Exhibit 10.1

 

November 20, 2018

 

 

KemPharm, Inc.

1180 Celebration Boulevard, Suite 103

Celebration, FL 34747

 

Re:     Amendment to Convertible Note and Warrant

 

Ladies and Gentlemen:

 

Reference is hereby made to (i) that certain Facility Agreement, dated as of
June 2, 2014 (as the same may have been previously or in the future be amended,
modified, restated or otherwise supplemented from time to time, the “Facility
Agreement”), by and between KemPharm, Inc., a Delaware corporation (the
“Company”), and Deerfield Private Design Fund III, L.P. (the “Lender”), (ii)
that certain Senior Secured Convertible Note in the original principal amount of
$10,000,000 issued by the Company to the Lender under the Facility Agreement on
June 2, 2014 (as the same may have been previously or in the future be amended,
modified, restated or otherwise supplemented from time to time, the “Convertible
Note”), and (iii) that certain warrant (number W-74), deemed to be issued by the
Company to the Lender under the Facility Agreement on June 2, 2014, relating to
the right of the Lender to purchase from the Company 1,923,077 fully paid and
nonassessable shares of common stock of the Company (as the same may have been
previously or in the future be amended, modified, restated or otherwise
supplemented from time to time, the “Warrant”). Capitalized terms used herein
which are defined in the Facility Agreement, unless otherwise defined herein,
shall have the meanings ascribed to them in the Facility Agreement. The Company
and the Lender desire to amend the Convertible Note and the Warrant on the terms
set forth in this letter agreement (this “Letter”).

 

Effective upon the execution and delivery of this Letter by the Company and the
Lender, the Convertible Note and the Warrant are hereby amended as follows:

 

(A) Section 2(i) of the Convertible Note is hereby amended by replacing the
percentage “9.985%” with “4.985%” in each place it appears (including the
defined term “9.985% Cap,” which shall be replaced with the defined term “4.985%
Cap”); and

 

(B) The second paragraph of Section 1 of the Warrant is hereby amended by
replacing the percentage “9.985%” with “4.985%” in each place it appears
(including the defined term “9.985% Cap,” which shall be replaced with the
defined term “4.985% Cap”).

 

 

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Page 2

 

Except as expressly set forth herein, (i) the Facility Agreement, the
Convertible Note, the Warrant and the other Transaction Documents remain
unchanged and in full force and effect, (ii) this Letter shall not be deemed to
be a waiver, amendment or modification of, or consent to or departure from, any
provision of the Facility Agreement or any other Transaction Document (other
than the Convertible Note and Warrant as expressly provided herein) or to be a
waiver of any Default or Event of Default under the Facility Agreement or any
other Transaction Document, whether arising before or after the date hereof or
as a result of the transactions contemplated hereby, and (iii) this Letter shall
not preclude the future exercise of any right, remedy, power or privilege
available to the Lender, whether under the Facility Agreement, any other
Transaction Document or otherwise, and shall not be construed or deemed to be a
satisfaction, novation, cure, modification, amendment or release of the
Obligations, the Facility Agreement or any other Transaction Document (or any
other liability or obligation thereunder) or establish a course of conduct with
respect to future requests for amendments, modifications or consents.

 

This Letter (i) is a Transaction Document and constitutes the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with respect
thereto are expressly superseded hereby, and (ii) shall be binding upon and
inure to the benefit of the successors and assigns of the parties hereto. This
Letter may be executed in counterparts (which taken together shall constitute
one and the same instrument) and by facsimile or other electronic transmission,
which facsimile or other electronic signatures shall be considered original
executed counterparts.

 

Upon the effectiveness of this Letter, any reference in the Convertible Note and
the Warrant to “this Warrant,” “this “Note” “hereunder,” hereof,” “herein,” or
words of like import referring to such agreement shall refer to the Warrant or
Convertible Note, as the case may be, as amended by this Letter.

 

The Company hereby reaffirms, confirms and ratifies its obligations and
liabilities set forth in the Facility Agreement and the other Transaction
Documents, all of which shall remain in full force and effect, as modified by
this Letter.

 

 

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Page 3

 

Reference is also hereby made to the Indenture, dated as of February 9, 2016,
between the Company and U.S. Bank National Association, a national banking
association organized under the laws of the United States of America, as trustee
(the “Trustee”), as amended and supplemented by the First Supplemental
Indenture, dated as of November 20, 2018, between the Company and the Trustee
(and as may otherwise be amended, supplemented or modified, the “Indenture”;
capitalized terms used without definition in this paragraph having the meanings
ascribed to them in the Indenture), and the Company’s 5.50% Senior Convertible
Notes due 2021 issued thereunder (the “Notes”) that are beneficially owned by
the Lender and Deerfield Special Situations Fund, L.P. (together, the “Note
Holders”). The Company and the Note Holders hereby agree, in accordance with
Section 13.02(k) of the Indenture, that (a) this Letter constitutes a notice
from each of the Note Holders that such Note Holder elects a limit on beneficial
ownership of 4.985% (i.e., a “4.985% Cap”); (b) that such 4.985% beneficial
ownership limitation shall be effective as of the date of this Letter; (c) that
accordingly, on and after the date hereof, so long as the Note Holder shall have
complied with the applicable requirements under the Indenture, including the
delivery of the certification required under Section 13.02(k)(i) of the
Indenture, the Company shall not issue to either Note Holder a number of shares
of Common Stock upon conversion of such Note Holder’s Notes (including any
shares of Common Stock deliverable in connection with any Interest Make-Whole
payment) to the extent that, upon such conversion, the number of shares of
Common Stock then beneficially owned by a such Note Holder and its Affiliates
and any other Persons or entities whose beneficial ownership of the Common Stock
would be aggregated with such Note Holder for the purposes of Section 13(d) of
the Exchange Act (including shares held by any “group” of which such Holder is a
member, but excluding shares beneficially owned by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth in Section
13.02(k) of the Indenture) (collectively, the “Capped Parties”) would exceed
4.985% of the total number of the shares of the Common Stock then issued and
outstanding; and (c) if a Note Holder transfers any Notes to any Affiliate of
such Note Holder, then the Company shall deem such 4.985% beneficial ownership
limitation to automatically apply to such Affiliate.

 

[Signature pages follow]

 

 

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Very truly yours,   DEERFIELD PRIVATE DESIGN FUND III, L.P.   By:   Deerfield
Mgmt III, L.P., its General Partner By:   J.E. Flynn Capital III, LLC, its
General Partner       By:   /s/ David J. Clark Name:   David Clark Title:  
Authorized Signatory       DEERFIELD SPECIAL SITUATIONS FUND, L.P.       By:  
Deerfield Mgmt., L.P., its General Partner By:   J.E. Flynn Capital LLC, its
General Partner       By:   /s/ David J. Clark Name:   David J. Clark Title:  
Authorized Signatory

 

 

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Acknowledged and Agreed To as of the date set forth above       KEMPHARM, INC.  
    By:   /s/ R. LaDuane Clifton Name:   R. LaDuane Clifton Title:   Chief
Financial Officer, Secretary and Treasurer