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EXHIBIT 99.2
NOTE AGREEMENT
This NOTE AGREEMENT (this "NOTE AGREEMENT") is made effective as of October
1, 2001 by and among Ascent Pediatrics, Inc., a Delaware corporation (the
"COMPANY"), Medicis Pharmaceutical Corporation, a Delaware corporation (the
"PARENT"), Xxxxxx Xxxx Investors II L.P., a Delaware limited partnership ("FS
II"), FS Employee Investors LLC, a Delaware limited liability company ("FS
EMPLOYEE"), FS Ascent Investments LLC, a Delaware limited liability company ("FS
ASCENT"), FS Parallel Fund L.P., a Delaware limited partnership ("FS PARALLEL"),
BancBoston Ventures Inc. ("BANCBOSTON") and Xxxxx Partners ("XXXXX").
WHEREAS, FS II, FS Employee, FS Parallel, BancBoston and Xxxxx (each a
"NOTE HOLDER" and collectively the "NOTE HOLDERS") are holders of (i) an
aggregate principal amount of $1,749,126 of 8% Subordinated Notes issued on July
23, 1999 (the "8% SUBORDINATED NOTES") under the May 13, 1998 Securities
Purchase Agreement, as amended, (the "MAY 1998 SECURITIES PURCHASE AGREEMENT")
by and among the Company, FS II., FS Employee, FS Parallel, BancBoston and
Xxxxx; (ii) an aggregate principal amount of $14,000,000 of 7.5% Convertible
Subordinated Notes issued on July 23, 1999 under the Third Amendment to the May
1998 Securities Purchase Agreement and on October 15, 1999 under the Fourth
Amendment to the May 1998 Securities Purchase Agreement (the "7.5% CONVERTIBLE
SUBORDINATED NOTES"); and (iii) an aggregate principal amount of $7,000,000 of
8% Convertible Subordinated Notes issued on July 23, 1999 upon exchange of
Series G Preferred Stock in the Second Amendment to the May 1998 Securities
Purchase Agreement (the "8% CONVERTIBLE SUBORDINATED NOTES," and together with
the 8% Subordinated Notes, and the 7.5% Convertible Subordinated Notes, the
"NOTES"), in each case as set forth on SCHEDULE A hereto;
WHEREAS, FS Ascent is the sole holder (the "7.5% SUBORDINATED NOTE HOLDER")
of the 7.5% Subordinated Note issued on January 2, 2001 in the aggregate
principal amount of $6,250,000 (the "7.5% SUBORDINATED NOTE") under the Loan
Agreement dated as of December 29, 2000 (the "LOAN AGREEMENT") by and between
the Company and FS Ascent;
WHEREAS, FS Ascent holds 2,001 shares of the Company's Series H Preferred
Stock, par value $.01 per share and has the obligation to purchase additional
shares upon request of the Company in accordance with the Fifth Amendment (the
"FIFTH AMENDMENT") to the May 1998 Securities Purchase Agreement dated January
2, 2001 (such shares of Series H Preferred Stock owned and any additional shares
of Series H Preferred Stock issued to FS Ascent after the date hereof being
herein referred to as the "SERIES H PREFERRED STOCK" and such holder of Series H
Preferred Stock, the "PREFERRED HOLDER");
WHEREAS, FS Ascent holds Warrants to purchase an additional 5,000,000
Depositary Shares issued pursuant to the Fifth Amendment and may be issued
additional Warrants by the Company (such Warrants owned and any additional
Warrants issued to FS Ascent after the date hereof being herein referred to as
the "WARRANTS" and such holder, the "WARRANT HOLDER");
WHEREAS, each Note Holder, 7.5% Subordinated Note Holder, Preferred Holder
and Warrant Holder desires that Parent, MPC Merger Corp., a Delaware corporation
and wholly
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owned subsidiary of Parent ("MERGER SUB"), and the Company enter into an
Agreement and Plan of Merger dated the date hereof (the "MERGER AGREEMENT";
capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement) providing for the merger of Merger Sub with and into
the Company (the "MERGER") upon the terms and subject to the conditions set
forth in the Merger Agreement; and
WHEREAS, each Note Holder, 7.5% Subordinated Note Holder, Preferred Holder,
Warrant Holder and the Company are executing this Note Agreement as an
inducement to Parent and Merger Sub to enter into and execute the Merger
Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by Parent
and Merger Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
1. TERM. This Note Agreement shall terminate upon the earlier to
occur of (a) the termination of the Merger Agreement pursuant to its terms, (b)
the consummation of the Merger and (c) the Drop Dead Date; provided, however,
that in the event that the Merger is consummated then SECTIONS 7 AND 8 of this
Note Agreement shall continue in full force and effect and shall not terminate
(the "TERM").
2. REPRESENTATIONS AND WARRANTIES OF EACH NOTE HOLDER AND FS ASCENT.
Each Note Holder and FS Ascent severally and not jointly represents and warrants
to Parent that as of the date of this Agreement:
(a) such Note Holder or FS Ascent is the record and beneficial
owner of such Notes, 7.5% Subordinated Notes, Series H Preferred Stock, and
Warrants (collectively, the "SECURITIES") as are set forth opposite such
holder's name on SCHEDULE A hereto;
(b) the Securities constitute the only capital stock, notes,
options, warrants or other rights (whether or not contingent) to acquire shares
of capital stock of the Company with respect to which such Note Holder or FS
Ascent is the record or beneficial owner; and
(c) the Securities are held by such Note Holder or FS Ascent
free and clear of all liens, encumbrances, claims, security interests or any
other restrictions whatsoever (other than any restrictions under applicable
securities laws), and there are no outstanding subscriptions, options, rights,
contracts, understandings or agreements to purchase or otherwise acquire the
Notes, 7.5% Subordinated Notes, Series H Preferred Stock and Warrants other than
the additional shares of Series H Preferred Stock and additional Warrants that
are issuable under the Fifth Amendment.
3. COVENANTS OF EACH NOTE HOLDER AND FS ASCENT. Each Note Holder and
FS Ascent shall not after the date hereof (i) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively "TRANSFER"), or consent
to any Transfer of, any Notes, 7.5% Subordinated Notes, Series H Preferred Stock
and Warrants or any interest therein, (ii) enter into any contract, option or
other agreement with respect to any Transfer of any or all of the Notes, 7.5%
Subordinated Notes, Series H Preferred Stock and Warrants or any interest
therein or (iii)
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assign any of its rights or obligations pursuant to the May 1998 Securities
Purchase Agreement or the Loan Agreement; provided, that each Note Holder and FS
Ascent may Transfer any of the Notes, 7.5% Subordinated Notes, Series H
Preferred Stock and Warrants to any other person or entity that, prior to or
coincident with such Transfer, executes an agreement to be bound by the
provisions of this Note Agreement including, without limitation, the provisions
contained in SECTIONS 4, 5, 6, 7 AND 8 hereof.
4. REDEMPTION OF SERIES H PREFERRED STOCK. Notwithstanding anything
to the contrary contained in the Certificate of Designations for the Series H
Preferred Stock, the Preferred Holder hereby covenants and agrees that during
the Term such Preferred Holder will not take any action to cause the Company to
be required to redeem any or all of the shares of Series H Preferred Stock then
outstanding.
5. CONVERSION OF THE NOTES. Notwithstanding anything to the contrary
contained in any of the Notes, each Note Holder hereby covenants and agrees that
during the Term such Note Holder will not convert any of the Notes into equity
securities of the Company.
6. DEMAND UNDER THE 7.5% SUBORDINATED NOTES.
(a) The Company hereby covenants and agrees to issue the Extension
Notice and take such other action as may be required to extend the Demand
Date through December 31, 2001. The Company further covenants and agrees
that should any action be required by the Company in order to cause the
maturity date of the 7.5% Subordinated Note as provided in SECTION 6(b)
below to be extended from December 31, 2001 to the Drop Dead Date, the
Company will use reasonable best efforts to take such action.
(b) The 7.5% Subordinated Note Holder hereby (i) covenants and agrees
that it will not take any action to cause the Company to be required to
repay the 7.5% Subordinated Note during the Term, (ii) agrees to extend the
Demand Date (as defined in the Loan Agreement) through December 31, 2001
upon proper receipt of an Extension Notice (as defined in the Fifth
Amendment) from the Company and for no additional consideration beyond that
currently provided in Section 2.2 of such Fifth Amendment, (iii) agrees
that if the Company has issued such Extension Notices to extend the Demand
Date through December 31, 2001 and if the Merger has not been consummated
on or prior to December 31, 2001, then the Demand Date shall automatically
be extended through the Drop Dead Date for no additional consideration,
(iv) waives any required notice of the Merger under the Loan Agreement and
(v) waives any required notices under the Loan Agreement of the anticipated
redemption of the 7.5% Subordinated Note as provided in the Merger
Agreement.
7. EXERCISE OR TERMINATION OF WARRANTS. Notwithstanding anything to
the contrary contained in the Warrants, FS Ascent hereby covenants and agrees
that all unexercised Warrants held by FS Ascent at the Effective Time will
terminate immediately prior to the consummation of the Merger.
8. WAIVER OF ISSUANCE OF NEW WARRANTS. Notwithstanding anything to
the contrary contained in the 7.5% Convertible
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Subordinated Notes, the 8% Convertible Subordinated Notes and the May 1998
Securities Purchase Agreement, effective as of the Effective Time, each Note
Holder hereby (i) waives the issuance of New Warrants (as defined in the May
1998 Securities Purchase Agreement) as a condition to the Company's right to
redeem such 7.5% Convertible Subordinated Notes and 8% Convertible Subordinated
Notes pursuant to Section 9.3(c) of the May 1998 Securities Purchase Agreement
upon the consummation of the Merger and (ii) waives any required notices under
the May 1998 Securities Purchase Agreement of the anticipated Merger and of the
anticipated redemption of the Notes upon the consummation of the Merger.
9. GOVERNING LAW. This Note Agreement will be governed by the laws
of the State of Delaware without regard to conflicts of laws principles.
10. COUNTERPARTS. This Note Agreement may be executed and delivered
(including by facsimile) in two or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement and shall become effective as to any
Note Holder or FS Ascent when one or more counterparts have been signed by each
of the Company, Parent and Merger Sub and such Note Holder or FS Ascent and
delivered to the Company, Parent and Merger Sub and such Note Holder or FS
Ascent even if all of the parties for which signature blocks exist have not
executed a counterpart to this Note Agreement.
11. SEPARABILITY. If any provision of this Note Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed and delivered this Note
Agreement as of the date first written above.
ASCENT PEDIATRICS, INC., a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
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Title: President
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MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation
By: /s/ Xxxx X. Xxxxxxxx, Xx.
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Name: Xxxx X. Xxxxxxxx, Xx.
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Title: Executive Vice-President &
Chief Financial Officer
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XXXXXX XXXX INVESTORS II L.P., a Delaware
limited Partnership, FS EMPLOYEE INVESTORS LLC,
a Delaware limited liability company, and
FS PARALLEL FUND L.P., a Delaware limited
partnership
BY: FS PRIVATE INVESTMENTS LLC, Manager
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Managing Member
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FS ASCENT INVESTMENTS LLC, a Delaware limited
liability company
BY: FS PRIVATE INVESTMENTS LLC, Manager
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Managing Member
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NOTE AGREEMENT SIGNATURE PAGE
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BANCBOSTON VENTURES INC.
By:
------------------------------------------
Name:
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Title:
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XXXXX PARTNERS
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
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Title: Partner
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NOTE AGREEMENT SIGNATURE PAGE
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SCHEDULE A TO NOTE AGREEMENT
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STOCKHOLDER 8% 7.5% 8.0% SERIES H WARRANTS
SUBORDINATED CONVERTIBLE CONVERTIBLE PREFERRED
NOTES SUBORDINATED SUBORDINATED STOCK
NOTES NOTES
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FS Private Investments LLC --- --- --- --- ---
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Xxxxxx Xxxx Investors II L.P. $1,156,423 $12,341,778 $4,628,000 --- ---
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FS Employee Investors LLC $98,785 $1,057,778 $397,000 --- ---
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FS Ascent Investments LLC --- --- --- 2,001 5,000,000
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FS Parallel Fund L.P. $56,429 $600,444 $225,000 ---
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BancBoston Ventures Inc. $415,542 --- $1,663,000 --- ---
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Xxxxx Partners $21,739 --- $87,000 --- ---
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