<PAGE>
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
/ / 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 Rule 14a-11(c) or Rule 14a-12
SPIROS DEVELOPMENT CORPORATION II, INC.
(Name of Registrant as Specified in Its Charter)
Mitchell R. Woodbury, Secretary
Spiros Development Corporation II, Inc. 7475 Lusk Blvd., San Diego, CA 92121
----------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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 transactions:
--------------------------------------------------------------
(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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<PAGE>
[LOGO]
SPIROS DEVELOPMENT CORPORATION II, INC.
7475 LUSK BOULEVARD
SAN DIEGO, CALIFORNIA 92121
April 16, 1999
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 19, 1999 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
MAY 19, 1999
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 19, 1999
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 2000 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 2000 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, 1999.
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 22, 1999 are
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 16, 1999 MITCHELL R. WOODBURY
SECRETARY
<PAGE>
SPIROS DEVELOPMENT CORPORATION II, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1999
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 the
offices of the Company at 10:00 a.m. on May 19, 1999 and at any adjournment or
postponement of the Annual Meeting. These proxy materials were first mailed to
stockholders of record beginning on approximately April 16, 1999.
The mailing address of the principal executive offices of the Company is
7475 Lusk Blvd., San Diego, California 92121.
PURPOSE OF THE 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,
electronic mail 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 22, 1999
(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 1999 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, LLC, the
Company's transfer agent, will tabulate the votes.
<PAGE>
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 Dura, 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 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 2000, 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, has served as Chairman of the Board of
Directors of Total Business Internet Connectivity ("Total Business") since 1998.
Prior to joining Total Business, Dr. Lizerbram was a co-founder of FPA Medical
Management, Inc. ("FPA"), a physician practice management company, and served as
Chairman of the Board of Directors of FPA from 1993 through March 1998 and
continues as a member of their Board of Directors. FPA filed a petition under
the Federal bankruptcy laws in July 1998. Dr. Lizerbram was first elected
director of the Company in 1998 and currently serves as a member of the
Company's Audit Committee.
WILLIAM H. RASTETTER, PH.D., 51, has served as Chairman of the Board of
Directors of IDEC Pharmaceuticals Corporation ("IDEC"), a pharmaceutical
company, since 1996 and as President and Chief Executive Officer since 1986. He
served as Chief Financial Officer of IDEC from 1988 to 1993. From 1984 to 1986,
he was Director of Corporate Ventures at Genentech, Inc. and from 1982 to 1984
he served in a scientific capacity at Genentech, directing the Biocatalysis and
Chemical Sciences groups. Dr. Rastetter was first elected director of the
Company in 1998 and currently serves as a member of the Company's Audit
Committee.
ALAIN B. SCHREIBER, M.D., 43, 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, most recently as 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 1998 and currently
serves as a member of the Company's Audit Committee.
2
<PAGE>
NOMINEES FOR ELECTION BY THE SPECIAL COMMON STOCK
CAM L. GARNER, 50, has served as Chairman of the Board of Dura, a
specialty respiratory pharmaceutical company, since 1995, as Chief Executive
Officer since 1990 and as President from 1990 until 1998. 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 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
Nanogen, Inc., a biotechnology company.
DAVID S. KABAKOFF, PH.D., 51, has served as Chairman, Chief Executive
Officer, President and a director of the Company since its formation in 1997.
He joined Dura in 1996 as Executive Vice President and a director, and he was
named President, Dura Technologies in 1998. 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 currently serves as a director of Dura.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors met four times during the fiscal year
ended December 31, 1998 and took action by unanimous written consent a total of
seven 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 either 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, Schreiber and
Rastetter. The Audit Committee met two times during the fiscal year ended
December 31, 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 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, 1999. 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 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 22,
1999, 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.
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. Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
<TABLE>
<CAPTION>
Number
Number of Shares Percentage
Title of Name and Address of Shares Underlying of Shares
Class of Beneficial Owner Owned Options Outstanding
----- ------------------- ----- ------- -----------
<S> <C> <C> <C> <C>
Callable Dura Pharmaceuticals, Inc. (1) 0 6,325,000 100%
Common 7475 Lusk Blvd.
Stock San Diego, California 92121
Callable Funds managed by Farallon Partners, L.L.C. (2) 1,120,800 0 17.7%
Common One Maritime Plaza, Suite 1325
Stock San Francisco, California 94111
Callable Elan International Services, Ltd. (3) 37,500 0 14.8%
Common 102 St. James Court
Stock Flatts, Smiths FL04
Bermuda
Callable Lehman Brothers Holdings Inc. (4) 441,400 0 7.0%
Common 3 World Financial Center, 24th Floor
Stock New York, New York 10285
Callable State Street Research & Management Company (5) 331,200 0 5.2%
Common One Financial Center
Stock Boston, Massachusetts 02111-2690
Special Dura Pharmaceuticals, Inc. (1) 1,000 0 100%
Common 7475 Lusk Blvd.
Stock San Diego, California 92121
</TABLE>
(1) Pursuant to Schedule 13D dated December 31, 1997. 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.
(2) Pursuant to Amendment No. 6 to Schedule 13D dated March 4, 1999. Such
entities reported shared voting and dispositive power over the shares,
and certain affiliates disclaim beneficial ownership.
(3) Pursuant to Schedule 13D dated March 12, 1998.
(4) Pursuant to Amendment No. 1 to Schedule 13G dated December 31, 1998.
(5) Pursuant to Schedule 13G dated February 11, 1999.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the
ownership of Callable Common Stock as of March 22, 1999, 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. The persons named in the table have sole voting and investment power
with respect to all shares of Callable Common Stock shown as beneficially owned
by them, subject to community property laws, where applicable. Percentage of
ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
<TABLE>
<CAPTION>
Number Percentage
Name Of Shares Of Shares
Title of Class of Beneficial Owner Owned Outstanding
---------------- --------------------- ---------- ------------
<S> <C> <C> <C>
Callable Cam L. Garner 13,250 *
Common Stock
Callable Sol Lizerbram 0 *
Common Stock
Callable William H. Rastetter 0 *
Common Stock
Callable Alain B. Schreiber 0 *
Common Stock
Callable David S. Kabakoff 10,660 *
Common Stock
Callable Erle T. Mast 0 *
Common Stock
Callable Directors and executive 23,910 *
Common Stock officers as a group
(6 persons)
</TABLE>
- --------------------------
*Less than 1%
5
<PAGE>
EXECUTIVE OFFICERS
The Company's executive officers are:
<TABLE>
<CAPTION>
Name Age Position Held With the Company
---- --- ------------------------------
<S> <C> <C>
David S. Kabakoff 51 Chairman, President, Chief
Executive Officer and director
Erle T. Mast 36 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 1997. Mr. Mast also has served as Vice
President, Finance of Dura since 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.
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 years ended December 31,
1998 and 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.
SUMMARY COMPENSATION TABLE
---------------------------
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
-------------------
Number of
Securities
Name and Underlying
Principal Position Year Options/SARs
------------------ ---- ------------
<S> <C> <C>
David S. Kabakoff 1998 0
Chairman, President and 1997 71,000
Chief Executive Officer
Erle T. Mast 1998 0
Vice President and 1997 22,000
Chief Financial Officer
</TABLE>
STOCK OPTIONS
No stock options or stock appreciation rights ("SARS") were granted
under the Company's 1997 Stock Option Plan (the "Option Plan") to the Company's
Named Executive Officers in the fiscal year ended December 31, 1998.
6
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the Company's
Named Executive Officers, concerning unexercised options held under the Option
Plan as of December 31, 1998. No options were exercised during the 1998 fiscal
year. 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, 1998 was $8.94 per share. The Company believes the fair market
value of the Callable Common Stock on that date was $8.44 per share, based on
estimated valuation of the warrant component of the Units at $.50 per warrant.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
----------------------------------------------------
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
December 31, 1998 December 31, 1998
----------------- -----------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David S. Kabakoff 0 71,000 $0 $0
Erle T. Mast 0 22,000 $0 $0
</TABLE>
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 or any committee. 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
February 1998, Dr. Lizerbram and Dr. Schreiber were granted options to purchase
10,000 shares each of Callable Common Stock at $15.81 per share, and in August
1998, Dr. Rastetter was granted an option to purchase 10,000 shares of Callable
Common Stock at $14.00 per share. The Company believes the per share exercise
price represents the fair market value of the underlying shares on the dates of
grant.
EMPLOYMENT CONTRACTS, SEVERANCE AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company has not entered into any employment contracts, severance
agreements and/or change of control agreements with its executive officers.
Each option granted under the Option Plan 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.
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.
7
<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 compensation in the form
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. Options allow the
executive 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. Grants are made at the
discretion of the Board of Directors, and the Board chose not to grant
additional options to executive officers of the Company in 1998.
THE BOARD OF DIRECTORS
DAVID S. KABAKOFF
CAM L. GARNER
SOL LIZERBRAM
WILLIAM H. RASTETTER
ALAIN B. SCHREIBER
8
<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 of (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.
[CHART]
<TABLE>
<CAPTION>
Nasdaq
Nasdaq Pharmaceutical
Spiros Index Index
<S> <C> <C> <C>
12/17/97 100 100 100
12/31/97 $ 97.86 $ 101.35 $ 101.11
3/31/98 $ 91.43 $ 118.61 $ 111.15
6/30/98 $ 92.14 $ 121.91 $ 103.02
9/30/98 $ 70.00 $ 110.38 $ 97.38
12/31/98 $ 51.07 $ 142.82 $ 129.26
</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 of Dura and as President,
Dura Technologies, and Mr. Garner serves as Chairman and Chief Executive Officer
and a director 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 fiscal year 1998, the Company incurred research and development
expenses of $50,799,000 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
9
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of the Company. In addition, Dura holds an option to acquire Spiros Corp. II's
exclusive rights for the use of the Spiros-Registered Trademark- system with
albuterol and with a second product other than albuterol. The purchase price
for these options is payable in cash.
SECTION16(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 (the "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 1998 fiscal year, its
officers, directors and greater than 10% beneficial owners complied with all
applicable Section 16(a) filing requirements, with the exception of Dura, which
filed late one Form 3 reporting its December 1997 purchase option to acquire
100% of the Callable Common Stock of the Company.
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 19, 2000 (120 days prior to May 19, 2000). 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. In
addition, the proxy solicited by the Board of Directors for the next year's
Annual Meeting of Stockholders will confer discretionary authority to vote on
any stockholder proposal presented at that meeting, unless the Company
receives notice of such proposal not later than January 19, 2000.
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 16, 1999 MITCHELL R. WOODBURY
SECRETARY
10
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PROXY
SPIROS DEVELOPMENT CORPORATION II, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mitchell R. Woodbury and Erle T. Mast,
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 19, 1999, 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)
- --------------------------------------------------------------------------------
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<S><C>
Please mark
your votes as /X/
indicated in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
WITHHELD
FOR FOR ALL FOR AGAINST ABSTAIN
ITEM 1-ELECTION OF DIRECTORS / / / / ITEM 2-RATIFICATION OF / / / / / / UNLESS OTHERWISE SPECIFIED
Nominees: DELOITTE & TOUCHE BY THE UNDERSIGNED, THIS
Sol Lizerbram LLP AS INDEPENDENT PROXY WILL BE VOTED FOR
William H. Rastetter ACCOUNTANTS PROPOSALS 1 AND 2 AND WILL
Alain B. Schreiber BE VOTED BY THE PROXYHOLDER
AT HIS DISCRETION AS TO ANY
WITHHELD FOR: (write that nominee's name in the space provided below). 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.
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