<PAGE> 1
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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Penwest Pharmaceuticals Co.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[PENWEST LOGO] PENWEST PHARMACEUTICALS CO.
PATTERSON, NEW YORK
May 8, 2000
Dear Shareholders:
You are cordially invited to attend the annual meeting of shareholders of
Penwest Pharmaceuticals Co. to be held on Tuesday, June 6, 2000 at 10:30 a.m. at
the Ethan Allen Inn, 21 Lake Avenue Extension, Danbury, Connecticut.
In addition to the items set forth in the accompanying Notice of Annual
Meeting of Shareholders and Proxy Statement, we will report on current
activities of the Company and will provide an opportunity to discuss matters of
interest to you as a shareholder.
We sincerely hope you will be able to attend our Annual Meeting. However,
whether or not you plan to attend, please sign, date and promptly return the
enclosed proxy to ensure that your shares are represented.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in Penwest.
Very truly yours,
/s/ Tod R. Hamachek
TOD R. HAMACHEK
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
PENWEST PHARMACEUTICALS CO.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 6, 2000
------------------------
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Penwest
Pharmaceuticals Co., a Washington corporation (the "Company"), will be held at
the Ethan Allen Inn, 21 Lake Avenue Extension, Danbury, Connecticut, on Tuesday,
June 6, 2000, at 10:30 a.m., for the following purposes:
1. To elect three Class III directors for the ensuing three years;
2. To ratify the selection of Ernst & Young LLP as independent auditors
for the current fiscal year; and
3. To transact such other business as may properly come before the meeting
or at any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the meeting.
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1999, which contains financial statements and other information of
interest to shareholders, accompanies this notice and the enclosed proxy
statement.
Only shareholders of record at the close of business on April 20, 2000 are
entitled to notice of, and to vote at, the meeting and at any adjournments
thereof.
By Order of the Board of Directors
/s/ Jennifer L. Good
JENNIFER L. GOOD
Corporate Secretary
May 8, 2000
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN
PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES. PROMPTLY SIGNING, DATING AND RETURNING THE PROXY
WILL SAVE THE COMPANY THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION.
<PAGE> 4
PENWEST PHARMACEUTICALS CO.
2981 ROUTE 22
PATTERSON, NEW YORK 12563
------------------------
PROXY STATEMENT
------------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Penwest Pharmaceuticals Co., a Washington
corporation ("Penwest" or the "Company"), to be voted at the 2000 Annual Meeting
of Shareholders of the Company to be held at 10:30 a.m. on June 6, 2000 at the
Ethan Allen Inn, 21 Lake Avenue Extension, Danbury, Connecticut, and at any
adjournment thereof.
All proxies will be voted in accordance with the instructions of the
shareholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice. Any proxy may be revoked by a
shareholder at any time before its exercise by delivery of a written revocation
or a subsequently dated proxy to the Secretary of the Company or by voting in
person at the meeting. Attendance at the meeting will not itself be deemed to
revoke a proxy unless the shareholder gives affirmative notice at the meeting
that the shareholder intends to revoke the proxy and vote in person.
THE NOTICE OF THE MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1999 ARE
BEING MAILED TO SHAREHOLDERS ON OR ABOUT MAY 8, 2000. THE COMPANY WILL, UPON
WRITTEN REQUEST OF ANY SHAREHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), WITHOUT EXHIBITS. PLEASE ADDRESS
ALL SUCH REQUESTS TO THE COMPANY, ATTENTION OF JENNIFER L. GOOD, CHIEF FINANCIAL
OFFICER, 2981 ROUTE 22, PATTERSON, NEW YORK, 12563. EXHIBITS TO SUCH FORM 10-K
WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING
FEE.
VOTING SECURITIES AND VOTES REQUIRED
On April 20, 2000, the record date for determination of shareholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote an aggregate of 12,610,975 shares of Common Stock of the
Company, $.001 par value per share (the "Common Stock").
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the meeting shall constitute a quorum for
the transaction of business at the meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for shareholder approval)
will be counted for purposes of determining whether a quorum is present at the
meeting.
The director candidates elected will be those receiving the largest number
of votes cast by the shares entitled to vote in the election, up to the number
of directors to be elected. The votes cast by the shares entitled to vote
favoring the action must exceed the votes cast by the shares entitled to vote
opposing the action for the ratification of the selection of the Company's
independent auditors.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on the
election of directors, the ratification of auditors, or any other matter that
requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a matter.
1
<PAGE> 5
1. ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three Class I
Directors, two Class II Directors and three Class III Directors. At each annual
meeting of shareholders, directors are elected for a full term of three years to
succeed those whose terms are expiring. Three Class III Directors will be
elected at the meeting for a three-year term expiring at the 2003 Annual
Meeting. The term for the Class I Directors will expire at the 2001 Annual
Meeting, and the term for the Class II Directors will expire at the 2002 Annual
Meeting.
The persons named in the enclosed proxy will vote to elect, as Class III
Directors, Tod R. Hamachek, Robert J. Hennessey and John N. Staniforth, the
director nominees named below, unless the proxy is marked otherwise. Mr.
Hamachek, Mr. Hennessey and Dr. Staniforth are currently directors of the
Company.
Each Class III Director will be elected to hold office until the annual
meeting of shareholders to be held in 2003 and until his successor is elected
and qualified. Each of the nominees has indicated his or her willingness to
serve, if elected; however, if any nominee should be unable to serve, the person
acting under the proxy may vote the proxy for a substitutive nominee designated
by the Board of Directors. The Board of Directors has no reason to believe that
either of the nominees will be unable to serve if elected.
Set forth below are the name and age of each member of the Board of
Directors, including those who are nominees for election as Class III Directors,
whose term of office will continue beyond the date of the meeting, and the
position and offices held by such member, his or her principal occupation and
business experience during the past five years, the names of other publicly held
companies in which he or she serves as a director and the year of the
commencement of his or her term as a director of the Company.
Nominees for Election (Class III Directors)
TOD R. HAMACHEK, 54, has served as Chairman of the Board and Chief
Executive Officer of the Company since October 1997. Prior to that, he served as
President and Chief Executive Officer of Penford Corporation, the Company's
former parent ("Penford"), from 1985 through August 1998 and as a director of
Penford from 1983 through August 1998. He is also a director of Northwest
Natural Gas Company, a natural gas distribution company. Mr. Hamachek holds an
M.B.A. from the Harvard Business School and a B.A. from Williams College. Mr.
Hamachek serves on the Executive Committee of the Board.
ROBERT HENNESSEY, 57, has served as a director of the Company since October
1997. Mr. Hennessey has served as Chairman, President and Chief Executive
Officer of Genome Therapeutics Corporation, a biotechnology company, since March
1993. Prior to that, Mr. Hennessey served as President of Hennessey &
Associates, Inc., a strategic consulting firm to biotechnology and healthcare
companies from 1990 to 1993. Prior to that, Mr. Hennessey was Senior Vice
President of Corporate Development for Sterling Drug, Inc. and also served in
various executive assignments at Merck & Co., Inc., SmithKline Beecham PLC and
Abbott Laboratories, each a pharmaceutical company. Mr. Hennessey is also a
director of Virus Research Institute, Inc., a biotechnology company, and
Repligen, Inc., a biotechnology company. Mr. Hennessey holds an M.A. in
Political Science and an A.B. in Liberal Arts from the University of
Connecticut. Mr. Hennessey serves as Chairman of Penwest's Compensation and
Benefits Committee and also serves on the Executive Committee.
DR. JOHN N. STANIFORTH, 46, has served as a director of the Company since
December 1998 and also serves on Penwest's Scientific Advisory Board. Dr.
Staniforth has served as the Chief Scientific Officer and Executive Technical
Director for Vectura, Limited, a drug delivery company, since September 1999 and
prior to that served as a Professor of Pharmaceutics Technology at the
University of Bath since September 1980. Dr. Staniforth serves as scientific
advisor to a variety of international pharmaceutical companies and has extensive
teaching and research experience, chiefly at the University of Bath, Department
of Pharmacy and
2
<PAGE> 6
Pharmacology in Bath, England, at Rutgers and Cornell Universities in the United
States and at Monash University in Australia. His research into powder mixing
technology has been widely published and Dr. Staniforth is the recipient of
numerous scientific awards including the Churchill Fellowship, the Pfizer Medal
for Pharmaceutical Research and the Special Upjohn Award for research in the
field of microwave and radio-frequency drying. Dr. Staniforth has served as a
consultant to Penwest since its inception and is the co-inventor of two of the
Company's technologies: TIMERx and ProSolv.
CLASS I DIRECTORS (TERM EXPIRES 2001)
PAUL E. FREIMAN, 65, has served as a director of the Company since October
1997. Mr. Freiman has served as the Chief Executive Officer and President of
Neurobiological Technologies Inc., a biotechnology company, since May 1997 and
as Chairman of the Board of Digital Gene Technologies, a biotechnology company,
since February 1995. Mr. Freiman served as Chairman and Chief Executive Officer
of Syntex Corporation, a pharmaceutical company, from 1990 to 1995. Mr. Freiman
serves on the Board of Calypte Biomedical Corporation and Otsuka America
Pharmaceuticals Inc.. He is a graduate of Fordham University with a B.S. in
Pharmacy. Mr. Freiman serves as the Board's lead director and is also a member
of the Compensation Committee and the Executive Committee.
ROLF H. HENEL, 62, has served as a director of the Company since October
1997. Mr. Henel has served as Executive Director of Performance Effectiveness
Corp., a consulting firm to the pharmaceutical industry, since June 1995 and as
a partner of Naimark & Associates P.C., a consulting firm for the healthcare
industry, since September 1994. From 1978 to 1993 Mr. Henel served in a variety
of positions at American Cyanamid Co., a pharmaceutical company, most recently
as President of Cyanamid International -- Lederle Division, as well as Vice
Chairman of Lederle's Medical Research Planning Committee. He is a director and
chairman of the Audit Committee of SciClone Pharmaceuticals, a biopharmaceutical
company. Mr. Henel holds an M.B.A. from New York University and a B.A. from Yale
University. Mr. Henel is a member of the Audit Committee.
N. STEWART ROGERS, 70, has served as a director of the Company since
October 1997. Mr. Rogers has been the Chairman of the Board of Penford since
1990 and has served as a director of Penford since 1983. He served as Senior
Vice President of Univar Corporation until retiring in 1991. Mr. Rogers is a
director of Royal Vopak, N.V. (the Netherlands), a chemical logistics and
distribution company. He is a graduate of Stanford University with a B.A. in
Economics. Mr. Rogers serves as Chairman of the Audit Committee, and is a member
of the Compensation Committee.
CLASS II DIRECTORS (TERM EXPIRES 2002)
DR. JERE E. GOYAN, 69, has served as a director of the Company since
October 1997. Dr. Goyan also chairs Penwest's Scientific Advisory Board. Dr.
Goyan served as President and Chief Operating Officer of Alteon, Inc., a
pharmaceutical company ("Alteon"), from April 1993 through December 1998. Prior
to that he was Senior Vice President for Research and Development from January
1993 through April 1993 and served as a member of the Scientific Advisory Board
of Alteon from its founding in May 1987. Dr. Goyan is Professor Emeritus of
Pharmacy and Pharmaceutical Chemistry and Dean Emeritus of the School of
Pharmacy, University of California ("USFC"). He has been on the faculty of the
School of Pharmacy at USFC since 1963. He took a leave of absence from 1979 to
1981 to serve as Commissioner of Food and Drugs of the United States (FDA). Dr.
Goyan is a director of ATRIX Laboratories, Inc., Emisphere Technologies, Inc.,
and SciClone Pharmaceuticals, Inc., each a biopharmaceutical firm, and
Boehringer Ingelheim Pharmaceuticals, Inc., a pharmaceutical company.
3
<PAGE> 7
ANNE M. VANLENT, 52, has served as a director of the Company since December
1998. Ms. VanLent has served as a Vice President, Ventures and Licensing at the
Sarnoff Corporation, an electronics company, since August, 1997. Prior to that,
she served as President of AMV Associates, an emerging growth healthcare
consulting firm, from March 1994 through August 1997. She currently serves on
the board of i-STAT Corporation, a manufacturer of medical diagnostic products,
and serves on the board of several private emerging growth companies. Ms.
VanLent received a B.A. in Physics from Mount Holyoke College. Ms. VanLent is a
member of the Audit Committee.
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 31, 2000, regarding
the beneficial ownership of the Company's common stock (i) by any person known
to the Company to be the beneficial owner of more than five percent of such
outstanding common stock, (ii) by each director, (iii) by each executive officer
named in the Summary Compensation Table and (iv) by the directors and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP OF PERCENT
NAME (AND ADDRESS FOR BENEFICIAL OWNERS OVER 5%) COMMON STOCK(1) OF CLASS
- ------------------------------------------------ -------------------- --------
<S> <C> <C>
5% Shareholders:
Tod R. Hamachek............................................. 714,065(2) 5.65
2981 Route 22
Patterson, NY 12563
Other Directors:
Paul E. Freiman............................................. 29,913(3) *
Jere E. Goyan............................................... 23,107(4) *
Rolf H. Henel............................................... 16,833(5) *
Robert J. Hennessey......................................... 30,643(6) *
N. Stewart Rogers........................................... 264,942(7) 2.09
John N. Staniforth.......................................... 21,641(8) *
Anne M. VanLent............................................. 21,037(9) *
Other Named Executive Officers:
Anand R. Baichwal........................................... 80,344(10) *
Stephen J. Berte, Jr........................................ 31,721(11) *
Jennifer L. Good............................................ 75,170(12) *
Paul K. Wotton.............................................. 3,640 *
All directors and executive officers as a group (12 1,313,056(13) 9.96
persons)..................................................
</TABLE>
- ---------------
* Represents less than 1%.
(1) The number of shares beneficially owned by each person or entity known by
the Company to own beneficially more than 5% of the outstanding voting
stock, director and executive officer is determined under rules promulgated
by the SEC, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which an individual or group has sole or shared
voting power or investment power and also any shares which an individual or
group has the right to acquire within 60 days after March 31, 2000 through
the exercise of any stock option, warrant or other right. The inclusion
herein of such shares, however, does not constitute an admission that the
named shareholder is a direct or indirect beneficial owner of such shares.
Unless otherwise indicated, each person or group named in the table has
sole voting and investment power (or shares such power with his or her
spouse) with respect to all shares or common stock listed as owned by such
person or entity.
(2) Includes 213,491 shares subject to outstanding stock options held by Mr.
Hamachek, which are exercisable within the 60-day period following March
31, 2000.
(3) Includes 22,413 shares subject to outstanding stock options held by Mr.
Freiman, which are exercisable within the 60-day period following March 31,
2000.
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<PAGE> 9
(4) Includes 15,607 shares subject to outstanding stock options held by Dr.
Goyan, which are exercisable within the 60-day period following March 31,
2000.
(5) Includes 9,333 shares subject to outstanding stock options held by Mr.
Henel, which are exercisable within the 60-day period following March 31,
2000.
(6) Includes 23,143 shares subject to outstanding stock options held by Mr.
Hennessey, which are exercisable within the 60-day period following March
31, 2000.
(7) Includes 180,000 shares held in a Grantor Annuity Trust for which Mr.
Rogers has sole voting power, as well as 76,422 shares subject to
outstanding stock options held by Mr. Rogers, which are exercisable within
the 60-day period following March 31, 2000.
(8) Includes 13,537 shares subject to outstanding stock options held by Dr.
Staniforth, which are exercisable within the 60-day period following March
31, 2000.
(9) Includes 14,141 shares subject to outstanding stock options held by Ms.
VanLent, which are exercisable within the 60-day period following March 31,
2000.
(10) Includes 76,486 shares subject to outstanding stock options held by Dr.
Baichwal, which are exercisable within the 60-day period following March
31, 2000.
(11) Includes 27,333 shares subject to outstanding stock options held by Mr.
Berte, which are exercisable within the 60-day period following March 31,
2000.
(12) Includes 70,516 shares subject to outstanding stock options held by Ms.
Good, which are exercisable within the 60-day period following March 31,
2000.
(13) Includes an aggregate of 562,922 shares subject to outstanding stock
options which are exercisable within the 60-day period following March 31,
2000.
COMMITTEES OF THE BOARD
The Board of Directors has the following standing committees:
The Board has established a Compensation Committee, an Audit Committee and
an Executive Committee. The Compensation Committee makes recommendations to the
Board with respect to the compensation of directors and executive officers and
also supervises the Company's employee benefit plans. The Compensation Committee
consists of Messrs. Freiman, Hennessey and Rogers. See "Compensation and
Benefits Committee Report on Executive Compensation".
The Audit Committee recommends to the Board the selection of the
independent auditors, reviews the proposed scope of the independent audit,
reviews the annual financial statements and the independent auditors' report,
reviews the independent auditors' recommendations relating to accounting,
internal controls and other matters, and reviews internal controls and
accounting procedures with the management. The Audit Committee consists of
Messrs. Rogers and Henel and Ms. VanLent.
The Executive Committee exercises all powers and authority of the Board
with certain exceptions as provided under Washington law. The Executive
Committee consists of Messrs. Freiman, Hamachek and Hennessey.
The Audit Committee met two times; the Compensation and Benefits Committee
met three times; the Executive Committee met once during fiscal year 1999; and
the Board of Directors met seven times during fiscal year 1999. All directors
except for Dr.Goyan attended 75% or more of the Board meetings and meetings of
committees on which they served.
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<PAGE> 10
DIRECTOR COMPENSATION
Non-employee directors were compensated during the last fiscal year as
follows:
<TABLE>
<S> <C>
Annual retainer for the lead director....................... $14,500
Annual retainer as a director............................... 7,500
Fee for each meeting of the Board of Directors attended..... 1,500
Reimbursement for all reasonable expenses incurred in
attending Board or committee meetings
</TABLE>
Each director may elect to receive the above fees in the form of stock
options under the Company's 1997 Equity Incentive Plan (the "1997 Plan"), which
options, if elected, will be granted as of the date such fees are earned to
purchase the number of shares of Common Stock determined by dividing the amount
of the fees earned by 25% of the fair market value of one share of Common Stock
on the grant date. The exercise price of such options will equal 75% of the fair
market value of one share of Common Stock on the grant date and will be
immediately exercisable. In 1999, options to purchase an aggregate of 25,724
shares of Common Stock pursuant to directors elections were granted.
Non-employee directors are granted annual options under the 1997 Plan to
purchase 7,000 shares of Common Stock on January 1, of each year. All such
options will vest on the first anniversary of the date of grant. However, the
exercisability of these options will be accelerated upon the occurrence of a
change in control of the Company. The exercise price of all such options granted
will equal the fair market value of one share of common stock on the grant date.
On January 1, 2000 each non-employee director was granted a stock option to
purchase 7,000 shares of common stock at an exercise price of $14.38 per share.
The date of the initial election of any non-employee directors thereafter,
such non-employee director will receive the right to receive up to 7,500 shares
of Common Stock under the 1997 Plan on the earlier of (i) the date four years
from the date of grant or (ii) the date upon which such director ceases to be a
director by reason of death, permanent disability, resignation or retirement.
The right to receive these shares will vest in four equal annual installments
commencing upon the first anniversary date of grant.
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<PAGE> 11
EXECUTIVE COMPENSATION
Compensation paid by the Company or Penford, the Company's predecessor,
during fiscal years 1999, 1998 and 1997 to the Chief Executive Officer of the
Company and the Company's other four most highly compensated executive officers
is set out in the following table.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(#)(2) COMPENSATION(3)
- --------------------------- ---- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Tod R. Hamachek(4)...................... 1999 $315,000 $100,000 -- $18,789
President and Chief Executive 1998 332,000 89,325 610,501(5) 24,926
Officer 1997 340,000 453,934 -- 19,352
Anand R. Baichwal, Ph.D.(6)............. 1999 157,500 37,800 -- 9,322
Senior Vice President Research & 1998 150,000 33,251 181,749(5) 11,250
Development 1997 114,269 39,827 -- 8,642
Stephen J. Berte, Jr.................... 1999 134,000 40,200 -- 3,985
Vice President Global Sales 1998 134,000 31,773 97,641(5) 7,296
1997 122,076 31,481 -- 7,062
Jennifer L. Good........................ 1999 145,000 34,800 -- 7,319
Vice President Finance and Chief 1998 135,000 43,226 166,602(5) 10,875
Financial Officer 1997 122,000 41,943 -- 7,475
Paul K. Wotton(7)....................... 1999 150,000 15,000 15,000 6,532
Vice President Business Development 1998 132,000 23,399 122,816(5) 8,945
1997 111,000 30,880 -- 6,514
</TABLE>
- ---------------
(1) In accordance with the rules of the Commission, this table and the stock
option grant table and the stock option exercise table which follow present
information concerning the Company's Chief Executive Officer and its four
other most highly compensated executive officers serving as officers as of
December 31, 1999 whose total annual salary and bonus exceeded $100,000
(determined by reference to total annual salary and bonus earned by such
officers) for the year ended December 31, 1999.
(2) Bonuses paid to the executive officers represent payments of amounts for
Penford's fiscal year ended August 31, 1997 and 1998 and bonuses paid by
Penwest for the fiscal year ended December 31, 1999.
(3) Represents matching and profit sharing contributions under the Penwest
Savings and Stock Ownership Plan and the Penford Savings and Stock Ownership
Plan and premiums paid on behalf of the Chief Executive Officer for
supplemental life and disability insurance plans.
(4) Mr. Hamachek earned the compensation set forth above through September 1,
1998 for services rendered to Penford Corporation in his capacity as
President and Chief Executive Officer of Penford.
(5) Includes options to purchase common stock of Penwest granted under the
Company's 1998 Spin-off Stock Option Plan in respect of options to purchase
Penford Common Stock held by the executive officers.
(6) For a discussion of certain other amounts payable to Dr. Baichwal, see
"Certain Transactions."
(7) On March 31, 2000 Dr. Wotton's employment was terminated.
8
<PAGE> 12
OPTION GRANT TABLE
There were no stock options granted to the Named Executive Officers in the
year ended December 31, 1999.
STOCK OPTIONS HELD AS OF YEAR END
The following table sets forth certain information concerning the number
and value of unexercised stock options to purchase shares of common stock of
Penwest held by each of the Named Executive Officers as of December 31, 1999. No
stock options were exercised by the Named Executive Officers during the year
ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN 1998 AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Tod R. Hamachek........................... 213,491 407,010 $1,965,660 $3,691,948
Anand R. Baichwal......................... 70,017 111,732 618,483 962,479
Stephen J. Berte, Jr...................... 27,333 65,308 242,907 567,139
Jennifer L. Good.......................... 70,516 96,086 496,186 826,551
Paul K. Wotton............................ 43,025 79,402 381,261 683,733
</TABLE>
- ---------------
(1) Values are calculated by subtracting the exercise price from the fair market
value of the stock as December 31, 1999 ($15.25 per share).
CERTAIN TRANSACTIONS
Since January 1, 1999, the Company has not engaged in any transactions with
any director or officer of the Company or any security holder holding more than
5% of the Company's Common Stock or any affiliate of them or the Company except
as described below:
Under a Recognition and Incentive Agreement (as amended, the "Baichwal
Agreement") with Anand Baichwal, the Company's Senior Vice President, Research
and Development, the Company is obligated to pay to Dr. Baichwal on an annual
basis in arrears (i) one-half of one percent of the Company's Net Sales (as
defined in the Baichwal Agreement) of TIMERx material (as defined in the
Baichwal Agreement) to third parties, (ii) one-half of one percent of royalties
received by the Company under licenses, collaborations or other exploitation
agreements with third parties with respect to the sale, license, use or
exploitation by such third parties of products based on or incorporating the
TIMERx Material, and (iii) one-half of one percent of payments made in lieu of
such Net Sales or royalties and received by the Company. Such payments cease in
the event that Dr. Baichwal's employment is terminated for cause. The Baichwal
Agreement also contains non-competition and non-solicitation provisions which
expire two years after the termination of his employment.
Under a Royalty Agreement with John N. Staniforth, a member of the
Company's Board of Directors, the Company is obligated to pay to Dr. Staniforth
on an annual basis in arrears (i) one-half of one percent of the Company's net
sales as defined in the agreement, and these payments continue through the life
of patents developed by Dr. Staniforth. In 1999, the Company paid Dr. Staniforth
$6,028 and Dr. Baichwal $3,273 under
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<PAGE> 13
the Recognition and Incentive Agreement. Dr. Staniforth also has an annual
consulting agreement with the Company for which he is paid $80,000 per year, or
$1,250 per day, payable in quarterly payments. The agreement is renewed each
year, and is cancellable upon thirty days notice. Any invention that results
from this consulting agreement is legally owned by Penwest. Dr. Staniforth also
serves on the Scientific Advisory Board of the Company and is paid $1,500 per
meeting.
COMPENSATION AND BENEFITS COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of Penwest's Board of Directors
(the "Committee") is comprised of non-employee, outside directors. The Committee
is broadly charged by the Board of Directors with the following
responsibilities:
- Establishing compensation and incentive programs that are directly tied
to the long-term financial performance of Penwest, including a balanced
combination of targets requiring the achievement of short-term operating
goals and longer-term strategic objectives.
- Encouraging meaningful levels of Penwest stock ownership for key
personnel.
- Directing and monitoring the Company's benefit plans for all Penwest
employees.
Penwest maintains the philosophy that compensation of its executive
officers should be directly and materially linked to the long-term results
shareholders receive.
The executive compensation program consists of base salary, an incentive
compensation program based on predetermined cash flow goals as well as certain
qualitative objectives and stock-based incentive programs.
BASE SALARY
The Committee uses outside consultants to identify competitive salary
grades and ranges. The Committee directs the outside firm to consider similar
sized companies (based on market capitalization and revenue size), geographic
factors, similar market-related companies and growth profiles of other
companies. These competitive standards are reviewed periodically and are
targeted towards the 50th percentile of the companies surveyed. In addition, an
executive officer's performance and potential, as well as changes in duties and
responsibilities, are factors that may be considered in adjusting base salaries.
INCENTIVE COMPENSATION
This program is an annual cash payout dependent on achieving predetermined
cash flow goals as well as certain qualitative objectives. Penwest's Committee
believes strongly that a balanced combination of targets requiring the
achievement of short term operating goals and longer-term strategic objectives
translates directly into increasing the long-term value of Penwest stock.
Individual incentive compensation target awards are determined by salary grade
and are subject to an adjustment based on individual performance. The highest
individual target payout is 40% of an individual's base salary, and the lowest
individual target payout is 20%. Payouts can exceed targets when quantitative
and qualitative targets are exceeded. For 1999, executive payouts were paid
based on achieving cash flow targets and drug development milestones.
STOCK BASED INCENTIVE PROGRAMS
The Committee strongly encourages all executive officers of Penwest to
build a significant ownership position, over time, in Penwest common stock. All
stock options to executive officers have been granted at
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<PAGE> 14
market price. Options under the stock-based incentive programs offered by
Penwest consist of five-year term incentive stock options, and four-year
non-qualified stock options, and are granted at levels deemed competitive in the
marketplace. Penwest did not grant any stock options to its executive officers
in 1999 because there were option grants made in late fiscal 1998 associated
with the Company becoming publicly traded.
SUPPLEMENTAL BENEFIT PLANS
Supplemental Benefit Plans for the Chief Executive Officer include a
supplemental retirement plan, deferred compensation plan, and survivor benefit
life and disability plan. These plans are designed to be competitive with other
plans for comparably sized companies and to attract and retain highly qualified
management.
CEO COMPENSATION
As discussed above, Penwest's executive cash compensation program includes
a base salary and a performance based incentive compensation program. Mr.
Hamachek participates in the same incentive compensation program applicable to
other named executive officers. The Committee's objective is to correlate Mr.
Hamachek's remuneration with the Company's performance and the achievement of
predetermined goals. Base salary is generally reviewed annually in an effort to
maintain market competitiveness. Mr. Hamachek's salary was not adjusted in 1999.
In addition, Mr. Hamachek is the single largest individual shareholder in
the Company, and to the extent his performance translates into an increase in
the value of the Company's stock, all shareholders, including Mr. Hamachek share
the benefits.
Robert J. Hennessey, Chair
Paul E. Freiman
N. Stewart Rogers
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation and Benefits Committee
are Messrs. Hennessey, Freiman and Rogers. No executive officer of the Company
has served as a director or member of the compensation committee (or other
committee serving an equivalent function) of any other entity, one of whose
executive officers served as a director of or member of the Compensation and
Benefits Committee of the Company.
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<PAGE> 15
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return on its common stock from August 10, 1998, the record date for the
distribution by Penford to Penford shareholders of all the shares of the
Company's common stock, through December 31, 1999, the time during which
Penwest's stock traded as a public company with the cumulative total return of
the Nasdaq Market Index, U.S. companies (the "Nasdaq U.S.") and the Nasdaq
Pharmaceutical Index (the "Nasdaq-Pharmaceutical"). The graph assumes that $100
was invested on August 10, 1998 in the Company's common stock and in the stated
indices. The comparison assumes that all dividends are reinvested.
Performance Graph
<TABLE>
<CAPTION>
PENWEST PHARMACEUTICALS NASDAQ-PHARMACEUTICAL
CO. NASDAQ U.S. INDEX INDEX
----------------------- ----------------- ---------------------
<S> <C> <C> <C>
August 10, 1998 100.00 100.00 100.00
December 31, 1998 74.05 118.01 124.57
December 31, 1999 180.68 213.20 231.87
</TABLE>
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors requests that the shareholders ratify its selection
of Ernst & Young LLP, Certified Public Accountants, as independent auditors for
the Company for the current year. If the shareholders do not ratify the
selection of Ernst & Young LLP, another firm of certified public accountants
will be selected as independent auditors by the Board.
Representatives of Ernst & Young LLP will be present at the meeting, will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
12
<PAGE> 16
SHAREHOLDER PROPOSALS
Under Rule 14a-8(e)(2) of the Securities and Exchange Commission,
shareholder proposals intended for inclusion in next year's proxy statement must
be directed to the Corporate Secretary at Penwest Pharmaceuticals Co., 2981
Route 22, Patterson, New York 12563, and must be received by January 8, 2001. If
the Company does not receive shareholder proposals by this date, it retains the
discretion to vote proxies it receives.
If a shareholder of the Company wishes to present a proposal before the
2001 Annual Meeting but has not complied with the requirements for inclusion of
such proposal in the Company's proxy materials pursuant to Rule 14a-8 under the
Exchange Act, such shareholder must give written notice of such proposal to the
Secretary of the Company at the principal offices of the Company not less than
60 days nor more than 90 days prior to the 2001 Annual Meeting. Notwithstanding
the foregoing, if the Company provides less than 70 days notice or prior public
disclosure of the date of the meeting to the shareholders, notice by the
shareholders must be received by the Secretary no later than the close of
business on the tenth day following the date on which the notice of the meeting
was mailed or such public disclosure was made, whichever occurs first. The
advance notice provisions of the Company's by-laws supercede the notice
requirements contained in Rule 14a-8 under the Exchange Act. If a shareholder
provides timely notice under the Company's advance notice procedure outlined
above, the Company retains discretion to vote proxies it receives provided (1)
the Company includes in its proxy statement advice on the nature of the proposal
and how it intends to exercise its voting discretion and (2) the proponent does
not issue a proxy statement.
SOLICITATION OF PROXIES
The proxy card accompanying this proxy statement is solicited by the Board
of Directors. Proxies may be solicited by officers, directors and other
employees of the Company, none of whom will receive any additional compensation
for their services. Solicitations of proxies may be made personally, or by mail,
telephone, telegraph, facsimile or messenger. The Company will pay persons
holding shares of common stock in their names or in the names of nominees, but
not owning such shares beneficially, such as brokerage houses, banks and other
fiduciaries, for the expense of forwarding soliciting materials to their
principals. All costs of soliciting proxies will be paid by the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The federal securities laws require the Company's directors and executive
officers, and persons who own more than ten percent of the Company's common
stock to file with the Securities and Exchange commission initial reports of
ownership and reports of changes in ownership of any securities of the Company.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1999, all of the
Company's directors, executive officers and greater-than-ten percent beneficial
owners made all required filings.
OTHER MATTERS
The Company is not aware of any other business to be acted upon at the
meeting. If other business requiring a vote of the shareholders should come
before the meeting, the holders of the proxies will vote in accordance with
their best judgment.
MAY 8, 2000
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<PAGE> 17
PROXY
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF
PENWEST PHARMACEUTICALS CO.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Tod R.
Hamachek and Jennifer L. Good, and each of them, as proxies of the undersigned
(with full power of substitution in them and each of them) to attend and
represent the undersigned at the Annual Meeting of Shareholders of Penwest
Pharmaceuticals, Co. (the "Company") to be held at the Ethan Allen Inn, 21 Lake
Avenue Extension, Danbury, Connecticut on Tuesday, June 6, 2000 at 10:30 a.m.,
and any adjourned sessions thereof, and there to act and vote as indicated, upon
all matters referred to on the reverse side and described in the proxy statement
relating to the meeting, all shares of common stock of the Company which the
undersigned would be entitled to vote or act upon, with all powers the
undersigned would possess, if personally present at the meeting and at any
adjourned sessions thereof. Each of the following matters is being proposed by
the Board of Directors of the Company. All capitalized terms used in this proxy
and not defined herein shall have the meaning ascribed them in the proxy
statement relating to the meeting.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER
MATTERS AS PROPERLY MAY COME BEFORE THE MEETING, OR ANY ADJOURNMENT THEREOF.
(Continued and to be signed on the reverse side)
................................................................................
- FOLD AND DETACH HERE -
<PAGE> 18
FOR ALL WITHHELD FROM
1. Election of Directors: NOMINEES ALL NOMINEES
Tod R. Hamachek, Robert J. [ ] [ ]
Hennessey, John N.Staniforth
[ ]
-------------------------------------
To withhold authority to vote for any individual Nominee, print that nominee's
name on the line provided.
2. Ratification of selection FOR AGAINST ABSTAIN
of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors for the
Company for the current year.
I plan to attend the meeting. [ ]
Attendance of the undersigned at the meeting or at any adjourned session thereof
will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate thereof the intention of the undersigned to vote said
shares in person. If the undersigned hold(s) any of the shares of the Company in
a fiduciary, custodial or joint capacity or capacities, this proxy is signed by
the undersigned in every such capacity as well as individually.
IMPORTANT -- PLEASE SIGN AND RETURN THIS PROXY PROMPTLY. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
Signature(s) Dated , 2000
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................................................................................
- FOLD AND DETACH HERE -
