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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: October 20, 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
Ascent Pediatrics, Inc. ("Ascent") announced on October 20, 1999 that
it had entered into an agreement with Alpharma Inc. modifying the strategic
alliance between Ascent and Alpharma Inc.
Under the original strategic alliance, Alpharma, through its subsidiary
Alpharma USPD Inc., agreed to provide up to $40 million in financing to Ascent
through a 7.5% convertible subordinated note due in 2004 and 2005, and Alpharma
acquired an option, exercisable during the first half of year 2002, to acquire
the then outstanding shares of Ascent for cash at a price to be determined by a
formula based upon Ascent's results in 2001.
Under the new agreement, Ascent and Alpharma agreed, among other
things, to extend by 12 months the exercise period of Alpharma's option to the
first half of year 2003, to change the fiscal year upon which the exercise price
of Alpharma's option is based from 2001 to 2002 and to modify certain conditions
on Ascent's access to funds under the Alpharma credit facility. In addition,
Ascent agreed that, to the extent it borrowed funds from Alpharma under the $40
million credit facility to finance the acquisition of products or businesses, it
would grant Alpharma a security interest in such products or businesses. The
modification of the terms of Alpharma's purchase option are subject to the
approval of Ascent's stockholders.
In connection with the modification of the Alpharma-Ascent alliance,
ING Furman Selz agreed to provide up to $10 million in additional financing to
Ascent for general corporate purposes through 7.5% convertible subordinated
notes due July 1, 2004. In return, Ascent issued ING Furman Selz warrants to
purchase 1,000,000 Ascent Depositary Shares at a price of $3.00 per share and
agreed to issue ING Furman Selz warrants to purchase up to an additional
4,000,000 Ascent Depositary Shares at an exercise price of $3.00 per share in
connection with borrowings under the Alpharma credit facility.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits. The following exhibits are incorporated herein by
reference:
<TABLE>
<CAPTION>
Exhibit
Number
<S> <C>
4.1 Form of 7.5% Convertible Subordinated Note.
4.2 Form of Warrant to Purchase Depositary Shares.
</TABLE>
2
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<TABLE>
<S> <C>
10.1 Second Supplemental Agreement dated as of October 15, 1999 by
and among Ascent, Alpharma USPD Inc., Alpharma Inc., State
Street Bank and Trust Company and each of the Original Lenders
(as defined therein).
10.2 Amended and Restated Subordination Agreement dated as of October 15,
1999 by and among Ascent, Alpharma USPD Inc. and each of the Original
Lenders (as defined therein).
10.3 Fourth Amendment dated as of October 15, 1999 to the Series G
Securities Purchase Agreement dated as of May 13, 1998, as
amended, by and among Ascent, Furman Selz Investors II, L.P.,
FS Employee Investors LLC, FS Parallel Fund L.P., Flynn
Partners and BancBoston Ventures Inc.
99.1 Press release dated October 20, 1999.
</TABLE>
3
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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: November 4, 1999 ASCENT PEDIATRICS, INC.
/s/ Alan R. Fox
--------------------------------------
Alan R. Fox
President and Chief Executive Officer
4
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EXHIBIT 4.1
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
$________ OCTOBER 15, 1999
WILMINGTON, MASSACHUSETTS
FOR VALUE RECEIVED, ASCENT PEDIATRICS, INC., a Delaware corporation
(the "undersigned"), hereby promises to pay to the order of ____________, or
registered assigns, the principal amount of ______________, or if less, the
aggregate unpaid amount of all Advances made to the undersigned under the Fourth
Amendment (as defined below), on July 1, 2004, and to pay interest from the date
hereof (computed on the basis of a 360-day year of twelve 30-day months) on the
unpaid principal amount outstanding hereof at the rate of 7.5% per annum until
the unpaid principal amount outstanding hereunder shall become due and payable,
and to pay, on demand, interest on any overdue principal, including any overdue
prepayment of principal and premium, if any, at the rate of 12% per annum.
Schedule A attached hereto and incorporated herein by reference records
(i) the date and amount of each Advance hereunder and (ii) 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.
Payments of principal, premium, if any, and interest shall be made to
the registered holder hereof in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, at the office of the Company at 187 Ballardvale
Street, Suite B125, Wilmington, Massachusetts 01887, subject to the right of the
registered holder hereof under the Fourth Amendment to receive direct payment in
immediately available funds.
Accrued interest shall be paid by the undersigned quarterly on March
31, June 30, September 30 and December 31 of each year, commencing on December
31, 1999.
If any amounts under this Note become due and payable on a Saturday or
Sunday or a day on which banks in the State of New York or the Commonwealth of
Massachusetts are authorized by law to remain closed, such amounts shall be paid
on the next succeeding day that such banks shall be open for business.
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This Note has been issued pursuant to, and is one of a series of notes
(the "Fourth Amendment Convertible Notes") issued pursuant to the Fourth
Amendment dated as of October 15, 1999 (the "Fourth Amendment") to the
Securities Purchase Agreement dated as of May 13, 1998 between the undersigned
and the Purchasers named therein, as amended (such Securities Purchase
Agreement, as amended on September 30, 1998, February 16, 1999 and July 1, 1999
and by the Fourth Amendment being referred to herein as the "Purchase
Agreement"). This Note is subject to and entitled to the benefits of all of the
provisions of the Purchase Agreement. Capitalized terms herein are used as
defined in the Purchase Agreement unless otherwise defined herein.
This Note may be redeemed by either the undersigned or the holder as
provided in Article IX of the Purchase Agreement. This Note may, or in certain
circumstances, shall automatically, be converted into Depositary Shares or other
securities of the Company in accordance with Section 12.2 of the Purchase
Agreement.
This Note is a general unsecured obligation of the undersigned and is
subordinated to all Senior Indebtedness in accordance with Article XI of the
Purchase Agreement and, as provided under Article XI, in certain circumstances,
to Senior Indebtedness under the Subordination Agreement dated as of February
16, 1999 among the Company, Alpharma USPD Inc. and the Original Lenders named
therein, as amended. Upon the occurrence of any one or more Events of Default,
all amounts then remaining unpaid on this Note may be declared to be immediately
due and payable subject to and as provided in the Purchase Agreement.
This Note may be amended and the provisions hereof may be waived only
in accordance with Article XIV of the Purchase Agreement.
This Note shall be governed by and construed in accordance with the
laws of the State of New York.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, ASCENT PEDIATRICS, INC. has caused this Note
to be duly executed.
ASCENT PEDIATRICS, INC.
By: _________________
Name: Emmett Clemente
Title: Chairman
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EXHIBIT 4.2
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, 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 WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON OCTOBER 15, 2006, OR IF NOT A BUSINESS
DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING
BUSINESS DAY.
WARRANT TO PURCHASE
_________ DEPOSITARY SHARES
WARRANT TO PURCHASE DEPOSITARY SHARES
OF
ASCENT PEDIATRICS, INC.
--------------------------
This certifies that, for value received, _________. or registered
assigns ("Warrantholder"), is entitled to purchase from Ascent Pediatrics, Inc.,
a Delaware corporation (the "Company"), subject to the terms set forth below, at
any time prior to the Expiration Date, after which time this Warrant shall
become void, _______________ Warrant Shares at the Warrant Price. The Warrant
Price and the number of Warrant Shares purchasable hereunder are subject to
adjustment from time to time as provided herein.
This Warrant is one of a series of warrants (the "Warrants")
evidencing the right to purchase Depositary Shares of the Company issued
pursuant to a certain Fourth Amendment (the "Fourth Amendment"), dated as of
October 15, 1999, to the Series G Securities Purchase Agreement, dated as of May
13, 1998, by and between the Company and the persons named therein, as amended
(such Securities Purchase Agreement, as amended on September 30, 1998, February
16, 1999 and July 1, 1999 and by the Fourth Amendment being referred to herein
as the "Purchase Agreement"), copies of which Purchase Agreement are on file at
the principal office of
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the Company, and the holder of this Warrant shall be entitled to all of the
benefits of and be bound by all of the applicable obligations of the Purchase
Agreement, as provided therein.
ARTICLE I
DEFINED TERMS
Section 1.1. Definition of Terms. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) "Business Day" shall mean a day other than a Saturday, Sunday or
other day on which banks in the State of New York or the Commonwealth of
Massachusetts are authorized by law to remain closed.
(b) "Convertible Notes" shall mean the 7.5% Convertible Subordinated
Notes due July 1, 2004 issued pursuant to the Third Amendment dated as of July
1, 1999 to the Purchase Agreement, the 7.5% Convertible Subordinated Notes due
July 1, 2004 issuable pursuant to the Fourth Amendment and the 8.0% Convertible
Subordinated Notes issued on July 23, 1999 pursuant to the Purchase Agreement.
(c) "Common Stock" shall mean the Common Stock, $.00004 par value per
share, of the Company.
(d) "Closing Price" shall mean, with respect to any day, the last
reported sales price of the Depositary Shares, regular way, or in case no sale
takes place on such day, the average of the reported closing bid and asked
prices of the Depositary Shares, regular way, in either case as reported on the
principal national securities exchange on which the Depositary Shares is listed
or admitted to trading or, if the Depositary Shares are not listed or admitted
to trading on any national securities exchange, but is traded in the
over-the-counter market, the closing sale price of the Depositary Shares or in
case no sale is publicly reported, the average of the representative closing bid
and asked quotations for the Depositary Shares on the Nasdaq National Market,
or, if bid and asked prices for such day shall not have been reported on The
Nasdaq Stock Market, the average of the bid and asked prices for the Depositary
Shares as furnished by any New York Stock Exchange, Inc. member firm regularly
making a market in the Depositary Shares and selected for such purpose by the
Board of Directors of the Company.
(e) "Depositary Shares" means the depositary shares of the Company
issued pursuant to the Depositary Agreement dated as of February 16, 1999 by and
among the Company, Alpharma USPD Inc. and State Street Bank and Trust Company,
as amended (the "Depositary Agreement"), each Depositary Share representing one
share of Common Stock of the Company subject to a call option and represented by
a depositary receipt.
(f) "Expiration Date" shall mean the earlier of (a) October 15, 2006,
or if such day is not a Business Day, the next succeeding day which is a
Business Day.
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(g) "Fair Market Value" with respect to the date of any exercise by the
Warrantholder of all or a portion of this Warrant, shall mean the average daily
Closing Price of the Depositary Shares, as applicable, for thirty (30)
consecutive trading days commencing forty-five (45) days before the date of such
exercise by the Warrantholder of all or a portion of this Warrant, provided,
however, that where no public market exists for the Depositary Shares at the
time of the exercise of all or a portion of this Warrant, the fair market value
per share shall be determined by the Company's Board of Directors in good faith.
(h) "Fourth Amendment" shall mean the Fourth Amendment, dated as of
October 15, 1999, to the Purchase Agreement.
(i) "Person" shall mean any individual, corporation, association,
company, business trust, partnership, limited liability company, joint venture,
joint-stock company, trust, unincorporated organization, association or any
other entity or government or any agency or political subdivision thereof.
(j) "Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of May 13, 1998, among the Company and the persons named
therein, as amended.
(k) "Related Person" of any Person means any other Person directly or
indirectly owning (A) twenty percent (20%) or more of the outstanding common
stock of such Person (or, in the case of a Person that is not a corporation,
twenty percent (20%) or more of the equity interest in such Person) or (B)
twenty percent (20%) or more of the combined voting power of the voting capital
stock of such Person.
(l) "Securities Act" shall mean the Securities Act of 1933, as amended.
(m) "Subordinated Notes" shall mean the Company's 8% Subordinated Notes
due 2005 issued pursuant to the Purchase Agreement.
(n) "Third Amendment" shall mean the Third Amendment, dated as of July
1, 1999, to the Purchase Agreement.
(o) "Warrant Price" shall mean Three Dollars ($3.00) per Warrant Share,
as such price may be adjusted from time to time pursuant to Article III hereof.
(p) "Warrant Shares" shall mean the Depositary Shares purchasable upon
exercise of this Warrant.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
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Section 2.1. Exercise of Warrant. The Warrantholder may exercise this
Warrant, in whole or in part, by presentation and surrender of this Warrant at
the address of the Company set forth in Section 4.6 hereof or at such other
address as the Company may designate by notice in writing to the Warrantholder
with the Subscription Form annexed hereto duly executed, accompanied by payment
of the Warrant Price for each Warrant Share purchased. Upon receipt thereof, the
Company shall cause to be issued certificates for the Warrant Shares so
purchased in such denominations as are requested for delivery to the
Warrantholder. Such certificates shall be delivered as promptly as practicable
to the Warrantholder. Upon any partial exercise of this Warrant, the Company
shall execute and deliver a new Warrant of like tenor and date for the balance
of the Warrant Shares purchasable hereunder. Upon exercise, the Warrantholder
shall be deemed to be the holder of record of Depositary Shares issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Depositary Shares
shall not then be actually delivered to the Warrantholder. If at the time this
Warrant is exercised, a registration statement is not in effect to register
under the Securities Act the Warrant Shares issuable upon exercise of this
Warrant, the Company may require the Warrantholder to make such representations,
and may place such legends on certificates representing the Warrant Shares, as
may be reasonably required to permit the Warrant Shares to be issued without
such registration. The Company shall pay any and all stock transfer and similar
taxes which may be payable in respect of the issue of the Warrant or in respect
of the issue of any of the Warrant Shares, except the Company shall not pay such
transfer taxes if the Warrant Shares are issued to a Person other than the
Warrantholder.
Section 2.2. Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of Depositary Shares or other shares of capital stock
of the Company as may be from time to time issuable upon exercise of this
Warrant. All such shares shall be duly authorized, and when issued upon such
exercise, shall be validly issued, fully paid and nonassessable, free and clear
of all liens, security interests, charges and other encumbrances or
restrictions, other than those restrictions imposed by the Securities Act of
1933, and free and clear of all preemptive and similar rights.
Section 2.3. Fractional Shares. The Company shall not be required to
issue any fraction of a Depositary Share in connection with the exercise of this
Warrant, and in any case where the Warrantholder would, except for the
provisions of this Section 2.3, be entitled under the terms of this Warrant to
receive a fraction of a share upon the exercise of this Warrant, the Company
shall, upon the exercise of this Warrant and receipt of the Warrant Price (as
adjusted to cover the balance of the share), issue the largest number of whole
shares purchasable upon exercise of this Warrant, but in no event shall the
Company issue more than such number of Depositary Shares as are issuable
pursuant to the exercise of this Warrant. The Company shall not be required to
make any cash or other adjustment in respect of such fraction of a share to
which the Warrantholder would otherwise be entitled.
Section 2.4. Payment for Warrant Shares.
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(a) Payment of the aggregate Warrant Price for Warrant Shares to be
purchased upon exercise of all or a portion of this Warrant shall be made in
full by delivery to the Company, at its address set forth in Section 4.6 hereof
or at such other address as the Company may designate by notice in writing to
the Warrantholder, of a certified or bank cashier's check or by wire transfer to
an account in the United States designated by the Company.
(b) Payment of the aggregate Warrant Price may also be made in full by
(i) delivery to the Company of Convertible Notes plus accrued interest thereon,
in an aggregate principal amount equal to the aggregate Warrant Price, (ii)
delivery to the Company of Subordinated Notes plus accrued interest thereon, in
an aggregate principal amount equal to the aggregate Warrant Price or (iii) a
combination of cash (payable by wire transfer or certified or bank check),
Convertible Notes or Subordinated Notes beneficially owned by such Warrantholder
and such accumulated dividends or accrued interest, as the case may be, in an
aggregate principal amount equal to the aggregate Warrant Price. Any Convertible
Notes or Subordinated Notes surrendered for exchange hereunder shall be, if so
required by the Company, accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company duly delivered by the
Warrantholder.
(c) Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one Depositary Share is greater than the Warrant Price (at the
date of calculation as set forth below), in lieu of exercising this Warrant for
cash, the Warrantholder may elect to receive shares equal to the value (as
determined below) of this Warrant (or the portion thereof, which portion shall
be canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Subscription Form annexed hereto and notice
of such election in which event the Company shall issue to the Warrantholder a
number of Depositary Shares computed using the following formula:
X = Y(A-B)
------
A
Where X = the number of Depositary Shares to be issued to
the Warrantholder
Y = the number of Depositary Shares purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the Fair Market Value of one Depositary Share
(at the date of such calculation)
B = Warrant Price (as adjusted to the date of such
calculation)
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ARTICLE III
ADJUSTMENT OF WARRANT PRICE OR WARRANT SHARES
Section 3.1. Adjustment of Warrant Price.
(a) Except as hereinafter provided, in case the Company shall at any
time after the date hereof issue or sell any obligations or Depositary Shares,
for a consideration per share less than the Warrant Price in effect immediately
prior to the issuance or sale of such shares, or without consideration, then,
and thereafter successively upon each issuance or sale, the Warrant Price in
effect immediately prior to each such issuance or sale shall forthwith be
reduced to a price determined by dividing (i) an amount equal to (X) the total
number of Depositary Shares outstanding immediately prior to such issuance or
sale multiplied by the Warrant Price in effect immediately prior to such
issuance or sale, plus (Y) the consideration, if any, received by the Company
upon such issuance or sale, by (ii) the total number of Depositary Shares
outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in accordance
with the provisions of this paragraph (a), the following shall be applicable:
(i) In case of the issuance or sale of Depositary
Shares for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be the
amount of cash received by the Company for such shares (or, if such
Depositary Shares are offered by the Company for subscription, the
subscription price, or, if Depositary Shares shall be sold to
underwriters or dealers for public offering without a subscription
offering, the public offering price) before deducting therefrom any
commissions or other expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with the issuance of such
shares;
(ii) In case of the issuance or sale of Depositary
Shares for a consideration part or all of which shall be other than
cash (otherwise than as a dividend or other distribution on any
Depositary Shares of the Company or on conversion, exercise or exchange
of other securities of the Company or upon acquisition of the assets or
securities of another company or upon merger or consolidation with
another entity), the amount of consideration therefor other than cash
shall be the value of such consideration as of the date of the issuance
or sale of the Depositary Shares, irrespective of accounting treatment,
but as determined by the Board of Directors of the Company in good
faith. The reclassification of securities other than Depositary Shares
into Depositary Shares shall be deemed to involve the issuance for a
consideration other than cash of such Depositary Shares immediately
prior to the close of business on the date fixed for the determination
of security holders entitled to receive such Depositary Shares;
(iii) In case of the issuance of Depositary Shares
upon conversion or exchange of any obligations or of any securities of
the Company that shall be convertible into or exchangeable for
Depositary Shares or upon the exercise of rights or options to
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subscribe for or to purchase Depositary Shares (other than upon
exercise of this Warrant), the amount of consideration received by the
Company for such Depositary Shares shall be deemed to be the sum of (A)
the amount of the consideration received by the Company upon the
original issuance of such obligations, shares, rights or options, as
the case may be, plus (B) the consideration, if any, other than such
obligations, shares, rights or options, received by the Company upon
such conversion, exchange, or exercise except in adjustment of interest
and dividends. The amount of the consideration received by the Company
upon the original issuance of the obligations, shares, rights or
options so converted, exchanged or exercised and the amount of the
consideration, if any, other than such obligations, shares, rights or
options, received by the Company upon such conversion, exchange or
exercise shall be determined in the same manner provided in
subparagraphs (i) and (ii) above with respect to the consideration
received by the Company in case of the issuance of Depositary Shares;
if such obligations, shares, rights or options shall have been issued
as a dividend upon any securities of the Company, the amount of the
consideration received by the Company upon the original issuance
thereof shall be deemed to be zero. In case of the issuance of Warrant
Shares upon exercise of this Warrant, the Company shall be deemed to
have received the Warrant Price then in effect as the consideration for
each Depositary Share so issued;
(iv) Depositary Shares issuable by way of dividend or
other distribution on any securities of the Company shall be deemed to
have been issued and to be outstanding at the close of business on the
record date fixed for the determination of security holders entitled to
receive such dividend or other distribution and shall be deemed to have
been issued without consideration. Depositary Shares issued otherwise
than as a dividend, shall be deemed to have been issued and to be
outstanding at the close of business on the date of issue;
(v) The number of Depositary Shares at any time
outstanding shall not include any shares then owned or held by or for
the account of the Company, but shall include the aggregate number of
shares deliverable in respect of options, rights and exercisable,
convertible and exchangeable securities at all times while such
options, rights or securities remain outstanding and unexercised,
unconverted or unexchanged, as the case may be; and
(vi) No adjustment shall be made to the Warrant Price
in effect upon conversion or exchange of (i) securities convertible or
exercisable or exchangeable for Depositary Shares or for other
securities that are subsequently exercisable for Depositary Shares that
are outstanding as of the date of the Fourth Amendment, or (ii) any
obligations or any securities of the Company that shall be convertible
into or exercisable or exchangeable for Depositary Shares or upon the
exercise of rights or options to subscribe for or to purchase
Depositary Shares for which an adjustment in the Warrant Price has
previously been made in accordance with paragraph (b) of this Section
3.1.
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(vii) In the event that any payment is made to the
holders of warrants issued pursuant to the Securities Purchase
Agreement dated as of January 31, 1997 among the Company, Triumph
Connecticut Limited Partnership and the other purchasers named therein
pursuant to Section 8.3(b) (or successor provision) of such Securities
Purchase Agreement which does not result in a modification pursuant to
Section 3.4, the Company shall be deemed to have issued without
consideration as of the date of the event giving rise to such payment a
number of Depositary Shares equal to the amount of such payment divided
by the Closing Price on the date of such event.
(b) In case the Company shall at any time after the date hereof issue
options or rights to subscribe for Depositary Shares, or issue any obligations
or securities convertible into or exchangeable for Depositary Shares, otherwise
than as contemplated by Section 3.1(a)(vi) or pursuant to Section 3.3 hereof,
for a consideration per share less than the Warrant Price in effect immediately
prior to the issuance of such options or rights or convertible or exchangeable
securities, or without consideration, the Warrant Price in effect immediately
prior to the issuance of such options or rights or securities shall be reduced
to a price determined by making a computation in accordance with the provisions
of paragraph (a) of this Section 3.1, provided that:
(i) the aggregate maximum number of Depositary Shares deliverable under
such options or rights shall be considered to have been delivered at the time
such options or rights were issued, and for a consideration equal to the minimum
purchase price per Depositary Share provided for in such options or rights, plus
the consideration (determined in the same manner as consideration received on
the issue or sale of Depositary Shares), if any, received by the Company for
such options or rights;
(ii) the aggregate maximum number of Depositary Shares deliverable upon
conversion of or exchange for any such obligations or securities shall be
considered to have been delivered at the time of issuance of such securities,
and for a consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of Depositary Shares)
received by the Company for such securities, plus the consideration, if any, to
be received by the Company upon the exchange or conversion thereof; and
(iii) on the expiration of such options or rights, or an increase in
the minimum exercise price thereof, or a decrease in the maximum number of
Depositary Shares deliverable upon exercise or conversion of such options,
rights or convertible or exchangeable securities pursuant to the terms thereof
(and not as a result of exercise or conversion), or the termination of such
right to convert or exchange, the Warrant Price in effect shall forthwith be
readjusted to such Warrant Price as would have obtained (A) in the case of the
expiration or termination of options or rights or the termination of the right
to convert or exchange convertible or exchangeable securities, had no
adjustments been made upon the issuance of such options, rights or convertible
or exchangeable securities, or (B) in the case of an increase in the minimum
exercise price thereof, or a decrease in the maximum number of shares
deliverable thereunder, had the adjustments made upon the issuance of such
options, rights or convertible or exchangeable securities been made upon the
basis of the delivery of only the number of
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Depositary Shares (A) actually deliverable upon the exercise of such options or
rights or upon conversion or exchange of such securities, or (B) deliverable by
reason of such increase in price or decrease in number of shares.
(c) No adjustment to the Warrant Price shall be made in connection with
the issuance of:
(i) the Convertible Notes, the Warrants issued
pursuant to the Third Amendment, the Warrants issued pursuant to the
Fourth Amendment, the Warrants issued pursuant to the Purchase
Agreement and the New Warrants, as such term is defined in the Purchase
Agreement (together, the "Convertible Securities"), and the securities
issued or issuable upon conversion or exercise of the Convertible
Securities, or other currently outstanding securities that are
convertible, exercisable or exchangeable for Depositary Shares; and
(ii) Depositary Shares or rights, options or warrants
to acquire Depositary Shares issued to directors, employees or
consultants of the Company pursuant to a stock option plan or agreement
(and, in the case of rights, options, or warrants, the Depositary
Shares issued or issuable upon exercise thereof) and approved by the
Board of Directors;
(d) In case the Company shall at any time after the date hereof
subdivide or combine the outstanding Depositary Shares, the Warrant Price in
effect shall forthwith be proportionately decreased in the case of the
subdivision or proportionately increased in the case of combination to the
nearest one cent. Any such adjustment shall become effective at the close of
business on the date that such subdivision or combination shall become
effective.
(e) No adjustment to the Warrant Price shall be made in connection with
the conversion of all outstanding Depositary Shares into shares of Common Stock
on the Option Expiration Date (as defined in the Depositary Agreement) pursuant
to the terms of the Depositary Agreement.
Section 3.2. Adjustment of Warrant Shares. In the event of an
adjustment of the Warrant Price, the number of Depositary Shares (or
reclassified or recapitalized stock) issuable upon exercise of this Warrant
after such adjustment shall be equal to the number determined by multiplying the
number of Depositary Shares issuable upon exercise of this Warrant immediately
prior to such adjustment by a fraction, of which the numerator is the Warrant
Price in effect immediately prior to such adjustments, and the denominator is
the Warrant Price in effect immediately after such adjustment.
Section 3.3. Dividends and Distributions. In the event that the Company
shall at any time after the date hereof pay any dividend (other than in
Depositary Shares) on, or make any distribution of its assets upon or with
respect to, the Depositary Shares, or in the event that
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the Company shall offer options or rights to subscribe for Depositary Shares, or
issue any securities convertible into or exchangeable for Depositary Shares, to
all of its holders of Depositary Shares, then on the record date for such
payment, distribution or offer or, in the absence of a record date, on the date
of such payment, distribution or offer, the Warrantholder shall receive what the
Warrantholder would have received had it exercised this Warrant in full
immediately prior to the record date of such payment, distribution or offer or,
in the absence of a record date, immediately prior to the date of such payment,
distribution or offer.
Section 3.4. Mergers, Consolidations, Reclassifications. In the case of
any reorganization or reclassification of the outstanding Depositary Shares
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination) or in
the case of any consolidation of the Company into, or merger of the Company with
another corporation in which it is not the surviving entity (or it is the
surviving entity, but its Depositary Shares become shares of another
corporation), or in the case of any sale, lease or conveyance of all, or
substantially all, of the property, assets, business and goodwill of the Company
as an entirety, the Warrantholder shall thereafter have the right upon exercise
of this Warrant to receive the kind and amount of shares of stock and other
securities, cash and property receivable upon such reorganization,
reclassification, consolidation, merger or disposition by a holder of the number
of Depositary Shares which the Warrantholder would have received had it
exercised this Warrant immediately prior to such reorganization,
reclassification, consolidation, merger or disposition, at a price equal to the
aggregate Warrant Price then in effect for exercising this Warrant in full (the
kind, amount and price of such stock and other securities to be subject to
adjustment as herein provided); provided, however, that the kind and amount of
such shares of stock and other securities, cash and other property shall be
determined as if any payment made to the holders of warrants issued pursuant to
the Securities Purchase Agreement dated as of January 31, 1997 among the
Company, Triumph Connecticut Limited Partnership and the other purchasers named
therein upon such reorganization, reclassification, consolidation, merger or
disposition in excess of the amount such holders would otherwise have been
entitled to receive under the terms of such warrants without regard to Section
8.3(b) (or successor provision) of such Securities Purchase Agreement had not
been made. The foregoing provisions of this Section 3.4 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers and
dispositions.
Section 3.5. Notice of Adjustment. Whenever the Warrant Price or the
number of Warrant Shares shall be adjusted pursuant to the provisions of Article
III, the Company shall prepare and deliver forthwith to the Warrantholder a
certificate signed by the President of the Company and by its Chief Financial
Officer, setting forth the adjusted number of Warrant Shares purchasable upon
the exercise of this Warrant and the Warrant Price calculated to the nearest
cent and setting forth in reasonable detail the method of calculation and the
facts requiring such adjustment and upon which such calculation is based.
Section 3.6. Notice of Certain Corporate Action. In case at any time:
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(A) the Company shall declare any dividend (or
any other distributions) on Depositary
Shares; or
(B) the Company shall authorize the granting to
all holders of its Depositary Shares of
rights to subscribe for or purchase any
shares of stock of any class or of any other
rights; or
(C) there shall be any reclassification of the
Depositary Shares or capital stock of the
Company; or
(D) there shall be any capital reorganization by
the Company; or
(E) there shall be any (i) consolidation or
merger involving the Company, other than the
merger contemplated by the Merger Agreement,
or (ii) sale, transfer or other disposition
of all or substantially all of the Company's
property, assets or business (except a
merger or other reorganization in which the
Company shall be the surviving corporation
and its shares of capital stock shall
continue to be outstanding and unchanged and
except a consolidation, merger, sale,
transfer or other disposition involving a
wholly-owned subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of
the Company or any partial liquidation of
the Company or distribution to holders of
Depositary Shares;
then, in each of such cases, the Company shall give written notice to the
Warrantholder of the date on which (i) the books of the Company shall close or a
record date shall be fixed for such dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding-up, as the case may be, shall
take place. Such notice also shall specify the date as of which the holders of
Depositary Shares of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their depositary receipts
for Depositary Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be. Such notice shall be
given at least twenty (20) days prior to the action in question and not less
than twenty (20) days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
Section 3.7. Adjustment for Expiration of Call Option. From and after
the Option Expiration Date, this Warrant shall be exercisable into a number of
shares of Common
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Stock of the Company equal to the number of shares of Common Stock that the
Warrantholder would have received upon the exchange of the Depositary Shares
that the Warrantholder would have received had it exercised this Warrant in full
immediately prior to the Option Expiration Date. From and after the Option
Expiration Date, all references herein to Depositary Shares shall be deemed to
include the Common Stock of the Company.
Section 3.8. Form of Warrant after Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Warrant Price or
the number or kind of the Warrant Shares.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Successors and Assigns; Transfers.
(a) The terms of this Warrant shall be binding upon, inure to the
benefit of and be enforceable by and against any successors or assigns of the
Company and of the Warrantholder; provided, however, that the Company may not
assign its rights or obligations hereunder.
(b) Subject to the provisions of paragraph (f) below and Section 17.3
of the Purchase Agreement, this Warrant and all rights hereunder are
transferable by the Warrantholder, in whole or in party, upon surrender of this
Warrant with a properly executed assignment at the principal office of the
Company.
(c) Any transferee 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 the
Warrantholder under this Warrant to the same extent as if such transferee was
the Warrantholder.
(d) The Company will maintain a register containing the names and
addresses of the Warrantholders of the Warrants. Any Warrantholder may change
its or his address as shown on the warrant register by written notice to the
Company requesting such change.
(e) Until any transfer of this Warrant is made in the warrant register,
the Company may treat the Warrantholder as the absolute owner hereof for all
purposes; provided, however, that if and when this Warrant is properly assigned
in blank, the Company may (but shall not be obligated to) treat the bearer
hereof as the absolute owner hereof for all purposes, notwithstanding any notice
to the contrary.
(f) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act or (ii) the Company
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<PAGE> 13
first shall have been furnished with an opinion of legal counsel, reasonably
satisfactory to the Company, to the effect that such sale or transfer is exempt
from the registration requirements of the Securities Act.
(g) Each certificate representing Warrant Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have
not been registered under the Securities Act of
1933, as amended, and may not be offered, sold or
otherwise transferred, pledged or hypothecated
unless and until such securities are registered
under such Act or an opinion of counsel reasonably
satisfactory to the Company is obtained to the
effect that such registration is not required."
The foregoing legend shall be removed from the certificates
representing any Warrant Shares, at the request of the holder thereof, at such
time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act.
Section 4.2. Rights as Stockholder. Except as provided herein, the
Warrantholder, as such, shall not be entitled to vote or be deemed to be a
stockholder of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Warrantholder, as such, any rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action or receive notice of meetings.
Section 4.3. Acceptance by Warrantholder. Receipt of this Warrant by
the Warrantholder shall constitute acceptance of an agreement to the foregoing
terms and conditions.
Section 4.4. Governing Law. This Warrant and the rights of the parties
hereunder shall be governed in all respects by the laws of the State of New
York, without giving effect to the provisions thereof relating to conflicts of
law.
Section 4.5. Severability. In case any provision of this Warrant 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.
Section 4.6. Notices. Any notices or certificates by the Company to the
Warrantholder and by the Warrantholder to the Company shall be deemed delivered
if in writing and delivered in person or by registered mail (return receipt
requested) to the Warrantholder, at its address in the registry of
Warrantholders maintained by the Company, and if to the Company, at 187
Ballardvale Street, Suite B125, Wilmington, MA 01887, Attention: Principal
Financial Officer. The Company may change its address by written notice to the
Warrantholder.
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Section 4.7. Amendment. This Warrant may be amended or modified (or any
provision hereof waived) only if Warrantholders holding at least eighty percent
(80%) of the Warrant Shares (assuming exercise of all the Warrants) shall
approve such amendment, modification or waiver in writing; provided, however,
that no amendment that adversely affects the rights of any Warrantholder in a
manner different from the rights of the other Warrantholders shall be effective
against such Warrantholder unless approved in writing by such Warrantholder.
After an amendment, modification or waiver of a provision the Warrants becomes
effective, the Company shall mail to the Warrantholders a notice briefly
describing the amendment, modification or waiver.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 15th day of October, 1999.
ASCENT PEDIATRICS, INC.
By:__________________
Name: Emmett Clemente
Its: Chairman
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<PAGE> 1
EXHIBIT 10.1
ASCENT PEDIATRICS, INC.
SECOND SUPPLEMENTAL AGREEMENT
DATE: OCTOBER 15, 1999
<PAGE> 2
SECOND SUPPLEMENTAL AGREEMENT (the "Agreement") dated as of October 15,
1999 among Ascent Pediatrics, Inc., a Delaware corporation (the "Company"),
Alpharma USPD Inc., a Maryland corporation (the "Lender"), Alpharma Inc., a
Delaware corporation (the "Parent"), State Street Trust Bank and Trust Company
(the "Depositary") and each of the Original Lenders named in the Subordination
Agreement described below.
WHEREAS, pursuant to the Loan Agreement dated as of February 16, 1999
among the Company, the Lender and the Parent (the "Loan Agreement"), the Lender
has agreed to loan to the Company an aggregate of up to $40 million from time to
time upon the terms and conditions set forth therein, as amended as described
below;
WHEREAS, the Lender, the Company and the Depositary are parties to a
Depositary Agreement dated February 16, 1999, as amended as described below (the
"Depositary Agreement"):
WHEREAS, the Lender, the Company and the Original Lenders named therein
are parties to a Subordination Agreement dated February 16, 1999, as amended as
described below (the "Subordination Agreement"):
WHEREAS, the Company, the Lender and the Parent are parties to a Master
Agreement dated February 16, 1999, as amended as described below (the "Master
Agreement");
WHEREAS, the Loan Agreement, Depositary Agreement, Subordination
Agreement and the Master Agreement were amended pursuant to the terms of the
Supplemental Agreement dated July 1, 1999 between the parties hereto (the
"Supplemental Agreement"):
WHEREAS, the parties hereto wish to further supplement and amend the
Loan Agreement, the Depositary Agreement, the Master Agreement, the
Subordination Agreement and the Supplemental Agreement upon the terms and
conditions set forth herein;
WHEREAS, the Lender is the sole holder of the Note (as defined in the
Loan Agreement) and the parties are entering into this Second Supplemental
Agreement (to the extent it modifies the Loan Agreement) pursuant to Section
12.1 of the Loan Agreement;
WHEREAS, on or prior to the date hereof, this Second Supplemental
Agreement has been approved by a majority of the Non-Alpharma Directors pursuant
to Section 9.01 of the Depositary Agreement and Section 8.5 of the Master
Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and
among the parties hereto as follows:
ARTICLE I
DEFINITIONS, ETC.
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<PAGE> 3
1.1 Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to them in the Loan Agreement or in the Ancillary
Agreements (as defined in the Loan Agreement).
1.2 Unless the context otherwise requires:
a. a term has the meaning assigned to it;
b. an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
c. "or" is not exclusive;
d. words in the singular include the plural and in the plural
include the singular;
e. provisions apply to successive events and transactions; and
f. "herein", "hereof" and other words of similar import refer to
this Agreement as a whole and not to any particular Article,
Section or other subdivision.
1.3 This Agreement amends and supplements the Loan Agreement, the Depositary
Agreement, the Subordination Agreement, the Guaranty Agreement, the
Master Agreement and the Supplemental Agreement. In case of any
inconsistency between the terms of this Agreement and the Loan Agreement,
the Depositary Agreement, the Subordination Agreement, the Guaranty
Agreement, the Master Agreement, or the Supplemental Agreement, the terms
of this Agreement shall govern. In the absence of such inconsistency, all
provisions of the Loan Agreement, the Depositary Agreement, the
Subordination Agreement, the Guaranty Agreement, the Master Agreement and
the Supplemental Agreement shall remain in full force and effect. Without
limiting the foregoing, the conditions set forth in Article II hereof
shall for all purposes be considered part of the Loan Agreement. Any
reference to the Loan Agreement, the Depositary Agreement, the Master
Agreement, the Guaranty Agreement, the Subordination Agreement or the
Supplemental Agreement in any such agreement or to the Ancillary
Agreements shall be deemed to be a reference to such agreement as
modified hereby. Any reference in any such agreement to approval or
adoption of the Merger Agreement and the transactions contemplated
thereby shall be deemed to be a reference to the Merger Agreement and
such transactions as modified hereby.
1.4 The parties may sign any number of copies of this Agreement. Each signed
copy shall be an original and may be signed in counterparts, but all of
them together represent the same agreement.
1.5 The laws of the State of New York, without regard to principles of
conflicts of law, shall govern this Agreement to the extent it modifies
the Loan Agreement or the Subordination Agreement. The laws of the State
of Delaware, without regard to principals of conflict of
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laws, shall govern this Agreement to the extent it modifies the
Depositary Agreement or the Master Agreement.
ARTICLE II
ADDITIONAL CONDITIONS AND OBLIGATIONS OF THE LENDER
2.1 The obligation of the Lender to make any Loans on or after the date
hereof is subject to the fulfillment to its reasonable satisfaction, or
the waiver by the Lender, on or prior to the applicable Loan Date, of
each of the following additional conditions:
(a) The Fourth Amendment to the May 1998 Securities Purchase
Agreement in the form attached hereto as Exhibit A (the
"Fourth Amendment to the Securities Purchase Agreement") shall
be in full force and effect and
(b) The Company and each of the Furman Selz Entities shall have
performed in all material respects all of their respective
obligations under the Fourth Amendment to the Securities
Purchase Agreement including, without limitation, the
satisfaction of the conditions set forth in Section 2.2(b)
thereof.
2.2 The obligation of the Lender to make any Secured Loans (as defined in the
Loan Agreement (as amended)) on or after the date hereof is subject to
the fulfillment to its reasonable satisfaction, or the waiver by Lender,
on or prior to the applicable Loan Date, of each of the following
conditions:
(a) The Lender shall be reasonably satisfied that the
security interest required by Section 13.10 of the
Loan Agreement (as amended) has attached to the
Collateral (as defined in the Loan Agreement) and
(b) The Amendment to the Subordination Agreement, in
the form attached hereto as Exhibit B shall be in
full force and effect.
ARTICLE III
AGREEMENTS AND AMENDMENTS
THE PLAN UPDATE
3.1 The Lender agrees that the Company delivered to the Lender, on or about
September 21, 1999, a detailed operating plan covering the periods through
December 31, 2001 which includes, on an annual basis, $1.4 million in
research and development and sales force expenditure reductions from the
previously approved Plan and reflects the immediate commercial
introduction of the Primsol product. The representatives of the Company
and the
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<PAGE> 5
Lender agree to cause their respective representatives to the Screening
Committee to take all action necessary to approve said September 21,
1999 plan as an Update, as that term is used in Section 4.1 of the
Supplemental Agreement.
THE SECURED LOAN
3.2 The Loan Agreement (as amended) is further amended by adding the
following definitions to Section 1.1 thereof:
"Secured Loans" means all Project Loans and Screened
Project Loans.
"Collateral" means all assets, properties, contract
rights and other intangibles and choses in action
purchased, licensed or otherwise acquired by the
Company with the proceeds of a Secured Loan.
3.3 The Loan Agreement (as amended) is further amended by adding the following
clause to Article XIII of the Loan Agreement:
13.10 SECURITY.
As security for the full and timely payment of all
Secured Loans and the performance of all obligations
contained herein in connection with the Secured Loans,
the Company covenants that it will, on or before each
Loan Date for a Secured Loan, do or cause to be done,
all things necessary in the reasonable opinion of the
Lender and, its counsel, to grant to the Lender a duly
perfected first priority purchase money security
interest in all of the Collateral acquired by Company
with the proceeds of said Secured Loan. At the request
of the Lender, the Company will cause its duly
authorized officers to execute on its behalf, any
certificate, instrument, statement or document, or to
procure any such certificate, instrument, statement or
document, or to take such other action which the
Lender's counsel reasonably deems necessary, from time
to time, to create, continue or preserve Lender's
security interest in and to the Collateral (and the
perfection and priority thereof) as contemplated
hereby, specifically including the execution of such
security agreement and the filing of such financing
statements in the form reasonably requested by Lender's
counsel.
3.4 Section 7.2 of the Loan Agreement is hereby amended by adding
the following clause to the beginning of the first sentence
thereof:
"Except for any security interest in the Collateral
with respect to Secured Loans and Fourth Amendment
Advances (as defined in the Fourth Amendment to the
Securities Purchase Agreement), ..."
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<PAGE> 6
THE OPTION EXERCISE PERIOD
3.5 The definition of the term "2001 Audited Financial Statements" in
Article I of the Depositary Agreement (as amended by the Supplemental
Agreement) is hereby amended by changing (a) the term "2001 Audited
Financial Statements" to the term "2002 Audited Financial Statements"
in said definition and in each other place where the term "2001 Audited
Financial Statements" appears in the Depositary Agreement and (b) the
date "December 31, 2001" to "December 31, 2002" in each of the two
places it appears in said definition.
3.6 The definition of the term "Adjusted 2001 Operating Income" in Article
I of the Depositary Agreement (as amended by the Supplemental
Agreement) is hereby amended by changing (a) the term "Adjusted 2001
Operating Income" to the term "2002 Operating Income" in said
definition and in each other place where the term "Adjusted 2001
Operating Income" appears in the Depositary Agreement and (b) the date
"December 31, 2001" to "December 31, 2002 in each of the five places it
appears in said definition.
3.7 The definition of the term "Excluded Interest Expense" in Article I of
the Depositary Agreement (as amended by the Supplemental Agreement) is
hereby amended by changing the date "December 31, 2001" each time it
appears to "December 31, 2002.
3.8 The definition of the term "GAAP Adjustments" in Article I of the
Depositary Agreement (as amended by the Supplemental Agreement) is
hereby amended by changing (a) all references to "2000" and "2001" to
"2001" and "2002", respectively and (b) all references to "December 31,
2001" and "December 31, 2002" to "December 31, 2002" and "December 31,
2003", respectively.
3.9 The definition of the term "Option Expiration Date" in Article I of the
Depositary Agreement (as amended by the Supplemental Agreement) is
hereby amended by changing the term "December 31, 2002" to "December
31, 2003".
3.10 Section 3.01 of the Depositary Agreement (as amended by the
Supplemental Agreement) is hereby amended by (a) restating the last
sentence of subsection (a) as follows:
"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, 2003 and continuing
until December 31, 2003."
and (b) changing the two references to "January 15, 2003" in subsection
(b) to "January 15, 2004".
3.11 Section 4.01 of the Depositary Agreement (as amended by the
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<PAGE> 7
Supplemental Agreement) is hereby amended by (a) restating the first
sentence of subsection (a) as follows:
"The Company shall deliver the Option Exercise Deliverables to
Alpharma on or before March 30, 2003."
and (b) changing the reference to "January 1, 2002" in subsection (b)
(v) to "January 1, 2003".
3.12 Section 4.03 (c) (i) of the Depositary Agreement (as amended by the
Supplemental Agreement) is hereby amended by changing the reference to
"September 30, 2001" to "September 30, 2002".
3.13 Section 5.02 (b) of the Depositary Agreement (as amended by the
Supplemental Agreement) is hereby amended by changing the reference in
the second paragraph thereof from "January 15, 2003" to "January 15,
2004".
3.14 Section 2.6 of the Loan Agreement (as amended) is hereby amended by (a)
changing the reference to "December 31, 2002" to "December 31, 2003"
and (b) changing the reference to "February 28, 2003" to "February 28,
2004".
3.15 Section 2.7 of the Loan Agreement (as amended) is hereby amended by
changing the reference to "December 31, 2002" to "December 31,2003".
3.16 Section 6.8 of the Loan Agreement (as amended) is hereby amended by
changing the reference to the "2001 fiscal year" to the "2002 fiscal
year".
3.17 It is recognized that the stockholders of Ascent must approve the
amendments contained in Sections 3.5 through 3.16 of this Agreement
(the "Option Extension Provisions") in order for such provisions to be
effective. The parties therefore agree that the Option Extension
Provisions shall have no force and effect unless and until approved by
the holders of a majority of the Depositary Shares (the "Favorable
Shareholder Vote") and that, at all times prior to a Favorable
Shareholder Vote, the Depositary Agreement shall continue to be in full
force and effect in the form existing without considering the Option
Extension Provisions. A Favorable Shareholder Vote shall be deemed to
have taken place (and the Option Extension Provisions shall thereupon
be effective as amendments to the Depositary Agreement) upon the
delivery to the Lender and the Depositary of an opinion of the
Company's counsel to the effect that a Favorable Shareholder Vote has
taken place and that each of the Agreements referred to in Section 1.3
of this Agreement (as amended hereby) are valid, binding and
enforceable against the Company. The failure to obtain a Favorable
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<PAGE> 8
Shareholder Vote shall not effect any of the amendments or terms of
this Agreement other than the Option Extension Provisions.
THE MINIMUM PURCHASE PRICE
3.18 Subclause (i) of Clause (A) of the definition of "Option Exercise
Price" in Article I of the Depositary Agreement (as amended by
the Supplemental Agreement) is amended and restated in its
entirety as follows:
"$140,000,000 plus an amount equal to all funds actually
advanced to the Company under the Fourth Amendment to the
Securities Purchase Agreement and which have not been repaid
as of the date of delivery of the Option Exercise
Deliverables."
CONDITIONS FOR UNRESTRICTED LOANS
3.19 The Lender agrees that the existence of a Plan or Update
approved by the Screening Committee (as those terms are defined
in the Supplemental Agreement) is not a condition precedent to
the Lender's obligation to fund an Unrestricted Loan, and that
Article III, Section (c) of the Supplemental Agreement is hereby
amended and restated as follows:
"The Lender shall be reasonably satisfied that the
proceeds of any Project Loans or Screened Loans will be
used for the purposes approved by the Screening
Committee pursuant to Section 4.3 of this Agreement."
3.20 Section 4.1 of the Supplemental Agreement is hereby amended by
deleting the entire third sentence of such Section which begins
as follows:
"Notwithstanding Section 6.6 of the Loan Agreement,
the Company shall use the proceeds of Unrestricted
Loans only for the purposes specified in the
Plan..."
GENERAL
3.21 The definition of the term "Option Expiration Date" in the
Depositary Agreement (as amended by the Supplemental Agreement) is
amended by adding the following text to the end of such
definition:
"or Article II of the Second Supplemental Agreement dated
October 13, 1999 between the same parties".
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<PAGE> 9
3.22 Subclause III of Clause Y of the provision in the definition
of the term "Option Exercise Price" in the Depositary
Agreement (as amended by the Supplemental Agreement) is
amended and restated in its entirety as follows:
"(III) the 7.5% Convertible Subordinated Notes due
July 1, 2004, in each case outstanding as of the
Option Closing Date, or issued or issuable upon
exercise of the warrants issued pursuant to the
Series G Agreement, as amended by the fourth
amendment hereto, dated as of October 1, 1999 (to the
extent any shares continue to be held as of the
Option Closing Date by one of the purchasers set
forth on Schedule 1 to the Series G Agreement as so
amended or an Affiliate of any such purchaser), the
Original Option Exercise Price, and"
3.23 Section 7.1(i) of the Loan Agreement is hereby amended and
restated as follows:
(i) Indebtedness incurred pursuant to the Third and
Fourth Amendments to the May 1998 Securities Purchase
Agreement."
3.24 The Loan Agreement is hereby amended to amend and restate
clause (i) of the definition of "Impairment Event" in its
entirety as follows:
"(i) the existence of a Negative Equity Position, provided,
however, that notwithstanding the requirements of GAAP,
(A) any amounts outstanding under the 8% Subordinated
Notes, (B) any amounts outstanding under any debt
securities issued upon conversion or exchange of the
Series G Preferred and (C) any amounts outstanding under
the Company's 7.5% Convertible Subordinated Notes due
July 1, 2004 (including, without limitation, any Notes
issued under the Fourth Amendment to the Securities
Purchase Agreement) shall be considered to be equity for
purposes of this clause only;".
9
<PAGE> 10
3.25 The Lender consents to the Company entering into the Fourth
Amendment to the Securities Purchase Agreement and consummating the transactions
contemplated thereby including, without limitation, for the purpose of Sections
7.7 and 7.12 of the Loan Agreement, as amended.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first set forth above.
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-USPD
ALPHARMA INC.
By: /s/ Jeffrey E. Smith
---------------------------
Name: Jeffrey E. Smith
Title: Vice President Finance
and CFO
10
<PAGE> 11
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles Rossi
---------------------------
Name: Charles Rossi
Title: Vice President
11
<PAGE> 1
Exhibit 10.2
EXECUTION COPY
AMENDED AND RESTATED SUBORDINATION AGREEMENT
This AMENDED AND RESTATED SUBORDINATION AGREEMENT (this
"Agreement") is dated as of October 15, 1999 and made among ASCENT PEDIATRICS,
INC., a Delaware corporation (the "Company"), the original lenders named on the
signature pages hereto (the "Original Lenders"), and ALPHARMA USPD, INC., a
Maryland corporation ("Alpharma").
WHEREAS, the Original Lenders have entered into a Series G
Securities Purchase Agreement dated as of May 13, 1998, with the Company,
pursuant to which they purchased 7,000 shares of Series G Preferred Stock of the
Company (the "Series G Preferred") and $9,000,000 principal amount of 8%
Subordinated Notes of the Company (the "Subordinated Notes");
WHEREAS, the Original Lenders have exchanged all outstanding
shares of the Series G Preferred for 8% Convertible Subordinated Notes (the "8%
Convertible Notes");
WHEREAS, the Series G Securities Purchase Agreement has been
further amended by the third and fourth amendments thereto, which provided for
the issuance from time to time of 7.5% Convertible Subordinated Notes of the
Company (the "7.5% Convertible Notes" and, together with the 8% Convertible
Notes and the Subordinated Notes, the "Furman Notes");
WHEREAS, Alpharma has entered into a Loan Agreement (the "Loan
Agreement") with the Company, as amended to date, pursuant to which Alpharma
will make a First Loan and Unrestricted Loans to the Company in the maximum
principal amount of up to $12,000,000 (the "Alpharma Note") and Project Loans
and Screened Project Loans to the Company in the maximum principal amount of
$28,000,000 (the "Secured Loans"); and
WHEREAS, the extension of credit by Alpharma to the Company
will benefit the Original Lenders, and in extending such credit, Alpharma has
relied on the subordination of the Original Lenders as hereinafter set forth;
WHEREAS, the parties hereto have entered into a Subordination
Agreement dated February 16, 1999 (the "Subordination Agreement");
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby mutually acknowledged, the parties hereby amend and restate the
Subordination Agreement in its entirety as follows:
1. Definitions. Capitalized terms used but not defined herein
shall have the meanings set forth in the Loan Agreement. The following
definitions shall for all purposes apply to the respective terms used in this
Agreement.
<PAGE> 2
"Officers' Certificate" means the certificate signed by two
Officers or by an Officer and an Assistant Treasurer or an Assistant Secretary
of the Company.
"Senior Indebtedness" means the principal, premium, if any,
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-filing interest is allowed in such proceeding), fees,
charges, expenses, reimbursement and indemnification obligations, and all other
amounts payable under or in respect of Secured Loans and Borrowed Money
Indebtedness in an aggregate principal amount not greater than $50,000,000
(which in the case of clause (C) (i) prior to or on the Option Expiration Date,
must consist solely of Screened Project Indebtedness and (ii) thereafter, may
include up to $10,000,000 of Borrowed Money Indebtedness that is not Screened
Project Indebtedness), which in the case of clause (C) is designated by the
Company as Senior Indebtedness.
2. Subordination.
2.1 Agreement to Subordinate. The Company, Alpharma and the
Original Lenders agree, that (a) the Indebtedness evidenced by the Alpharma Note
and the 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) such portion of the Furman Notes equal in principal amount to the amount of
any Negative Equity Position existing as the result of or at the time of a
payment will be subordinate in right of payment to the Alpharma Note, all as
provided in this Section 2. To the extent not subordinate in right of payment
pursuant to clause (b) of the immediately preceding sentence, the 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:
(1) holders of Senior Indebtedness shall be
entitled to receive payment in full in cash
of the principal of and interest (including
interest accruing after the commencement of
any such proceeding) to the date of payment
on the Senior Indebtedness before holders of
the Alpharma Note or the Furman Notes shall
be entitled to receive any payment of
principal of or interest on the Alpharma
Note and the Furman Notes, respectively;
(2) holders of the Alpharma Note and the Furman
Notes shall be entitled to receive payment
in full in cash (or to share ratably in any
payment if payment is full is not possible)
of the principal and interest (including
interest accruing after the commencement of
any such proceeding) to the date of payment;
provided, however, that if the Company has a
Negative Equity Position as a result of or
at the time of the payment contemplated
hereby, holders of the Alpharma Note shall
be entitled to receive payment in cash of
principal and interest (including interest
accruing after the commencement of any such
2
<PAGE> 3
proceeding) to the date of payment on the
Alpharma Note in an amount equal to the
amount of such Negative Equity Position,
before holders of the Furman Notes shall be
entitled to receive any payment of principal
of or interest on the Furman Notes; and
(3) until the Senior Indebtedness is paid in
full in cash, any distribution to which
Alpharma or the Original Lenders would be
entitled but for this Section shall be made
to holders of Senior Indebtedness as their
interests may appear.
(4) until the portion of the Alpharma Note equal
in principal amount to the amount of any
Negative Equity Position existing as the
result of or at the time of a payment is
paid in full in cash, any distribution to
which holders of the Furman Notes would be
entitled but for this Section shall be made
to holders of the Alpharma Note as their
interests may appear.
2.3 Company Not to Make Payments with Respect to Securities in
Certain Circumstances.
(1) Under any circumstances,
(1) No payment of principal of, or premium, if
any, or interest may be made by the Company,
directly or indirectly, on the Alpharma Note
or Furman Notes at any time if a default in
payment or interest on Senior Indebtedness
exists, and (A) such default is subject to
judicial proceedings or (B) notice of such
default has been received by the Company
from a holder of Senior Indebtedness, unless
and until such default shall have been cured
or waived or shall have ceased to exist.
During the continuance of any event of
default with respect to any Senior
Indebtedness, as such event of default is
defined under any such Senior Indebtedness
or in any agreement pursuant to which any
Senior Indebtedness has been issued (other
than default in payment of the principal of,
or premium, if any, or interest on any
Senior Indebtedness), permitting the holders
of such Senior Indebtedness to accelerate
the maturity thereof, no payment may be made
by the Company, directly or indirectly, with
respect to principal of, or premium, if any,
or interest on the Alpharma Note or 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.
3
<PAGE> 4
(2) In the event that, notwithstanding the
foregoing, any payment by the Company of any
kind or character, whether in cash, property
or securities, prohibited by the foregoing,
shall be received by holders of the Alpharma
Note or the Furman Notes before all Senior
Indebtedness is paid in full, in cash, or
provision is made for such payment to the
satisfaction of the holders thereof, and if
such fact shall then have been or thereafter
be made known to such holders, then and in
such event such payment shall be paid over
or delivered to the holders of Senior
Indebtedness or their representative or
representatives, or to the trustee or
trustees under any indenture pursuant to
which any instruments evidencing any Senior
Indebtedness may have been issued, as their
respective interests may appear, for
application to the payment of all Senior
Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent
payment to or for the holders of such Senior
Indebtedness, and, until so delivered, the
same shall be held in trust by holders of
the Alpharma Note or the Furman Note as the
property of the holders of Senior
Indebtedness.
(3) The holders of Senior Indebtedness may, at
any time and from time to time, without the
consent of or notice to holders of the
Alpharma Note or the Furman Notes, without
incurring responsibility to holders of the
Alpharma Note or the Furman Notes and
without impairing or releasing the
obligations of holders of the Alpharma Note
or the Furman Notes hereunder to the holders
of Senior Indebtedness: (A) change the
manner, place or terms of payment or change
or extend the time of payment of, or renew
or alter, Senior Indebtedness, or otherwise
amend in any manner Senior Indebtedness or
any instrument evidencing the same or any
agreement under which Senior Indebtedness is
outstanding; (B) sell, exchange, release or
otherwise deal with any Property pledged,
mortgaged or otherwise securing Senior
Indebtedness; (C) release any Person liable
in any manner for the collection of Senior
Indebtedness; and/or (D) exercise or refrain
from exercising any rights against the
Company and any other Person.
(2) In the event there is a Negative Equity Position at the
time of or as a result of any payment
(1) No payment of principal of, or premium, if
any, or interest may be made by the Company,
directly or indirectly, on such portion of
the Furman Notes equal in principal amount
to the amount of such Negative Equity
Position at any time if a default in payment
or interest on the Alpharma Note exists, and
(A) such default is subject to judicial
proceedings or (B) notice of such default
has been received by the Company from a
holder of the Alpharma Note, unless and
until such default shall have been cured or
waived or shall have ceased to exist. During
the continuance of any event of default with
respect to the Alpharma Note, as such event
of default is defined under the Alpharma
4
<PAGE> 5
Note or in the Loan Agreement as amended
from time to time (other than default in
payment of the principal of, or premium, if
any, or interest on the Alpharma Note),
permitting the holders of the Alpharma Note
to accelerate the maturity thereof, no
payment may be made by the Company, directly
or indirectly, with respect to principal of,
or premium, if any, or interest on such
portion of the Furman Notes equal in
principal amount to the amount of such
Negative Equity Position for 183 days
following written notice to the Company,
from any holder or holders of the Alpharma
Note or their representative or
representatives, that such an event of
default has occurred and is continuing.
However, if the maturity of the Alpharma
Note is accelerated, no payment may be made
on such portion of the Furman Notes equal in
principal amount to the amount of such
Negative Equity Position until the Alpharma
Note has been paid to the extent it has
matured or such acceleration has been cured
or waived.
(2) In the event that, notwithstanding the
foregoing, any payment by the Company of any
kind or character, whether in cash, property
or securities, prohibited by the foregoing,
shall be received by holders of the Furman
Notes before such portion of the Alpharma
Note equal in principal amount to the amount
of such Negative Equity Position is paid in
full, in cash, or provision is made for such
payment to the satisfaction of the holders
thereof, and if such fact shall then have
been or thereafter be made known to such
holders, then and in such event such payment
shall be paid over or delivered to the
holders of the Alpharma Note or their
representative or representatives, as their
respective interests may appear, for
application to the payment of any portion of
the Alpharma Note remaining unpaid to the
extent necessary to pay such portion of the
Alpharma Note equal in principal amount to
the amount of such Negative Equity Position
in full, after giving effect to any
concurrent payment to or for the holders of
the Alpharma Note, and, until so delivered,
the same shall be held in trust by holders
of the Furman Notes as the property of the
holders of the Alpharma Note.
(3) The holders of the Alpharma Note may, at any
time and from time to time, without the
consent of or notice to holders of the
Furman Notes, without incurring
responsibility to holders of the Furman
Notes and without impairing or releasing the
obligations of holders of the Furman Notes
hereunder to the holders of the Alpharma
Note: (A) change the manner, place or terms
of payment or change or extend the time of
payment of, or renew or alter, the Alpharma
Note, or otherwise amend in any manner the
Alpharma Note or any instrument evidencing
the same or any agreement under which the
Alpharma Note is outstanding; (B) sell,
exchange, release or otherwise deal with any
Property pledged, mortgaged or otherwise
securing the Alpharma Note; (C) release any
Person liable in any manner for the
collection of the Alpharma
5
<PAGE> 6
Note; and/or (D) exercise or refrain from
exercising any rights against the Company
and any other Person.
Nothing contained in this Section 2 will limit the right of holders of
the Alpharma Note or the Furman Notes to take any action to accelerate
the maturity of Senior Indebtedness, 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 (a)
holders of the Alpharma Note or the Furman Notes, as applicable, in writing of
any facts known to the Company that would cause a payment of principal of or
interest on the Alpharma Note or the 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 or the subordination of the Furman
Notes to the Alpharma Note as provided in this Section.
2.6 Subrogation. (1) After all Senior Indebtedness is paid in
full in cash and until the Alpharma Note and the Furman Notes are paid in full
in cash, holders of the Alpharma Note and the Furman Notes shall be subrogated
to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to holders of the Alpharma Note and the Furman Notes have been applied
to the payment of Senior Indebtedness. A distribution made under this Section to
holders of Senior Indebtedness which otherwise would have been made to holders
of the Alpharma Note and the Furman Notes is not, as between the Company and
holders of the Alpharma Note and the Furman Notes, a payment by the Company on
Senior Indebtedness.
(2) In the event of a Negative Equity Position, after such
portion of the Alpharma Note equal in principal amount to the amount of such
Negative Equity Position is paid in full in cash and until the Furman Notes are
paid in full in cash, holders of the Furman Notes shall be subrogated to the
rights of holders of the Alpharma Note to receive distributions applicable to
the Alpharma Note to the extent that distributions otherwise payable to holders
of the Furman Notes have been applied to the payment of the Alpharma Note. A
distribution made under this Section to holders of the Alpharma Note which
otherwise would have been made to holders of the Furman Notes is not, as between
the Company and such holders, a payment by the Company on the Alpharma Note.
2.7 Relative Rights. This Section 2 defines the relative
rights of Alpharma, the Original Lenders and holders of Senior Indebtedness.
Nothing in this Agreement shall:
(1) affect the relative rights of Alpharma, the
Original Lenders and creditors of the
Company other than holders of Senior
Indebtedness; or
6
<PAGE> 7
(2) prevent Alpharma or the Original Lenders
from exercising their available remedies
upon a Default or Event of Default, subject
to the rights of holders of Senior
Indebtedness and, where applicable, holders
of the Alpharma Note to receive
distributions otherwise payable to holders
of the Alpharma Note or the Furman Notes.
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. No right of any holder of the Alpharma Note to enforce the
subordination of the indebtedness evidenced by 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 Project Loans, Screened
Project Loans, 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 and holders of the Alpharma
Note, in respect of cash, property or securities of the Company received upon
the exercise of any such remedy. Upon any distribution of assets of the Company
referred to in this Section 2, Alpharma and the Original Lenders are entitled to
rely upon any order or decree by any court of competent jurisdiction in which
such dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the liquidating trustee or agent or other Person
making any distribution to Alpharma and the Original Lenders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section 2. Nothing
contained in this Section 2 or
7
<PAGE> 8
elsewhere in this Agreement, Project Loans, Screened Project Loans, 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 any of the provisions of this Section 2 shall not
be construed as preventing the occurrence of an Event of Default or an event of
default under the Alpharma Note or the 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 AN AMENDED AND
RESTATED SUBORDINATION AGREEMENT DATED AS OF OCTOBER 15, 1999,
AMONG ASCENT PEDIATRICS, INC., ALPHARMA USPD, INC. AND THE
ORIGINAL LENDERS NAMED THEREIN, WHICH AGREEMENT IS
INCORPORATED HEREIN BY REFERENCE. NOTWITHSTANDING ANY
STATEMENT TO THE CONTRARY CONTAINED IN THIS INSTRUMENT, NO
PAYMENT OF ANY NATURE ON ACCOUNT OF THE OBLIGATIONS HEREUNDER,
WHETHER PRINCIPAL OR INTEREST, SHALL BE MADE, PAID, RECEIVED
OR ACCEPTED EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS OF
SUCH AGREEMENT.
6. Enforcement. The holders of the Alpharma Note and the
Furman Notes hereby acknowledge that the provisions of this Agreement are
intended to be enforceable at all times,
8
<PAGE> 9
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.
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.
* * * * *
9
<PAGE> 10
IN WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
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-USPD
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
10
<PAGE> 11
FLYNN PARTNERS
By: /s/ James E. Flynn
-------------------------------------
Name: James E. Flynn, General Partner
Flynn Partners
11
<PAGE> 1
Exhibit 10.3
- --------------------------------------------------------------------------------
FOURTH AMENDMENT
DATED OCTOBER 15, 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
FOURTH AMENDMENT dated as of the 15th day of October 1999 (the
"Fourth 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" and together with Investors and Employee, the
"Furman Selz Entities"), BancBoston Ventures Inc. ("BancBoston") and Flynn
Partners ("Flynn"), (each of Investors, Employee, Parallel, BancBoston and Flynn
are herein referred to individually as a "Purchaser", and collectively, as 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, February 16, 1999 and July 1, 1999 (the "Series G Purchase Agreement");
WHEREAS, pursuant to the Third Amendment dated as of July 1,
1999 (the "Third Amendment") to the Series G Purchase Agreement, the Furman Selz
Entities advanced $2,000,000 to the Company and agreed to advance an additional
$2,000,000 to the Company pursuant to the terms set forth therein;
WHEREAS, the Furman Selz Entities wish to purchase from the
Company, and the Company wishes to issue and sell to the Furman Selz Entities,
(i) up to $10,000,000 aggregate principal amount of 7.5% Convertible
Subordinated Notes of the Company substantially in the form attached hereto as
Exhibit A (the "Fourth Amendment Convertible Notes"), and (ii) warrants
substantially in the form attached hereto as Exhibit B (the "Fourth Amendment
Warrants") to purchase up to an aggregate of 5,000,000 depositary shares of the
Company ("Depositary Shares"), each Depositary Share representing one share of
Common Stock of the Company subject to a call option and represented by a
depositary receipt;
WHEREAS, the Furman Selz Entities and the Company desire to
provide for such purchase and sale and to establish various rights and
obligations in connection therewith; and
WHEREAS, in connection with such purchase and sale, the
Purchasers and the Company desire to amend certain provisions of the Series G
Purchase Agreement.
NOW THEREFORE, in consideration of these premises, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE> 3
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) 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.
(c) The sections and the headings in the sections in this Fourth
Amendment are for convenience only. Said sections and headings shall not be
deemed to be part of this Fourth Amendment and in no way define, limit, extend
or describe the scope or intent of its provisions.
ARTICLE II
SALE AND PURCHASE OF FOURTH AMENDMENT
CONVERTIBLE NOTES AND FOURTH AMENDMENT WARRANTS
Section 2.1 Advances.
(a) Amount and Term.
(i) Subject to the terms and conditions hereinafter set forth,
each Furman Selz Entity severally agrees to make loans hereunder (each, a
"Fourth Amendment Advance" and collectively the "Fourth Amendment Advances") in
an aggregate amount not to exceed such Furman Selz Entity's Commitment
Percentage (as defined in clause (ii) below) of $10,000,000 to the Company from
time to time on any Business Day (as defined in clause (iv) below) occurring on
and after the date hereof to and including June 30, 2001 (the "Termination
Date").
(ii) "Commitment Percentage" shall mean, as to each Furman
Selz Entity, the amount shown as such Furman Selz Entity's Commitment Percentage
on Schedule 1 hereto.
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(iii) As used herein, the term "Business Day" shall mean any
day other than a Saturday, Sunday or other day on which banks in the State of
New York or the Commonwealth of Massachusetts are authorized by law to remain
closed.
(b) Fourth Amendment Convertible Notes. On the date hereof, the Company
shall issue to each Furman Selz Entity a Fourth Amendment Convertible Note in an
original principal amount equal to the Furman Selz Entity's Commitment
Percentage of $10,000,000. There shall be attached to each Fourth Amendment
Convertible Note, and maintained by the Company, a register in which the Company
shall, from time to time, record (i) the date and amount of each Fourth
Amendment Advance under the Fourth Amendment Convertible Note, and (ii) the date
and amount of any principal and interest payments made by the Company under the
Fourth Amendment Convertible Note. The entries made in the register by the
Company shall be conclusive and binding for all purposes, absent manifest error.
(c) Making the Fourth Amendment Advances.
(i) Any Fourth Amendment Advance, including without limitation
the initial Fourth Amendment Advance, shall be made on at least twelve (12)
Business Days' notice (each, a "Notice") from the Company to each Furman Selz
Entity specifying the date (which date shall be a Business Day) and the amount
of such Fourth Amendment Advance. Upon fulfillment of the applicable conditions
set forth in Section 2.2 hereof, each Furman Selz Entity shall pay the portion
of such Fourth Amendment Advance equal to such Furman Selz Entity's Commitment
Percentage of the aggregate amount specified in the Notice in United States
dollars by wire transfer of same day funds to the account of the Company at such
banking institution as may be designated by the Company.
(ii) Each Notice shall contain a certificate from the Chief
Executive Officer of the Company that the conditions set forth in Section 2.2(c)
below have been met.
(iii) Fourth Amendment Advances shall be made, upon
fulfillment of the applicable conditions, in installments of no less than
$250,000.
Section 2.2 Conditions of Lending.
(a) Obligation to Lend. Subject to the conditions set forth herein,
each Furman Selz Entity hereby agrees to the making of Fourth Amendment Advances
up to and until the Termination Date upon receipt of Notices from the Company.
All obligations of the Furman Selz Entities hereunder shall be several, and not
joint and several.
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(b) Conditions to the Initial Fourth Amendment Advance. The agreement
of each Furman Selz Entity to make the initial Fourth Amendment Advance is
subject to the condition that each Furman Selz Entity shall have received the
following, each dated as of the date hereof:
(i) The applicable Initial Fourth Amendment Warrant (as
defined in Section 2.3) executed by the Company;
(ii) The applicable Fourth Amendment Convertible Note executed
by the Company.
(iii) Certified copies of the resolutions of the Board of
Directors of the Company approving this Fourth Amendment, the Fourth Amendment
Convertible Notes and the Fourth Amendment Warrants and all documents evidencing
other necessary corporate action, governmental approvals and consents of other
persons, if any, with respect to this Fourth Amendment, each Fourth Amendment
Convertible Note and each Fourth Amendment Warrant.
(iv) All legal matters incident to the consummation of the
transactions contemplated hereby shall be satisfactory to counsel for the Furman
Selz Entity, and the Furman Selz Entities shall have received from Hale and Dorr
LLP, counsel for the Company, such firm's opinion addressed to the Furman Selz
Entities and dated the date hereof in the form attached hereto as Exhibit C.
(v) The Company shall have obtained the consent of Alpharma
USPD Inc. ("Alpharma") to the transactions contemplated by this Fourth
Amendment, and the Subordination Agreement (as defined below) shall have been
amended to reflect the issuance of the Fourth Amendment Convertible Notes.
(c) Conditions to Fourth Amendment Advances. The agreement of each
Furman Selz Entity to make any Fourth Amendment Advance shall be subject to the
fulfillment to their reasonable satisfaction, or the waiver by the Furman Selz
Entities, on or prior to the date of such Fourth Amendment Advance of each of
the following conditions:
(i) No event has occurred and is continuing which constitutes
a Default or an Event of Default;
(ii) No event has occurred and is continuing which constitutes
an Impairment Event (as defined by clause (ii) of the definition of "Impairment
Event" in the Loan Agreement dated as of February 16, 1999 between the Company
and Alpharma, as amended (the "Loan Agreement")); provided that this condition
shall be
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deemed to be fulfilled if Alpharma agrees in writing that the occurrence of such
an Impairment Event will not be a condition to its obligation to make the next
Loan requested of it by the Company under the Loan Agreement.
Section 2.3. Warrants.
(a) Initial Fourth Amendment Warrants. Upon execution of this Fourth
Amendment, the Company will issue to each Furman Selz Entity a Fourth Amendment
Warrant (each, an "Initial Fourth Amendment Warrant") to acquire a number of
Depositary Shares equal to the product of such Furman Selz Entity's Commitment
Percentage and 1,000,000, at an exercise price of $3.00 per share; provided that
in the event that the Company is required hereunder to issue to a Furman Selz
Entity a Fourth Amendment Warrant to purchase fractional Depositary Shares, the
number of shares issuable upon exercise of such Fourth Amendment Warrant shall
be rounded down to the nearest whole number.
(b) Subsequent Fourth Amendment Warrants. Upon receipt of any Advance
hereunder from a Furman Selz Entity, the Company will issue to such Furman Selz
Entity a Fourth Amendment Warrant (each, a "Subsequent Fourth Amendment
Warrant") to acquire:
(i) in the case of Advances hereunder which, together with all
previous Advances hereunder total $4,000,000 or less, 1 Depositary
Share of the Company (subject to appropriate adjustment for stock
splits, stock dividends, reclassifications or any similar
recapitalization affecting the Depositary Shares) for each $4.00 in
principal amount of Advances made by such Furman Selz Entity;
(ii) in the case of Advances hereunder which, together with
all previous Advances hereunder total from $4,000,001 to $7,000,000, 1
Depositary Share of the Company (subject to appropriate adjustment for
stock splits, stock dividends, reclassifications or any similar
recapitalization affecting the Depositary Shares) for each $3.00 in
principal amount of Advances made by such Furman Selz Entity;
(iii) in the case of Advances hereunder which, together with
all previous Advances hereunder total from $7,000,001 to $9,000,000, 1
Depositary Share of the Company (subject to appropriate adjustment for
stock splits, stock dividends, reclassifications or any similar
recapitalization affecting the Depositary Shares) for each $2.00 in
principal amount of Advances made by such Furman Selz Entity; and
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(iv) in the case of Advances hereunder which, together with
all previous Advances hereunder total from $9,000,001 to $10,000,000, 1
Depositary Share of the Company (subject to appropriate adjustment for
stock splits, stock dividends, reclassifications or any similar
recapitalization affecting the Depositary Shares) for each $1.00 in
principal amount of Advances made by such Furman Selz Entity.
Each Subsequent Fourth Amendment Warrant shall have an exercise price of $3.00
per share (subject to appropriate adjustment for stock splits, stock dividends,
reclassifications or any similar recapitalization affecting the Depositary
Shares); provided that (i) in the event that the Company is required hereunder
to issue to a Furman Selz Entity a Subsequent Fourth Amendment Warrant to
purchase fractional Depositary Shares, the number of shares issuable upon
exercise of such Subsequent Fourth Amendment Warrant shall be rounded down to
the nearest whole number and (ii) in the event that subsequent to the date
hereof the exercise price of the Initial Fourth Amendment Warrants issued on the
date hereof is adjusted pursuant to Article III of such Initial Fourth Amendment
Warrants, the initial exercise price of the Subsequent Fourth Amendment Warrants
issued after the date hereof in connection with any subsequent Advance shall
equal the adjusted exercise price of the Initial Fourth Amendment Warrants
issued on the date hereof; and provided further that such Furman Selz Entity
reaffirms the representations and warranties contained in Article IV.
Section 2.4 Purchase Price Allocation. The Company and the Furman Selz
Entities agree to use their best efforts to reach agreement with respect to the
allocation of the purchase price for the Initial Fourth Amendment Warrants to be
issued on the date hereof. The Company and the Furman Selz Entities further
agree to use their best efforts to reach agreement with respect to the
allocation of the purchase price for the Fourth Amendment Convertible Notes and
Subsequent Fourth Amendment Warrants issued upon each Fourth Amendment Advance
made hereunder.
Section 2.5. Third Amendment Advances.
(a) The Furman Selz Entities each hereby confirm that, notwithstanding
this Fourth Amendment, each Furman Selz Entity is and shall remain obligated to
make advances under the Third Amendment (each, a "Third Amendment Advance") in
accordance with the terms of the Third Amendment, as amended by this Section
2.5.
(b) Clause (c)(ii)(b) of Section 2.2 of the Third Amendment is hereby
deleted in its entirety and replaced with the following:
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"(b) notwithstanding the foregoing, the condition set forth in
this clause (ii) shall not be deemed to be fulfilled if
following such Advance and any advance under the Fourth
Amendment dated as of October 15, 1999 to the Series G
Purchase Agreement made as of the date of such Advance
hereunder, the Company would continue to be in a Negative
Equity Position unless Alpharma agrees in writing that the
occurrence of a Negative Equity Impairment Event will not be a
condition to its obligation to make the next Loan (as defined
in the Loan Agreement) requested of it by the Company under
the Loan Agreement; and"
SECTION 2.6 Security. As security for the full and timely payment of
all Fourth Amendment Advances and the performance of the obligations contained
herein in connection with the Fourth Amendment Advances, the Company covenants
that it will, on or before the date of each Fourth Amendment Advance hereunder,
do or cause to be done, all things necessary in the reasonable opinion of the
Furman Selz Entities and their counsel, to grant the Furman Selz Entities a duly
perfected security interest in all of the Collateral (as defined in the Loan
Agreement) acquired by the Company with the proceeds of Secured Loans, such
security interest to be junior to any security interest in the Collateral
granted by the Company to Alpharma pursuant to the Second Supplemental Agreement
(as defined below). At the request of the Furman Selz Entities, the Company will
cause its duly authorized officers to execute on its behalf, any certificate,
instrument, statement or document, or to take such other action which the Furman
Selz Entities' counsel reasonably deems necessary, from time to time, to create,
continue or preserve the Furman Selz Entities' security interest in and to the
Collateral (and the perfection and priority thereof) as contemplated hereby,
specifically including the execution of such security agreement and the filing
of such financing statements in the form reasonably requested by counsel to the
Furman Selz Entities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Furman Selz Entities as
follows:
SECTION 3.1 Organization and Existence, etc. The Company (a) is duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite power and authority to carry on its business
as now conducted and as proposed to be conducted, and (b) is duly qualified to
do business as a foreign corporation and is in good standing (or the equivalent
thereof under applicable law) in each jurisdiction in which the conduct of its
business requires such qualification by reason of the ownership or leasing of
property or otherwise (except for those jurisdictions in which the failure so to
qualify does not have a Material Adverse Effect).
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"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 3.2 Capitalization of the Company.
(a) As of the date hereof, (i) the Company's authorized capital stock
consists of: (1) 60,000,000 shares of Common Stock, of which 9,643,833 shares
are validly issued and outstanding, fully paid and non-assessable, each of which
shares is subject to a call option held by Alpharma, represented by a Depositary
Share and held of record by State Street Bank and Trust Company, as Depositary,
and (2) 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 were exchanged for 8%
convertible subordinated notes of the Company on July 23, 1999; and (ii) the
Company has outstanding the securities set forth on Schedule 3.2 attached hereto
which are convertible into or exercisable or exchangeable for Common Stock (the
"Derivative Securities").
(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 3.2 attached hereto, there are no outstanding agreements or
commitments requiring the Company to issue capital stock or Derivative
Securities as of the date hereof.
SECTION 3.3 Authorization; Binding Obligations.
(a) The Company has full power and authority to execute and deliver
this Fourth Amendment, the Fourth Amendment Convertible Notes, the Fourth
Amendment Warrants and such other documents furnished or to be furnished by the
Company hereunder. This Fourth Amendment has been duly authorized, executed and
delivered by the Company and 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. The issuance, offering and sale of the Fourth Amendment
Convertible Notes and the Fourth Amendment Warrants pursuant to this Fourth
Amendment and the compliance by the Company with the provisions of this Fourth
Amendment, the Fourth Amendment Convertible Notes and the Fourth Amendment
Warrants, 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
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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) subject to Alpharma's consent to this Fourth Amendment and the
transactions contemplated hereby, any contract or other agreement to which the
Company is a party or by which the Company or any of its 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) The Fourth Amendment Convertible Notes have been duly authorized
for issuance and the Depositary Shares issuable upon conversion of the Fourth
Amendment Convertible Notes have been duly authorized and reserved for issuance,
and (i) the Fourth Amendment Convertible Notes have been duly executed and
delivered by the Company and constitute valid and legally binding obligations of
the Company enforceable against the Company in accordance with their 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 Fourth
Amendment Convertible Notes will be convertible into Depositary Shares in
accordance with the provisions of this Fourth Amendment and the Fourth Amendment
Convertible Notes, and (iii) the Depositary Shares initially issuable upon such
conversion, when issued and delivered in accordance with the provisions of this
Fourth Amendment and the Fourth Amendment Convertible Notes, will be validly
issued, fully paid and nonassessable.
(c) The Fourth Amendment Warrants have been duly authorized for
issuance and the Depositary Shares issuable upon exercise of the Fourth
Amendment Warrants have been duly authorized and reserved for issuance and (i)
the Initial Fourth Amendment Warrants being delivered on the date hereof have
been, and the Subsequent Fourth Amendment Warrants being delivered after the
date hereof in connection with any subsequent Advance, when delivered, will have
been, duly executed and delivered by the Company in accordance with this Fourth
Amendment and constitute and will constitute valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their 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 Fourth Amendment Warrants will be exercisable for
Depositary Shares in accordance with their terms, and (iii) the Depositary
Shares issuable upon exercise of the Fourth Amendment Warrants, when issued and
delivered in accordance with the provisions of the Fourth Amendment Warrants,
will be validly issued, fully paid and nonassessable.
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SECTION 3.4 Compliance with Instruments, etc. Except as set forth on
Schedule 3.4 hereto, the Company is not in breach or violation of, or in default
under, any term or provision of (i) its Certificate of Incorporation and Bylaws,
(ii) subject to Alpharma's approval of this Fourth Amendment and the
transactions contemplated hereby and the execution on the date hereof of the
Second Supplemental Agreement (the "Second Supplemental Agreement") by and among
the Company, Alpharma., Alpharma Inc., State Street Bank and Trust Company and
the Purchasers, 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.
SECTION 3.5 Litigation. Except as set forth on Schedule 3.5 hereto,
there are no actions, suits, proceedings or investigations pending, or, to the
knowledge of the Company, threatened, against the Company before or by any
court, regulatory body or administrative agency or any other governmental agency
or body, domestic or foreign, which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, or any actions, suits,
proceedings or investigations pending, or, to the knowledge of the Company,
threatened, which challenge the validity of any action taken or to be taken
pursuant to or in connection with this Fourth Amendment or the issuance of the
Fourth Amendment Convertible Notes or the Fourth Amendment Warrants and the
Depositary Shares issuable upon the conversion or exercise thereof 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 3.6 Offering. Subject to the Furman Selz Entities'
representations and warranties in Article IV of this Fourth Amendment, the
offer, sale and issuance of the Fourth Amendment Convertible Notes and the
Fourth Amendment Warrants as contemplated by this Fourth 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 3.7 Permits; Governmental and Other Approvals. Subject to the
consent of Alpharma to this Fourth Amendment and the transactions contemplated
hereby, no
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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 Fourth
Amendment or the consummation of the transactions contemplated hereby except for
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").
SECTION 3.8 Subsidiaries. The Company has no subsidiaries and owns no
securities of other corporations or entities other than short-term money market
investments.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE FURMAN SELZ ENTITIES
Each Furman Selz Entity, 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
Fourth Amendment Convertible Notes and the Fourth Amendment Warrants and the
Depositary Shares issuable upon the conversion or exercise thereof 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 or this Fourth Amendment, such Furman Selz Entity 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 Furman Selz Entity or of any arbitrator, court, regulatory
body, administrative agency or any other governmental agency or body, domestic
or foreign, having jurisdiction over such Furman Selz Entity or any of its
activities or properties, (vi) any Furman Selz Entity 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 Fourth Amendment
Convertible Notes and the Fourth Amendment Warrants and the Depositary Shares
issuable upon the conversion or exercise thereof have not been registered under
the Securities Act and it will not offer, sell, transfer, pledge, hypothecate or
otherwise dispose of any of the Fourth Amendment Convertible Notes or
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the Fourth Amendment Warrants or the Depositary Shares issuable upon the
conversion or exercise thereof 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 the Fourth
Amendment Convertible Notes and the Fourth Amendment Warrants and any
certificates representing the Depositary Shares issuable upon the conversion or
exercise thereof 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."
Each Furman Selz Entity further represents that (i) it has full power
and authority to execute, deliver and perform this Fourth Amendment, (ii) the
person executing this Fourth Amendment on behalf of such Furman Selz Entity has
the appropriate authority to act on behalf of such Furman Selz Entity, (iii)
this Fourth Amendment has been duly authorized, executed and delivered by such
Furman Selz Entity and constitutes a legal, valid and binding agreement of such
Furman Selz Entity, enforceable against such Furman Selz Entity 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 Fourth Amendment. To
the best of its knowledge, each Furman Selz Entity acknowledges receipt of, and
the opportunity to review, the information that it believes necessary to make an
investment in the Fourth Amendment Convertible Notes and the Fourth Amendment
Warrants and the Depositary Shares issuable upon the conversion or exercise
thereof.
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ARTICLE V
AMENDMENTS TO THE SERIES G PURCHASE AGREEMENT
SECTION 5.1 Agreement of Furman Selz Entities. Each of the Furman Selz Entities,
by its execution of this Fourth Amendment, hereby joins in and agrees to be
bound by and subject to the provisions of Articles VII, VIII, IX, X, XI, XII,
XIII, XIV, XV, XVI and XVII of the Series G Purchase Agreement, all as amended
from time to time in accordance with Article XIV of the Series G Purchase
Agreement, as a Purchaser or a Holder thereunder, with respect to the Fourth
Amendment Convertible Notes and the Fourth Amendment Warrants issued or issuable
to such Furman Selz Entities and the Depositary Shares issued or issuable upon
conversion or exercise thereof.
SECTION 5.2 Definitions. For purposes of Articles VII, VIII, IX, X, XI,
XII, XIII, XIV, XV, XVI and XVII of the Series G Purchase Agreement: (a) the
terms "Notes" and "Convertible Notes" shall hereby be amended to include the
Fourth Amendment Convertible Notes; (b) the term "Note Conversion Shares" shall
hereby be amended to include the Depositary Shares issued or issuable upon
conversion of the Fourth Amendment Convertible Notes; (c) the term "Warrants"
shall hereby be amended to include the Fourth Amendment Warrants; (d) the term
"Warrant Shares" shall hereby be amended to include the Depositary Shares issued
or issuable upon exercise of the Fourth Amendment Warrants; and (e) the term
"Securities" shall hereby be amended to include the Fourth Amendment Convertible
Notes and the Fourth Amendment Warrants.
SECTION 5.3 Conversion. Article XII of the Series G Purchase Agreement
is hereby amended as follows:
(a) Section 12.1 of Article XII is hereby amended by inserting
immediately following the definition of "Person" the following definitions:
"Convertible Notes" means the 8% Convertible Notes, the Third
Amendment Convertible Notes and the Fourth Amendment Convertible Notes.
"Fourth Amendment Convertible Notes" means the 7.5% convertible notes
issued as of October 15, 1999."
(b) Section 12.2 of Article XII is hereby deleted in its entirety and
the following paragraph is hereby inserted in lieu thereof:
"12.2 Right of Conversion; Conversion Price.
(a) Conversion to Common Stock. Any holder of Convertible Notes shall
have the right, at its option, at any time to convert, subject to the terms and
provisions of this Article
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XII, such Convertible Notes into shares of Common Stock upon surrender of the
Convertible Notes to be so converted, accompanied by written notice of
conversion duly executed, to the Company, and, if so required by the Company,
duly endorsed to the Company or in blank or accompanied by proper instruments of
transfer to the Company or in blank. The 8% Convertible Notes shall be
convertible at the conversion price of $4.75 per share of Common Stock, or in
case an adjustment of such price has taken place pursuant to the provisions of
this Article XII, the price as last adjusted (such price or adjusted price being
referred to herein as the "8% Note Conversion Price"). The Third Amendment
Convertible Notes shall be convertible at the conversion price of $3.00 per
share of Common Stock, or in case an adjustment of such price has taken place
pursuant to the provisions of this Article XII, the price as last adjusted (such
price or adjusted price being referred to herein as the "Third Amendment
Conversion Price"). The Fourth Amendment Convertible Notes shall be convertible
at the conversion price of $3.00 per share of Common Stock, or in case an
adjustment of such price has taken place pursuant to the provisions of this
Article XII, the price as last adjusted (such price or adjusted price being
referred to herein as the "Fourth Amendment Conversion Price," and together with
the 8% Note Conversion Price and the Third Amendment Conversion Price, the
"Conversion Price"). The number of shares of Common Stock issuable upon such
conversion shall be equal to (a) the aggregate principal amount of the
Convertible Note to be converted plus accrued but unpaid interest thereon to the
date of conversion, divided by (b) the applicable Conversion Price. Whenever the
Conversion Price in effect shall be adjusted pursuant to this Article XII, the
Company shall promptly provide to each holder of Convertible Notes a notice
stating that the Conversion Price has been adjusted and setting forth the
adjusted Conversion Price, which notice shall be signed on behalf of the Company
by the President and the Chief Financial Officer of the Company and shall set
forth in reasonable detail a calculation to the nearest cent of the Conversion
Price, the method of calculation and the facts requiring such adjustment.
(b) Conversion to Depositary Shares; Call Option Exercise.
Notwithstanding the foregoing, from and after July 23, 1999 until the Option
Determination Date (as defined in the Depositary Agreement dated as of February
16, 1999 by and among the Company, Alpharma and State Street Bank and Trust
Company (the "Depositary Agreement")), each Convertible Note shall be
convertible into a number of depositary shares, each Depositary Share
representing one share of Common Stock of the Company subject to a call option
(a "Depositary Share"), equal to the number of shares of Common Stock that would
otherwise be issuable upon conversion of such Convertible Note. From and after
the Option Expiration Date (as defined in the Depositary Agreement), each
Convertible Note shall be convertible into Common Stock of the Company in
accordance with subclause (a) of this Section 12.2."
(c) Section 12.4 of Article XII is hereby amended by deleting Section
12.4(c) in its entirety and inserting in lieu thereof the following:
14
<PAGE> 16
"(c) Notwithstanding Sections 12.4(a) and (b), no adjustment
to the applicable Conversion Price with respect to the Convertible Notes shall
be made in connection with the issuance of:
(i) the Securities and the securities issued or issuable upon
conversion or exercise of the Securities, or other Derivative Securities
outstanding as of June 1, 1998;
(ii) shares of Common Stock or rights, options or warrants to
acquire Common Stock issued to directors, employees or consultants of the
Company pursuant to a stock option plan, employee stock purchase plan,
restricted stock plan or other similar stock plan or agreement (and, in the case
of rights, options, or warrants, the Common Stock issued or issuable upon
exercise thereof) and approved by the Board of Directors;
(iii) the Direct Purchase Shares and the shares of Common
Stock issuable pursuant to the letter agreement dated February 16, 1999 among
the Company and FS Private Investments LLC;
(iv) the Third Amendment Convertible Notes and the associated
Third Amendment Warrants and the shares of Common Stock issued or issuable upon
conversion or exercise thereof; and
(v) the Fourth Amendment Convertible Notes and the associated
Fourth Amendment Warrants and the securities issued or issuable upon conversion
or exercise thereof."
SECTION 5.4 Secured Loans. Article VIII of the Series G Purchase
Agreement is hereby amended as follows:
(a) Section 8.2 of Article VIII is hereby amended by adding the
following clause to the beginning of the first sentence thereof:
"Except for any security interest in the Collateral with respect
to Secured Loans or Fourth Amendment Advancements,".
(b) Section 8.12 of Article VIII is hereby amended by deleting clause
(iii) in its entirety and replacing it with the following:
"(iii) securities permitted by Section 8.1(g) of the Loan
Agreement."
(c) Section 8.15 of Article VIII is hereby amended by adding the
following definitions:
15
<PAGE> 17
"Secured Loans" means all Project Loans and all Screened
Project Loans (each as defined in the Second Supplemental
Agreement dated October 15, 1999 by and between the Company,
Alpharma USPD Inc., Alpharma Inc., State Street Bank and Trust
Company and the Purchasers).
"Collateral" means all assets, properties, contract rights and
other intangibles and choses in action purchased, licensed or
otherwise acquired by the Company with the proceeds of a Secured
Loan.
ARTICLE VI
OTHER AGREEMENTS, WAIVERS AND CONSENTS
SECTION 6.1 Seniority of Notes. The Furman Selz Entities hereby agree
that the 7.5% Convertible Subordinated Note in the aggregate principal amount of
up to $40,000,000 (the "Alpharma Convertible Note") issued by the Company on
February 19, 1999 to Alpharma pursuant to the Loan Agreement dated as of
February 16, 1999 by and among the Company, Alpharma and Alpharma Inc., as
amended (the "Alpharma Loan Agreement"), shall rank pari passu in right of
payment with the Fourth Amendment Convertible Notes, the Third Amendment
Convertible Notes, the Subordinated Notes and the Convertible Notes issuable
upon exchange of the Preferred Stock, except as otherwise provided in the
Subordination Agreement dated as of February 16, 1999 among the Company, the
Purchasers and Alpharma, as amended (the "Subordination Agreement").
SECTION 6.2 Consent to Issuance of the Fourth Amendment Convertible
Notes and Fourth Amendment Warrants. The Purchasers hereby consent, in all
respects under the Series G Purchase Agreement, including without limitation
under Sections 8.1 and 8.7, to the consummation of the transactions contemplated
by this Fourth Amendment, including without limitation the issuance of the
Fourth Amendment Convertible Notes and the Fourth Amendment Warrants.
SECTION 6.3 Rights 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
the Fourth Amendment Convertible Notes and the Depositary Shares issuable upon
the conversion thereof and (ii) the issuance of the Fourth Amendment Warrants
and the Depositary Shares issuable upon the exercise thereof.
SECTION 6.4 Antidilution Adjustment. The Purchasers hereby agree that
no adjustment shall be made to the Conversion Price of the Convertible Notes
under Section 12.4 of the Purchase Agreement or the Warrant Price and the
Warrant Shares under Article III of the Warrants or under Article III of the
Third Amendment Warrants with respect to
16
<PAGE> 18
(i) the issuance of the Fourth Amendment Convertible Notes and the Depositary
Shares issuable upon the conversion thereof and (ii) the issuance of the Fourth
Amendment Warrants and the Depositary Shares issuable upon the exercise thereof.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 The Series G Purchase Agreement. Except as amended by this
Fourth Amendment, the Series G Purchase Agreement shall remain in full force and
effect in accordance with its terms. This Fourth Amendment shall be deemed to be
included in the Series G Purchase Agreement as defined above.
SECTION 7.2 Governing Law. The rights and obligations of the parties
under or pursuant to this Fourth Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 7.3 Expenses. The Company will pay all reasonable legal fees
and disbursements of counsel for the Furman Selz Entities incurred with respect
to the negotiation, execution and consummation of this Fourth Amendment and the
transactions contemplated by this Fourth Amendment.
SECTION 7.4 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 Fourth
Amendment.
SECTION 7.5 Amendments to Alpharma Agreements. No amendment to the
Alpharma Loan Agreement or any of the Ancillary Agreements shall have the effect
of changing the meaning of any provision of this Fourth 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.
SECTION 7.6 Counterparts. This Fourth 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 Fourth
Amendment to produce or account for more than one such counterpart.
SECTION 7.7 Effectiveness. This Fourth Amendment to the Series G
Purchase Agreement shall be effective on the date hereof.
17
<PAGE> 19
SECTION 7.8 Depositary Share Conversion. From and after the Option
Expiration Date, the term Depositary Shares as used herein shall be deemed to
include the shares of Common Stock issuable upon the exchange of the Depositary
Shares upon expiration of the Call Option (as defined in the Depositary
Agreement).
[remainder of page intentionally left blank]
18
<PAGE> 20
IN WITNESS WHEREOF this Fourth 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/ Emmett Clemente
---------------------------------
Name: Emmett Clemente
Title: Chairman
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
19
<PAGE> 21
Schedule 1
COMMITMENT PERCENTAGES
Furman Selz Entity Commitment Percentage
Furman Selz Investors II LP 88.15555%
FS Employee Investors LLC 7.55555%
FS Parallel Fund LP 4.28890%
20
<PAGE> 22
SCHEDULE 3.2
Capitalization
Pursuant to the terms of the Depositary Agreement dated as of February 16, 1999
by and among the Company, Alpharma, USPD Inc. and State Street Bank and Trust
Company, as amended (the "Depositary Agreement"), each share of Common Stock of
the Company is held of record by State Street Bank and Trust Company, as
Depositary, is represented by a Depositary Share, and is subject to a call
option held by Alpharma USPD Inc.
The following securities outstanding securities of the Company are convertible
into or exercisable for Depositary Shares:
1. Warrants to purchase an aggregate of 555,063 and 218,195 Depositary
Shares at an exercise price of $0.01 and $5.29 per share, respectively,
issued to Triumph- Connecticut Limited Partnership and certain
affiliated persons and entities.
2. $1,749,126 aggregate principal amount of 8% subordinated notes and
$7,000,000 aggregate principal amount of 8% convertible subordinated
notes issued to the Purchasers pursuant to the Series G Purchase
Agreement.
3. $2,000,000 aggregate principal amount of 7.5% convertible subordinated
notes and warrants to purchase an aggregate of 300,000 Depositary
Shares issued to the Furman Selz Entities pursuant to the Third
Amendment.
3. Convertible Subordinated Note in the principal amount of up to $40.0
Million issued on February 19, 1999 to Alpharma USPD, Inc.
4. Warrants to purchase an aggregate of 103,891 Depositary Shares at an
exercise price of $10.59 per share, 496,033 Depositary Shares at an
exercise price of $9.00 per share and 48,449 Depositary Shares at
weighted average exercise price of $4.60 per share.
5. The Company maintains an Employee Stock Purchase Plan that provides for
the purchase of up to an aggregate of 500,000 Depositary Shares by
employees of the Company.
6. The Company maintains a Director Stock Option Plan that provides for
the issuance of up to 300,000 Depositary Shares to non-employee
directors of the Company pursuant to the exercise of options granted
thereunder.
21
<PAGE> 23
7. The Company maintains a 1992 Equity Incentive Plan that provides for
the issuance of up to 1,850,000 Depositary Shares to employees,
officers and directors of and consultants to Company pursuant to the
exercise of options granted thereunder.
8. The Company maintains a 1999 Stock Inventive Plan that provides for the
issuance of up to 500,000 Depositary Shares to employees, officers and
directors of and consultants to Company pursuant to the exercise of
options granted thereunder.
Pursuant to the terms of the Third Amendment, the Company has agreed to issue
the Furman Selz Entities warrants to purchase up to an additional 300,000
Depositary Shares in connection with the borrowing of the remaining $2,000,000
available thereunder.
22
<PAGE> 24
SCHEDULE 3.4
Compliance With Instruments
The consent of Alpharma USPD Inc. is required for execution of the Fourth
Amendment and the consummation of the transactions contemplated thereby.
23
<PAGE> 25
SCHEDULE 3.5
Litigation
None.
24
<PAGE> 1
Exhibit 99.1
FOR IMMEDIATE RELEASE
ASCENT PEDIATRICS, INC.
Alan R. Fox, CEO or
Eliot M. Lurier, CFO
Tel: 978-658-2500
Fax: 978-658-3939
ASCENT PEDIATRICS ANNOUNCES MODIFICATION OF STRATEGIC ALLIANCE WITH ALPHARMA
- --ING FURMAN SELZ INVESTMENTS COMMITS TO INVEST UP TO AN ADDITIONAL $10 MILLION-
WILMINGTON, Mass., October 20, 1999 (OTCBB - ASCTP) -- Ascent Pediatrics, Inc.
announced today that it has entered into an agreement with Alpharma Inc.
modifying the strategic alliance between Ascent and Alpharma Inc.
Under the original strategic alliance, Alpharma, through its subsidiary Alpharma
USPD, Inc., agreed to provide up to $40 million in financing to Ascent through a
7.5% convertible subordinated note due in 2004 and 2005, and Alpharma acquired
an option, exercisable during the first half of year 2002, to acquire the then
outstanding shares of Ascent for cash at a price to be determined by a formula
based upon Ascent's results in 2001.
Under the new agreement, Ascent and Alpharma agreed, among other things, to
extend for 12 months the exercise period of Alpharma's option to the first half
of year 2003, change the price formula results measurement year from 2001 to
2002 and modify certain conditions on Ascent's access to the Alpharma credit
facility. In addition, Ascent agreed that, to the extent it borrowed funds from
Alpharma under the $40 million credit facility to finance the acquisition of
products or businesses, it would grant Alpharma a security interest in such
products or businesses. The modification of the terms of Alpharma's purchase
option are subject to the approval of Ascent's stockholders.
In connection with the modification of the Alpharma-Ascent alliance, ING Furman
Selz Investments agreed to provide up to $10 million in additional financing to
Ascent for general corporate purposes through 7.5% convertible subordinated
notes due July 1, 2004. In return, Ascent issued ING Furman Selz warrants to
purchase 1,000,000 Ascent Depositary Shares at a price of $3.00 per share and
agreed to issue ING Furman Selz Investments warrants to purchase up to an
additional 4,000,000 Ascent Depositary Shares at an exercise price of $3.00 per
share in connection with borrowings under this credit facility.
"We remain excited about the prospects of our strategic alliance with Alpharma,"
commented Alan R. Fox, Chief Executive Officer of Ascent. " We believe that the
modifications to this alliance, coupled with the additional financing commitment
from Furman Selz, will provide Ascent with adequate capital for operating
requirements, if needed, and will assist Ascent in seeking to maximize
shareholder value should Alpharma exercise its option and acquire Ascent in
2003."
Ascent Pediatrics, Inc. is a drug development and marketing company focused
exclusively on the pediatric market. The Company's strategy is to address the
unmet medical needs of children through
<PAGE> 2
the development of differentiated, proprietary products based on approved
compounds with well-known clinical profiles. Ascent is developing a range of
pharmaceuticals designed to improve upon currently available products for common
pediatric illnesses through the application of its drug delivery and
reformulation techniques.
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 risks of uncertainty related to the approval of Primsol antibiotic solution
and Orapred syrup, uncertainty relating to the success of the strategic alliance
with Alpharma and the loans to be provided thereunder, capital needs, the
Company's early stage of development, seasonality and variable operating
results, dependence on new product development, dependence on obtaining
regulatory approval to market products, management of growth, inability to
retain or attract customers due to competition, uncertainty in the healthcare
industry, risk of product liability claims and uncertainties with respect to our
co-promotion arrangement. 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, 1998, under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Certain Factors that May Affect Future Results", which description is
incorporated herein by this reference, and in its other SEC filings.
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