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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. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
ATRIX LABORATORIES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(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)(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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[ATRIX LOGO]
ATRIX LABORATORIES, INC.
Dear Stockholder:
On behalf of the Board of Directors, I invite you to attend the Annual
Meeting of Stockholders of Atrix Laboratories, Inc. to be held on May 7, 2001 at
10:00 a.m. local time, at The Fort Collins Marriott, 350 East Horsetooth Road,
Fort Collins, Colorado.
You are urged to vote your proxy even if you currently plan to attend the
Annual Meeting. Please remember to sign and date the proxy card, otherwise, it
is invalid. Returning your proxy will not prevent you from voting in person but
will assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ DAVID R. BETHUNE
David R. Bethune,
Chairman of the Board and
Chief Executive Officer
April 4, 2001
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ATRIX LABORATORIES, INC.
2579 MIDPOINT DRIVE
FORT COLLINS, COLORADO 80525
(970) 482-5868
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 2001
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TO THE STOCKHOLDERS OF ATRIX LABORATORIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of Atrix
Laboratories, Inc. will be held at The Fort Collins Marriott, 350 East
Horsetooth Road, Fort Collins, Colorado 80525 on May 7, 2001 at 10:00 a.m. Fort
Collins time, for the following purposes:
1. To elect three directors for three-year terms.
2. To consider and vote on a proposal to amend our 2000 Stock Incentive
Plan to increase by 1,000,000 the number of shares of common stock
reserved for issuance under the plan.
3. To consider and vote on a proposal to amend our Amended and Restated
Certificate of Incorporation to increase the authorized number of shares
of capital stock from 30,000,000 to 50,000,000, of which 45,000,000 will
be designated common stock and 5,000,000 will be designated preferred
stock.
4. To ratify the appointment of Deloitte & Touche LLP as our independent
auditors for the fiscal year ending December 31, 2001.
5. To transact such other business as may properly come before the meeting
and at any and all postponements, continuations or adjournments thereof.
Only stockholders of record at the close of business on March 21, 2001 are
entitled to notice of and to vote at the meeting or any postponements,
continuations and adjournments thereof.
All stockholders, whether or not they expect to attend the meeting in
person, are requested to complete, date and sign the enclosed form of proxy and
return it promptly in the postage paid, return-addressed envelope provided for
that purpose. By returning your proxy promptly, you can help us avoid the
expense of follow-up mailings to ensure a quorum so that the meeting can be
held. Stockholders who attend the meeting may revoke a prior proxy and vote
their proxy in person as set forth in the proxy statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY OUR BOARD OF DIRECTORS. OUR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSED ITEMS. YOUR VOTE
IS IMPORTANT.
By Order of the Board of Directors
/s/ DAVID R. BETHUNE
David R. Bethune,
Chairman of the Board and
Chief Executive Officer
Fort Collins, Colorado
Dated: April 4, 2001
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ATRIX LABORATORIES, INC.
2579 MIDPOINT DRIVE
FORT COLLINS, COLORADO 80525
(970) 482-5868
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 2001
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INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by and on behalf of the board of directors of Atrix Laboratories, Inc.,
a Delaware corporation, for use at our Annual Meeting of Stockholders to be held
at The Fort Collins Marriott, 350 East Horsetooth Road, Fort Collins, Colorado,
on May 7, 2001 at 10:00 a.m. Fort Collins time and at any postponements,
continuations or adjournments thereof. This proxy statement, the accompanying
form of proxy and the notice of annual meeting will be first mailed or given to
our stockholders on or about April 4, 2001.
All shares of our $.001 par value common stock, represented by properly
executed Proxies received in time for the meeting will be voted at the meeting
in accordance with the instructions marked thereon or otherwise as provided
therein, unless such Proxies have previously been revoked. Unless instructions
to the contrary are marked, or if no instructions are specified, shares
represented by proxies will be voted for the proposals set forth on the proxy,
and in the discretion of the persons named as proxies, on such other matters as
may properly come before the meeting. You may revoke your proxy at any time
prior to its exercise by submitting another proxy bearing a later date, giving
written notice of revocation to us at the address indicated above or by voting
in person at the meeting. Any notice of revocation sent to us must include the
stockholder's name and must be received prior to the meeting to be effective.
VOTING
Only holders of record of shares at the close of business on March 21,
2001, or the record date, will be entitled to receive notice of and to vote at
the meeting. On the record date there were shares outstanding, each of
which will be entitled to one vote on each matter properly submitted for vote to
the stockholders at the meeting. The presence, in person or by proxy, of holders
of a majority of shares entitled to vote at the meeting constitutes a quorum for
the transaction of business at the meeting.
Our transfer agent will tabulate votes cast by proxy by an automated
system. Votes cast by proxy or in person at the meeting will be counted by the
persons appointed by us to act as election inspectors for the meeting.
Abstentions, broker non-votes, which are explained below, and shares as to which
authority to vote on any proposal is withheld, are each included in the
determination of the number of shares present and voting at the meeting for
purposes of obtaining a quorum. Each will be tabulated separately.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions and broker non-votes in all
circumstances, we believe that both abstentions and broker non-votes should be
counted for purposes of determining whether a quorum is present at the annual
meeting. In the absence of controlling precedent to the contrary, we intend to
treat abstentions and broker non-votes in the following manner. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have the
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. Broker "non-votes" and shares as to
which proxy authority has been withheld with respect to any matter are not
deemed to be entitled to vote for purposes of determining whether stockholder
approval of that matter has been obtained. As a result, broker "non-votes" are
not included in the tabulation of the voting results on the election of
directors or issues requiring the approval of a majority of the shares of common
stock
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present and entitled to vote and, therefore, do not have the effect of votes in
opposition for such proposals. With respect to Proposal 1 requiring a plurality
vote and Proposals 2 and 4 requiring the affirmative vote of a majority of the
common stock, present and entitled to vote, broker "non-votes have no effect.
However, with respect to Proposal 3 which requires the affirmative vote of a
majority of the outstanding shares of our common stock, broker "non-votes" and
shares as to which proxy authority has been withheld have the effect of a vote
against Proposal 3. Because abstentions will be included in tabulations of the
shares of common stock entitled to vote for purposes of determining whether a
proposal has been approved, abstentions have the same effect as negative votes
on Proposals 2, 3 and 4.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation provides for a board of directors made up
of three classes. The members of each class serve three-year staggered terms
with one class to be elected at each annual meeting. As provided in our Bylaws,
the board of directors has currently set the total number of directors at ten,
with four directors in Class A, three directors in Class B and three directors
in Class C. The current terms of the Class C and Class A directors expire at our
Annual Meeting of Stockholders for the years ended 2001 and 2002, respectively.
The current term of the Class B directors expires at the meeting for the year
ended 2000.
Dr. Jere E. Goyan resigned his position as a Class B Director in April,
2000. The Board appointed Dr. Nicolas G. Bazan to replace Dr. Goyan for a
one-year term expiring at the meeting and until his successor is elected and
qualified.
The Board has nominated Mr. David R. Bethune, Dr. Richard L. Jackson and
Dr. Nicolas Bazan for election as Class B directors to serve for a three-year
term expiring at the Annual Meeting of Stockholders for the year ended 2003 and
until their successors are elected and qualified.
Each director nominee is currently a Class B director. Each of the nominees
has consented to be a nominee and to serve as a director if elected. We intend
that shares represented by properly executed proxies will be voted for the
election of the nominees except where authority to so vote is withheld. Our
board of directors has no reason to believe that any of the director nominees
will be unable to serve as directors or will become unavailable for any reason.
If, at the time of the meeting, any of the director nominees becomes unavailable
for any reason, the persons entitled to vote the proxy will vote for such
substituted nominee or nominees, if any, as such persons determine in their
discretion.
Information is set forth below regarding the director nominees and the
directors who will continue in office after the meeting, including the name and
age of each director and nominee, his principal occupation and business
experience during the past five years and the commencement of his term as our
director.
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL TO ELECT MR. DAVID R. BETHUNE, DR. RICHARD I. JACKSON AND DR. NICOLAS
BAZAN FOR ELECTION AS CLASS B DIRECTORS.
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NOMINEES FOR ELECTION
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ ----------------------------------------- --------
David R. Bethune(1) Chairman and Chief Executive Officer since August 1999. 1995
(60) President and Chief Operating Officer of IVAX Corporation,
a pharmaceutical holding company, from 1997 to 1998.
Consultant to the pharmaceutical industry from 1996 to
1997. President and Chief Executive Officer of Aesgen,
Inc., a pharmaceutical company, from 1995 to 1996. Group
Vice President of American Cyanamid Company, a health care
business, from 1992 to 1995. Mr. Bethune also serves as a
director of Female Health Co. Mr. Bethune received a
Bachelors degree in Business from Lenoir Rhyne College and
Executive Management degree from Columbia University
Graduate School.
Dr. Richard Jackson(1) Senior Vice President of Research and Development since 1999
(62) November 1998. Senior Vice President of Discovery Research
at Wyeth-Ayerst, American Home Products from 1992 to June
1998. Dr. Jackson received his B.S. in Chemistry and his
Ph.D. degree in Microbiology from the University of
Illinois, Urbana, Illinois.
Dr. Nicolas Bazan(2) Professor at Louisiana State University Medical Center and 2000
(58) Neuroscience Center of Excellence in the areas of
Ophthalmology, Biochemistry, Molecular Biology, and
Neurology; Director, Neuroscience Training Program. Dr.
Bazan sits on the Scientific Advisory Board of Centaur in
Sunnyvale, California, and is the founder and Chairman of
the Board of St. Charles Pharmaceuticals in New Orleans,
Louisiana. Dr. Bazan received his Bachelor's degree from
Colegio Belgrano, Argentina, his M.D. from U. Tucuman,
Argentina, and his Ph.D. from the Medical School at U.
Tucuman.
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(1) Member of the Executive Committee
(2) Added as Class B director in November 2000
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE MEETING
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ ----------------------------------------- --------
John E. Urheim(1)* (60) Principal, Urheim Consultants since August 1998. 1993
Vice Chairman and Chief Executive Officer from June
1993 to August 1999. Mr. Urheim received his
Masters degree in Economics from the University of
Iowa.
Sander A. Flaum(1)(2)* (64) Chief Executive Officer of Robert A. Becker, Inc. 1999
Euro RSCG (a member of the Euro RSCG Healthcare
Global Network) since 1998. Mr. Flaum is also
adjunct professor at The Fordham University
Graduate School of Business in New York City and a
member of the editorial advisory board of
Pharmaceutical Executive. He serves on the boards
of Fischer College of Business at The Ohio State
University, Fordham Graduate School of Business,
Hollins Communications Research Institute and
Neopharm Corporation.
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PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ ----------------------------------------- --------
Dr. D. Walter Cohen(1)* (74) Chancellor-Emeritas of MCP Hahnemann University's 1992
School of Medicine since 1998, chancellor of MCP
Hahnemann University's School of Medicine from 1993
to 1998 and President of MCP Hahnemann University's
School of Medicine from 1986 to 1993. Since 1950,
Dr. Cohen has had a dental practice specializing in
periodontics. Dr. Cohen also serves as a director
of Crusader Bank of Philadelphia. Dr. Cohen
received his DDS from the University of
Pennsylvania School of Dentistry and served as its
Dean from 1972 to 1983.
C. Rodney O'Connor(2)** (68) Chairman and Chief Executive Officer of Cameron 1987
Associates, Inc., a financial services firm, since
1976. Mr. O'Connor also serves on the boards of
Streicher Mobile Fueling, Inc., Fundamental
Management Corporation and Morgan Holdings, Inc.
Mr. O'Connor received a Bachelor of Arts Degree
from Wesleyan University and a Masters Degree in
Finance from the Wharton School of Finance.
Mr. H. Stuart Campbell(2)** Owner and Vice-President of Highland Packaging 1995
(71) Labs, Inc., a specialty packaging company for the
pharmaceutical industry, since 1983. Mr. Campbell
also serves as a director for Biomatrix, Inc. and
Mesa Laboratories, Inc. Campbell received a
Bachelor of Science degree from Cornell University.
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(1) Member of the Compensation Committee
(2) Member of the Audit Committee
* Class A Director
** Class C Director
BOARD MEETINGS
During 2000 the board of directors met six times and acted by unanimous
written consent four times. No director attended fewer than 75% of the aggregate
of (i) the total number of meetings of the board of directors during 2000; and
(ii) the total number of meetings held by all committees of the board of
directors on which he served during 2000.
COMMITTEES OF THE BOARD
Executive Committee. Our board of directors has an executive committee and
during 2000 its members were Mr. Bethune, chairman of the executive committee,
and Drs. Southard and Jackson. Dr. Southard resigned his position from our board
of directors and from the executive committee in November 2000. The executive
committee has the authority to conduct our business and affairs, except where
action of the entire board of directors is specified by statute. Our Executive
Committee did not meet in 2000.
Audit Committee. Our board has an audit committee and during 2000 our
members were Mr. O'Connor, Mr. Flaum and Mr. Campbell. Messrs. O'Connor, Flaum
and Campbell are "independent" directors as defined in Rule 4200(a)(14) of the
National Association of Securities Dealers listing standards. Mr. O'Connor was
chairman of the audit committee until November 2000, at which time Mr. Campbell
was named chairman of the committee. The audit committee's duties include the
following: (i) making recommendations to our board of directors as to the
selection of our independent auditors;
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(ii) reviewing the results of our annual audit with the independent auditors and
appropriate management representatives; (iii) reviewing with the independent
auditors such major accounting policies as are deemed appropriate for review by
the audit committee; and (iv) reporting to our board of directors at each
meeting of the full board following a meeting of the audit committee concerning
its activities. Our audit committee met one time during 2000. Mr. Flaum did not
attend the meeting.
Compensation Committee. Our Board has a compensation committee and during
2000 its members were Mr. Campbell, Chairman of the compensation committee, Mr.
Flaum and Dr. Cohen. In November 2000, Mr. Flaum became the Chairman, and Mr.
Urheim replaced Mr. Campbell. The compensation committee performs the following
duties: (i) considering and making recommendations to our Board with respect to
our overall compensation policies; (ii) approving the compensation payable to
all officers; (iii) reviewing proposed compensation of executives as provided in
our executive compensation plan; (iv) advising management on all other executive
compensation matters as requested; (v) construing and interpreting our Amended
and Restated Stock Option Plan, or our Stock Option Plan, and our 2000 Incentive
Stock Option Plan, or our Incentive Plan, and, subject to the express provisions
of our Stock Option Plan and Incentive Plan, determining the persons to whom
options are granted, the number of shares subject to options, when options shall
be granted, the exercise price of shares subject to options, the time during
which options shall be exercisable and the duration of the exercise period and
other terms and provisions thereof; and (vi) reporting to our Board as and when
appropriate with respect to all of the foregoing. In November 2000, the Board
established an Option Committee, the sole member of which is Dr. David R.
Bethune, which is generally responsible for determining individuals who are
entitled to option grants, the number of options granted and the terms and
conditions of the options. Our compensation committee met two times during 2000.
All members were present.
Nominating Committee. Our Board established a nominating committee in
March 2001. The nominating committee monitors the size and composition of the
Board and considers and makes recommendations with respect to the nomination and
election of directors. The nominating committee will also consider nominees
recommended by stockholders. Recommendations for our Annual Meeting of
Stockholders to be held in 2002 must be submitted in writing to our Corporate
Secretary at 2579 Midpoint Drive, Fort Collins, Colorado 80525. Such
recommendations must include the name, address and principal business occupation
of the candidate for the last five years and must be received by the Corporate
Secretary on or before November 30, 2001.
EXECUTIVE OFFICERS
Information is set forth below regarding our executive officers, including
their age, principal occupation during the last five years and the date each
first became an executive officer. Our executive officers serve in such capacity
at the pleasure of our board of directors.
EXECUTIVE OFFICER
NAME AGE PRESENT EXECUTIVE OFFICE OF THE COMPANY SINCE
---- --- ------------------------ --------------------
David R. Bethune 60 Chairman and Chief Executive Officer since August 1999
1999. President and Chief Operating Officer of IVAX
Corporation from 1997 to 1998. Consultant to the
pharmaceutical industry from 1996 to 1997.
President and Chief Executive Officer of Aesgen,
Inc from 1995 to 1996.
Dr. Richard Jackson 62 Senior Vice President of Research and Development 1998
since November 1998 and Senior Vice President of
Discovery Research of Wyeth-Ayerst, American Home
Products from 1993 to June 1998.
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EXECUTIVE OFFICER
NAME AGE PRESENT EXECUTIVE OFFICE OF THE COMPANY SINCE
---- --- ------------------------ --------------------
Dr. Richard L. Dunn 60 Senior Vice President, Drug Delivery Research since 1987
1998; Vice President, Drug Delivery Research from
1992-1998 and Vice President, Research and
Development from 1987 to 1992.
Dr. Charles P. Cox 48 Vice President, New Business Development since 1992
January 1996 and Vice President, Product
Development from September 1992 to January 1996.
Brian G. Richmond 49 Vice President, Finance since December 1997, 1997
Assistant Secretary since January 1997, Corporate
Controller from January 1997 to November 1997 and
Accounting Manager from 1991 to 1996.
Dr. J. Steven Garrett 56 Vice President, Clinical Research since April 1995. 1995
Professor of Periodontics at Loma Linda University
from 1986 to 1995 and in private practice
specializing in periodontics since 1978.
Michael R. Duncan 38 Vice President, Manufacturing since October 1995. 1995
Director of Production Operations and Packaging
Manager for Geneva Pharmaceuticals, Inc. from
October 1991 to October 1995.
David W. Osborne 40 Vice President, Pharmaceutical Development since 1998
November 1998. Vice President of Research and
Development for ViroTex Corporation from June 1993
to November 1998.
Elaine M. Gazdeck 50 Vice President, Regulatory Affairs/Quality 1996
Assurance since June 1996, Director, Regulatory
Affairs from May 1994 to May 1996 and Manager,
Regulatory Affairs from May 1990 to April 1994.
Sean F. Moriarty 36 Vice President, Licensing and Counsel since October 2000
2000. Director of Business Development for Geneva
Pharmaceuticals from September 1998 to October
2000. Attorney with the law firm of Isaacson,
Rosenbaum, Woods & Levy, P.C. from June 1996 to
September 1998.
Magnus Pelles 54 Vice President Sales & Marketing, European 2000
Operations since January 2000. Managing Director
and Chief Executive Officer for Germany, Austria
and Switzerland for Biora AB from 1995 to January
2000.
Officers serve at the discretion of our board of directors and are elected
at the first meeting of the board of directors after each annual meeting of
stockholders. There are no family relationships among any of our directors or
executive officers.
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PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT TO
THE 2000 STOCK INCENTIVE PLAN
Our stockholders are being asked to vote on the proposed amendment to our
Incentive Plan amendment to increase by 1,000,000 the number of shares
authorized for issuance under the plan to 2,750,000. The Incentive Plan
amendment currently provides for the issuance of stock options and restricted
stock covering up to 1,750,000 shares plus any shares awarded under our Stock
Option Plan which are cancelled, expired or are forfeited to us. As of the
record date, options to purchase an aggregate of shares and shares of
restricted stock were outstanding, and options to purchase shares or shares of
restricted stock totaling shares were available for future grant. Our Board
has concluded that the proposed amendment is in the best interests of us and our
stockholders. The amendment to our Incentive Plan to increase the number of
shares that may be issued thereunder will enable us to grant options and
restricted stock as needed to attract and retain talented employees.
Our Board believes that our long-term success depends upon our ability to
attract and retain highly qualified individuals who, by virtue of their ability
and qualifications, make important contributions to us. Our Incentive Plan is
intended to enhance our ability to provide individuals with awards and
incentives commensurate with their contributions and is competitive with those
offered by other employers. The stock options and restricted stock granted under
this Plan will increase stockholder value by further aligning the interests of
these individuals with the interests of our stockholders by providing our
employees an opportunity to benefit from stock price appreciation that generally
accompanies improved financial performance.
Because of our continuing efforts to conserve cash and pursue a
conservative fiscal policy, stock and options have constituted and will continue
to constitute an important and significant component of the compensation offered
to our employees. Especially in the highly competitive biotechnology industries,
the ability to attract and retain highly qualified employees is essential to our
success. The grant of stock options and restricted stock in these industries is
often the primary consideration of individual employees in making employment
decisions, both at the time of initial employment and later when they consider
possible employment alternatives. It is essential that we have a stock incentive
plan which provides a sufficient number of option available for grant.
A general description of the principal terms of our Incentive Plan is set
forth below; however, the summary does not purport to be a complete description
of all of the provisions of our Incentive Plan and is qualified in its entirety
by reference to Incentive Plan. Copies of the Incentive Plan may be obtained
upon request to our principal executive offices.
The affirmative vote of a majority of the shares present in person or by
proxy at our meeting and entitled to vote is required for approval of the
amendment to our Incentive Plan.
GENERAL DESCRIPTION
Our Incentive Plan was approved by our Board in March 2000 and by our
stockholders in May 2000. The purposes of our Incentive Plan are to give our
employees, directors and consultants an incentive, through ownership of our
common stock, to continue in service to us, and to help us compete effectively
with other enterprises for the services of qualified individuals.
Our Incentive Plan permits the grant of "incentive stock options," or ISOs
within the meaning of Section 422 of the Internal Revenue Code, or the Code,
only to our employees or any parent or subsidiary corporation ours.
Non-qualified stock options and restricted stock may be granted to employees,
directors and consultants. Our Incentive Plan provides for the grant of options,
including ISOs and non-qualified stock options, or awards, with an exercise
privilege at a fixed price related to the common stock and/or the passage of
time, the occurrence of one or more events or the satisfaction of performance
criteria or other conditions. Under our Incentive Plan, awards may be granted to
such employees, directors or consultants who are residing in foreign
jurisdictions as the administrator may determine from time to time. The
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Incentive Plan is not a qualifying deferred compensation plan under Section
401(a) of the Code and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended, or ERISA.
ADMINISTRATION
Our Incentive Plan is administered, with respect to grants to directors,
officers, consultants, and other employees, by the administrator of our
Incentive Plan, defined as our Board or a committee designated by our Board. Our
committee is constituted in such a manner as to satisfy applicable laws,
including Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. With respect to awards subject to Code Section 162(m), the committee
will be comprised solely of two or more "outside directors" as defined under
Code Section 162(m) and applicable tax regulations. For grants of awards to
individuals not subject to Rule 16b-3 and Code Section 162(m), our Board may
authorize one or more officers to grant such awards.
SHARES RESERVED
Our Incentive Plan provides for the issuance of stock options and
restricted stock covering up to 1,750,000 shares plus any shares awarded under
our Stock Option Plan which are forfeited to us. The Incentive Plan was intended
to replace the Stock Option Plan. Options that are outstanding under our Stock
Option Plan will remain outstanding under such plan. Option grants made after
our stockholders approved our Incentive Plan in May 2000 have been and will
continue to be made under our Incentive Plan. However, to the extent that
options granted under our Stock Option Plan are forfeited, expired or are
cancelled without delivery of shares or which otherwise result in the forfeiture
of shares back to us, there is an automatic corresponding increase in the shares
authorized for issuance under our Incentive Plan.
CODE SECTION 162(M) LIMITATIONS
Our Incentive Plan limits the number of options, which may be awarded to an
employee in any fiscal year to 250,000 shares. However, in connection with his
or her initial commencement of services with us, a participant in our Incentive
Plan may be granted stock options for up to an additional 100,000 shares, which
do not count against the limit set forth in the previous statement. The
limitations ensure that any options granted under our Incentive Plan qualify as
"performance-based compensation" under Section 162(m) of the Code.
Under Code Section 162(m) no deduction is allowed in any taxable year for
compensation in excess of $1 million paid to our chief executive officer and
each of our four most highly paid other executive officers who are serving in
such capacities as of the last day of such taxable year. An exception to this
rule applies to compensation that is paid pursuant to a stock incentive plan
approved by our stockholders and that specifies, among other things, the maximum
number of shares with respect to which options may be granted to eligible
employees under such plan during a specified period. Compensation paid pursuant
to options granted under such a plan and with an exercise price equal to the
fair market value of our common stock on the date of grant is deemed to be
inherently performance-based, since such awards provide value to employees only
if the stock price appreciates.
If our Incentive Plan did not contain the Code Section 162(m) share limits
with respect to which options may be granted to eligible employees under such
plan during a specified period, any compensation expense associated with the
options granted under our Incentive Plan in excess of the shares currently
available for issuance (together with all other non-performance based
compensation) in excess of $1 million for any of our five highest paid officers
would not be deductible under the Code.
AMENDMENT AND TERMINATION
Our Board may at any time amend, suspend or terminate our Incentive Plan.
To the extent necessary to comply with applicable provisions of federal
securities laws, state corporate and securities laws, the Code, the rules of any
applicable stock exchange or national market system and the rules of any foreign
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jurisdiction applicable to awards granted to residents therein, we will obtain
stockholder approval of any amendment to our Incentive Plan in such a manner and
to such a degree as required. Our Incentive Plan will terminate in March 2010
unless previously terminated by our Board.
OTHER TERMS
Our Incentive Plan authorizes the administrator to select the employees,
directors and consultants of ours to whom awards may be granted. The Plan also
authorizes the administrator and to determine the terms and conditions of any
award; however, the term of an award may not be for more than 10 years (or 5
years in the case of ISOs granted to any grantee who owns stock representing
more than 10% of the combined voting power of ours or any parent or subsidiary
corporation of ours).
Our Incentive Plan authorizes the administrator to grant ISOs at an
exercise price of not less than 100% (or 110% in the case of ISOs granted to any
grantee who owns stock representing more than 10% of the combined voting power
of ours or any parent or subsidiary corporation of ours) of the fair market
value of the shares on the date the option is granted. Non-qualified stock
options may be granted at an exercise price of not less than 85% of the fair
market value of the shares on the date the option is granted. The exercise price
of awards intended to qualify as performance-based compensation for purposes of
Code Section 162(m) may not be less than 100% of the fair market value. The
exercise price is generally payable in cash or, in certain circumstances, with a
promissory note, with such documentation as the administrator and the broker, if
applicable, requires us to effect an exercise of an Award and delivery to us of
the sale or loan proceeds required to pay the exercise price, or with shares.
The aggregate fair market value of the shares with respect to any ISOs that are
exercisable for the first time by an eligible employee in any calendar year may
not exceed $100,000.
Awards may be granted subject to vesting schedules and restrictions on
transfer and repurchase or forfeiture rights in favor of us as specified in
agreements issued under our Incentive Plan. The administrator has the authority
to accelerate the vesting schedule of awards so that they become fully vested,
exercisable and released from any restrictions on transfer and repurchase or
forfeiture rights in the event of a change in control, corporate transaction or
related entity disposition, all as defined in our Incentive Plan. Effective upon
the consummation of a corporate transaction, all outstanding awards under our
Incentive Plan will terminate unless assumed by the successor company or its
parent including affirmation of the awards by us if we are the surviving entity
in the transaction. Our Incentive Plan also permits the administrator to include
a provision whereby the grantee may elect at any time while an employee,
director or consultant to exercise any part or all of the award prior to full
vesting of the award.
Under our Incentive Plan, ISOs may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised during the lifetime of
the grantee only by the grantee. However, our Incentive Plan permits the
designation of beneficiaries by holders of ISOs. Other awards are transferable
to the grantee's immediate family to the extent provided in the award agreement
or in the manner and to the extent permitted by the administrator.
Under our Incentive Plan, the administrator may establish one or more
programs under our Incentive Plan to permit selected grantees the opportunity to
elect to defer receipt of consideration payable under an award. The
administrator also may establish under our Incentive Plan separate programs for
the grant of particular forms of awards to one or more classes of grantees.
CERTAIN FEDERAL TAX CONSEQUENCES
The grant of a non-qualified stock option under our Incentive Plan will not
result in any federal income tax consequences to the optionee or to us. Upon
exercise of a non-qualified stock option, the optionee is subject to income
taxes at the rate applicable to ordinary compensation income on the difference
between the option exercise price and the fair market value of the shares on the
date of exercise. This income is subject to withholding for federal income and
employment tax purposes. We are is entitled to an income tax deduction in the
amount of the income recognized by the optionee, subject to
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possible limitations imposed by Section 162(m) of the Code. Any gain or loss on
the optionee's subsequent disposition of the shares will receive long-term or
short-term capital gain or loss treatment, depending on whether the shares are
held for more than one year following exercise. We do not receive a tax
deduction for any such gain.
The grant of an ISO under our Incentive Plan will not result in any federal
income tax consequences to the optionee or to us. An optionee recognizes no
federal taxable income upon exercising an ISO (subject to the alternative
minimum tax rules discussed below), and we receive no deduction at the time of
exercise. The tax consequences of a disposition of stock acquired upon exercise
of an ISO depends upon how long the optionee has held the shares. If the
optionee does not dispose of the shares within two years after the ISO was
granted, nor within one year after the ISO was exercised, the optionee will
recognize a long-term capital gain (or loss) equal to the difference between the
sale price of the shares and the exercise price. We are not entitled to any
deduction under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods,
he or she must recognize ordinary income in the year of the disposition
(referred to as a disqualifying disposition). The amount of such ordinary income
generally is the lesser of (i) the difference between the amount realized on the
disposition and the exercise price, or (ii) the difference between the fair
market value of the stock on the exercise date and the exercise price. Any gain
in excess of the amount taxed as ordinary income will be treated as a long-term
or short-term capital gain, depending on whether the stock was held for more
than one year. We are entitled to a deduction equal to the amount of ordinary
income recognized by the optionee in the year of the disqualifying disposition.
The "spread" under an ISO, i.e., the difference between the fair market
value of the shares at exercise and the exercise price, is classified as an item
of adjustment in the year of exercise for purposes of the alternative minimum
tax.
The grant of restricted stock will subject the recipient to ordinary
compensation income on the difference between the amount paid for such stock and
the fair market value of the shares on the date that the restrictions lapse.
This income is subject to withholding for federal income and employment tax
purposes. We are entitled to an income tax deduction in the amount of the
ordinary income recognized by the recipient, subject to possible limitations
imposed by Section 162(m) of the Code. Any gain or loss on the recipient's
subsequent disposition of the shares will receive long-term or short-term
capital gain or loss treatment depending on whether the shares are held for more
than one year and depending on how long the stock has been held since the
restrictions lapsed. We do not receive a tax deduction for any such gain.
Recipients of restricted stock may make an election under Section 83(b) of
the Code to recognize as ordinary compensation income in the year that such
restricted stock is granted the amount equal to the spread between the amount
paid for such stock and the fair market value on the date of the issuance of the
stock. If such an election is made, the recipient recognizes no further amounts
of compensation income upon the lapse of any restrictions and any gain or loss
on subsequent disposition will be long-term or short-term capital gain to the
recipient. An election under Section 83(b) must be made within 30 days from the
time the restricted stock is issued.
THE FOREGOING IS ONLY A SUMMARY OF THE CURRENT EFFECT OF FEDERAL INCOME
TAXATION UPON THE GRANTEE AND US WITH RESPECT TO THE SHARES PURCHASED UNDER OUR
INCENTIVE PLAN. YOU SHOULD REFER TO THE APPLICABLE PROVISIONS OF THE CODE. IN
ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A GRANTEE'S DEATH
OR THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY TO WHICH
THE GRANTEE MAY BE SUBJECT.
PLAN BENEFITS
The grant of stock options and shares of restricted stock to executive
officers is subject to the discretion of our compensation committee and our
board of directors. The following table sets forth the number of stock options
and shares of restricted stock granted to our Chief Executive Officer and our
other four most highly compensated executive officers whose total annual
compensation exceeded $100,000
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during 2000 (referred to as named executive officers), all current executive
officers as a group, all current directors who are not executive officers as a
group and all employees, including all current officers who are not executive
officers as a group and the exercise prices for such options and shares. The
closing price of our shares of common stock on the Nasdaq National Market as of
the record date was $ .
As of the date hereof, our compensation committee and our Board has not
determined future awards that may be made under our Incentive Plan. Accordingly,
future benefits or amounts received are not determinable.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE 2000 STOCK INCENTIVE PLAN.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
Our stockholders are being asked to vote on the proposed amendment to our
certificate of incorporation to increase from 30,000,000 to 50,000,000 the
number of shares of our authorized stock, 45,000,000 of which will be designated
common stock and 5,000,000 of which will be designated preferred stock.
Our certificate of incorporation currently authorizes the issuance of
25,000,000 shares of common stock. In February 2001, our board of directors
approved an increase in the authorized number of shares of our common stock to
45,000,000 shares, subject to stockholder approval of the amendment. As of the
record date, there were approximately issued and outstanding shares of
our common stock and approximately 554,834 additional shares reserved for future
issuance under our stock option plans. Under our employee stock purchase plan,
there were approximately 282,663 shares available for grant of purchase. There
were also approximately 1,000,000 shares of common stock issued for issuance
upon the exercise of outstanding warrants and 667,500 shares reserved for
issuance upon the conversion of 12,015 shares of Series A Convertible
Exchangeable Preferred Stock issued and outstanding. Based upon the foregoing
number of outstanding and reserved shares of common stock, we currently have
approximately million shares remaining available for other purposes.
Our certificate of incorporation currently authorizes the issuances of
5,000,000 shares of preferred stock, 200,000 shares of which have been
designated Series A Preferred Stock and 20,000 of which have been designated
Series A Convertible Exchangeable Preferred Stock . As of the record date
shares of the Series A Preferred Stock have been reserved for issuance under our
stockholder rights plan and 12,015 shares of our Series A Convertible
Exchangeable Preferred Stock were outstanding. Accordingly, we currently have
approximately shares of preferred stock remaining available for other
purposes.
In 2000, we continued to utilize the issuance of equity to establish
collaborative arrangements with large pharmaceutical and biotechnology companies
and to acquire technologies and products. Our board of directors considers the
proposed authorization of an additional 25,000,000 shares of common stock
desirable because it would provide us with the ability to take advantage of
future opportunities for the issuance of equity in connection with financings,
possible future acquisitions of companies, products and technologies, other
programs to facilitate expansion and growth and for other general corporate
purposes, including stock dividends, stock splits and employee benefit plans,
without the delay and expense incident to the holding of a special meeting of
stockholders to consider any specific issuance. Such additional shares could
also be issued in a public offering or privately placed to raise capital for
various purposes. Authorized but unissued shares may be issued at such time or
times, to such person or persons and for such consideration as our board of
directors determines to be in the best interests of us.
In February 2001, we filed a Registration Statement on Form S-3 for the
issuance and sale from time to time of up to 4,000,000 shares. We intend to
issue and sale additional shares of our common stock to raise equity capital
when deemed advisable by our board of directors, considering the market price of
the shares of our common stock and our capital resources. We may also issue
additional shares of our common stock as permitted or required under our
employee benefit plans and under outstanding options,
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warrants and other securities convertible into common stock. Our board of
directors has no other immediate plans, understanding, agreements or commitments
to issue additional common stock or any shares of preferred stock for any
purposes. No additional action or authorization by our stockholders would be
necessary prior to the issuance of such additional shares of common or preferred
stock, unless required by applicable law or the rules of any stock exchange or
national securities association trading system on which our common stock is then
listed or quoted. We reserve the right to seek a further increase in authorized
shares from time to time in the future as considered appropriate by our board of
directors.
Under our certificate of incorporation, our stockholders do not have
preemptive rights with respect to common or preferred stock. Thus, should our
board of directors elect to issue additional shares of common stock, existing
stockholders would not have any preferential rights to purchase such shares. In
addition, if our board of directors elects to issue additional shares of common
or preferred stock, such issuance could have a dilutive effect on the earnings
per share, voting power and shareholdings of current stockholders.
The proposed amendment to increase the authorized number of shares of stock
could, under certain circumstances, have an anti-takeover effect, although this
is not the intention of this proposal. For example, in the event of a hostile
attempt to take over control of Atrix, we may endeavor to impede the attempt by
issuing shares of common or preferred stock, thereby diluting the voting power
of the other outstanding shares and increasing the potential costs to acquire
control of Atrix. The amendment therefore may have the effect of discouraging
unsolicited takeover attempts, thereby potentially limiting the opportunity for
our stockholders to dispose of their shares at the higher price generally
available in takeover attempts or that may be available under a merger proposal.
The proposed amendment may have the effect of permitting our current management,
including the current board of directors, to retain its position, and place it
in a better position to resist changes that stockholders may wish to make if
they are dissatisfied with the conduct of our business. However, our board of
directors is not aware of any attempt to take control of Atrix, and our board of
directors has not presented this proposal with the intent that it be utilized as
a type of anti-takeover device.
If the proposed amendment is adopted, it will become effective upon filing
of a certificate of amendment to our certificate of incorporation with the
Delaware Secretary of State. If our stockholders approve the proposed amendment
to our certificate of incorporation, however, our board of directors retains
discretion under Delaware law not to implement the proposed amendment. If our
board of directors exercised such discretion, the number of authorized shares
would remain at current levels. The affirmative vote of the holders of a
majority of outstanding shares of our common stock is required to approve the
amendment to our certificate of incorporation.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF STOCK FROM 30,000,000 TO 50,000,000.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid by
us for each of the last three fiscal years to our Chief Executive Officer and
the named executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATIONS
-------------
AWARDS
ANNUAL -------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ------------- ---------------
Mr. David R. Bethune, 2000 $255,000 $ -0- 260,000 $ 101,459(2)
Chairman and CEO 1999 94,808 -0- 309,380(1)
Dr. Richard L. Jackson 2000 $250,000 $ -0- 150,000 $ 22,368(7)
Director, Senior Vice President, 1999 250,000 -0- -0- -0-
Research and Development 1998 41,667 -0- 100,000 -0-
Dr. J. Steven Garrett 2000 $190,000 $ -0- 100,000 $ 5,458(3)
Vice President, Clinical Research 1999 190,000 $ -0- 9,000 4,984(3)
1998 178,000 40,000(4) 7,500 4,620(3)
Dr. Charles P. Cox, 2000 $155,000 $ -0- 86,000 $ 15,846(5)
Vice President, New Business Development 1999 155,000 -0- 7,500 5,000(3)
1998 145,000 30,000(4) 7,500 4,313(3)
Dr. Richard L. Dunn, 2000 $152,000 $ -0- 69,000 $ 14,516(6)
Senior Vice President, Drug Delivery Research 1999 152,000 -0- 6,500 4,567(3)
1998 142,000 30,000(4) 7,500 4,251(3)
---------------
(1) Upon becoming CEO on August 10, 1999, the board of directors provided Mr.
Bethune the right to purchase up to 50,000 shares of common stock at the
market price on the date of purchase. Upon purchase, we agreed to match the
number of shares acquired for no additional consideration. During 2000,
10,000 shares were acquired and an additional 10,000 were issued to match
these corresponding stock purchases. We recognized $309,380 of compensation
expense related to this arrangement. This restricted stock award cannot be
traded for a minimum of one year and is subject to SEC regulations
pertaining to our insiders.
(2) Under the arrangement described in footnote (1) above, 10,000 shares were
acquired and an additional 10,000 shares were issued to match this
corresponding stock purchase in 1999. We recognized $75,062 of compensation
expense related to this arrangement. The remaining $25,839 represents a
housing and travel adjustment, for a total of $101,459.
(3) Represents our 50% matching contribution up to 6% of annual compensation
under our 401(k) Plan.
(4) Performance bonus.
(5) Represents $10,698 of accumulated vacation paid out, and $5,148 of our 50%
matching contribution up to 6% of annual compensation under our 401(k) Plan.
(6) Represents $9,747 of accumulated vacation paid out, and $4,769 of our 50%
matching contribution up to 6% of annual compensation under our 401(k) Plan.
(7) Represents a housing and travel adjustment.
The foregoing compensation table does not include certain fringe benefits
made available on a non-discriminatory basis to all of our employees such as
group health insurance, dental insurance, long-term disability insurance,
vacation and sick leave. In addition, we make available certain non-monetary
benefits to our executive officers with a view to acquiring and retaining
qualified personnel and facilitating job performance. We consider such benefits
to be ordinary and incidental business costs and expenses. We also did not
include in the table the aggregate value of such benefits in the case of the
executive officers, which cannot be precisely ascertained but which is the
lesser of either (a) 10% of the salary and bonus paid to
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each such executive officer or to the group, respectively, or (b) $50,000 or
$50,000 times the number of individuals in the group, as the case may be.
OPTION GRANTS TABLE
The following table provides information relating to the grant of stock
options to our CEO and the Named Executive Officers during the fiscal year ended
December 31, 2000 under our Stock Option Plan and our Incentive Plan.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------------------------ ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED(#)(2) FISCAL YEAR PRICE ($/SH)(3) DATE 5%($) 10%($)
---- ------------- ------------ ---------------- ---------- -------- ----------
Mr. David R. Bethune............. 40,000 3.0% $ 9.719 4/19/10 244,489 619,583
100,000 7.4% 9.750 6/02/10 613,172 1,553,899
50,000 3.7% 9.500 8/03/10 298,725 757,028
50,000 3.7% 12.875 8/18/10 404,851 1,025,972
20,000 1.5% 15.125 9/05/10 190,241 482,107
Dr. Richard L. Jackson........... 25,000 1.8% $ 9.719 4/19/10 152,806 387,240
75,000 5.5% 9.750 6/02/10 459,879 1,165,424
20,000 1.5% 9.500 8/03/10 119,490 302,811
20,000 1.5% 12.875 8/18/10 161,940 410,389
10,000 0.7% 15.125 9/05/10 95,120 241,054
10,000 0.7% 18.125 12/08/10 113,987 288,866
Dr. J. Steven Garrett............ 20,000 1.5% $ 9.719 4/19/10 122,245 309,792
40,000 3.0% 9.750 6/02/10 245,269 621,560
10,000 0.7% 9.500 8/03/10 59,745 151,406
10,000 0.7% 12.875 8/18/10 80,970 205,194
10,000 0.7% 15.563 8/30/10 97,875 248,034
10,000 0.7% 15.125 9/05/10 95,120 241,054
Dr. Charles P. Cox............... 16,000 1.2% $ 9.719 4/19/10 97,796 247,833
20,000 1.5% 9.750 6/02/10 122,634 310,780
20,000 1.5% 9.500 8/03/10 119,490 302,811
10,000 0.7% 12.875 8/18/10 80,970 205,194
10,000 0.7% 15.125 9/05/10 95,120 241,054
10,000 0.7% 18.125 12/08/10 113,987 288,866
Dr. Richard L. Dunn.............. 14,000 1.0% $ 9.719 4/19/10 85,571 216,854
30,000 2.2% 9.750 6/02/10 183,952 466,170
5,000 0.4% 9.500 8/03/10 29,872 75,703
10,000 0.7% 12.875 8/18/10 80,970 205,194
10,000 0.7% 15.125 9/05/10 95,120 241,054
---------------
(1) Potential realizable value is based on an assumption that the stock price of
the common stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten-year option term. These
numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect our estimate of future
stock price growth.
(2) Vest and become exercisable at the rate of one-third on the first, second
and third anniversaries of the grant date.
(3) All options were granted at the fair market value of the shares on the date
of grant based on the closing bid price for the shares on the Nasdaq
National Market.
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AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides information relating to the exercise of stock
options during the year ended December 31, 2000 by our CEO and each of the Named
Executive Officers and the 2000 fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END AT FISCAL YEAR END
(#) ($)(1)
SHARES ACQUIRED --------------- --------------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------- --------------------
Mr. David Bethune.......................... -0- $-0- 23,333/262,667 $206,062/$1,670,241
Dr. Richard Jackson........................ -0- $-0- 66,666/193,334 $420,829/$1,186,196
Dr. J. Steven Garrett...................... -0- $-0- 88,669/108,500 $ 647,004/$677,959
Dr. Charles P. Cox......................... -0- $-0- 74,008/102,033 $ 656,391/$568,616
Dr. Richard L. Dunn........................ -0- $-0- 52,248/76,167 $ 417,850/$435,672
---------------
(1) Market value of underlying shares is (i) the fair market value at December
31, 2000 ($17.0625 per share) less the option exercise price, multiplied by
(ii) the number of shares in the money.
EMPLOYMENT AGREEMENTS
On April 17, 1995, we entered into an employment agreement with Dr.
Garrett. Pursuant to the terms of the agreement, Dr. Garrett's duties are to act
as Vice President of Dental Clinical Research. The employment agreement provides
that Dr. Garrett receive a starting annual base salary of $150,000 (which at the
discretion of our Board, upon recommendation by our compensation committee, may
be increased annually). Dr. Garrett's agreement provides for severance pay at
full salary and benefits until the earlier of one year from the date of
termination or until re-employment; and for the immediate vesting of all
unvested options, in case of termination other than for cause. Dr. Garrett's
base salary was increased to $190,000 effective January 1, 1999.
On November 1, 1998, we entered into an employment agreement with Dr.
Richard Jackson. Pursuant to the terms of the agreement, Dr. Jackson's duties
are to act as Senior Vice President of Research and Development. The employment
agreement provides that Dr. Jackson receive a starting annual base salary of
$250,000. The base salary, at the discretion of our Board, upon recommendation
by our compensation committee, may be increased annually. Upon entering into the
agreement, Dr. Jackson received options to purchase 100,000 shares, which
options vest in three equal annual installments. Dr. Jackson's agreement
provides for severance pay at a full salary for one year from the date of
termination. The agreement also provides that we will pay insurance benefits
until the earlier of one year from the date of termination or until
re-employment and provides for the immediate vesting of all unvested options, in
case of termination other than for cause or upon a change of control.
On August 3, 1999, we entered into an agreement with Mr. Bethune. Pursuant
to the terms of the agreement, Mr. Bethune's duties are to act as Chief
Executive Officer. The employment agreement provides that Mr. Bethune receive a
monthly base salary of $21,250. Mr. Bethune's agreement provides him the right
to purchase 50,000 shares and receive an equivalent number of matching
restricted shares. The agreement does not provide for any severance pay or
benefits.
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COMPENSATION PURSUANT TO PLANS
Stock Option Plans. We have four stock option plans under which options
may currently be granted, the Incentive Plan, the Stock Option Plan,
Non-Qualified Stock Option Plan and Non-Employee Director Stock Plan. The
persons eligible to receive options, the number of options authorized and
outstanding, and the number of options granted during the preceding fiscal year
under each plan are as follows:
# OPTIONS # OPTIONS # OPTIONS GRANTED
NAME OF PLAN PERSONS ELIGIBLE AUTHORIZED OUTSTANDING(1) IN 2000
------------ -------------------- ---------- -------------- -----------------
Stock Option Plan.............................. Employees and 2,500,000 1,509 289,450
directors
Incentive Plan................................. Employees, directors 1,750,000(2) 553,325 1,064,325
and consultants
Non-Qualified Stock Option Plan................ Consultants 150,000 3,040 20,000
Non-Employee Directors Stock Plan.............. Non-Employee 25,000 19,433 3,092
Directors
---------------
(1) Any unexercised options that expire or terminate in accordance with the plan
become available again for issuance under the plan.
(2) The Board proposes that the stockholders approve an amendment to the
executive plan at the meeting to increase the number of shares that may be
issued pursuant to the exercise of options granted thereunder to 2,750,000.
401(k) Plan. We maintain a defined contribution savings plan, or the
401(k) Plan, to provide retirement income to our employees, including all
executive officers. All employees who are over 21 years of age are eligible to
participate in our 401(k) Plan. It is funded by voluntary pre-tax contributions
from employees up to a maximum amount equal to 17% of annual compensation up to
$10,000 and by 50% matching contributions by us up to 6% of annual compensation.
Employees who have completed one year of service are eligible for the 50%
company match. Participants are fully vested in all pre-tax, after-tax and
matching contributions as soon as they are made.
Employee Stock Purchase Plan. We maintain an employee stock purchase plan,
or the ESPP, which provides eligible employees the opportunity to purchase
shares of our common stock through authorized payroll deductions at 85% of the
average market price on the last day of each quarter. All employees who have
completed six months of employment of 20 hours per week or greater are eligible
to participate in our ESPP. This plan qualifies as an "employee stock purchase
plan" under Section 423 of the Code. Currently, 286,000 shares are available for
purchase under our ESPP.
COMPENSATION OF DIRECTORS
Each non-employee director receives an annual retainer fee of $8,000
($10,000 for a non-employee Chairman of our Board) which is paid in quarterly
installments. Each non-employee director may elect to apply all or any portion
of the annual retainer fee to the acquisition of restricted shares or the
receipt of stock options in accordance with the terms of the Non-Employee
Director Stock Plan. In May 2000, the retainer of $8,000 ($10,000 for the
Chairman of the Board) was eliminated by the Board and each non-employee
director was granted 2,800 stock options in lieu of the annual retainer. In
addition, under our Non-Employee Director Stock Plan, immediately following each
annual meeting of stockholders, each non-employee director is granted a
non-qualified stock option to purchase 4,000 shares (5,000 shares in the case of
a non-employee Chairman of our Board). The options vest in three equal annual
installments. We also reimburse expenses of directors for attending meetings.
Our directors who are also officers do not receive any additional compensation
for their service as members of the board of directors.
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REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of our Board is responsible for establishing
compensation policy and administering the compensation programs of our executive
officers. The compensation committee is currently comprised of three independent
outside directors. The compensation committee meets at least once a year to
review executive compensation policies, design of compensation programs, and
individual salaries and awards for our executive officers based on performance
criteria.
Pursuant to the rules regarding disclosure of company polices concerning
executive compensation, this report is submitted by Mr. Flaum, Mr. Urheim and
Dr. Cohen in their capacities as members of our compensation committee for the
year ended December 31, 2000 and addresses our compensation policies as they
affected Mr. Bethune, the CEO, and our other executive officers, including the
Named Executive Officers.
EXECUTIVE COMPENSATION PHILOSOPHY
We apply a consistent philosophy to compensation for all of our employees,
including executive officers. This philosophy is based on the premise that our
achievements result from the coordinated efforts of all individuals working
toward common objectives.
The goals of the executive compensation program are to align compensation
with business objectives and performance, and to enable us to attract, retain
and reward executive officers who contribute to our long-term success. Our
compensation program for executive officers is based on the same principles
applicable to compensation decisions for all of our employees and generally
consists of two compensation elements: cash and equity. However, over the past
two years the cash element has remained relatively constant and we have relied
more heavily on equity as a form of compensation. The process used by us in
determining executive officer compensation levels for each of the two components
takes into account both qualitative and quantitative factors. Among the factors
considered by us are the recommendations of the CEO with respect to the
compensation of our other key executive officers. However, we make the final
compensation decisions concerning such officers.
In making compensation decisions, we consider compensation practices and
financial performance of the company's peer group. We use this information to
guide us, but we do not target total executive compensation or any component
thereof to any particular point within, or outside, the range of peer group
results. However, we believe that compensation at or near the weighted average
of the peer group for base salaries is generally appropriate for us to use as a
guideline for compensation decisions. The specified weighted averages are
considered on both an absolute basis and a size-adjusted basis (i.e., reflecting
compensation levels that are commensurate with the company's size relative to
the sizes of the peer group companies). Specific compensation for individual
executive officers will vary from these levels as the result of other factors
considered by us unrelated to compensation practices of the peer group.
The peer group is comprised of biotech and pharmaceutical companies that
are among those entities who participate in an annual biotechnological survey
conducted by Radford Associates in conjunction with Aon Consulting Group. The
2000 survey included information on 152 public and private companies from the
group of 50 to 149 employees.
The Compensation Committee does not believe that Code Section 162(m), which
denies a deduction for compensation payments in excess of $1,000,000 to the CEO
or a Named Executive Officer, is likely to be applicable to the company in the
near future. We will reconsider the implication of Section 162(m) if and when it
appears that the section may become applicable.
COMPENSATION ELEMENTS
For the year ended December 31, 2000, our executive compensation program
included a base salary and grants of stock options.
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Base Salary. We determine salaries for executive officers by evaluating
subjectively the responsibilities of the position held and the experience and
performance of the individual and comparing base salaries for comparable
positions at peer group entities. Our board of directors and management believe
that our company has exceeded its goals for 2000; however, because of our
continuing efforts to conserve cash, base salaries for executives in 2000
remained the same as in 1999. In lieu of cash, additional stock options were
granted to executives in an effort to keep compensation expense at the same
level.
We have not yet determined base salaries for 2001, but in doing so we will
review peer group data and rely on the recommendation of the CEO for each
executive position. In addition, we will review the responsibility level of each
position, together with the executive officer's individual performance for the
prior year and objectives for the current year. Finally, we will compare the
company's performance to objectives for the prior year and performance targets
for the current year.
In determining the CEO's base salary for 2001, we reviewed the peer group
data, compared the company's performance to its stated objectives in 2000, and
considered performance targets for 2001. Our management and board of directors
believe that the company and the CEO exceeded stated goals for 2000; however,
because of our efforts to conserve cash, Mr. Bethune's cash compensation in 2001
remained unchanged from 2000. In recognition of Mr. Bethune's achievements and
the company's performance under his leadership, and in an effort to further
align his interests with those of our stockholders, Mr. Bethune was granted an
option to purchase 100,000 shares of our common stock effective January 2, 2001.
The option will vest on a pro rata basis over a three-year period.
Stock Options. The long-term incentive component of the CEO's and the
executive officers' compensation is stock options. We believe that providing
executive officers with opportunities to acquire significant equity positions in
the company and thus, the opportunity to share in its growth and prosperity,
through the grant of stock options will enable the company to attract and retain
qualified and experienced executive officers. Stock options represent a valuable
portion of the compensation program for our executive officers. The exercise
price of stock options is the fair market value of the shares on the date of the
grant based on the closing bid price of the shares on the date of grant, and
will only provide a benefit if the value of the shares increases. Grants of
stock options to executive officers are made by us upon the recommendation of
the CEO and are based upon a review of peer group and the company's relative
size data within the 2000 survey. Each executive officer's position is compared
to grants of officers in similar positions. We also evaluate the executive
officer's past and expected future performance, the number of outstanding and
previously granted options, and discussions with the executive officer when we
grant options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 2000, the members of the compensation committee were Mr. Sander
A. Flaum, Mr. John E. Urheim, and Dr. D. Walter Cohen. Mr. Campbell served on
the compensation committee until November 2000 at which time he resigned. Mr.
Urheim replaced Mr. Campbell in November 2000. Mr. Urheim served as our Vice
Chairman and Chief Executive Officer from June 1993 to August 1999.
COMPENSATION COMMITTEE
Sander A. Flaum, Chairman
John E. Urheim
Dr. D. Walter Cohen
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PERFORMANCE GRAPH
The graph and table below compare the total stockholder returns (assuming
reinvestment of dividends) of the company's shares, the Nasdaq Pharmaceutical
Index and the Nasdaq Index. The graph assumes $100 invested on January 1, 1995
in the shares and each of the indices. The stock price performance shown on the
graph below is not necessarily indicative of the future price performance.
[PERFORMANCE GRAPH]
---------------------------------------------------------------------------------------------------------------------
Date 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
---------------------------------------------------------------------------------------------------------------------
Company Index 100.00 138.71 190.32 114.52 66.94 220.16
Nasdaq Pharmaceutical 100.00 100.31 103.66 131.95 248.01 308.49
Nasdaq Total 100.00 123.04 150.69 212.51 394.92 237.62
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF OUR PREVIOUS
FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934
THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE
OR IN PART, THE PRECEDING REPORT OF THE COMPENSATION COMMITTEE AND PERFORMANCE
GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
AUDIT COMMITTEE REPORT
The following is a report of the audit committee with respect to our
audited financial statements for the fiscal year ended December 31, 2000, which
include our consolidated balance sheets as of December 31, 2000 and 1999, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 2000, and the notes thereto.
The board of directors has adopted a written audit committee charter, a
copy of which is attached to this proxy statement as Appendix A. In general the
charter sets forth:
- the scope of the audit committee's responsibilities and the means by
which it carries out these responsibilities;
- the outside auditor's accountability to the board of directors and the
audit committee; and
- the audit committee's responsibility to ensure the independence of the
outside auditor.
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REVIEW WITH MANAGEMENT
We have reviewed and discussed the company's audited financial statements
with management.
REVIEW AND DISCUSSIONS WITH INDEPENDENT ACCOUNTANTS
We have discussed with Deloitte & Touche, the company's independent
accountants, the matters required to be discussed by SAS 61 (Codification of
Statements on Accounting Standards) which includes, among other items, matters
related to the conduct of the audit of the company's financial statements.
We have also received written disclosures and the letter from Deloitte &
Touche LLP required by Independence Standards Board Standard No. 1 (which
relates to the accountant's independence from the company and its related
entities) and have discussed with Deloitte & Touche LLP their independence from
the company. In addition, we have also considered whether the provision of those
services set forth in the table below is compatible with Deloitte & Touche LLP
maintaining its independence from the company.
CONCLUSION
Based on the review and discussions referred to above, we recommended to
the company's board of directors that the company's audited financial statements
be included in the company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.
AUDIT COMMITTEE
H. Stuart Campbell, Chairman
C. Rodney O'Connor
Sander A. Flaum
AUDIT FEES
The following table sets forth the aggregate fees billed by Deloitte &
Touche LLP for the following services during fiscal 2000:
DESCRIPTION OF SERVICES FEE AMOUNT
----------------------- ----------
Audit fees(1)........................................... $152,547
All other fees.......................................... $ --
--------
Total......................................... $152,547
========
---------------
(1) Represents the aggregate fees billed for professional services rendered for
the audit of the company's annual financial statements during fiscal 2000
and for the review of the financial statements included in the company's
quarterly reports during such period.
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PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our Board, upon the recommendation of our audit committee, has selected
Deloitte & Touche LLP as our independent auditors for the year ending December
31, 2001. Representatives of Deloitte & Touche LLP will be present at the
meeting and will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from stockholders.
Although it is not required to do so, our Board is submitting its selection
of our independent auditors for ratification by our Stockholders at the meeting
in order to ascertain the views of stockholders regarding such selection. A
majority of the votes cast at the meeting, if a quorum is present, will be
sufficient to ratify the selection of Deloitte & Touche LLP as our independent
auditors for the year ending December 31, 2001. Whether the proposal is approved
or defeated, our Board may reconsider its selection.
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of outstanding shares as of the record date, by (i) each person who is
known by us to own beneficially five percent or more of the outstanding shares,
(ii) each of our directors, (iii) the CEO and each Named Executive Officer, and
(iv) all directors and executive officers as a group.
SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS
---- ------------ --------
Elan International Services, Ltd.(2)........................ 1,442,478 9.9%
Sanofi-Synthelabo Inc.(3)................................... 824,572 6.0%
Mr. David R. Bethune........................................ 148,477 1.09%
Mr. H. Stuart Campbell...................................... 35,228(4) *
Dr. D. Walter Cohen......................................... 26,371 *
Dr. Charles P. Cox.......................................... 87,341 *
Dr. Richard L. Dunn......................................... 135,665 *
Mr. Sander Flaum............................................ 9,364 *
Dr. J. Steven Garrett....................................... 98,256 *
Dr. Richard Jackson......................................... 125,000 *
Mr. C. Rodney O'Connor...................................... 98,999 *
Mr. Nicolas Bazan........................................... -0- *
All executive officers and directors as a group (18
persons).................................................. 1,473,256 10.35%
---------------
* Less than 1%
(1) Shares are considered beneficially owned, for purposes of this table, only
if held by the person indicated, or if such person, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares the power to vote, to direct the voting of and/or to dispose
of or to direct the disposition of such security, or if the person has the
right to acquire beneficial ownership within 60 days, unless otherwise
indicated. The foregoing share amounts include the following number of
shares which may be acquired pursuant to stock options exercisable within 60
days of the record date: Mr. Bethune, 14,667 shares, Mr. Campbell, 2,667
shares; Dr. Cohen, 2,667 shares; Dr. Cox, 5,333 shares; Dr. Dunn, 4,666
shares; Mr. Flaum, 1,333 shares, Dr. Garrett, 6,667 shares; Dr. Jackson,
8,334; Mr. O'Connor, 2,666 shares; and all executive officers and directors
as a group, 71,167 shares.
(2) Information is based upon the Schedule 13D filed by Elan International
Services, Ltd., on August 7, 2000. Elan International's business address is
102 St. James Court, Flatts, Smiths Parish, FL 04,
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Bermuda. The shares beneficially owned include 1,000,000 shares which may be
acquired pursuant to the exercise of warrants.
(3) The business address of Sanofi-Synthelabo Inc. is 90 Park Avenue, New York,
New York 10016.
(4) Includes 57 shares held by Mr. Campbell's wife. Mr. Campbell disclaims any
beneficial interest in all shares held by this wife.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the
rules thereunder require our executive officers and directors, and persons who
own more than 10% of a registered class of our equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission, the NASD, and us.
Based solely on our review of Section 16(a) forms received by us and
written representations that no other reports were required, we believe that,
during the last fiscal year, all Section 16(a) filing requirements applicable to
our executive officers, directors and 10% beneficial owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into various employment agreements with our executive
officers, which are discussed under "Executive Compensation-Employment
Agreements."
In December 2000, we entered into an exclusive North American marketing
agreement with Sanofi-Synthelabo, a major international pharmaceutical company,
for One-month, Three-month, and Four-month Leuprogel. Under the terms of the
agreement, we are to receive a license fee, research and development support and
payments for certain clinical, regulatory and sales milestones. We will also
receive royalty payments based on sales of the Leuprogel products upon approval
for marketing by the FDA. As part of the agreement, Sanofi-Synthelabo purchased
approximately $15 million of our common stock. In addition to the prostate
cancer products, Sanofi-Synthelabo received an option to develop a six-month
product for prostate cancer, as well as additional Leuprogel products for other
indications. Sanofi-Synthelabo owns more than five percent of our outstanding
common stock.
On August 2, 1999, we entered into a severance agreement with John E.
Urheim, a director and our former CEO. Under the agreement, Mr. Urheim is
entitled to receive $255,000 over a period of twelve months commencing September
1, 1999 and ending August 31, 2000 and is entitled to receive health benefits
during the same period of time. In addition, unvested options to acquire up to
28,034 shares became immediately vested as of the date of the agreement. In
2000, Mr. Urheim received $126,926 in consulting fees for the set-up and
promotion of the European sales program.
On July 18, 2000, we formed a joint venture with Elan International
Services, Ltd., a wholly owned subsidiary of Elan Corporation, plc. The joint
venture is a Bermuda limited company and is initially owned 80.1% by us and
19.9% by Elan. Its purpose is to develop and commercialize oncology and pain
management products. In a related transaction, Elan purchased 12,015 shares of
our Series A convertible exchangeable preferred stock on July 18, 2000 for
$12,015,000. We used the proceeds of the preferred stock sale to purchase 6,000
shares of the joint venture's common stock and 3,612 shares of its preferred
stock to fund our share of the joint venture's initial capitalization. Elan may
also loan us up to $8,010,000 to support our share of the joint venture's
research and development costs pursuant to a convertible promissory note issued
by us to Elan. Elan purchased 442,478 shares of our common stock for $5,000,000
and we issued Elan a five-year warrant to purchase up to 1,000,000 shares of our
common stock for $18 per share in conjunction with the formation of the joint
venture.
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SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of our Board, but may
also be made without additional remuneration by our officers or employees by
telephone, telegraph, facsimile transmission, e-mail or personal interview. We
will bear the expense of the preparation, printing and mailing of the enclosed
form of proxy, notice of annual meeting and this proxy statement and any
additional material relating to the meeting which may be furnished to our
stockholders by our Board subsequent to the furnishing of this proxy statement.
We will reimburse banks and brokers who hold shares in their name or custody, or
in the name of nominees for others, for their out-of-pocket expenses incurred in
forwarding copies of the proxy materials to those persons for whom they hold
such shares. To obtain the necessary representation of stockholders at the
meeting, supplementary solicitations may be made by mail, telephone or interview
by officers or employees of us, without additional compensation, or selected
securities dealers. We anticipated that the cost of such supplementary
solicitations, if any, will not be material.
ANNUAL REPORT
We have mailed our Annual Report for 2000 to our stockholders along with
this proxy statement. WE WILL, UPON WRITTEN REQUEST AND WITHOUT CHARGE, PROVIDE
TO ANY PERSON, SOLICITED HEREUNDER, A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2000, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. Requests should be addressed to Investor Relations, 2579 Midpoint
Drive, Fort Collins, Colorado 80525.
OTHER MATTERS
We are not aware of any business to be presented for consideration at the
meeting, other than those specified in the notice of annual meeting. If any
other matters are properly presented at the meeting, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
STOCKHOLDER PROPOSALS
If you intend to submit a proposal at the Annual Meeting of Stockholders
for the year ended 2001 and wish to have the proposal considered for inclusion
in the proxy statement and form of proxy for that meeting, you must comply with
the applicable laws and regulations governing submission of such proposals and
must deliver the proposal to us for consideration no later than December 5,
2001. If you submit a proposal to our Annual Meeting of Stockholders for the
year ended 2001 outside the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934, it will be considered untimely for purposes of Rule 14a-4
and 14a-5 if we receive notice thereof after February 18, 2002. You should send
such proposal to our Corporate Secretary at 2579 Midpoint Drive, Fort Collins,
Colorado 80525.
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NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise us whether other persons are the beneficial owners of the
shares for which proxies are being solicited from you, and, if so, the number of
copies of this proxy statement and other soliciting materials you wish to
receive in order to supply copies to the beneficial owners of the shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WE REQUEST
THAT WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU COMPLETE,
DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. BY RETURNING YOUR PROXY PROMPTLY YOU CAN HELP US AVOID THE EXPENSE OF
FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE MEETING CAN BE HELD.
STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE A PRIOR PROXY AND VOTE THEIR
PROXY IN PERSON AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors,
/s/ DAVID R. BETHUNE
David R. Bethune
Chairman of the Board and Chief
Executive Officer
Fort Collins, Colorado
April 4, 2001
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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
ATRIX LABORATORIES, INC.
PURPOSE AND AUTHORITY
The audit committee (the "Committee") for Atrix Laboratories, Inc., a
Delaware company (the "Company"), is appointed by the Company's Board of
Directors (the "Board") to assist the Board in monitoring (1) the integrity of
the financial statements of the Company, (2) the compliance by the Company with
legal and regulatory requirements and (3) the independence and performance of
the Company's internal and external auditors.
The Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee and, if necessary, to institute
special investigations. The Committee may request any officer or employee of the
Company or the Company's outside counsel or independent auditor to attend a
meeting of the Committee or to meet with any members of, or consultants to, the
Committee.
In addition, the Committee shall undertake those specific duties and
responsibilities listed below and such other duties as the Board shall from time
to time prescribe.
COMMITTEE MEMBERSHIP
The Committee members (the "Members") shall be appointed by the Board, and
will serve at the discretion of the Board. The Committee will consist of at
least three (3) members of the Board subject to the following requirements:
(i) each of the Members must be able to read and understand
fundamental financial statements, including a company's balance sheet,
income statement, and cash flow statement or must become able to do so
within a reasonable time period after his or her appointment to the
Committee;
(ii) at least one (1) of the Members must have past employment
experience in finance or accounting, requisite professional certification
in accounting, or other comparable experience or background, including a
current or past position as a chief executive or financial officer or other
senior officer with financial oversight responsibilities; and
(iii) each Member must be either (a) an independent director or (b)
the Board must determine it to be in the best interests of the Company and
its stockholders to have one (1) director who is not independent, and the
Board must disclose the reasons for its determination in the Company's
first annual proxy statement subsequent to such determination, as well as
the nature of the relationship between the Company and director. Under such
circumstances the Company may appoint one (1) director who is not
independent to the Committee, so long as the director is not a current
employee or officer, or an immediate family member of a current employee or
officer.
DUTIES AND RESPONSIBILITIES
The Committee shall report, at least annually, to the Board. Further, the
Committee shall:
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval;
2. Review the annual audited financial statements with management,
including a review of major issues regarding accounting and auditing
principles and practices, and evaluate the adequacy of internal controls
that could significantly affect the Company's financial statements;
A-1
29
3. Review an analysis prepared by management and the independent
auditor of significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements;
4. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of its Form 10-Q;
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures;
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor, internal
auditors or management;
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Committee and the Board;
8. Approve the fees to be paid to the independent auditor;
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if
deemed necessary by the Committee, take or recommend that the full Board
take appropriate action to satisfy itself of the independence of the
auditor;
10. Evaluate together with the Board the performance of the
independent auditor and, if deemed necessary by the Committee, recommend
that the Board replace the independent auditor;
11. Review the appointment of, and any replacement of, the senior
internal auditing executive;
12. Review the significant reports to management prepared by the
internal auditing department and management's responses;
13. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit;
14. Obtain from the independent auditor assurance that Section 10A of
the Securities Exchange Act of 1934 has not been implicated.
15. Obtain reports from management, the Company's senior internal
auditing executive and the independent auditor that the Company's
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements, including the Foreign Corrupt Practices Act, and the
Company's code of conduct.
16. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit.
17. Review with the independent auditor any problems or difficulties
the auditor may have encountered, any management letter provided by the
auditor, and the Company's response to that letter. Such review should
include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information;
b. Any changes required in the planned scope of the internal audit;
and
c. The internal audit department responsibilities, budget and
staffing.
18. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy statement
in accordance with the requirements of Item 306 of Regulation S-K and S-B
and item 7(e)(3) of Schedule 14A;
19. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations and
with the Company's Code of Conduct;
A-2
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20. Review with the Company's outside counsel legal matters that may
have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received from
regulators or governmental agencies;
21. Review related party transactions for potential conflict of
interest; and
22. Provide oversight and review of the Company's asset management
policies, including an annual review of the Company's investment policies
and performance for cash and short-term investments.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.
MEETINGS
The Committee will meet at least two times each year. The Committee may
establish its own schedule and notify the Board.
The Committee will meet at least annually with the chief financial officer,
the senior internal auditing executive, and the independent auditor in separate
executive sessions. The Committee will meet with the independent auditors of the
Company, at such times as it deems appropriate, to review the independent
auditor's examination and management report.
MINUTES
The Committee will maintain written minutes of its meetings, which minutes
will be filed with the minutes of the meetings of the Board.
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PROXY
ATRIX LABORATORIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD MAY 7, 2001
The undersigned stockholder of Atrix Laboratories, Inc. hereby constitutes and
appoints Desiree Calvelage and Brian G. Richmond and each of them, proxies, with
full power of substitution, for and on behalf of the undersigned to vote, as
designated below, according the number of shares of the Company's $.001 par
value common stock held of record by the undersigned on March 21, 2001, and as
fully as the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of the Company to be held at The Fort Collins
Marriott, 350 East Horsetooth Road, Fort Collins, Colorado on May 7, 2001 at
10:00 a.m. local time, and at any and all postponements, continuations and
adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED. IF PROPERLY EXECUTED AND NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF PROPOSED NOMINEES TO THE BOARD OF DIRECTORS OF THE
COMPANY AND FOR EACH OTHER PROPOSAL.
1. Proposal to elect the following nominees to the board of directors:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
below (except as marked vote all nominees listed
to the contrary below) below
Mr. David R. Bethune
Dr. Richard L. Jackson
Dr. Nicolas Bazan
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below:)
2. Approve the Amendment to the 2000 Stock Incentive Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approve the Amendment to the Certificate of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal for ratification of selection of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 2001:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any and all postponements,
continuations or adjournments thereof.
The undersigned hereby acknowledges receipt of the notice of annual meeting of
Stockholders dated April 4, 2001 and the proxy statement furnished therewith.
Please sign exactly as your name appears hereon. When shares are held by joint
tenants, both should sign. Executors, administrators, trustees and other
fiduciaries, and persons signing on behalf of corporations or partnerships,
should so indicate.
Dated , 2001
---------------------
------------------------------------
Authorized Signature
------------------------------------
Title
------------------------------------
Authorized Signature
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Title
PLEASE MARK BOXES [X] IN INK. SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.