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EXHIBIT 99.3
ASCENT PEDIATRICS, INC.
MAXIMUM $40,000,000
7.5% CONVERTIBLE SUBORDINATED NOTES DUE 2005
LOAN AGREEMENT
DATE: FEBRUARY 16, 1999
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE............................................................... 1
1.1 DEFINITIONS..................................................................................... 1
1.2 RULES OF CONSTRUCTION.......................................................................... 10
ARTICLE II
AMOUNT AND TERMS OF SECURITIES.......................................................................... 11
2.1 COMMITMENT TO LEND; LOANS...................................................................... 11
2.2 EVIDENCE OF DEBT............................................................................... 11
2.3 MAKING OF LOANS................................................................................ 12
2.4 INTEREST AND PRINCIPAL PAYMENTS................................................................ 12
2.5 MANDATORY PREPAYMENT UPON CHANGE IN CONTROL.................................................... 13
2.6 LENDER DISCRETIONARY BORROWING UNDER NOTE...................................................... 14
2.7 OPTIONAL PREPAYMENT............................................................................ 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................... 14
3.1 ORGANIZATION AND EXISTENCE, ETC................................................................ 14
3.2 SUBSIDIARIES................................................................................... 15
3.3 CAPITALIZATION................................................................................. 15
3.4 AUTHORIZATION; BINDING OBLIGATIONS............................................................. 15
3.5 COMPLIANCE WITH INSTRUMENTS, ETC............................................................... 16
3.6 LITIGATION..................................................................................... 17
3.7 FINANCIAL STATEMENTS; TAXES.................................................................... 17
3.8 OFFERING....................................................................................... 18
3.9 PERMITS; GOVERNMENTAL AND OTHER APPROVALS...................................................... 18
3.10 SALES REPRESENTATIVES, CUSTOMERS AND KEY EMPLOYEES............................................. 18
3.11 INTELLECTUAL PROPERTY.......................................................................... 19
3.12 FORM 10-K AND 10-Q............................................................................. 20
3.13 REGULATORY STATUS.............................................................................. 20
3.14 REGISTRATION RIGHTS............................................................................ 20
3.15 NO RELATIONSHIP BETWEEN PARTIES................................................................ 20
3.16 ORDINARY COURSE................................................................................ 21
3.17 NO FINDERS..................................................................................... 21
ARTICLE IV
CONDITIONS OF OBLIGATIONS OF THE LENDER................................................................. 21
4.1 CONDITIONS TO LENDER'S OBLIGATIONS ON THE FIRST LOAN DATE...................................... 21
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4.2 CONDITIONS TO LENDER'S OBLIGATIONS TO MAKE THE FIRST UNRESTRICTED LOAN......................... 23
4.3 CONDITIONS PRECEDENT TO EACH LOAN.............................................................. 24
4.4 COOPERATION.................................................................................... 24
ARTICLE V
CONDITIONS OF OBLIGATIONS OF THE COMPANY................................................................ 25
5.1 COMPANY'S OBLIGATION........................................................................... 25
5.2 COOPERATION.................................................................................... 25
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE COMPANY.................................................................... 25
6.1 REPORTS........................................................................................ 25
6.2 ACCOUNTS AND RECORDS........................................................................... 27
6.3 INSPECTION..................................................................................... 27
6.4 INDEPENDENT ACCOUNTANTS........................................................................ 27
6.5 BOARD MEMBERS AND MEETINGS..................................................................... 27
6.6 USE OF PROCEEDS................................................................................ 28
6.7 INSURANCE...................................................................................... 28
6.8 RESEARCH AND DEVELOPMENT....................................................................... 28
6.9 FURTHER ASSURANCES............................................................................. 28
6.10 TERMINATION.................................................................................... 28
ARTICLE VII
NEGATIVE COVENANTS...................................................................................... 29
7.1 BORROWED MONEY INDEBTEDNESS.................................................................... 29
7.2 LIENS.......................................................................................... 30
7.3 CONTINGENT LIABILITIES......................................................................... 30
7.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF ASSETS............................ 30
7.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS........................................................ 31
7.6 NATURE OF BUSINESS............................................................................. 31
7.7 TRANSACTIONS WITH RELATED PARTIES.............................................................. 31
7.8 LOANS AND INVESTMENTS.......................................................................... 31
7.9 ORGANIZATIONAL DOCUMENTS....................................................................... 32
7.10 LEASE EXPENSES; PURCHASE MONEY INDEBTEDNESS.................................................... 32
7.11 SALE/LEASEBACKS................................................................................ 32
7.12 ISSUANCE OF STOCK.............................................................................. 32
7.13 SUBSIDIARIES................................................................................... 32
7.14 TERMINATION.................................................................................... 32
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ARTICLE VIII
DEFAULTS AND REMEDIES................................................................................... 33
8.1 EVENTS OF DEFAULT.............................................................................. 33
8.2 ACCELERATION................................................................................... 34
8.3 OTHER REMEDIES................................................................................. 34
8.4 WAIVER OF PAST DEFAULTS........................................................................ 35
ARTICLE IX
CONVERSION.............................................................................................. 35
9.1 RIGHT OF CONVERSION............................................................................ 35
9.2 CONVERSION PRICE............................................................................... 35
9.3 EXERCISE OF CONVERSION RIGHT................................................................... 35
9.4 PROVISIONS IN CASE OF MERGER, ETC.............................................................. 36
9.5 TAXES ON CONVERSION............................................................................ 36
9.6 COMPANY TO PROVIDE STOCK....................................................................... 36
9.7 REQUIRED ANTITRUST APPROVAL.................................................................... 36
ARTICLE X
SUBORDINATION........................................................................................... 37
10.1 AGREEMENT TO SUBORDINATE....................................................................... 37
ARTICLE XI
RESTRICTIONS ON TRANSFER................................................................................ 37
11.1 SECURITIES LAWS RESTRICTIONS ON TRANSFER....................................................... 37
11.2 RESTRICTIVE LEGEND............................................................................. 37
11.3 REGISTRATION RIGHTS AGREEMENT.................................................................. 38
11.4 ADDITIONAL RESTRICTIONS........................................................................ 38
ARTICLE XII
AMENDMENT, SUPPLEMENT AND WAIVER........................................................................ 39
12.1 WITH CONSENT OF HOLDERS OF THE NOTE............................................................ 39
ARTICLE XIII
MISCELLANEOUS........................................................................................... 40
13.1 NOTICES........................................................................................ 40
13.2 DUPLICATE ORIGINALS............................................................................ 41
13.3 GOVERNING LAW.................................................................................. 41
13.4 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.................................................. 41
13.5 SUCCESSORS AND ASSIGNS......................................................................... 41
13.6 SEPARABILITY................................................................................... 41
13.7 HEADINGS, ETC.................................................................................. 41
13.8 CONFIDENTIALITY................................................................................ 41
13.9 PARENT GUARANTEE............................................................................... 42
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LOAN AGREEMENT (the "Agreement") dated as of February 16, 1999 among
ASCENT PEDIATRICS, Inc., a Delaware corporation (the "Company"), Alpharma USPD
Inc., a Maryland corporation (the "Lender"), and Alpharma Inc., a Delaware
corporation (the "Parent").
WHEREAS, the Lender has agreed to loan to the Company an aggregate of
up to $40 million from time to time upon the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises, it is agreed by and
among the parties hereto as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 DEFINITIONS.
"Affiliate" shall have the meaning ascribed to it in Rule 405
promulgated under the Securities Act.
"Alpharma Director" has the meaning set forth in Section 6.5(a) of this
Agreement.
"Ancillary Agreements" shall mean the Depositary Agreement, the Master
Agreement, the Merger Agreement and the Registration Rights Agreement.
"Approved Accounting Firm" shall have the meaning set forth in Section
6.1(a) of this Agreement.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or
State law for the relief of debtors. The term "Custodian" means any
receiver trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
"Board of Directors" means the Board of Directors of the Company or any
committee of the Board authorized to act for it hereunder.
"Borrowed Money Indebtedness" means, with respect to any Person,
without duplication:
(a) all obligations of such Person for borrowed
money;
(b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments;
(c) all obligations of such Person under conditional
sale or other title retention agreements relating to Property
purchased by such Person;
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(d) all obligations of such Person issued or assumed
as the deferred purchase price of Property or services
(excluding obligations of such Person to creditors for raw
materials, inventory, services and supplies and deferred
payment for services to employees and former employees
incurred in the ordinary course of such Person's business);
(e) all capital lease obligations;
(f) all obligations of others secured by any Lien on
Property or assets owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed;
(g) all outstanding letters of credit, surety bonds
and currency swap or similar agreements issued for the account
of such Person; and
(h) all guarantees of such Person for obligations of
the type described above.
"Business Day" means any day which is neither a Saturday nor a Sunday
nor a legal holiday on which banks are authorized or required to be
closed in Boston, Massachusetts, New York, New York or in any other
city in which the Depositary's Office (as defined in the Depositary
Agreement) is located.
"Call Option" has the meaning set forth in the Depositary Agreement.
"Capital Stock" means any and all shares, interests, participations or
other equivalents of or interests in (however designated) equity of the
Company, including any preferred stock, but excluding any debt
securities convertible into such equity prior to such conversion.
"Change in Control" of the Company means:
(a) the acquisition by any Person or "group" within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (excluding, for this purpose, the Company or its
Subsidiaries, any employee benefit plan of the Company or its
Subsidiaries which acquires beneficial ownership of voting
securities of the Company, or the Lender or its Affiliates) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of the
aggregate voting power of all classes of outstanding Voting
Capital Stock that are then outstanding or that are issuable
upon the conversion or exercise of convertible securities,
options, warrants or rights of the Company that are then
outstanding; provided that any voting securities acquired
directly from the Company by an underwriter of the Company as
part of an underwritten public offering of Capital Stock of
the Company shall not be deemed to be beneficially
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owned by such underwriter for purposes of determining whether
a Change in Control has occurred;
(b) Persons who, as of the Closing Date constitute
all of the Non- Alpharma Directors (the "Non-Alpharma
Incumbent Directors") cease for any reason to constitute at
least a majority of the Non-Alpharma Directors then in office,
provided that any Person becoming a director subsequent to the
Closing Date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a
majority of the Non-Alpharma Incumbent Directors shall be
considered as though such Person were one of the Non- Alpharma
Incumbent Directors as of the Closing Date, provided, however,
that there shall be excluded from this clause (b) any
individual whose initial assumption of office occurred as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a
Person other than the Board of Directors;
(c) the consummation of a reorganization, merger or
consolidation involving the Company, if the stockholders of
the Company beneficially owning 100% of the aggregate voting
power of all classes of Voting Capital Stock that are then
outstanding or that are issuable upon conversion or exercise
of convertible securities, options, warrants or rights that
are then outstanding immediately prior to such reorganization,
merger, or consolidation do not, immediately thereafter,
beneficially own more than 50% of the aggregate voting power
of all classes of Voting Capital Stock that are then
outstanding or issuable upon conversion or exercise of
convertible securities, options, warrants or rights that are
then outstanding; or
(d) a liquidation or dissolution of the Company
(other than pursuant to the United States Bankruptcy Code) or
the conveyance, transfer or leasing of all or substantially
all of the assets of the Company to any Person.
"Closing Date" has the meaning set forth in the Master Agreement.
"Common Stock" means (i) prior to the Effective Time, the Old Common
Stock, and (ii) at and after the Effective Time, the New Common Stock.
"Company" means the party named as such above until a successor
replaces it pursuant to the applicable provision hereof and thereafter
means the successor to such party.
"Company Intellectual Property" has the meaning set forth in Section
3.11(a) of this Agreement.
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"Conversion Date" has the meaning set forth in Section 9.3 of this
Agreement.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default (as defined in Article VIII of
this Agreement).
"Depositary Agreement" means the Depositary Agreement dated as of the
date hereof by and among the Company, the Lender and State Street Bank
and Trust Company, as Depositary.
"Depositary Share" has the meaning set forth in the Merger Agreement.
"Derivative Securities" has the meaning set forth in Section 3.3(a) of
this Agreement.
"Effective Time" has the meaning set forth in the Merger Agreement.
"Encumbrance" has the meaning set forth in Section 3.4(a) of this
Agreement.
"Event of Default" has the meaning set forth in Section 8.1 of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDA" means the United States Food and Drug Administration.
"Financial Statements" has the meaning set forth in Section 3.7(a) of
this Agreement.
"First Loan" has the meaning set forth in Section 2.3 of this
Agreement.
"First Loan Date" has the meaning set forth in Section 2.3 of this
Agreement.
"GAAP" means U.S. generally accepted accounting principles as in effect
from time to time.
"Historical Financial Statements" has the meaning set forth in Section
3.7(a) of this Agreement.
"Holder" means the Lender and any other Person to whom all or a portion
of the Note is transferred in accordance with Article XI of this
Agreement.
"HSR Act" means the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Impairment Event" means (i) the existence of a Negative Equity
Position, provided, however, that notwithstanding the requirements of
GAAP, any amounts outstanding under the 8% Subordinated Notes and any
amounts outstanding under any debt securities issued
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upon conversion or exchange of the Series G Preferred shall be
considered to be equity for purposes of this clause only; (ii) the
occurrence of an event which would make it reasonably probable that the
Company's operating income as defined by GAAP for the 2001 fiscal year
will be less than the amount set forth on Schedule I hereto; or (iii)
the occurrence of an event described in Section 8.1(i) or (j) hereof.
"Indebtedness" means and includes:
(a) all items which in accordance with GAAP would be
included on the liability side of a balance sheet on the date
as of which Indebtedness is to be determined (excluding
capital stock, surplus reserves and deferred credits);
(b) all guaranties, letter of credit, contingent
reimbursement obligations and other contingent obligations in
respect of, or any obligations to purchase or otherwise
acquire, indebtedness of others; and
(c) all indebtedness secured by any Lien existing on
any interest of the Person with respect to which indebtedness
is being determined in Property owned subject to such Lien
whether or not the indebtedness secured thereby shall been
assumed.
"Intellectual Property" has the meaning set forth in Section 3.11(a) of
this Agreement.
"Investment" means the purchase or other acquisition of any
Indebtedness of, or the making of any loan, advance or capital
contribution to, or the incurring of any liability, contingent or
otherwise, in respect of the Indebtedness of, any Person.
"Lien" means any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any
kind, whether based on common law, constitutional provision, statute or
contract, and shall include reservations, exceptions, encroachments,
easements, rights of way, covenants, conditions, restrictions and other
title exceptions.
"Loan" means any borrowing by the Company from the Lender of up to a
maximum principal amount of $40,000,000 pursuant to Section 2.1 and the
other terms and conditions of this Agreement.
"Loan Date" has the meaning set forth in Section 2.3 of this Agreement.
"Master Agreement" means the Master Agreement dated as of the date
hereof by and between the Company and the Lender.
"Material Adverse Effect" means, when used in connection with the
Company, any development, change or effect that is materially adverse
to the business, Properties
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(including, without limitation, Intellectual Property), assets, net
worth, financial condition, results of operations or future prospects
(including, without limitation, future equity value) of the Company and
its Subsidiaries taken as a whole.
"May 1998 Securities Purchase Agreement" means the Series G Securities
Purchase Agreement dated as of May 13, 1998 by and among the Company
and the Purchasers named in Schedule I thereto.
"Merger" means the merger of Merger Sub with and into the Company
pursuant to the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
the date hereof by and between the Company and Bird Merger Corporation,
a Delaware corporation and wholly-owned subsidiary of the Company
("Merger Sub").
"Merger Sub" has the meaning set forth in the definition of Merger
Agreement.
"Negative Equity Position" means the existence of a stockholders'
deficit on the Company's balance sheet, determined in accordance with
GAAP, as of the last day of any monthly fiscal period.
"New Common Stock" has the meaning set forth in the Depositary
Agreement.
"Non-Alpharma Directors" has the meaning set forth in the Depositary
Agreement.
"Note" means the note to be issued by the Company to the Lender
pursuant to Section 2.2(a) of this Agreement, substantially in the form
attached hereto as Exhibit A, evidencing the maximum principal amount
of the Loans; provided however, that in the event that the Lender
exchanges all or a portion of the Note for one or more Notes in
accordance with Section 2.2(c) of this Agreement or transfer all or a
portion of the Note in accordance with Article XI, all references to
the Note in this Agreement shall be deemed to include the Notes issued
by the Company upon such exchange or transfer.
"Note Conversion Shares" has the meaning set forth in Section 3.4(b) of
this Agreement.
"Notice of Borrowing" has the meaning set forth in Section 2.3 of this
Agreement.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Old Common Stock" has the meaning set forth in the Depositary
Agreement.
"Option Determination Date" has the meaning set forth in the Depositary
Agreement.
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"Option Expiration Date" has the meaning set forth in the Depositary
Agreement.
"Permitted Investments" means:
(a) readily marketable securities issued or fully
guaranteed by the United States of America with maturities of
not more than one year;
(b) commercial paper rated "Prime 1" by Xxxxx'x
Investors Services, Inc. or "A-1" by Standard and Poor's
Rating Services with maturities of not more than 180 days;
(c) certificates of deposit or repurchase obligations
issued by any bank organized under the laws of the United
States of America or any state thereof having capital surplus
of at least $100,000,000 or by any other financial institution
acceptable to the Requisite Holders, all of the foregoing not
having a maturity of more than one year from the date of
issuance thereof; and
(d) other Investments not exceeding, in the
aggregate, $50,000 in any fiscal year.
"Permitted Liens" means each of the following:
(a) artisans' or mechanics' Liens arising in the
ordinary course of business, and Liens for taxes, but only to
the extent that payment thereof shall not at the time be due
or if due, the payment thereof is being diligently contested
in good faith and adequate reserves computed in accordance
with GAAP have been set aside therefor;
(b) Liens in effect on the First Loan Date and
disclosed to the Lender in the Financial Statements, provided
that neither the Borrowed Money Indebtedness secured thereby
nor the Property covered thereby shall increase after the
First Loan Date without the prior written consent of the
Requisite Holders, provided that, for purposes of this clause
(b), the accrual of interest on such Borrowed Money
Indebtedness, so long as it is not converted to principal,
shall not be deemed to increase such Borrowed Money
Indebtedness;
(c) normal encumbrances and restrictions on title
which do not secure Borrowed Money Indebtedness and which do
not have a material adverse affect on the value or utility of
the applicable Property;
(d) Liens incurred or deposits made in the ordinary
course of business (i) in connection with workmen's
compensation, unemployment insurance, social security and
other like laws, or (ii) to secure insurance in the ordinary
course of business, the performance of bids, tenders,
contracts, leases, licenses, statutory
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obligations, surety, appeal and performance bonds and other
similar obligations incurred in the ordinary course of
business, but not, in any of the cases specified in this
clause (ii), incurred in connection with the borrowing of
money, the obtaining of advances or the payment of the
deferred purchase of Property;
(e) Liens in connection with or to secure Borrowed
Money Indebtedness permitted under Section 7.1(c);
(f) attachments, judgments and other similar Liens
arising in connection with the court proceedings, provided
that the execution and enforcement of such Liens are
effectively stayed and the claims secured thereby are being
actively contested in good faith with adequate reserve made
therefor in accordance with GAAP;
(g) Liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and vendors' liens
incurred in good faith in the ordinary course of business and
securing obligations which are not yet due or which are being
contested in good faith by appropriate proceedings if adequate
reserves with respect thereto are maintained in accordance
with GAAP;
(h) zoning restrictions, easements, licenses,
reservations, provisions, covenants, conditions, waivers, and
restrictions on the use of Property, and which do not in any
case singly or in the aggregate materially impair the present
use or value of Property subject to any such restriction or
materially interfere with the ordinary conduct of the business
of the Company and its Subsidiaries, if any;
(i) Liens securing purchase money Indebtedness
permitted under Section 7.1 hereof and covering only the
Property so purchased;
(j) capital leases and sale/leaseback transactions
permitted under the other provisions of this Agreement; and
(k) extensions, renewals and replacements of Liens
referred to in paragraphs (a) through (j) of this Section;
provided that any such extension, renewal or replacement Lien
shall be limited to the Property or assets (and, in the case
of clause (e), categories of Property or assets) covered by
the Lien extended, renewed or replaced and that the Borrowed
Money Indebtedness secured by any such extension, renewal or
replacement Lien shall be in an amount not greater than the
amount of the Indebtedness secured by the Lien extended,
renewed or replaced.
"Person" means any individual, corporation, association, company,
business trust, partnership, joint venture, joint-stock company,
limited liability company, trust,
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unincorporated organization or association or government or any agency
or political subdivision thereof.
"Project" means (i) the acquisition of all or a substantial part of the
stock or assets of any Person engaged in the development, manufacture
or sale of pharmaceuticals or other health care products principally
for the pediatric market; (ii) the acquisition of a product or product
line from, or the acquisition of the right to manufacture, distribute
or sell any product or product line of any Person, in each case with
applications in the pediatric pharmaceutical or pediatric health care
market; or (iii) R&D Project.
"Project Loans" has the meaning set forth in Section 2.1.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
"R&D Project" means any project for the research and development of
products or processes related to pediatric pharmaceuticals.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Lender dated as of the date hereof.
"Requisite Holders" means Holders of more than 50% of the aggregate
principal amount of the Note outstanding at any time.
"Screened Project" means a Project that meets the criteria set forth on
Schedule II hereto.
"Screened Project Loans" has the meaning set forth in Section 2.1.
"Screened Project Indebtedness" means Borrowed Money Indebtedness
(other than Loans under this Agreement) incurred for the purpose of
funding a Screened Project.
"SEC" means the United States Securities and Exchange Commission.
"Second Amendment" means the Second Amendment to the May 1998
Securities Purchase Agreement.
"Securities" means the Note and the Note Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Series G Preferred" means the Series G Convertible Exchangeable
Preferred Stock of the Company.
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"Subordination Agreement" means the Subordination Agreement dated the
date hereof by and among the Company, the Lender and the Original
Lenders (as defined therein).
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
fifty percent (50%) of the voting stock or other equity interests (in
the case of Persons other than corporations), is owned or controlled
directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof.
"Top-Off Notice" has the meaning set forth in Section 2.6 of this
Agreement.
The term "to the knowledge of" or derivatives thereof shall mean the
actual knowledge of the Chief Executive Officer or the Vice President,
Finance of the Company.
"Type," when referring to a Loan, indicates whether such Loan is the
First Loan, an Unrestricted Loan, a Project Loan or a Screened Project
Loan.
"Unrestricted Loans" means one or more Loans made on or after the
Closing Date in an aggregate principal amount not to exceed $8,000,000.
"Voting Capital Stock" means the Capital Stock entitled to vote
generally in the election of directors.
"1934 Act Filings" means the Annual Report on Form 10-K of the Company
for the fiscal year ended December 31, 1997, the Quarterly Reports of
the Company on Form 10-Q for each of the three months ended March 31,
1998, June 30, 1998 and September 30, 1998 and any other reports or
other documents filed by the Company with the SEC since December 31,
1997 pursuant to the Exchange Act.
"1998 Financial Statements" has the meaning set forth in Section 3.7(a)
of this Agreement.
"1999 Financial Statements" has the meaning set forth in Section 3.7(a)
of this Agreement.
"8% Subordinated Notes" means the Company's 8% Subordinated Notes in
the aggregate principal amount of $9,000,000 issued pursuant to the May
1998 Securities Purchase Agreement.
1.2 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
a. a term has the meaning assigned to it;
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b. an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
c. "or" is not exclusive;
d. words in the singular include the plural and in the
plural include the singular;
e. provisions apply to successive events and
transactions; and
f. "herein", "hereof" and other words of similar import
refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
ARTICLE II
AMOUNT AND TERMS OF SECURITIES
2.1 COMMITMENT TO LEND; LOANS. On the terms and subject to the conditions
contained in this Agreement (including, without limitation, Section
2.3(b) of this Agreement), the Lender agrees to make one or more Loans
to the Company from time to time on any Business Day on or prior to
December 31, 2001. Such Loans shall consist of (i) the First Loan, (ii)
the Unrestricted Loans, (iii) Loans in addition to those referred to in
clauses (i) and (ii) in the maximum principal amount of $8,000,000
("Project Loans") and (iv) Loans in addition to those referred to in
clauses (i), (ii) and (iii) in the maximum principal amount of
$20,000,000 ("Screened Project Loans"). The maximum principal amount of
Loans outstanding at any time shall not exceed $4,000,000 prior to the
Closing Date and $40,000,000 at any time thereafter. On the terms and
subject to the conditions contained in this Agreement, on or prior to
December 31, 2001 amounts repaid pursuant to the first sentence of
Section 2.4(b) may be reborrowed by the Company and, if reborrowed, (A)
shall be deemed to be a Loan of the same Type as the Loan that was
repaid, if the aggregate amount of Loans made pursuant to this
Agreement at the time of such reborrowing (whether or not repaid) is
less than $20,000,000 and (B) shall be deemed to be a Screened Project
Loan, in all other cases. The Lender shall (i) have no obligation to
make more than one Loan in any one calendar month and (ii) have no
obligation to make any Loans to the Company after December 31, 2001.
2.2 EVIDENCE OF DEBT.
(a) On the First Loan Date, Lender shall receive from the Company
the Note evidencing the maximum aggregate principal amount of
the Loans.
(b) There shall be attached to the Note, and maintained by the
Company, a register in which the Company shall, from time to
time, record (i) the date, amount and
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Type of each Loan under the Note, (ii) the date and amount of
any interest payments due under the Note and (iii) the date
and amount of any principal and interest payments made by the
Company under the Note. The entries made in the register by
the Company shall be conclusive and binding for all purposes,
absent manifest error.
(c) At any time after the Option Expiration Date, the Lender may,
at its option, exchange the Note for one or more Notes of like
tenor, in such denominations as the Lender may determine,
payable to the order of the Lender evidencing in the aggregate
the principal amount of Loans outstanding on such date;
provided that the Lender may not transfer the Note or any
portion of the Note except in accordance with Article XI of
this Agreement.
2.3 MAKING OF LOANS.
(a) The Lender agrees to make each Loan upon receipt of a notice
of borrowing in the form of Exhibit B (a "Notice of
Borrowing") specifying the amount of the proposed Loan given
by the Company to the Lender not later than 10:00 am (New York
time) on the tenth Business Day prior to the date of the
proposed Loan, except with respect to the first Loan hereunder
which shall be in the principal amount of $4,000,000 (the
"First Loan") and which shall be made by the Lender to the
Company on the third Business Day after the date hereof (the
"First Loan Date") and shall be made without any requirement
that the Company deliver a Notice of Borrowing. Subject to the
terms and conditions of this Agreement, upon the date of a
proposed Loan (a "Loan Date"), the Lender shall make available
for the account of the Company in accordance with the bank
wire instructions contained in such Notice of Borrowing,
immediately available funds in the amount of the Loan. Each
Loan shall be in an aggregate amount of not less than
$1,000,000 or a multiple of $500,000 in excess thereof. Each
Notice of Borrowing shall be irrevocable and binding upon the
Company. The Company shall indemnify the Lender against any
loss, cost or expense including, without limitation, the cost
of Lender funds on its credit facilities, incurred by the
Lender if a proposed Loan requested in a Notice of Borrowing
(other than any Notice of Borrowing delivered pursuant to
Section 2.6) is not made by the Lender because the conditions
precedent to such Loan as set forth in Section 4.1, 4.2 or 4.3
of this Agreement were not satisfied or waived.
(b) Each Notice of Borrowing shall describe the proposed use of
proceeds, and shall provide sufficient information (including
a description of any Project, if applicable) to allow the
Lender to reasonably determine that the proceeds of the
requested Loan will be used as required by Section 6.6. The
Lender shall have the reasonable opportunity to review
information (including without limitation the Company's
financial projections) related to any Screened Project
proposed in a
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Notice of Borrowing and to discuss the proposed use of
proceeds with the Company.
2.4 INTEREST AND PRINCIPAL PAYMENTS.
(a) The Company shall pay interest on the unpaid principal amount
of each Loan from the date of the making thereof until the
principal amount thereof shall be paid in full at a rate of
7.5% per annum. Interest shall be due and payable by the
Company with respect to each Loan quarterly, in arrears on the
last Business Day of each calendar quarter. All amounts paid
shall first be applied to any accrued but unpaid interest. All
payments required to be made by the Company under this
Agreement shall be paid to the Lender to an account of the
Lender designated to the Company in writing.
(b) On or prior to June 30, 2001, the Company may repay all or a
portion of the outstanding principal amount of the Note in its
sole discretion (by approval of the Non-Alpharma Directors) on
no more than one occasion in each calendar quarter on the last
Business Day of such calendar quarter. Subject to the terms
and conditions of this Agreement, amounts so repaid may be
reborrowed pursuant to Section 2.1 on or prior to December 31,
2001. The Company shall repay the aggregate principal amount
of the Note outstanding as of December 31, 2001 in accordance
with the following schedule:
% of Principal Amount of Note
Date of Payment Outstanding as of December 31, 2001
-------------------------------------------------------
March 30, 2004 5%
June 30, 2004 5%
September 30, 2004 5%
December 31, 2004 5%
March 30, 2005 10%
June 30, 2005 70%
provided that any then remaining principal and interest
outstanding with respect to the Note shall be paid in full on
June 30, 2005. Notwithstanding the foregoing, Loans made
pursuant to Section 2.6 may not be repaid by the Company.
(c) Notwithstanding the foregoing, if the Closing Date has not
occurred on or prior to September 30, 1999 (i) the Lender
shall have no further obligation to make Loans and (ii) all
unpaid principal and accrued interest on the Note shall be and
become immediately due and payable by the Company without any
declaration or other act on the part of any Holder.
(d) If any required payment of principal or interest is not paid
when due, whether at stated maturity, by acceleration or
otherwise, the interest rate applicable to the
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amount of any such payment shall be the 7.5% per annum
provided above plus an additional 2% per annum, all payable on
demand.
2.5 MANDATORY PREPAYMENT UPON CHANGE IN CONTROL. The Company shall give all
Holders notice of any Change in Control with respect to the Company
within 10 days after the later of (i) the date of such Change in
Control and (ii) the date on which the Company becomes aware of such
Change in Control. Upon any such Change in Control, any Holder shall
have the right at its option exercisable upon written notice to the
Company within 15 days after the Holder receives notice of such Change
in Control, (i) to convert all or a portion of the then outstanding
principal of the Note into Common Stock (or such other security as may
be provided under Section 9.4) pursuant to Article IX hereof, or (ii)
to require the Company to repay all of the outstanding amounts
principal and accrued and unpaid interest under the Note held by such
Holder. Following a Change in Control with respect to the Company, the
Lender shall have no further obligations to make Loans.
2.6 LENDER DISCRETIONARY BORROWING UNDER NOTE. So long as the Company has
not exercised its right under Section 2.7 hereof, at any time after the
close of business on December 31, 2002 and prior to the close of
business on February 28, 2003, the Company shall, upon receipt of a
written request from the Lender, deliver to the Lender a Notice of
Borrowing (a "Top-Off Notice") requesting a Loan in an amount so that
after giving effect to the Loan requested by such Notice of Borrowing
the maximum principal amount of $40,000,000 is outstanding under the
Note and the Lender shall make such Loan on the third Business Day
following receipt of such Top-Off Notice. The Loan made pursuant to
this Section is intended by the parties to provide for conversion of
the maximum principal amount of the Note into Common Stock and may not
be repaid by the Company. If a Loan is made pursuant to this Section,
the Lender shall deliver a notice of conversion pursuant to Section 9.3
with respect to the maximum principal amount of $40,000,000 within
three Business Days of making such Loan. Notwithstanding Section 2.3(b)
of this Agreement, any Top-Off Notice need not specify a Project for
which the Company proposes to use the proceeds of the Loan being
requested. Notwithstanding the foregoing, the Lender shall have no
right to request a Top-Off Notice and no obligation to make a Loan
pursuant to this Section if the Option Expiration Date has occurred due
to the failure or refusal of Alpharma to make Loans, as set forth in
the proviso to the definition of the term "Option Expiration Date" in
the Depositary Agreement.
2.7 OPTIONAL PREPAYMENT. At any time beginning at the close of business on
the Option Expiration Date and ending at the close of business on
December 31, 2002, the Company may, at its option, upon five Business
Days prior written notice to the Lender, prepay all, but not less than
all, of the outstanding principal amount of the Note, together with any
accrued and unpaid interest to the date of such prepayment. Concurrent
with such prepayment, the Company shall pay to the Lender in cash a
conversion termination fee equal to 25% of the principal amount of the
Note outstanding as of the close of business on December 31, 2001.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Lender as follows:
3.1 ORGANIZATION AND EXISTENCE, ETC. The Company (a) is duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to carry
on its business as now conducted and as proposed to be conducted, and
(b) is duly qualified to do business as a foreign corporation and is in
good standing (or the equivalent thereof under applicable law) in each
jurisdiction in which the conduct of its business requires such
qualification by reason of the ownership or leasing of property or
otherwise (except for those jurisdictions in which the failure so to
qualify does not have a Material Adverse Effect).
3.2 SUBSIDIARIES. Other than Merger Sub, the Company has no Subsidiaries
and owns no securities of other corporations or entities other than
Permitted Investments.
3.3 CAPITALIZATION.
(a) As of the date hereof, (i) the Company's authorized capital
stock consists of: 60,000,000 shares of Common Stock, of which
7,026,445 shares are validly issued and outstanding, fully
paid and non-assessable, and 5,000,000 shares of "blank check"
preferred stock, $.01 par value per share, of which 7,000
shares have been designated Series G Convertible Exchangeable
Preferred Stock, all of which shares are validly issued and
outstanding, fully paid and non-assessable; and (ii) the
Company has outstanding the securities set forth on Schedule
3.3A which are convertible into or exercisable or exchangeable
for Common Stock (the "Derivative Securities").
(b) All the issued and outstanding shares of Capital Stock are
free of preemptive and similar rights and have been offered,
issued, sold and delivered by the Company in transactions in
compliance with the applicable federal, state and foreign
securities laws. Other than as set forth in Schedule 3.3A,
there are no outstanding agreements or commitments requiring
the Company to issue Capital Stock or Derivative Securities.
3.4 AUTHORIZATION; BINDING OBLIGATIONS.
(a) The Company has full power and authority to execute, deliver
and perform this Agreement, the Note, the Ancillary Agreements
and such other documents furnished or to be furnished by the
Company hereunder, subject to the approval by the stockholders
of the Company of the Merger Agreement and the transactions
contemplated thereby. This Agreement, the Note and the
Ancillary Agreements
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have each been duly authorized, executed and delivered by the
Company, subject to the approval by the stockholders of the
Company of the Merger Agreement and the transactions
contemplated thereby, and each constitutes a legal, valid and
binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and
to general principles of equity and subject to the approval by
the stockholders described above. Subject to the approval by
the stockholders of the Company of the Merger Agreement and
the transactions contemplated thereby, the issuance, offering
and sale of the Securities pursuant to this Agreement, the
compliance by the Company with the provisions of this
Agreement, the Securities and the Ancillary Agreements, and
the consummation of the other transactions contemplated hereby
or thereby will not result in the creation or imposition of
any lien, charge, security interest or encumbrance
(collectively "Encumbrance") upon any of the assets of the
Company pursuant to the terms or provisions of, or result in a
breach or violation of or conflict with any of the terms or
provisions of, or constitute a default under, or give any
other party a right to terminate any of its obligations under,
or result in the acceleration of any obligation under, (i) the
Certificate of Incorporation and Bylaws of the Company, (ii)
any contract or other agreement to which the Company is a
party or by which the Company or any of its respective
properties is bound, or (iii) any judgment, ruling, decree,
order, statute, rule or regulation of any court or other
governmental agency or body, domestic or foreign, applicable
to the business or properties of the Company, except, with
respect to clauses (ii) and (iii), in circumstances that would
not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(b) The Note has been duly authorized for issuance and, following
the issuance of the Note, the shares of Common Stock issuable
upon conversion of the Note (the "Note Conversion Shares")
will have been duly authorized and reserved for issuance. When
the Note has been duly executed and delivered by the Company
in accordance with this Agreement, (i) the Note will
constitute the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or
affecting creditors' rights and to general principles of
equity, (ii) the principal amount outstanding under the Note
will be convertible into Note Conversion Shares in accordance
with the provisions of this Agreement and the Note, and (iii)
the Note Conversion Shares initially issuable upon such
conversion, when issued and delivered in accordance with the
provisions of this Agreement and the Note, will be validly
issued, fully paid and non-assessable.
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3.5 COMPLIANCE WITH INSTRUMENTS, ETC. Except as set forth on Schedule 3.5
hereto, the Company is not in breach or violation of, or in default
under, any term or provision of (i) its Certificate of Incorporation
and Bylaws, (ii) any indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note agreement, debt instrument or
other agreement or instrument to which it is a party or by which it is
bound or to which any of its Property is subject, the effect of which
breach, violation or default, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the
Company or of any arbitrator, court, regulatory body, administrative
agency or any other governmental agency or body, domestic or foreign,
having jurisdiction over the Company or any of its respective
activities or properties and the effect of which breach, violation or
default, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
3.6 LITIGATION. Except as set forth on Schedule 3.6 hereto, there are no
actions, suits, proceedings or investigations pending, or, to the
knowledge of the Company, threatened, against the Company before or by
any court, regulatory body or administrative agency or any other
governmental agency or body, domestic or foreign, which would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, or any actions, suits, proceedings or
investigations pending, or, to the knowledge of the Company,
threatened, which challenges the validity of any action taken or to be
taken pursuant to or in connection with this Agreement or the issuance
of the Note or the Note Conversion Shares, which would, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
3.7 FINANCIAL STATEMENTS; TAXES.
(a) The Company has previously delivered to the Lender, true,
correct and complete copies of its financial statements for
the years ended December 31, 1995, 1996 and 1997 (the
"Historical Financial Statements") and for the nine months
ended September 30, 1998 (the "1998 Financial Statements").
The Company will deliver to the Lender true, correct and
complete copies of all financial statements filed with the SEC
from January 1, 1999 to the Closing Date (the "1999 Financial
Statements" and together with the Historical Financial
Statements and the 1998 Financial Statements, the "Financial
Statements"). The Financial Statements have been (and in the
case of 1999 Financial Statements will be) prepared in
accordance with GAAP (except for the absence of the footnotes
in any Financial Statements which do not cover a full fiscal
year) and fairly present (and in the case of the 1999
Financial Statements will present) in all material respects,
the financial position of the Company as of the respective
dates thereof and the results of operations and cash flows of
the Company for the periods then ended (subject to normal
year-end adjustments in the case of the 1998 Financial
Statements and in any other Financial Statements which do not
cover a full fiscal year). The Historical Financial Statements
have been (and the Company's financial statements
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for the year ended December 31, 1998 will be) audited by
PricewaterhouseCoopers LLP who are independent public
accountants within the meaning of the Securities Act and they
have expressed (or in the case of the Company's financial
statements for the year ended December 31, 1998 will express)
an opinion thereon, which is unqualified with respect to the
Financial Statements for the years ended December 31, 1995 and
1996. As of the respective dates of the Financial Statements,
the Company had (and in the case of 1999 Financial Statements
will have) no material liabilities or obligations of any
nature (absolute, accrued, contingent or otherwise) whether or
not required by GAAP to be reflected on a balance sheet or
disclosed in the notes thereto except as were reflected on any
balance sheet or disclosed in any notes contained in the
Financial Statements.
(b) Except as set forth on Schedule 3.7B hereto, the Company has
filed or obtained extensions for all necessary income,
franchise and other material tax returns, domestic and
foreign, and has paid all taxes shown as due thereunder
(except in the case where the Company is contesting such
matter in good faith and except in such circumstances where
such failure would not reasonably be expected to have a
Material Adverse Effect), and the Company has no knowledge of
any tax deficiency which might be assessed against the Company
which would reasonably be expected to have a Material Adverse
Effect.
3.8 OFFERING. Subject to the Lender's representations and warranties in the
Ancillary Agreements, the offer, sale and issuance of the Securities to
the Lender as contemplated by this Agreement are not subject to the
registration requirements of the Securities Act and neither the
Company, nor anyone acting on its behalf, has taken or will take any
action that would cause such registration requirements to be
applicable.
3.9 PERMITS; GOVERNMENTAL AND OTHER APPROVALS. Except as set forth in
Schedule 3.9 hereto, the Company has such licenses, permits, consents,
orders, approvals and other authorizations necessary for the conduct of
its business as now being conducted, except where the absence of such
authorizations would not have a Material Adverse Effect and except with
respect to the Company's products in development for which marketing
and other approval from the FDA and similar regulatory authorities have
not been obtained. No approval, consent, authorization or other order
of, and no designation, filing, registration, qualification or
recording with, any governmental authority, domestic or foreign, is
required for the Company's performance of this Agreement or the
consummation of the transactions contemplated hereby except for
applicable filings with the Nasdaq Stock Market, the filing of Form D
under the Securities Act, the filing of one or more Reports on Form 8-K
under the Exchange Act, the filing of a Registration Statement on Form
S-4 and a Registration Statement on Form 8-A in connection with the
Merger, any filings required under the HSR Act and the filing of a
Certificate of Merger and Certificate of Amendment to the Company's
Certificate of Incorporation in connection with the Merger.
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3.10 SALES REPRESENTATIVES, CUSTOMERS AND KEY EMPLOYEES. Except as set forth
in Schedule 3.10A, to the knowledge of the Company, as of the date
hereof, no independent sales representative or key employee or group of
employees of, or party or Person providing services to, the Company has
any intention to terminate his, her or its relationship with the
Company or, in the case of employees, to leave the employ of the
Company, which termination or departure would have a Material Adverse
Effect. Except as set forth in Schedule 3.10B hereto, all personnel as
of the date hereof are employed on an "at will" basis and may be
terminated upon notice of not more than (30) days.
3.11 INTELLECTUAL PROPERTY.
(a) To the Company's knowledge, the Company has full and exclusive
right, title and interest in and to, or, to the extent set
forth on Schedule 3.11(a), license rights to, all (i) patents,
patent applications, registered or unregistered trademarks,
service marks, tradenames, and applications therefor,
registered or unregistered copyrights and applications
therefor, know-how, proprietary rights and processes, trade
secrets, customer lists, methodologies (to the extent
practicable), proprietary developments and marketing
information, (ii) know-how, inventions, inventors' notes (to
the extent such notes exist), drawings and designs associated
with the foregoing and (iii) other confidential information,
(all of the foregoing collectively, "Intellectual Property")
used in or necessary for the ongoing conduct of its business
and the development of the Pipeline Products ("Company
Intellectual Property"), free and clear of all Encumbrances of
any nature, except where the failure to have full and
exclusive right, title and interest in and to, or license
rights to, Intellectual Property would not reasonably be
expected to have a Material Adverse Effect; and except as set
forth on Schedule 3.11(a), the Company has no material
obligation to any other Person or entity with respect to
Company Intellectual Property or any developed or under
development product or process of the Company utilizing or
embodying any Company Intellectual Property. Schedule 3.11(a)
is a complete and accurate schedule of all patents, patent
applications, registered trademarks, service marks, tradenames
and applications therefor, registered copyrights and
applications therefor, and license agreements used in or
necessary for the ongoing conduct of Company's business.
(b) There is (i) to the Company's knowledge, no infringement,
misuse or misappropriation of any Intellectual Property owned,
licensed or controlled by any third party arising out of any
product or process (including without limitation any Pipeline
Product) now being used, manufactured, developed, under
development, or distributed, or ever having been used,
manufactured, developed, under development, or distributed at
any time previously, by or on behalf of the Company, except to
the extent such infringement, misuse or misappropriation would
not reasonably be expected to have a Material Adverse Effect,
(ii) no pending or, to the knowledge of the Company,
threatened claim or challenge of or proceeding for
infringement, misuse or misappropriation of or interference
with
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any Intellectual Property owned, licensed or controlled by any
third party arising out of any product or process now being
used, manufactured, developed or distributed, or ever having
been used, manufactured, distributed or developed at any time
previously, by or on behalf of the Company, which would
reasonably be expected to have a Material Adverse Effect,
(iii) except as set forth in Schedule 3.11(b) hereto, no
pending or, to the knowledge of the Company, threatened claim,
challenge or proceeding by the Company against any third party
for infringement, misuse or misappropriation of or
interference with any Intellectual Property owned, licensed or
controlled by the Company or (iv) no notice from any another
party to the Company to the effect that, or, to the knowledge
of the Company, facts or information which, in the reasonable
opinion of the Company, would render any Company Intellectual
Property owned, invalid or unenforceable, nor, to the
knowledge of the Company, is there any allegation that any
such Company Intellectual Property is invalid or
unenforceable, except to the extent that the invalidity or
unenforceability of such Company Intellectual Property would
not reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth in Schedule 3.11(c), the Company has not
disclosed any material confidential information developed or
utilized by the Company to any third party except on a
confidential basis and pursuant to a written confidentiality
agreement, nor, to the knowledge of the Company, has any third
party disclosed confidential information developed or utilized
by the Company to any Person in material breach of such
confidentiality agreement.
3.12 FORM 10-K AND 10-Q. The Annual Report on Form 10-K of the Company for
the fiscal year ended December 31, 1997, the Quarterly Reports on Form
10-Q for each of the three months ended March 31, 1998, June 30, 1998
and September 30, 1998, and any reports filed with the SEC pursuant to
the Exchange Act from the date hereof to the First Loan Date when filed
by the Company, complied or will comply as to form in all material
respects with the applicable requirements of the Exchange Act and did
not or will not, as of the date of such filing, contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
3.13 REGULATORY STATUS. Schedule 3.13 sets forth a description of the
development status of each of the Company's principal products not
currently on the market as of the date hereof ("Pipeline Products"),
including status with the FDA. The Company has made available to the
Lender for its review all of its correspondence with the FDA related to
the Pipeline Products and has had no oral communications with the FDA
that are contrary to any such correspondence dated later than January
1, 1998. With respect to any Pipeline Products not in commercial
production, such description sets forth the remaining steps to be taken
prior to commercial production and an estimate of the time required to
reach commercial production. The Company makes no representation or
warranty with respect to the estimated time to achieve such steps.
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3.14 REGISTRATION RIGHTS. Except as provided for in this Agreement, the
Ancillary Agreements, or in Schedule 3.14, the Company is not under any
obligation to register under the Securities Act any of its currently
outstanding securities or any of its securities which may hereunder be
issued.
3.15 NO RELATIONSHIP BETWEEN PARTIES. The Company is not an owner of any
shares of the stock or equity interest in the Lender. To the Company's
knowledge, as of the date hereof no officer, director, or owner of more
than 5% of the outstanding capital stock of the Company with which any
officer or director of the Company is affiliated owns any shares of the
capital stock of or equity interest in the Lender.
3.16 ORDINARY COURSE. Since September 30, 1998, the Company, except as set
forth on Schedule 3.16 hereto, in the 1934 Act Filings or as explicitly
contemplated by this Agreement, has conducted its business in the
ordinary course, has not incurred any material obligation, absolute or
contingent, or entered into any material transactions not in the
ordinary course of business which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect, and has
not declared or paid any dividends or distributions on its Capital
Stock or reacquired any shares of its Capital Stock.
3.17 NO FINDERS. The Company has not employed any broker or finder in
connection with the transactions contemplated by this Agreement or the
Ancillary Agreements.
ARTICLE IV
CONDITIONS OF OBLIGATIONS OF THE LENDER
4.1 CONDITIONS TO LENDER'S OBLIGATIONS ON THE FIRST LOAN DATE. The
obligation of the Lender to make the First Loan is subject to the
fulfillment to its reasonable satisfaction, or the waiver by the
Lender, on the First Loan Date of each of the following conditions:
(a) Representations and Warranties Correct. The representations
and warranties of the Company in Article III hereof shall be
(x) true and correct on and as of the date hereof and (y) true
and correct in all material respects on and as of the First
Loan Date with the same force and effect as if they had been
made on and as of the First Loan Date, except in the case of
clause (y) for (i) those representations and warranties which
address matters only as of a particular date (which shall be
true and correct as of such date), (ii) circumstances in which
the failure of such representations and warranties to be true
and correct would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect and
(iii) inaccuracies resulting from the failure to obtain
shareholder approval for the transactions contemplated by the
Ancillary Agreements.
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(b) Compliance Certificate. The Company shall have delivered to
the Lender a certificate of the Company's President, dated the
First Loan Date, certifying to the fulfillment of the
conditions specified in subsections (a) and (e) of this
Section 4.1.
(c) No Impediments. No statute, judgment, order or decree of any
court, regulatory body, administrative agency or any other
governmental agency or body shall be in effect which would
impose any material limitation on the ability of the Lender to
exercise full rights of ownership of the Securities.
(d) No Defaults. The Company shall not be in default under any
indenture, mortgage, agreement, instrument or commitment
evidencing or under which there is at the time outstanding any
Indebtedness of the Company or any Subsidiary, in excess of
$200,000, or which results in such Indebtedness, in an
aggregate amount (with other defaulted Indebtedness) in excess
of $200,000 becoming due and payable prior to its due date.
(e) No Material Adverse Events. Except as set forth in the
schedules attached hereto pursuant to Article III hereof, as
disclosed in the 1934 Act Filings filed with the SEC prior to
the date hereof or as set forth in Schedule 4.1(e) hereto,
since September 30, 1998, there shall have been no Material
Adverse Effect with respect to the Company (other than the
continued incurrence of losses in the ordinary course of
business).
(f) Legal Investment. The purchase of the Note by the Lender
hereunder shall be legally permitted by all statutes, rules
and regulations to which the Lender and the Company are
subject.
(g) Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body that are
now required in connection with the lawful issuance and sale
of the Note pursuant to this Agreement shall have been duly
obtained and shall be in full force and effect.
(h) Issuance Taxes. All taxes imposed by law in connection with
the initial issuance, sale and delivery of the Securities
shall have been fully paid by the Company, and all laws
imposing such taxes shall have been fully complied with at the
time of such issuance.
(i) Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements (other than
shareholder approval) shall have been taken, and the Lender
shall have received such other documents and instruments in
form and substance reasonably satisfactory to it and its
counsel, as to such other matters
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incident to the transaction contemplated hereby as it may
reasonably request. The Ancillary Agreements shall be in full
force and effect.
(j) Opinion of Counsel. The Lender shall have received the opinion
of Xxxx and Xxxx LLP, counsel for the Company, dated the First
Loan Date, substantially with respect to the matters set forth
on Exhibit C attached hereto.
(k) Consents, Waivers, Etc. The Company shall have obtained all
consents or waivers necessary to execute and deliver this
Agreement and the Ancillary Agreements, issue the Securities
and carry out the transactions contemplated hereby and
thereby, and all such consents and waivers shall be in full
force and effect except for shareholder approval.
(l) Delivery. The Company shall have delivered to the Lender (i)
the Note and (ii) the following:
(A) A certified copy of the Company's certificate of
incorporation and all amendments thereto,
appropriately authenticated;
(B) A copy of the Company's bylaws, as amended to date,
certified as being true by a principal Officer of the
Company; and
(C) A certificate of good standing of the Company as a
foreign corporation certified as of a recent date by
the Secretary of State of the Commonwealth of
Massachusetts, and from every jurisdiction in which
the Company is qualified to do business.
4.2 CONDITIONS TO LENDER'S OBLIGATIONS TO MAKE THE FIRST UNRESTRICTED LOAN.
The obligation of the Lender to make the first Unrestricted Loan is
subject to the fulfillment to its reasonable satisfaction, or the
waiver by the Lender, on or prior to the Closing Date of each of the
following conditions:
(a) Representations and Warranties Correct. The representations
and warranties of the Company in Article III hereof shall be
(x) true and correct on and as of the date hereof and (y) true
and correct in all material respects on and as of the Closing
Date with the same force and effect as if they had been made
on and as of the Closing Date, except in the case of clause
(y) for (i) those representations and warranties which address
matters only as of a particular date (which shall be true and
correct as of such date) and (ii) circumstances in which the
failure of such representations and warranties to be true and
correct would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with
on or prior to the Closing Date by
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the Company shall have been performed or complied with by the
Company in all material respects on or prior to the Closing
Date.
(c) Conditions in Section 4.1. The conditions set forth in Section
4.1 remain fulfilled or waived by the Lender on or prior to
the Closing Date, provided that any exceptions therein for
shareholder approval shall not be given effect.
(d) Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated
by this Agreement and the Ancillary Agreements shall have been
taken, and the Lender shall have received such other documents
and instruments in form and substance reasonably satisfactory
to it and its counsel, as to such other matters incident to
the transaction contemplated hereby as it may reasonably
request. The Ancillary Agreements shall be in full force and
effect. The Merger shall have occurred as contemplated by the
Merger Agreement and the other transactions required by the
Ancillary Agreements (including the satisfaction or waiver of
the conditions set forth in Section 5.1, 5.2 and 5.3 of the
Master Agreement) to have occurred at or prior to the
Effective Time shall have occurred. The Second Amendment shall
be in full force and effect. The Second Amendment Closing Date
(as defined in the Second Amendment) shall have occurred and
all the other transactions required by the Second Amendment to
have occurred at or prior to the Second Amendment Closing Date
shall have occurred.
(e) No Defaults. No event has occurred and is continuing or would
result from the first Unrestricted Loan being made on such
date, which constitutes a Default or an Event of Default.
(f) Use of Proceeds. The Lender shall be reasonably satisfied that
the proceeds of the Loan being made will be used as set forth
in Section 6.6.
4.3 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Lender to make
any Loan other than the First Loan or the first Unrestricted Loan is
subject to the fulfillment to its reasonable satisfaction, or the
waiver by the Lender, on or prior to the applicable Loan Date of each
of the following conditions:
(a) The conditions set forth in subsections (c), (d), (f) and (g)
of Section 4.1 remain fulfilled or waived by Lender.
(b) No event has occurred and is continuing, or would result from
the Loan being made on such date, which constitutes a Default
or an Event of Default.
(c) No Impairment Event has occurred and is continuing since
September 30, 1998.
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(d) The Lender shall be reasonably satisfied that the proceeds of
the Loan being made will be used as set forth in Section 6.6.
4.4 COOPERATION. The Lender shall take all reasonable steps and use all
reasonable efforts necessary or desirable, and shall cooperate with the
Company to enable it, to obtain, as promptly as practicable, all
approvals, authorizations, certificates, consents and clearances
required to consummate the transactions contemplated hereby and satisfy
the conditions set forth in Sections 4.1, 4.2 and 4.3.
ARTICLE V
CONDITIONS OF OBLIGATIONS OF THE COMPANY
5.1 COMPANY'S OBLIGATION. The Company's obligations under this Agreement
are subject to the fulfillment to its reasonable satisfaction, or the
waiver by the Company, on or prior to the First Loan Date of each of
the following conditions:
(a) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with
on or prior to the First Loan Date by the Lender shall have
been performed or complied with in all respects on or prior to
the First Loan Date.
(b) Compliance Certificate. The Lender shall have delivered to the
Company a certificate of an Officer of the Lender, dated the
First Loan Date, certifying to the fulfillment of the
condition specified in subsection (a) of this Section 5.1.
5.2 COOPERATION. The Company shall take all reasonable steps and use all
reasonable efforts necessary or desirable, and shall cooperate with the
Lender to enable it, to obtain, as promptly as practicable, all
approvals, authorizations, certificates, consents and clearances
required to consummate the transactions contemplated hereby and satisfy
the conditions set forth in Section 5.1.
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE COMPANY
Subject to Section 6.10 hereof, the Company hereby covenants and
agrees:
6.1 REPORTS.
The Company will deliver to each Holder the following:
(a) within thirty (30) days after the end of each of the twelve
(12) monthly accounting periods in each fiscal year (or when
furnished to the Board of Directors, if
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earlier), unaudited consolidated statements of income and
retained earnings and cash flows of the Company and its
Subsidiaries, if any, for each monthly period and for the
period from the beginning of such fiscal year to the end of
such monthly period, together with consolidated balance sheets
of the Company and its Subsidiaries, if any, as at the end of
each monthly period, setting forth in each case comparisons to
budget and to corresponding periods in the preceding fiscal
year which statements will be prepared in accordance with
GAAP, consistently applied subject to the absence of footnotes
and year-end adjustments;
(b) within ninety (90) days after the end of each fiscal year,
consolidated statements of income and retained earnings and
cash flow of the Company and its Subsidiaries, if any, for the
period from the beginning of each fiscal year to the end of
such fiscal year, and consolidated balance sheets as at the
end of such fiscal year, setting forth in each case in
comparative form corresponding figures for the preceding
fiscal year, which statements will be prepared in accordance
with GAAP, consistently applied (except as approved by the
accounting firm examining such statements and disclosed by the
Company) and will be accompanied by a report on the
consolidated statements of a public accounting firm reasonably
acceptable to the Requisite Holders or one of the public
accounting firms currently known as the "Big Five" (either, an
"Approved Accounting Firm");
(c) within ten (10) days after transmission thereof, copies of all
financial statements, proxy statements, reports and other
communications which the Company sends to its stockholders,
copies of all registration statements and all regular, special
or periodic reports which it files with the SEC or with any
securities exchange on which any of the securities of the
Company are then listed or proposed to be listed, and copies
of all press releases made generally available by the Company
to the public concerning material developments in the business
of the Company and its Subsidiaries, if any; and
(d) promptly after the occurrence thereof (but in any event within
seven (7) days after such occurrence is known to the Company)
notice of any condition or event which constitutes, or the
occurrence of (i) an event which would lead the Company to
believe that the Company is not in compliance in material
respects with the covenants in this Agreement or (ii) the
institution or threatened institution of an action, suit or
proceeding against the Company or any of its Subsidiaries by
or before any court, regulatory authority, administrative
agency or any other governmental agency or body, domestic or
foreign, which, if adversely decided, could have a Material
Adverse Effect.
(e) at least thirty (30) days prior to the end of each fiscal
year, a detailed annual operating budget and business plan for
the Company and its subsidiaries, if any, for such fiscal
year. Such budgets shall be prepared on a monthly basis,
displaying consolidated statements of anticipated income and
retained earnings,
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consolidated statements of anticipated cash flow and projected
consolidated balance sheets, setting forth in each case the
assumption (which assumptions and projections shall represent
and be based upon the good faith best judgment in respect
thereof of the Chief Executive Officer of the Company) behind
the projections contained in such financial statements, and
which budgets shall have been approved by the Board of
Directors of the Company or prior to the beginning of each
twelve-month period to which they pertain and, promptly upon
preparation thereof, any other budgets that the Company may
prepare and any revisions of such annual or other budgets.
6.2 ACCOUNTS AND RECORDS. The Company shall keep true records and books of
account in which entries will be made of all dealings or transactions
in relation to the business and affairs of the Company and its
Subsidiaries, if any, in accordance with GAAP, to the extent
applicable, applied on a consistent basis.
6.3 INSPECTION. For so long as the Lender has not transferred any portion
of the Note, the Company shall permit the Lender or any of its
officers, employees, representatives or such other Person as the Lender
may designate, during regular business hours of the Company, upon
reasonable prior notice, to visit and inspect the offices and
properties of the Company and to (i) review and make extracts or copies
of the books, accounts and records of the Company, and (ii) discuss the
affairs, finances and accounts of the Company, with the Company's
Officers, members of the Board of Directors, Approved Accounting Firm,
consultants and attorneys.
6.4 INDEPENDENT ACCOUNTANTS. The Company will retain an Approved Accounting
Firm to audit the Company's financial statements at the end of each
fiscal year. In the event the services of the Approved Accounting Firm
shall be terminated, the Company shall promptly thereafter seek to
engage another Approved Accounting Firm.
6.5 BOARD MEMBERS AND MEETINGS. From and after the Closing Date and prior
to the Option Expiration Date,
(a) The Company's Board of Directors may not consist of more than
eleven or less than seven directors without the consent of the
Requisite Holders. The Company agrees to hold meetings of its
Board of Directors at least four times a year, at least once
per calendar quarter. The Lender shall have the right to have
one (1) nominee included on the Board of Directors' slate of
nominees to stand for election to the Board of Directors. The
director of the Company designated by the Lender pursuant to
this Section 6.5(a) shall be referred to hereinafter as the
"Alpharma Director".
(b) If at any time the Board of Directors designates a committee
or committees to act on behalf of the Board, (other than any
special committee or committees of Xxx-
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Alpharma Directors constituted for the purpose of making any
determination that is to be made by such committee under the
terms of this Agreement or any Ancillary Agreement or that
otherwise relates to any matter with respect to which the
Company and the Lender have a potential conflict of interest,
if counsel to the Company advises the Board of Directors that
the exclusion of the Alpharma Director from such committee is
appropriate given such potential conflict of interest) the
Alpharma Director shall be given an option to be a member of
such committee or committees. Prior to the Closing Date, the
Alpharma Director shall have been appointed to the
Compensation Committee and the Audit Committee of the
Company's Board of Directors.
(c) No more than three (3) of the members of the Company's Board
of Directors shall be employed, or otherwise be compensated
(other than normal director's compensation (i.e., meeting
fees, expense reimbursements and stock options), by the
Company.
(d) The Company shall pay fees to the Alpharma Director in an
amount not less than the fees paid to any other director of
the Company who is not an executive officer of the Company,
and shall reimburse such Alpharma Director for his or her
reasonable expenses incurred in attending each Board or
committee meeting or otherwise serving as a director.
6.6 USE OF PROCEEDS. The Company shall use all the proceeds received from
the First Loan and the Unrestricted Loans for (a) general corporate
purposes, including capital expenditures and working capital, (b) the
payment of legal fees and disbursements, accounting fees, investment
banking fees, SEC filing fees and other fees and expenses incurred in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements, and (c) any Projects. The Company shall use all
of the proceeds of Project Loans (other than Loans made pursuant to
Section 2.6 hereof) only for Projects and the payment of fees and
expenses related thereto. The Company shall use all the proceeds
received from Screened Project Loans (other than any Loans made
pursuant to Section 2.6 hereof) for Screened Projects and the payment
of fees and expenses related thereto. Pending the Company's use of the
proceeds as set forth herein, the Company shall invest all Loan
proceeds in Permitted Investments consisting exclusively of such
proceeds.
6.7 INSURANCE. The Company shall keep in force with responsible insurers,
policies of insurance providing coverage, limits and deductibles
customary in the Company's industry.
6.8 RESEARCH AND DEVELOPMENT. The Company shall not incur expenses of, or
make commitments with respect to, more than an aggregate of $7,500,000
in the 2001 fiscal year in R&D Projects.
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6.9 FURTHER ASSURANCES. From time to time the Company shall execute and
deliver to Lender such other instruments, certificates, agreements and
documents and take such other action and do all other things as may be
reasonably requested by Lender in order to implement or effectuate the
terms and provisions of this Agreement.
6.10 TERMINATION. The covenants and agreements of the Company set forth in
this Article VI (other than Section 6.9) shall terminate and be of no
further force or effect at such time as no principal or interest on the
Note is outstanding or payable (whether as a result of the payment of
all outstanding principal and accrued interest on the Note or the
conversion of the Note) and no amounts may be borrowed pursuant to this
Agreement.
ARTICLE VII
NEGATIVE COVENANTS
Subject to Section 7.14 hereof, the Company hereby covenants and agrees
that it will not, will not agree to and will not suffer or permit any Subsidiary
of the Company to, do any of the following without the consent of the Requisite
Holders:
7.1 BORROWED MONEY INDEBTEDNESS. Create, incur, suffer or permit to exist,
or assume or guarantee, or become or remain liable with respect to any
Borrowed Money Indebtedness, except the following:
(a) the Note;
(b) the Borrowed Money Indebtedness existing on the date of this
Agreement and disclosed in the Financial Statements, and all
renewals, extensions and replacements (but not increases) of
any of the foregoing, provided that the accrual of interest on
such liabilities, so long as it is not converted to principal,
shall not be deemed to increase such liabilities;
(c) principal of up to $50,000,000 of Borrowed Money Indebtedness
in the aggregate outstanding at any time (which (i) prior to
or on the Option Expiration Date must consist solely of
Screened Project Indebtedness and (ii) thereafter, may include
up to $10,000,000 of Borrowed Money Indebtedness that is not
Screened Project Indebtedness), plus any accrued interest
thereon; provided, that all such Screened Project Indebtedness
outstanding on the Option Exercise Date must be repayable at
the option of the Company in full with aggregate penalties not
in excess of $1,000,000 in connection with the Lender's
purchase of the Common Stock pursuant to its exercise of the
Call Option;
(d) purchase money Indebtedness permitted by Section 7.10 to the
extent liens securing the same are allowed by the other
provisions of this Agreement;
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(e) capitalized lease obligations to the extent leases with
respect thereto are allowed by the other provisions of this
Agreement;
(f) the convertible notes issuable pursuant to the May 1998
Securities Purchase Agreement;
(g) on or prior to the Option Expiration Date, any Screened
Project Indebtedness that is convertible directly or
indirectly into Common Stock provided that (i) the aggregate
annual interest expense (including, without limitation the
full effect of both cash and non-cash accrued interest) with
respect to such Indebtedness shall not exceed $1,500,000; (ii)
such Indebtedness by its terms is automatically converted into
Common Stock on or prior to the Option Closing Date; and (iii)
such Indebtedness may not be repaid by the Company prior to
the Option Closing Date; and
(h) after the Option Expiration Date, any Borrowed Money
Indebtedness that is convertible directly or indirectly into
Common Stock.
7.2 LIENS. Create or suffer to exist any Lien upon any of its Property now
owned or hereafter acquired, or acquire any Property upon any
conditional sale or other title retention device or arrangement or any
purchase money security agreement; provided, however, that the Company
any Subsidiaries of the Company may create or suffer to exist Permitted
Liens.
7.3 CONTINGENT LIABILITIES. Directly or indirectly guarantee the
performance or payment or, or purchase or agree to purchase, or assume
or contingently agree to become or be secondarily liable in respect of,
any obligation or liability of any other Person except for:
(a) the endorsement of checks or other negotiable instruments in
the ordinary course of business;
(b) obligations disclosed to Lender in the Financial Statements
(but not increases of such obligations after the First Loan
Date, provided that the accrual of interest on such
obligations, so long as it is not converted to principal,
shall not be deemed to increase such obligations);
(c) obligations in respect of employees which shall not exceed an
aggregate amount equal to $200,000 at any time outstanding;
and
(d) those liabilities permitted under Section 7.1 hereof.
7.4 MERGERS, CONSOLIDATIONS AND DISPOSITIONS AND ACQUISITIONS OF ASSETS. In
any single transaction or series of related transactions, directly or
indirectly:
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(a) liquidate or dissolve;
(b) be a party to any merger or consolidation unless (i) no
Default or Event of Default has occurred that is then
continuing; (ii) immediately thereafter and giving effect
thereto, no event will occur and be continuing which
constitutes a Default; (iii) the Company, or the Subsidiary,
if any, is the surviving Person; and (iv) the Holders are
given at least twenty (20) days prior notice of such merger or
consolidation or such lesser number of days as is practicable;
(c) sell, convey or lease all or substantially all of its assets,
except for the sale of property in the ordinary course of
business;
(d) acquire all or a substantial portion of the assets or stock of
any person whether by merger or otherwise other than in a
transaction or series of transactions that constitute a
Screened Project, provided that this subsection shall not
prevent any Project funded with the proceeds of the First
Loan, any Unrestricted Loan or Project Loans; or
(e) pledge, transfer or otherwise dispose of any equity interest
in any of its Subsidiaries, if any exist, or issue or permit
any of its Subsidiaries, if any exist, to issue any additional
equity interests except to the Company or another of its
Subsidiaries. Nothing in this Agreement shall prohibit the
Company from selling obsolete equipment or from replacing used
equipment in the ordinary course of business.
7.5 REDEMPTION, DIVIDENDS AND DISTRIBUTIONS. At any time, except as
contemplated by this Agreement and the terms of the Note, by the
Ancillary Agreements and by the Series G Preferred: (a) redeem, retire
or otherwise acquire, directly or indirectly, any equity interest of
the Company or any of its Subsidiaries (other than $250,000 in any
fiscal year to be used to effectuate the repurchase of restricted stock
issued to employees, directors or consultants of the Company pursuant
to a restricted stock agreement) or (b) make any distributions of any
property or cash in respect of any of its Capital Stock.
7.6 NATURE OF BUSINESS. Change the nature of its business or enter into any
business which is substantially different from the development,
manufacture and sale of pharmaceuticals principally for the pediatric
market.
7.7 TRANSACTIONS WITH RELATED PARTIES. Enter into any transaction or
agreement with any Officer, director or beneficial owner of five
percent (5%) or more of the outstanding Capital Stock in the Company or
any of its Subsidiaries (or any Affiliate of any such Person) unless
the transaction is upon no less favorable terms than those that are
obtainable from wholly unrelated sources. The provisions of this
Section 7.7 shall not apply to (a) fees and compensation (including
options and equity compensation) paid to or indemnity provided on
behalf of Officers, directors, employees or consultants of the
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Company and any of its Subsidiaries, as determined by the Board of
Directors of the Company or any of such Subsidiaries or the Chief
Executive Officer thereof in good faith and (b) transactions
exclusively between or among the Company's Subsidiaries, provided such
transactions are not otherwise prohibited by this Agreement.
Notwithstanding the prior two sentences, the Company may not pay
management or consulting fees to such related parties in excess of an
aggregate of $50,000 per year.
7.8 LOANS AND INVESTMENTS. Make any loan, advance, extension of credit or
capital contribution to, or make or have any Investment in, any Person,
or make any commitment to make any such extension of credit or
investment, except (a) Permitted Investments, (b) normal and reasonable
advances in the ordinary course of business to Officers and employees
and (c) capital contributions or Investments used to fund a Project
permitted by Section 6.6, provided in the case of clause (c) that the
making of such capital contribution or Investment does not cause a
Default under any other provision hereof.
7.9 ORGANIZATIONAL DOCUMENTS. Amend, modify, restate or supplement its
Certificate of Incorporation or Bylaws if such action could reasonably
be expected to adversely affect the rights of the Lender under this
Agreement or any Ancillary Agreement.
7.10 LEASE EXPENSES; PURCHASE MONEY INDEBTEDNESS. Permit aggregate operating
lease expenses (excluding lease payments under capital leases), for the
Company and its Subsidiaries in the aggregate in any fiscal year, to
exceed $500,000. Incur or create new capital lease obligations or
purchase money Indebtedness in any fiscal year in excess of $200,000 in
the aggregate for the Company and its Subsidiaries. Permit aggregate
capital lease obligations and purchase money Indebtedness outstanding
at any one time to exceed $2,000,000 in the aggregate for the Company
and its Subsidiaries.
7.11 SALE/LEASEBACKS. Enter into any sale/leaseback transactions except as
permitted under the provisions of Section 7.10.
7.12 ISSUANCE OF STOCK. On or prior to the Option Expiration Date, issue, or
become obligated to issue shares of Capital Stock or securities
convertible into Capital Stock, except for (i) shares of Common Stock,
(ii) rights, warrants or options to purchase shares of Common Stock
granted prior to March 31, 2002 and rights, warrants or options to
purchase up to 100,000 shares of Common Stock on or after March 31,
2002 (such number to be adjusted for stock splits or
reclassifications), (iii) securities evidencing Screened Project
Indebtedness permitted by Section 7.1(g). On or prior to the Option
Expiration Date, use the proceeds of any issuances of securities (other
than pursuant to the exercise of options granted to officers,
directors, consultants, employees and advisors and other than the First
Loan, the Unrestricted Loans and the Project Loans) to fund Screened
Projects and the payment of fees and expenses related thereto. Prior to
the Option Expiration Date, establish a "Shareholders Rights Plan" or
"Poison Pill" or issue any securities in connection therewith.
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7.13 SUBSIDIARIES. Form, create or acquire any Subsidiary other than Merger
Sub or permit any Person other than the Company or a wholly owned
Subsidiary to hold an equity interest in any Subsidiary.
7.14 TERMINATION. The covenants and agreements of the Company set forth in
this Article VII shall terminate and be of no further force or effect
at such time as no principal or interest on the Note is outstanding or
payable (whether a result of the payment of all outstanding principal
and accrued interest on the Note or the conversion of the Note) and no
amounts may be borrowed pursuant to this Agreement.
ARTICLE VIII
DEFAULTS AND REMEDIES
8.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on the Note
when the same becomes due and payable and such default
continues for a period of 5 Business Days;
(b) the Company defaults in the payment of the principal of the
Note when the same becomes due and payable at maturity, upon
acceleration or otherwise;
(c) the Company defaults in the performance of any covenants under
Article VII of this Agreement;
(d) the Company fails to comply with any of the provisions of this
Agreement (other than Article VII) and such failure continues
for 20 Business Days after notice from the Requisite Holders;
(e) the Company defaults in payment on Borrowed Money Indebtedness
(giving effect to any applicable grace periods and any
extensions thereof) of at least $700,000 principal amount;
(f) there has been an acceleration of the final stated maturity of
any Borrowed Money Indebtedness of the Company (which
acceleration shall not have been cured, waived, rescinded or
annulled for 10 Business Days) if the aggregate principal
amount of such Borrowed Money Indebtedness, together with the
principal amount of any other such Borrowed Money Indebtedness
in default for failure to pay principal at maturity or which
has been accelerated, aggregates $700,000 or more at any time;
(g) any representation or warranty of the Company under this
Agreement shall prove to have been incorrect in any material
respect when made;
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(h) there exists an outstanding unsatisfied final judgment which,
either alone or together with other outstanding unsatisfied
final judgments against the Company, exceeds an aggregate of
$200,000 (to the extent not covered by insurance) and such
judgment shall have continued undischarged or unstayed for 20
Business Days after entry thereof;
(i) the Company pursuant to or within the meaning of any
Bankruptcy Law:
(i) commenced a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a custodian of it or
for all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors; or
(j) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company in an involuntary
case,
(ii) appoints a custodian of the Company for all or
substantially all of its property, or
(iii) orders the liquidation of the Company, and the order
or decree remains unstayed and in effect for 90
consecutive days.
8.2 ACCELERATION. If an Event of Default occurs and is continuing, the
Requisite Holders by notice to the Company, may declare the principal
of and any accrued interest on the Note to be due and payable. Upon
such declaration such principal and interest shall be due and payable
immediately. If an Event of Default specified in Section 8.1(i) or (j)
occurs, all unpaid principal and accrued interest on the Note then
outstanding shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of any Holder.
8.3 OTHER REMEDIES. Notwithstanding any other provision of this Agreement,
if an Event of Default occurs and is continuing, any Holder may pursue
any available remedy by proceeding at law or in equity to collect the
principal of or interest then due on the Note held by such Holder.
Without limiting the foregoing, the Company, the Parent and the Lender
acknowledge and agree that the respective remedies of the Company, the
Parent, the Lender and any other Holder at law for a breach or
threatened breach of any of the provisions of this Agreement or the
Subordination Agreement would be inadequate and, in recognition of that
fact, agree that, in the event of a breach or threatened breach by the
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Company, the Parent, the Lender or any Holder of any of the provisions
of this Agreement, or the Subordination Agreement, in addition to any
remedies specified herein, at law or otherwise, any party hereto and
any Holder, without posting any bond shall be entitled to seek
equitable relief in the form of specific performance, a temporary
restraining order, a temporary or permanent injunction or any other
equitable remedy which may then be available, provided that no Holder
shall be entitled to specific performance of the provisions of Section
6.5 hereof.
A delay or omission by any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative.
8.4 WAIVER OF PAST DEFAULTS. Any past Default or Event of Default and its
consequences may be waived in accordance with Section 12.2. When a
Default or an Event of Default is waived, it is cured and ceases.
ARTICLE IX
CONVERSION
9.1 RIGHT OF CONVERSION. A Holder may convert all or a portion of the then
outstanding principal of the Note into Common Stock of the Company (i)
on one occasion on or after any Change in Control with respect to the
Company in accordance with Section 2.5 and (ii) at any time after the
close of business on December 31, 2002.
9.2 CONVERSION PRICE. The conversion price per share of Common Stock for
the Note shall be $7.125 per share. The number of shares of Common
Stock issuable upon conversion of the Note shall be determined by
dividing the dollar amount of the outstanding principal of the Note to
be converted, by $7.125. Except as set forth in Section 9.4, no payment
or adjustment to the conversion price shall be made with respect to
dividends or other distributions declared on shares of Common Stock
prior to the Conversion Date. The Company will pay the Lender in cash
any accrued and unpaid interest with respect to the principal amount of
the Note being converted on the Conversion Date. No fractional shares
of Common Stock shall be issuable upon conversion of the Note, but a
payment in cash will be made in respect of any fraction of a share
which would otherwise be issuable upon such conversion. Such payment
shall be based on the fair market value of the Common Stock at the time
of conversion of the Note, as determined in good faith by the Board of
Directors.
9.3 EXERCISE OF CONVERSION RIGHT. A Holder may exercise the conversion
right set forth in this Article IX by giving written notice to the
Company at the time or times specified in Section 9.1, which notice
shall be accompanied by the Note being surrendered for cancellation and
shall state the portion of the principal amount of the Note being
converted. As promptly as practicable after receipt of the Holder's
notice of conversion
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and the Note being surrendered, the Company shall deliver or cause to
be delivered at its principal executive office to the Holder a
certificate or certificates for the number of full shares issuable upon
the conversion of the Note, or portion thereof, in accordance with the
provisions hereof. Such conversion shall be deemed to have been made at
the time the Note was surrendered for conversion and the notice
specified above shall have been received by the Company at its
principal executive office (the "Conversion Date"), and the Holder upon
such conversion shall be deemed to have become on the Conversion Date
the holder of record of the shares represented thereby. If less than
the entire outstanding principal amount of the Note is being converted,
a new Note shall promptly be delivered to the Holder for the
unconverted principal balance and shall be of like tenor as to all
terms as the Note surrendered. Upon the Conversion Date, the Note or
the portion of the Note being converted shall be deemed to be retired
and canceled.
9.4 PROVISIONS IN CASE OF MERGER, ETC. In the case of any reorganization or
reclassification of the outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value) or as a
result of a subdivision, combination or stock split or in the case of
any consolidation of the Company into, or the merger of the Company
with another entity in which the Company is not the surviving entity
(or it is the surviving entity, but its shares of Common Stock become
shares of another entity), or in the case of a sale, lease or
conveyance of all or substantially all of the assets of the Company as
an entity, a Holder shall thereafter have the right to convert the Note
held by such Holder into the kind and amount of securities, cash or
other property that would have otherwise been receivable by such Holder
upon such reorganization, reclassification, consolidation, merger or
disposition if such Holder had converted the Note into shares of Common
Stock immediately prior to such reorganization, reclassification,
consolidation, merger or disposition. Notwithstanding the foregoing,
nothing in this Section shall alter or affect any covenant in this
Agreement which would limit or prevent the Company from entering into
any transaction described in this Section.
9.5 TAXES ON CONVERSION. If a Holder converts the Note, the Company shall
pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon such conversion.
9.6 COMPANY TO PROVIDE STOCK. The Company shall reserve out of its
authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit the conversion of the
maximum principal amount of the Note.
All shares of Common Stock which may be issued upon conversion of the
Note in accordance with the terms hereof shall be validly issued, fully
paid and non-assessable.
The Company will endeavor to comply with all securities laws regulating
the offer and delivery of shares of Common Stock upon conversion of the
Note and will endeavor to list or qualify such shares for trading on
each national securities exchange or market on which the Common Stock
is then listed or traded.
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9.7 REQUIRED ANTITRUST APPROVAL. Notwithstanding anything in this Article
IX to the contrary, the Note may not be converted at any time if such
conversion and the issuance of shares of Common Stock upon such
conversion require governmental approval under applicable antitrust
laws, including without limitation the HSR Act, until such approval is
obtained. If such approval is required and a Holder wishes to convert
all or a portion of the Note, the Company shall at the request of such
Holder:
(a) take all actions necessary to make the filings required of the
Holder or the Company under the HSR Act, relating to the
possible conversion of the Note, which filings shall comply in
all respects with the requirements of the HSR Act;
(b) comply at the earliest practicable date with any formal or
informal request for additional information received by the
Holder or the Company from the Federal Trade Commission or
Antitrust Division of the Department of Justice pursuant to
the HSR Act;
(c) consult and cooperate with the Holder and consider in good
faith the views of the Holder, in connection with any
analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on
behalf of any party in connection with proceedings under or
relating to the required approvals;
(d) request early termination of the applicable waiting period
under the HSR Act; and
(e) take any and all other commercially reasonable actions in
order to obtain the approval of the governmental entity with
the jurisdiction of enforcing applicable antitrust laws,
including without limitation complying with the HSR Act and
obtaining termination or expiration of the applicable waiting
period under the HSR Act.
ARTICLE X
SUBORDINATION
10.1 AGREEMENT TO SUBORDINATE. The Company shall perform and comply with the
covenants and other obligations for the benefit of the Lender set forth
in the Subordination Agreement, which covenants and other obligations
are incorporated by reference herein, as if such covenants and other
obligations were included herein.
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ARTICLE XI
RESTRICTIONS ON TRANSFER
11.1 SECURITIES LAWS RESTRICTIONS ON TRANSFER. Neither the Note or the Note
Conversion Shares shall be sold or transferred unless either (a) they
first shall have been registered under the Securities Act or (b) the
Company shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such a
transfer is exempt from the registration requirements of the Securities
Act.
11.2 RESTRICTIVE LEGEND. Each Note or certificate representing Note
Conversion Shares and any other securities issued in respect of such
securities shall be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable
state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED."
The foregoing legend may be removed after the second anniversary of the
later of (a) the issue date of the Conversion Shares and (b) the last
date upon which the Company or any Affiliate of the Company was the
owner of such Security (or such shorter period of time as permitted by
Rule 144(k) under the Securities Act or any successor provision).
11.3 REGISTRATION RIGHTS AGREEMENT. The rights and obligations of the
Company and the Lender with respect to Securities Act registration are
set forth in the Registration Rights Agreement.
11.4 ADDITIONAL RESTRICTIONS.
(a) Notwithstanding the foregoing, none of this Agreement, the
Note or the rights and obligations hereunder and thereunder
may be transferred by the Lender on or prior to the Option
Expiration Date except in the event of a Change in Control.
Following the Option Expiration Date or such Change in
Control, this Agreement, the Note and the rights and
obligations hereunder and thereunder may be transferred or
assigned by a Holder to an affiliate of such Holder, to
another Holder, if any, or to any Person acquiring a Note
having a principal amount equal to at least 25% of the
aggregate principal amount of the Note or Notes then
outstanding; provided, however, that the transferee provides
written notice of such assignment to the Company stating its
name and address and the principal amount
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of the Note with respect to which such rights are being
assigned; and provided further, that the Company receives the
written instrument provided in subparagraph (b) below. Any
transferee to whom a transfer is made in accordance with the
immediately preceding sentence shall be deemed a Holder for
purposes of this Agreement.
(b) Any transferee (other than a Holder) to whom rights hereunder
are transferred shall, as a condition to such transfer,
deliver to the Company a written instrument by which such
transferee agrees to be bound by the obligations imposed upon
Holders under this Agreement to the same extent as if such
transferee were a party hereto, including without limitation
the obligations imposed upon Holders pursuant to Section 13.8.
(c) A transferee to whom such rights are transferred pursuant to
this Section 11.4 may not again transfer such rights to any
other Person, other than as provided in this Section 11.4.
ARTICLE XII
AMENDMENT, SUPPLEMENT AND WAIVER
12.1 WITH CONSENT OF HOLDERS OF THE NOTE. Except as provided below in this
Section 12.1, no provision of this Agreement or the Note may be
amended, supplemented or waived without the consent of the Requisite
Holders voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of,
the Note) and the Company, and no existing Default or Event of Default
(other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Note, other than a
payment default resulting from an acceleration that has been rescinded)
and no compliance with any provision of this Agreement or the Note may
be waived without the consent of the Requisite Holders voting as a
single class (including consents obtained in connection with a tender
offer or exchange offer for, or purchase, of the Note). Except as
provided below in this Section 12.1, without the consent of the Holders
holding at least 75% in principal amount of the Note then outstanding
(including consents obtained in connection with a tender offer or
exchange offer for, or purchase of, such Note) and the Company, no
provisions of Article II hereof may be amended, supplemented or waived
in a manner that adversely affects the rights of any Holder.
It shall not be necessary for the consent of the Holders of the Note
under this Section 12.1 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of the Note a notice
briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect
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44
therein, shall not, however, in any way impair or affect the validity
of any such amendment, supplement or waiver. Notwithstanding the
foregoing, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 12.1 may not (with respect to
the Note held by a non-consenting Holder):
(a) reduce the principal amount of the Note;
(b) reduce the principal of or change the fixed maturity of the
Note or alter or waive any of the provisions with respect to
the conversion of the Note;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on the Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Note
(except a rescission of acceleration of the Note by the
Requisite Holders and a waiver of the payment default that
resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Note;
(f) make any change in the provisions of this Agreement relating
to waivers of past Defaults or the rights of the Holders of
the Note to receive payments of principal of or interest on
the Note; or
(g) make any changes in the foregoing amendment and waiver
provisions.
ARTICLE XIII
MISCELLANEOUS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications to any party hereunder or pursuant to the terms hereof
shall be in writing. Any such notice, request, demand, claim, or other
communication to any party hereunder shall be deemed duly delivered
three Business Days after it is sent by registered or certified mail,
return receipt requested, postage prepaid, or one Business Day after it
is sent via a reputable nationwide overnight courier service, in each
case to the intended recipient as set forth below:
if to the Lender, to:
Alpharma, Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attention: President
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45
with a copy to:
Alpharma, Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
Attention: Chief Legal Officer
If to the Company, to:
Ascent Pediatrics, Inc.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx X000
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxx
with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to a Holder other than the Lender, to the address provided to the
Company pursuant to Section 11.4.
Any party may give any such notice, request, demand, claim, or other
communication using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim, or other communication shall be
deemed to have been duly given unless and until it actually is received by the
party for whom it is intended. Any party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
13.2 DUPLICATE ORIGINALS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
13.3 GOVERNING LAW. The laws of the State of New York, without regard to
principles of conflicts of law, shall govern this Agreement and the
Securities.
13.4 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Agreement may not
be used to interpret another indenture, loan or debt agreement of the
Company or a subsidiary. Any such indenture, loan or debt agreement may
not be used to interpret this Agreement.
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13.5 SUCCESSORS AND ASSIGNS. All agreements of the Company in this Agreement
and the Securities shall bind its successors and assigns. All
agreements of the Lender in this Agreement shall bind its successors
and assigns.
13.6 SEPARABILITY. In case any provision in this Agreement or in the
Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
13.7 HEADINGS, ETC. The Headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only, are not
to be considered a part hereof and shall in no way modify or restrict
any of the terms or provisions hereof.
13.8 CONFIDENTIALITY. The Lender and each other Holder agree that he, she or
it will keep confidential and will not disclose, divulge or use for any
purpose other than to monitor his, her or its investment in the Company
any confidential, proprietary or secret information which such Holder
may obtain from the Company pursuant to financial statements, reports
and other materials submitted by the Company to such Holder pursuant to
this Agreement, or pursuant to visitation or inspection rights granted
hereunder, unless such information is known, or until such information
becomes known, to the public (other than as a result of a breach of
this Section 13.8 by such Holder); provided, however that a Holder may
disclose such information if required by law, provided that the Holder
provides prior written notice to the Company of such proposed
disclosure and takes reasonable steps to avoid and/or minimize the
extent of any such required disclosure. The Lender and each other
Holder further acknowledge and agree that certain of the confidential,
proprietary or secret information which it may obtain hereunder may be
material non-public information and that neither it nor any of its
Affiliates shall engage in any acquisition, disposition or other
similar transaction involving the Company's securities on the basis of,
or at such time as such Holder possesses, such material non-public
information.
13.9 PARENT GUARANTEE. The Parent agrees to enter into a guaranty agreement
with the Company with respect to all obligations of the Lender,
monetary or otherwise, under this Agreement.
47
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above set forth.
ASCENT PEDIATRICS, INC.
By: /s/ Xxxxxx Xxxxxxxx
------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chairman
ALPHARMA USPD, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
ALPHARMA INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President Finance and
Chief Financial Officer
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EXHIBIT A
NOTE
Wilmington, Massachusetts
February 19, 1999
up to $40,000,000
FOR VALUE RECEIVED, the undersigned, ASCENT PEDIATRICS, INC., a
Delaware corporation (the "Company"), HEREBY PROMISES TO PAY to the order of
ALPHARMA USPD INC., a Maryland corporation (the "Lender") in lawful money of the
United States of America in immediately available funds, the amount of
$40,000,000 or, if less, the aggregate unpaid amount of all Loans made to the
undersigned under the "Loan Agreement" (as hereinafter defined). Schedule A
attached hereto and incorporated herein by reference records (i) the date,
amount and Type of each Loan hereunder, (ii) the date and amount of any interest
payments due hereunder and (iii) the date and amount of any principal and
interest payments made by the Company hereunder; provided, however, that any
failure to endorse such information on such schedule or continuation thereof
shall not in any manner affect the obligation of the Company to make payments of
principal and interest in accordance with the terms of this Note. All
capitalized terms used but not otherwise defined herein have the meanings given
to them in the Loan Agreement.
This Note is issued pursuant to that certain Loan Agreement dated as of
February 16, 1999 by and between the Company, the Lender and Alpharma Inc., a
Delaware corporation (including all annexes, exhibits and schedules thereto and
as amended, modified, restated or supplemented from time to time (the "Loan
Agreement")), and is entitled to the benefit and security of the Loan Agreement.
Reference is hereby made to the Loan Agreement for a statement of all of the
terms and conditions under which the Loans evidenced hereby are made and are to
be repaid.
1. Interest and Principal Payments. The principal amount of the
indebtedness evidenced hereby shall be payable in the amounts and on the dates
specified in the Loan Agreement, the terms of which are hereby incorporated
herein by reference. Interest thereon shall be paid until such principal amount
is paid in full at such interest rates and at such times, and pursuant to such
calculations, as are specified in the Loan Agreement.
2. Default and Remedies. Subject to the requirements of Section 8.2 of
the Loan Agreement, upon and after the occurrence of any Event of Default, this
Note may, as provided in the Loan Agreement, be declared, and immediately shall
become, due and payable.
3. Conversion. A Holder has the right to convert this Note under the
circumstances and at a Conversion Price as provided in the Loan Agreement. A
Holder may exercise the conversion right by following the procedures set forth
in the Loan Agreement.
4. Subordination. This Note is subordinated in right of payment, in the
manner and to the extent set forth in the Subordination Agreement dated as
of February 16, 1999 among the
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49
Company, the Lender and the Original Lenders named therein (the "Subordination
Agreement"), to the prior payment in full of the Senior Indebtedness in
accordance with the terms set forth in the Loan Agreement.
5. Legends.
"THIS NOTE AND THE SECURITIES ISSUED UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OFFERED
FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE AND THE SECURITIES ISSUED UPON
CONVERSION OF THIS NOTE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
The foregoing legend may be removed after the second
anniversary of the later of (a) the issue date of the Conversion Shares
and (b) the last date upon which the Company or any Affiliate of the
Company was the owner of such Security (or such shorter period of time
as permitted by Rule 144(k) under the Securities Act or any successor
provision).
"THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION
AGREEMENT DATED AS OF FEBRUARY 16, 1999, AMONG ASCENT
PEDIATRICS, INC., ALPHARMA USPD, INC. AND THE ORIGINAL LENDERS
NAMED THEREIN, WHICH AGREEMENT IS INCORPORATED HEREIN BY
REFERENCE. NOTWITHSTANDING ANY STATEMENT TO THE CONTRARY
CONTAINED IN THIS INSTRUMENT, NO PAYMENT OF ANY NATURE ON
ACCOUNT OF THE OBLIGATIONS HEREUNDER, WHETHER PRINCIPAL OR
INTEREST, SHALL BE MADE, PAID, RECEIVED OR ACCEPTED EXCEPT IN
ACCORDANCE WITH THE EXPRESS TERMS OF SUCH AGREEMENT."
The foregoing legend may be removed upon termination of the
Subordination Agreement.
"THIS INSTRUMENT HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT,
AS SUCH TERM IS DEFINED IN SECTION 1271 ET SEQ. OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED. FROM AND AFTER THE
CLOSING DATE (AS DEFINED IN THE LOAN AGREEMENT DATED AS OF
FEBRUARY 16, 1999 BY AND BETWEEN ASCENT PEDIATRICS, INC.,
ALPHARMA USPD INC. AND ALPHARMA, INC.) UPON INQUIRY MADE BY
ANY HOLDER HEREOF, ADDRESSED TO ASCENT PEDIATRICS, INC. AT 000
XXXXXXXXXXX XXXXXX, XXXXX X000, XXXXXXXXXX, XXXXXXXXXXXXX,
ATTENTION: XXXX X. XXX, ASCENT PEDIATRICS, INC. WILL PROVIDE A
STATEMENT SETTING
A-2
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FORTH THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT,
THE ISSUE DATE AND THE YIELD TO MATURITY WITH RESPECT TO THE
INSTRUMENT HELD BY SUCH HOLDER."
6. Registration Rights. The rights and obligations of the Company and
the Lender with respect to Securities Act registration are set forth in the
Registration Rights Agreement.
7. Additional Restrictions.
(a) None of this Note or the rights and obligations hereunder
may be transferred by the Lender on or prior to the Option Expiration Date
except in the event of a Change in Control. Following the Option Expiration Date
or such Change in Control, this Note and the rights and obligations hereunder
may be transferred or assigned by a Holder to an affiliate of such Holder, to
another Holder, if any, or to any Person acquiring a Note having a principal
amount equal to at least 25% of the aggregate principal amount of the Note or
Notes then outstanding; provided, however, that the transferee provides written
notice of such assignment to the Company stating its name and address and the
principal amount of the Note with respect to which such rights are being
assigned; and provided further, that the Company receives the written instrument
provided in subparagraph (b) below. Any transferee to whom a transfer is made in
accordance with the immediately preceding sentence shall be deemed a Holder of
the Loan Agreement.
(b) Any transferee (other than a Holder) to whom rights
hereunder are transferred shall, as a condition to such transfer, deliver to the
Company a written instrument by which such transferee agrees to be bound by the
obligations imposed upon Holders under the Loan Agreement to the same extent as
if such transferee were a party hereto, including without limitation the
obligations imposed upon Holders pursuant to the Loan Agreement.
(c) A transferee to whom such rights are transferred pursuant
to the Loan Agreement may not again transfer such rights to any other Person,
other than as provided in the Loan Agreement.
8. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE.
ASCENT PEDIATRICS, INC.
By:
-------------------------
Title:
-------------------------
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51
SCHEDULE A TO THE NOTE OF
ASCENT PEDIATRICS, INC.
DATED FEBRUARY 19, 1999
Unpaid Name of
Type Payments Principal Person
of Interest Balance Making
Date Loan Period Principal of Note Notation
---- ---- ------ --------- ------- --------
Interest
--------
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52
EXHIBIT B
FORM OF NOTICE OF BORROWING
Reference is made to that certain Loan Agreement dated as February 16,
1999 by and among Ascent Pediatrics, Inc. (the "Company"), Alpharma USPD Inc.
(the "Lender") and Alpharma Inc. (including all annexes, exhibits and schedules
thereto, and as from time to time amended, restated, supplemented or otherwise
modified, the "Loan Agreement"). Capitalized terms used herein without
definition are so used as defined in the Loan Agreement.
The Company hereby gives irrevocable notice, pursuant to Section 2.3(a)
of the Loan Agreement, that it requests a Loan under the Loan Agreement and in
that connection sets forth below the terms on which such Loan is requested to be
made:
(A) Date of Borrowing
(which is a Business Day)______________________________________________
(B) Principal Amount of Loan(1)____________________________________________
(C) Funds are requested to be disbursed to the Company's account with______
Account No._________________________________
(D) Project Information and Use of Proceeds:
--------
(1) Not less than $1,000,000 or a multiple of $500,000 in excess thereof.
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53
The Company shall indemnify the Lender against any loss, cost or
expense including, without limitation, the cost of Lender funds on its credit
facilities, incurred by the Lender as a result of the Loan requested in this
Notice of Borrowing (other than any Notice of Borrowing delivered pursuant to
Section 2.6 of the Loan Agreement) not being made if such Loan is not made by
the Lender because the conditions precedent to such Loan as set forth in Section
4.1, 4.2 or 4.3 of the Loan Agreement were not satisfied or waived.
IN WITNESS WHEREOF, the Company has caused this Notice of Borrowing to
be executed and delivered by its duly authorized officer as of the date first
set above.
ASCENT PEDIATRICS, INC.
By: ---------------------------------------
Title:-------------------------------------
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EXHIBIT C
OPINION OF XXXX AND XXXX LLP
1. Each of the Company and Merger Sub is a corporation existing and in
good standing under the General Corporation Law of the State of
Delaware.
2. The Company has the requisite corporate power and authority to execute,
deliver and, subject to the approval of the stockholders of the Company
of the Merger Agreement (including the exhibits thereto) and the
transactions contemplated thereby, perform the Merger Agreement and the
Transaction Agreements. The Merger Sub has the requisite corporate
power and authority to execute, deliver and perform the Merger
Agreement.
3. The Board of Directors of the Company has adopted by requisite vote
the resolutions necessary to authorize the execution, delivery and,
subject to the approval of the stockholders of the Company of the
Merger Agreement (including the exhibits thereto) and the transactions
contemplated thereby, performance by the Company of the Merger
Agreement and the Transaction Agreements. The Board of Directors of
the Merger Sub has adopted by requisite vote the resolutions necessary
to authorize the execution, delivery and performance by the Merger Sub
of the Merger Agreement.
4. The Company has duly executed and delivered the Merger Agreement and
the Transaction Agreements. The Merger Sub has duly executed and
delivered the Merger Agreement.
5. Subject to the approval of the stockholders of the Company of the
Merger Agreement (including the exhibits thereto) and the transactions
contemplated thereby, each of the Merger Agreement and the
Transaction Agreements is a valid and binding obligation of the
Company and is enforceable against the Company in accordance with
its respective terms. The Merger Agreement is a valid and binding
obligation of the Merger Sub and is enforceable against the Merger Sub
in accordance with its terms.
6. The Note has been duly authorized, executed, issued and delivered by
the Company and constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
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7. Subject to the approval of the stockholders of the Company of the
Merger Agreement (including the exhibits thereto) and the transactions
contemplated thereby, the execution and delivery by the Company of the
Merger Agreement and the Transaction Agreements and the performance of
its obligations thereunder will not (a) constitute a violation of the
certificate of incorporation or bylaws of the Company, (b) constitute a
material violation by the Company of any statutory law or governmental
regulation covered by this Opinion, or (c) breach, or result in a
default under any existing obligation of the Company under any of its
Other Specified Agreements. The execution and delivery by the Merger
Sub of the Merger Agreement and the performance of its obligations
thereunder will not (a) constitute a violation of the certificate of
incorporation or bylaws of the Merger Sub or (b) constitute a material
violation by the Merger Sub of any statutory law or governmental
regulation covered by this Opinion. The term Other Specified Agreements
means those agreements set forth on Schedule A attached hereto.
8. Except as provided on the schedule of Governmental Filings attached
hereto as Schedule B, to our knowledge and based in part upon the
representations of Alpharma in the Master Agreement, neither the
Company nor Merger Sub was required to obtain any consent, approval,
authorization or order of, or make any filings or registrations with,
any United States federal court or governmental agency in order to
obtain the right to enter into or perform under the Merger Agreement
or, in the case of the Company, any of the Transaction Agreements, or
to take any of the actions taken by it on or prior to this date to
consummate the transactions contemplated thereby, except for (i) such
consents, authorizations, approvals, orders, registrations or filings
as have been obtained or made prior to the date hereof, or as permitted
to be made or obtained on or after the date hereof pursuant to the
Merger Agreement, the Transaction Agreements and the exhibits and
schedules thereto, respectively; and (ii) such consents,
authorizations, approvals, orders, registrations or filings as could
not individually or in the aggregate reasonably be expected to have a
Material Adverse Effect.
9. Neither the Company nor Merger Sub is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
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