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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
- --------------------------------------------------------------------------------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
Ascent Pediatrics, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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EXPLANATORY NOTE:
THIS PROXY STATEMENT IS AMENDED TO REFLECT THAT THE PROPOSED AMENDMENT TO THE
1999 STOCK INCENTIVE PLAN IS TO INCREASE THE NUMBER OF DEPOSITARY SHARES
AVAILABLE FOR ISSUANCE UNDER THE PLAN FROM 500,000 DEPOSITARY SHARES TO
1,250,000 DEPOSITARY SHARES, AS DESCRIBED HEREIN.
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ASCENT PEDIATRICS, INC.
187 BALLARDVALE STREET, SUITE B125
WILMINGTON, MASSACHUSETTS 01887
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 2000
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of
Ascent Pediatrics, Inc., a Delaware corporation, will be held on Wednesday, June
14, 2000 at 10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts for the purpose of considering and voting upon the
following matters:
1. To elect three class III directors for the ensuing three years;
2. To approve certain amendments to:
- the Depositary Agreement dated as of February 16, 1999, as amended,
among the Company, Alpharma USPD Inc. and State Street Bank and
Trust Company and
- the Loan Agreement dated as of February 16, 1999, as amended, among
the Company, Alpharma USPD Inc. and Alpharma Inc.
and to delay by one year from 2002 to 2003 the period during which
the call option assigned by the Company to Alpharma USPD Inc. to
purchase all of the Company's common stock then outstanding may be
exercised, as described herein;
3. To approve an amendment to the Company's 1999 Stock Incentive Plan,
as described herein;
4. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of the Company for the current fiscal year; and
5. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Our board of directors has no knowledge of any other business to be
transacted at the meeting.
Our board of directors has fixed the close of business on Tuesday, April
25, 2000, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting and at any adjournments thereof.
A copy of the Company's annual report to stockholders for the year ended
December 31, 1999, which contains consolidated financial statements and other
information of interest to stockholders, accompanies this notice and the
enclosed proxy statement.
By order of the Board of Directors,
/s/ EMMETT CLEMENTE, PH.D.
EMMETT CLEMENTE, PH.D.
Chairman and President
April 28, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED VOTING INSTRUCTION CARD IN THE ACCOMPANYING
ENVELOPE TO ASSURE REPRESENTATION OF YOUR DEPOSITARY SHARES AT THE MEETING. NO
POSTAGE NEED BE AFFIXED IF THE VOTING INSTRUCTION CARD IS MAILED IN THE UNITED
STATES.
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ASCENT PEDIATRICS, INC.
187 BALLARDVALE STREET, SUITE B125
WILMINGTON, MASSACHUSETTS 01887
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 2000
This proxy statement is furnished in connection with the solicitation of
voting instruction cards by the board of directors of Ascent Pediatrics, Inc.
for the annual meeting of stockholders to be held on Wednesday, June 14, 2000 at
10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts and at any adjournments thereof.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED VOTING
INSTRUCTION CARD AND THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1999 ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT MAY 4,
2000. WE WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A
COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE
ADDRESS ALL SUCH REQUESTS TO THE COMPANY, ATTENTION OF ELIOT LURIER, CHIEF
FINANCIAL OFFICER AND TREASURER, 187 BALLARDVALE STREET, SUITE B125, WILMINGTON,
MASSACHUSETTS 01887. EXHIBITS TO THE FORM 10-K WILL BE PROVIDED UPON WRITTEN
REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTING SECURITIES AND VOTES REQUIRED
On April 25, 2000, the record date for determination of stockholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote an aggregate of 9,764,158 shares of common stock, all of which
are represented by depositary shares of the Company outstanding on the record
date. Each depositary share evidences an interest in one share of Ascent common
stock, par value $.0004 per share, subject to a call option held by Alpharma
USPD Inc. and represented by a depositary receipt. All outstanding shares of
Ascent common stock are held by State Street Bank and Trust Company, the
"Depositary," pursuant to a depositary agreement that we entered into with State
Street Bank and Trust Company and Alpharma USPD Inc. in connection with our
strategic alliance with Alpharma USPD Inc. and its parent company, Alpharma,
Inc. References in this proxy statement to "Alpharma" mean Alpharma USPD Inc. In
connection with our strategic alliance with Alpharma, we granted Alpharma a call
option to purchase all of the then-outstanding shares of Ascent common stock.
Prior to the exercise of the call option, which is more fully described in
"Proposal 2 -- Approval of Certain Amendments to the Depositary Agreement and
the Loan Agreement and the Delay By One Year of the Period During Which the
Alpharma Call Option May Be Exercised," of this proxy statement, or the
termination or expiration of the call option, each holder of a depositary share
will generally be entitled to all of the rights it would have if it held
directly the share of Ascent common stock evidenced by the depositary share.
The holders of depositary shares are entitled to one vote per depositary
share on all matters to be voted on by stockholders of the Company, in the same
manner and subject to the same limitations as a holder of shares of common
stock. The record holders of depositary shares on the Record Date will be
entitled to instruct State Street Bank and Trust Company, as Depositary, as to
the exercise of the voting rights pertaining to the number of shares of common
stock represented by their respective depositary shares by completing, dating,
signing and returning the enclosed voting instruction card. The Depositary will
endeavor, insofar as practicable, to vote the number of shares of Ascent common
stock represented by such depositary shares in accordance with such
instructions, and the Company has agreed to take all action that may be deemed
necessary by the Depositary in order to enable the Depositary to do so. If no
choice is specified in a voting instruction card, the Depositary
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will endeavor, insofar as practicable, to vote the number of shares of common
stock represented by such depositary shares in favor of the matters set forth in
the accompanying notice of meeting. The Depositary will abstain from voting
shares of Ascent common stock to the extent it does not receive instructions
from the owners of the corresponding depositary shares. In this proxy statement,
we refer to the Ascent common stock, including the right to vote, and the Ascent
depositary shares collectively as the "depositary shares".
Any voting instruction card may be revoked by a stockholder at any time
before its exercise by delivery of a written revocation or a subsequently dated
voting instruction card to the corporate secretary of the Company or by voting
in person at the meeting. Attendance at the meeting will not be sufficient to
revoke a voting instruction card unless the stockholder gives affirmative notice
at the meeting that the stockholder intends to revoke the voting instruction
card and vote in person.
The holders of a majority of the depositary shares issued and outstanding
and entitled to vote at the meeting constitute a quorum for the transaction of
business at the meeting. Depositary shares present in person or represented by
proxy, including shares which abstain or do not vote with respect to one or more
of the matters presented for stockholder approval, will be counted for purposes
of determining whether a quorum is present at the meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
holders of the outstanding depositary shares entitled to vote at the meeting is
required for the election of directors. The affirmative vote of the holders of a
majority of the outstanding depositary shares is required for the approval of
the amendments to the Depositary Agreement and the Loan Agreement. The
affirmative vote of the holders of a majority of the depositary shares present
or represented by proxy and voting on the matter is required for the approval of
the amendment to the Company's 1999 Stock Incentive Plan and the ratification of
the selection of the Company's independent auditors.
Shares which abstain from voting as to a particular matter, and depositary
shares held in "street name" by brokers or nominees who indicate on their voting
instruction cards that they do not have discretionary authority to vote such
depositary shares as to a particular matter, will not be counted as votes in
favor of such matter, and will also not be counted as votes cast or depositary
shares voting on such matter. Accordingly, abstentions and "broker non-votes"
will have no effect on the voting on a matter that requires the affirmative vote
of a certain percentage of the votes cast or depositary shares voting on a
matter, but will be the equivalent of a "no" vote on a matter which requires the
affirmative vote of a certain percentage of shares entitled to vote on a
proposal, including the approval of the amendments to the Depositary Agreement
and the Loan Agreement.
SOLICITATION OF VOTING INSTRUCTION CARDS
The expenses of the solicitations for the Ascent 2000 annual meeting,
including the cost of printing and distributing this proxy statement and the
form of voting instruction card, will be paid by Ascent. In addition to
solicitation by mail, voting instruction cards may be solicited by our
directors, officers and employees in person or by telephone, telecopier or other
means of communication. These persons will not receive additional compensation
for solicitation of voting instruction cards, but may be reimbursed for
reasonable out-of-pocket expenses in connection with this solicitation.
Arrangements will also be made by us with custodians, nominees and fiduciaries
for forwarding of solicitation materials to the beneficial owners of shares, and
we will reimburse these persons for reasonable expenses incurred in connection
with this solicitation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of January 31, 2000,
regarding the beneficial ownership of depositary shares by (a) each person or
entity known to us to beneficially own more than five percent of the outstanding
depositary shares on that date, (b) each director, including director nominees,
(c) each named
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executive officer of Ascent, which we define in the "Summary Compensation Table"
section; and (d) all directors and executive officers of Ascent as a group.
The number of shares beneficially owned by each 5% stockholder, director
and executive officer is determined under rules promulgated by the Securities
and Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes any shares as to which an individual or group has sole or
shared voting power or investment power and also any shares which an individual
or group has the right to acquire within 60 days of January 31, 2000 through the
conversion of any convertible note or the exercise of any stock option, warrant
or other right. The inclusion in this proxy statement of these shares, however,
is not an admission that the named stockholder is a direct or indirect
beneficial owner of the shares. Unless otherwise indicated, each person or group
named in the table has sole voting and investment power (or shares the power
with his or her spouse) with respect to all shares of capital stock listed as
owned by the person or entity. Unless otherwise indicated, the address of each
officer and director of Ascent is care of Ascent Pediatrics, Inc., 187
Ballardvale Drive, Suite B125, Wilmington, Massachusetts 01887.
DEPOSITARY SHARES
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NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OWNED CLASS
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5% STOCKHOLDERS
Funds affiliated with ING Furman Selz Investments LLC(1).... 5,416,981 40.9%
55 East 52nd Street
37th Floor
New York, NY 10055
BancBoston Ventures Inc.(2)................................. 924,133 9.3%
175 Federal Street
Boston, MA 02110
Medical Science Partners Group(3)........................... 824,302 7.8%
161 Worcester Rd, Suite 301,
Framingham, MA 01701
Funds affiliated with Burr, Egan, Deleage & Co.(4).......... 667,514 6.5%
One Post Office Square
Boston, MA 02109
New York Life Insurance Company(5).......................... 659,851 6.8%
51 Madison Avenue
New York, NY 10010
Triumph-Connecticut Limited Partnership(6).................. 654,591 6.4%
60 State Street
Boston, MA 02109
Paribas Group(7)............................................ 535,840 5.3%
c/o White & Case
1155 Avenue of the Americas
New York, NY 10036
DIRECTORS
Thomas L. Anderson.......................................... -- --
Raymond F. Baddour, Sc.D.(8)................................ 277,605 2.9%
Robert E. Baldini(9)........................................ 117,750 1.2%
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DEPOSITARY SHARES
--------------------------------
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OWNED CLASS
------------------ ----------
Emmett Clemente, Ph.D.(10).................................. 317,150 3.2%
Nicholas Daraviras.......................................... -- --
Joseph R. Ianelli (11)...................................... -- --
Andre L. Lamotte, Sc.D.(12)................................. 856,565 8.2%
James L. Luikart(13)........................................ 5,401,981 40.9%
Lee J. Schroeder(14)........................................ 28,500 *
EXECUTIVE OFFICERS
Eliot Lurier................................................ -- --
Gregory A. Vannatter(15).................................... 41,741 *
John G. Bernardi............................................ 10,892 *
Timothy K. Moffit(16)....................................... 126,500 1.3%
Alan R. Fox(17)............................................. 318,818 3.2%
All directors and executive officers as a group(18)......... 7,497,502 53.5%
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* Represents less than 1% of the outstanding depositary shares of the
Company.
(1) Consists of (a) 1,627,984 shares of common stock held by Furman Selz
Investors II L.P., (b) 1,278,256 shares issuable upon the exercise of
warrants held by Furman Selz Investors II L.P. within 60 days of January
31, 2000, (c) 881,556 shares issuable upon the conversion of a 7.5%
convertible note and 974,316 shares issuable upon the conversion of an
8.0% convertible subordinated note held by Furman Selz Investors II L.P.
within 60 days of January 31, 2000, (d) 139,530 shares of common stock
held by FS Employee Investors LLC, (e) 109,555 shares issuable upon the
exercise of warrants held by FS Employee Investors LLC within 60 days of
January 31,2000, (f) 75,555 shares issuable upon the conversion of a 7.5%
convertible note and 83,579 shares issuable upon the conversion of an 8.0%
convertible subordinated note held by FS Employee Investors LLC within 60
days of January 31, 2000, (g) 79,204 shares of common stock held by FS
Parallel Fund L.P., (h) 62,189 shares issuable upon the exercise of
warrants held by FS Parallel Fund L.P. within 60 days of January 31, 2000,
(i) 42,889 shares issuable upon the conversion of a 7.5% convertible note
and 47,368 shares issuable upon the conversion of an 8.0% convertible
subordinated note held by FS Parallel Fund L.P. within 60 days of January
31, 2000 and (j) 15,000 shares issuable upon the exercise of options
within 60 days of January 31,2000. These entities also received
additional securities after January 31,2000. See "Certain Relationships
and Related Transactions." Furman Selz Investors II L.P., FS Employee
Investors LLC and FS Parallel Fund L.P. are affiliates under common
control.
(2) Includes 350,105 shares issuable upon the conversion of an 8% convertible
subordinated note due June 1, 2005.
(3) Consists of (a) 738,776 shares held by Medical Science Partners, L.P., (b)
2,888 shares issuable upon the exercise of warrants held by Medical
Science Partners, L.P. within 60 days of January 31, 2000, (c) 57,142
shares held by Medical Science Partners II, L.P., (d) 11,805 shares
issuable upon the exercise of warrants held by Medical Science Partners
II, L.P. within 60 days of January 31, 2000 and (e) 13,691 shares held by
Medical Science II Co-Investment, L.P. Medical Science Partners, L.P.,
Medical Science Partners II, L.P. and Medical Science II Co-Investment,
L.P. are affiliates under common control.
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(4) Consists of (a) 582,341 shares held by Alta V Limited Partnership, (b)
78,319 shares issuable upon the exercise of warrants held by Alta V Limited
Partnership within 60 days of January 31, 2000, (c) 6,119 shares held by
Customs House Partners and (d) 735 shares issuable upon the exercise of
warrants held by Customs House Partners within 60 days of January 31, 2000.
The respective general partners of each of these funds exercise sole voting
and investment power with respect to the shares held by the funds.
(5) Includes 117,706 shares issuable upon the exercise of warrants within 60
days of January 31, 2000.
(6) Consists of 654,591 shares issuable upon the exercise of warrants within 60
days of January 31, 2000.
(7) Consists of (a) 392,307 shares held by Paribas Principal, Inc., (b) 133,333
shares issuable upon the exercise of warrants held by Paribas Principal,
Inc. within 60 days of January 31, 2000 and (c) 10,200 shares issuable upon
the exercise of warrants held by Banque Paribas within 60 days of January
31, 2000. Paribas Principal, Inc. and Banque Paribas are affiliates under
common control.
(8) Includes (a) 22,221 shares issuable upon the exercise of warrants within 60
days of January 31, 2000 and (b) 20,000 shares issuable upon the exercise
of options within 60 days of January 31, 2000.
(9) Consists of 117,750 shares issuable upon the exercise of options within 60
days of January 31, 2000.
(10) Includes 144,500 shares issuable upon the exercise of options within 60
days of January 31, 2000.
(11) Mr. Ianelli was appointed to our board of directors effective April 12,
2000.
(12) Consists of (a) the shares described in note (3), (b) 9,153 shares held by
Dr. Lamotte, (c) 3,110 shares issuable upon the exercise of warrants held
by Dr. Lamotte within 60 days of January 31, 2000 and (d) 20,000 shares
issuable upon the exercise of options held by Dr. Lamotte within 60 days of
January 31, 2000. Dr. Lamotte is the managing general partner of the
general partners of Medical Science Partners, L.P., Medical Science
Partners II, L.P. and Medical Science II Co-Investment, L.P. and may be
considered the beneficial owner of the shares held by such entities,
although Dr. Lamotte disclaims such beneficial ownership, except as to his
pecuniary interest therein.
(13) Consists of the shares described in note (1). Mr. Luikart is an executive
vice president of ING Furman Selz Investments LL and may be considered the
beneficial owner of the shares described in note (1). Mr. Luikart disclaims
such beneficial ownership.
(14) Includes 20,000 shares issuable upon the exercise of options within 60 days
of January 31, 2000.
(15) Includes 34,811 shares issuable upon the exercise of options within 60 days
of January 31, 2000.
(16) Includes 125,000 shares issuable upon the exercise of options within 60
days of January 31, 2000.
(17) Consists of (a) 31,635 shares held by Mr. Fox, (b) 5,407 shares held by the
spouse and children of Mr. Fox, (c) 3,776 shares issuable upon the exercise
of warrants within 60 days of January 31, 2000 and (d) 278,000 shares
issuable upon the exercise of options within 60 days of January 31, 2000.
(18) See notes (8) through (17).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended, requires our
executive officers and directors, and persons who beneficially own more than 10%
of a registered class of Ascent equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of our equity securities. To our knowledge, based solely on review of
the copies of the reports furnished to us and written representations that no
year-end reports on Form 5 were required, during the fiscal year ended December
31, 1999, all Section 16(a) filing requirements applicable to our executive
officers, directors and greater-than-10% stockholders were timely made other
than the filing of a Form 3 by Thomas L. Anderson in connection with his
becoming a director of the Company, a Form 5 by each of Thomas L. Anderson and
Nicholas Daraviras in connection with the grant of a stock option to purchase
depositary shares upon
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becoming a director of Ascent and a Form 3 and a Form 4 by each of the funds
affiliated with ING Furman Selz Investments LLC upon becoming a 10% stockholder
of the Company and in connection with the issuance of certain warrants and
convertible notes.
PROPOSAL 1 -- ELECTION OF DIRECTORS
We have three classes of directors currently consisting of three class I
directors, three class II directors and three class III directors. At each
annual meeting, directors are elected for a full term of three years to succeed
those whose terms are expiring. The terms of the three classes are staggered in
a manner so that only one class is elected by stockholders annually. The three
class III directors are proposed for election this year to serve as members of
our board of directors until the 2003 annual meeting of stockholders, or until
their successors are elected and qualified. The term of the class I directors
will expire at the 2001 annual meeting. The class II directors were elected at
the annual meeting last year (other than Mr. Ianelli, who was appointed by our
board of directors on April 12, 2000 to fill the vacancy created by the
resignation of Mr. Fox) for a three year term expiring at the 2002 annual
meeting. Our board of directors may not consist of more than eleven or less than
seven directors. Currently, we have fewer nominees than the number fixed by
resolutions adopted by our board of directors because we increased the number of
directorships to eleven without filling the new seats.
The persons named in the enclosed voting instruction card will vote to
elect, as class III directors, Emmett Clemente, Ph.D., Nicholas Daraviras and
Andre Lamotte, Sc.D., unless the voting instruction card is marked otherwise.
Messrs. Clemente, Daraviras and Lamotte are currently directors of Ascent. Each
class III director nominee has indicated his willingness to serve, if elected;
however, if any nominee should be unable to serve, the person acting under the
voting instruction card may vote the voting instruction card for a substitute
nominee designated by our board of directors. Our board of directors has no
reason to believe that any of the nominees will be unable to serve if elected.
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The table below includes information for each director, including the class
III director nominees, as of December 31, 1999 with respect to (a) his name and
age; (b) position and offices at Ascent; (c) principal occupation and business
experience during the past five years; (d) directorships, if any, of other
publicly held companies and (e) the year he became a director of Ascent.
PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING THE PAST FIVE YEARS AND
NAME AGE SINCE OTHER DIRECTORSHIPS
---- --- -------- -----------------------------------------
NOMINEES FOR TERMS IN EXPIRING IN
2003 (CLASS III DIRECTORS)
Emmett Clemente, Ph.D................ 61 1989 President of Ascent since December 1999;
founder of Ascent in 1989 and Chairman of
our board of directors since May 1996;
Chief Executive Officer of Ascent from
1989 to 1996; Director of Pharmaceutical
Research for Fisons Corporation, U.S., a
pharmaceutical company, from 1980 to 1989
and Director of New Product Development
and Acquisitions of Fisons from 1972 to
1980; Chief Scientist in the Consumer
Products Division of Warner-Lambert
Company, a pharmaceutical company, from
1970 to 1972; Senior Scientist of
Richardson-Merrell Company, a
pharmaceutical company, from 1967 to
1970.
Nicholas Daraviras................... 26 1999 Vice President of ING Furman Selz
Investments LLC, the general partner of
Furman Selz Investors II, L.P. and FS
Parallel Fund L.P. and the managing
member of FS Employee Investors LLC,
since March 1996; Equity research analyst
at Oppenheimer & Co. from January 1996 to
March 1996 and Ladenburg Thalmann & Co.
from October 1994 to January 1996, each
an investment banking company.
Andre L. Lamotte, Sc.D............... 51 1989 Managing General Partner of Medical
Science Ventures, L.P., the general part-
ner of MSP, the venture capital firm
founded by Harvard University, since
1989; General Manager of the Merieux
Institute, Inc., the U.S. affiliate of
Institute Merieux and Pasteur Vaccines,
from 1983 to 1988.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
(CLASS I DIRECTORS)
Thomas L. Anderson................... 51 1999 President of Alpharma USPD Inc., a
subsidiary of Alpharma Inc., a pharma-
ceutical company, since 1997; President
and Chief Operating Officer of FoxMeyer
Health Corporation, a distributor of
pharmaceutical and over-the-counter
products, from May 1993 to February 1996,
and Executive Vice President and Chief
Oper-
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PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING THE PAST FIVE YEARS AND
NAME AGE SINCE OTHER DIRECTORSHIPS
---- --- -------- -----------------------------------------
ating Officer of FoxMeyer Health Corpo-
ration from July 1991 to April 1993.
Raymond F. Baddour, Sc.D............. 74 1989 Lammot du Pont Professor Emeritus of
Chemical Engineering at the Massachu-
setts Institute of Technology since 1989;
Co-founder and director of Amgen Inc., a
biopharmaceutical company, from 1980 to
1997, and Mattek Corp., a biosciences
company; director of Hyseq, Inc., a bio-
technology company and Scully Signal Co.,
a signal device company.
Lee J. Schroeder..................... 71 1990 President of Lee Schroeder and Associ-
ates, Inc., a pharmaceutical consulting
company, since 1985; President of the
Lincoln Wholesale Drug Company, a
wholesale drug company, from 1983 to
1985; Executive Vice President of Sandoz,
Inc., U.S., a pharmaceutical company,
from 1981 to 1983; Vice President and
General Manager of Dorsey Laboratories, a
pharmaceutical company, from 1974 to
1981; Director of Interneuron
Pharmaceuticals, Inc., MGI Pharmaceuti-
cals, Inc. and Celgene Corporation, each
a pharmaceutical company.
DIRECTORS WHOSE TERMS EXPIRE IN 2002
(CLASS II DIRECTORS)
Robert E. Baldini.................... 69 1993 Vice Chairman of our board of directors
since April 1996; consultant to, and a
director of, several private and public
pharmaceutical and medical device com-
panies; Senior Vice President of Sales
and Marketing for Key Pharmaceuticals
from 1982 to 1986 and following the
acquisition of Key Pharmaceuticals by
Schering-Plough Corporation in 1986,
various positions with the Key
Pharmaceuticals Division of
Schering-Plough until 1995, last serving
as its President; Executive Director of
Sales and Promotion of Ciba-Geigy
Corporation, a pharmaceutical and chemi-
cal company, from 1977 to 1982; Vice
Chairman of the board of directors of KOS
Pharmaceuticals, Inc., a pharmaceutical
company.
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PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING THE PAST FIVE YEARS AND
NAME AGE SINCE OTHER DIRECTORSHIPS
---- --- -------- -----------------------------------------
Joseph R. Ianelli.................... 61 2000 President and Chief Executive Officer of
Renaissance Pharmaceuticals, Inc., a drug
delivery company, since 1999 and Founder,
President, Chief Executive Officer and a
Director of PharmaConnect Inc., a
publicly-traded internet-based company
focused on detailing medical products to
physicians, since 1999. Prior to this,
Mr. Ianelli served in a variety of
positions with Astra USA Inc., a pharma-
ceutical company, from 1978 to 1999,
including Director of Marketing, Vice
President, Marketing and Senior Vice
President of Business Development.
James L. Luikart..................... 54 1998 Executive Vice President of ING Furman
Selz Investments LLC, the general part-
ner of Furman Selz Investors II L.P. and
FS Parallel Fund L.P. and the managing
member of FS Employee Investors LLC,
since 1995.
Thomas L. Anderson was nominated and elected to our board of directors and
to our compensation and audit committees in connection with our strategic
alliance with Alpharma and Alpharma Inc. and pursuant to the terms of a Master
Agreement and a Loan Agreement, each dated as of February 16, 1999 and as
amended to date, by and among Ascent, Alpharma and Alpharma Inc.
James L. Luikart was nominated and elected to our board of directors and to
our compensation committee in connection with the issuance and sale of Series G
preferred stock of Ascent, notes and associated warrants pursuant to the terms
of the securities purchase agreement, dated as of May 13, 1998, as amended, by
and among Ascent and the purchasers named therein, which we refer to as the "May
1998 securities purchase agreement."
Nicholas Daraviras was nominated and elected to our board of directors and
to our audit committee pursuant to the terms of the second amendment, dated as
of February 16, 1999, to the May 1998 securities purchase agreement.
For information relating to the depositary shares beneficially owned by
each of the directors, see "Security Ownership of Certain Beneficial Owners and
Management."
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
Our board of directors met seven times (including by telephone conference)
during 1999. Messrs. Anderson and Baldini and Drs. Baddour and Lamotte each
attended less than 75% of the meetings of our board of directors during 1999.
All directors attended at least 75% of the meetings of the committees on which
they served.
Our board of directors has a compensation committee which held two formal
and a number of informal meetings during 1999. The current members of the
compensation committee are Messrs. Anderson, Luikart and Schroeder. The
compensation committee is responsible for:
- making recommendations concerning salaries and incentive compensation for
our employees and consultants;
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- establishing and approving salaries and incentive compensation for
certain senior officers and employees; and
- administering, making recommendations concerning and granting stock
options pursuant to our stock option plans.
In 1999, the compensation committee also established a subcommittee to
grant stock options to our executive officers in order to comply with Section
162(m) of the Internal Revenue Code. The current members of this subcommittee
are Dr. Lamotte and Mr. Schroeder.
Our board of directors has an audit committee, which held two formal and a
number of informal meetings during 1999. The current members of the audit
committee are Dr. Baddour and Messrs. Anderson, Baldini and Daraviras. The audit
committee is responsible for reviewing the results and scope of the audit and
other services provided by our independent public accountants.
We do not have a nominating committee or a committee serving a similar
function. Nominations are made by and through the full board of directors.
COMPENSATION OF DIRECTORS
Messrs. Anderson, Baldini, Ianelli and Schroeder and Dr. Baddour are each
paid $6,000 each year as compensation for serving on our board of directors.
Except as set forth below, no other directors currently are compensated for
serving on our board of directors. All of our directors are reimbursed for their
expenses incurred in connection with their attendance at board of directors and
committee meetings.
Under our 1997 Director Stock Option Plan, options to purchase 15,000
depositary shares are granted to each new non-employee director upon his or her
initial election to our board of directors. On July 23, 1999, Messrs. Anderson
and Daraviras each were granted an option to purchase 15,000 depositary shares.
Options to purchase 5,000 depositary shares are granted to each non-employee
director on May 1 of each year. On May 1, 1999, Messrs. Baldini, Luikart and
Schroeder and Drs. Baddour and Lamotte each received an option to purchase 5,000
depositary shares. On April 12, 2000, Mr. Ianelli was also granted an option to
purchase 5,000 depositary shares in connection with his initial election to our
board of directors. All options vest on the first anniversary of the date of
grant. However, the exercisability of these options accelerates upon the
occurrence of a change in control of Ascent, as provided for in the director
plan. A total of 300,000 depositary shares may be issued upon the exercise of
stock options granted under the director plan. With the exception of the options
granted on the date of our initial public offering, the exercise price of all
options granted under the director plan has equaled the closing price of a
depositary share on the date of grant as reported on the OTC Bulletin Board or
of a share of common stock on the Nasdaq National Market, as applicable. As of
April 15, 2000, options to purchase an aggregate of 135,000 depositary shares
were outstanding under the director plan. No options to purchase depositary
shares under the 1997 Director Stock Option Plan had been exercised as of April
15, 2000.
We were party to a written consulting agreement with Mr. Robert E. Baldini,
vice chairman of our board of directors, dated April 1, 1996, as amended.
Pursuant to this agreement, Mr. Baldini provides consulting services as
requested by us in return for compensation of $1,500 per day. Mr. Baldini did
not receive any consulting fees in 1999 pursuant to this agreement. Upon
execution of this agreement in 1996, we granted Mr. Baldini an option under our
1992 Equity Incentive Plan exercisable for 85,000 depositary shares in four
equal annual installments. This consulting agreement expired on April 1, 2000.
Ascent and Mr. Baldini expect to continue this consulting relationship.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for each of the fiscal
years ended December 31, 1999, 1998 and 1997 for (a) the persons who served as
our chief executive officer or president at any time during the fiscal year
ended December 31, 1999, (b) our other most highly compensated executive
officer, other than the officers covered in (a) above, whose total annual salary
and bonus exceeded $100,000 for the fiscal year ended December 31, 1999 and who
was serving as an executive officer as of such date (c) the two persons for whom
we would have disclosed information pursuant to (b) but for the fact that the
individuals were not serving as executive officers as of December 31, 1999. The
foregoing executive officers are referred to as the "named executive officers."
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- --------------------------- ---- -------- ------- ------------------- ------------
Emmett Clemente, Ph.D.......... 1999 $214,300 (2) 167,860(2) $45,733(3)
Chairman of the board of 1998 $210,300 $42,060 -- $17,833(3)
directors and president(1) 1997 $201,083 $47,232 -- $ 7,705(3)
Alan R. Fox.................... 1999 $217,436 $44,340 125,000 $ 4,264(5)
President and chief 1998 $217,700 $43,540 -- --
executive officer(4) 1997 $207,753 $36,500 -- --
Gregory A. Vannatter........... 1999 $177,500 (2) 110,500(2) --
Executive vice president, 1998 $167,500 $33,500 50,000(6) --
sales and marketing 1997 $153,000 -- -- $32,436(7)
Timothy K. Moffitt............. 1999 $151,911 $32,580 25,000 $50,386(9)
Vice president, sales(8) 1998 $154,400 $30,880 100,000(10) $ 3,687(6)
1997 $ 95,192 -- 40,000(11) $55,313(6)
John G. Bernardi............... 1999 $117,318 $20,940 25,000 $29,530(5)
Vice president, finance 1998 $133,600 $26,720 17,500(13) --
and treasurer(12) 1997 $128,092 -- -- --
- ---------------
(1) Dr. Clemente became president of Ascent, a position he previously held
until 1996, as of December 17, 1999.
(2) Under the 1997 Executive Compensation Plan, Dr. Clemente received a bonus
of $58,933 and Mr. Vannatter received a bonus of $48,813, each of Dr.
Clemente and Mr. Vannatter elected to receive their respective bonuses in
stock options in lieu of cash. The stock options are reflected in the
securities underlying options column and is based on an exercise price of
$1.375 per share, the fair market value of the depository shares on the
date of grant. See "Option Grants Table."
(3) Amounts consist of life insurance premiums paid by Ascent for the benefit
of Dr. Clemente.
(4) Mr. Fox resigned as president and chief executive officer of Ascent as of
December 16, 1999.
(5) Amounts consist of severance pay paid by Ascent to the named executive
officer in connection with the resignation of the named executive officer.
See footnotes (4), (8) and (12). Also see note (9) for description of
additional severance pay paid by Ascent.
(6) Includes 18,000 options which were granted and repriced in 1998.
(7) Relocation costs, including related tax adjustments, paid by Ascent on
behalf of the named executive officer.
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(8) Mr. Moffitt resigned as vice president, sales of Ascent as of December 17,
1999.
(9) Consists of $46,000 in forgiveness of a promissory note by Ascent and
$4,386 of severance pay in connection with the resignation of Mr. Moffitt.
See note (8).
(10) Includes 40,000 options which were granted in 1997 and repriced in 1998 and
20,000 options which were granted and repriced in 1998. See note (11).
(11) These options were repriced in 1998. See note (10).
(12) Mr. Bernardi resigned as vice president, finance and treasurer of Ascent as
of October 8, 1999.
(13) Includes 16,000 options which were granted and repriced in 1998.
OPTION GRANTS TABLE
The following table sets forth information for each of the Ascent named
executive officers with respect to the grant of stock options to purchase
depositary shares during fiscal 1999.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES OR BASE EXPIRATION --------------------------
NAME GRANTED IN FISCAL YEAR PRICE DATE 5% 10%
- ---- ---------- ---------------- -------- ---------- ---------- ------------
Emmett Clemente, Ph.D.... 125,000(2) 15.5% $6.750 02/10/09 $530,630 $1,344,720
42,860(3) 5.3% $1.375 01/14/10 $ 37,062 $ 93,923
Alan R. Fox.............. 125,000(4) 15.5% $6.750 03/15/00 $ 46,342 $ 92,896
Gregory A. Vannatter..... 25,000(2) 3.1% $6.750 02/10/09 $106,126 $ 268,944
50,000(5) 6.2% $1.125 12/08/09 $ 35,375 $ 89,648
35,500(3) 4.4% $1.375 01/14/10 $ 30,698 $ 77,795
Timothy K. Moffitt....... 25,000(4) 3.1% $6.750 03/16/00 $ 9,292 $ 18,628
John G. Bernardi......... 25,000 3.1% $6.750 10/08/99 (7) (7)
- ---------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of depositary shares on the date of option grant over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect our estimate of
future stock price growth. Actual gains, if any, on stock option exercise
and depositary shares holdings are dependent on the timing of the exercise
and the future performance of the depositary shares. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the individuals.
(2) The option is exercisable in three equal annual installments beginning on
February 10, 2001.
(3) The option was granted on January 14, 2000 in lieu of a cash bonus to the
named executive officer, which was earned in fiscal 1999, and is exercisable
in full on January 14, 2001. See "Summary Compensation Table."
(4) This option was accelerated in full, and became immediately exercisable, in
connection with the resignation of Mr. Fox. This option expired without
being exercised on March 15, 2000.
(5) The option is exercisable in four equal annual installments beginning on
December 8, 2000.
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(6) This option was accelerated in full, and became immediately exercisable, in
connection with the resignation of Mr. Moffit. This option expired on March
16, 2000 without being exercised.
(7) The option expired without being exercised prior to December 31, 1999 and,
accordingly, there were no options underlying the grant at fiscal year end
pursuant to which the potential realizable price appreciation could be
calculated.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION TABLE
The following table sets forth information regarding the number and value
of exercisable and unexercisable options held by each of the named executive
officers on December 31, 1999. No stock options were exercised by any of the
named executive officers in fiscal 1999.
FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF SHARES UNDERLYING IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
------------------------------ ------------------------------
NAME EXERCISEABLE UNEXERCISEABLE EXERCISEABLE UNEXERCISEABLE
- ---- ------------ -------------- ------------ --------------
Emmett Clemente, Ph.D. ................. 144,500 167,860 $625 --
Alan R. Fox(2).......................... 278,000 -- -- --
Gregory A. Vannatter.................... 34,811 155,439 -- $6,250
Timothy K. Moffitt(3)................... 125,000 -- -- --
John G. Bernardi........................ 25,187 -- -- --
- ---------------
(1) The closing price for depositary shares as reported on the OTC Bulletin
Board on December 31, 1999 was $1.25 per share. The value of these options
is calculated on the basis of the difference between the option exercise
price and $1.25, multiplied by the number of depositary shares underlying
the option.
(2) On March 15, 2000 Mr. Fox exercised options for 97,000 shares at an
exercise price of $2.35 per share. Mr. Fox's remaining options expired on
March 15, 2000 without being exercised.
(3) These options expired on March 16, 2000 without being exercised.
EMPLOYMENT AGREEMENT
We are a party to an employment agreement with Dr. Emmett Clemente for the
period commencing March 16, 1994 and ending March 15, 2001, unless extended by
mutual agreement of the parties. Under this agreement, Dr. Clemente is entitled
to receive (a) an annual base salary of $210,300, which may be adjusted, and (b)
an annual bonus of up to 30% of his annual base salary based upon the attainment
of performance criteria set by our board of directors annually (with the
potential to exceed 30% of his annual base salary, at the discretion of our
board of directors, in the event that we achieve break-even cash flow). In
addition, as part of Dr. Clemente's annual compensation review, our board of
directors is required to consider in its sole discretion granting Dr. Clemente a
stock option to acquire additional depositary shares. In the event Dr.
Clemente's employment is terminated by us without cause, Dr. Clemente will
continue to receive (a) his annual base salary for the one-year period
commencing on the effective date of termination and (b) benefits for the
18-month period following the effective date of termination. However, any of the
above payments or benefits which we are required to provide will be reduced
dollar for dollar by any payments or benefits Dr. Clemente receives from any
other employer during the period we are required to provide these payments or
benefits. Following the cessation or termination of his employment by us, Dr.
Clemente has agreed not to
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compete with us for two years with respect to any products developed, produced,
marketed or sold by us during his tenure with us.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This report is submitted by the compensation committee of our board of
directors, which is responsible for establishing and administering our executive
compensation policies, including for the chief executive officer and the other
named executive officers, and setting the compensation for these individuals.
GENERAL COMPENSATION POLICY
The compensation committee, including its stock plan subcommittee, seeks to
achieve the following three broad goals in connection with Ascent's executive
compensation programs and decisions regarding individual compensation:
- structure executive compensation programs in order to enable us to
attract and retain qualified executives;
- establish compensation programs that reward executives for the
achievement of our business objectives and/or in the individual
executive's particular area of responsibility, and thereby create a
performance-oriented environment; and
- provide executives with an equity interest in Ascent so as to link a
portion of the executive's compensation with the performance of Ascent
common stock.
PROCEDURES FOR ESTABLISHING COMPENSATION
Ascent performs periodic reviews of executive compensation to confirm the
competitiveness of the overall executive compensation package as compared with
industry peers who compete with Ascent for prospective employees who possess the
scientific and technical knowledge and skills required to develop, manufacture
and market pediatric drug products.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The compensation programs for Ascent's executives consist principally of
three elements based upon the foregoing objectives: base salary, cash bonuses
and stock-based equity incentives in the form of participation in Ascent's stock
option plans.
Base Salary. In establishing base salaries for the executive officers,
including the chief executive officer, the compensation committee: (a) monitors
salaries at other companies, particularly those that are in the same industry as
Ascent or related industries and/or located in the same general geographic area
as Ascent; (b) considers historic salary levels of the individual and the nature
of the individual's responsibilities; (c) compares the individual's base salary
with those of other executives at Ascent; and (d) considers general economic
conditions, our financial performance and the individual's performance, to the
extent determined to be appropriate.
Annual Incentive Compensation. The compensation committee considers the
payment of cash bonuses pursuant to the 1997 Executive Bonus Plan, as amended
and restated, as part of its compensation program. In this regard, the
compensation committee determined to pay bonuses to Messrs. Clemente, Bernardi,
Fox, Vannatter and Moffitt for 1999. Dr. Clemente and Mr. Vannatter elected to
receive their bonuses in the form of stock options. In establishing the amounts
of the cash bonuses for 1999, the compensation committee considered Ascent's
achievements in 1999, including the consummation of our strategic alliance with
Alpharma and the approval by the U.S. Food and Drug Administration for Ascent to
market Primsol(R) Solution in 1999, and the roles played by the named executive
officers in accomplishing these achievements.
Long-Term Incentive Compensation. The compensation committee uses stock
options as a significant element of the compensation package of Ascent's
executive officers, including the chief executive officer,
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because they provide an incentive to executives to maximize stockholder value
and because they reward the executives only to the extent that stockholders also
benefit. The compensation committee believes that it is to Ascent's advantage to
increase the interest of executives in Ascent's welfare, as such employees share
the primary responsibility for the management and growth of Ascent.
Our board of directors currently grants stock options based on the
recommendation of the compensation committee, or the subcommittee thereof. It is
not the policy of the compensation committee to recommend the grant of stock
options to executives annually, and the timing of grants depends upon a number
of factors, including (a) new hires of executives, (b) the executives' current
stock and option holdings, (c) vesting schedules of outstanding options and (d)
the current stock price, and such other factors as the compensation committee
deems relevant. In 1999, after reviewing Ascent's executive officers' stock and
option holdings, the compensation committee determined to recommend the grant of
stock options to Dr. Clemente and Messrs. Bernardi, Fox, Moffitt and Vannatter.
When recommending the grant of stock options, it has generally been the policy
of the compensation committee to recommend that the exercise price of the
options be equal to or greater than the fair market value of Ascent's depositary
shares on the date of grant. For additional information concerning option grants
to certain named executive officers, see the table under the heading "Option
Grants in Last Fiscal Year." Commencing in 1999, in order to comply with Section
162(m) of the Internal Revenue Code, an executive stock option subcommittee of
the compensation committee was delegated the authority to grant options to
executive officers.
CERTAIN TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1.0 million paid to the
chief executive officer and the four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. In this regard, Ascent has
limited the number of shares subject to stock options which may be granted to
Company employees in a manner that complies with the performance-based
requirements of Section 162(m). While the committee does not currently intend to
qualify its other compensatory awards as performance-based compensation, it will
continue to monitor the impact of Section 162(m) on us. In any event, there can
be no assurance that compensation attributable to stock options granted under
the Company's stock plans will be exempt from Section 162(m) as
performance-based compensation.
COMPENSATION COMMITTEE
Thomas L. Anderson
James L. Luikart
Lee J. Schroeder
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of our Company's compensation committee are Messrs.
Anderson, Luikart and Schroeder. No executive officer of Ascent has served as a
director or member of the compensation committee (or other committee serving an
equivalent function) of any other entity, one of whose executive officers served
as a director of or member of our compensation committee.
Since January 1, 1999, we have engaged in the transactions described below
under "Certain Relationships and Related Transactions" with affiliates of
Messrs. Anderson and Luikart, directors of Ascent and members of our
compensation committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1999, we entered into or engaged in the following
transactions with the following directors, executive officers and 5%
stockholders of Ascent, and their affiliates:
ING Furman Selz Investments LLC. On June 1, 1998, we issued and sold to
funds affiliated with ING Furman Selz Investments LLC (which we refer to as ING
Furman Selz in this proxy statement) and BancBoston Ventures Inc. an aggregate
of 7,000 shares of Series G preferred stock exchangeable into $7.0 million
aggregate principal of 8% convertible subordinated notes of Ascent, $9.0 million
aggregate principal amount of 8% seven-year subordinated notes and seven-year
warrants to purchase 2,116,958 shares of Ascent common stock at a per share
exercise price of $4.75 for an aggregate purchase price of $16.0 million. On
February 16, 1999, in connection with and as a condition to the strategic
alliance with Alpharma, we entered into a second amendment to the May 1998
securities purchase agreement. Pursuant to the second amendment, we reduced the
exercise price of the warrants from $4.75 per share to $3.00 per share, at which
time the warrants were exercised, and issued to the holders of these warrants an
aggregate of 300,000 depositary shares at a price of $3.00 per share. On May 25,
1999, we entered into an additional agreement with the purchasers of Series G
preferred stock providing that our obligation under the terms of the Series G
preferred stock and 8% subordinated notes to make dividend and interest payments
on June 1, 1999 would be deferred until July 1, 1999 and that the dividends and
interest would accrue at a rate of 9% per annum during the period from June 1,
1999 through July 1, 1999. In addition, the Series G preferred stock was
exchanged for 8% convertible subordinated notes in accordance with the existing
terms of the Series G preferred stock.
On June 1, 1998, in connection with the Series G preferred stock financing
described above, we entered into a financial advisory services fee agreement
with ING Furman Selz and BancBoston Ventures Inc. under which ING Furman Selz
agreed to provide ongoing customary financial advisory services to us at the
times and on the matters mutually agreed to by us and ING Furman Selz until June
1, 2003 for an advisory fee of $150,000 per year. On June 1, 1998, in connection
with the Series G preferred stock financing, we paid ING Furman Selz a closing
fee of $381,250 and BancBoston Ventures, Inc. a closing fee of $118,750. In
addition, in 1998, we paid ING Furman Selz financial advisory services fees of
$112,500 under this agreement. On February 16, 1999, we amended this agreement
in connection with our strategic alliance with Alpharma and Alpharma Inc. such
that in lieu of paying the annual $150,000 financial advisory services fee, we
issued ING Furman Selz 150,000 depositary shares upon the consummation of our
strategic alliance with Alpharma, and the financial advisory services fee
agreement was terminated upon the issuance of the shares.
On July 1, 1999, Ascent and the Series G purchasers entered into a third
amendment to the May 1998 securities purchase agreement under which funds
affiliated with ING Furman Selz agreed to loan us up to $4.0 million. Upon
executing the third amendment, we borrowed $2.0 million from these funds and
issued them 7.5% convertible subordinated notes in the aggregate principal
amount of up to $4.0 million and warrants to purchase 300,000 depositary shares.
On each of December 30, 1999 and February 14, 2000, we borrowed an additional
$1.0 million from these funds and issued warrants to purchase 150,000 depositary
shares. All of the
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warrants we have issued under the third amendment have an exercise price of
$3.00 per share and expire on July 1, 2006. The 7.5% convertible subordinated
notes issued under the third amendment expire on July 1, 2004 and are
convertible into depositary shares at a conversion price of $3.00 per share in
accordance with the terms of the May 1998 securities purchase agreement.
Interest on the notes is due and payable quarterly, in arrears, on the last day
of each calendar quarter, and the outstanding principal on the notes is payable
in full on July 1, 2004.
On October 20, 1999, in connection with the modification of our strategic
alliance with Alpharma, which is described in Proposal 2, we entered into a
fourth amendment to the May 1998 securities purchase agreement under which funds
affiliated with ING Furman Selz agreed to provide up to $10.0 million in
additional financing to us for general corporate purposes through 7.5%
convertible subordinated notes due July 1, 2004. In return, we issued these
funds warrants to purchase 1,000,000 depositary shares at a price of $3.00 per
share and agreed to issue warrants to purchase up to an additional 4,000,000
depositary shares at an exercise price of $3.00 per share in connection with our
borrowings under this credit facility.
Mr. James L. Luikart, a director of Ascent, is an executive vice president
of ING Furman Selz Investments LLC, the general partner of Furman Selz Investors
II L.P. and FS Parallel Fund L.P. and the managing member of FS Employee
Investors LLC, which collectively constitute a greater than 5% stockholder of
Ascent. Mr. Nicholas Daraviras, also a director of Ascent, is also vice
president of ING Furman Selz Investments LLC.
Alpharma and Alpharma Inc. On February 16, 1999, we entered into a series
of agreements with Alpharma and Alpharma Inc. Under these agreements, Alpharma
has agreed to provide up to $40 million in financing to us through a 7.5%
convertible subordinated note due in 2004 and 2005. Up to $12 million of such
$40.0 million could be used for general corporate purposes, with $28 million
reserved for projects and acquisitions intended to enhance the growth of Ascent.
We borrowed $4.0 million of the $40.0 million immediately upon the execution of
the agreements. We subsequently borrowed additional money under these agreements
as described below. Alpharma's obligation to loan the balance of the $40.0
million is subject to additional conditions.
Under the original strategic alliance agreements, Alpharma had the option,
during a specified period during the first half of year 2002, to acquire our
then-outstanding shares of common stock for cash at a price to be determined by
an earnings-based formula based upon our financial results in fiscal 2001. In
connection with our granting this option, we entered into a merger agreement
with one of our subsidiaries pursuant to which the subsidiary merged with us and
each share of Ascent common stock was converted into one depositary receipt,
represented by a depositary share.
Under the strategic alliance agreements, Alpharma's option to acquire
Ascent for cash in 2002 was at the higher of $140 million or a price equal to
12.2 times Ascent's 2001 pre-tax operating income, adjusted to exclude any
research and development expense in excess of $1.5 million and interest on
selected securities. If Alpharma did not exercise this option, we would be
required to repay the debt outstanding under the $40.0 million credit facility
in installments from 2004 into 2005. We would also have the right to prepay such
debt following the expiration of the purchase option until December 31, 2002 at
an amount equal to 125% of the outstanding principal on December 31, 2001, plus
accrued interest. If this right is not exercised, the debt becomes convertible
into shares of Ascent common stock at a conversion price of $7.125 per share.
On July 1, 1999, we entered into a supplemental agreement with Alpharma
amending our strategic alliance agreements with them. Under the supplemental
agreement, we agreed, among other things, (i) to form a screening committee,
comprised of a nominee of each of Alpharma and ING Furman Selz and two nominees
of Ascent, to approve, among other things, any changes in our operating plan,
and (ii) to additional restrictions on our rights to borrow the remaining funds
under our loan agreement with Alpharma. Under the amended loan agreement, we
could only use the $8.0 million that remained outstanding as of July 1, 1999 for
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general corporate purposes as set forth in our operating plan, as updated from
time to time, and we may only borrow the remaining $28.0 million for
acquisitions and research and development projects approved by the screening
committee. The supplemental agreement also amended our strategic alliance
agreements in order to reflect the 7.5% convertible subordinated notes issued to
funds affiliated with ING Furman Selz on the same date under the third amendment
to the May 1998 securities purchase agreement and to treat such notes in the
same manner as our existing 8% subordinated notes and the 8% convertible notes
issuable upon conversion of our Series G preferred stock.
On October 15, 1999, Ascent and Alpharma entered into a second supplemental
agreement that further amended the strategic alliance agreements. Under the
second supplemental agreement, Ascent and Alpharma agreed, among other things
(and subject to the approval by our stockholders as described in Proposal 2
herein), (i) to delay the exercise period of Alpharma's call option by 12 months
to the first half of 2003, (ii) to change the calculation of the exercise price
of Alpharma's option from (a) the greater of $140 million or a price equal to
12.2 times Ascent's 2001 pre-tax operating income, adjusted to exclude any
research and development expense in excess of $1.5 million and interest on
selected securities, to (b) the greater of $150 million or a price equal to 12.2
times Ascent's 2002 pre-tax operating income, as similarly adjusted, and (iii)
to modify certain conditions on Ascent's access to funds under the Alpharma
credit facility. In addition, we agreed that, to the extent we borrowed funds
from Alpharma to finance the acquisition of products or businesses, we would
grant Alpharma a security interest in such products or businesses. For
additional information concerning transactions with Alpharma, see "Proposal 2 --
Approval of Certain Amendments to the Depositary Agreement and the Loan
Agreement and the Delay by One Year of the Period During which the Alpharma Call
Option May be Exercised." Mr. Thomas L. Anderson, a director of Ascent, is
president of Alpharma.
Voting Agreement. In connection with our strategic alliance with Alpharma
as described above, Alpharma and Alpharma Inc. each agreed that, until the call
option terminates or expires, in any election of directors and in any other vote
to be taken by our stockholders as to any matter, whether taken at an annual or
special meeting of stockholders or by written action, Alpharma and Alpharma Inc.
will each, and will cause their respective affiliates to, vote any depositary
shares which Alpharma, Alpharma Inc. or their respective affiliates hold, in the
same manner and in the same proportion as the votes cast by the other holders of
depositary shares.
Registration Rights. Some persons and entities, including funds affiliated
with ING Furman Selz and other former purchasers of Ascent Series G preferred
stock and related warrants, Triumph-Connecticut Limited Partnership and
Alpharma, are entitled to registration of their depositary shares under the
Securities Act, including depositary shares acquired upon the conversion or
exercise of warrants and notes, under the terms of registration agreements
between us and such persons and entities. The registration agreements generally
provide that, in the event we propose to register any of our securities under
the Securities Act, the holders of registration rights are entitled to include
their depositary shares in the registration, subject to the right of the
managing underwriter of any underwritten offering to exclude some or all of
their shares from the registration for marketing reasons. Some holders of
registration rights also have the right to require us to register their
depositary shares under the Securities Act, including depositary shares that may
be acquired upon the conversion or the exercise of warrants and notes if the
holders of such depositary shares holding specified percentages of registrable
shares so request, and we are required to use our best efforts to effect the
registration, subject to some conditions and limitations. We are generally
required to bear the expense of all registrations.
We believe that the securities issued in the preceding transactions were
sold at their then fair market value and that the terms of the transactions
described above were no less favorable than we could have obtained from
unaffiliated third parties.
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STOCK PERFORMANCE GRAPH
The stock performance graph below compares the percentage change in
cumulative stockholder return on Ascent depositary shares for the period from
May 29, 1997 (the date Ascent capital stock was first publicly traded) through
December 31, 1999 with the cumulative total return on (a) the Nasdaq National
Market Index and (b) the Nasdaq Pharmaceuticals Index.
This graph assumes the investment of $100.00 in Ascent depositary shares
(at the initial public offering price of Ascent common stock), in the Nasdaq
National Market Index and in the Nasdaq Pharmaceuticals Index on May 29, 1997
and assumes dividends are reinvested. Prior to May 29, 1997, neither Ascent
common stock nor depositary shares were registered under the Exchange Act.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
[PERFORMANCE GRAPH]
NASDAQ PHARMACEUTICALS NASDAQ NATIONAL MARKET
INDEX INDEX ASCENT PEDIATRICS
---------------------- ---------------------- -----------------
May 29, 1997 100.00 100.00 100.00
Dec. 31, 1997 100.44 112.86 65.28
Dec. 31, 1998 127.77 159.03 47.92
Dec. 31, 1999 238.76 287.31 13.89
- ---------------
* Total return based on $100.00 initial investment and reinvestment of dividends
PROPOSAL 2 -- APPROVAL OF CERTAIN AMENDMENTS TO
THE DEPOSITARY AGREEMENT AND THE LOAN AGREEMENT
AND THE DELAY BY ONE YEAR OF THE PERIOD DURING
WHICH THE ALPHARMA CALL OPTION MAY BE EXERCISED
On October 15, 1999, we entered into a second supplemental agreement with
Alpharma, Alpharma Inc., State Street Bank and Trust Company and certain lenders
to Ascent, including ING Furman Selz, modifying our strategic alliance with
Alpharma. A copy of the second supplemental agreement is attached to this proxy
statement as Annex A.
Under the original terms of the strategic alliance, which was consummated
in July 1999, Alpharma agreed to loan us up to $40 million from time to time in
accordance with the terms of a loan agreement among
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the parties and pursuant to a 7.5% convertible subordinated note due in 2004 and
2005. In addition, as part of the strategic alliance, we assigned to Alpharma a
call option, exercisable in 2002, to acquire the then-outstanding shares of our
common stock for cash at a price to be determined by a formula based on Ascent's
financial results in 2001 and on such other terms as are set forth in the
depositary agreement.
Under the second supplemental agreement, Ascent and Alpharma agreed, among
other things:
- to modify certain conditions to Ascent's ability to borrow funds under
the loan agreement;
- to require Ascent, in connection with certain loans made by Alpharma
under the loan agreement to finance the acquisition of products or
businesses by Ascent, to grant a security interest in such products or
businesses to Alpharma; and
- to amend the depositary agreement and the loan agreement to reflect
additional loans made to Ascent by ING Furman Selz and certain other
security holders of Ascent.
In addition, Ascent and Alpharma agreed:
- to delay by one year from 2002 to 2003 the period during which Alpharma
may exercise its call option; and
- consistent with the one-year delay, to change the calculation of the
exercise price of Alpharma's call option from (a) the greater of $140
million or a price equal to 12.2 times Ascent's 2001 pre-tax operating
income, adjusted to exclude any research and development expense in
excess of $1.5 million and interest on selected securities, to (b) the
greater of $150 million or a price equal to 12.2 times Ascent's 2002
pre-tax operating income, as similarly adjusted.
In order to effect the parties' agreement regarding Alpharma's call option,
Ascent and Alpharma agreed in the second supplemental agreement to amendments to
the depositary agreement to reflect the changed call option exercise period and
the changed call option exercise price and to other amendments to the depositary
agreement and the loan agreement to conform certain provisions of such
agreements to the new terms of Alpharma's call option. These amendments are set
forth in Section 3.5 through Section 3.16 of the second supplemental agreement,
which is attached to this proxy statement as Annex A, and provide, among other
things, that:
- the call option exercise price will be calculated based on the Company's
2002 operating income as set forth in the Company's financial statements
for the year ending December 31, 2002;
- the Company will deliver its 2002 financial statements and its
calculation of the call option exercise price to Alpharma by March 31,
2003 instead of March 31, 2002 as currently provided in the depositary
agreement;
- the Company and Alpharma will take all actions necessary to make the
filings required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, relating to the possible exercise of the call option
by September 30, 2002 instead of September 30, 2001 as currently provided
in the depositary agreement;
- although the payment dates for the 7.5% convertible subordinated note
issued to Alpharma have not been extended, the Company's right to prepay
all of the outstanding principal amount of the 7.5% convertible
subordinated note, together with accrued and unpaid interest, will expire
on December 31, 2003 instead of December 31, 2002 as currently provided
in the loan agreement;
- Alpharma may exercise its top-off right to cause us to borrow under the
loan agreement an amount that would result in the full $40 million being
borrowed by Ascent at any time from January 1, 2003 to February 28, 2004
instead of from January 1, 2002 to February 28, 2003 as currently
provided in the loan agreement; and
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- Ascent may not expend more than $7.5 million on research and development
activities in 2002 instead of 2001 as currently provided in the loan
agreement.
Under the terms of the second supplemental agreement, the effectiveness of
the foregoing amendments is subject to the stockholder approval being sought at
the annual meeting. If the stockholders do not approve the amendments to the
depositary agreement and the loan agreement, the provisions of the second
supplemental agreement other than the foregoing amendments will remain in full
force and effect, and the call option will remain exercisable by Alpharma during
2002 at an exercise price determined based upon our financial results in 2001.
Reasons for the Call Option Amendment. In reaching its decision to approve
the call option amendment provisions of the second supplemental agreement, our
board of directors considered, among other things, certain delays that we had
experienced in obtaining the U.S. Food and Drug Administration approval to
market our Primsol and Orapred products. Our board of directors recognized that,
due to such delays, Primsol and Orapred would not be introduced to market at the
time previously anticipated by us when we entered into our strategic alliance
with Alpharma. Our board of directors concluded that delaying the period of the
call option by 12 months and postponing the fiscal year used to determine the
financial results upon which the exercise price for the call option would be
based from 2001 to 2002 would increase the likelihood that more significant
revenues from sales of our Primsol and Orapred products would be included in the
operating results upon which the call option exercise price is based, which
would likely increase the exercise price of the call option.
FOR THESE REASONS, OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS
APPROVE THE AMENDMENTS TO THE CALL OPTION AS SET FORTH IN SECTIONS 3.5 THROUGH
3.16 OF THE SECOND SUPPLEMENTAL AGREEMENT ATTACHED TO THIS PROXY STATEMENT AS
ANNEX A.
Mr. Thomas L. Anderson, president of Alpharma, and a director of Ascent,
may have interests in this vote that are different from, and in addition to,
those of our stockholders. Mr. Anderson, pursuant to our strategic alliance
agreements with Alpharma, recused himself from the meeting of the board of
directors at which the above transaction was approved and abstained from voting
on this matter as a director of Ascent.
PROPOSAL 3 -- APPROVAL OF THE AMENDMENT TO THE
1999 STOCK INCENTIVE PLAN
GENERAL
Our 1999 Stock Incentive Plan currently provides for the grant of incentive
and nonstatutory stock options and restricted stock awards to employees,
officers and directors of, and consultants and advisors to, Ascent to purchase
up to an aggregate of 500,000 depositary shares. Our 1999 Stock Incentive Plan
is intended to supplement our 1992 Equity Incentive Plan, which expires in 2002
and under which only 256,691 shares remained available for new options as of
March 15, 2000.
In April 2000, our board of directors adopted, subject to stockholder
approval, an amendment to the 1999 Stock Incentive Plan, providing for an
increase in the number of depositary shares available for issuance under the
plan from an aggregate of 500,000 to 1,250,000. Our board of directors believes
that awards under the 1999 Stock Incentive Plan, including stock options, have
been and will continue to be an important compensation element in attracting and
retaining key employees who are expected to contribute to our growth and
success. OUR BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT IS IN THE BEST
INTEREST OF ASCENT AND ITS STOCKHOLDERS, AND RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.
Under the 1999 Stock Incentive Plan, as of March 15, 2000, 491,750
depositary shares were outstanding under the plan, 8,250 remained available for
new option grants and no options had been exercised. No restricted stock awards
had been made under the plan. As of March 15, 2000, we had 83 full-time
employees, all of whom were eligible to participate in the plan. Through that
date, under the plan, Dr. Emmett Clemente,
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president and a director, had received 62,860 options to purchase depositary
shares, Mr. Vannatter, executive vice president, sales and marketing, had
received 85,500 options to purchase depositary shares and all current executive
officers as a group had received 148,360 options to purchase depositary shares.
As a group, all employees, excluding the named executive officers, had received
an aggregate of 343,390 options to purchase depositary shares through March 15,
2000. The granting of awards under the plan is discretionary and the Company
cannot now determine the number or type of awards to be granted in the future to
any particular person or group. On April 27, 2000, the last reported sale price
of a depositary share on the OTC Bulletin Board was $1.75 per share.
DESCRIPTION OF AWARDS
The plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code, nonstatutory stock
options, restricted stock awards and other stock-based awards, including the
grant of shares based upon certain conditions, the grant of securities
convertible into depositary shares and the grant of stock appreciation rights.
Incentive Stock Options And Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of depositary shares at a specified
option price and subject to such other terms and conditions as are specified in
connection with the option grant. Options may be granted at an exercise price
which may be less than, equal to or greater than the fair market value of
depositary shares on the date of grant. Under present law, however, incentive
stock options and options intended to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code may not be granted at an
exercise price less than the fair market value of a depositary share on the date
of grant (or less than 110% of the fair market value in the case of incentive
stock options granted to optionees holding more than 10% of the total combined
voting power of Ascent or any of its subsidiaries). Options may not be granted
for a term in excess of ten years (5 years in the case of incentive stock
options granted to optionees holding more than 10% of the total combined voting
power of Ascent or any of its subsidiaries). The plan permits our board of
directors to determine the manner of payment of the exercise price of options,
including through payment by cash, check or in connection with a "cashless
exercise" through a broker, by surrender to us of depositary shares, by delivery
to us of a promissory note, or by any other lawful means.
Restricted Stock Awards. Restricted stock awards entitle recipients to
acquire depositary shares, subject to our right to repurchase all or part of the
depositary shares from the recipient in the event that the conditions specified
in the applicable award are not satisfied prior to the end of the applicable
restriction period established for the award.
Other Stock-Based Awards. Under the plan, our board of directors has the
right to grant other awards based upon depositary shares having the terms and
conditions as our board of directors may determine, including the grant of
shares based upon certain conditions, the grant of securities convertible into
depositary shares and the grant of stock appreciation rights.
ELIGIBILITY TO RECEIVE AWARDS
Our officers, employees, directors, consultants and advisors (and those of
any future subsidiaries) are eligible to be granted awards under the 1999 Stock
Incentive Plan. Under present law, however, incentive stock options may only be
granted to employees. The maximum number of shares with respect to which awards
may be granted to any participant under the plan may not exceed 400,000 shares
per calendar year.
ADMINISTRATION
The 1999 Stock Incentive Plan is administered by our board of directors.
Our board of directors has the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the plan and
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to interpret the provisions of the plan. Pursuant to the terms of the 1999 Stock
Incentive Plan, our board of directors may delegate authority under the plan to
one or more committees of our board of directors, and subject to some
limitations, to one or more of our executive officers. Our board of directors
has authorized a subcommittee of the compensation committee to administer some
aspects of the plan, including the granting of options to executive officers.
Subject to any applicable limitations contained in the plan, our board of
directors, the compensation committee, or any other committee or subcommittee or
executive officer to whom our board of directors delegates authority, as the
case may be, selects the recipients of awards and determine each of the
following:
- the number of depositary shares covered by options;
- the dates upon which the options become exercisable;
- the exercise price of options;
- the duration of options; and
- the number of depositary shares subject to any restricted stock or other
stock-based awards and the terms and conditions of the awards, including
conditions for repurchase, issue price and repurchase price.
Our board of directors is required to make appropriate adjustments in
connection with the 1999 Stock Incentive Plan and any outstanding awards to
reflect stock dividends, stock splits and certain other events. In the event of
a merger, liquidation or other acquisition event, as defined in the 1999 Stock
Incentive Plan, our board of directors is authorized to provide for (a)
outstanding options or other stock-based awards to be assumed or substituted
for, (b) to accelerate the awards to make them fully exercisable prior to
consummation of the acquisition event, or (c) to provide for a cash out of the
value of any outstanding options. If any award expires or is terminated,
surrendered, canceled or forfeited, the unused depositary shares covered by the
award will again be available for grant under the 1999 Stock Incentive Plan
subject, however, in the case of incentive stock options, to any limitations
under the Internal Revenue Code.
AMENDMENT OR TERMINATION
No award may be made under the 1999 Stock Incentive Plan after April 14,
2009, but awards previously granted may extend beyond that date but in no event
later than 10 years from the date of grant. Our board of directors may at any
time amend, suspend or terminate the plan, except that after the date of the
amendment no award intended to comply with Section 162(m) of the Internal
Revenue Code will become exercisable, realizable or vested unless and until the
amendment will have been approved by our stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to awards granted under the
plan and with respect to the sale of depositary shares acquired under the 1999
Stock Incentive Plan. This summary does not address the tax consequences on
awards granted under the plan in the event that Alpharma exercises its call
option.
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
depositary shares acquired through the exercise of the option ("ISO stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
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Generally, the tax consequences of selling ISO stock will vary with the
length of time that the participant has owned the ISO stock at the time it is
sold. If the participant sells ISO stock after having owned it for at least two
years from the date the option was granted, referred to as the grant date, and
one year from the date the option was exercised, referred to as the exercise
date, then the participant will recognize long-term capital gain in an amount
equal to the excess of the sale price of the ISO stock over the exercise price.
If the participant sells ISO stock for more than the exercise price prior
to having owned it for at least two years from the grant date and one year from
the exercise date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO stock for more than
one year prior to the date of sale.
If a participant sells ISO stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO stock. This capital loss will be a
long-term capital loss if the participant has held the ISO stock for more than
one year prior to the date of sale.
NONSTATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the depositary
shares acquired through the exercise of the option ("NSO stock") on the exercise
date over the exercise price.
With respect to any NSO stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO stock over
the participant's tax basis in the NSO stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO stock for more than
one year prior to the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock award, unless the participant makes an election under Section
83(b) of the Internal Revenue Code, referred to as a Section 83(b) election. If
the participant makes a Section 83(b) election within 30 days of the date of the
grant, then the participant will recognize ordinary income, for the year in
which the award is granted, in an amount equal to the difference between the
fair market value of the depositary shares at the time the award is granted and
the purchase price paid for the depositary shares. If a Section 83(b) election
is not made, the participant will recognize ordinary income, at the time that
the forfeiture provisions or restrictions on transfer lapse, in an amount equal
to the difference between the fair market value of the depositary shares at the
time of such lapse and the original purchase price paid for the depositary
shares. The participant will have a basis in the depositary shares acquired
equal to the sum of the price paid and the amount of ordinary compensation
income recognized.
Upon the disposition of the depositary shares acquired pursuant to a
restricted stock award, the participant will recognize a capital gain or loss
equal to the difference between the sale price of the depositary shares and the
participant's basis in the depositary shares. The gain or loss will be a
long-term gain or loss if the shares are held for more than one year. For this
purpose, the holding period will begin just after the date on which the
forfeiture provisions or restrictions lapse if a Section 83(b) election is not
made, or just after the award is granted if a Section 83(b) election is made.
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OTHER STOCK-BASED AWARDS
The tax consequences associated with any other stock-based award granted
under the 1999 Stock Incentive Plan will vary depending on the specific terms of
such award. Among the relevant factors are whether or not the award has a
readily ascertainable fair market value, whether or not the award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the award and the participant's holding
period and tax basis for the award or underlying depositary shares.
TAX CONSEQUENCES TO US
The grant of an award under the 1999 Stock Incentive Plan will have no tax
consequences to us. Moreover, in general, neither the exercise of an incentive
stock option nor the sale of any depositary shares acquired under the 1999 Stock
Incentive Plan will have any tax consequences to us. We generally will be
entitled to a business-expense deduction, however, with respect to any ordinary
compensation income recognized by a participant under the Stock Incentive Plan,
including as a result of the exercise of a nonstatutory stock option, a
Disqualifying Disposition or a Section 83(b) Election. Any such deduction will
be subject to the limitations of Section 162(m) of the Internal Revenue Code.
RECOMMENDATION OF OUR BOARD OF DIRECTORS.
Our board of directors believes stock options and stock-based incentives
play an important role in attracting and retaining the services of outstanding
personnel and in encouraging such employees to have a greater personal financial
investment in Ascent. Consequently, our board of directors recommends that
Ascent stockholders vote "FOR" approval of the amendment to the 1999 Stock
Incentive Plan to increase the number of depositary shares that may be issued
under the plan from 500,000 to 1,250,000.
PROPOSAL 4 -- RATIFICATION OF THE SELECTION OF
INDEPENDENT AUDITORS
Our board of directors has selected PricewaterhouseCoopers LLP as our
auditors for the year ending January 3, 2001, subject to ratification by
stockholders at the annual meeting. If our stockholders do not ratify our
selection of PricewaterhouseCoopers LLP, our board of directors will reconsider
the matter. A representative of PricewaterhouseCoopers LLP, which served as our
auditors for the year ended December 31, 1999, is expected to be present at the
annual meeting, to respond to appropriate questions, and to make a statement if
he or she so desires.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 2001 Annual
Meeting of Stockholders must be submitted to the corporate secretary of the
Company at its offices, 187 Ballardvale Drive, Suite B125, Wilmington,
Massachusetts 01887, no later than December 30, 2000 in order to be considered
for inclusion in the proxy statement relating to that meeting.
If a stockholder wishes to present a proposal before the annual meeting in
2001 but has not complied with the requirements for inclusion of the proposal in
our proxy materials pursuant to Rule 14a-8 under the Exchange Act, the
stockholder must give notice of the proposal to our secretary at our principal
offices. The required notice must be made in writing and delivered or mailed by
first class United States mail, postage prepaid, to our secretary at our
principal offices, and received not less than 60 days nor more than 90 days
prior to the annual meeting in 2001.
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Notwithstanding the foregoing, if we provide stockholders with less than 70
days notice or public disclosure of the date of the meeting, then our secretary
must receive proposals from stockholders no later than the close of business 10
days after the date on which the notice of the meeting was mailed or the public
disclosure was made, whichever occurs first.
OTHER MATTERS
Our board of directors knows of no other business which will be presented
for consideration at the meeting other than that described above. However, if
any other business should come before the meeting, it is the intention of the
persons named in the enclosed voting instruction card to vote, or otherwise act,
in accordance with their best judgment on such matters.
SOURCES OF ADDITIONAL INFORMATION
This proxy statement incorporates important business and financial
information about Ascent that is not included or delivered with this document.
This information is available without charge to Ascent stockholders upon written
or oral request. Contact us at 187 Ballardvale Street, Suite B125, Wilmington,
Massachusetts 01887, Attention: Eliot Lurier, chief financial officer and
treasurer. Ascent's telephone number is (978) 658-2500.
To obtain timely delivery of requested documents prior to the annual
meeting of Ascent stockholder, you must request them no later than June 7, 2000,
which is five business days prior to the date of the annual meeting.
OUR BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED VOTING INSTRUCTION CARD IN THE ACCOMPANYING ENVELOPE. PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR
COOPERATION IS APPRECIATED.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN
THOUGH THEY HAVE SENT IN THEIR VOTING INSTRUCTION CARDS IF THEY AFFIRMATIVELY
GIVE NOTICE AT THE MEETING THAT THEY REVOKE THEIR RESPECTIVE VOTING INSTRUCTION
CARD AND VOTE.
By Order of the Board of Directors,
/s/ EMMETT CLEMENTE, PH.D.
EMMETT CLEMENTE, PH.D.
Chairman and President
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ANNEX A
ASCENT PEDIATRICS, INC.
SECOND SUPPLEMENTAL AGREEMENT
SECOND SUPPLEMENTAL AGREEMENT (the "Agreement") dated as of October 15,
1999 among Ascent Pediatrics, Inc., a Delaware corporation (the "Company"),
Alpharma USPD Inc., a Maryland corporation (the "Lender"), Alpharma Inc., a
Delaware corporation (the "Parent"), State Street Trust Bank and Trust Company
(the "Depositary") and each of the Original Lenders named in the Subordination
Agreement described below.
WHEREAS, pursuant to the Loan Agreement dated as of February 16, 1999 among
the Company, the Lender and the Parent (the "Loan Agreement"), the Lender has
agreed to loan to the Company an aggregate of up to $40 million from time to
time upon the terms and conditions set forth therein, as amended as described
below;
WHEREAS, the Lender, the Company and the Depositary are parties to a
Depositary Agreement dated February 16, 1999, as amended as described below (the
"Depositary Agreement"):
WHEREAS, the Lender, the Company and the Original Lenders named therein are
parties to a Subordination Agreement dated February 16, 1999, as amended as
described below (the "Subordination Agreement"):
WHEREAS, the Company, the Lender and the Parent are parties to a Master
Agreement dated February 16, 1999, as amended as described below (the "Master
Agreement");
WHEREAS, the Loan Agreement, Depositary Agreement, Subordination Agreement
and the Master Agreement were amended pursuant to the terms of the Supplemental
Agreement dated July 1, 1999 between the parties hereto (the "Supplemental
Agreement"):
WHEREAS, the parties hereto wish to further supplement and amend the Loan
Agreement, the Depositary Agreement, the Master Agreement, the Subordination
Agreement and the Supplemental Agreement upon the terms and conditions set forth
herein;
WHEREAS, the Lender is the sole holder of the Note (as defined in the Loan
Agreement) and the parties are entering into this Second Supplemental Agreement
(to the extent it modifies the Loan Agreement) pursuant to Section 12.1 of the
Loan Agreement;
WHEREAS, on or prior to the date hereof, this Second Supplemental Agreement
has been approved by a majority of the Non-Alpharma Directors pursuant to
Section 9.01 of the Depositary Agreement and Section 8.5 of the Master
Agreement;
NOW, THEREFORE, in consideration of the premises, it is agreed by and among
the parties hereto as follows:
ARTICLE I
DEFINITIONS, ETC.
1.1 Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them in the Loan Agreement or in the Ancillary
Agreements (as defined in the Loan Agreement).
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1.2 Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural and in the plural include
the singular;
(e) provisions apply to successive events and transactions; and
(f) "herein", "hereof" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision.
1.3 This Agreement amends and supplements the Loan Agreement, the
Depositary Agreement, the Subordination Agreement, the Guaranty Agreement, the
Master Agreement and the Supplemental Agreement. In case of any inconsistency
between the terms of this Agreement and the Loan Agreement, the Depositary
Agreement, the Subordination Agreement, the Guaranty Agreement, the Master
Agreement, or the Supplemental Agreement, the terms of this Agreement shall
govern. In the absence of such inconsistency, all provisions of the Loan
Agreement, the Depositary Agreement, the Subordination Agreement, the Guaranty
Agreement, the Master Agreement and the Supplemental Agreement shall remain in
full force and effect. Without limiting the foregoing, the conditions set forth
in Article II hereof shall for all purposes be considered part of the Loan
Agreement. Any reference to the Loan Agreement, the Depositary Agreement, the
Master Agreement, the Guaranty Agreement, the Subordination Agreement or the
Supplemental Agreement in any such agreement or to the Ancillary Agreements
shall be deemed to be a reference to such agreement as modified hereby. Any
reference in any such agreement to approval or adoption of the Merger Agreement
and the transactions contemplated thereby shall be deemed to be a reference to
the Merger Agreement and such transactions as modified hereby.
1.4 The parties may sign any number of copies of this Agreement. Each
signed copy shall be an original and may be signed in counterparts, but all of
them together represent the same agreement.
1.5 The laws of the State of New York, without regard to principles of
conflicts of law, shall govern this Agreement to the extent it modifies the Loan
Agreement or the Subordination Agreement. The laws of the State of Delaware,
without regard to principals of conflict of laws, shall govern this Agreement to
the extent it modifies the Depositary Agreement or the Master Agreement.
ARTICLE II
ADDITIONAL CONDITIONS AND OBLIGATIONS OF THE LENDER
2.1 The obligation of the Lender to make any Loans on or after the date
hereof is subject to the fulfillment to its reasonable satisfaction, or the
waiver by the Lender, on or prior to the applicable Loan Date, of each of the
following additional conditions:
(a) The Fourth Amendment to the May 1998 Securities Purchase Agreement
in the form attached hereto as Exhibit A (the "Fourth Amendment to the
Securities Purchase Agreement") shall be in full force and effect and
(b) The Company and each of the Furman Selz Entities shall have
performed in all material respects all of their respective obligations
under the Fourth Amendment to the Securities Purchase
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Agreement including, without limitation, the satisfaction of the conditions
set forth in Section 2.2(b) thereof.
2.2 The obligation of the Lender to make any Secured Loans (as defined in
the Loan Agreement (as amended)) on or after the date hereof is subject to the
fulfillment to its reasonable satisfaction, or the waiver by Lender, on or prior
to the applicable Loan Date, of each of the following conditions:
(a) The Lender shall be reasonably satisfied that the security
interest required by Section 13.10 of the Loan Agreement (as amended) has
attached to the Collateral (as defined in the Loan Agreement) and
(b) The Amendment to the Subordination Agreement, in the form attached
hereto as Exhibit B shall be in full force and effect.
ARTICLE III
AGREEMENTS AND AMENDMENTS THE PLAN UPDATE
THE PLAN UPDATE
3.1 The Lender agrees that the Company delivered to the Lender, on or about
September 21, 1999, a detailed operating plan covering the periods through
December 31, 2001 which includes, on an annual basis, $1.4 million in research
and development and sales force expenditure reductions from the previously
approved Plan and reflects the immediate commercial introduction of the Primsol
product. The representatives of the Company and the ender agree to cause their
respective representatives to the Screening Committee to take all action
necessary to approve said September 21, 1999 plan as an Update, as that term is
used in Section 4.1 of the Supplemental Agreement.
THE SECURED LOAN
3.2 The Loan Agreement (as amended) is further amended by adding the
following definitions to Section 1.1 thereof:
"Secured Loans" means all Project Loans and Screened Project Loans.
"Collateral" means all assets, properties, contract rights and other
intangibles and choses in action purchased, licensed or otherwise acquired
by the Company with the proceeds of a Secured Loan.
3.3 The Loan Agreement (as amended) is further amended by adding the
following clause to Article XIII of the Loan Agreement:
13.10 Security.
As security for the full and timely payment of all Secured Loans and
the performance of all obligations contained herein in connection with the
Secured Loans, the Company covenants that it will, on or before each Loan
Date for a Secured Loan, do or cause to be done, all things necessary in
the reasonable opinion of the Lender and, its counsel, to grant to the
Lender a duly perfected first priority purchase money security interest in
all of the Collateral acquired by Company with the proceeds of said Secured
Loan. At the request of the Lender, the Company will cause its duly
authorized officers to execute on its behalf, any certificate, instrument,
statement or document, or to procure any such certificate, instrument,
statement or document, or to take such other action which the Lender's
counsel reasonably deems necessary, from time to time, to create, continue
or preserve Lender's security interest in and to the Collateral (and the
perfection and priority thereof) as contemplated hereby, specifically
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including the execution of such security agreement and the filing of such
financing statements in the form reasonably requested by Lender's counsel.
3.4 Section 7.2 of the Loan Agreement is hereby amended by adding the
following clause to the beginning of the first sentence thereof:
"Except for any security interest in the Collateral with respect to
Secured Loans and Fourth Amendment Advances (as defined in the Fourth
Amendment to the Securities Purchase Agreement), . . ."
THE OPTION EXERCISE PERIOD
3.5 The definition of the term "2001 Audited Financial Statements" in
Article I of the Depositary Agreement (as amended by the Supplemental Agreement)
is hereby amended by changing (a) the term "2001 Audited Financial Statements"
to the term "2002 Audited Financial Statements" in said definition and in each
other place where the term "2001 Audited Financial Statements" appears in the
Depositary Agreement and (b) the date "December 31, 2001" to "December 31, 2002"
in each of the two places it appears in said definition.
3.6 The definition of the term "Adjusted 2001 Operating Income" in Article
I of the Depositary Agreement (as amended by the Supplemental Agreement) is
hereby amended by changing (a) the term "Adjusted 2001 Operating Income" to the
term "2002 Operating Income" in said definition and in each other place where
the term "Adjusted 2001 Operating Income" appears in the Depositary Agreement
and (b) the date "December 31, 2001" to "December 31, 2002 in each of the five
places it appears in said definition.
3.7 The definition of the term "Excluded Interest Expense" in Article I of
the Depositary Agreement (as amended by the Supplemental Agreement) is hereby
amended by changing the date "December 31, 2001" each time it appears to
"December 31, 2002.
3.8 The definition of the term "GAAP Adjustments" in Article I of the
Depositary Agreement (as amended by the Supplemental Agreement) is hereby
amended by changing (a) all references to "2000" and "2001" to "2001" and
"2002", respectively and (b) all references to "December 31, 2001" and "December
31, 2002" to "December 31, 2002" and "December 31, 2003", respectively.
3.9 The definition of the term "Option Expiration Date" in Article I of the
Depositary Agreement (as amended by the Supplemental Agreement) is hereby
amended by changing the term "December 31, 2002" to "December 31, 2003".
3.10 Section 3.01 of the Depositary Agreement (as amended by the
Supplemental Agreement) is hereby amended by (a) restating the last sentence of
subsection (a) as follows:
"The Company may elect to exercise the Call Option by delivery of the
Call Option Exercise Notice to the Depositary at any time during the period
(the "Call Period") commencing February 1, 2003 and continuing until
December 31, 2003."
and (b) changing the two references to "January 15, 2003" in subsection (b) to
"January 15, 2004".
3.11 Section 4.01 of the Depositary Agreement (as amended by the
Supplemental Agreement) is hereby amended by (a) restating the first sentence of
subsection (a) as follows:
"The Company shall deliver the Option Exercise Deliverables to
Alpharma on or before March 30, 2003."
and (b) changing the reference to "January 1, 2002" in subsection (b) (v) to
"January 1, 2003".
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3.12 Section 4.03 (c) (i) of the Depositary Agreement (as amended by the
Supplemental Agreement) is hereby amended by changing the reference to
"September 30, 2001" to "September 30, 2002".
3.13 Section 5.02 (b) of the Depositary Agreement (as amended by the
Supplemental Agreement) is hereby amended by changing the reference in the
second paragraph thereof from "January 15, 2003" to "January 15, 2004".
3.14 Section 2.6 of the Loan Agreement (as amended) is hereby amended by
(a) changing the reference to "December 31, 2002" to "December 31, 2003" and (b)
changing the reference to "February 28, 2003" to "February 28, 2004".
3.15 Section 2.7 of the Loan Agreement (as amended) is hereby amended by
changing the reference to "December 31, 2002" to "December 31,2003".
3.16 Section 6.8 of the Loan Agreement (as amended) is hereby amended by
changing the reference to the "2001 fiscal year" to the "2002 fiscal year".
3.17 It is recognized that the stockholders of Ascent must approve the
amendments contained in Sections 3.5 through 3.16 of this Agreement (the "Option
Extension Provisions") in order for such provisions to be effective. The parties
therefore agree that the Option Extension Provisions shall have no force and
effect unless and until approved by the holders of a majority of the Depositary
Shares (the "Favorable Shareholder Vote") and that, at all times prior to a
Favorable Shareholder Vote, the Depositary Agreement shall continue to be in
full force and effect in the form existing without considering the Option
Extension Provisions. A Favorable Shareholder Vote shall be deemed to have taken
place (and the Option Extension Provisions shall thereupon be effective as
amendments to the Depositary Agreement) upon the delivery to the Lender and the
Depositary of an opinion of the Company's counsel to the effect that a Favorable
Shareholder Vote has taken place and that each of the Agreements referred to in
Section 1.3 of this Agreement (as amended hereby) are valid, binding and
enforceable against the Company. The failure to obtain a Favorable Shareholder
Vote shall not effect any of the amendments or terms of this Agreement other
than the Option Extension Provisions.
THE MINIMUM PURCHASE PRICE
3.18 Subclause (i) of Clause (A) of the definition of "Option Exercise
Price" in Article I of the Depositary Agreement (as amended by the Supplemental
Agreement) is amended and restated in its entirety as follows:
"$140,000,000 plus an amount equal to all funds actually advanced to
the Company under the Fourth Amendment to the Securities Purchase Agreement
and which have not been repaid as of the date of delivery of the Option
Exercise Deliverables."
CONDITIONS FOR UNRESTRICTED LOANS
3.19 The Lender agrees that the existence of a Plan or Update approved by
the Screening Committee (as those terms are defined in the Supplemental
Agreement) is not a condition precedent to the Lender's obligation to fund an
Unrestricted Loan, and that Article III, Section (c) of the Supplemental
Agreement is hereby amended and restated as follows:
"The Lender shall be reasonably satisfied that the proceeds of any
Project Loans or Screened Loans will be used for the purposes approved by
the Screening Committee pursuant to Section 4.3 of this Agreement."
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3.20 Section 4.1 of the Supplemental Agreement is hereby amended by
deleting the entire third sentence of such Section which begins as follows:
"Notwithstanding Section 6.6 of the Loan Agreement, the Company shall
use the proceeds of Unrestricted Loans only for the purposes specified in
the Plan . . ."
GENERAL
3.21 The definition of the term "Option Expiration Date" in the Depositary
Agreement (as amended by the Supplemental Agreement) is amended by adding the
following text to the end of such definition:
"or Article II of the Second Supplemental Agreement dated October 13,
1999 between the same parties".
3.22 Subclause III of Clause Y of the provision in the definition of the
term "Option Exercise Price" in the Depositary Agreement (as amended by the
Supplemental Agreement) is amended and restated in its entirety as follows:
"(III) the 7.5% Convertible Subordinated Notes due July 1, 2004, in
each case outstanding as of the Option Closing Date, or issued or issuable
upon exercise of the warrants issued pursuant to the Series G Agreement, as
amended by the fourth amendment hereto, dated as of October 1, 1999 (to the
extent any shares continue to be held as of the Option Closing Date by one
of the purchasers set forth on Schedule 1 to the Series G Agreement as so
amended or an Affiliate of any such purchaser), the Original Option
Exercise Price, and"
3.23 Section 7.1(i) of the Loan Agreement is hereby amended and restated as
follows:
(i) Indebtedness incurred pursuant to the Third and Fourth Amendments
to the May 1998 Securities Purchase Agreement."
3.24 The Loan Agreement is hereby amended to amend and restate clause (i)
of the definition of "Impairment Event" in its entirety as follows:
"(i) the existence of a Negative Equity Position, provided, however,
that notwithstanding the requirements of GAAP, (A) any amounts outstanding
under the 8% Subordinated Notes, (B) any amounts outstanding under any debt
securities issued upon conversion or exchange of the Series G Preferred and
(C) any amounts outstanding under the Company's 7.5% Convertible
Subordinated Notes due July 1, 2004 (including, without limitation, any
Notes issued under the Fourth Amendment to the Securities Purchase
Agreement) shall be considered to be equity for purposes of this clause
only;".
3.25 The Lender consents to the Company entering into the Fourth Amendment
to the Securities Purchase Agreement and consummating the transactions
contemplated thereby including, without limitation, for the purpose of Sections
7.7 and 7.12 of the Loan Agreement, as amended.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first set forth above.
ASCENT PEDIATRICS, INC.
By: /s/ EMMETT CLEMENTE
---------------------------------------
Name: Emmett Clemente
Title: Chairman
ALPHARMA USPD INC.
By: /s/ THOMAS L. ANDERSON
---------------------------------------
Name: Thomas L. Anderson
Title: President-USPD
ALPHARMA INC.
By: /s/ JEFFREY E. SMITH
---------------------------------------
Name: Jeffrey E. Smith
Title: Vice President Finance and CFO
STATE STREET BANK AND TRUST COMPANY
By: /s/ CHARLES ROSSI
---------------------------------------
Name: Charles Rossi
Title: Vice President
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APPENDIX I
ASCENT PEDIATRICS, INC.
1999 STOCK INCENTIVE PLAN
(PRE-AMENDMENT)
1. PURPOSE
The purpose of this 1999 Stock Incentive Plan (the "Plan") of Ascent
Pediatrics, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any of the Company's present or future subsidiary corporations as defined in
Section 424(f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code") and any other business venture
(including, without limitation, joint venture or limited liability company) in
which the Company has a significant interest, as determined by the Board of
Directors of the Company (the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) Administration by Board of Directors. The Plan will be administered by
the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board or the
executive officer referred to in Section 3(b) to the extent that the Board's
powers or authority under the Plan have been delegated to such Committee or
executive officer.
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4. STOCK AVAILABLE FOR AWARDS
(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
made under the Plan for up to 500,000 shares of common stock, $.00004 par value
per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, the
maximum number of shares of Common Stock with respect to which an Award may be
granted to any Participant under the Plan shall be 400,000 per calendar year.
The per-Participant limit described in this Section 4(c) shall be construed and
applied consistently with Section 162(m) of the Code.
5. STOCK OPTIONS
(a) General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement;
provided, however, that the exercise price shall not be less than 100% of the
fair market value of the Common Stock, as determined by the Board, at the time
the Option is granted.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement; provided, however, that no Option will be granted
for a term in excess of 10 years and that no Option granted hereunder may be
exercised on the Option Closing Date (as defined in Section 8(d) below).
(e) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly
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to the Company sufficient funds to pay the exercise price or (ii) delivery
by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price;
(3) by delivery of shares of Common Stock owned by the Participant
valued at their fair market value as determined by (or in a manner approved
by) the Board in good faith ("Fair Market Value"), provided (i) such method
of payment is then permitted under applicable law and (ii) such Common
Stock as owned by the Participant at least six months prior to such
delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on
terms determined by the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
6. RESTRICTED STOCK
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(c), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted Awards may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
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adjustment (or substitution) is necessary and appropriate. If this Section 8(a)
applies and Section 8(c) also applies to any event, Section 8(c) shall be
applicable to such event, and this Section 8(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
(c) Acquisition Events
(1) Definition. An "Acquisition Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.
(2) Consequences of an Acquisition Event on Options. Upon the occurrence
of an Acquisition Event, or the execution by the Company of any agreement with
respect to an Acquisition Event, the Board shall provide that all outstanding
Options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof). For purposes
hereof, an Option shall be considered to be assumed if, following consummation
of the Acquisition Event, the Option confers the right to purchase, for each
share of Common Stock subject to the Option immediately prior to the
consummation of the Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of the Acquisition Event by
holders of Common Stock for each share of Common Stock held immediately prior to
the consummation of the Acquisition Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event is not solely common
stock of the acquiring or succeeding corporation (or an affiliate thereof), the
Company may, with the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the exercise of Options to
consist solely of common stock of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in fair market value to the per share
consideration received by holders of outstanding shares of Common Stock as a
result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding corporation
(or an affiliate thereof) does not agree to assume, or substitute for, such
Options, then the Board shall, upon written notice to the Participants, provide
that all then unexercised Options will become exercisable in full as of a
specified time prior to the Acquisition Event and will terminate immediately
prior to the consummation of such Acquisition Event, except to the extent
exercised by the Participants before the consummation of such Acquisition Event;
provided, however, that in the event of an Acquisition Event under the terms of
which holders of Common Stock will receive upon consummation thereof a cash
payment for each share of Common Stock surrendered pursuant to such Acquisition
Event (the "Acquisition Price"), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such Acquisition Event
and that each Participant shall receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (A) the Acquisition Price multiplied by
the number of shares of Common Stock subject to such outstanding Options
(whether or not then exercisable), exceeds (B) the aggregate exercise price of
such Options.
(3) Consequences of an Acquisition Event on Restricted Stock Awards. Upon
the occurrence of an Acquisition Event, the repurchase and other rights of the
Company under each outstanding Restricted Stock Award shall inure to the benefit
of the Company's successor and shall apply to the cash, securities or other
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property which the Common Stock was converted into or exchanged for pursuant to
such Acquisition Event in the same manner and to the same extent as they applied
to the Common Stock subject to such Restricted Stock Award.
(4) Consequences of an Acquisition Event on Other Awards. The Board shall
specify the effect of an Acquisition Event on any other Award granted under the
Plan at the time of the grant of such Award.
(d) Depositary Shares Merger.
(1) In accordance with this Section 8, effective as of the effective time
(the "Effective Time") of the merger (the "Merger") contemplated by the
Agreement and Plan of Merger dated as of February 16, 1999 by and between the
Company and Bird Merger Corporation, a wholly-owned subsidiary of the Company,
the class of securities available under this Plan shall mean the depositary
shares ("Depositary Shares") issued or issuable pursuant to the Depositary
Agreement dated as of February 16, 1999 by and among the Company, Alpharma USPD,
Inc. and State Street Bank and Trust Company (the "Depositary") until the Option
Expiration Date (as defined in the Depositary Agreement) and shall mean the
Common Stock of the Company from and after the Option Expiration Date.
(2) From and after the Effective Time until the Option Determination Date
(as defined in the Depositary Agreement), a Participant shall receive from the
Depositary, upon the exercise of an Option a depositary receipt ("Depositary
Receipt") representing the number of Depositary Shares issuable upon exercise of
such Option.
(3) From and after the Option Closing Date (as defined in the Depositary
Agreement), a Participant shall receive from the Company, upon exercise of an
Option, cash in an amount equal to the Option Exercise Price (as defined in the
Depositary Agreement) for each Depositary Share issuable upon conversion or
exercise of such Option.
(4) From and after the Option Expiration Date, a Participant shall receive
from the Company, upon exercise of an Option, the number of shares of Common
Stock of the Company issuable upon conversion or exercise of such Option.
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced by a written instrument
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
I-5
41
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, Participants may, to the extent then permitted under
applicable law, satisfy such tax obligations in whole or in part by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation, valued at their Fair Market Value. The Company may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to a Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
10. MISCELLANEOUS
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant designated by the Board as subject to Section 162(m) of the Code by
the Board shall become exercisable, vested or realizable, as applicable to such
Award, unless and until the Plan has been approved by the Company's stockholders
to the extent stockholder
I-6
42
approval is required by Section 162(m) in the manner required under Section
162(m) (including the vote required under Section 162(m)). No Awards shall be
granted under the Plan after the completion of ten years from the earlier of (i)
the date on which the Plan was adopted by the Board and (ii) the date the Plan
was approved by the Company's stockholders, but Awards previously granted may
extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m) of the Code, no Award granted to a Participant designated as
subject to Section 162(m) by the Board after the date of such amendment shall
become exercisable, realizable or vested, as applicable to such Award (to the
extent that such amendment to the Plan was required to grant such Award to a
particular Participant), unless and until such amendment shall have been
approved by the Company's stockholders as required by Section 162(m) (including
the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
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43
VOTING INSTRUCTION CARD
ASCENT PEDIATRICS, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 14, 2000
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned, having received notice of the meeting and the proxy
statement therefor, and revoking all prior proxies, hereby directs State Street
Bank and Trust Company, as depositary (the "Depositary"), to vote and act upon
the matters on the reverse side in accordance with the instructions indicated
herein in respect of all shares of Common Stock of Ascent Pediatrics, Inc. (the
"Company") represented by Depositary Shares held by the undersigned. In
addition, the undersigned authorize(s) the Depositary to appoint Emmett Clemente
and Eliot Lurier, and each of them, attorneys or attorney of the Depositary
(with full power of substitution) for and in the name of the Depositary to
attend the Annual Meeting of Stockholders of the Company to be held at 60 State
Street, Boston, Massachusetts at 10:00 a.m., local time, on Wednesday, June 14,
2000 and any adjourned sessions thereof, and there to vote and act, as
indicated, upon the matters on the reverse side in respect of all shares of
Common Stock of the Company which the Depositary would be entitled to vote or
act upon, with all powers the Depositary would possess if personally present,
including the power to vote upon such other matters as may properly come before
the meeting or any adjournment thereof.
Attendance of the undersigned at the meeting or at any adjourned
session thereof will not be deemed to revoke this voting instruction card unless
the undersigned shall affirmatively indicate thereat the intention of the
undersigned to vote said shares in person. If the undersigned hold(s) any of the
shares of the Company in a fiduciary, custodial or joint capacity or capacities,
this voting instruction card is signed by the undersigned in every such capacity
as well as individually.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND PROMPTLY RETURN THIS VOTING
INSTRUCTION CARD IN THE ENCLOSED ENVELOPE.
Please sign name(s) exactly as appearing hereon. When signing as
attorney, executor, administrator or other fiduciary, give your full title as
such. Joint owner should each sign personally. If a corporation, sign in full
corporate name, by authorized officer. If a partnership, sign in partnership
name, by authorized person.
Has your address changed?_______________________________________
Do you have any comments?_______________________________________
44
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ASCENT PEDIATRICS, INC.
Mark box at right if an address change or comment has been noted on
the reverse side of this card. [ ]
Date_________________________
Stockholder sign here___________________ Co-owner sign here_____________________
PLEASE BE SURE TO SIGN AND DATE THIS VOTING INSTRUCTION CARD.
1. To elect the following persons as Class II Directors for the ensuing
three years:
Emmett Clemente, Ph.D. FOR ALL WITH- FOR ALL
Nicholas Daraviras NOMINEES HOLD EXCEPT
Andre L. Lamotte, Sc.D. [ ] [ ] [ ]
NOTE: IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE,
MARK THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NAME(S) OF
THE NOMINEE(S). YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEES.
2. To approve certain amendments to the Depositary Agreement dated as of
February 16, 1999, as amended, among the Company, Alpharma USPD Inc.
and State Street Bank and Trust Company and the Loan Agreement dated as
of February 16, 1999, as amended, among the Company, Alpharma USPD Inc.
and Alpharma Inc. to delay the period during which the option granted
by the Company to Alpharma USPD Inc. to purchase all of the Company's
common stock then outstanding from 2002 to 2003.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve an amendment to the Company's 1999 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the current fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
IN THEIR DISCRETION, THE NAMED ATTORNEYS ARE AUTHORIZED TO VOTE UPON THE OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT THEREOF.
The shares represented by this voting instruction card will be voted as directed
by the undersigned. If no direction is given with respect to any election to
office or proposal specified above, the shares of Common Stock of the Company
corresponding to this voting instruction card will be voted FOR such election to
office or proposal.