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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
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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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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ASCENT PEDIATRICS, INC.
187 BALLARDVALE STREET, SUITE B125
WILMINGTON, MASSACHUSETTS 01887
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 2001
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of
Ascent Pediatrics, Inc., a Delaware corporation, will be held on Wednesday, June
13, 2001, at 10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts 02109, for the purpose of considering and voting upon the
following matters:
1. To elect three class I directors for the ensuing three years;
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors of Ascent for the current fiscal year; and
3. 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
17, 2001, 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 Ascent's annual report to stockholders for the year ended
December 31, 2000, which contains financial statements and other information of
interest to stockholders, accompanies this notice and the enclosed proxy
statement.
By order of the Board of Directors,
EMMETT CLEMENTE, PH.D.
CHAIRMAN AND PRESIDENT
April 30, 2001
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 13, 2001
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 13, 2001 at
10:00 a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, and at any adjournments thereof.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED VOTING
INSTRUCTION CARD AND ASCENT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 2000 ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT MAY 11, 2001. 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, 2000, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE ADDRESS
ALL SUCH REQUESTS TO ASCENT PEDIATRICS, INC., ATTENTION OF JENNIFER A. MARCHAND,
CONTROLLER, 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 17, 2001, 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 17,009,722 shares of common stock, all of which
are represented by depositary shares of Ascent outstanding on the record date.
Each depositary share evidences an interest in one share of Ascent common stock,
par value $.00004 per share, and is 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. on
February 16, 1999, as amended.
The holders of depositary shares are entitled to one vote per depositary
share on all matters to be voted on by stockholders of Ascent, 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 Ascent 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 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 Ascent 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
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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 the class I directors. The affirmative vote of the
holders of a majority of the votes cast by the holders of the outstanding
depositary shares entitled to vote at the meeting is required for the
ratification of the selection of Ascent'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
respective 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" would have no effect on the voting on a matter that requires
the affirmative vote of a certain percentage of the votes cast on a matter, but
would be the equivalent of a "no" vote on any matter which requires the
affirmative vote of a certain percentage of shares entitled to vote on a matter.
As of the close of business on April 17, 2001, the record date, funds
affiliated with ING Furman Selz Investments LLC held more than a majority of the
outstanding depositary shares of Ascent. These funds have indicated to Ascent
that they intend to vote "For" each proposal described in this proxy statement.
Accordingly, Ascent expects that each proposal will be approved. Nevertheless,
whether or not you plan to attend the annual meeting in person, please sign and
promptly return the enclosed voting instruction card, which requires no postage
if mailed in the United States.
SOLICITATION OF VOTING INSTRUCTION CARDS
The expenses of the solicitations for the Ascent 2001 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 April 17, 2001, 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 the director nominees, (c)
each of the named executive officers 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,
director nominee 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 April 17, 2001
through the conversion of any convertible note or other convertible security 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 group. Unless
otherwise indicated, the address of each director and executive officer of
Ascent is care of Ascent Pediatrics, Inc., 187 Ballardvale Drive, Suite B125,
Wilmington, Massachusetts 01887.
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DEPOSITARY SHARES
--------------------------------------
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OWNED CLASS
------------------ ----------
5% STOCKHOLDERS
Funds affiliated with ING Furman Selz Investments LLC........... 14,894,796(1) 65.3%
55 East 52nd Street, 37th Floor
New York, NY 10055
BancBoston Ventures, Inc........................................ 924,133(2) 5.3%
175 Federal Street
Boston, MA 02110
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
Raymond F. Baddour, Sc.D........................................ 287,605(3) 1.7%
Robert E. Baldini .............................................. 134,000(4) *
Emmett Clemente, Ph.D........................................... 406,676(5) 2.4%
Nicholas Daraviras.............................................. -- --
James E. Flynn ................................................. 266,909(6) 1.6%
Brian P. Friedman .............................................. 14,894,796(7) 65.3%
Joseph R. Ianelli .............................................. 20,000(8) *
Andre L. Lamotte, Sc.D.......................................... 856,376(9) 5.1%
James L. Luikart ............................................... 14,894,796(10) 65.3%
All directors, director nominees and current executive
officers as a group (nine persons).............................. 16,801,362(11) 72.3%
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* Represents less than 1% of the outstanding depositary shares of Ascent.
(1) Consists of (a) 6,343,387 depositary shares held by Furman Selz Investors
II L.P., (b) a total of 5,088,243 depositary shares issuable upon the
conversion of a 7.5% convertible note and an 8.0% convertible subordinated
note held by Furman Selz Investors II L.P. within 60 days of April 17,
2001, (c) 543,670 depositary shares held by FS Employee Investors LLC, (d)
a total of 436,171 depositary shares issuable upon the conversion of a 7.5%
convertible note and an 8.0% convertible subordinated note held by FS
Employee Investors LLC within 60 days of April 17, 2001, (e) 308,604
depositary shares held by FS Parallel Fund L.P., (f) a total of 247,517
depositary shares issuable upon the conversion of a 7.5% convertible note
and an 8.0% convertible subordinated note held by FS Parallel Fund L.P.
within 60 days of April 17, 2001, (g) 150,000 depositary shares held by FS
Private Investments, (h) 1,732,204 depositary shares held by funds
affiliated with ING Furman Selz Investments pursuant to its ownership
interest in FS Ascent Investments LLC and (i) 45,000 depositary shares
issuable upon the exercise of options assigned by certain Ascent directors
affiliated with ING Furman Selz Investments LLC within 60 days of April 17,
2001. Furman Selz Investors II L.P., FS Employee Investors LLC, FS Parallel
Fund L.P., FS Private Investments and FS Ascent Investments LLC are
affiliates under common control. These entities also have the right to
receive additional securities. See "Certain Relationships and Related
Transactions."
(2) Consists of (a) 574,028 depositary shares and (b) 350,105 depositary shares
issuable upon the conversion of an 8% convertible subordinated note within
60 days of April 17, 2001.
(3) Consists of (a) 235,384 depositary shares, (b) 22,221 depositary shares
issuable upon the exercise of warrants within 60 days of April 17, 2001 and
(c) 30,000 depositary shares issuable upon the exercise of options within
60 days of April 17, 2001.
(4) Consists of 134,000 depositary shares issuable upon the exercise of options
within 60 days of April 17, 2001.
(5) Consists of (a) 172,650 depositary shares and (b) 234,026 depositary shares
issuable upon the exercise of options within 60 days of April 17, 2001.
(6) Consists of (a) 23,000 depositary shares held by Mr. Flynn, (b) 95,212
shares owned by Flynn Partners, (c) 18,316 depositary shares issuable
upon the conversion of an 8% convertible subordinated note within 60 days
of April 17, 2001 and (d) 130,381 shares held by Flynn Partners pursuant to
its ownership interest in FS Ascent Investments LLC. Mr. Flynn is the
general partner of Flynn Partners, which is a member of FS Ascent
Investments LLC. See "Certain Relationships and Related Transactions."
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(7) Consists of the depositary shares described in note (1). Mr. Friedman is
president of ING Furman Selz Investments LLC and may be considered the
beneficial owner of the depositary shares described in note (1). Mr.
Friedman disclaims such beneficial ownership.
(8) Consists of 20,000 depositary shares issuable upon the exercise of options
within 60 days of April 17, 2001.
(9) Consists of (a) 738,776 depositary shares held by Medical Science
Partners, L.P., (b) 57,142 depositary shares held by Medical Science
Partners II, L.P., (c) 13,691 depositary shares held by Medical
Science II Co-Investment, L.P., (d) 2,888 depositary shares issuable
upon the exercise of warrants within 60 days of April 17, 2001, held
by Medical Science Partners, L.P., (e) 10,769 depositary shares held
by Dr. Lamotte, (f) 3,110 depositary shares issuable upon the exercise
of warrants held by Dr. Lamotte within 60 days of April 17, 2001 and
(g) 30,000 depositary shares issuable upon the exercise of options
held by Dr. Lamotte within 60 days of April 17, 2001. 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 depositary shares held by such entities, although Dr.
Lamotte disclaims such beneficial ownership, except as to his
pecuniary interest therein.
(10) Consists of the depositary shares described in note (1). Mr. Luikart is an
executive vice president of ING Furman Selz Investments LLC and may be
considered the beneficial owner of the depositary shares described in note
(1). Mr. Luikart disclaims such beneficial ownership.
(11) See notes (3) through(10).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities 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,
during the fiscal year ended December 31, 2000, 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 4
by James L. Luikart, a director of Ascent, and by FS Private Investments LLC,
Furman Selz Investors II L.P., FS Employee Investors LLC and FS Parallel Fund
L.P., each of which is affiliated with ING Furman Selz Investments LLC, in
connection with the issuance to such entities of certain convertible notes and
warrants.
PROPOSAL 1 -- ELECTION OF DIRECTORS
We have three classes of directors currently consisting of one class I
director, 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. Dr. Raymond
F. Baddour is currently serving as a class I director. Our board of directors
has also nominated James E. Flynn and Brian P. Friedman for election as class I
directors. The three class I directors proposed for election this year, if
elected, will serve as members of our board of directors until the 2004 annual
meeting of stockholders, or until their successors are elected and qualified.
The term of the class II directors will expire at the 2002 annual meeting. The
class III directors were elected at the annual meeting last year for a three
year term expiring at the 2003 annual meeting.
The persons named in the enclosed voting instruction card will vote to
elect, as class I directors, Dr. Raymond F. Baddour and Messrs. Flynn and
Friedman, unless the voting instruction card is marked otherwise. The class I
director nominees have indicated their willingness to serve, if elected;
however, if a nominee should be unable to serve, the persons 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 a nominee will be unable to serve if elected.
The table below includes information for each director, including the class
I director nominees, as of April 17, 2001, 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, if
applicable.
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PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING THE PAST FIVE YEARS AND
NAME AGE SINCE OTHER DIRECTORSHIPS
- ---- --- -------- -----------------------------------------
NOMINEES FOR TERMS EXPIRING IN 2004
(CLASS I DIRECTORS)
Raymond F. Baddour, Sc.D.(1)................ 76 1989 Lammot du Pont Professor Emeritus of
Chemical Engineering at the Massachusetts
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; and a director of Hyseq, Inc., a bio-
technology company and Scully Signal Co., a
signal device company.
James E. Flynn(2)........................... 35 Partner of Deerfield Management, a
healthcare hedge fund, since February 2000;
Managing Director of the Equity Research
Department of ING Baring Furman Selz, a
global financial services company, from 1996
to February 2000; Vice President of
Corporate Development of Alpharma, Inc., a
pharmaceutical company, from 1993 to 1995;
and Senior Vice President, Equity Research,
of Kidder, Peabody & Co., an investment
banking firm, from 1988 to 1993.
Brian P. Friedman, Esq.(2).................. 45 President of ING Furman Selz Investments
LLC, a private equity investment firm, since
1994. Mr. Friedman also serves on the
boards of directors of Acapulco Restaurants,
BricsNet N.V., StarBand Communications,
Inc., Cognitive Arts, Inc., IDB Carries
Limited BVI and Net Schools Corporation.
Mr. Friedman also serves on the board of
managers of Apartment MediaWorks LLC, Beacon
Industrial Group LLC, and Stagebill LLC.
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PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING THE PAST FIVE YEARS AND
NAME AGE SINCE OTHER DIRECTORSHIPS
- ---- --- -------- -----------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 2002 (CLASS II
DIRECTORS)
Robert E. Baldini(1)........................ 70 1993 Vice Chairman of our board of directors
since April 1996; Consultant to several
private and public pharmaceutical and
medical device companies; 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 chemical company, from
1977 to 1982; and Vice Chairman of the board of
directors of KOS Pharmaceuticals, Inc., a
pharmaceutical company.
Joseph R. Ianelli(3)........................ 62 2000 President of Ianelli Associates LLC, a
consulting firm, since August 2000;
President and Chief Executive Officer of
Renaissance Pharmaceuticals, Inc., a drug
delivery company, from February 1999 to
August 2000; Founder, President, Chief
Executive Officer and a Director of
PharmaConnect Inc., a publicly-traded
internet-based company focused on detailing
medical products to physicians, from
February 1999 to March 2000. Prior to this,
Mr. Ianelli served in a variety of positions
with Astra USA Inc., a pharmaceutical
company, from 1978 to 1999, including
Director of Marketing, Vice President,
Marketing and Senior Vice President of
Business Development.
James L. Luikart(3)......................... 55 1998 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, since 1995.
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PRINCIPAL OCCUPATION, OTHER BUSINESS
DIRECTOR EXPERIENCE DURING THE PAST FIVE YEARS AND
NAME AGE SINCE OTHER DIRECTORSHIPS
- ---- --- -------- -----------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 2003
(CLASS III DIRECTORS)
Emmett Clemente, Ph.D....................... 62 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;
and Senior Scientist of Richardson-Merrell
Company, a pharmaceutical company, from 1967
to 1970.
Nicholas Daraviras(1)....................... 27 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.
Andre L. Lamotte, Sc.D...................... 53 1989 Founder and Investment Manager of New Medical
Technologies, Inc. since May 1997; Managing
General Partner of Medical Science
Ventures, L.P., the general partner of
Medical Science Partners L.P., the venture
capital firm founded by Harvard University,
since 1989; and General Manager of the Merieux
Institute, Inc., the U.S. affiliate of
Institute Merieux and Pasteur Vaccines, from
1983 to 1988.
- ----------
(1) Member of audit committee.
(2) Not currently a member of the board of directors.
(3) Member of compensation committee.
Mr. 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.
Mr. 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.
Messrs. Flynn and Friedman have been nominated for election to our board of
directors pursuant to the resolution of our board of directors dated as of March
30, 2001.
For information relating to the depositary shares beneficially owned by
each of the directors and director nominees, see "Security Ownership of Certain
Beneficial Owners and Management."
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BOARD OF DIRECTORS AND COMMITTEE MEETINGS
Our board of directors met eight times (including by telephone conference)
during 2000. All of our directors, other than Dr. Lamotte, attended 75% or more
of the meetings of our board of directors and the committees on which they
served during 2000.
Our board of directors has a compensation committee which held eight formal
and a number of informal meetings during 2000. The current members of the
compensation committee are Mr. Ianelli and Mr. Luikart. Thomas Anderson and Lee
Schroeder, former directors of Ascent, served on the compensation committee
during 2000. The compensation committee is responsible for:
- making recommendations concerning salaries and incentive compensation
for our employees and any consultants;
- 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.
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.
Our board of directors has an audit committee, which held two formal and a
number of informal meetings during 2000. The current members of the audit
committee are Dr. Baddour and Messrs. Baldini and Daraviras. The audit committee
is responsible for, as more fully set forth below, reviewing the results and
scope of the audit and other services provided by our independent public
accountants.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The audit committee reviewed Ascent's audited financial statements for the
year ended December 31, 2000 and discussed these financial statements with
Ascent's management. Management is responsible for Ascent's internal controls
and the financial reporting process. Ascent's independent accountants,
PricewaterhouseCoopers LLP, are responsible for performing an independent audit
of Ascent's financial statements in accordance with generally accepted
accounting principles and to issue a report on those financial statements. The
audit committee is responsible for monitoring and overseeing these processes. As
appropriate, the audit committee reviews, evaluates and discusses with Ascent's
management, internal accounting, and financial personnel and the independent
auditors, the following:
- the plan for, and the independent auditors' report on, each audit of
Ascent's financial statements;
- Ascent's financial disclosure documents, including all financial
statements and reports filed with the Securities and Exchange Commission
or sent to stockholders;
- changes in Ascent's accounting practices, principles, controls or
methodologies; and
- significant developments or changes in accounting rules applicable to
Ascent.
The audit committee also reviewed and discussed the audited financial
statements for fiscal year 2000 with management and the independent auditors.
The audit committee discussed the matters required to be discussed by
Statement on Auditing Standards 61 (Communication with Audit Committees), as
amended, with PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP also
provided the audit committee with the written disclosures and the letter
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has engaged in a discussion of their
independence with the audit committee. In evaluating the independence of our
auditors, the audit committee considered whether the services
PricewaterhouseCoopers LLP provided to Ascent
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beyond their audit and review of financial statements was compatible with
maintaining their independence. The audit committee also considered the amount
of fees PricewaterhouseCoopers LLP received for their audit and non-audit
services.
Based on its discussions with management and PricewaterhouseCoopers LLP,
and its review of the representations and information provided by management and
PricewaterhouseCoopers LLP, the audit committee recommended to Ascent's board of
directors that the audited financial statements be included in Ascent's annual
report on Form 10-K for the year ended December 31, 2000.
The audit committee currently does not operate under a written audit
committee charter and is not required to adopt a written charter. However, a
charter has been drafted and is in the process of being adopted. The members of
the audit committee, other than Mr. Daraviras, are independent directors, as
that term is defined by the National Association of Securities Dealers, Inc.
BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF ASCENT
Raymond F. Baddour, Sc.D.
Robert E. Baldini
Nicholas Daraviras
COMPENSATION OF DIRECTORS
Dr. Baddour and Messrs. Baldini and Ianelli are each paid $6,000 each year
as compensation 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. Except as set forth below, no other
directors currently are compensated for serving on our board of directors.
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. Options to purchase 5,000 depositary
shares are also granted to each non-employee director on May 1 of each year. On
May 1, 2000, Messrs. Baldini, Daraviras, Ianelli and Luikart and Drs. Baddour
and Lamotte each received an option to purchase 5,000 depositary shares. All
options vest on the first anniversary of the date of grant. However, the
exercisability of these options accelerated upon the occurrence of a change in
control of Ascent, as provided for in the director plan, which was deemed to
have occurred at such time as funds affiliated with ING Furman Selz Investments
LLC beneficially owned 50% or more of the combined voting power of Ascent's
then outstanding securities. 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
Over-The-Counter Bulletin Board or of a share of common stock on the Nasdaq
National Market, as applicable. As of April 17, 2001, options to purchase an
aggregate of 205,000 depositary shares were outstanding under the director plan.
No options to purchase depositary shares under the director plan had been
exercised as of April 17, 2001.
We are party to a written consulting agreement with Mr. Robert E. Baldini,
vice chairman of our board of directors and a member of our audit committee,
dated as of October 12, 2000. Pursuant to this agreement, Mr. Baldini provides
consulting services as requested by us in return for compensation of $1,500 per
day. For the fiscal year ended December 31, 2000, Mr. Baldini received
approximately $3,000 in consulting fees pursuant to this agreement. Upon
execution of this agreement, we granted Mr. Baldini an option to acquire an
aggregate of 25,000 depositary shares pursuant to our 1999 Stock Incentive Plan.
These options vest over four years. This consulting agreement expired on April
1, 2001. Ascent and Mr. Baldini expect to continue this consulting relationship.
We were also party to a written consulting agreement with Mr. Joseph R.
Ianelli, a member of our board of directors and of our compensation committee,
dated as of September 18, 2000. Pursuant to this agreement, Mr. Ianelli agreed
to provide consulting services as requested by us in return for compensation of
$1,500 per day. For the fiscal year ended December 31, 2000, Mr. Ianelli
received approximately $27,800 in consulting fees pursuant to this agreement.
Upon execution of this agreement, we granted Mr. Ianelli an option to acquire an
aggregate of 20,000 depositary shares pursuant to our 1999 Stock Incentive Plan.
These options
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vest over four years. This consulting agreement expired on March 1, 2001. Ascent
and Mr. Ianelli expect to continue this consulting relationship.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for each of the last three
fiscal years, for Ascent's president and the person for whom we would have
disclosed information as our other most highly compensated executive officer,
whose total annual salary and bonus exceeded $100,000 for the fiscal year ended
December 31, 2000, but for the fact that the individual was not serving as an
executive officer as of December 31, 2000. The foregoing executive officers are
referred to in this proxy statement as the "named executive officers."
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- --------------------------------
AWARDS PAYOUTS
------------- --------------
SECURITIES LONG TERM
NAME AND PRINCIPAL UNDERLYING INCENTIVE PLAN ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS PAYOUTS COMPENSATION
------------------ ---- -------- ------- ---------- -------------- ------------
Emmett Clemente, Ph.D... 2000 $214,300 -- 70,000 -- $45,733(1)
Chairman of the board of 1999 $214,300 (2) 167,860(2) $42,060 $45,733(1)
directors and president 1998 $210,300 $42,060 -- -- $17,833(1)
Gregory A. Vannatter(3)... 2000 $100,015 -- -- -- $23,894(4)
Former executive vice 1999 $177,500 (2) 110,500(2) $33,500 --
president, sales and 1998 $167,500 $33,500 50,000(5) -- --
marketing
- ----------
(1) Consists of life insurance premiums paid by Ascent for the benefit of Dr.
Clemente.
(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 a depositary share on the date
of grant.
(3) Mr. Vannatter resigned as executive vice president, sales and marketing of
Ascent as of July 14, 2000.
(4) Consists of severance pay paid by Ascent to Mr. Vannatter in connection
with his resignation.
(5) Includes options to purchase 18,000 depositary shares which were granted
and repriced in 1998.
OPTION GRANTS TABLE
The following table sets forth information for each of the named executive
officers with respect to the grant of stock options to purchase depositary
shares during fiscal 2000.
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OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL 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.... 20,000(2) 2.2% $1.3750 01/14/10 $17,295 $ 43,828
50,000(3) 5.6% $1.3125 07/20/10 $41,271 $104,589
Gregory A. Vannatter..... -- -- -- -- -- --
- ----------
(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 four equal annual installments beginning on
January 14, 2001.
(3) The option is exercisable in four equal annual installments beginning on
July 20, 2001.
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, 2000. No stock options were exercised by any of the
named executive officers in fiscal 2000.
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
---------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Emmett Clemente, Ph.D........... 165,930 216,430 -- --
Gregory A. Vannatter............ -- -- -- --
- -----------
(1) The closing price for depositary shares as reported on the Over-The-Counter
Bulletin Board on Friday, December 29, 2000, was $0.75 per share, which is
less than the exercise price of such granted options and, accordingly, such
options were not in-the-money as of such date.
EMPLOYMENT AGREEMENT
We are a party to an employment agreement, as amended, with Dr. Emmett
Clemente, our president, for the period commencing March 16, 1994 and ending
March 15, 2002, unless further 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
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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 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 president, and setting the compensation
for these individuals.
GENERAL COMPENSATION POLICY
The compensation committee 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
depositary shares.
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 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 executive officers,
including the president, 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 employees 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. The compensation committee
did not pay any bonuses in 2000.
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 president, because stock options provide an
incentive to executives to maximize stockholder value and because they reward
executives only to the extent that stockholders also benefit. The compensation
committee believes that it is to Ascent's advantage to increase the
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interest of executives in Ascent's welfare, as such employees share the primary
responsibility for the management and growth of Ascent.
Ascent's board of directors grants options to executive officers based on
the recommendation of the compensation committee. 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
2000, after reviewing Ascent's executive officers' stock and option holdings,
the compensation committee determined to recommend the grant of stock options to
Dr. Clemente. 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 the named executive officers, see the table under
the heading "Option Grants in Last Fiscal Year."
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. The board of directors reviews
the potential effect of Section 162(m) periodically and uses its judgment to
authorize compensation payments that may be subject to the limit when the board
believes such payments are appropriate and in the best interests of Ascent and
its stockholders, after taking into consideration changing business conditions
and the performance of its employees.
COMPENSATION COMMITTEE
Joseph R. Ianelli
James L. Luikart
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of our compensation committee are Messrs. Ianelli and
Luikart. Mr. Thomas L. Anderson resigned from our board of directors and our
compensation committee as of December 29, 2000 in connection with the
termination of our strategic alliance with Alpharma. Mr. Lee J. Schroeder
resigned from our board of directors and our compensation committee as of April
1, 2001 to pursue other interests. 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, 2000, we have engaged in the transactions described below
under "Certain Relationships and Related Transactions" with affiliates of
Messrs. Anderson and Luikart.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 2000, we entered into or engaged in the following
transactions with the following directors, director nominees, executive officers
and 5% stockholders of Ascent and their affiliates:
ING FURMAN SELZ INVESTMENTS LLC AND FLYNN PARTNERS. On May 13, 1998, Ascent
entered into a Series G Securities Purchase Agreement with funds affiliated with
ING Furman Selz Investments LLC, Flynn Partners and BancBoston Ventures, Inc. In
accordance with this agreement, on June 1, 1998, Ascent issued and sold to these
entities an aggregate of 7,000 shares of Series G convertible exchangeable
preferred stock, $9.0 million of 8% seven-year subordinated notes and seven-year
warrants to purchase an aggregate of 2,116,958 shares of Ascent common stock at
a per share exercise price of $4.75 per share, which, as discussed below, was
subsequently decreased, for an aggregate purchase price of $16.0 million. Of
such securities, (i) funds affiliated with ING Furman Selz Investments LLC
received 5,250 shares of Series G convertible exchangeable preferred stock,
$6.75 million of the 8% seven-year subordinated notes and 1,587,718 of the
seven-year warrants to purchase Ascent common stock; (ii) Flynn Partners
received 87 shares of Series G convertible exchangeable preferred stock, $87,000
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of the 8% seven-year subordinated notes and 26,311 of the seven-year warrants to
purchase Ascent common stock; and (iii) BancBoston Ventures, Inc. received 1,663
shares of Series G convertible exchangeable preferred stock, $1.66 million of
the 8% seven-year subordinated notes and 502,929 of the seven-year warrants to
purchase Ascent common stock. Ascent used a portion of the net proceeds, after
fees and expenses, of $14.7 million to repay $5.3 million in existing
indebtedness and used the balance for working capital.
In connection with Ascent's strategic alliance with Alpharma USPD, Inc. and
Alpharma, Inc., which is discussed below, Ascent entered into a second amendment
to the May 1998 securities purchase agreement on July 23, 1999 with funds
affiliated with ING Furman Selz Investments LLC, Flynn Partners and BancBoston
Ventures, Inc. The second amendment provided for, among other things, (a)
Ascent's agreement to exercise its right to exchange all outstanding shares of
Series G preferred stock for convertible subordinated notes in accordance with
the terms of the Series G preferred stock, (b) the reduction in the exercise
price of warrants to purchase an aggregate of 2,116,958 shares of Ascent common
stock from $4.75 per share to $3.00 per share and the agreement of the Series G
purchasers to exercise these warrants, (c) the issuance and sale to the Series G
purchasers of an aggregate of 300,000 shares of Ascent common stock at a price
of $3.00 per share and (d) the cancellation of approximately $7.25 million of
principal under the subordinated notes held by the Series G purchasers to pay
the exercise price of the warrants and the purchase price of the additional
300,000 shares. Ascent issued 225,000 of the 300,000 shares issued to the Series
G purchasers to funds affiliated with ING Furman Selz Investments LLC, 3,750 of
the 300,000 shares to Flynn Partners and 71,250 of the 300,000 shares to
BancBoston Ventures, Inc.
The subordinated notes and convertible notes bear interest at a rate of 8%
per annum, payable semiannually in June and December of each year, commencing
December 1998. Ascent deferred forty percent of the interest due on the
subordinated notes and fifty percent of the dividend interest due on the
convertible notes in each of December 1998, June 1999, December 1999, June 2000
for a period of three years.
In the event of a change in control or unaffiliated merger of Ascent,
Ascent could redeem the convertible notes issued upon exchange of the Series G
preferred stock at a price equal to the liquidation preference plus accrued and
unpaid dividends, although Ascent would be required to issue new common stock
purchase warrants in connection with such redemption. In the event of a change
of control or unaffiliated merger of Ascent, the holders of the convertible
notes and the subordinated notes could require Ascent to redeem these notes at a
price equal to the unpaid principal plus accrued and unpaid interest on such
notes.
ING FURMAN SELZ INVESTMENTS LLC $4.0 MILLION CREDIT FACILITY. On July 1,
1999, Ascent entered into a third amendment to the May 1998 securities purchase
agreement in July 1999 with certain funds affiliated with ING Furman Selz
Investments LLC, Flynn Partners and BancBoston Ventures, Inc. Pursuant to the
third amendment, funds affiliated with ING Furman Selz Investments LLC agreed to
loan Ascent up to $4.0 million. Pursuant to this agreement, Ascent issued 7.5%
convertible subordinated notes in the aggregate principal amount of $4.0 million
and warrants to purchase an aggregate of 600,000 depositary shares at an
exercise price of $3.00 per share, which, as described below, was subsequently
decreased to $0.05 per share, and which expire on July 1, 2006, to the funds
affiliated with ING Furman Selz Investments LLC. As of February 2000, Ascent had
borrowed the entire $4.0 million under this credit facility. The notes mature on
July 1, 2004 and are convertible into depositary shares at a conversion price of
$3.00 per share. Interest on these 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.
ING FURMAN SELZ INVESTMENTS LLC $10.0 MILLION CREDIT FACILITY. On October
15, 1999, Ascent entered into a fourth amendment to the May 1998 securities
purchase agreement with certain funds affiliated with ING Furman Selz
Investments LLC, Flynn Partners and BancBoston Ventures, Inc. Pursuant to the
third amendment, funds affiliated with ING Furman Selz Investments LLC agreed to
loan Ascent up to an additional $10.0 million. Pursuant to this agreement,
Ascent issued to the funds affiliated with ING Furman Selz Investments LLC 7.5%
convertible subordinated notes in the aggregate principal amount of $10.0
million and warrants to purchase an aggregate of 5,000,000 depositary shares at
an original exercise price of $3.00 per share, which, as described below, was
subsequently decreased to $0.05 per share, and which expire on October 15, 2006.
As of December 31, 2000, Ascent had borrowed an aggregate of $10.0 million under
this credit facility. The notes mature on July 1, 2004 and are convertible into
Ascent depositary shares at a conversion price of $3.00 per share. Interest on
these 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.
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ING FURMAN SELZ INVESTMENTS LLC AND FLYNN PARTNERS $10.25 MILLION CREDIT
FACILITY. On December 29, 2000, Ascent entered into a loan agreement with FS
Ascent Investments LLC ("FS Investments"), the members of which consist of
certain funds affiliated with ING Furman Selz Investments LLC and Flynn
Partners. The ownership interest of FS Investments is as follows: (i) certain
funds affiliated with ING Furman Selz Investments LLC own 99.3% and (ii) Flynn
Partners owns 0.07%. Also as of such date, Ascent entered into a fifth amendment
to the Series G securities purchase agreement with certain funds affiliated with
ING Furman Selz Investments LLC, Flynn Partners and BancBoston Ventures, Inc.
Pursuant to the loan agreement and the fifth amendment, Ascent will receive up
to $10.25 million in financing from FS Investments. The financing is comprised
of $6.25 million of 7.5% secured notes ($5.0 million of which was advanced to
Ascent prior to April 17, 2001) and $4.0 million of Series H preferred stock
($1,000 of which has been sold in 2001). Under the terms of the notes, Ascent
will pay interest quarterly and repay the outstanding principal of the notes on
June 30, 2001, unless extended to no later than June 30, 2002 at Ascent's
election, or earlier upon a change in control (as defined in the loan agreement)
of Ascent or certain other conditions. The notes are secured by Ascent's Primsol
product line, including intellectual property rights of Ascent pertaining to
Primsol, pursuant to a security agreement, dated as of December 29, 2000, by and
between Ascent and FS Investments. The $6.25 million to be advanced to Ascent
under the loan agreement will be obtained by FS Investments from Alpharma USPD
under a loan agreement between FS Investments and Alpharma USPD. Under the terms
of the Series H preferred stock, Ascent will be entitled to, and the holders of
the Series H preferred stock will be entitled to cause Ascent to redeem the
Series H preferred stock for a price equal to the liquidation amount of the
Series H preferred stock, plus $10.0 million. In connection with the financing,
Ascent agreed to issue warrants to FS Investments to purchase up to an aggregate
of 10,950,000 depositary shares of Ascent at an exercise price of $.05 per share
(of which warrants to purchase 1,950,000 depositary shares were issued on
January 2, 2001) and reduced the exercise price of certain of the above
described outstanding warrants to purchase a total of 5,600,000 depositary
shares issued under the Series G securities purchase agreement from $3.00 to
$0.05 per share. The remaining warrants to purchase 9,000,000 depositary shares
issuable under the credit facility will be issued if the outstanding amounts are
not repaid by June 20, 2001, and thereafter. On March 23, 2001, the funds
affiliated with ING Furman Selz Investments LLC and FS Investments exercised all
of the warrants held by them, on a cashless basis, which resulted in the
issuance to such entities an aggregate of 7,211,528 depositary shares.
The Series H preferred stock is entitled to cumulative annual dividends
payable on December 31, 2001 at the rate of 7.5% of the liquidation preference
(as defined in the loan agreement between Ascent and FS Investments). The Series
H preferred stock is redeemable at the redemption price at any time after the
demand date or the occurrence of a change in control (each as defined in the
loan agreement) of Ascent at the option of the holders of the Series H preferred
stock holding at least 80% of the shares of such stock then outstanding. Ascent
may redeem all of the Series H preferred stock at the redemption price at any
time. The holders of Series H preferred stock generally do not have any voting
rights.
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., FS Parallel Fund L.P. and the managing member of FS Employee Investors
LLC. Mr. Nicholas Daraviras, also a director of Ascent, is also a vice president
of ING Furman Selz Investments LLC. Mr. Brian P. Friedman, a director nominee,
is president of ING Furman Selz Investments LLC, the general partner of Furman
Selz Investors II L.P., FS Parallel Fund L.P. and the managing member of FS
Employee Investors LLC. Mr. James E. Flynn, a director nominee is general
partner of Flynn Partners, which is a member of FS Investments.
ALPHARMA USPD, INC. AND ALPHARMA, INC. On February 16, 1999, Ascent entered
into a series of agreements, which we collectively refer to as a strategic
alliance, with Alpharma, Inc. and its wholly-owned subsidiary, Alpharma USPD,
Inc., which provided for a number of arrangements, including:
- Call Option. In connection with the consummation of the strategic
alliance, Ascent obtained a call option to acquire all of its
outstanding common stock and assigned the call option to Alpharma
USPD, thereby giving Alpharma USPD the option, exercisable in 2003, to
purchase all of Ascent's common stock then outstanding at a purchase
price to be determined by a formula based on Ascent's 2002 earnings.
- $40.0 Million Credit Facility. Alpharma USPD agreed to loan Ascent up to
$40.0 million from time to time, $12.0 million of which could be used
for general corporate purposes and $28.0 million of which could only
be used for specified projects and acquisitions intended to enhance
Ascent's growth.
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- On February 19, 1999, Ascent borrowed $4.0 million from Alpharma USPD
under the loan agreement and issued Alpharma a 7.5% convertible
subordinated note in the principal amount of up to $40.0 million.
Ascent borrowed the entire $12.0 million available for general
corporate purposes by June 2000. The note bears interest at a rate of
7.5% per annum, due and payable quarterly, in arrears on the last day
of each calendar quarter.
On December 29, 2000, Ascent entered into a Termination Agreement with
Alpharma USPD, Alpharma, Inc., the Original Lenders (as defined therein) and
State Street Bank and Trust Company terminating the strategic alliance. Pursuant
to the terms of the Termination Agreement, the parties terminated the (i) Loan
Agreement dated as of February 16, 1999, as amended, by and among Ascent,
Alpharma USPD and Alpharma, (ii) Master Agreement, dated as of February 16,
1999, as amended, by and among Ascent, Alpharma USPD and Alpharma, (iii)
Guaranty Agreement, dated as of February 16, 1999, as amended, by Alpharma for
the benefit of Ascent, (iv) Registration Rights Agreement, dated as of February
16, 1999, as amended, by and between Ascent and Alpharma USPD, (v) Subordination
Agreement, dated as of February 16, 1999, as amended, by and among Ascent,
Alpharma and the Original Lenders (as defined therein), (vi) covenants and
obligations of the parties under the Supplemental Agreement, dated as of July 1,
1999, by and among Ascent, Alpharma USPD, Alpharma, the Original Lenders (as
defined therein) and State Street and (vii) Second Supplemental Agreement, dated
as of October 15, 1999, by and among Ascent, Alpharma USPD, Alpharma, the
Original Lenders (as defined therein) and State Street.
In addition, under the Termination Agreement, Alpharma USPD agreed that it
would not exercise its call option to acquire Ascent pursuant to the Depositary
Agreement, dated as of February 16, 1999, as amended, by and among Ascent,
Alpharma USPD and State Street Bank and Trust Company. Ascent agreed that upon
the consummation of any change of control (as defined in the Termination
Agreement) of Ascent, Ascent would pay to Alpharma USPD a fee equal to 2% of the
aggregate consideration received by Ascent upon such event in excess of $65.0
million.
On December 29, 2000, Ascent also entered into a Product Purchase Agreement
with Alpharma USPD. Pursuant to the terms of the Product Purchase Agreement,
Ascent sold its Feverall product line in an asset sale to Alpharma USPD in
exchange for the cancellation by Alpharma USPD of $12.0 million of indebtedness
owed to Alpharma USPD by Ascent under a 7.5% note issued to Alpharma USPD. Under
the terms of the Product Purchase Agreement, Ascent has the option to repurchase
the Feverall product line at anytime before December 29, 2001 for $12.0 million.
Mr. Thomas L. Anderson, president of Alpharma USPD, was nominated and
elected to our board of directors and to our compensation and audit committees
in connection with our strategic alliance with Alpharma USPD and Alpharma. Mr.
Anderson resigned from our board directors as of December 29, 2000 in connection
with the termination of the strategic alliance.
REGISTRATION RIGHTS. Some persons and entities, including funds affiliated
with ING Furman Selz Investments LLC and other former purchasers of Ascent
Series G preferred stock and related warrants are entitled to registration of
their depositary shares under the Securities Act of 1933, as amended, including
depositary shares acquired upon the conversion of notes or the exercise of
warrants, 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, 2000 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 Securities Exchange
Act of 1934, as amended.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
[GRAPH]
May 29, 1997 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2000
------------ ------------- ------------- -------------
Ascent Pediatrics, Inc. $100.00 $ 47.92 $ 13.89 $ 8.33
Nasdaq National Market Index $100.00 $159.03 $295.69 $177.91
Nasdaq Pharmaceuticals Index $100.00 $127.77 $240.49 $299.13
* Total return based on $100.00 initial investment and reinvestment of dividends
PROPOSAL 2 -- RATIFICATION OF THE SELECTION OF
INDEPENDENT AUDITORS
Our board of directors has selected PricewaterhouseCoopers LLP as our
auditors for the year ending December 31, 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, 2000, 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.
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INDEPENDENT AUDITORS FEES AND OTHER MATTERS
AUDIT FEES
PricewaterhouseCoopers LLP billed Ascent an aggregate of approximately
$126,200 in fees for professional services rendered in connection with the audit
of Ascent's financial statements for the most recent fiscal year included in the
annual report on Form 10-K and the reviews of the financial statements included
in each of Ascent's quarterly reports on Form 10-Q during the fiscal year ended
December 31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP did not bill Ascent for any professional
services rendered to Ascent and its affiliates for the fiscal year ended 2000 in
connection with financial information systems design or implementation, the
operation of Ascent's information system or the management of its local area
network.
ALL OTHER FEES
PricewaterhouseCoopers LLP billed Ascent an aggregate of approximately
$53,000 in all other fees, primarily for reviews of the financial statements
included in Current Reports on Form 8-K, the preparation of its corporate taxes
and assistance to Ascent in other filings with the Securities and Exchange
Commission during the year ended December 31, 2000.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 2002 Annual
Meeting of Stockholders must be submitted to the corporate secretary of Ascent
care of Ascent Pediatrics, Inc., 187 Ballardvale Drive, Suite B125, Wilmington,
Massachusetts 01887, no later than January 11, 2002, 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
2002 but has not complied with the requirements for inclusion of the proposal in
our proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended, the stockholder must give notice of the proposal to our
corporate 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 corporate secretary at our principal offices, and received not
less than 60 days nor more than 90 days prior to the annual meeting in 2002.
Notwithstanding the foregoing, if we provide stockholders with less than 70 days
notice or public disclosure of the date of the meeting, then our corporate
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.
If a stockholder who wished to present a proposal before the annual meeting
fails to notify the Company by the required date, the proxies that management
solicits for the meeting will have discretionary authority to vote on the
stockholder's proposal if it is properly brought before that meeting. If a
stockholder makes timely notification, the proxies may still exercise
discretionary authority under circumstances consistent with the Securities and
Exchange Commission's proxy rules.
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
To obtain timely delivery of requested documents prior to the annual
meeting of Ascent stockholders, you must request them no later than June 6,
2001, which is five business days prior to the date of the annual meeting.
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OUR BOARD OF DIRECTORS URGES STOCKHOLDERS TO 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,
EMMETT CLEMENTE, PH.D.
CHAIRMAN AND PRESIDENT
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VOTING INSTRUCTION CARD ASCENT PEDIATRICS, INC. VOTING INSTRUCTION CARD
ANNUAL MEETING OF STOCKHOLDERS
JUNE 13, 2001
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
following matters in accordance with the instructions indicated on the reverse
side 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, Ph.D. and Jennifer A. Marchand, 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 13, 2001, 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 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?
__________________________________________ _______________________________________
__________________________________________ _______________________________________
__________________________________________ _______________________________________
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[x] PLEASE MARK VOTES
AS IN THE EXAMPLE
ASCENT PEDIATRICS, INC.
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 BELOW, THE SHARES OF COMMON STOCK OF THE COMPANY
CORRESPONDING TO THIS VOTING INSTRUCTION CARD WILL BE VOTED FOR SUCH ELECTION TO
OFFICE OR PROPOSAL.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]
CONTROL NUMBER:
RECORD DATE SHARES:
Please be sure to sign and date this Voting Instruction Card. Date _________________________________________
Stockholder sign here________________________________ Co-owner sign here____________________________
1. To elect the following persons as Class I directors for the ensuing three years:
FOR ALL WITHHOLD FOR ALL
NOMINEES FOR ALL EXCEPT
(01) RAYMOND F. BADDOUR, Sc.D.
(02) JAMES E. FLYNN [ ] [ ] [ ]
(03) BRIAN P. FRIEDMAN
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 SUCH NOMINEE(S).
YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEE(S).
2. 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 ADJOURNMENTS THEREOF.
DETACH CARD DETACH CARD