<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SPIROS DEVELOPMENT CORPORATION II, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
------------------------------------------------------------------------
<PAGE>
[LOGO]
SPIROS DEVELOPMENT CORPORATION II, INC.
7475 LUSK BOULEVARD
SAN DIEGO, CALIFORNIA 92121
April 9, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Spiros Development Corporation II, Inc., which will be held at the offices of
the Company, 7475 Lusk Blvd., San Diego, California, on May 20, 1998 at 10:00
a.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting of Stockholders and Proxy Statement.
In order for us to have an efficient meeting, please sign, date and return
the enclosed proxy promptly in the accompanying reply envelope. If you are able
to attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ DAVID S. KABAKOFF
DAVID S. KABAKOFF
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are
requested to complete, sign and date the enclosed proxy as promptly as
possible and return it in the enclosed envelope. No postage need be
affixed if mailed in the United States.
- -------------------------------------------------------------------------------
<PAGE>
[LOGO]
SPIROS DEVELOPMENT CORPORATION II, INC.
7475 LUSK BOULEVARD
SAN DIEGO, CALIFORNIA 92121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 9, 1998
The Annual Meeting (the "Annual Meeting") of Stockholders of Spiros
Development Corporation II, Inc. (the "Company") will be held at the offices of
the Company, 7475 Lusk Blvd., San Diego, California, on Wednesday, May 20, 1998
at 10:00 a.m., for the following purposes:
1(a). To elect three (3) directors, by holders of the Company's
Callable Common Stock, voting as a separate class, to serve
a one-year term to expire at the 1999 Annual Meeting of
Stockholders.
1(b). To elect two (2) directors, by holders of the Company's Special
Common Stock, voting as a separate class, to serve a one-year
term to expire at the 1999 Annual Meeting of Stockholders.
2. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent public accountants for the fiscal year
ending December 31, 1998.
3. To transact any other business which may properly come before the
meeting or any adjournment(s) thereof.
Stockholders of record at the close of business on March 23, 1998 will
be entitled to vote at the Annual Meeting. A list of stockholders entitled
to vote at the Annual Meeting will be available for inspection at the offices
of the Company. Whether or not you plan to attend the meeting in person,
please sign, date and return the enclosed proxy in the reply envelope
provided. If you attend the Annual Meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the Annual Meeting will
be counted. The prompt return of your proxy will assist us in preparing for
the Annual Meeting.
By Order of the Board of Directors
/s/ Mitchell R. Woodbury
Dated: April 9, 1998 MITCHELL R. WOODBURY
SECRETARY
<PAGE>
SPIROS DEVELOPMENT CORPORATION II, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
These proxy materials and the enclosed proxy card are being mailed in
connection with the solicitation of proxies by the Board of Directors of Spiros
Development Corporation II, Inc., a Delaware corporation (the "Company"), for
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at 10:00
a.m. on May 20, 1998 and at any adjournment or postponement of the Annual
Meeting. These proxy materials were first mailed to stockholders of record
beginning on approximately April 9, 1998.
The mailing address of the principal executive office of the Company is
7475 Lusk Blvd., San Diego, California 92121.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy
Statement.
VOTING RIGHTS AND SOLICITATION
Any stockholder executing a proxy has the power to revoke it at any time
before it is voted by delivering written notice of such revocation to the
Secretary of the Company before the Annual Meeting or by properly executing and
delivering a proxy bearing a later date. Proxies may also be revoked by any
stockholder present at the Annual Meeting who elects to vote his or her shares
in person. The cost of soliciting proxies will be paid by the Company and may
include reimbursement paid to brokerage firms and others for their expense in
forwarding solicitation material. Solicitation will be made primarily through
the use of the mail, but officers or agents of the Company may, without
additional remuneration, solicit proxies personally by telephone, telegram, or
facsimile.
The record date for determining those stockholders who are entitled to
notice of, and to vote at, the Annual Meeting has been fixed as March 23, 1998
(the "Record Date"). At the close of business on the Record Date, the Company
had 6,325,000 outstanding shares of callable common stock, par value $.001 per
share (the "Callable Common Stock"), and 1,000 outstanding shares of special
common stock, par value $1.00 per share (the "Special Common Stock"). Holders
of Callable Common Stock are entitled, generally, to one vote on matters brought
before the Annual Meeting for each share of Callable Common Stock held on the
record date, except where the holder of Special Common Stock elects two
directors as a separate class. The holder of Special Common Stock is entitled
to vote only as required by law or in connection with the election of two
directors, and in such instances, the holder of Special Common Stock is entitled
to one vote for each share of Special Common Stock held on the record date. At
the 1998 Annual Meeting, the Callable Common Stock will elect three directors
and the Special Common Stock will elect two directors. Cumulative voting is not
permitted. Both abstentions and broker non-votes are counted as present for the
purpose of determining the presence or absence of a quorum for the transaction
of business. For purposes of determining the number of shares voting on a
particular proposal, abstentions are counted as shares voting, whereas broker
non-votes are not counted as shares voting. Thus, broker non-votes can have the
effect of preventing approval of certain proposals where the number of
affirmative votes, though a majority of the votes cast, does not constitute a
majority of the required quorum. The Callable Common Stock trades on the Nasdaq
National Market as a component of Units consisting of one share of Callable
Common Stock and one warrant to purchase one-fourth of one share of common stock
of Dura Pharmaceuticals, Inc. ("Dura"). Dura is the holder of all of the
outstanding Special Common Stock. ChaseMellon Shareholder Services, the
Company's transfer agent, will tabulate the votes.
<PAGE>
On the Record Date, directors and executive officers of the Company may
be deemed to be beneficial owners of an aggregate of 14,910 shares of
Callable Common Stock constituting less than 1% of the Callable Common Stock
outstanding and entitled to vote at the Annual Meeting. In addition, two
directors of the Company may be deemed to be beneficial owners of all of the
outstanding shares of the Special Common Stock. Such directors and officers
have indicated to the Company that each such person intends to vote or direct
the vote of all shares of Callable Common Stock and Special Common Stock held
or owned by each such person, or over which such person has voting control,
in favor of all proposals. Other than the election of two directors by the
holder of Special Common Stock, voting as a separate class, the approval of
the proposals is not assured. See "Principal Stockholders" and "Security
Ownership of Management."
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is currently composed of five
members. All of the nominees are now serving as directors of the Company. The
Company's Amended and Restated Certificate of Incorporation gives the holder of
Special Common Stock, voting as a separate class, the right to elect two
directors. This right continues until Dura exercises its option to purchase all
of the Callable Common Stock (the "Purchase Option") or the Purchase Option
expires or terminates according to its terms. Therefore, the holders of the
Callable Common Stock, voting as a separate class, will elect three directors at
the 1998 Annual Meeting. The two candidates receiving the highest number of
affirmative votes by the holder of Special Common Stock will be elected
directors of the Company, and the three candidates receiving the highest number
of affirmative votes by the holders of Callable Common Stock will be elected
directors of the Company
The proxy received by the proxyholders from the holder of Special Common
Stock cannot be voted for more than two directors and, unless otherwise
indicated, will be voted for the election of the nominees named below to be
elected solely by the Special Common Stock. The proxies received by the
proxyholders from the holders of Callable Common Stock cannot be voted for more
than three directors and, unless otherwise indicated, will be voted for the
election of the nominees named below to be elected solely by the Callable Common
Stock. Each person nominated for election has agreed to stand for election to
hold office for a term of one year, expiring at the Annual Meeting of
Stockholders in 1999, or until a successor is elected and has qualified. If,
however, any of those named are unable to serve, or for good cause decline to
serve at the time of the Annual Meeting, the persons named in the enclosed proxy
will exercise discretionary authority to vote for substitutes. The Board of
Directors is not aware of any circumstances that would render any nominee
unavailable for election.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE NOMINEES LISTED HEREIN.
NOMINEES FOR ELECTION BY THE CALLABLE COMMON STOCK
Sol Lizerbram, RPh., D.O., 51, is a co-founder of FPA Medical Management,
Inc. ("FPA"), a physician practice management company, and has served as
Chairman of the Board of Directors of FPA since 1986. As a graduate of Long
Island University, School of Pharmacy, Dr. Lizerbram received a degree in
pharmacy in 1970 and was licensed as a registered pharmacist in the states of
New York and Pennsylvania. He later obtained his medical degree from the
Philadelphia College of Osteopathic Medicine in 1977. He was first elected
director of the Company in February 1998 and currently serves as a member of the
Company's Audit Committee.
Alain B. Schreiber, M.D., 42, has served as President and Chief Executive
Officer and a director of Vical, Inc. ("Vical"), a pharmaceutical company, since
1992. Prior to joining Vical, Dr. Schreiber held various executive level
positions at Rhone-Poulenc Rorer Inc., a pharmaceutical company, from 1985 to
1992, including Senior Vice President of Discovery Research. From 1982 to 1985,
he served as Biochemistry Department Head at Syntex Research. Dr. Schreiber
was first elected director of the Company in February 1998 and currently serves
as a member of the Company's Audit Committee.
2
<PAGE>
Robert S. Whitehead, 48, currently serves as Chairman and Chief
Executive Officer of Trega Biosciences, Inc. ("Trega"), a biopharmaceutical
company. He joined Trega in 1993 as President and Chief Executive Officer.
From 1992 to 1993, Mr. Whitehead was Senior Vice President, Commercial
Operations, of Solvay Pharmaceuticals. He was previously with Searle
Pharmaceuticals and over a 13-year period held several positions, including
President and General Manager, Searle Canada. Mr. Whitehead was first elected
director of the Company in February 1998 and currently serves as a member of
the Company's Audit Committee.
NOMINEES FOR ELECTION BY THE SPECIAL COMMON STOCK
Cam L. Garner, 50, has served as the President and Chief Executive Officer
of Dura, a specialty respiratory pharmaceutical company, since 1990 and as
Chairman of the Board of Dura since 1995. He joined Dura in 1989 as Executive
Vice President. From 1987 to 1989, he served as President of Syntro
Corporation, a biotechnology company. He has served as a director of the
Company since its formation in September 1997. Mr. Garner currently serves as a
director of Dura, Safeskin Corporation, a manufacturer of medical supplies,
CardioDynamics International Corporation, a manufacturer of medical devices, and
Trega.
David S. Kabakoff, Ph.D., 50, has served as a director, Chairman, President
and Chief Executive Officer of the Company since its formation in September
1997. Dr. Kabakoff has also served as a director and Executive Vice President
of Dura since 1996. From 1989 to 1996, Dr. Kabakoff was employed by Corvas
International, Inc., a biopharmaceutical company, and served in a number of
capacities during that time period, including Chief Executive Officer,
President, Chief Operating Officer and Chairman of the Board. Dr. Kabakoff
received a Ph.D. in Organic Chemistry from Yale University and a B.A. in
Chemistry from Case Western Reserve University.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors met one time during the fiscal year ended
December 31, 1997 and took action by unanimous written consent a total of eight
times. Each director attended at least 75% of the aggregate of (i) the total
meetings of the Board of Directors (held during the period for which he has been
a director) and (ii) the total number of meetings held by all committees of the
board on which he served (during the periods that he served).
The Company does not have a standing Compensation Committee or Nominating
Committee as all matters are considered by the full Board of Directors. The
Company has a standing Audit Committee currently composed of the following three
non-employee directors: Drs. Lizerbram and Schreiber and Mr. Whitehead. The
Audit Committee was formed and held its initial meeting in February 1998. The
Audit Committee assists in selecting the independent auditors, designating
services they are to perform and maintaining effective communication with those
auditors.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company is asking the stockholders to ratify the selection of Deloitte
& Touche LLP as the Company's independent public accountants for the year ending
December 31, 1998. In the event that the stockholders fail to ratify the
appointment, the Board of Directors will reconsider its selection. Even if the
selection is ratified, the Board of Directors, in its discretion, may direct the
appointment of a different independent accounting firm at any time during the
year if the Board of Directors feels that such a change would be in the
Company's and the stockholders' best interest.
A representative of Deloitte & Touche LLP is expected to be present at the
meeting to respond to questions and will have the opportunity to make a
statement if he or she desires to do so.
The affirmative vote of the holders of a majority of the Callable Common
Stock represented and voting at the Annual Meeting will be required to ratify
the selection of Deloitte & Touche LLP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP
AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
3
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of Callable Common Stock and Special Common Stock as of March 15, 1998, for each
person known to the Company to be the beneficial owner of more than five percent
of the Callable Common Stock or the Special Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------
Name and Address
Title of Class of Beneficial Owner Number (1) Percent (2)
- ----------------- -------------------- ---------- ----------
<S> <C> <C> <C>
Callable Dura Pharmaceuticals, Inc. (3) 6,325,000 100%
Common Stock 7475 Lusk Blvd.
San Diego, California 92121
Callable Elan International Services, Ltd. (4) 937,500 14.8%
Common Stock
102 St. James Court
Flatts, Smiths FL04
Bermuda
Callable Funds managed by Farallon Partners, 678,300 10.7%
Common Stock L.L.C. (5)
One Maritime Plaza, Suite 1325
San Francisco, California 94111
Callable Lehman Brothers Holdings Inc. (6) 415,000 6.6%
Common Stock 3 World Financial Center, 24th
Floor
New York, New York 10285
Callable HBK Investments L.P. (7) 352,000 5.6%
Common Stock 777 Main Street, Suite 2750
Fort Worth, Texas 76102
Special Dura Pharmaceuticals, Inc. (3) 1,000 100%
Common Stock 7475 Lusk Blvd.
San Diego, California 92121
</TABLE>
- -------------------------
(1) Except as indicated in the footnotes to this table, the entities named in
the table have sole voting and investment power with respect to all shares
of Callable Common Stock or Special Common Stock shown as beneficially
owned by them.
(2) Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
(3) Pursuant to Schedule 13D dated December 31, 1997 and filed January 2, 1998.
Dura holds beneficially and of record all shares of Special Common Stock.
Dura is also deemed, under the rules and regulations of the SEC, to be the
beneficial owner of all of the outstanding shares of Callable Common Stock
of the Company by virtue of its Purchase Option to acquire all of the
Callable Common Stock of the Company. Mr. Garner and Dr. Kabakoff,
directors of the Company, are directors and officers of Dura. See
"Proposal 1 -- Election of Directors -- Nominees for Election by the
Special Common Stock" and "Certain Relationships and Related
Transactions."
(4) Pursuant to Schedule 13D dated and filed March 12, 1998.
(5) Pursuant to Amendment No. 3 to Schedule 13D dated and filed March 9, 1998.
Such entities reported shared voting and dispositive power over the shares,
and certain affiliates disclaim beneficial ownership.
(6) Pursuant to Schedule 13G dated December 31, 1997 and filed February 17,
1998.
(7) Pursuant to Schedule 13G dated and filed March 12, 1998 by HBK Investments
L.P. and HBK Finance L.P. HBK Investments L.P. reported sole voting and
dispositive power over 228,800 shares, and both entities reported shared
voting and dispositive power over 123,200 shares.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the ownership
of Callable Common Stock and Special Common Stock as of March 15, 1998, by each
director and nominee, by the Company's Chairman, President and Chief Executive
Officer and by the other executive officer of the Company (collectively, the
"Named Executive Officers"), and by directors and executive officers as a group.
The address for each beneficial owner listed below is 7475 Lusk Blvd., San
Diego, California 92121.
<TABLE>
<CAPTION>
Shares Beneficially Owned
----------------------------
Name and Address
Title of Class of Beneficial Owner Number (1) Percent (2)
- ---------------- ------------------- ---------- -----------
<S> <C> <C> <C>
Callable Cam L. Garner 6,250 *
Common Stock
Callable David S. Kabakoff 8,660 *
Common Stock
Callable Sol Lizerbram 0 *
Common Stock
Callable Erle T. Mast 0 *
Common Stock
Callable Alain B. Schreiber 0 *
Common Stock
Callable Robert S. Whitehead 0 *
Common Stock
Callable Directors and 14,910 *
Common Stock executive officers as
a group
(6 persons)
Special Cam L. Garner (3) 1,000 100%
Common Stock
Special David S. Kabakoff (3) 1,000 100%
Common Stock
Special Directors and 1,000 100%
Common Stock executive
officers as a group
(6 persons) (4)
</TABLE>
- -------------------------------
*Less than 1%
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Callable Common Stock or Special Common Stock shown as beneficially
owned by them, subject to community property laws, where applicable.
(2) Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
(3) Includes 1,000 shares beneficially owned by Dura. Mr. Garner is Chairman,
President and Chief Executive Officer of Dura. Dr. Kabakoff is Executive
Vice President and a director of Dura. Mr. Garner and Dr. Kabakoff may be
deemed to be the beneficial owners of such shares as that term is defined
under the federal securities regulations; Mr. Garner and Dr. Kabakoff
disclaim beneficial ownership of these shares.
(4) Includes shares described in footnote 3 above owned by an affiliate of
certain of the Company's directors.
5
<PAGE>
EXECUTIVE OFFICERS
The Company's executive officers as of March 15, 1998 are:
<TABLE>
<CAPTION>
Name Age Position Held With the Company
----- --- -------------------------------
<S> <C> <C>
David S. Kabakoff 50 Chairman, President, Chief Executive Officer and director
Erle T. Mast 35 Vice President and Chief Financial Officer
</TABLE>
Dr. Kabakoff is a director of the Company. See "Election of Directors --
Nominees for Election by the Special Common Stock" for a discussion of his
business experience.
Erle T. Mast has served as Vice President and Chief Financial Officer of
the Company since its formation in September 1997. Mr. Mast also has served as
Vice President, Finance of Dura since February 1997. From 1984 through 1997,
Mr. Mast served in various positions at Deloitte & Touche LLP, an accounting and
consulting firm, most recently as a partner, where he specialized in providing
accounting, auditing and business consulting services to companies in various
industries, including the healthcare and life science industries. He has been a
Certified Public Accountant in California since 1986. Mr. Mast received a B.A.
in Business Administration from California State University at Bakersfield.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation earned by the Named Executive Officers of the Company for services
rendered in all capacities to the Company for fiscal year ended December 31,
1997. The Company was formed in September 1997. The Company's Named Executive
Officers are also employees of Dura and, except as set forth in the table,
received no other compensation from the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
---------------------------
Long-Term
Compensation
Annual Compensation Awards
-------------------- --------------
Number of
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options/SARs Compensation
- -------------------- ---- ------ ----- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
David S. Kabakoff 1997 $0 $0 $0 71,000 $0
Chairman, President and
Chief Executive Officer
Erle T. Mast 1997 $0 $0 $0 22,000 $0
Vice President and Chief
Financial Officer
</TABLE>
6
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1997 Stock Option Plan (the "Option Plan") to the
Company's Named Executive Officers. No stock appreciation rights ("SARs") were
granted under the Option Plan to the Company's Named Executive Officers in the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------
Potential Realizable
Number of Value at Assumed
Securities Percent of Annual Rates of Stock
Underlying Total Price Appreciation for
Options/ Options/SARs Exercise or Option Term
SARs Granted in Base Price Expiration ----------------------------
Name Granted (1) Fiscal Year ($/Share) (2) Date (3) 5% (4) 10% (4)
- ------------------- ------------- -------------- ------------- ----------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
David S. Kabakoff 71,000 12.9% $14.00 12-16-07 $625,121 $1,584,180
Erle T. Mast 22,000 4.0% $14.00 12-16-07 $193,700 $ 490,873
</TABLE>
- -------------------------
(1) Each option becomes exercisable five years following the grant date. The
option vesting accelerates in the event Dura exercises its Purchase Option
to acquire all of the Callable Common Stock of the Company. The Option
Plan also provides for acceleration of outstanding options in the event of
certain corporate transactions, including a merger, sale or change of
control.
(2) The exercise price per share of options granted represented the fair market
value of the underlying shares of Callable Common Stock on the date of
grant as determined by the Board of Directors. The exercise price may be
paid in cash or in shares of Callable Common Stock valued at fair market
value on the exercise date, or through a same-day sale program without any
cash outlay by the optionee.
(3) Each option has a term of ten years from the grant date. Options which
expire 12-16-07 were granted 12-16-97.
(4) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the ten-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Callable Common Stock
does in fact appreciate over the option term, no value will be realized
from the option grants made to the executive officers.
7
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the Company's
Named Executive Officers, concerning unexercised options held as of December 31,
1997. No options were exercised during the 1997 fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
--------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Shares Options/SARs at Options/SARs at
Acquired December 31, 1997 December 31, 1997 (1)
Upon Value -------------------------------- -------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------ ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David S. Kabakoff 0 $0 0 71,000 $0 $80,230
Erle T. Mast 0 $0 0 22,000 $0 $24,860
</TABLE>
- -----------------------------
(1) Value is defined as market price of the Company's Callable Common Stock at
fiscal year end less exercise price. The Callable Common Stock trades on
the Nasdaq National Market as a component of Units, and the Unit market
price at December 31, 1997 was $17.13 per share. The Company believes the
fair market value of the Callable Common Stock at December 31, 1997 was
$15.13 per share.
DIRECTOR COMPENSATION
The Company does not presently pay fees to its directors, other than
reimbursement for their out-of-pocket expenses incurred in attending meetings of
the Board of Directors and its committees. In addition, directors may receive
options under the Option Plan in connection with their service on the Board of
Directors, as determined at the discretion of the Board of Directors. In
December 1997, Mr. Garner and Dr. Kabakoff were granted options to purchase
87,000 and 71,000 shares, respectively, of Callable Common Stock at $14.00 per
share, the fair market value of the underlying shares on the date of grant.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company has not entered into any employment contracts and/or change of
control agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a standing Compensation Committee as all matters
are considered by the full Board of Directors. The Company has no insider
relationships reportable pursuant to this item.
8
<PAGE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), THAT MIGHT
INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART,
THE FOLLOWING REPORT AND THE PERFORMANCE GRAPH INCLUDED HEREIN SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
BOARD REPORT ON EXECUTIVE COMPENSATION
The Company's executive officers, who along with others provide
services to the Company pursuant to certain operating agreements with Dura,
are employees of and are provided base salaries and incentive compensation
exclusively by Dura.
With respect to compensation paid to the Company's executive
officers, the primary focus of the Board of Directors (there is no
Compensation Committee) is to provide long-term incentive compensation in
the form of grants of options to purchase Callable Common Stock of the
Company. The grants are designed to consistently align the interests of
each executive officer with those of the stockholders and to provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant
allows the officer to acquire shares of the Company's Callable Common Stock
at a fixed price (the fair market value on the grant date), but no such
options are exercisable for a period of five years from the date of grant,
unless in the interim Dura exercises in full its option to purchase all of
the Company's Callable Common Stock. Such provision is designed in part to
encourage the continuation of the executive officers' services over the
long term.
THE BOARD OF DIRECTORS
CAM L. GARNER
DAVID S. KABAKOFF
SOL LIZERBRAM
ALAIN B. SCHREIBER
ROBERT S. WHITEHEAD
9
<PAGE>
PERFORMANCE GRAPH
The Company's Callable Common Stock trades on the Nasdaq National Market as
a component of Units, each Unit consisting of one share of Callable Common Stock
and one warrant to purchase one-fourth of one share of common stock of Dura.
The following graph compares total stockholder returns on the Units since
December 1997 when the Company became a reporting company under the Exchange
Act, to the Nasdaq Stock Market (the "NASDAQ Index") and to a peer group
comprised of companies included in the NASDAQ Pharmaceutical Index. The graph
is constructed on the assumption that $100 was invested on December 17, 1997
(the date trading of the Units commenced on a when-issued basis) in each (a) the
Units, (b) the NASDAQ Index, and (c) the NASDAQ Pharmaceutical Index, and that
all dividends were reinvested, although dividends have not been declared on the
Callable Common Stock. The stockholder return shown on the graph below is not
necessarily indicative of future performance, and the Company will not make or
endorse any predictions as to future stockholder returns.
The Callable Common Stock is not separately tradeable apart from the Units
prior to December 31, 1999 or upon the earlier occurrence of certain events.
Market value in the following graph is the market value of the Units. There is
no quoted market value for the shares of Callable Common Stock apart from the
Units.
<TABLE>
<CAPTION>
NASDAQ
Pharmace
NASDAQ Utical
Spiros Index Index
------ ------- -------
<S> <C> <C> <C>
12/17/97 100 100 100
12/31/97 $ 97.86 $101.56 $100.79
1/30/98 $101.79 $104.82 $ 99.82
2/27/98 $ 82.86 $114.67 $103.10
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Officers and directors of the Company are indemnified pursuant to certain
provisions of the Delaware General Corporation Law and the Company's Amended and
Restated Certificate of Incorporation and Bylaws to the fullest extent permitted
under Delaware law, in addition to Indemnification Agreements in effect between
the Company and its officers and directors.
CERTAIN BUSINESS RELATIONSHIPS
Dr. Kabakoff currently serves as a director and Executive Vice President of
Dura, and Mr. Garner serves as a director, Chairman, President and Chief
Executive Officer of Dura. Pursuant to various agreements, the Company has
engaged Dura to develop certain products to which the Company has rights, for
use with Spiros-Registered Trademark-, a proprietary dry powder pulmonary drug
delivery system. For the period September 23, 1997 (date of incorporation)
through December 31, 1997, the Company incurred research and development
expenses of $7,040,000 and administrative expenses of $106,000 for activities
conducted under the agreements with Dura.
Dura's Purchase Option entitles it to purchase all, but not less than all,
of the Callable Common Stock of the Company. The Purchase Option is exercisable
at any time before December 31, 2002 (which exercise period may be shortened or
lengthened in certain circumstances). If the Purchase Option is exercised, the
per share exercise price will be $24.01 through December 31, 1999, increasing on
a quarterly basis to $45.95 per share through December 31, 2002. The Purchase
Option exercise price may be paid in cash or shares of Dura common stock, or any
combination of the foregoing, at Dura's sole discretion. Dura has no legal
obligation to exercise the Purchase Option. Dura owns all of the issued and
outstanding Special Common Stock, which confers certain voting and other rights,
including the right to elect two directors of the Company.
10
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the Nasdaq
National Market. Officers, directors and greater than 10% beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company
or written representations from certain reporting persons that no Forms 5 were
required, the Company believes that, during the 1997 fiscal year, its officers,
directors and greater than 10% beneficial owners complied with all applicable
Section 16(a) filing requirements, with the exception of Elan International
Services, Ltd. which filed late one Form 3 reporting its December 1997
acquisition of more than 10% of the Company's equity securities.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND LIST OF
EXHIBITS. REQUESTS SHOULD BE SENT TO THE ATTENTION OF INVESTOR RELATIONS,
SPIROS DEVELOPMENT CORPORATION II, INC., 7475 LUSK BLVD., SAN DIEGO, CALIFORNIA
92121.
STOCKHOLDER PROPOSALS
Under the present rules of the SEC, the deadline for stockholders to submit
proposals to be considered for inclusion in the Company's Proxy Statement for
next year's Annual Meeting of Stockholders is expected to be January 20, 1999
(120 days prior to May 20, 1999). Such proposals may be included in next year's
Proxy Statement if they comply with certain rules and regulations promulgated by
the SEC and the Bylaws of the Company.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Annual Meeting other than the matters set forth in this Proxy
Statement. Should any other matter requiring a vote of the stockholders arise,
the persons named as proxies on the enclosed proxy card will vote the shares
represented thereby in the interests of the Company in accordance with their
best judgment. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed proxy card.
By Order of the Board of Directors
/s/ Mitchell R. Woodbury
Dated: April 9, 1998 MITCHELL R. WOODBURY
SECRETARY
11
<PAGE>
PROXY
SPIROS DEVELOPMENT CORPORATION II, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Erle T. Mast and Mitchell R. Woodbury, jointly
and severally, as proxies, with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote all of the shares
of Special Common Stock of Spiros Development Corporation II, Inc. standing in
the name of the undersigned, as designated below, with all powers which the
undersigned would possess if present at the Annual Meeting of Stockholders to be
held May 20, 1998, or any postponements or adjournments thereof, and to vote in
his or her discretion on such other business as may properly come before the
Meeting and any adjournments thereof.
- ------------------------------------------------------------ Please mark
your votes as /X/
indicated in
- ------------------------------------------------------------ this example
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
<S><C>
WITHHELD
FOR FOR ALL
ITEM 1-ELECTION OF DIRECTORS / / / /
Nominees: UNLESS OTHERWISE SPECIFIED
Cam L. Garner BY THE UNDERSIGNED, THIS
David S. Kabakoff PROXY WILL BE VOTED FOR
PROPOSAL 1 AND WILL BE
VOTED BY THE PROXYHOLDER
AT HIS DISCRETION AS TO
ANY OTHER MATTERS PROPERLY
TRANSACTED AT THE MEETING
OR ANY ADJOURNMENTS
THEREOF. TO VOTE IN
ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDA-
WITHHELD FOR: (write that nominee's name in the space TIONS, JUST SIGN BELOW, NO
provided below). BOXES NEED TO BE CHECKED.
- ------------------------------------------
- ---------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.
7475 Lusk Blvd. 1,000 shares
San Diego, CA 92121 Special Common Stock
- ---------------------------------------------------------------------------
DURA PHARMACEUTICALS, INC.
Dated: By:
-------------------- --------------------------
Mitchell R. Woodbury
Senior Vice President,
General Counsel & Secretary
</TABLE>
<PAGE>
PROXY
SPIROS DEVELOPMENT CORPORATION II, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Erle T. Mast and Mitchell R. Woodbury,
jointly and severally, as proxies, with power to act without the other and
with power of substitution, and hereby authorizes them to represent and vote
all of the shares of Callable Common Stock of Spiros Development Corporation
II, Inc. standing in the name of the undersigned, as designated on the other
side, with all powers which the undersigned would possess if present at the
Annual Meeting of Stockholders to be held May 20, 1998, or any postponements
or adjournments thereof, and to vote in his or her discretion on such other
business as may properly come before the Meeting and any adjournments thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- ------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
[LOGO]
<PAGE>
Please mark your votes as indicated in this example /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
ITEM 1 - ELECTION OF DIRECTORS
Nominees:
Sol Lizerbram
Alain B. Schreiber
Robert S. Whitehead
FOR / / WITHHELD FOR ALL / /
WITHHELD FOR: (write that nominee's name in the space provided below).
- ----------------------------------------------------------------------
ITEM 2 - RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS
FOR / / AGAINST / / ABSTAIN / /
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2 AND WILL BE VOTED BY THE PROXY-HOLDER AT HIS DISCRETION AS
TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR ANY ADJOURNMENTS
THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS,
JUST SIGN BELOW, NO BOXES NEED TO BE CHECKED.
Signature _____________________ Signature ________________ Date ______________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- FOLD AND DETACH HERE -
[LOGO]
