed letter
containing the same notice (or a confirmation thereof in the case of a telegram
or telex message) is deposited, postage prepaid, in a post-office letter box.
The Depositary or the Company may, however, act upon any telegram or telex
message received by it from any holder of a Depositary Receipt, notwithstanding
that such telegram or telex message shall not subsequently be confirmed by
letter as aforesaid.
SECTION 10.05 Depositary's Agents. The Depositary may from time to time
appoint Depositary's Agents (which may include the Company) for the purposes of
this Depositary Agreement and may at any time appoint additional Depositary's
Agents and vary or terminate the appointment of such Depositary's Agents;;
provided that no such Depositary Agent may hold the New Common Stock at any
time, other than EquiServe Limited Partnership, a Delaware limited partnership,
which may hold the New Common Stock as service agent for the Depositary. The
Depositary will notify the Company of any such action.
SECTION 10.06 Holders of Depositary Receipts are Parties. The holders of
Depositary Receipts from time to time shall be parties to this Depositary
Agreement and shall be bound by all of the terms and conditions hereof and of
the Depositary Receipts by acceptance thereof.
B-38
<PAGE> 90
SECTION 10.07 Governing Law. This Depositary Agreement and the
Depositary Receipts and all rights hereunder and thereunder and provisions
hereof and thereof shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the principles of
conflicts of law thereof.
SECTION 10.08 Headings. The headings of articles and sections in this
Depositary Agreement and in the form of the Depositary Receipt set forth in
Exhibit A hereto have been inserted for convenience only and are not to be
regarded as a part of this Depositary Agreement or to have any bearing upon the
meaning or interpretation of any provision contained herein or in the Depositary
Receipts.
SECTION 10.09 Successors and Assigns. The provisions of this Depositary
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Depositary Agreement without the consent of the other party hereto.
Notwithstanding the foregoing, (i) the Company may transfer the Call Option to
and assign, delegate or otherwise transfer all of its rights and obligations as
the holder of the Call Option under this Depositary Agreement to Alpharma in
accordance with Sections 5.2(n) and 7.2 of the Master Agreement, and (ii)
Alpharma may assign, delegate or otherwise transfer all of its rights and
obligations under this Agreement to a transferee that acquires all or
substantially all of the business, assets or capital stock of Alpharma, provided
that (a) Alpharma also assigns, delegates or otherwise transfers all or its
rights and obligations under the Master Agreement to such transferee and (b)
such transferee agrees in writing to be bound by and subject to the provisions
of this Depositary Agreement and the Master Agreement.
[REMAINDER OF PAGE LEFT BLANK.]
B-39
<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have duly executed this
Depositary Agreement as of the day and year first above set forth and all
holders of Depositary Receipts shall become parties hereto upon acceptance by
them of Depositary Receipts issued in accordance with the terms hereof.
Attest: ASCENT PEDIATRICS, INC.
/s/ John G. Bernardi By: /s/ Alan R. Fox
- ----------------------------- -------------------------------
Secretary Title: President
Attest: ALPHARMA USPD INC.
By: /s/ Thomas L. Anderson
- ----------------------------- -------------------------------
Secretary Title: President
Attest: STATE STREET BANK AND TRUST
COMPANY
/s/ David M. Elwood By: /s/ Charles V. Rossi
- ----------------------------- -------------------------------
Vice President Title: Vice President
B-40
<PAGE> 92
EXHIBIT A
FORM OF DEPOSITARY RECEIPT
- ------ DEPOSITARY RECEIPT ------
number FOR number
- ------ DEPOSITARY SHARES, ------
EACH REPRESENTING ONE SHARE OF COMMON STOCK,
$.00004 PAR VALUE PER SHARE,
OF
ASCENT PEDIATRICS, INC.
SUBJECT TO THE CALL OPTION EXERCISABLE PURSUANT TO
THE DEPOSITARY AGREEMENT,
SEE BELOW AND REVERSE.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, NEW YORK,
CHICAGO OR LOS ANGELES
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP
State Street Bank and Trust Company, a Massachusetts trust company, as
Depositary (the "Depositary"), hereby certifies that
is the registered owner of Depositary Shares
By Depositary and Registrar
Authorized Signature
<PAGE> 93
Each Depositary Share ("Depositary Shares") represents one share (a
"Share") of Common Stock, $.00004 par value per share, (the "Common Stock") of
Ascent Pediatrics, Inc., a Delaware corporation (the "Company") (i) subject to
an option under the Depositary Agreement dated as of February 19, 1999 (the
"Depositary Agreement"), among the Company, Alpharma USPD, Inc., a Maryland
corporation ("Alpharma"), and the Depositary to purchase all shares of Common
Stock held by the Depositary at any time during the Call Period (as defined in
the Depositary Agreement) (the "Call Option") at the Option Exercise Price
determined in accordance with the Depository Agreement (the "Option Exercise
Price"), and (ii) deposited with the Depositary. Subject to the terms and
entitled to the benefits of the Depositary Agreement, each owner of a Depositary
Share is entitled proportionately to all the powers, preferences and rights and
the qualifications, limitations or restrictions of such preferences and/or
rights of the Common Stock represented thereby, including dividends and voting
rights as set forth in the Amended and Restated Certificate of Incorporation and
the By-Laws of the Company, as amended from time to time (copies of which are on
file with the Depositary). If the Call Option is exercised, the holders of
Depositary Shares will be entitled to receive the Option Exercise Price paid in
respect thereof. By accepting this Depositary Receipt, the holder hereof agrees
to be bound by all of the terms and conditions of the Depositary Agreement. This
Depositary Receipt shall not be valid or obligatory for any purpose or entitled
to any benefits under the Depositary Agreement unless it shall have been
executed by the Depositary by the manual signature of a duly authorized officer
or, if executed in facsimile by the Depositary, countersigned by a Registrar in
respect of the Depositary Receipts by the manual signature of a duly authorized
officer thereof.
The Company will furnish without charge to each holder of a Depositary
Receipt who so requests a copy of the Depositary Agreement, such request to be
addressed to the Depositary named on the face of this receipt.
The following receipt abbreviations, when used in the instructions on the
face of this receipt shall be construed as though they were written out in full
according to applicable laws or regulations
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT___________Custodian____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act_______________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________ hereby sell(s), assign(s) and transfer(s) unto
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE. PLEASE INSERT
SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------- Depositary Shares
represented by the within Depositary Receipt, and does (do) hereby irrevocably
constitute and appoint ________________________________________________ Attorney
- --------------------------------------------------------------------------------
to transfer such Depositary Shares on the books of the within named Depositary,
with full power of substitution in the premises.
Dated __________________________
X __________________________________________
NOTICE: THE SIGNATURE APPEARING ABOVE TO
THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THIS
DEPOSITARY RECEIPT IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
<PAGE> 94
EXHIBIT C
CERTIFICATE OF MERGER
OF
BIRD MERGER CORPORATION
(A DELAWARE CORPORATION)
INTO
ASCENT PEDIATRICS, INC.
(A DELAWARE CORPORATION)
Ascent Pediatrics, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger is as follows:
<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
Ascent Pediatrics, Inc. Delaware
Bird Merger Corporation Delaware
</TABLE>
SECOND: That an Agreement and Plan of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by each
of the constituent corporations in accordance with the requirements of
Subsection (c) of Section 251 of the General Corporation Law of the State of
Delaware.
THIRD: That the name of the surviving corporation of the merger is Ascent
Pediatrics, Inc., a Delaware Corporation.
FOURTH: That the amendments or changes in the Restated Certificate of
Incorporation of Ascent Pediatrics, Inc., a Delaware corporation, which is the
surviving corporation, that are to be effected by the merger are as follows:
That the following Article FOURTEENTH be and hereby is inserted
immediately following Article THIRTEENTH of the Restated Certificate of
Incorporation of the surviving corporation:
<PAGE> 95
"FOURTEENTH. The Board of Directors of the Corporation may discuss,
consider and take any actions relating to any of the following matters, without
the participation or consent of any Alpharma Director (as defined below), upon
the approval of a majority of the Non-Alpharma Directors (as defined below) of
the Corporation then in office:
(a) approve any amendment or waiver by the Corporation of the form of
Depositary Receipt (as defined in the Depositary Agreement dated
as of February 16, 1999 (the "Depositary Agreement") by and among
the Corporation, Alpharma USPD, Inc., a Delaware corporation
("Alpharma"), and State Street Bank and Trust Company) or any
provision of the Depositary Agreement pursuant to Section 9.01 of
the Depositary Agreement;
(b) consent to any waiver or exception to Section 6.1 of the Master
Agreement dated as of February 16, 1999 by and between the
Corporation, Alpharma and Alpharma, Inc., a Delaware corporation
("Parent"), (the "Master Agreement");
(c) exclude any Alpharma Director from access to any documents or
other materials provided to the other members of the Board of
Directors of the Corporation which relate to any matter with
respect to which the Corporation and Alpharma have a potential
conflict of interest if counsel to the Corporation advises the
Non-Alpharma Directors that such exclusion is appropriate given
such potential conflict of interest;
(d) approve any amendment or waiver by the Corporation of any
provision of the Master Agreement pursuant to Section 8.5(a)
thereof; or
(e) make any other determination under the terms of the Depositary
Agreement, the Master Agreement or the Loan Agreement dated as of
February 16, 1999 (the "Loan Agreement") by and among the
Corporation, Alpharma and Parent, or that otherwise relates to any
matter with respect to which the Corporation and Alpharma have a
potential conflict of interest if counsel to the Corporation has
advised the Corporation to such effect.
Any act or decision done or made by a majority of the Non-Alpharma Directors
pursuant to this Article FOURTEENTH shall be regarded as the act of the Board of
Directors of the Corporation. For purposes of this Article FOURTEENTH, (i) the
"Non-Alpharma Directors" shall mean all members of the Board of Directors of the
Corporation at any time in office, excluding any Alpharma Director then in
office, and (ii) the "Alpharma Director" shall mean the member of the Board of
Directors of the Corporation nominated by Alpharma and appointed to the Board of
Directors pursuant to Section 6.5 of the Loan Agreement and any successor to or
replacement
C-2
<PAGE> 96
of such director then in office who was elected to the Board of Directors upon
the nomination of Alpharma. This Article FOURTEENTH shall terminate and be of no
further force or effect from and after the Option Expiration Date (as defined in
the Depositary Agreement).
FIFTEENTH. The Board of Directors of the Corporation may not, without the
consent of the Alpharma Director then in office, authorize the issuance of any
securities of the Company convertible into any equity security of the Company
(including Depositary Shares (as defined in the Depositary Agreement)), or any
rights, options or warrants to acquire any equity security of the Company,
which, following the Option Closing (as defined in the Depositary Agreement)
(whether or not convertible, vested, exercisable or exchangeable on the Option
Closing Date (as defined in the Depositary Agreement)), are not convertible into
or exercisable or exchangeable solely for the cash that the holders thereof
would have received had they converted, exercised or exchanged such convertible
securities, rights, options and warrants for such equity security of the Company
immediately prior to the Option Closing Date. This Article FIFTEENTH shall
terminate and be of no further force or effect from and after the Option
Expiration Date."
FIFTH: That the executed Agreement and Plan of Merger is on file at the
principal place of business of the surviving corporation. The address of said
principal place of business is 187 Ballardvale Street, Suite B-125, Wilmington,
Massachusetts 01887.
SIXTH: That a copy of the Agreement and Plan of Merger will be furnished
by the surviving corporation upon request and without cost to any stockholder of
any constituent corporation.
SEVENTH: That this Certificate of Merger shall be effective upon filing.
IN WITNESS WHEREOF, Ascent Pediatrics, Inc. has caused this Certificate
to be executed by its Chief Executive Officer this _____ day of ___________,
1999.
ASCENT PEDIATRICS, INC.
(a Delaware corporation)
By: ___________________________
Alan R. Fox
Chief Executive Officer
C-3
<PAGE> 1
Exhibit 10.4
ASCENT PEDIATRICS, INC.
MAXIMUM $40,000,000
7.5% CONVERTIBLE SUBORDINATED NOTES DUE 2005
LOAN AGREEMENT
DATE: FEBRUARY 16, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE............................................................... 1
1.1 DEFINITIONS..................................................................................... 1
1.2 RULES OF CONSTRUCTION.......................................................................... 10
ARTICLE II
AMOUNT AND TERMS OF SECURITIES.......................................................................... 11
2.1 COMMITMENT TO LEND; LOANS...................................................................... 11
2.2 EVIDENCE OF DEBT............................................................................... 11
2.3 MAKING OF LOANS................................................................................ 12
2.4 INTEREST AND PRINCIPAL PAYMENTS................................................................ 12
2.5 MANDATORY PREPAYMENT UPON CHANGE IN CONTROL.................................................... 13
2.6 LENDER DISCRETIONARY BORROWING UNDER NOTE...................................................... 14
2.7 OPTIONAL PREPAYMENT............................................................................ 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................... 14
3.1 ORGANIZATION AND EXISTENCE, ETC................................................................ 14
3.2 SUBSIDIARIES................................................................................... 15
3.3 CAPITALIZATION................................................................................. 15
3.4 AUTHORIZATION; BINDING OBLIGATIONS............................................................. 15
3.5 COMPLIANCE WITH INSTRUMENTS, ETC............................................................... 16
3.6 LITIGATION..................................................................................... 17
3.7 FINANCIAL STATEMENTS; TAXES.................................................................... 17
3.8 OFFERING....................................................................................... 18
3.9 PERMITS; GOVERNMENTAL AND OTHER APPROVALS...................................................... 18
3.10 SALES REPRESENTATIVES, CUSTOMERS AND KEY EMPLOYEES............................................. 18
3.11 INTELLECTUAL PROPERTY.......................................................................... 19
3.12 FORM 10-K AND 10-Q............................................................................. 20
3.13 REGULATORY STATUS.............................................................................. 20
3.14 REGISTRATION RIGHTS............................................................................ 20
3.15 NO RELATIONSHIP BETWEEN PARTIES................................................................ 20
3.16 ORDINARY COURSE................................................................................ 21
3.17 NO FINDERS..................................................................................... 21
ARTICLE IV
CONDITIONS OF OBLIGATIONS OF THE LENDER................................................................. 21
4.1 CONDITIONS TO LENDER'S OBLIGATIONS ON THE FIRST LOAN DATE...................................... 21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.2 CONDITIONS TO LENDER'S OBLIGATIONS TO MAKE THE FIRST UNRESTRICTED LOAN......................... 23
4.3 CONDITIONS PRECEDENT TO EACH LOAN.............................................................. 24
4.4 COOPERATION.................................................................................... 24
ARTICLE V
CONDITIONS OF OBLIGATIONS OF THE COMPANY................................................................ 25
5.1 COMPANY'S OBLIGATION........................................................................... 25
5.2 COOPERATION.................................................................................... 25
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE COMPANY.................................................................... 25
6.1 REPORTS........................................................................................ 25
6.2 ACCOUNTS AND RECORDS........................................................................... 27
6.3 INSPECTION..................................................................................... 27
6.4 INDEPENDENT ACCOUNTANTS........................................................................ 27
6.5 BOARD MEMBERS AND MEETINGS..................................................................... 27
6.6 USE OF PROCEEDS................................................................................ 28
6.7 INSURANCE...................................................................................... 28
6.8 RESEARCH AND DEVELOPMENT....................................................................... 28
6.9 FURTHER ASSURANCES............................................................................. 28
6.10 TERMINATION.................................................................................... 28
ARTICLE VII
NEGATIVE COVENANTS...................................................................................... 29
7.1 BORROWED MONEY INDEBTEDNESS.................................................................... 29
7.2 LIENS.......................................................................................... 30
7.3 CONTINGENT LIABILITIES......................................................................... 30
7.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF ASSETS............................ 30
7.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS........................................................ 31
7.6 NATURE OF BUSINESS............................................................................. 31
7.7 TRANSACTIONS WITH RELATED PARTIES.............................................................. 31
7.8 LOANS AND INVESTMENTS.......................................................................... 31
7.9 ORGANIZATIONAL DOCUMENTS....................................................................... 32
7.10 LEASE EXPENSES; PURCHASE MONEY INDEBTEDNESS.................................................... 32
7.11 SALE/LEASEBACKS................................................................................ 32
7.12 ISSUANCE OF STOCK.............................................................................. 32
7.13 SUBSIDIARIES................................................................................... 32
7.14 TERMINATION.................................................................................... 32
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII
DEFAULTS AND REMEDIES................................................................................... 33
8.1 EVENTS OF DEFAULT.............................................................................. 33
8.2 ACCELERATION................................................................................... 34
8.3 OTHER REMEDIES................................................................................. 34
8.4 WAIVER OF PAST DEFAULTS........................................................................ 35
ARTICLE IX
CONVERSION.............................................................................................. 35
9.1 RIGHT OF CONVERSION............................................................................ 35
9.2 CONVERSION PRICE............................................................................... 35
9.3 EXERCISE OF CONVERSION RIGHT................................................................... 35
9.4 PROVISIONS IN CASE OF MERGER, ETC.............................................................. 36
9.5 TAXES ON CONVERSION............................................................................ 36
9.6 COMPANY TO PROVIDE STOCK....................................................................... 36
9.7 REQUIRED ANTITRUST APPROVAL.................................................................... 36
ARTICLE X
SUBORDINATION........................................................................................... 37
10.1 AGREEMENT TO SUBORDINATE....................................................................... 37
ARTICLE XI
RESTRICTIONS ON TRANSFER................................................................................ 37
11.1 SECURITIES LAWS RESTRICTIONS ON TRANSFER....................................................... 37
11.2 RESTRICTIVE LEGEND............................................................................. 37
11.3 REGISTRATION RIGHTS AGREEMENT.................................................................. 38
11.4 ADDITIONAL RESTRICTIONS........................................................................ 38
ARTICLE XII
AMENDMENT, SUPPLEMENT AND WAIVER........................................................................ 39
12.1 WITH CONSENT OF HOLDERS OF THE NOTE............................................................ 39
ARTICLE XIII
MISCELLANEOUS........................................................................................... 40
13.1 NOTICES........................................................................................ 40
13.2 DUPLICATE ORIGINALS............................................................................ 41
13.3 GOVERNING LAW.................................................................................. 41
13.4 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.................................................. 41
13.5 SUCCESSORS AND ASSIGNS......................................................................... 41
13.6 SEPARABILITY................................................................................... 41
13.7 HEADINGS, ETC.................................................................................. 41
13.8 CONFIDENTIALITY................................................................................ 41
13.9 PARENT GUARANTEE............................................................................... 42
</TABLE>
iii
<PAGE> 5
LOAN AGREEMENT (the "Agreement") dated as of February 16, 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").
WHEREAS, 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
herein;
NOW, THEREFORE, in consideration of the premises, it is agreed by and
among the parties hereto as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 DEFINITIONS.
"Affiliate" shall have the meaning ascribed to it in Rule 405
promulgated under the Securities Act.
"Alpharma Director" has the meaning set forth in Section 6.5(a) of this
Agreement.
"Ancillary Agreements" shall mean the Depositary Agreement, the Master
Agreement, the Merger Agreement and the Registration Rights Agreement.
"Approved Accounting Firm" shall have the meaning set forth in Section
6.1(a) of this Agreement.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or
State law 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
committee of the Board authorized to act for it hereunder.
"Borrowed Money Indebtedness" means, with respect to any Person,
without duplication:
(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;
<PAGE> 6
(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 legal holiday on which banks are authorized or required to be
closed in Boston, Massachusetts, New York, New York or in any other
city in which the Depositary's Office (as defined in the Depositary
Agreement) is located.
"Call Option" has the meaning set forth in the Depositary Agreement.
"Capital Stock" means any and all shares, interests, participations or
other equivalents of or interests in (however designated) equity of the
Company, including any preferred stock, but excluding any debt
securities convertible into such equity prior to such conversion.
"Change in Control" of the Company means:
(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
2
<PAGE> 7
owned by such underwriter for purposes of determining whether
a Change in Control has occurred;
(b) Persons who, as of the Closing Date constitute
all of the Non- Alpharma Directors (the "Non-Alpharma
Incumbent Directors") cease for any reason to constitute at
least a majority of the Non-Alpharma 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 Non-Alpharma Incumbent Directors shall be
considered as though such Person were one of the Non- Alpharma
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.
"Closing Date" has the meaning set forth in the Master Agreement.
"Common Stock" means (i) prior to the Effective Time, the Old Common
Stock, and (ii) at and after the Effective Time, the New Common Stock.
"Company" means the party named as such above until a successor
replaces it pursuant to the applicable provision hereof and thereafter
means the successor to such party.
"Company Intellectual Property" has the meaning set forth in Section
3.11(a) of this Agreement.
3
<PAGE> 8
"Conversion Date" has the meaning set forth in Section 9.3 of this
Agreement.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default (as defined in Article VIII of
this Agreement).
"Depositary Agreement" means the Depositary Agreement dated as of the
date hereof by and among the Company, the Lender and State Street Bank
and Trust Company, as Depositary.
"Depositary Share" has the meaning set forth in the Merger Agreement.
"Derivative Securities" has the meaning set forth in Section 3.3(a) of
this Agreement.
"Effective Time" has the meaning set forth in the Merger Agreement.
"Encumbrance" has the meaning set forth in Section 3.4(a) of this
Agreement.
"Event of Default" has the meaning set forth in Section 8.1 of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDA" means the United States Food and Drug Administration.
"Financial Statements" has the meaning set forth in Section 3.7(a) of
this Agreement.
"First Loan" has the meaning set forth in Section 2.3 of this
Agreement.
"First Loan Date" has the meaning set forth in Section 2.3 of this
Agreement.
"GAAP" means U.S. generally accepted accounting principles as in effect
from time to time.
"Historical Financial Statements" has the meaning set forth in Section
3.7(a) of this Agreement.
"Holder" means the Lender and any other Person to whom all or a portion
of the Note is transferred in accordance with Article XI of this
Agreement.
"HSR Act" means the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended.
"Impairment Event" means (i) the existence of a Negative Equity
Position, provided, however, that notwithstanding the requirements of
GAAP, any amounts outstanding under the 8% Subordinated Notes and any
amounts outstanding under any debt securities issued
4
<PAGE> 9
upon conversion or exchange of the Series G Preferred shall be
considered to be equity for purposes of this clause only; (ii) the
occurrence of an event which would make it reasonably probable that the
Company's operating income as defined by GAAP for the 2001 fiscal year
will be less than the amount set forth on Schedule I hereto; or (iii)
the occurrence of an event described in Section 8.1(i) or (j) hereof.
"Indebtedness" means and includes:
(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.
"Intellectual Property" has the meaning set forth in Section 3.11(a) of
this Agreement.
"Investment" means the purchase or other acquisition of any
Indebtedness of, or 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, collateral assignment or other lien or restriction of any
kind, whether based on 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 principal amount of $40,000,000 pursuant to Section 2.1 and the
other terms and conditions of this Agreement.
"Loan Date" has the meaning set forth in Section 2.3 of this Agreement.
"Master Agreement" means the Master Agreement dated as of the date
hereof by and between the Company and the Lender.
"Material Adverse Effect" means, when used in connection with the
Company, any development, change or effect that is materially adverse
to the business, Properties
5
<PAGE> 10
(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.
"May 1998 Securities Purchase Agreement" means the Series G Securities
Purchase Agreement dated as of May 13, 1998 by and among the Company
and the Purchasers named in Schedule I thereto.
"Merger" means the merger of Merger Sub with and into the Company
pursuant to the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
the date hereof by and between the Company and Bird Merger Corporation,
a Delaware corporation and wholly-owned subsidiary of the Company
("Merger Sub").
"Merger Sub" has the meaning set forth in the definition of Merger
Agreement.
"Negative Equity Position" means the existence of a stockholders'
deficit on the Company's balance sheet, determined in accordance with
GAAP, as of the last day of any monthly fiscal period.
"New Common Stock" has the meaning set forth in the Depositary
Agreement.
"Non-Alpharma Directors" has the meaning set forth in the Depositary
Agreement.
"Note" means the note to be issued by the Company to the Lender
pursuant to Section 2.2(a) of this Agreement, substantially in the form
attached hereto as Exhibit A, evidencing the maximum principal amount
of the Loans; provided however, that in the event that the Lender
exchanges all or a portion of the Note for one or more Notes in
accordance with Section 2.2(c) of this Agreement or transfer all or a
portion of the Note in accordance with Article XI, all references to
the Note in this Agreement shall be deemed to include the Notes issued
by the Company upon such exchange or transfer.
"Note Conversion Shares" has the meaning set forth in Section 3.4(b) of
this Agreement.
"Notice of Borrowing" has the meaning set forth in Section 2.3 of this
Agreement.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Old Common Stock" has the meaning set forth in the Depositary
Agreement.
"Option Determination Date" has the meaning set forth in the Depositary
Agreement.
6
<PAGE> 11
"Option Expiration Date" has the meaning set forth in the Depositary
Agreement.
"Permitted Investments" means:
(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 Moody's
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:
(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
7
<PAGE> 12
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; and
(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.
"Person" means any individual, corporation, association, company,
business trust, partnership, joint venture, joint-stock company,
limited liability company, trust,
8
<PAGE> 13
unincorporated organization or association or government or any agency
or political subdivision thereof.
"Project" means (i) the acquisition of all or a substantial part of the
stock or assets of any Person engaged in the development, manufacture
or sale of pharmaceuticals or other health care products principally
for the pediatric market; (ii) the acquisition of a product or product
line from, or the acquisition of the right to manufacture, distribute
or sell any product or product line of any Person, in each case with
applications in the pediatric pharmaceutical or pediatric health care
market; or (iii) R&D Project.
"Project Loans" has the meaning set forth in Section 2.1.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
"R&D Project" means any project for the research and development of
products or processes related to pediatric pharmaceuticals.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Lender dated as of the date hereof.
"Requisite Holders" means Holders of more than 50% of the aggregate
principal amount of the Note outstanding at any time.
"Screened Project" means a Project that meets the criteria set forth on
Schedule II hereto.
"Screened Project Loans" has the meaning set forth in Section 2.1.
"Screened Project Indebtedness" means Borrowed Money Indebtedness
(other than Loans under this Agreement) incurred for the purpose of
funding a Screened Project.
"SEC" means the United States Securities and Exchange Commission.
"Second Amendment" means the Second Amendment to the May 1998
Securities Purchase Agreement.
"Securities" means the Note and the Note Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Series G Preferred" means the Series G Convertible Exchangeable
Preferred Stock of the Company.
9
<PAGE> 14
"Subordination Agreement" means the Subordination Agreement dated the
date hereof by and among the Company, the Lender and the Original
Lenders (as defined therein).
"Subsidiary" of a Person means any corporation, association,
partnership, joint 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.
"Top-Off Notice" has the meaning set forth in Section 2.6 of this
Agreement.
The term "to the knowledge of" or derivatives thereof shall mean the
actual knowledge of the Chief Executive Officer or the Vice President,
Finance of the Company.
"Type," when referring to a Loan, indicates whether such Loan is the
First Loan, an Unrestricted Loan, a Project Loan or a Screened Project
Loan.
"Unrestricted Loans" means one or more Loans made on or after the
Closing Date in an aggregate principal amount not to exceed $8,000,000.
"Voting Capital Stock" means the Capital Stock entitled to vote
generally in the election of directors.
"1934 Act Filings" means the Annual Report on Form 10-K of the Company
for the fiscal year ended December 31, 1997, the Quarterly Reports of
the Company on Form 10-Q for each of the three months ended March 31,
1998, June 30, 1998 and September 30, 1998 and any other reports or
other documents filed by the Company with the SEC since December 31,
1997 pursuant to the Exchange Act.
"1998 Financial Statements" has the meaning set forth in Section 3.7(a)
of this Agreement.
"1999 Financial Statements" has the meaning set forth in Section 3.7(a)
of this Agreement.
"8% Subordinated Notes" means the Company's 8% Subordinated Notes in
the aggregate principal amount of $9,000,000 issued pursuant to the May
1998 Securities Purchase Agreement.
1.2 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
a. a term has the meaning assigned to it;
10
<PAGE> 15
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 II
AMOUNT AND TERMS OF SECURITIES
2.1 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 on or prior to
December 31, 2001. Such Loans shall consist of (i) the First Loan, (ii)
the Unrestricted Loans, (iii) Loans in addition to those referred to in
clauses (i) and (ii) in the maximum principal amount of $8,000,000
("Project Loans") and (iv) Loans in addition to those referred to in
clauses (i), (ii) and (iii) in the maximum principal amount of
$20,000,000 ("Screened Project Loans"). The maximum principal amount of
Loans outstanding at any time shall not exceed $4,000,000 prior to the
Closing Date and $40,000,000 at any time thereafter. On the terms and
subject to the conditions contained in this Agreement, on or prior to
December 31, 2001 amounts repaid pursuant to the first sentence of
Section 2.4(b) may be reborrowed by the Company and, if reborrowed, (A)
shall be deemed to be a Loan of the same Type as the Loan that was
repaid, if the aggregate amount of Loans made pursuant to this
Agreement at the time of such reborrowing (whether or not repaid) is
less than $20,000,000 and (B) shall be deemed to be a Screened Project
Loan, in all other cases. 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 after December 31, 2001.
2.2 EVIDENCE OF DEBT.
(a) On the First Loan Date, 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, amount and
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<PAGE> 16
Type 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.
(c) At any time after the Option Expiration Date, the Lender may,
at its option, exchange the Note for one or more Notes of like
tenor, in such denominations as the Lender may determine,
payable to the order of the Lender evidencing in the aggregate
the principal amount of Loans outstanding on such date;
provided that the Lender may not transfer the Note or any
portion of the Note except in accordance with Article XI of
this Agreement.
2.3 MAKING OF LOANS.
(a) The Lender agrees to make each Loan upon receipt of a notice
of borrowing in the form of Exhibit B (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 $4,000,000 (the
"First Loan") and which shall be made by the Lender to the
Company on the third Business Day after the date hereof (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
$1,000,000 or a multiple of $500,000 in excess thereof. 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
(other than any Notice of Borrowing delivered pursuant to
Section 2.6) is not made by the Lender because the conditions
precedent to such Loan as set forth in Section 4.1, 4.2 or 4.3
of this Agreement were not satisfied or waived.
(b) Each Notice of Borrowing shall describe the proposed use of
proceeds, and shall provide sufficient information (including
a description of any Project, if applicable) to allow the
Lender to reasonably determine that the proceeds of the
requested Loan will be used as required by Section 6.6. The
Lender shall have the reasonable opportunity to review
information (including without limitation the Company's
financial projections) related to any Screened Project
proposed in a
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<PAGE> 17
Notice of Borrowing and to discuss the proposed use of
proceeds with the Company.
2.4 INTEREST AND PRINCIPAL PAYMENTS.
(a) The Company shall pay 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 Business Day of each calendar quarter. 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 June 30, 2001, the Company may repay all or a
portion of the outstanding principal amount of the Note in its
sole discretion (by approval of the Non-Alpharma Directors) on
no more than one occasion in each calendar quarter on the last
Business Day of such calendar quarter. Subject to the terms
and conditions of this Agreement, amounts so repaid may be
reborrowed pursuant to Section 2.1 on or prior to December 31,
2001. The Company shall repay the aggregate principal amount
of the Note outstanding as of December 31, 2001 in accordance
with the following schedule:
% of Principal Amount of Note
Date of Payment Outstanding as of December 31, 2001
-------------------------------------------------------
March 30, 2004 5%
June 30, 2004 5%
September 30, 2004 5%
December 31, 2004 5%
March 30, 2005 10%
June 30, 2005 70%
provided that any then remaining principal and interest
outstanding with respect to the Note shall be paid in full on
June 30, 2005. Notwithstanding the foregoing, Loans made
pursuant to Section 2.6 may not be repaid by the Company.
(c) Notwithstanding the foregoing, if the Closing Date has not
occurred on or prior to September 30, 1999 (i) the Lender
shall have no further obligation to make Loans and (ii) all
unpaid principal and accrued interest on the Note shall be and
become immediately due and payable by the Company without any
declaration or other act on the part of any Holder.
(d) 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
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<PAGE> 18
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. The Company shall give all
Holders notice of any Change in Control with respect to the Company
within 10 days after the later of (i) the date of such Change in
Control and (ii) the date on which the Company becomes aware of such
Change in Control. Upon any such Change in Control, 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, (i) to convert all or a portion of the then outstanding
principal of the Note into Common Stock (or such other security as may
be provided under Section 9.4) pursuant to Article IX hereof, or (ii)
to require the Company to repay all of the outstanding amounts
principal and accrued and unpaid interest under the Note held by such
Holder. Following a Change in Control with respect to the Company, the
Lender shall have no further obligations to make Loans.
2.6 LENDER DISCRETIONARY BORROWING UNDER NOTE. So long as the Company has
not exercised its right under Section 2.7 hereof, at any time after the
close of business on December 31, 2002 and prior to the close of
business on February 28, 2003, the Company shall, upon receipt of a
written request from the Lender, deliver to the Lender a Notice of
Borrowing (a "Top-Off Notice") requesting a Loan in an amount so that
after giving effect to the Loan requested by such Notice of Borrowing
the maximum principal amount of $40,000,000 is outstanding under the
Note and the Lender shall make such Loan on the third Business Day
following receipt of such Top-Off Notice. The Loan made pursuant to
this Section is intended by the parties to provide for conversion of
the maximum principal amount of the Note into Common Stock and may not
be repaid by the Company. If a Loan is made pursuant to this Section,
the Lender shall deliver a notice of conversion pursuant to Section 9.3
with respect to the maximum principal amount of $40,000,000 within
three Business Days of making such Loan. Notwithstanding Section 2.3(b)
of this Agreement, any Top-Off Notice need not specify a Project for
which the Company proposes to use the proceeds of the Loan being
requested. Notwithstanding the foregoing, the Lender shall have no
right to request a Top-Off Notice and no obligation to make a Loan
pursuant to this Section if the Option Expiration Date has occurred due
to the failure or refusal of Alpharma to make Loans, as set forth in
the proviso to the definition of the term "Option Expiration Date" in
the Depositary Agreement.
2.7 OPTIONAL PREPAYMENT. At any time beginning at the close of business on
the Option Expiration Date and ending at the close of business on
December 31, 2002, the Company may, at its option, upon five Business
Days prior written notice to the Lender, prepay all, but not less than
all, of the outstanding principal amount of the Note, together with any
accrued and unpaid interest to the date of such prepayment. Concurrent
with such prepayment, the Company shall pay to the Lender in cash a
conversion termination fee equal to 25% of the principal amount of the
Note outstanding as of the close of business on December 31, 2001.
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<PAGE> 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Lender as follows:
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 corporate 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 SUBSIDIARIES. Other than Merger Sub, the Company has no Subsidiaries
and owns no securities of other corporations or entities other than
Permitted Investments.
3.3 CAPITALIZATION.
(a) As of the date hereof, (i) the Company's authorized capital
stock consists of: 60,000,000 shares of Common Stock, of which
7,026,445 shares are validly issued and outstanding, fully
paid and non-assessable, and 5,000,000 shares of "blank check"
preferred stock, $.01 par value per share, of which 7,000
shares have been designated Series G Convertible Exchangeable
Preferred Stock, all of which shares are validly issued and
outstanding, fully paid and non-assessable; and (ii) the
Company has outstanding the securities set forth on Schedule
3.3A which are convertible into or exercisable or exchangeable
for Common Stock (the "Derivative Securities").
(b) All the issued and outstanding shares of Capital Stock are
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 3.3A,
there are no outstanding agreements or commitments requiring
the Company to issue Capital Stock or Derivative Securities.
3.4 AUTHORIZATION; BINDING OBLIGATIONS.
(a) The Company has full power and authority to execute, deliver
and perform this Agreement, the Note, the Ancillary Agreements
and such other documents furnished or to be furnished by the
Company hereunder, subject to the approval by the stockholders
of the Company of the Merger Agreement and the transactions
contemplated thereby. This Agreement, the Note and the
Ancillary Agreements
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<PAGE> 20
have each been duly authorized, executed and delivered by the
Company, subject to the approval by the stockholders of the
Company of the Merger Agreement and the transactions
contemplated thereby, and each constitutes a legal, valid and
binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and
to general principles of equity and subject to the approval by
the stockholders described above. Subject to the approval by
the stockholders of the Company of the Merger Agreement and
the transactions contemplated thereby, the issuance, offering
and sale of the Securities pursuant to this Agreement, the
compliance by the Company with the provisions of this
Agreement, the Securities and the Ancillary Agreements, and
the consummation of the other transactions contemplated hereby
or thereby 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 respective
properties is bound, 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), in 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 and, following
the issuance of the Note, the shares of Common Stock issuable
upon conversion of the Note (the "Note Conversion Shares")
will have been duly authorized and reserved for issuance. When
the Note has been duly executed and delivered by the Company
in accordance with this Agreement, (i) 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, (ii) the principal amount outstanding under the Note
will be convertible into Note Conversion Shares in accordance
with the provisions of this Agreement and the Note, and (iii)
the Note Conversion Shares initially issuable upon such
conversion, when issued and delivered in accordance with the
provisions of this Agreement and the Note, will be validly
issued, fully paid and non-assessable.
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<PAGE> 21
3.5 COMPLIANCE WITH INSTRUMENTS, ETC. Except as set forth on Schedule 3.5
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.
3.6 LITIGATION. Except as set forth on Schedule 3.6 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 or the Note Conversion Shares, which would, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
3.7 FINANCIAL STATEMENTS; TAXES.
(a) The Company has previously delivered to the Lender, true,
correct and complete copies of its financial statements for
the years ended December 31, 1995, 1996 and 1997 (the
"Historical Financial Statements") and for the nine months
ended September 30, 1998 (the "1998 Financial Statements").
The Company will deliver to the Lender true, correct and
complete copies of all financial statements filed with the SEC
from January 1, 1999 to the Closing Date (the "1999 Financial
Statements" and together with the Historical Financial
Statements and the 1998 Financial Statements, the "Financial
Statements"). The Financial Statements have been (and in the
case of 1999 Financial Statements will be) prepared in
accordance with GAAP (except for the absence of the footnotes
in any Financial Statements which do not cover a full fiscal
year) and fairly present (and in the case of the 1999
Financial Statements will present) in all material respects,
the financial position of the Company as of the respective
dates thereof and the results of operations and cash flows of
the Company for the periods then ended (subject to normal
year-end adjustments in the case of the 1998 Financial
Statements and in any other Financial Statements which do not
cover a full fiscal year). The Historical Financial Statements
have been (and the Company's financial statements
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<PAGE> 22
for the year ended December 31, 1998 will be) audited by
PricewaterhouseCoopers LLP who are independent public
accountants within the meaning of the Securities Act and they
have expressed (or in the case of the Company's financial
statements for the year ended December 31, 1998 will express)
an opinion thereon, which is unqualified with respect to the
Financial Statements for the years ended December 31, 1995 and
1996. As of the respective dates of the Financial Statements,
the Company had (and in the case of 1999 Financial Statements
will have) no material liabilities or obligations of any
nature (absolute, accrued, contingent or otherwise) whether or
not required by GAAP to be reflected on a balance sheet or
disclosed in the notes thereto except as were reflected on any
balance sheet or disclosed in any notes contained in the
Financial Statements.
(b) Except as set forth on Schedule 3.7B hereto, the Company has
filed or obtained extensions for all necessary income,
franchise and other material tax returns, domestic and
foreign, and has paid all taxes shown as due thereunder
(except in the case where the Company is contesting such
matter in good faith and except in such circumstances where
such failure would not reasonably be expected to have a
Material Adverse Effect), and the Company has no knowledge of
any tax deficiency which might be assessed against the Company
which would reasonably be expected to have a Material Adverse
Effect.
3.8 OFFERING. Subject to the Lender's representations and warranties in the
Ancillary Agreements, the offer, sale and issuance of the Securities to
the Lender as contemplated by this Agreement are 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.
3.9 PERMITS; GOVERNMENTAL AND OTHER APPROVALS. Except as set forth in
Schedule 3.9 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 and except with
respect to the Company's products in development for which marketing
and other approval from the FDA and similar regulatory authorities have
not been obtained. 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 of the transactions contemplated hereby except for
applicable filings with the Nasdaq Stock Market, the filing of Form D
under the Securities Act, the filing of one or more Reports on Form 8-K
under the Exchange Act, the filing of a Registration Statement on Form
S-4 and a Registration Statement on Form 8-A in connection with the
Merger, any filings required under the HSR Act and the filing of a
Certificate of Merger and Certificate of Amendment to the Company's
Certificate of Incorporation in connection with the Merger.
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<PAGE> 23
3.10 SALES REPRESENTATIVES, CUSTOMERS AND KEY EMPLOYEES. Except as set forth
in Schedule 3.10A, to the knowledge of the Company, as of the date
hereof, no independent sales representative or key employee or group of
employees of, or party or Person providing services to, the Company has
any intention to terminate his, her or its relationship with the
Company or, in the case of employees, to leave the employ of the
Company, which termination or departure would have a Material Adverse
Effect. Except as set forth in Schedule 3.10B hereto, all personnel as
of the date hereof are employed on an "at will" basis and may be
terminated upon notice of not more than (30) days.
3.11 INTELLECTUAL PROPERTY.
(a) To the Company's knowledge, the Company has full and exclusive
right, title and interest in and to, or, to the extent set
forth on Schedule 3.11(a), license rights to, all (i) patents,
patent applications, registered or unregistered trademarks,
service marks, tradenames, and applications therefor,
registered or unregistered copyrights and applications
therefor, know-how, proprietary rights and processes, trade
secrets, customer lists, methodologies (to the extent
practicable), proprietary developments and marketing
information, (ii) know-how, inventions, inventors' notes (to
the extent such notes exist), drawings and designs associated
with the foregoing and (iii) other confidential information,
(all of the foregoing collectively, "Intellectual Property")
used in or necessary for the ongoing conduct of its business
and the development of the Pipeline Products ("Company
Intellectual Property"), free and clear of all Encumbrances of
any nature, except where the failure to have full and
exclusive right, title and interest in and to, or license
rights to, Intellectual Property would not reasonably be
expected to have a Material Adverse Effect; and except as set
forth on Schedule 3.11(a), the Company has no material
obligation to any other Person or entity with respect to
Company Intellectual Property or any developed or under
development product or process of the Company utilizing or
embodying any Company Intellectual Property. Schedule 3.11(a)
is a complete and accurate schedule of all patents, patent
applications, registered trademarks, service marks, tradenames
and applications therefor, registered copyrights and
applications therefor, and license agreements used in or
necessary for the ongoing conduct of Company's business.
(b) There is (i) to the Company's knowledge, no infringement,
misuse or misappropriation of any Intellectual Property owned,
licensed or controlled by any third party arising out of any
product or process (including without limitation any Pipeline
Product) now being used, manufactured, developed, under
development, or distributed, or ever having been used,
manufactured, developed, under development, or distributed at
any time previously, by or on behalf of the Company, except to
the extent such infringement, misuse or misappropriation would
not reasonably be expected to have a Material Adverse Effect,
(ii) no pending or, to the knowledge of the Company,
threatened claim or challenge of or proceeding for
infringement, misuse or misappropriation of or interference
with
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<PAGE> 24
any Intellectual Property owned, licensed or controlled by any
third party arising out of any product or process now being
used, manufactured, developed or distributed, or ever having
been used, manufactured, distributed or developed at any time
previously, by or on behalf of the Company, which would
reasonably be expected to have a Material Adverse Effect,
(iii) except as set forth in Schedule 3.11(b) hereto, no
pending or, to the knowledge of the Company, threatened claim,
challenge or proceeding by the Company against any third party
for infringement, misuse or misappropriation of or
interference with any Intellectual Property owned, licensed or
controlled by the Company or (iv) no notice from any another
party to the Company to the effect that, or, to the knowledge
of the Company, facts or information which, in the reasonable
opinion of the Company, would render any Company Intellectual
Property owned, invalid or unenforceable, nor, to the
knowledge of the Company, is there any allegation that any
such Company Intellectual Property is invalid or
unenforceable, except to the extent that the invalidity or
unenforceability of such Company Intellectual Property would
not reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth in Schedule 3.11(c), the Company has not
disclosed any material confidential information developed or
utilized by the Company to any third party except on a
confidential basis and pursuant to a written confidentiality
agreement, nor, to the knowledge of the Company, has any third
party disclosed confidential information developed or utilized
by the Company to any Person in material breach of such
confidentiality agreement.
3.12 FORM 10-K AND 10-Q. The Annual Report on Form 10-K of the Company for
the fiscal year ended December 31, 1997, the Quarterly Reports on Form
10-Q for each of the three months ended March 31, 1998, June 30, 1998
and September 30, 1998, and any reports filed with the SEC pursuant to
the Exchange Act from the date hereof to the First Loan Date when filed
by the Company, complied or will comply as to form in all material
respects with the applicable requirements of the Exchange Act and did
not or will 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.
3.13 REGULATORY STATUS. Schedule 3.13 sets forth a description of the
development status of each of the Company's principal products not
currently on the market as of the date hereof ("Pipeline Products"),
including status with the FDA. The Company has made available to the
Lender for its review all of its correspondence with the FDA related to
the Pipeline Products and has had no oral communications with the FDA
that are contrary to any such correspondence dated later than January
1, 1998. With respect to any Pipeline Products not in commercial
production, such description sets forth the remaining steps to be taken
prior to commercial production and an estimate of the time required to
reach commercial production. The Company makes no representation or
warranty with respect to the estimated time to achieve such steps.
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<PAGE> 25
3.14 REGISTRATION RIGHTS. Except as provided for in this Agreement, the
Ancillary Agreements, or in Schedule 3.14, the Company is not under any
obligation to register under the Securities Act any of its currently
outstanding securities or any of its securities which may hereunder be
issued.
3.15 NO RELATIONSHIP BETWEEN PARTIES. The Company is not an owner of any
shares of the stock or equity interest in the Lender. To the Company's
knowledge, as of the date hereof no officer, director, or owner of more
than 5% of the outstanding capital stock of the Company with which any
officer or director of the Company is affiliated owns any shares of the
capital stock of or equity interest in the Lender.
3.16 ORDINARY COURSE. Since September 30, 1998, the Company, except as set
forth on Schedule 3.16 hereto, in the 1934 Act Filings or as explicitly
contemplated by this Agreement, has conducted its business in the
ordinary course, has not incurred any material obligation, absolute or
contingent, or entered into any material transactions not in the
ordinary course of business which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect, and has
not declared or paid any dividends or distributions on its Capital
Stock or reacquired any shares of its Capital Stock.
3.17 NO FINDERS. The Company has not employed any broker or finder in
connection with the transactions contemplated by this Agreement or the
Ancillary Agreements.
ARTICLE IV
CONDITIONS OF OBLIGATIONS OF THE LENDER
4.1 CONDITIONS TO LENDER'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 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), (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 and
(iii) inaccuracies resulting from the failure to obtain
shareholder approval for the transactions contemplated by the
Ancillary Agreements.
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(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 Securities.
(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, 1998, 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 Securities
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 and the Ancillary Agreements (other than
shareholder approval) 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
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<PAGE> 27
incident to the transaction contemplated hereby as it may
reasonably request. The Ancillary Agreements shall be in full
force and effect.
(j) Opinion of Counsel. The Lender shall have received the opinion
of Hale and Dorr 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 and the Ancillary Agreements, issue the Securities
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) Delivery. The Company shall have delivered to the Lender (i)
the Note and (ii) the following:
(A) A certified copy of the Company's certificate of
incorporation and all amendments thereto,
appropriately authenticated;
(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.
4.2 CONDITIONS TO LENDER'S OBLIGATIONS TO MAKE THE FIRST UNRESTRICTED LOAN.
The obligation of the Lender to make the first Unrestricted Loan is
subject to the fulfillment to its reasonable satisfaction, or the
waiver by the Lender, on or prior to the Closing 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 Closing
Date with the same force and effect as if they had been made
on and as of the Closing 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) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with
on or prior to the Closing Date by
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<PAGE> 28
the Company shall have been performed or complied with by the
Company in all material respects on or prior to the Closing
Date.
(c) Conditions in Section 4.1. The conditions set forth in Section
4.1 remain fulfilled or waived by the Lender on or prior to
the Closing Date, provided that any exceptions therein for
shareholder approval shall not be given effect.
(d) Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements 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. The Ancillary Agreements shall be in full force and
effect. The Merger shall have occurred as contemplated by the
Merger Agreement and the other transactions required by the
Ancillary Agreements (including the satisfaction or waiver of
the conditions set forth in Section 5.1, 5.2 and 5.3 of the
Master Agreement) to have occurred at or prior to the
Effective Time shall have occurred. The Second Amendment shall
be in full force and effect. The Second Amendment Closing Date
(as defined in the Second Amendment) shall have occurred and
all the other transactions required by the Second Amendment to
have occurred at or prior to the Second Amendment Closing Date
shall have occurred.
(e) No Defaults. No event has occurred and is continuing or would
result from the first Unrestricted Loan being made on such
date, which constitutes a Default or an Event of Default.
(f) Use of Proceeds. The Lender shall be reasonably satisfied that
the proceeds of the Loan being made will be used as set forth
in Section 6.6.
4.3 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Lender to make
any Loan other than the First Loan or 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 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) No Impairment Event has occurred and is continuing since
September 30, 1998.
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<PAGE> 29
(d) The Lender shall be reasonably satisfied that the proceeds of
the Loan being made will be used as set forth in Section 6.6.
4.4 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, 4.2 and 4.3.
ARTICLE V
CONDITIONS OF OBLIGATIONS OF THE COMPANY
5.1 COMPANY'S OBLIGATION. The Company's obligations under this Agreement
are subject to the fulfillment to its reasonable satisfaction, or the
waiver by the Company, on or prior to the First Loan Date of each of
the following conditions:
(a) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with
on or prior to the First Loan Date by the Lender shall have
been performed or complied with in all respects on or prior to
the First Loan Date.
(b) Compliance Certificate. The Lender shall have delivered to the
Company a certificate of an Officer of the Lender, dated the
First Loan Date, certifying to the fulfillment of the
condition specified in subsection (a) of this Section 5.1.
5.2 COOPERATION. The Company shall take all reasonable steps and use all
reasonable efforts necessary or desirable, and shall cooperate with the
Lender 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 Section 5.1.
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE COMPANY
Subject to Section 6.10 hereof, the Company hereby covenants and
agrees:
6.1 REPORTS.
The Company will deliver to each Holder the following:
(a) within thirty (30) days after the end of each of the twelve
(12) monthly accounting periods in each fiscal year (or when
furnished to the Board of Directors, if
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earlier), unaudited consolidated statements of income and
retained earnings and cash flows of the Company and its
Subsidiaries, if any, for each monthly period and for the
period from the beginning of such fiscal year to the end of
such monthly period, together with consolidated balance sheets
of the Company and its Subsidiaries, if any, as at the end of
each monthly period, setting forth in each case comparisons to
budget and to corresponding periods in the preceding fiscal
year which statements will be prepared in accordance with
GAAP, consistently applied subject to the absence of footnotes
and year-end adjustments;
(b) within ninety (90) days after the end of each fiscal year,
consolidated statements of income and retained earnings and
cash flow of the Company and its Subsidiaries, if any, for the
period from the beginning of each fiscal year to the end of
such fiscal year, and consolidated balance sheets as at the
end of such fiscal year, setting forth in each case in
comparative form corresponding figures for the preceding
fiscal year, which statements will be prepared in accordance
with GAAP, consistently applied (except as approved by the
accounting firm examining such statements and disclosed by the
Company) and will be accompanied by a report on the
consolidated statements of a public accounting firm reasonably
acceptable to the Requisite Holders or one of the public
accounting firms currently known as the "Big Five" (either, an
"Approved Accounting Firm");
(c) within ten (10) days after transmission thereof, copies of all
financial statements, proxy statements, reports and other
communications which the Company sends to its stockholders,
copies of all registration statements and all regular, special
or periodic reports which it files with the SEC or with any
securities exchange on which any of the securities of the
Company are then listed or proposed to be listed, and copies
of all press releases made generally available by the Company
to the public concerning material developments in the business
of the Company and its Subsidiaries, if any; and
(d) promptly after the occurrence thereof (but in any event within
seven (7) days after such occurrence is known to the Company)
notice of any condition or event which constitutes, or the
occurrence of (i) an event which would lead the Company to
believe that the Company is not in compliance in material
respects with the covenants in this Agreement or (ii) the
institution or threatened institution of an action, suit or
proceeding against the Company or any of its Subsidiaries by
or before any court, regulatory authority, administrative
agency or any other governmental agency or body, domestic or
foreign, which, if adversely decided, could have a Material
Adverse Effect.
(e) at least thirty (30) days prior to the end of each fiscal
year, a detailed annual operating budget and business plan for
the Company and its subsidiaries, if any, for such fiscal
year. Such budgets shall be prepared on a monthly basis,
displaying consolidated statements of anticipated income and
retained earnings,
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consolidated statements of anticipated cash flow and projected
consolidated balance sheets, setting forth in each case the
assumption (which assumptions and projections shall represent
and be based upon the good faith best judgment in respect
thereof of the Chief Executive Officer of the Company) behind
the projections contained in such financial statements, and
which budgets shall have been approved by the Board of
Directors of the Company or prior to the beginning of each
twelve-month period to which they pertain and, promptly upon
preparation thereof, any other budgets that the Company may
prepare and any revisions of such annual or other budgets.
6.2 ACCOUNTS AND RECORDS. The Company shall keep true records and books of
account in which entries will be made of all dealings or transactions
in relation to the business and affairs of the Company and its
Subsidiaries, if any, in accordance with GAAP, to the extent
applicable, applied on a consistent basis.
6.3 INSPECTION. For so long as the Lender has not transferred any portion
of the Note, the Company shall permit the Lender or any of its
officers, employees, representatives or such other Person as the Lender
may designate, during regular business hours of the Company, upon
reasonable prior notice, to visit and inspect the offices and
properties of the Company and to (i) review and make extracts or copies
of the books, accounts and records of the Company, and (ii) discuss the
affairs, finances and accounts of the Company, with the Company's
Officers, members of the Board of Directors, Approved Accounting Firm,
consultants and attorneys.
6.4 INDEPENDENT ACCOUNTANTS. The Company will retain an Approved Accounting
Firm to audit the Company's financial statements at the end of each
fiscal year. In the event the services of the Approved Accounting Firm
shall be terminated, the Company shall promptly thereafter seek to
engage another Approved Accounting Firm.
6.5 BOARD MEMBERS AND MEETINGS. From and after the Closing Date and prior
to the Option Expiration Date,
(a) The Company's Board of Directors may not consist of more than
eleven or less than seven directors without the consent of the
Requisite Holders. The Company agrees to hold meetings of its
Board of Directors at least four times a year, at least once
per calendar quarter. The Lender shall have the right to have
one (1) nominee included on the Board of Directors' slate of
nominees to stand for election to the Board of Directors. The
director of the Company designated by the Lender pursuant to
this Section 6.5(a) shall be referred to hereinafter as the
"Alpharma Director".
(b) If at any time the Board of Directors designates a committee
or committees to act on behalf of the Board, (other than any
special committee or committees of Non-
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Alpharma Directors constituted for the purpose of making any
determination that is to be made by such committee under the
terms of this Agreement or any Ancillary Agreement or that
otherwise relates to any matter with respect to which the
Company and the Lender have a potential conflict of interest,
if counsel to the Company advises the Board of Directors that
the exclusion of the Alpharma Director from such committee is
appropriate given such potential conflict of interest) the
Alpharma Director shall be given an option to be a member of
such committee or committees. Prior to the Closing Date, the
Alpharma Director shall have been appointed to the
Compensation Committee and the Audit Committee of the
Company's Board of Directors.
(c) No more than three (3) of the members of the Company's Board
of Directors shall be employed, or otherwise be compensated
(other than normal director's compensation (i.e., meeting
fees, expense reimbursements and stock options), by the
Company.
(d) The Company shall pay fees to the Alpharma Director in an
amount not less than the fees paid to any other director of
the Company who is not an executive officer of the Company,
and shall reimburse such Alpharma Director for his or her
reasonable expenses incurred in attending each Board or
committee meeting or otherwise serving as a director.
6.6 USE OF PROCEEDS. The Company shall use all the proceeds received from
the First Loan and the Unrestricted Loans for (a) general corporate
purposes, including capital expenditures and working capital, (b) the
payment of legal fees and disbursements, accounting fees, investment
banking fees, SEC filing fees and other fees and expenses incurred in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements, and (c) any Projects. The Company shall use all
of the proceeds of Project Loans (other than Loans made pursuant to
Section 2.6 hereof) only for Projects and the payment of fees and
expenses related thereto. The Company shall use all the proceeds
received from Screened Project Loans (other than any Loans made
pursuant to Section 2.6 hereof) for Screened Projects and the payment
of fees and expenses related thereto. 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.
6.7 INSURANCE. The Company shall keep in force with responsible insurers,
policies of insurance providing coverage, limits and deductibles
customary in the Company's industry.
6.8 RESEARCH AND DEVELOPMENT. The Company shall not incur expenses of, or
make commitments with respect to, more than an aggregate of $7,500,000
in the 2001 fiscal year in R&D Projects.
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6.9 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 Lender in order to implement or effectuate the
terms and provisions of this Agreement.
6.10 TERMINATION. The covenants and agreements of the Company set forth in
this Article VI (other than Section 6.9) 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 or the
conversion of the Note) and no amounts may be borrowed pursuant to this
Agreement.
ARTICLE VII
NEGATIVE 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 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) principal of up to $50,000,000 of Borrowed Money Indebtedness
in the aggregate outstanding at any time (which (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), plus any accrued interest
thereon; provided, that all such Screened Project Indebtedness
outstanding on the Option Exercise Date must be repayable at
the option of the Company in full with aggregate penalties not
in excess of $1,000,000 in connection with the Lender's
purchase of the Common Stock pursuant to its exercise of the
Call Option;
(d) purchase money Indebtedness permitted by Section 7.10 to the
extent liens securing the same are allowed by the other
provisions of this Agreement;
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(e) capitalized lease obligations to the extent leases with
respect thereto are allowed by the other provisions of this
Agreement;
(f) the convertible notes issuable pursuant to the May 1998
Securities Purchase Agreement;
(g) on or prior to the Option Expiration Date, any Screened
Project Indebtedness that is convertible directly or
indirectly into Common Stock provided that (i) the aggregate
annual interest expense (including, without limitation the
full effect of both cash and non-cash accrued interest) with
respect to such Indebtedness shall not exceed $1,500,000; (ii)
such Indebtedness by its terms is automatically converted into
Common Stock on or prior to the Option Closing Date; and (iii)
such Indebtedness may not be repaid by the Company prior to
the Option Closing Date; and
(h) after the Option Expiration Date, any Borrowed Money
Indebtedness that is convertible directly or indirectly into
Common Stock.
7.2 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 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 which shall not exceed an
aggregate amount equal to $200,000 at any time outstanding;
and
(d) those liabilities permitted under Section 7.1 hereof.
7.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF ASSETS. In
any single transaction or series of related transactions, directly or
indirectly:
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(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;
(d) acquire all or a substantial portion of the assets or stock of
any person whether by merger or otherwise other than in a
transaction or series of transactions that constitute a
Screened Project, provided that this subsection shall not
prevent any Project funded with the proceeds of the First
Loan, any Unrestricted Loan or Project Loans; or
(e) 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. Nothing in this Agreement shall prohibit the
Company from selling obsolete equipment or from replacing used
equipment in the ordinary course of business.
7.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS. At any time, except as
contemplated by this Agreement and the terms of the Note, by the
Ancillary Agreements and by the Series G 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 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 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
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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 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
and (c) capital contributions or Investments used to fund a Project
permitted by Section 6.6, provided in the case of clause (c) that the
making of such capital contribution or Investment does not cause a
Default under any other provision hereof.
7.9 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 or any Ancillary Agreement.
7.10 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/LEASEBACKS. Enter into any sale/leaseback transactions except as
permitted under the provisions of Section 7.10.
7.12 ISSUANCE OF STOCK. On or prior to the Option Expiration 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
granted prior to March 31, 2002 and rights, warrants or options to
purchase up to 100,000 shares of Common Stock on or after March 31,
2002 (such number to be adjusted for stock splits or
reclassifications), (iii) securities evidencing Screened Project
Indebtedness permitted by Section 7.1(g). On or prior to the Option
Expiration Date, use the proceeds of any issuances of securities (other
than pursuant to the exercise of options granted to officers,
directors, consultants, employees and advisors and other than the First
Loan, the Unrestricted Loans and the Project Loans) to fund Screened
Projects and the payment of fees and expenses related thereto. Prior to
the Option Expiration Date, establish a "Shareholders Rights Plan" or
"Poison Pill" or issue any securities in connection therewith.
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7.13 SUBSIDIARIES. Form, create or acquire any Subsidiary other than Merger
Sub or permit any Person other than the Company or a wholly owned
Subsidiary to hold an equity interest in any Subsidiary.
7.14 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 VIII
DEFAULTS AND REMEDIES
8.1 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 maturity, 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) and such failure continues
for 20 Business Days after notice from the Requisite Holders;
(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;
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(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 ACCELERATION. If an Event of Default occurs and is continuing, the
Requisite Holders 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 REMEDIES. Notwithstanding any other provision of this Agreement,
if an Event of Default occurs and is continuing, any Holder 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 Holder.
Without limiting the foregoing, the Company, the Parent and the Lender
acknowledge and agree that the respective remedies of the Company, the
Parent, the Lender and any other Holder at law for a breach or
threatened breach of any of the provisions of this Agreement or the
Subordination Agreement would be inadequate and, in recognition of that
fact, agree that, in the event of a breach or threatened breach by the
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Company, the Parent, the Lender or any Holder of any of the provisions
of this Agreement, or the Subordination Agreement, in addition to any
remedies specified herein, at law or otherwise, any party hereto and
any Holder, 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, provided that no Holder
shall be entitled to specific performance of the provisions of Section
6.5 hereof.
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 DEFAULTS. Any past Default or Event of Default and its
consequences may be waived in accordance with Section 12.2. When a
Default or an Event of Default is waived, it is cured and ceases.
ARTICLE IX
CONVERSION
9.1 RIGHT OF CONVERSION. A Holder may convert all or a portion of the then
outstanding principal of the Note into Common Stock of the Company (i)
on one occasion on or after any Change in Control with respect to the
Company in accordance with Section 2.5 and (ii) at any time after the
close of business on December 31, 2002.
9.2 CONVERSION PRICE. The conversion price per share of Common Stock for
the Note shall be $7.125 per share. The number of shares of Common
Stock issuable upon conversion of the Note shall be determined by
dividing the dollar amount of the outstanding principal of the Note to
be converted, by $7.125. Except as set forth in Section 9.4, no payment
or adjustment to the conversion price shall be made with respect to
dividends or other distributions declared on shares of Common Stock
prior to the Conversion Date. The Company will pay the Lender in cash
any accrued and unpaid interest with respect to the principal amount of
the Note being converted on the Conversion Date. No fractional shares
of Common Stock shall be issuable upon conversion of the Note, but a
payment in cash will be made in respect of any fraction of a share
which would otherwise be issuable upon such conversion. Such payment
shall be based on the fair market value of the Common Stock at the time
of conversion of the Note, as determined in good faith by the Board of
Directors.
9.3 EXERCISE OF CONVERSION RIGHT. A Holder may exercise the conversion
right set forth in this Article IX by giving written notice to the
Company at the time or times specified in Section 9.1, which notice
shall be accompanied by the Note being surrendered for cancellation and
shall state the portion of the principal amount of the Note being
converted. As promptly as practicable after receipt of the Holder's
notice of conversion
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and the Note being surrendered, the Company shall deliver or cause to
be delivered at its principal executive office to the Holder a
certificate or certificates for the number of full shares issuable upon
the conversion of the Note, or portion thereof, in accordance with the
provisions hereof. Such conversion shall be deemed to have been made at
the time the Note was surrendered for conversion and the notice
specified above shall have been received by the Company at its
principal executive office (the "Conversion Date"), and the Holder upon
such conversion shall be deemed to have become on the Conversion Date
the holder of record of the shares represented thereby. If less than
the entire outstanding principal amount of the Note is being converted,
a new Note shall promptly be delivered to the Holder for the
unconverted principal balance and shall be of like tenor as to all
terms as the Note surrendered. Upon the Conversion Date, the Note or
the portion of the Note being converted shall be deemed to be retired
and canceled.
9.4 PROVISIONS IN CASE OF MERGER, ETC. In the case of any reorganization or
reclassification of the outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value) or as a
result of a subdivision, combination or stock split or in the case of
any consolidation of the Company into, or the merger of the Company
with another entity in which the Company is not the surviving entity
(or it is the surviving entity, but its shares of Common Stock become
shares of another entity), or in the case of a sale, lease or
conveyance of all or substantially all of the assets of the Company as
an entity, a Holder shall thereafter have the right to convert the Note
held by such Holder into the kind and amount of securities, cash or
other property that would have otherwise been receivable by such Holder
upon such reorganization, reclassification, consolidation, merger or
disposition if such Holder had converted the Note into shares of Common
Stock immediately prior to such reorganization, reclassification,
consolidation, merger or disposition. Notwithstanding the foregoing,
nothing in this Section shall alter or affect any covenant in this
Agreement which would limit or prevent the Company from entering into
any transaction described in this Section.
9.5 TAXES ON CONVERSION. If a Holder converts the Note, the Company shall
pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon such conversion.
9.6 COMPANY TO PROVIDE STOCK. The Company shall reserve out of its
authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit the conversion of the
maximum principal amount of the Note.
All shares of Common Stock which may be issued upon conversion of the
Note in accordance with the terms hereof shall be validly issued, fully
paid and non-assessable.
The Company will endeavor to comply with all securities laws regulating
the offer and delivery of shares of Common Stock upon conversion of the
Note and will endeavor to list or qualify such shares for trading on
each national securities exchange or market on which the Common Stock
is then listed or traded.
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9.7 REQUIRED ANTITRUST APPROVAL. Notwithstanding anything in this Article
IX to the contrary, the Note may not be converted at any time if such
conversion and the issuance of shares of Common Stock upon such
conversion require governmental approval under applicable antitrust
laws, including without limitation the HSR Act, until such approval is
obtained. If such approval is required and a Holder wishes to convert
all or a portion of the Note, the Company shall at the request of such
Holder:
(a) take all actions necessary to make the filings required of the
Holder or the Company under the HSR Act, relating to the
possible conversion of the Note, which filings shall comply in
all respects with the requirements of the HSR Act;
(b) comply at the earliest practicable date with any formal or
informal request for additional information received by the
Holder or the Company from the Federal Trade Commission or
Antitrust Division of the Department of Justice pursuant to
the HSR Act;
(c) consult and cooperate with the Holder and consider in good
faith the views of the Holder, in connection with any
analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on
behalf of any party in connection with proceedings under or
relating to the required approvals;
(d) request early termination of the applicable waiting period
under the HSR Act; and
(e) take any and all other commercially reasonable actions in
order to obtain the approval of the governmental entity with
the jurisdiction of enforcing applicable antitrust laws,
including without limitation complying with the HSR Act and
obtaining termination or expiration of the applicable waiting
period under the HSR Act.
ARTICLE X
SUBORDINATION
10.1 AGREEMENT TO SUBORDINATE. The Company shall perform and comply with the
covenants and other obligations for the benefit of the Lender set forth
in the Subordination Agreement, which covenants and other obligations
are incorporated by reference herein, as if such covenants and other
obligations were included herein.
37
<PAGE> 42
ARTICLE XI
RESTRICTIONS ON TRANSFER
11.1 SECURITIES LAWS RESTRICTIONS ON TRANSFER. Neither the Note or the Note
Conversion Shares shall 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.
11.2 RESTRICTIVE LEGEND. Each Note or certificate representing Note
Conversion Shares and any other securities issued in respect of such
securities shall be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable
state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
The foregoing legend may be removed after the second anniversary of the
later of (a) the issue date of the Conversion Shares and (b) 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).
11.3 REGISTRATION RIGHTS AGREEMENT. The rights and obligations of the
Company and the Lender with respect to Securities Act registration are
set forth in the Registration Rights Agreement.
11.4 ADDITIONAL RESTRICTIONS.
(a) Notwithstanding the foregoing, none of this Agreement, the
Note or the rights and obligations hereunder and thereunder
may be transferred by the Lender on or prior to the Option
Expiration Date except in the event of a Change in Control.
Following the Option Expiration Date or such Change in
Control, 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
38
<PAGE> 43
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 13.8.
(c) A transferee to whom such rights are transferred pursuant to
this Section 11.4 may not again transfer such rights to any
other Person, other than as provided in this Section 11.4.
ARTICLE XII
AMENDMENT, SUPPLEMENT AND WAIVER
12.1 WITH CONSENT OF HOLDERS OF THE NOTE. Except as provided below in this
Section 12.1, no provision of this Agreement or the Note may be
amended, supplemented or waived without the consent of the Requisite
Holders 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 Requisite Holders 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 12.1, without the consent of the Holders
holding at least 75% 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 12.1 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
39
<PAGE> 44
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 12.1 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 or alter or waive any of the provisions with respect to
the conversion 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 XIII
MISCELLANEOUS
13.1 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:
Alpharma, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: President
40
<PAGE> 45
with a copy to:
Alpharma, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: Chief Legal Officer
If to the Company, to:
Ascent Pediatrics, Inc.
187 Ballardvale Street, Suite B125
Wilmington, Massachusetts 01887
Attention: Alan R. Fox
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
If to a Holder other than the Lender, to the address provided to the
Company pursuant to Section 11.4.
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.
13.2 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.
13.3 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.
13.4 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.
41
<PAGE> 46
13.5 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.
13.6 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.
13.7 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.
13.8 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 13.8 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.
13.9 PARENT GUARANTEE. The Parent agrees to enter into a guaranty agreement
with the Company with respect to all obligations of the Lender,
monetary or otherwise, under this Agreement.
<PAGE> 47
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/ Emmett Clemente
------------------------
Name: Emmett Clemente
Title: Chairman
ALPHARMA USPD, INC.
By: /s/ Thomas L. Anderson
------------------------
Name: Thomas L. Anderson
Title: President
ALPHARMA INC.
By: /s/ Jeffrey E. Smith
------------------------
Name: Jeffrey E. Smith
Title: Vice President Finance and
Chief Financial Officer
43
<PAGE> 48
EXHIBIT A
NOTE
Wilmington, Massachusetts
February 19, 1999
up to $40,000,000
FOR VALUE RECEIVED, the undersigned, ASCENT PEDIATRICS, INC., a
Delaware corporation (the "Company"), HEREBY PROMISES TO PAY to the order of
ALPHARMA USPD INC., a Maryland corporation (the "Lender") in lawful money of the
United States of America in immediately available funds, the amount of
$40,000,000 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,
amount and Type 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.
This Note is issued pursuant to that certain Loan Agreement dated as of
February 16, 1999 by and between the Company, the Lender and Alpharma Inc., a
Delaware corporation (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. Conversion. A Holder has the right to convert this Note under the
circumstances and at a Conversion Price as provided in the Loan Agreement. A
Holder may exercise the conversion right by following the procedures set forth
in the Loan Agreement.
4. Subordination. This Note is subordinated in right of payment, in the
manner and to the extent set forth in the Subordination Agreement dated as
of February 16, 1999 among the
A-1
<PAGE> 49
Company, the Lender and the Original Lenders named therein (the "Subordination
Agreement"), to the prior payment in full of the Senior Indebtedness in
accordance with the terms set forth in the Loan Agreement.
5. Legends.
"THIS NOTE AND THE SECURITIES ISSUED UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED
FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE AND THE SECURITIES ISSUED UPON
CONVERSION OF THIS 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 (a) the issue date of the Conversion Shares
and (b) 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).
"THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION
AGREEMENT DATED AS OF FEBRUARY 16, 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."
The foregoing legend may be removed upon termination of the
Subordination Agreement.
"THIS INSTRUMENT HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT,
AS SUCH TERM IS DEFINED IN SECTION 1271 ET SEQ. OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED. FROM AND AFTER THE
CLOSING DATE (AS DEFINED IN THE LOAN AGREEMENT DATED AS OF
FEBRUARY 16, 1999 BY AND BETWEEN ASCENT PEDIATRICS, INC.,
ALPHARMA USPD INC. AND ALPHARMA, INC.) UPON INQUIRY MADE BY
ANY HOLDER HEREOF, ADDRESSED TO ASCENT PEDIATRICS, INC. AT 187
BALLARDVALE STREET, SUITE B125, WILMINGTON, MASSACHUSETTS,
ATTENTION: ALAN R. FOX, ASCENT PEDIATRICS, INC. WILL PROVIDE A
STATEMENT SETTING
A-2
<PAGE> 50
FORTH THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT,
THE ISSUE DATE AND THE YIELD TO MATURITY WITH RESPECT TO THE
INSTRUMENT HELD BY SUCH HOLDER."
6. Registration Rights. The rights and obligations of the Company and
the Lender with respect to Securities Act registration are set forth in the
Registration Rights Agreement.
7. Additional Restrictions.
(a) None of this Note or the rights and obligations hereunder
may be transferred by the Lender on or prior to the Option Expiration Date
except in the event of a Change in Control. Following the Option Expiration Date
or such Change in Control, this Note and the rights and obligations hereunder
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 of
the Loan 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 the Loan Agreement to the same extent as
if such transferee were a party hereto, including without limitation the
obligations imposed upon Holders pursuant to the Loan Agreement.
(c) A transferee to whom such rights are transferred pursuant
to the Loan Agreement may not again transfer such rights to any other Person,
other than as provided in the Loan Agreement.
8. 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:
-------------------------
Title:
-------------------------
A-3
<PAGE> 51
SCHEDULE A TO THE NOTE OF
ASCENT PEDIATRICS, INC.
DATED FEBRUARY 19, 1999
<TABLE>
<CAPTION>
Unpaid Name of
Type Payments Principal Person
of Interest Balance Making
Date Loan Period Principal of Note Notation
---- ---- ------ --------- ------- --------
Interest
--------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
A-4
<PAGE> 52
EXHIBIT B
FORM OF NOTICE OF BORROWING
Reference is made to that certain Loan Agreement dated as February 16,
1999 by and among Ascent Pediatrics, Inc. (the "Company"), Alpharma USPD Inc.
(the "Lender") and Alpharma Inc. (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(1)____________________________________________
(C) Funds are requested to be disbursed to the Company's account with______
Account No._________________________________
(D) Project Information and Use of Proceeds:
- --------
(1) Not less than $1,000,000 or a multiple of $500,000 in excess thereof.
B-1
<PAGE> 53
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 (other than any Notice of Borrowing delivered pursuant to
Section 2.6 of the Loan Agreement) 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, 4.2 or 4.3 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:-------------------------------------
B-2
<PAGE> 54
EXHIBIT C
OPINION OF HALE AND DORR LLP
1. Each of the Company and Merger Sub is a corporation existing and in
good standing under the General Corporation Law of the State of
Delaware.
2. The Company has the requisite corporate power and authority to execute,
deliver and, subject to the approval of the stockholders of the Company
of the Merger Agreement (including the exhibits thereto) and the
transactions contemplated thereby, perform the Merger Agreement and the
Transaction Agreements. The Merger Sub has the requisite corporate
power and authority to execute, deliver and perform the Merger
Agreement.
3. The Board of Directors of the Company has adopted by requisite vote
the resolutions necessary to authorize the execution, delivery and,
subject to the approval of the stockholders of the Company of the
Merger Agreement (including the exhibits thereto) and the transactions
contemplated thereby, performance by the Company of the Merger
Agreement and the Transaction Agreements. The Board of Directors of
the Merger Sub has adopted by requisite vote the resolutions necessary
to authorize the execution, delivery and performance by the Merger Sub
of the Merger Agreement.
4. The Company has duly executed and delivered the Merger Agreement and
the Transaction Agreements. The Merger Sub has duly executed and
delivered the Merger Agreement.
5. Subject to the approval of the stockholders of the Company of the
Merger Agreement (including the exhibits thereto) and the transactions
contemplated thereby, each of the Merger Agreement and the
Transaction Agreements is a valid and binding obligation of the
Company and is enforceable against the Company in accordance with
its respective terms. The Merger Agreement is a valid and binding
obligation of the Merger Sub and is enforceable against the Merger Sub
in accordance with its terms.
6. 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.
C-1
<PAGE> 55
7. Subject to the approval of the stockholders of the Company of the
Merger Agreement (including the exhibits thereto) and the transactions
contemplated thereby, the execution and delivery by the Company of the
Merger Agreement and the Transaction Agreements 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 execution and delivery by the Merger
Sub of the Merger Agreement and the performance of its obligations
thereunder will not (a) constitute a violation of the certificate of
incorporation or bylaws of the Merger Sub or (b) constitute a material
violation by the Merger Sub of any statutory law or governmental
regulation covered by this Opinion. The term Other Specified Agreements
means those agreements set forth on Schedule A attached hereto.
8. 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 Alpharma in the Master Agreement, neither the
Company nor Merger Sub was 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 Merger Agreement
or, in the case of the Company, any of the Transaction Agreements, 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
Merger Agreement, the Transaction Agreements 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.
9. Neither the Company nor Merger Sub is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
C-2
<PAGE> 1
EXHIBIT 10.5
GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of February 16, 1998 (the "Guaranty
Agreement"), from Alpharma Inc., a Delaware corporation ("Parent"), for the
benefit of Ascent Pediatrics, Inc., a Delaware corporation ("Ascent"), and each
of its successors and assigns, under the Loan Agreement dated as of the date
hereof (the "Loan Agreement") between Ascent and Alpharma USPD, Inc., a Maryland
corporation ("Alpharma USPD"), the Master Agreement dated as of the date hereof
among Ascent, Parent and Alpharma USPD, the Depositary Agreement dated as of the
date hereof among Ascent, Alpharma USPD and State Street Bank and Trust Company
as Depositary and the Registration Rights Agreement dated as of the date hereof
between Ascent and Alpharma USPD (collectively, the "Agreements"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to them in the Agreements.
WHEREAS, Parent owns and holds all of the issued and outstanding capital
stock of Alpharma USPD;
WHEREAS, as a condition to Ascent's execution and delivery of the
Agreements and its performance of the transactions contemplated thereby, Ascent
has required Parent to guarantee Alpharma USPD's performance and compliance with
the covenants, agreements, obligations, terms and conditions applicable to
Alpharma USPD contained in the Agreements;
WHEREAS, in consideration for the execution and delivery of the Agreements
by Ascent and the performance by Ascent of the transactions contemplated
thereby, Parent is willing to guarantee Alpharma USPD's performance and
compliance with the covenants, agreements, obligations, terms and conditions
applicable to Alpharma USPD contained in the Agreements;
NOW, THEREFORE, in consideration of the mutual agreements herein and in
the Agreements contained, the parties hereto, intending to be legally bound
hereby, agree as follows:
SECTION 1. Guarantee.
Parent irrevocably and unconditionally guarantees to Ascent and its
successors and assigns the due and punctual performance of and compliance with
all covenants, agreements, obligations, terms and conditions of each of the
Agreements executed or to be executed by Alpharma USPD and required to be
performed or complied with by Alpharma USPD. This guarantee is an irrevocable
guaranty of performance and compliance and shall continue in effect with respect
to each of the Agreements
<PAGE> 2
notwithstanding (a) any extension or modification of the terms of such
Agreement, (b) any assumption of any such guaranteed obligation by any other
party or (c) any other act or event which might otherwise operate as a legal or
equitable discharge of Parent's obligations under this Agreement.
Notwithstanding the foregoing, this guaranty shall not apply to an extension or
modification of the terms of an Agreement, without the prior written consent of
Parent, if such extension or modification is agreed to by Alpharma USPD at a
time when such party is not an Affiliate (as defined in the Loan Agreement) of
Parent. Parent hereby waives all special suretyship and other defenses and
notice requirements. This guarantee is in no way conditioned upon any
requirement that Ascent first attempt to collect or enforce the guaranteed
obligation from or against Alpharma USPD. So long as any obligation of Alpharma
USPD to Ascent under any of the Agreements remains outstanding, Parent hereby
waives (but only with respect to Ascent and not as to any other parties) all
rights to subrogation arising out of any payment by Parent under this Guaranty
Agreement.
SECTION 2. Representations and Warranties. Parent represents and warrants
to the Company that:
(a) Parent (i) is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite corporate power
and authority to carry on its business as now conducted and proposed to be
conducted, and (ii) 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 (as defined in the Loan Agreement) with respect to Parent),
(b) it has full power and authority to execute, deliver and perform this
Guaranty Agreement,
(c) the person executing this Guaranty Agreement on behalf of Parent has
the appropriate authority to act on behalf of Parent,
(d) this Guaranty Agreement has been duly authorized, executed and
delivered by Parent and constitutes a legal, valid and binding agreement of
Parent, enforceable against Parent in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity,
and
(e) the compliance by Parent with the provisions of this Guaranty
Agreement and the consummation of the transactions contemplated hereby will not
result in a breach or violation of or conflict with any of the terms or
provisions of, or
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<PAGE> 3
constitute a default under, (i) the Certificate of Incorporation and Bylaws of
Parent, (ii) any contract or other agreement to which Parent is a party or by
which Parent or any of its respective properties is bound, 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 Parent, except, with respect to clauses (ii) and
(iii), in circumstances that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to Parent.
SECTION 3. Costs and Expenses. Parent will pay all out-of-pocket costs and
expenses (including without limitation reasonable legal fees and expenses)
incurred by or on behalf of Ascent in connection with the enforcement of
Parent's obligations under this Guaranty Agreement.
SECTION 4. Notices, etc.
(a) Parent hereby covenants and agrees that Parent shall provide Ascent
with notice of any bankruptcy, insolvency, reorganization, arrangement,
adjustment, composition, dissolution, liquidation, or the like of Parent.
(b) 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 Parent, to:
Alpharma, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: President
with a copy to:
Alpharma, Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Attention: Chief Legal Officer
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<PAGE> 4
If to Ascent, to:
Ascent Pediatrics, Inc.
187 Ballardvale Street, Suite B125
Wilmington, Massachusetts 01887
Attention: Alan R. Fox
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
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.
SECTION 5. Amendments and Waivers. No term or provision of this Guaranty
Agreement may be changed, modified, amended, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against which
enforcement of such change, modification, amendment, waiver, discharge or
termination is sought.
SECTION 6. Miscellaneous. This Guaranty Agreement shall remain in full
force and effect until payment in full of all sums payable by Alpharma USPD
under the Agreements and performance in full of all obligations of Parent
hereunder or of Alpharma USPD in accordance with the terms and conditions of the
Agreements. The obligations of each of the parties under this Guaranty Agreement
shall not be assigned without the prior written consent of the other party
hereto. In addition, Ascent shall not assign this Guaranty Agreement to another
party unless such assignment is made in connection with the assignment to such
party of at least one of the Agreements. This Guaranty Agreement shall inure to
the benefit of, and be binding on and enforceable against, the successors and
assigns of the respective parties hereto. The headings contained in this
Guaranty Agreement are for purposes of reference only and shall not affect in
any way the meaning or interpretation of this Guaranty Agreement. Any provision
of this Guaranty Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating
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<PAGE> 5
the remaining provisions hereof or affecting the validity or enforceability of
such provisions in any other jurisdiction. This Guaranty Agreement constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof. This Guaranty Agreement may be executed in several counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same instrument. This Guaranty Agreement shall be governed in all respects,
including without limitation validity, interpretation and effect, by the laws of
the State of Delaware.
IN WITNESS WHEREOF, the parties have duly executed this Guaranty Agreement
as of the date first above written.
ALPHARMA INC.
By: /s/ Jeffrey E. Smith
------------------------------------
Name: Alpharma, Inc.
Title: Vice President Finance and
Chief Financial Officer
ASCENT PEDIATRICS, INC.
By: /s/ Alan R. Fox
------------------------------------
Name: Alan R. Fox
Title: President and
Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.6
SUBORDINATION AGREEMENT
This SUBORDINATION AGREEMENT (this "Agreement") is dated as of
February 16, 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 on or prior to the Closing Date are
exchanging all outstanding shares of the Series G Preferred for 8% Convertible
Subordinated Notes (the "Convertible Notes" and, together with the "Subordinated
Notes", the "Furman Notes");
WHEREAS, Alpharma has agreed to enter into a Loan Agreement (the
"Loan Agreement") with the Company, pursuant to which Alpharma will make loans
to the Company to be evidenced by a 7.5% Convertible Subordinated Note in the
maximum principal amount of $40,000,000 (the "Alpharma Note"); 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;
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 Original Lenders hereby agree with Alpharma 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.
"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 Borrowed Money Indebtedness in an
aggregate principal amount not greater than $50,000,000 (which (i) prior to or
on the Option Expiration Date, must consist solely of Screened Project
Indebtedness and (ii) thereafter, may include up to
<PAGE> 2
$10,000,000 of Borrowed Money Indebtedness that is not Screened Project
Indebtedness) , which 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 evidence by the Alpharma Note and the
Furman 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) the
Furman Notes will be subordinate in right of payment to the Alpharma Note to the
extent of any Negative Equity Position. To the extent not subordinate in right
of payment pursuant to clause (b) of the immediately preceding sentence, the
Furman 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:
(a) 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 Alpharma or the
Original Lenders shall be entitled to receive any payment of
principal of or interest on the Alpharma Note and the Furman Notes,
respectively;
(b) if the Company has a Negative Equity Position, 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 proceeding) to the date of payment on the
Alpharma Note to the extent of such Negative Equity Position, before
the Original Lenders shall be entitled to receive any payment of
principal of or interest on the Furman Notes; and
(c) 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.
2.3 Company Not to Make Payments with Respect to Securities in
Certain Circumstances.
(a) 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
Furman Notes at any time if a default in payment or interest on
Senior Indebtedness exists, and (i) such default is subject to
judicial proceedings or (ii) notice of such default has been
received by the Company from a holder of Senior Indebtedness, unless
and until
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<PAGE> 3
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 Furman 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 Furman Notes until such Senior Indebtedness
that has matured has been paid or such acceleration has been cured
or waived.
(b) 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
Alpharma or the Original Lenders 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 Alpharma or the Original Lenders as
the property of the holders of Senior Indebtedness.
(c) The holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to Alpharma or the Original
Lenders, without incurring responsibility to Alpharma or the
Original Lenders and without impairing or releasing the obligations
of Alpharma or the Original Lenders hereunder to the holders of
Senior Indebtedness: (i) 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; (ii) sell, exchange,
release or otherwise deal with any Property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii)
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<PAGE> 4
release any Person liable in any manner for the collection of Senior
Indebtedness; and/or (iv) 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 Alpharma or
the Original Lender to take any action to accelerate the maturity of the
Alpharma Note or the Furman Notes or to pursue any rights or remedies
hereunder.
2.4 Acceleration of Securities. If payment of the Alpharma Note or
Furman 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 Furman 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 Alpharma
and the Original Lenders in writing of any facts known to the Company that would
cause a payment of principal of or interest on the Alpharma Note and the Furman
Notes, as applicable, to violate this Section, but failure to give such notice
shall not affect the subordination of the Alpharma Note and the Furman Notes, as
applicable, to the Senior Indebtedness as provided in this Section.
2.6 Subrogation. After all Senior Indebtedness is paid in full in
cash and until the Alpharma Note and the Furman Notes are paid in full in cash,
Alpharma or the Original Lenders 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 Alpharma or the Original
Lenders 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 Alpharma or the Original Lenders is not, as between the
Company and Alpharma or the Original Lenders, a payment by the Company on Senior
Indebtedness.
2.7 Relative Rights. This Section defines the relative rights of
Alpharma, the Original Lenders and holders of Senior Indebtedness. Nothing in
this Agreement shall:
(a) impair, as between the Company and Alpharma or the Original Lenders,
the obligation of the Company, which is absolute and unconditional,
to pay principal of and interest on the Alpharma Note and the Furman
Notes, as applicable, in accordance with its terms;
(b) affect the relative rights of Alpharma or the Original Lenders and
creditors of the Company other than holders of Senior Indebtedness;
or
(c) prevent Alpharma or the Original Lenders from exercising its
available remedies upon a Default or Event of Default, subject to
the rights of holders of Senior Indebtedness to receive
distributions otherwise payable to Alpharma or the Original Lenders.
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<PAGE> 5
If the Company fails because of this Section to pay principal of or
interest on the Alpharma Note or the Furman 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 Furman 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 Furman 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 Alpharma Note and the
Furman 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 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 elsewhere in this Agreement, the
Alpharma Note or the Furman 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 Furman
Notes by reason of
5
<PAGE> 6
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 Furman Notes.
3. Effect of Failure to Pay. The failure to make any payment on
account of the Alpharma Note or the Furman 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 Furman
Notes will sell, assign, pledge, encumber or otherwise dispose of any of the
Alpharma Note or the Furman 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
Furman Notes shall cause each instrument or document which now or hereafter
evidences all or any portion of the Alpharma Note and the Furman Notes to be
conspicuously marked with the following legend:
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT
DATED AS OF FEBRUARY [ ], 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 Furman
Notes hereby acknowledge that the provisions of this Agreement are intended to
be enforceable at all times, 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
Furman 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.
6
<PAGE> 7
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 Furman 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.
* * * * *
7
<PAGE> 8
IN WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ASCENT PEDIATRICS, INC.
By: /s/ Alan R. Fox
--------------------------------------------
Name: Alan R. Fox
Title: President and Chief Executive Officer
ALPHARMA USPD, INC.
By: /s/ Thomas L. Anderson
--------------------------------------------
Name: Thomas L. Anderson
Title: President
ORIGINAL LENDERS:
FURMAN SELZ INVESTORS II L.P.
FS EMPLOYEE INVESTORS L.L.C.
FS PARALLEL FUND L.P.
By: FS PRIVATE INVESTMENTS LLC
MANAGER
By: /s/ James L. Luikart
--------------------------------------------
Name: James L. Luikart
Title: Managing Member
BANCBOSTON VENTURES INC.
By /s/ Marcia T. Bates
--------------------------------------------
Name: Marcia T. Bates
Title: Managing Director
8
<PAGE> 9
FLYNN PARTNERS
By: /s/ James E. Flynn
--------------------------------------------
Name: James E. Flynn, General Partner
Flynn Partners
9
<PAGE> 1
EXHIBIT 10.7
ASCENT PEDIATRICS, INC.
REGISTRATION RIGHTS AGREEMENT
This Agreement dated as of February 16, 1999 is entered into by and among
Ascent Pediatrics, Inc., a Delaware corporation (the "Company"), and Alpharma
USPD Inc., a Maryland corporation ("Alpharma").
Recitals
WHEREAS, the Company, Alpharma and Alpharma, Inc., a Delaware corporation,
have entered into a Loan Agreement of even date herewith (the "Loan Agreement");
and
WHEREAS, the Company has agreed to issue to Alpharma 7.5% Convertible
Notes (the "Convertible Notes") due 2003 through 2005 in an aggregate original
principal amount of up to $40,000,000 in accordance with the terms of the Loan
Agreement; and
WHEREAS, in accordance with the terms of the Loan Agreement and the
Convertible Notes, Alpharma may convert all or a portion of the principal amount
of the Convertible Notes and any accrued interest thereon into shares of Common
Stock (as defined below) of the Company; and
WHEREAS, the Company and Alpharma desire to provide for certain
arrangements with respect to the registration of the shares of Common Stock
issued or issuable upon conversion of the Convertible Notes (and any other
shares of Common Stock of the Company issued in respect of such shares) under
the Securities Act (as defined below);
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act and the
Exchange Act.
"Common Stock" shall have the meaning set forth in the Loan
Agreement.
<PAGE> 2
"Conversion Shares" means the shares of Common Stock issued or
issuable upon conversion of the Convertible Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"First Conversion Date" means the first date on which a Rightsholder
is permitted to convert any portion of the Convertible Notes into Common Stock.
"Initiating Other Holders" shall have the meaning set forth in
Section 3(b).
"Initiating Rightsholders" means the Rightsholder or Rightsholders
initiating a request for registration pursuant to Section 2(a).
"May 1998 Securities Purchase Agreement" means the Securities
Purchase Agreement dated as of May 13, 1998 among the Company and the Purchasers
(as defined therein).
"Other Holders" shall have the meaning set forth in Section 2(d).
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by an amendment or prospectus supplement,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.
"Registration Statement" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section 5.
"Registrable Shares" means (i) the Conversion Shares and (ii) any
other shares of Common Stock issued in respect of such Conversion Shares
(because of stock splits, stock dividends, reclassifications, recapitalizations
or similar events); provided, however, that any shares of Common Stock which are
Registrable Shares shall cease to be Registrable Shares upon the earliest of (a)
any sale of such Registrable Shares pursuant to a Registration Statement or Rule
144 under the Securities Act, (b) any sale of such Registrable Shares in any
manner to a person or entity which, by virtue of Section 11 of this Agreement,
is not entitled to the rights provided by this Agreement, or (c) the date on
which the holder of such Registrable
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<PAGE> 3
Shares shall be able to sell all of such Registrable Shares in a three-month
period pursuant to Rule 144 under the Securities Act. Wherever reference is made
in this Agreement to a request or consent of holders of a certain percentage of
Registrable Shares, the determination of such percentage shall include the
shares of Common Stock issuable upon any conversion of the Convertible Notes,
even if such conversion has not been effected.
"Rightsholders" means Alpharma and any persons or entities to whom
the rights granted under this Agreement are transferred by Alpharma, its
successors or assigns pursuant to Section 11 hereof.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Selling Holder" means any Rightsholder owning Registrable Shares
included in a Registration Statement.
2. Demand Registration Rights.
(a) At any time after the First Conversion Date, a
Rightsholder or Rightsholders holding in the aggregate at least 35% of the
Registrable Shares may request, in writing, that the Company effect the
registration of Registrable Shares owned by such Rightsholder or Rightsholders
having an aggregate value of at least $5,000,000 (based on the then current
market price or fair value).
(b) Upon receipt of any request for registration pursuant to
this Section 2, the Company shall promptly give written notice of such proposed
registration to all other Rightsholders. Such Rightsholders shall have the
right, by giving written notice to the Company within 20 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Rightsholders may request in such notice of
election, subject in the case of an underwritten offering to the approval of the
managing underwriter as provided in Section 2(e) below. Thereupon, the Company
shall, as expeditiously as possible, use its best efforts to effect the
registration of all Registrable Shares which the Company has been requested to
so register on such registration form as the Company shall determine, acting in
its sole discretion.
(c) If the Initiating Rightsholders intend to distribute the
Registrable Shares covered by their request by means of a registered public
offering involving an underwriting, they shall so advise the Company as a part
of their request made pursuant to Section 2(a). The right of any other
Rightsholder to include its Registrable Shares in such registration shall be
conditioned upon such other Rightsholder's participation in such underwriting
and acceptance of the terms
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<PAGE> 4
of the underwriting as agreed upon by the Initiating Rightsholders and the
underwriters selected by them.
(d) Subject in the case of an underwritten offering to the
approval of the managing underwriter as provided in Section 2(e) below, the
Company may include in any registration effected pursuant to this Section 2
Securities to be offered by the Company and securities of the Company held by
any officers or directors of the Company or by other holders of securities of
the Company who are entitled, by contract with the Company, to have securities
included in such a registration (the "Other Holders"); provided that the right
of any officer, director or Other Holder to have securities of the Company
included in a registration for an underwritten offering requested hereunder
shall be conditioned upon such officer's, director's or Other Holder's
participation in such underwriting and acceptance of the terms of the
underwriting as agreed upon by the Initiating Rightsholders and the underwriters
selected by them.
(e) Notwithstanding any other provision of this Section, in
the case of a registration for an underwritten offering, if the managing
underwriter advises the Company that the inclusion of all shares requested to be
registered would adversely affect the offering, the securities to be offered by
the Company, the securities of the Company held by officers or directors of the
Company (other than Registrable Shares) and the securities held by Other Holders
(other than Registrable Shares) shall be excluded from such registration and
underwriting to the extent deemed advisable by the managing underwriter, and if
a further limitation of the number of shares is required, the number of shares
that may be included in such registration and underwriting shall be allocated
among all holders of Registrable Shares requesting registration in proportion,
as nearly as practicable, to the respective number of Registrable Shares held by
them at the time of the request for registration made by the Initiating
Rightsholders pursuant to Section 2(a). If any holder of Registrable Shares,
officer, director or Other Holder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
and the securities so withdrawn shall also be withdrawn from registration. If
the managing underwriter has not limited the number of Registrable Shares or
other securities to be underwritten, the Company may include securities for its
own account in such registration if the managing underwriter so agrees and if
the number of Registrable Shares and other securities which would otherwise have
been included in such registration and underwriting will not thereby be limited.
(f) The Initiating Rightsholders shall have the right to
select the managing underwriter(s) for any underwritten offering requested
pursuant to Section 2(a), subject to the approval of the Company, which approval
shall not be unreasonably withheld.
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<PAGE> 5
(g) The Company shall not be required to effect more than one
registration pursuant to Section 2(a). For purposes of this Section 2(g), a
registration shall not be counted until such time as the Registration Statement
effecting such registration has been declared effective by the Commission
(unless the Initiating Rightsholders withdraw their request for such
registration (other than as a result of information concerning the business or
financial condition of the Company which is made known to the Initiating
Rightsholders after the date on which such registration was requested, where
such withdrawal is made within 10 days after such information is made known to
the Initiating Rightsholders) and elect not to pay the Registration Expenses
therefor pursuant to Section 5 of this Agreement).
(h) The Company shall not be required to effect any
registration pursuant to Section 2(a), if it has previously filed a Registration
Statement and such Registration Statement has not been abandoned or withdrawn,
until the earlier of (i) the date six months after the effective date of such
Registration Statement and (ii) the date that all securities of the Company
covered by such Registration Statement have been sold. For purposes of this
Section 2(h), a Registration Statement which has been filed but not declared
effective within six months of the date of filing shall be deemed abandoned.
3. Incidental Registration.
(a) Whenever the Company proposes to file a Registration
Statement (other than a Registration Statement filed pursuant to Section 2 or a
Registration Statement filed pursuant to Section 10.3 of the May 1998 Securities
Purchase Agreement), at any time and from time to time after the First
Conversion Date and prior to the tenth anniversary of the date hereof, it will,
at least 20 days prior to such filing, give written notice to all Rightsholders
of its intention to do so; provided, that no such notice need be given prior to
such filing if no Registrable Shares are to be included therein as a result of a
determination of the managing underwriter pursuant to Section 3(c). Upon the
written request of a Rightsholder or Rightsholders given within 20 days after
the Company provides such notice (which request shall state the intended method
of disposition of such Registrable Shares), the Company shall use its best
efforts to cause all Registrable Shares which the Company has been requested by
such Rightsholder or Rightsholders to register to be registered under the
Securities Act to the extent necessary to permit their sale or other disposition
in accordance with the intended methods of distribution specified in the request
of such Rightsholder or Rightsholders; provided that the Company shall have the
right to postpone or withdraw any registration effected pursuant to this Section
3 without obligation to any Rightsholder.
(b) If the registration for which the Company gives notice
pursuant to Section 3(a) is a registered public offering involving an
underwriting, the Company shall so advise the Rightsholders as a part of the
written notice given pursuant to Section 3(a). In such event, the right of any
Rightsholder to include its
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<PAGE> 6
Registrable Shares in such registration pursuant to Section 3 shall be
conditioned upon such Rightsholder's participation in the underwriting and
acceptance of the terms of the underwriting as agreed upon between the Company
and/or the Other Holders who have registration rights similar to those set forth
in Section 2 hereof and who have initiated and are participating in the offering
pursuant to such rights (the "Initiating Other Holders") and the underwriters
selected by it, and upon the approval of the managing underwriter as provided in
Section 3(c) below.
(c) Notwithstanding any other provision of this Section 3, if
the managing underwriter determines that the inclusion of all shares requested
to be registered would adversely affect the offering, the Company may limit the
number of Registrable Shares to be included in the registration and
underwriting. The Company shall so advise all holders of Registrable Shares
requesting registration, and the number of shares that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner:
(i) the party initiating the registration and
underwriting (the Company or the Initiating Other Holders, as the case may
be) shall be entitled to include all shares that they have requested to be
registered in such registration and underwriting;
(ii) the Rightsholders and the Other Holders (other than
the Initiating Other Holders) who have requested registration shall then
be entitled to include shares in such registration and underwriting on a
pro rata basis based upon the respective number of shares of Common Stock
(calculated on a fully-diluted basis) which they held at the time the
Company gave the notice specified in Section 3(a); and
(iii) the Company (if such registration and underwriting
has been initiated by the Initiating Other Holders) and the officers and
directors of the Company who have requested registration shall then be
entitled to include shares in such registration and underwriting on such
basis as the Company shall determine, acting in its sole discretion.
4. Registration Procedures.
(a) If and whenever the Company is required by the provisions
of this Agreement to use its best efforts to effect the registration of any
Registrable Shares under the Securities Act, the Company shall:
(i) file with the Commission a Registration Statement
with respect to such Registrable Shares and use its best efforts to cause
that Registration Statement to become effective as soon as possible and to
remain effective for 365 days from the effective date of such Registration
Statement or such lesser period until all such Registrable Shares are
sold;
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<PAGE> 7
(ii) as expeditiously as possible prepare and file with
the Commission any amendments and supplements to the Registration
Statement and the Prospectus as may be necessary to comply with the
provisions of the Securities Act (including the anti-fraud provisions
thereof) and to keep the Registration Statement effective for 365 days
from the effective date of such Registration Statement or such lesser
period until all such Registrable Shares are sold;
(iii) as expeditiously as possible furnish to each
Selling Holder such reasonable numbers of copies of the Prospectus,
including any preliminary Prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such Selling Holder may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by such Selling Holder;
(iv) as expeditiously as possible use its best efforts
to register or qualify the Registrable Shares covered by the Registration
Statement under the securities or Blue Sky laws of such states as the
Selling Holders shall reasonably request, and do any and all other acts
and things that may be necessary or desirable to enable the Selling
Holders to consummate the public sale or other disposition in such states
of the Registrable Shares owned by the Selling Holder; provided, however,
that the Company shall not be required in connection with this paragraph
(iv) to qualify as a foreign corporation or execute a general consent to
service of process in any jurisdiction;
(v) as expeditiously as possible, use its best efforts
to cause all such Registrable Shares to be listed on each securities
exchange or automated quotation system on which similar securities issued
by the Company are then listed;
(vi) promptly provide a transfer agent and registrar for
all such Registrable Shares not later than the effective date of such
Registration Statement;
(vii) promptly make available for inspection by the
Selling Holders, any managing underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant or
other agent retained by any such underwriter or selected by the Selling
Holders, all financial and other records, pertinent corporate documents
and properties of the Company and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such Selling Holder, underwriter, attorney, accountant or
agent in connection with such Registration Statement;
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<PAGE> 8
(viii) as expeditiously as possible, notify each Selling
Holder, promptly after it shall receive notice thereof, of the time when
such Registration Statement has become effective or a supplement to any
Prospectus forming a part of such Registration Statement has been filed;
and
(ix) as expeditiously as possible following the
effectiveness of such Registration Statement, notify each Selling Holder
of any request by the Commission for the amending or supplementing of such
Registration Statement or Prospectus; and
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make generally available
to its security holders, earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-five (45) days
after the end of any twelve (12) month period commencing at the end of any
fiscal quarter in which an applicable registration statement covering
Registrable Shares becomes effective.
(b) If the Company has delivered a Prospectus to the Selling
Holders and after having done so the Prospectus is amended to comply with the
requirements of the Securities Act, the Company shall promptly notify the
Selling Holders and, if requested, the Selling Holders shall immediately cease
making offers of Registrable Shares and return all Prospectuses to the Company.
The Company shall promptly provide the Selling Holders with revised Prospectuses
and, following receipt of the revised Prospectuses, the Selling Holders shall be
free to resume making offers of the Registrable Shares.
5. Allocation of Expenses. The Company will pay all Registration Expenses
for all registrations under this Agreement; provided, however, that if a
registration under Section 2 is withdrawn at the request of the Initiating
Rightsholders (other than as a result of information concerning the business or
financial condition of the Company which is made known to the Initiating Holders
after the date on which such registration was requested, where such withdrawal
is made within 10 days after such information is made known to the Initiating
Holders) and the Initiating Rightsholders elect not to have such registration
counted as a registration requested under Section 2, the requesting
Rightsholders shall pay the Registration Expenses of such registration pro rata
in accordance with the number of their Registrable Shares included in such
registration. For purposes of this Section, the term "Registration Expenses"
shall mean all expenses incurred by the Company in complying with this
Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and expenses of counsel for the
Company and fees and expenses of one counsel selected by the Selling Holders to
represent the Selling Holders, state Blue Sky fees and expenses, and the expense
of any special audits incident to or required by any such registration, but
excluding
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<PAGE> 9
underwriting discounts, selling commissions and the fees and expenses of Selling
Holders' own counsel (other than the counsel selected to represent all Selling
Holders).
6. Indemnification and Contribution.
(a) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless each Selling Holder, each underwriter of the
Registrable Shares being sold by the Selling Holders, and each other person, if
any, who controls such Selling Holder or underwriter within the meaning of the
Securities Act or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which such Selling Holder, underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or Blue Sky laws or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary Prospectus or final
Prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement or Prospectus, or arise out of or are
based upon the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and the Company will reimburse such Selling Holder, underwriter and controlling
person for any legal or any other expenses reasonably incurred by such Selling
Holder, underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
Prospectus or final Prospectus, or any such amendment or supplement, (i) in
reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such Selling Holder, underwriter or controlling
person specifically for use in the preparation thereof; or (ii) if at or prior
to the written confirmation of the sale of the Registrable Shares by or on
behalf of such Selling Holder such untrue statement or omission of a material
fact was corrected by the Company by the delivery to such Selling Holder of a
revised or supplemented Prospectus in accordance with Section 4(b), and such
revised or supplemented Prospectus was not sent or delivered to the purchaser of
such Registrable Shares.
(b) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold harmless
the Company, each of its directors and officers and each underwriter (if any)
and each person, if any, who controls the Company or any such underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities,
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<PAGE> 10
joint or several, to which the Company, such directors and officers, underwriter
or controlling person may become subject under the Securities Act, Exchange Act,
state securities or Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary Prospectus or final
Prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement or Prospectus, or arise out of or are
based upon any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information relating to such Selling Holder furnished in writing to the Company
by or on behalf of such Selling Holder specifically for use in connection with
the preparation of such Registration Statement, Prospectus, amendment or
supplement; provided, however, that the obligations of a Rightsholder hereunder
shall be limited to an amount equal to the net proceeds to such Rightsholder of
Registrable Shares sold in connection with such registration.
(c) Each party entitled to indemnification under this Section
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section except to the extent that the Indemnifying Party
is adversely affected by such failure. The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
Party shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential conflicting interests between the Indemnified Party and any other
party represented by such counsel in such proceeding; provided further that in
no event shall the Indemnifying Party be required to pay the expenses of more
than one law firm per jurisdiction as counsel for the Indemnified Party. The
Indemnifying Party also shall be responsible for the expenses of such defense if
the Indemnifying Party does not elect to assume such defense. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld.
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<PAGE> 11
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 6 is due
in accordance with its terms but for any reason is held to be unavailable to an
Indemnified Party in respect to any losses, claims, damages and liabilities
referred to herein, then the Indemnifying Party shall, in lieu of indemnifying
such Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities to
which such party may be subject in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Rightsholders on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Rightsholders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact related to information supplied by the Company
or the Rightsholders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Rightsholders agree that it would not be just and equitable
if contribution pursuant to this Section 6 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph of Section 6, (i) in no case shall any one Rightsholder be
liable or responsible for any amount in excess of the net proceeds received by
such Rightsholder from the offering of Registrable Shares and (ii) the Company
shall be liable and responsible for any amount in excess of such proceeds;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section, notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
from whom contribution may be sought shall not relieve such party from any other
obligation it or they may have thereunder or otherwise under this Section. No
party shall be liable for contribution with respect to any action, suit,
proceeding or claim settled without its prior written consent, which consent
shall not be unreasonably withheld.
7. Other Matters with Respect to Underwritten Offerings. In the event that
Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2, the Company agrees to (a) enter
into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of the Company and
customary covenants and agreements to be performed by the Company, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering; (b) use its best efforts to cause
its legal counsel to render customary opinions to the underwriters with respect
to the Registration Statement; and (c) use its best efforts to
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<PAGE> 12
cause its independent public accounting firm to issue customary "cold comfort
letters" to the underwriters with respect to the Registration Statement.
8. Information by Selling Holders. Each Selling Holder shall furnish to
the Company such information regarding such Selling Holder and the distribution
proposed by such Selling Holder as the Company may reasonably request in writing
and as shall be required in connection with any registration, qualification or
compliance referred to in this Agreement. The Company shall give the Selling
Holders and the counsel selected by the Selling Holders reasonable opportunity
to review and comment upon any Registration Statement filed by the Company
pursuant to Section 2 of this Agreement and any amendments thereto prior to the
filing thereof with the Commission. The Company shall provide the Selling
Holders and such counsel with a copy of any written comments or telephonic
notification of any verbal comments the Company may receive from the Commission
or its staff with respect to such Registration Statement promptly after the
receipt thereof, shall permit such Selling Holders and such counsel to
participate in the preparation of any written responses or any verbal responses
of the Company or its counsel and shall provide such Selling Holders and such
counsel with a copy of any written responses and telephonic notification of any
verbal responses of the Company or its counsel.
9. Limitations on Registration Rights
(a) Notwithstanding the provisions of Section 2, the Company
may by written notice to the Rightsholders (x) delay filing a Registration
Statement requested by the Initiating Rightsholders pursuant to Section 2 (a
"Delayed Demand Registration Statement") or (y) require that the Rightsholders
immediately cease sales of shares under any effective Registration Statement
("Suspended Registration Statement"), in any period during which the Company is
engaged in or has plans to engage in (i) a registered public offering of the
Company, or (ii) any activity or transaction or preparations or negotiations for
any activity or transaction ("Company Activity") that the Company desires to
keep confidential for business reasons, if the Company determines in good faith
that the public disclosure requirements imposed on the Company under the
Securities Act in connection with any such Registration Statement would require
disclosure of the Company Activity; provided, that, in the aggregate, all such
delays of filing Delayed Demand Registration Statements and/or cessations of
sales under Suspended Registration Statements shall not exceed 90 days in any
12-month period.
(b) If the Company requires the Rightsholders to cease sales
of shares pursuant to Section 9(a) above, the Company shall, as promptly as
practicable following the termination of the circumstance which entitled the
Company to do so, give written notice to the Rightsholders that such
circumstance has terminated and that they may resume sales pursuant to the
Suspended Registration Statement. If the prospectus included in such Suspended
Registration Statement has been amended to comply with the requirements of the
Securities Act, the Company shall enclose such
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<PAGE> 13
revised prospectus with the notice to Rightsholders given pursuant to this
Section 9(b), and the Rightsholders shall make no offers or sales of shares
pursuant to such Suspended Registration Statement other than by means of such
revised prospectus.
10. Rule 144 Requirements. The Company agrees to:
(a) make and keep current public information about the Company
available, as those terms are understood and defined in Rule 144;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to any holder of Registrable Shares upon request
(i) a written statement by the Company as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, (ii) a
copy of the most recent annual or quarterly report of the Company, and (iii)
such other reports and documents of the Company as such holder may reasonably
request to avail itself of any similar rule or regulation of the Commission
allowing it to sell any such securities without registration.
11. Transfers of Certain Rights; Additional Rightsholders.
(a) In General. The rights granted to each Rightsholder
pursuant to the terms of this Agreement may be transferred by such Rightsholder
to another Rightsholder, to any affiliate of such Rightsholder, or to any person
or entity acquiring at least 1,000,000 Registrable Shares (such number being
subject to adjustment for any stock divided, stock split, subdivision,
combination or other recapitalization of the Common Stock of the Company);
provided, however, in the case of any transfer referred to in this paragraph
(a), that the Company is given written notice by the transferee at the time of
such transfer stating the name and address of the transferee and identifying the
securities with respect to which such rights are being assigned.
(b) Transferees. Any transferee (other than Alpharma) 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 Rightsholders under this Agreement to the same
extent as if such transferee were a party hereto.
(c) Subsequent Transferees. A transferee to whom rights are
transferred pursuant to this Section 11 may not again transfer such rights to
any other person or entity, other than as provided in (a) and (b) above.
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12. General.
(a) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(b) Specific Performance. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each Rightsholder shall be entitled to specific performance of the
agreements and obligations of the Company hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware (without
reference to the conflicts of law provisions thereof).
(d) 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
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 Alpharma, to:
Alpharma USPD Inc.
7205 Windsor Blvd.
Baltimore, MD 21244
Attention: President
with a copy to:
Alpharma USPD Inc.
205 Windsor Blvd.
Baltimore, MD 21244
Attention: Chief Legal Officer
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<PAGE> 15
If to the Company, to:
Ascent Pediatrics, Inc.
187 Ballardvale Street, Suite B125
Wilmington, Massachusetts 01887
Attention: Alan R. Fox
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
If to any Rightsholder other than Alpharma, at the address of such
Rightsholder furnished to the Company in writing.
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.
(e) Complete Agreement. This Agreement and Article XII of the
Purchase Agreement constitute the entire agreement and understanding of the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to such subject matter.
(f) Amendments and Waivers. Any term of this Agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least a majority of the Registrable Shares held by all Rightsholders; provided,
that this Agreement may be amended with the consent of the holders of less than
all such Registrable Shares only in a manner which affects all such holders in
the same fashion. Any such amendment, termination or waiver effected in
accordance with this Section 12(f) shall be binding on all parties hereto, even
if they do not execute such consent. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
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(g) Pronouns. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
(h) Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same document.
This Agreement may be executed by facsimile signatures.
(i) Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties.
IN WITNESS WHEREOF, this Agreement has been executed on the day and year
first above written by the parties listed below.
ASCENT PEDIATRICS, INC.
By: /s/ Alan R. Fox
---------------------------------
Name: Alan R. Fox
Title: President and
Chief Executive Officer
ALPHARMA USPD INC.
By: /s/ Thomas L. Anderson
---------------------------------
Name: Thomas L. Anderson
Title: President
-16-
<PAGE> 1
Exhibit 10.8
EXECUTION COPY
SECOND AMENDMENT
DATED FEBRUARY 16, 1999
TO THE
SECURITIES PURCHASE AGREEMENT
DATED MAY 13, 1998
BY AND AMONG
FURMAN SELZ INVESTORS II L.P.
FS EMPLOYEE INVESTORS LLC
FS PARALLEL FUND L.P.
BANCBOSTON VENTURES INC.
FLYNN PARTNERS
AND
ASCENT PEDIATRICS, INC.
<PAGE> 2
SECOND AMENDMENT dated as of the 16th day of February 1999
(the "Second Amendment") among Ascent Pediatrics, Inc. (the "Company"), Furman
Selz Investors II L.P. ("Investors"), FS Employee Investors LLC ("Employee"), FS
Parallel Fund L.P. ("Parallel"), BancBoston Ventures Inc. ("BancBoston") and
Flynn Partners ("Flynn"), (each of Investors, Employee, Parallel, BancBoston and
Flynn are herein referred to as "Purchaser", and collectively, the
"Purchasers").
WHEREAS, the Company and the Purchasers are parties to a
Securities Purchase Agreement dated as of May 13, 1998, as amended September 30,
1998 (the "Series G Purchase Agreement");
WHEREAS, the Company is negotiating a Loan Agreement (the
"Loan Agreement") with Alpharma, Inc., a Delaware corporation ("Parent"), and
Alpharma USPD Inc., a Maryland corporation and a wholly-owned subsidiary of
Parent ("Alpharma"), pursuant to which the Company proposes to issue and sell to
Alpharma a 7.5% Convertible Subordinated Note in an aggregate principal amount
of up to $40,000,000 (the "Alpharma Convertible Note");
WHEREAS, in connection with the Loan Agreement, the Company
and Alpharma will enter into a Registration Rights Agreement (the "Registration
Rights Agreement"), pursuant to which the Company will grant Alpharma certain
demand and incidental registration rights with respect to the shares of Common
Stock issued or issuable upon conversion of the Alpharma Convertible Note (the
"Alpharma Registrable Shares");
WHEREAS, in connection with the Loan Agreement, (i) the
Company and Bird Merger Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company (the "Merger Subsidiary"), will enter into an
Agreement and Plan of Merger (the "Merger Agreement"), (ii) the Company,
Alpharma and Parent will enter into a Master Agreement (the "Master Agreement"),
and (iii) the Company, Alpharma and State Street Bank and Trust Company will
enter into a Depositary Agreement (the "Depositary Agreement" and together with
the Merger Agreement, the Registration Rights Agreement and the Master
Agreement, the "Ancillary Agreements"), pursuant to which, among other things
the Company will assign to Alpharma the right and option (the "Call Option"),
upon the terms and conditions set forth in the Depositary Agreement, to purchase
all of the outstanding shares of common stock, $.00004 par value per share, of
the Company (the "Common Stock"); and
WHEREAS, the Purchasers are the holders of all of (i) the
Preferred Stock and Preferred Conversion Shares issuable upon conversion of the
Preferred Stock, (ii) the principal amount of the Subordinated Notes, and (iii)
the Warrants and Warrant Shares issuable upon exercise of the Warrants.
NOW THEREFORE, in order to induce Alpharma to enter into the
Loan Agreement and the Ancillary Agreements and to consummate the transactions
contemplated thereby and in consideration of these premises, the mutual
covenants and agreements set forth
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herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation.
(a) All capitalized terms used herein which are not otherwise
specifically defined herein shall have the respective meaning as ascribed
thereto in the Series G Purchase Agreement.
(b) For purposes of this Second Amendment and the Series G Purchase
Agreement:
"Alpharma Closing Date" shall mean the Closing Date as such
term is defined in the Master Agreement.
"Direct Purchase Shares" shall have the meaning ascribed to
such term in Section 5.1 of this Second Amendment.
"Second Amendment Closing Date" shall have the meaning
ascribed to such term in Section 5.3 of this Second Amendment.
(c) Unless otherwise expressly indicated, all references contained
herein to SECTIONS or other subdivisions or SCHEDULES refer to the corresponding
SECTIONS and other subdivisions or SCHEDULES of the Series G Purchase Agreement.
(d) The sections and the headings in the sections in this Second
Amendment are for convenience only. Said sections and headings shall not be
deemed to be part of this Second Amendment and in no way define, limit, extend
or describe the scope or intent of its provisions.
ARTICLE II
CERTAIN AGREEMENTS, WAIVERS AND CONSENTS
SECTION 2.1 Registration Rights. The Purchasers hereby consent to the
grant of registration rights to Alpharma pursuant to the Registration Rights
Agreement and agree that, in the event that (i) Alpharma initiates an
underwritten offering of shares of Common Stock pursuant to the Registration
Rights Agreement, (ii) the Holders (as defined in Section 10.2 of the Series G
Purchase Agreement) elect pursuant to Section 10.4 of the Series G Purchase
Agreement to include Registrable Securities (as defined in the Series G Purchase
Agreement) in such offering, and (iii) the managing underwriter of such offering
determines that the number of shares to be included in such offering needs to be
reduced, then the number of Registrable Securities to be included in the
offering shall be reduced or eliminated, as determined by the managing
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<PAGE> 4
underwriter of such offering, prior to any reduction in the number of Alpharma
Registrable Shares included in the offering. The Purchasers hereby waive
compliance with the requirements set forth in the last sentence of Section 10.9
of the Series G Purchase Agreement as such requirements apply to the
Registration Rights Agreement.
SECTION 2.2 Waiver of Events of Default. The Purchasers hereby waive
any Events of Default under Section 13.1 of the Series G Purchase Agreement
arising on or before the date hereof, including without limitation, (i) any
Event of Default resulting from the formation of the Merger Subsidiary as a
wholly-owned subsidiary of the Company, and (ii) any Event of Default resulting
from any failure of the Company to provide to the Purchasers any of the
financial information or notices set forth in Section 7.1 of the Series G
Purchase Agreement and agree that the Company shall have no further obligation
to provide any of such financial information or notices to the extent such
financial information or notices were otherwise required to be provided prior to
the date hereof.
SECTION 2.3 Right of First Refusal. The Purchasers hereby waive any
rights of first refusal held by the Purchasers under Section 7.7 of the Series G
Purchase Agreement which were, are or may be, applicable to (i) the issuance of
any shares of New Common Stock, Depositary Receipts or Depositary Shares (each
as defined in the Depositary Agreement) pursuant to the Merger Agreement or the
Depositary Agreement, (ii) the issuance of the Alpharma Convertible Note and the
shares of Common Stock issuable upon conversion of the Alpharma Convertible
Note.
SECTION 2.4 Seniority of Notes. The Purchasers hereby agree that the
Alpharma Convertible Note issued pursuant to the Loan Agreement shall rank pari
passu in right of payment with the Subordinated Notes and any debt securities
issuable upon conversion or exchange of the shares of Preferred Stock of the
Company issued to the Purchasers pursuant to the Series G Purchase Agreement,
except as otherwise provided in the Subordination Agreement dated as of February
16, 1999 among the Company, the Purchasers and Alpharma.
SECTION 2.5 Consent to Loan Agreement and Ancillary Agreements. The
Purchasers hereby consent, in all respects under the Series G Purchase
Agreement, to the execution of the Loan Agreement and the Ancillary Agreements
and to the consummation of the transactions contemplated thereby, including
without limitation the incurrence of additional Indebtedness (as defined in the
Series G Purchase Agreement) by the Company.
SECTION 2.6 Consent to Letter Agreement. The Purchasers hereby consent,
in all respects under the Series G Purchase Agreement, to the letter agreement
dated February 16, 1999 among the Company and FS Private Investments LLC. The
parties agree that paragraph 2 of such letter agreement shall be an amendment to
Article X of the Series G Purchase Agreement.
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<PAGE> 5
ARTICLE III
AMENDMENTS TO THE SERIES G PURCHASE AGREEMENT
SECTION 3.1 Amendment to Section 3.1. Section 3.1 of the Series G
Purchase Agreement is hereby amended by deleting in its entirely the text of the
penultimate sentence thereof and inserting in lieu thereof the following:
"Material Adverse Effect" means, when used in connection with
the Company, any development, change or effect that is
materially adverse to the business, properties (including,
without limitation, Intellectual Property (as defined in
Section 3.11), assets, net worth, financial conditions,
results of operations or future prospects (including, without
limitation, future equity value) of the Company and its
Subsidiaries taken as a whole."
SECTION 3.2 Amendment to Sections 7.1 through 7.4. Section 7.1 through
7.4 of the Series G Purchase Agreement are hereby amended by deleting in its
entirety the text thereof and inserting in lieu thereof the following:
"7.1 Reports. The Company will deliver to each Purchaser the
following:
(a) within thirty (30) days after the end of each of the
twelve (12) monthly accounting periods in each fiscal
year (or when furnished to the Board of Directors, if
earlier), unaudited consolidated statements of income
and retained earnings and cash flows of the Company
and its Subsidiaries, if any, for each monthly period
and for the period from the beginning of such fiscal
year to the end of such monthly period, together with
consolidated balance sheets of the Company and its
Subsidiaries, if any, as at the end of each monthly
period, setting forth in each case comparisons to
budget and to corresponding periods in the preceding
fiscal year which statements will be prepared in
accordance with GAAP, consistently applied subject to
the absence of footnotes and year-end adjustments;
(b) within ninety (90) days after the end of each fiscal
year, consolidated statements of income and retained
earnings and cash flow of the Company and its
Subsidiaries, if any, for the period from the
beginning of each fiscal year to the end of such
fiscal year, and consolidated balance sheets as at
the end of such fiscal year, setting forth in each
case in comparative form corresponding figures for
the preceding fiscal year, which statements will be
prepared in accordance with GAAP, consistently
applied (except as approved by the accounting firm
examining such statements and disclosed by the
Company) and will be accompanied by a report on the
consolidated statements of a public accounting firm
reasonably acceptable to the Purchasers or one of the
public accounting firms currently known as the "Big
Five" (either, an "Approved Accounting Firm");
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<PAGE> 6
(c) within ten (10) days after transmission thereof,
copies of all financial statements, proxy statements,
reports and other communications which the Company
sends to its stockholders, copies of all registration
statements and all regular, special or periodic
reports which it files with the SEC or with any
securities exchange on which any of the securities of
the Company are then listed or proposed to be listed,
and copies of all press releases made generally
available by the Company to the public concerning
material developments in the business of the Company
and its Subsidiaries, if any;
(d) promptly after the occurrence thereof (but in any
event within seven (7) days after such occurrence is
known to the Company) notice of any condition or
event which constitutes, or the occurrence of (i) an
event which would lead the Company to believe that
the Company is not in compliance in material respects
with the covenants in this Agreement or (ii) the
institution or threatened institution of an action,
suit or proceeding against the Company or any of its
Subsidiaries by or before any court, regulatory
authority, administrative agency or any other
governmental agency or body, domestic or foreign,
which, if adversely decided, could have a Material
Adverse Effect; and
(e) at least thirty (30) days prior to the end of each
fiscal year, a detailed annual operating budget and
business plan for the Company and its Subsidiaries,
if any, for such fiscal year. Such budgets shall be
prepared on a monthly basis, displaying consolidated
statements of anticipated cash flow and projected
consolidated balance sheets, setting forth in each
case the assumption (which assumptions and
projections shall represent and be based upon the
good faith best judgment in respect thereof of the
Chief Executive Officer of the Company) behind the
projections contained in such financial statements,
and which budgets shall have been approved by the
Board of Directors of the Company or prior to the
beginning of each twelve-month period to which they
pertain and, promptly upon preparation thereof, any
other budgets that the Company may prepare and any
revisions of such annual or other budgets.
7.2 Accounts and Records. The Company shall keep true records
and books of account in which entries will be made of all dealings or
transactions in relation to the business and affairs of the Company and
its Subsidiaries, if any, in accordance with GAAP, to the extent
applicable, applied on a consistent basis.
7.3 Inspection. The Company shall permit Furman Selz
Investments LLC, BancBoston Ventures Inc. or any of their respective
officers, employees, representatives or such other Person as Furman
Selz Investments LLC or BancBoston Ventures Inc. may designate, during
regular business hours of the Company, upon reasonable prior notice,
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<PAGE> 7
to visit and inspect the offices and properties of the Company and to
(i) review and make extracts or copies of the books, accounts and
records of the Company, and (ii) discuss the affairs, finances and
accounts of the Company, with the Company's Officers, members of the
Board of Directors, Approved Accounting Firm, consultants and
attorneys.
7.4 Independent Accountants. The Company will retain an
Approved Accounting Firm to audit the Company's financial statements at
the end of each fiscal year. In the event the services of the Approved
Accounting Firm shall be terminated, the Company shall promptly
thereafter seek to engage another Approved Accounting Firm.
SECTION 3.3 Amendments to Sections 7.5.
(a) Section 7.5(a) of the Series G Purchase Agreement is hereby amended
by deleting in its entirety the text thereof and inserting in lieu thereof the
following:
"From and after the Alpharma Closing Date and prior to the
Option Expiration Date, the Company's Board of Directors shall consist
of a minimum of seven and a maximum of eleven directors. The Company
agrees to hold meetings of its Board of Directors at least four times a
year, at least once per calendar quarter. The Purchasers shall have the
right to have two (2) nominees included on the Board of Directors'
slate of nominees to stand for election to the Board of Directors. The
directors of the Company designated by the Purchasers pursuant to this
Section 7.5(a) shall be referred to hereinafter as the "Purchaser
Directors."'
(b) Section 7.5(b) of the Series G Purchase Agreement is hereby amended
by deleting in its entirety the text thereof and inserting in lieu thereof the
following:
"If at any time the Board of Directors designates a committee
or committees to act on behalf of the Board, at least one (1) of the
Purchaser Directors shall be a member of such committee or committees."
(c) Section 7.5(d) of the Series G Purchase Agreement is hereby amended
by deleting the word "the" before the term "Purchaser Director" in the first
line thereof and inserting the word "each" in lieu thereof.
SECTION 3.4 Addition of Section 7.10. Article VII of the Series G
Purchase Agreement is hereby amended by adding the following immediately after
Section 7.9:
"7.10 Insurance. The Company shall keep in force with
responsible insurers, policies of insurance providing coverage, limits
and deductibles customary in the Company's industry."
SECTION 3.5 Amendment to Section 7.10. Section 7.10 of the Series G
Purchase Agreement is hereby amended by renumbering the same as Section 7.11.
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<PAGE> 8
SECTION 3.6 Amendment to Sections 8.1 Through 8.12. Sections 8.1
through 8.12 of the Series G Purchase Agreement are hereby amended by deleting
in its entirety the text thereof and inserting in lieu thereof the following:
"8.1 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 Alpharma Convertible Note;
(b) the Borrowed Money Indebtedness existing on the date of the
Second Amendment 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) principal of up to $50,000,000 of Borrowed Money Indebtedness
in the aggregate outstanding at any time (which (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), plus any accrued interest
thereon;
(d) purchase money Indebtedness permitted by Section 8.10 to the
extent liens securing the same are allowed by the other
provisions of this Agreement;
(e) capitalized lease obligations to the extent leases with
respect thereto are allowed by the other provisions of this
Agreement;
(f) the Convertible Notes;
(g) on or prior to the Option Expiration Date, any Screened
Project Indebtedness that is convertible directly or
indirectly into Common Stock; and
(h) after the Option Expiration Date, any Borrowed Money
Indebtedness that is convertible directly or indirectly into
Common Stock.
8.2 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 and any Subsidiaries of the Company may create or suffer to
exist Permitted Liens.
8.3 Contingent Liabilities. Directly or indirectly guarantee
the performance or
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payment of, 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 the Purchasers 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 which shall not exceed an
aggregate amount equal to $200,000 at any time outstanding;
and
(d) those liabilities permitted under Section 8.1 hereof.
8.4 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 Purchasers 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;
(d) acquire all or a substantial portion of the assets or stock of
any person whether by merger or otherwise other than in a
transaction or series of transactions that constitute a
Screened Project, provided that this subsection shall not
prevent any Project funded with the proceeds of the First
Loan, any Unrestricted Loan or Project Loans; or
(e) 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. Nothing in this Agreement shall prohibit the
Company from selling obsolete equipment or from replacing used
equipment in the ordinary course of business.
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8.5 Redemption, Dividends and Distributions. At any time,
except as contemplated by this Agreement and the Securities and by the
terms of the Alpharma Convertible Note, by the Loan Agreement and, by
the Ancillary Agreements: (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.
8.6 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.
8.7 Transactions with Related Parties. Enter into any
transaction or agreement 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 8.7 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 person in excess of an
aggregate of $50,000 per year.
8.8 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 and (c) capital contributions or Investments used to fund a
Project permitted by Section 6.6 of the Loan Agreement, provided in the
case of clause (c) that the making of such capital contribution or
Investment does not cause a Default under any other provision hereof.
8.9 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
Purchasers under this Agreement.
8.10 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
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$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.
8.11 Sale/Leasebacks. Enter into any sale/leaseback
transactions except as permitted under the provisions of Section 8.10.
8.12 Issuance of Stock. On or prior to the Option Expiration
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 granted prior to March 31, 2002 and rights, warrants or
options to purchase up to 100,000 shares of Common Stock on or after
March 31, 2002 (such number to be adjusted for stock splits or
reclassifications), (iii) securities permitted by Section 7.1(g) of the
Loan Agreement. Prior to the Option Expiration Date, establish a
"Shareholders Rights Plan" or "Poison Pill" or issue any securities in
connection therewith.
8.13 Subsidiaries. Form, create or acquire any Subsidiary
other than Merger Subsidiary or permit any Person other than the
Company or a wholly owned Subsidiary to hold an equity interest in any
Subsidiary."
SECTION 3.7 Amendment to Section 8.13. Section 8.13 of the Series G
Purchase Agreement is hereby amended by renumbering the same as Section 8.14.
SECTION 3.8 Amendments to Section 8.14.
(a) Section 8.14 of the Series G Purchase Agreement is hereby amended
by renumbering the same as Section 8.15.
(b) Section 8.15 of the Series G Purchase Agreement (as renumbered) is
hereby amended by deleting in its entirety the text thereof and inserting in
lieu thereof the following:
"8.15 Definitions. For purposes of this Article VIII, the
following terms shall have the meanings set forth in this Section 8.15.
"Affiliate" has the meaning ascribed to it in Rule 405
promulgated under the Securities Act.
"Alpharma Closing Date" means the "Closing Date" as such term
is defined in the Master Agreement.
"Alpharma Convertible Note" has the meaning set forth in the
Preamble to the Second Amendment.
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"Ancillary Agreements" shall mean the Depositary Agreement,
the Master Agreement, the Merger Agreement and the Registration Rights
Agreement.
"Board of Directors" means the Board of Directors of the
Company or any committee of the Board authorized to act for it
hereunder.
"Borrowed Money Indebtedness" means, with respect to any
Person, without duplication:
(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 legal holiday on which banks are authorized or required to
close in Boston, Massachusetts, New York, New York or in any other city
in which the Depositary's Office (as defined in the Depositary
Agreement) is located.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of the Company, including any
preferred stock, but excluding any debt securities convertible into
such equity prior to such conversion.
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"Common Stock" means (i) prior to the Effective Time, the Old
Common Stock, and (ii) at and after the Effective Time, the New Common
Stock.
"Company" means the party named as such in the Preamble hereof
until a successor replaces it pursuant to the applicable provision
hereof and thereafter means the successor to such party.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default (as defined in Article
XIII this Agreement).
"Depositary Agreement" means the Depositary Agreement dated as
of the date hereof by and among the Company, the Lender and State
Street Bank and Trust Company, as Depositary.
"Effective Time" has the meaning set forth in the Merger
Agreement.
"Event of Default" has the meaning set forth in Article XIII
of this Agreement.
"Financial Statements" has the meaning set forth in Section
3.7(a) of the Loan Agreement.
"First Loan" has the meaning set forth in Section 2.3 of the
Loan Agreement.
"First Loan Date" has the meaning set forth in Section 2.3 of
the Loan Agreement.
"GAAP" means U.S. generally accepted accounting principles as
in effect from time to time.
"Indebtedness" means and includes:
(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.
"Lender" means Alpharma USPD Inc., a Maryland corporation, the
Lender under the Loan Agreement.
"Lien" means any mortgage, pledge, charge, encumbrance,
security interest, collateral assignment or other lien or restriction
of any kind, whether based on 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 principal amount of $40,000,000 pursuant to Section 2.1
of the Loan Agreement and the other terms and conditions of the Loan
Agreement.
"Loan Agreement" has the meaning set forth in the Preamble to
the Second Amendment.
"Master Agreement" has the meaning set forth in the Preamble
to the Second Amendment.
"Merger Agreement" has the meaning set forth in the Preamble
to the Second Amendment.
"Merger Subsidiary" has the meaning set forth in the Preamble
to the Second Amendment.
"New Common Stock" has the meaning set forth in the Depositary
Agreement.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.
"Old Common Stock" has the meaning set forth in the Depositary
Agreement.
"Option Closing Date" has the meaning set forth in the
Depositary Agreement.
"Option Expiration Date" has the meaning set forth in the
Depositary Agreement.
"Permitted Investments" means:
(a) readily marketable securities issued or fully
guaranteed by the United States of America with maturities of
not more than one year;
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(b) commercial paper rated "Prime 1" by Moody's
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 Purchasers (and permitted assignees of the
Purchasers) in accordance with Article XIV hereof, 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:
(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 Purchasers 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
Purchasers (and permitted assignees of the Purchasers) in
accordance with Article XIV hereof, 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
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Indebtedness permitted under Section 8.1(c) hereof;
(f) attachments, judgments and other similar Liens
arising in connection with 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 8.1 hereof and covering only the
Property so purchased;
(j) capital leases and sale/leaseback transactions
permitted under the other provisions of the Series G Purchase
Agreement; and
(k) extensions, renewals and replacements of Liens
referred to in paragraphs (a) through (j) of this definition;
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.
"Person" means any individual, corporation, association,
company, business trust, partnership, joint venture, joint-stock
company, limited liability company, trust, unincorporated organization
or association or government or any agency or political subdivision
thereof.
"Project" means (i) the acquisition of all or a substantial
part of the stock or assets of any Person engaged in the development,
manufacture or sale of pharmaceuticals or other health care products
principally for the pediatric market; (ii) the acquisition of a product
or product line from, or the acquisition of the right to manufacture,
distribute or sell any product or product line of any Person, in each
case with applications in the
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pediatric pharmaceutical health care market; or (iii) any R&D Project.
"Project Loans" has the meaning set forth in Section 2.1of the
Loan Agreement.
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"R&D Project" means any project for the research and
development of products or processes related to pediatric
pharmaceuticals
"Registration Rights Agreement" has the meaning set forth in
the Preamble to the Second Amendment.
"Screened Project" means a Project that meets the criteria set
forth on Schedule II to the Loan Agreement.
"Screened Project Loans" has the meaning set forth in Section
2.1 of the Loan Agreement.
"Screened Project Indebtedness" means Borrowed Money
Indebtedness (other than Loans under the Loan Agreement) incurred for
the purpose of funding a Screened Project.
"Second Amendment" means the Second Amendment dated February
16, 1999 to the Securities Purchase Agreement date May 13, 1998 by and
among Furman Selz Investors II L.P., FS Employee Investors LLC, FS
Parallel Fund L.P., BancBoston Ventures Inc., Flynn Partners and the
Company.
"Subsidiary" of a Person means any corporation, association,
partnership, joint 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.
"Unrestricted Loans" means one or more Loans made on or after
the Alpharma Closing Date in an aggregate principal amount not to
exceed $8,000,000."
SECTION 3.9 Amendment to Section 10.2. Section 10.2 of the Series G
Purchase Agreement is amended by deleting the definition of "Registrable Warrant
Shares" included thereon and inserting in lieu thereof the following:
""Registrable Warrant Shares" shall mean the
Warrant Shares and the Direct Purchase Shares and any other securities
issued in respect of the Warrant Shares or the Direct Purchase Shares
upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, provided, however, that shares of
Common Stock which are Registrable
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Warrant Shares shall cease to be Registrable Warrant Shares upon any
sale pursuant to a Registration Statement, Section 4(1) of the
Securities Act or Rule 144 under the Securities Act, or any sale in any
manner to a person or entity which, by virtue of Section 17.3 of this
Agreement is not entitled to the rights provided by this Article X or
at such time as the Holder of such shares may sell under Rule 144 under
the Securities Act in a three-month period all Registrable Securities
then held by such Holder. For purposes of this definition, Direct
Purchase Shares shall have the meaning ascribed to such term in the
Second Amendment, as such term is defined in Section 8.15."
SECTION 3.10 Amendment to Article XI. Article XI of the Series G
Purchase Agreement is amended by adding thereto the following:
"11.9 Senior Indebtedness Under the Alpharma
Loan. If any indebtedness of the Company would constitute both "Senior
Indebtedness" as defined in Section 11.1 and "Senior Indebtedness" as
defined in the Loan Agreement, as such term is defined in Section 8.15,
the terms of subordination of the Notes relating to such indebtedness
shall be as set forth in the Subordination Agreement dated as of
February 16, 1999 among the Company, the Purchasers and Alpharma USPD,
Inc., a Maryland corporation without reference to this Article XI."
SECTION 3.11 Amendment to Section 12.11. Section 12.11 of the Series G
Purchase Agreement is amended by deleting in its entirety the second sentence of
the first paragraph thereof and inserting in lieu thereof the following:
"Notwithstanding any additional or contrary rights of the
Purchasers contained in Section 9.3 hereof, the Convertible Notes shall
be automatically converted into shares of Common Stock at the
applicable Conversion Price in accordance with this Article XII
immediately prior to the Option Closing on the Option Closing Date, as
such terms are defined in the Depository Agreement (as such term is
defined in Section 8.15). The date on which either of the foregoing
conditions is first satisfied is hereinafter referred to as the
"Mandatory Conversion Date""
SECTION 3.12 Amendment to Section 13.1. Section 13.1 of the Series G
Purchase Agreement is amended by deleting the text thereof and inserting in lieu
thereof the following:
"13.1 Events of Default. An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on
any 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 any Note when the same becomes due and payable at
maturity, upon acceleration or otherwise;
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(c) the Company defaults in the performance of any
covenants under Article VIII of this Agreement;
(d) the Company fails to comply with any of the
provisions of this Agreement (other than Article
VIII) and such failure continues for 20 Business Days
after notice specified in the penultimate paragraph
of this Section 13.1 (the "Default Notice") without
cure (the Company to give forthwith to all other
holders of the Notes at the time outstanding written
notice of the receipt of such Default Notice,
specifying the default referred to therein); or
(e) the Company defaults in payment on Borrowed Money
Indebtedness (giving effect to any applicable grace
periods and any extensions thereof) of at least
$700,000 principal amount;
(f) there has been an acceleration of the final stated
maturity of any Borrowed Money Indebtedness of the
Company (which acceleration shall not have been
cured, waived, rescinded or annulled for 10 Business
Days) if the aggregate principal amount of such
Borrowed Money Indebtedness, together with the
principal amount of any other such Borrowed Money
Indebtedness in default for failure to pay principal
at maturity or which has been accelerated, aggregates
$700,000 or more at any time;
(g) any representation or warranty of the Company under
this Agreement shall prove to have been incorrect in
any material respect when made;
(h) there exists an outstanding unsatisfied final
judgment which, either alone or together with other
outstanding unsatisfied final judgments against the
Company, exceeds an aggregate of $200,000 (to the
extent not covered by insurance) and such judgment
shall have continued undischarged or unstayed for 20
Business Days after entry thereof;
(i) the Company pursuant to or within the meaning of any
Bankruptcy Law:
(i) commenced a voluntary case,
(ii) consents to the entry of an order
for relief against it in an
involuntary case,
(iii) consents to the appointment of a
custodian of it or for all or
substantially all of its property,
or
(iv) makes a general assignment for the
benefit of its creditors; or
(j) a court of competent jurisdiction enters an order or
decree under any
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Bankruptcy Law that:
(i) is for relief against the Company
in an involuntary case,
(ii) appoints a custodian of the Company
for all or substantially all of its
property, or
(iii) orders the liquidation of the
Company, and the order or decree
remains unstayed and in effect for
90 consecutive days.
A default under paragraph (d) of this Section 13.1 is not a
default unless the holders of at least eighty percent (80%) of the
aggregate principal amount then outstanding under the Notes notify the
Company of the default and the Company does not cure the default within
twenty (20) days after receipt of such notice. The notice must specify
the default and demand that it be remedied.
A "Business Day" means any day which is neither a Saturday nor
a Sunday nor a legal holiday on which banks are authorized or required
to close in Boston, Massachusetts or New York, New York. A "Default"
means any of the events specified in this Section 13.1, regardless of
whether there shall have occurred any passage of time or giving of
notice or both that would be necessary in order to constitute such
event an Event of Default."
SECTION 3.13 Effectiveness of Amendments.
(a) The amendments to the Series G Purchase Agreement set
forth in this Article III shall be effective on and after the Second Amendment
Closing Date.
(b) If the average closing price of the Common Stock is not
greater than $12.00 per share as traded on the Nasdaq Stock Market or a
registered national securities exchange over the 60 trading days prior to the
Option Expiration Date, as such term is defined in the Depositary Agreement,
then the amendments to the Series G Purchase Agreement set forth in this Article
III shall cease to be effective, and the terms of the Series G Purchase
Agreement amended hereby shall be as if such amendments had never been made, as
of the Option Expiration Date; provided, however, that (i) Section 7.5 (a) of
the Series G Purchase Agreement shall be amended by deleting the word "nine" in
the first sentence thereof and inserting in lieu thereof the word "ten" and (ii)
the Amendment to Article XI set forth in Section 3.10 of this Second Amendment
shall remain in effect so long as the Subordination Agreement dated as of
February 16, 1999 among the Company, the Purchasers and Alpharma remains in
effect. In such event, any Default or Event of Default due to the existence of
circumstances which would not have constituted a Default or Event of Default
immediately prior to the Option Expiration Date are hereby waived.
ARTICLE IV
AMENDMENT TO WARRANTS
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SECTION 4.1 Amendment to the Definition of "Warrant Price" in the
Warrants. The definition of "Warrant Price" in Section 1.1(m) of each
outstanding Warrant is amended by deleting the phrase "four dollars and seventy
five cents ($4.75)" and inserting in lieu thereof the phrase "three dollars
($3.00)."
SECTION 4.2 Effectiveness of the Amendment. The amendment to the
Warrants set forth in this Article IV shall be effective on and after the Second
Amendment Closing Date.
ARTICLE V
AUTHORIZATION AND SALE AND PURCHASE OF THE DIRECT PURCHASE SHARES
SECTION 5.1 Authorization of the Direct Purchase Shares. The Company
has, or before the Second Amendment Closing Date will have, authorized the
issuance and sale of 300,000 shares of Common Stock (the "Direct Purchase
Shares").
SECTION 5.2 Sale and Purchase of the Direct Purchase Shares. Subject to
the terms and conditions hereof and in reliance on the representations and
warranties contained herein, the Company will issue and sell to each Purchaser,
and such Purchaser will purchase from the Company, on the Second Amendment
Closing Date (as defined below), the number of Direct Purchase Shares set forth
opposite the name of such Purchaser on Schedule 1 attached hereto, for a
purchase price per share of Direct Purchase Shares of $3.00, with the aggregate
purchase price for all the Direct Purchase Shares being $900,000.
SECTION 5.3 Closing. The closing of the purchase and sale of the Direct
Purchase Shares (the "Second Amendment Closing") will take place at the offices
of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts 02109 at 1:00 p.m.,
local time, on the Alpharma Closing Date or such other time and date, or place
as shall be mutually agreed to by the Company and FS Private Investments LLC, on
behalf of the Purchasers. Such time and date are hereinafter referred to as the
"Second Amendment Closing Date." If the Second Amendment Closing shall not have
occurred on or before September 30, 1999, this Second Amendment shall
automatically terminate.
At the Second Amendment Closing, the Company will deliver to each
Purchaser a certificate or certificates (in definitive form) in the
denominations specified in Schedule 1 and registered in the name of such
Purchaser (or in the name of such Purchaser's nominee) representing the Direct
Purchase Shares to be purchased by such Purchaser against payment to the Company
of the purchase price of such Direct Purchase Shares, by delivery to the Company
of Subordinated Notes in an aggregate principal amount equal to the purchase
price to be paid by each Purchaser. Accrued interest on the Subordinated Notes
so delivered shall be paid to the Purchasers on the Second Amendment Closing
Date.
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ARTICLE VI
EXCHANGE OF PREFERRED STOCK
AND EXERCISE OF WARRANTS
SECTION 6.1 Exchange of Preferred Stock. Pursuant to the terms of the
Preferred Stock, the Company shall exchange all outstanding shares of the
Preferred Stock for Convertible Notes on the Second Amendment Closing Date. The
Exchange Date, as defined in the Certificate of Designation shall be the Second
Amendment Closing Date.
SECTION 6.2 Exercise of Warrants. Pursuant to the terms of the
Warrants, each Purchaser agrees to exercise all Warrants held by such Purchaser
on the Second Amendment Closing Date. The Warrant Price, as such term is defined
in the Warrants, shall be paid by delivery to the Company of Subordinated Notes
in an aggregate principal amount equal to the Warrant Price to be paid by each
Purchaser. Accrued interest on the Subordinated Notes so delivered shall be paid
to the Purchasers on the Second Amendment Closing Date.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
SECTION 7.1 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). "Material Adverse Effect"
means, when used in connection with the Company, any development, change or
effect that is materially adverse to the business, properties, assets, net
worth, financial condition, results of operations or future prospects (including
without limitation, future equity value) of the Company and its Subsidiaries
taken as a whole.
SECTION 7.2 Capitalization of the Company.
(a) As of the date hereof, (i) the Company's authorized
capital stock consists of: 60,000,000 shares of Common Stock, of which 7,026,445
shares are validly issued and outstanding, fully paid and non-assessable, and
5,000,000 shares of "blank check" preferred stock, $.01 par value per share, of
which 7,000 shares have been designated Series G Convertible Exchangeable
Preferred Stock, all of which shares are validly issued and outstanding, fully
paid and non-assessable; and (ii) the Company has outstanding the securities set
forth on Schedule 7.2 attached hereto which are convertible into or exercisable
or exchangeable for Common Stock (the "Derivative Securities").
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(b) All the issued and outstanding shares of capital stock of
the Company are 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 7.2 attached hereto, there are no outstanding agreements or
commitments requiring the Company to issue capital stock or Derivative
Securities as of the date hereof.
SECTION 7.3 Authorization; Binding Obligations.
(a) The Company has full power and authority to execute and
deliver this Second Amendment and such other documents furnished or to be
furnished by the Company hereunder, subject to the approval by the stockholders
of the Company of this Second Amendment and the transactions contemplated
hereby. This Second Amendment, subject to the approval by the stockholders of
the Company of this Second Amendment and the transactions contemplated hereby,
has been duly authorized, executed and delivered by the Company and, subject to
the approval by the stockholders of the Company of this Second Amendment and the
transactions contemplated hereby, constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity. Subject to the approval by the stockholders of the Company
of this Second Amendment and the transactions contemplated hereby, the issuance,
offering and sale of the Direct Purchase Shares pursuant to this Second
Amendment, the compliance by the Company with the provisions of this Second
Amendment, and the consummation of the other transactions herein contemplated
will not result in the creation or imposition of any lien, charge, security
interest or encumbrance upon any of the assets of the Company pursuant to the
terms or provisions of, or result in a breach or violation of or conflict with
any of the terms or provisions of, or constitute a default under, or give any
other party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, (i) the Certificate of Incorporation and
Bylaws of the Company, (ii) any contract or other agreement to which the Company
is a party or by which the Company or any of its respective properties is bound
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) Subject to the approval by the stockholders of the Company
of this Second Amendment and the transactions contemplated hereby, the Direct
Purchase Shares have been duly authorized for issuance and, when issued and
delivered in accordance with the provisions of this Second Amendment, will be
validly issued, fully paid and nonassessable.
SECTION 7.4 Compliance with Instruments, etc. Except as set forth on
Schedule 7.4 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
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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.
SECTION 7.5 Litigation. Except as set forth on Schedule 7.5 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 Second Amendment or the issuance of the
Direct Purchase Shares which would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. As it pertains to the Company,
when used herein, the phrases "to the knowledge of" or derivatives thereof shall
mean the actual knowledge of the Chief Executive Officer or Vice President,
Finance of the Company.
SECTION 7.6 Offering. Subject to the Purchasers' representations and
warranties in Article VIII of this Second Amendment, the offer, sale and
issuance of the Direct Purchase Shares as contemplated by this Second Amendment
are not subject to the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act") and neither the Company nor anyone acting on
its behalf, has taken or will take any action that would cause such registration
requirements to be applicable.
SECTION 7.7 Permits; Governmental and Other Approvals. 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 Second
Amendment or the consummation of the transactions contemplated hereby except for
applicable filings with the Nasdaq Stock Market, the filing of a Form D under
the Securities Act and the filing of a Form 8-K under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
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ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, hereby represents
and warrants to the Company that (i) it is an "accredited investor" as that term
is defined in Rule 501(a) promulgated under the Securities Act, (ii) it has the
requisite knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of an investment in the Company,
(iii) it has had an opportunity to discuss the Company's business, management
and financial affairs with the Company's management, (iv) it is acquiring the
Direct Purchase Shares for investment for its own account and not with a view
to, or for resale in connection with, any distribution thereof; nor with any
present intention of distributing or selling the same; and, except as
contemplated by the Series G Purchase Agreement, such Purchaser has no present
or contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof, (v) it is not in material
breach or violation of, or in default under, any term or provision of (A) its
organizational and governing documents, (B) any indenture, mortgage, deed of
trust, voting trust agreement, stockholders, partners or members agreement, note
agreement or other agreement or instrument to which it is a party or by which it
is or may be bound or to which any of its property is or may be subject, or (C)
any statute, judgment, decree, order, rule or regulation applicable to such
Purchaser or of any arbitrator, court, regulatory body, administrative agency or
any other governmental agency or body, domestic or foreign, having jurisdiction
over such Purchaser or any of its activities or properties, (vi) any Purchaser
which is a corporation, partnership, limited liability company or trust
represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of investing in the Company, (vii) it understands
that the Direct Purchase Shares have not been registered under the Securities
Act and it will not offer, sell, transfer, pledge, hypothecate or otherwise
dispose of any Direct Purchase Shares except pursuant to an exemption from, or
otherwise in a transaction not subject to, the registration requirements of the
Securities Act or pursuant to an effective registration statement under the
Securities Act, and, in each case, in accordance with any applicable state
securities or "blue sky" laws and (viii) it understands that any certificates
representing the Shares and any other securities issued in respect of such
securities upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend required under other
applicable securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE 'ACT'), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
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Each Purchaser further represents that (i) it has full power and authority to
execute, deliver and perform this Second Amendment, (ii) the person executing
this Second Amendment on behalf of such Purchaser has the appropriate authority
to act on behalf of such Purchaser, and (iii) this Second Amendment has been
duly authorized, executed and delivered by such Purchaser and constitutes a
legal, valid and binding agreement of such Purchaser, enforceable against such
Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity, and (iv) it has not
employed any broker or finder in connection with the transactions contemplated
by this Second Amendment. To the best of its knowledge, each Purchaser
acknowledges receipt of, and the opportunity to review, the information that it
believes necessary to make an investment in the Direct Purchase Shares.
ARTICLE IX
CONDITIONS OF OBLIGATIONS OF THE PURCHASERS
The obligations of each of the Purchasers under this Second Amendment
are subject to the fulfillment to their reasonable satisfaction, or the waiver
by the Purchasers, on or prior to the Second Amendment Closing Date of each of
the following conditions:
SECTION 9.1 Representations and Warranties Correct. The representations
and warranties of the Company in Article VII hereof shall be true and correct on
and as of the date hereof, and shall be true and correct in all material
respects on and as of the Second Amendment Closing Date with the same force and
effect as if they had been made on and as of the Second Amendment Closing Date.
SECTION 9.2 Performance. All covenants, agreements and conditions
contained in this Second Amendment to be performed or complied with on or prior
to the Second Amendment Closing Date by the Company shall have been performed or
complied with by the Company in all material respects on or prior to the Second
Amendment Closing Date.
SECTION 9.3 Compliance Certificate. The Company shall have delivered to
the Purchasers a certificate of the Company's President, dated the Second
Amendment Closing Date, certifying to the fulfillment of the conditions
specified in Sections 9.1, 9.2 and 9.5 of this Second Amendment and such other
matters as the Purchasers shall reasonably request.
SECTION 9.4 No Impediments. No statute, judgment, order, 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 Purchasers to exercise full rights of ownership of the Direct
Purchase Shares.
SECTION 9.5 No Material Adverse Change. Except as set forth in the
Schedules attached to the Loan Agreement pursuant to Article III thereof, as
disclosed in the 1934 Act Filings (as defined in the Loan Agreement) filed with
the SEC prior to the date of the Master Agreement or as set forth in Schedule
4.1(e) to the Loan Agreement, since September 30, 1998, there shall have been
25
<PAGE> 27
no Material Adverse Effect with respect to the Company (other than the continued
incurrence of losses in the ordinary course of business).
SECTION 9.6 Legal Investment. The purchase of the Direct Purchase
Shares by the Purchasers hereunder shall be legally permitted by all statutes,
rules and regulations to which the Purchasers and the Company are subject.
SECTION 9.7 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 Direct Purchase Shares
pursuant to this Second Amendment shall have been duly obtained and shall be in
full force and effect on and as of the Second Amendment Closing Date.
SECTION 9.8 Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Second
Amendment shall have been taken and the Purchasers shall have received such
other documents and instruments in form and substance reasonably satisfactory to
them and their counsel, as to such other matters incident to the transaction
contemplated hereby as they may reasonably request.
SECTION 9.9 Opinion of Counsel. The Purchasers shall have received the
opinion of Hale and Dorr LLP, counsel for the Company, dated the Second
Amendment Closing Date, substantially in the form delivered in connection with
the original issuance of the Securities, but limited to matters relating to the
Second Amendment and the Direct Purchase Shares.
SECTION 9.10 Other Matters. The Company shall have delivered to the
Purchasers certificates (in definitive form) in the denominations specified by
the respective Purchasers and registered in their respective names (or in the
names of their respective nominees) representing the Direct Purchase Shares.
ARTICLE X
CONDITIONS OF OBLIGATIONS OF THE COMPANY
The Company's obligations under this Second Amendment are subject to
the fulfillment to its reasonable satisfaction, or the waiver by the Company, on
or prior to the Second Amendment Closing Date of each of the following
conditions:
SECTION 10.1 Representations and Warranties Correct. The
representations and warranties of the Purchasers in Article VIII hereof shall be
true and correct on and as of the date hereof and shall be true and correct in
all material respects on and as of the Second Amendment Closing Date with the
same force and effect as if they had been made on and as of the Second Amendment
Closing Date.
26
<PAGE> 28
SECTION 10.2 Legal Investment. The purchase of the Direct Purchase
Shares by the Purchasers hereunder shall be legally permitted by all statutes,
rules and regulations to which the Purchasers and the Company are subject.
SECTION 10.3 Stockholder Approval. The stockholders of the Company
shall have approved this Second Amendment and the transactions contemplated
hereby.
SECTION 10.4 Payment of Purchase Price. The Company shall have received
payment in full of the aggregate purchase price required to be paid under
Article V.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 The Series G Purchase Agreement. Except as amended by this
Second Amendment, the Series G Purchase Agreement shall remain in full force and
effect in accordance with its terms. This Second Amendment shall be deemed to be
part of the Series G Purchase Agreement.
SECTION 11.2 Governing Law. The rights and obligations of the parties
under or pursuant to this Second Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 11.3 Representation and Warranty. Each party hereto hereby
represents and warrants that this Second Amendment is a legal, valid and binding
obligation of such party and is enforceable against such party in accordance
with its terms.
SECTION 11.4 References to Series G Purchase Agreement. Whenever in any
certificate, letter, notice or other instrument reference is made to the Series
G Purchase Agreement, such reference without more shall include this Second
Amendment.
SECTION 11.5 Amendments to Alpharma Agreements.
(a) No amendment to the Loan Agreement or any of the Ancillary
Agreements shall have the effect of changing the meaning of any provision of
this Second Amendment or the Series G Purchase Agreement without the consent of
the Purchasers (and permitted assignees of the Purchasers) in accordance with
Article XIV of the Series G Purchase Agreement.
(b) The Company shall not consent to any amendment to the
proviso to the definition of "Option Exercise Price" in the Depositary Agreement
without the consent of the Purchasers (and permitted assignees of the
Purchasers) in accordance with Article XIV of the Series G Purchase Agreement.
27
<PAGE> 29
SECTION 11.6 Counterparts. This Second Amendment may be executed
simultaneously in counterparts, each of which shall be deemed an original, and
it shall not be necessary in making proof of the contents of this Second
Amendment to produce or account for more than one such counterpart.
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<PAGE> 30
IN WITNESS WHEREOF this Second Amendment has been executed by duly
authorized representatives of the parties hereto on the day, month and year
first above written.
ASCENT PEDIATRICS, INC.
By: /s/ Alan R. Fox
-----------------------------------------
Name: Alan R. Fox
Title: President and
Chief Executive Officer
FURMAN SELZ INVESTORS II L.P.
FS EMPLOYEE INVESTORS LLC
FS PARALLEL FUND L.P.
By: FS PRIVATE INVESTMENTS LLC,
MANAGER
By: /s/ James L. Luikart
-----------------------------------------
Name: James L. Luikart
Title: Managing Member
BANCBOSTON VENTURES INC.
By: /s/ Marcia T. Bates
-----------------------------------------
Name: Marcia T. Bates
Title: Managing Director
FLYNN PARTNERS
By: /s/ James E. Flynn
-----------------------------------------
Name: James E. Flynn, General Partner
Flynn Partners
29
<PAGE> 1
Exhibit 99.1
ASCENT PEDIATRICS AND ALPHARMA ANNOUNCE STRATEGIC ALLIANCE
ALPHARMA TO INVEST UP TO $40 MILLION AND HOLD OPTION TO ACQUIRE ASCENT
PEDIATRICS 2002
WILMINGTON, Mass., February 16, 1999 -- Ascent Pediatrics, Inc. and Alpharma,
Inc. announced today that they have entered into agreements creating a strategic
alliance. Under these agreements, Alpharma, through its subsidiary Alpharma
USPD, Inc., will provide up to $40 million in financing to Ascent through a 7.5%
convertible subordinated note due in 2004 and 2005. Up to $12 million of the
proceeds can be used for general corporate purposes, with $28 million reserved
for projects and acquisitions intended to enhance the growth of Ascent.
Under these agreements Alpharma will have the option during a specified period
during the first half of year 2002 to acquire the then outstanding shares of
Ascent for cash at a price to be determined by an earnings-based formula.
Consequently, Ascent has entered into a merger agreement with one of Ascent's
subsidiaries in which the subsidiary will merge with Ascent and each share of
Ascent common stock will be converted into one depositary receipt which will
become subject to Alpharma's purchase option. Ascent intends to apply to have
these depositary receipts quoted on the Nasdaq National Market under its current
symbol, ASCT.
The agreement and other related transactions, including the authorization of the
purchase option, are subject to the approval of Ascent's stockholders at a
meeting expected to be held in the second quarter of 1999. Certain Ascent
shareholders represented on the Board of Directors, holding approximately 43% of
the voting capital stock, have agreed to vote their shares in favor of these
agreements.
"We are excited about the prospects of this strategic alliance with Alpharma,"
commented Dr. Emmett Clemente, Founder and Chairman of Ascent. "We expect that
the resources made available by Alpharma will allow Ascent to pursue
opportunities for growth in an effort to offer additional improved pediatric
products in the future. Alpharma's significant product development and
manufacturing expertise in topical and liquid pharmaceuticals make them an
excellent partner for Ascent."
"We believe that the excellent track record and quality of our sales
organization strategically complements Alpharma's capabilities," commented Alan
Fox, President and Chief Executive Officer of Ascent. "As the only
pharmaceutical sales force dedicated exclusively to pediatricians, our
organization is an important resource to Alpharma. We believe that this
partnership will make it possible for Ascent's shareholders to receive a fair
value for their investment, should Alpharma exercise their purchase option in
2002."
<PAGE> 2
Thomas L. Anderson, President of Alpharma's U.S. Pharmaceutical Division, who
will be appointed as a member of Ascent's Board of Directors, commented, "We are
very pleased to announce this strategic alliance with Ascent Pediatrics, which
represents a key step in executing our strategy of complementing Alpharma's
specialty generic pharmaceuticals with higher margin branded products. As the
leading provider of liquid and topical pharmaceuticals, we believe our current
technologies have many pediatric applications." Mr. Anderson continued, "This
relationship could potentially provide access to Ascent's value-added
proprietary technologies, particularly in taste masking and extended release,
which could then be incorporated into Alpharma USPD's future product development
initiatives. Finally, Alpharma's capabilities in manufacturing and distribution
may enhance Ascent's efforts in the areas of cost competitiveness and customer
service."
Alpharma's option to acquire Ascent for cash in 2002 is at the higher of $140
million or a price equal to 12.2 times Ascent's 2001 pre-tax operating income,
adjusted to exclude any R&D expense in excess of $1.5 million and interest on
selected securities.
The financing from Alpharma will be in the form of 7.5% subordinated notes due
in 2004 and 2005. Alpharma has agreed to loan $4.0 million of the $40.0 million
to Ascent immediately upon the execution of the agreements. Alpharma's
obligation to loan the balance of the $40.0 million is subject to Ascent
stockholder approval of the merger and additional conditions. If Alpharma does
not exercise its 2002 purchase option, Ascent will be required to repay the debt
in installments from 2004 into 2005. Ascent will also have the right to
repurchase such debt following the expiration of the purchase option until
December 31, 2002 at 125% of outstanding principal on December 31, 2001 plus
accrued interest. If this right is not exercised, the debt becomes convertible
into shares of Ascent common stock at a conversion price of $7.125 per share.
In connection with the Alpharma-Ascent alliance, ING Furman Selz Investments and
BankBoston Venture Capital have agreed to amend certain terms and rights held by
them as a result of their 1998 investment in Ascent. In return, Ascent has
agreed to reduce the exercise price of approximately 2.1 million warrants held
by ING Furman Selz Investments and BankBoston Venture Capital to $3.00 from
$4.75 per share and issue an additional 300,000 shares at a price of $3.00 per
share. These investors have agreed to exercise all these warrants and purchase
the additional shares by surrendering approximately $7.2 million in Ascent notes
held by the investors. The reduction in the exercise price of the warrants and
the issuance of these shares are also subject to stockholder approval.
Ascent is the only company dedicated exclusively to selling pharmaceutical
products to the pediatric market, a market estimated to be over $4 billion in
1998. Ascent currently markets FeverAll(R) Acetaminophen Suppositories and
Pediamist(R) Nasal Mist. Ascent also expects to begin marketing in the second
half of 1999 two of its significant products: Primsol(R) solution, an antibiotic
for acute otitis media, and Orapred(R), an improved tasting formulation of
liquid prednisolone, in both cases
<PAGE> 3
subject to FDA approval. Ascent currently has 87 sales representatives calling
on pediatricians.
Ascent's strategy is to address the unmet medical needs of children through the
development of differentiated, proprietary products based on approved compounds
with well-known clinical profiles and to utilize its specialized sales force to
leverage products from other larger pharmaceutical companies who are not focused
on the pediatric market.
Alpharma Inc. is a multinational pharmaceutical company that develops,
manufactures and markets specialty human pharmaceutical and animal health
products.
Investors are cautioned that this press release contains forward-looking
statements that involve a number of risks and uncertainties. For this purpose,
any statements that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes", "anticipates", "expects", "intends", "will", and similar expressions
are intended to identify forward-looking statements. Information contained in
these forward-looking statements is inherently uncertain, and actual performance
and results may differ materially from those indicated by such forward-looking
statements due to numerous factors, including but not limited to the following:
the risk that the strategic alliance with Alpharma is not successful, the
conditions to any additional loans are not satisfied or Alpharma does not
exercise its purchase option; the Company's dependence on obtaining regulatory
approval to market products; the Company's ability to comply with Nasdaq
National Market listing requirements; and the Company's management of growth.
Certain of these factors, as well as a number of other important factors, are
more fully described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain Factors
that May Effect Future Results", which description is incorporated herein by
this reference, and in its other SEC filings.
