<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 [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
FIRST HORIZON PHARMACEUTICAL CORPORATION
--------------------------------------------------------------------------------
(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] Fee not 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:
-1-
<PAGE> 2
---------------------------------------------------------------------
[ ] 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:
---------------------------------------------------------------------
-2-
<PAGE> 3
FIRST HORIZON PHARMACEUTICAL CORPORATION
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
SEPTEMBER 8, 2000
----------------------------------------------------
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
First Horizon Pharmaceutical Corporation, a Delaware corporation ("First
Horizon"), will be held at 660 Hembree Parkway, Suite 106, Roswell, Georgia
30076, on Friday, September 8, 2000, at 10:00 a.m., Eastern Daylight Time, for
the following purposes:
1. To elect one Class A Director to First Horizon's Board of
Directors; and
2. To transact such other business as may properly come before
the Annual Meeting and any adjournment or postponement
thereof.
Only stockholders who held their shares at the close of business on
August 10, 2000, the record date, are entitled to notice of, and to vote at the
Annual Meeting or any adjournments thereof.
In lieu of an annual report for 1999, we are enclosing a copy of First
Horizon's Prospectus, dated May 31, 2000, relating to our initial public
offering.
YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY STATEMENT. WE
INVITE ALL STOCKHOLDERS TO ATTEND THE ANNUAL MEETING. TO ENSURE THAT YOUR
SHARES WILL BE VOTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND
THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES IN PERSON EVEN IF YOU HAVE
PREVIOUSLY SUBMITTED A PROXY.
By Order of the Board of Directors
/s/ Mahendra G. Shah, Ph.D.
---------------------------------------
Mahendra G. Shah, Ph.D.
Chairman and Chief Executive Officer
Roswell, Georgia
August 14, 2000
-3-
<PAGE> 4
PROXY STATEMENT
FIRST HORIZON PHARMACEUTICAL CORPORATION
660 HEMBREE PARKWAY, SUITE 106
ROSWELL, GEORGIA 30076
------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
SEPTEMBER 8, 2000
------------------------------------------------
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of
Directors of First Horizon Pharmaceutical Corporation, a Delaware corporation
(the "Company""), for use at First Horizon's 2000 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Friday, September 8, 2000 at
10:00 a.m., Eastern Daylight Time, at the Company's Corporate Headquarters at
660 Hembree Parkway, Suite 660, Roswell, Georgia 30076, and an any and all
adjournments or postponements thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders.
The Company is bearing all the expenses associated with this
solicitation. In addition to solicitation by mail, officers, directors and
regular employees of the Company, who will receive no additional compensation
for their services, may solicit proxies by mail, fax or personal calls. The
Company has requested brokers and nominees who hold stock in their name to
furnish this proxy material to their customers and the Company will reimburse
such brokers and nominees for their related out-of-pocket expenses.
The Company's Board of Directors has designated the two persons named
on the enclosed proxy card, Mahendra G. Shah, Ph.D. and R. Brent Dixon, to
serve as proxies in connection with the annual meeting. These proxy materials
and the accompanying Prospectus are being mailed on or about August 14, 2000 to
our stockholders of record on August 10, 2000.
IMPORTANT
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN
IT IN THE ENVELOPE PROVIDED TO FIRST HORIZON'S TRANSFER AGENT AT LASALLE BANK
NATIONAL ASSOCIATION, ATTENTION: PROXY DEPARTMENT, 135 SOUTH LASALLE STREET,
CHICAGO, ILLINOIS 60603, TO BE RECEIVED NO LATER THAN SEPTEMBER 7, 2000. IN
ORDER TO AVOID THE ADDITIONAL EXPENSE TO FIRST HORIZON OF FURTHER SOLICITATION,
WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
-4-
<PAGE> 5
VOTING PROCEDURES
REVOCABILITY OF PROXIES
You may revoke any proxy you execute at any time prior to its use at the Annual
Meeting by:
- delivering written notice of revocation to our Secretary at
the Company's Corporate Headquarters;
- delivering an executed proxy bearing a later date to the
Company's Secretary; or
- attending the Annual Meeting and voting in person.
RECORD DATE
The Company's Board of Directors has fixed the close of business on
August 10, 2000, as the record date for determining which stockholders are
entitled to notice of and to vote at the annual meeting. At the close of
business on the record date, 12,919,143 shares of the Company's Common Stock
were outstanding.
VOTING; QUORUM
Each share of Common Stock outstanding on the record date is entitled
to one vote per share at the Annual Meeting. Stockholders are not entitled to
cumulate their votes. The presence, in person or by proxy, of the holders of a
majority of the Company's outstanding shares of Common Stock is necessary to
constitute a quorum at the Annual Meeting.
If a quorum is present at the Annual Meeting, the nominee who receives
the greatest number of votes cast for the election of the Class A Director by
the shares present and voting in person or by proxy will be elected as a Class
A Director.
EFFECT OF ABSTENTIONS
If you abstain from voting, your shares will be deemed present at the
Annual Meeting for purposes of determining whether a quorum is present. The
Class A Director will be elected by a plurality of the votes cast and only
votes cast in favor of a nominee will have an effect on the outcome. Therefore,
abstention from voting will not affect the outcome of the election.
EFFECT OF BROKER NON-VOTES
If a broker holds your shares in street name, you should instruct your
broker how to vote. If you do not provide voting instructions, the broker will
have discretionary voting authority. Broker non-votes are deemed present at the
Annual Meeting for purposes of determining whether a quorum is present.
However, broker non-votes are not counted as votes "for" or "against" the
election of the Class A Director and are not counted in determining the number
of votes cast on these proposals.
PROXY PROCEDURE
When a proxy card is properly dated, executed and returned, the shares
it represents will be voted at the Annual Meeting in accordance with the
instructions specified in the proxy. If no specific instructions are specified,
the shares will be voted FOR the election of the Director nominee described
below. If other matters properly come before the Annual Meeting, the persons
named in the accompanying proxy will vote in accordance with their best
judgment with respect to such matters.
-5-
<PAGE> 6
NOMINATION AND ELECTION OF CLASS A DIRECTOR
The persons named in the enclosed proxy will vote to elect the nominee
named below under "Nominee for Class A Director" unless instructed otherwise in
the proxy. The person receiving the greatest number of votes shall be the
person elected as the Class A Director. Shares represented by proxies which are
marked "withhold authority" will have the same effect as a vote against the
nominee. The Class A Director is to hold office until the 2003 Annual Meeting
of Stockholders and until his respective successor is duly qualified and
elected.
The name and certain information concerning the person nominated to be
elected as a Class A Director by the Board of Directors at the Annual Meeting
is set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEE NAMED BELOW UNDER "NOMINEE FOR CLASS A DIRECTOR".
Although the nominee has consented to serve as a Director if elected,
and the Board of Directors has no reason to believe that the nominee will be
unable to serve as a Director, if the nominee withdraws or otherwise becomes
unavailable to serve, the persons named as proxies will vote for any substitute
nominee designated by the Board of Directors. The following information
regarding the Company's Directors and executive officers, including the
nominee, is relevant to your consideration of the slate proposed by the Board
of Directors:
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Mahendra G. Shah, Ph.D......................... 55 Chairman of the Board and Chief Executive Officer
R. Brent Dixon................................. 55 President and Director
Gregory P. Hauck............................... 34 Secretary and Vice President, Developed Products
Balaji Venkataraman............................ 34 Vice President of Corporate Development and Chief
Financial Officer
Robert D. Godfrey, Jr.......................... 37 Vice President, Sales
William G. Campbell............................ 44 Controller
John N. Kapoor, Ph.D.(1)....................... 56 Director
Pierre Lapalme(1)(2)........................... 59 Director
Jon S. Saxe(1)(2).............................. 64 Director
</TABLE>
---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
The Board of Directors is divided into three classes, with each class
holding office for staggered three-year terms. The term of Class A Director
John N. Kapoor, Ph.D. expires in 2000, the terms of Class B Directors Mahendra
G. Shah, Ph.D. and Jon S. Saxe expire in 2001 and the terms of Class C
Directors R. Brent Dixon and Pierre Lapalme expire in 2002. All executive
officers of the Company are chosen by the Board of Directors and serve at its
discretion. There are no family relationships among the Company's officers and
Directors.
-6-
<PAGE> 7
NOMINEE FOR CLASS A DIRECTOR
The following person's name will be placed in nomination for election
to the Board of Directors. The shares represented by the proxy cards returned
will be voted FOR the election of this nominee unless you specify otherwise or
unless authority to vote for the nominee has been withheld in the proxy.
John N. Kapoor, Ph.D. has been one of the Company's Directors since
1996. Dr. Kapoor has over 20 years of experience in the healthcare field through
his ownership and management of healthcare-related businesses. In 1990, Dr.
Kapoor founded EJ Financial Enterprises, Inc., of which he is the President and
sole stockholder. EJ Financial Enterprises, Inc. is the managing general partner
of Kapoor-Pharma Investments, L.P., the Company's largest stockholder. EJ
Financial provides funds and strategic advice to healthcare businesses. Dr.
Kapoor is the Chairman of OptionCare, Inc., Akorn, Inc. and NeoPharm, Inc. Dr.
Kapoor is a director of Integrated Surgical Systems, Inc., as well as a Chairman
of a private company and a director of several other private companies. Dr.
Kapoor received a B.Sc. degree from Bombay University and a Ph.D. degree in
medicinal chemistry from the State University of New York.
Dr. Kapoor was previously the chairman and president of Lyphomed Inc.
Fujisawa Pharmaceutical Co. Ltd. was a major stockholder of Lyphomed from the
mid-1980s until 1990, at which time Fujisawa completed a tender offer for the
remaining shares of Lyphomed, including the shares held by Dr. Kapoor. In 1992,
Fujisawa filed suit in federal district court in Illinois against Dr. Kapoor
alleging that between 1980 and 1986, Lyphomed filed a large number of allegedly
fraudulent new drug applications with the FDA, and that Dr. Kapoor's failure to
make certain disclosures to Fujisawa constituted a violation of federal
securities laws and the Racketeer Influenced and Corrupt Organizations Act.
Fujisawa also alleged state law claims. Dr. Kapoor countersued, and in 1999,
the litigation was settled on terms mutually acceptable to the parties. The
terms of the settlement are subject to a confidentiality agreement. Dr. Kapoor
also controls Inpharmakon Corporation, a party to one of the Company's
development agreements.
OTHER DIRECTORS AND EXECUTIVE OFFICERS
Mahendra G. Shah, Ph.D. is the Chairman of the Board and Chief
Executive Officer. Dr. Shah has been a Director since 1993, and his present
term as Director will expire in 2001. Dr. Shah became Chief Executive Officer
in October 1999. Dr. Shah maintains other employment and expects to dedicate a
majority of his working time to the Company. From 1991 to the present, he has
been a Vice President of EJ Financial Enterprises, Inc., a company that invests
in healthcare companies. From 1996 to the present, he has been the President of
Protomed Pharmaceuticals, Inc. which is a privately-held drug development
company. From 1987 to 1991, he was the Senior Director of New Business
Development with Fujisawa USA, Inc. Prior to that time, he worked in various
scientific and management positions with Schering-Plough and Bristol
Myers-Squibb Company. He serves on the board of Structural Bioinformatics Inc.,
Zarix, Introgen Therapeutics and Inpharmakon Corporation. He previously served
on the board of Unimed Pharmaceuticals. Dr. Shah received a Ph.D. degree in
Industrial Pharmacy from St. John's University. EJ Financial Enterprises, Inc.
is the managing general partner of Kapoor-Pharma Investments, L.P., the
Company's largest stockholder.
R. Brent Dixon is the President and a Director of the Company. He has
been a Director since 1993, and his present term as Director will expire in
2002. Mr. Dixon has been with the Company since its formation. He has been the
Company's President since 1993 and served as a Vice President from 1992 to
1993. He has over 30 years of operational, sales, and strategic market
development experience in the pharmaceutical industry. Prior to working at the
Company, he was President of Dixon and Associates, a healthcare consulting
company. Prior to that he served as National Sales Manager for Center
Laboratories, a subsidiary of Merck AG. Mr. Dixon has also served as a Regional
and District Manager
-7-
<PAGE> 8
for Roberts Pharmaceuticals and Adams Laboratories. Mr. Dixon attended St.
Petersburg Junior College and the University of Mississippi.
Gregory P. Hauck is the Secretary and Vice President of Developed
Products. He has been with the Company since its formation and has been serving
as Vice President since 1993. He is responsible for developing product
promotional materials as well as product line marketing strategies. In his
previous position as Vice President of Sales and Marketing for the Company from
1994 to 1997, he was responsible for implementing its sales strategies. Mr.
Hauck began working with the Company in 1992 as the National Sales Manager
where he was primarily responsible for the hiring and training of all new sales
representatives. He entered the pharmaceutical industry in 1989 as a sales
representative with Hauck Pharmaceuticals and Roberts Pharmaceuticals. Mr.
Hauck received a B.S. degree in Education from the University of Georgia and,
afterwards, spent a brief period of time as an educator.
Balaji Venkataraman has been the Vice President of Corporate
Development and Chief Financial Officer since October 1999. Between August 1998
and September 1999, he was Vice President of Corporate Development and
Strategic Planning at the Company. He also served as a consultant to the
Company during his employment as the Director of Strategic Planning at EJ
Financial Enterprises, Inc. from September 1997 to August 1998. From 1995 to
1997, he was an Associate, Licensing and New Business Start-Up, at the
University of Pennsylvania Center for Technology Transfer. From 1994 to 1995,
he was the Marketing Manager at Curative Technologies Inc., a wound care
services company. From 1993 to 1994, he was a Technical Sales Representative
for Millipore Corporation. From 1991 to 1993 he was the Senior Research Chemist
at Scios Inc. He has also held product management and finance positions at
Schering Plough and Pfizer. Mr. Venkataraman received an M.S. degree in Organic
Chemistry from Case Western Reserve University and an M.B.A. degree from the
Wharton School at the University of Pennsylvania.
Robert D. Godfrey, Jr. has been Vice President of Sales since 1998. He
served as the National Sales Manager between 1996 and 1998. He began his career
with the Company in 1992 as a Sales Representative for the Jacksonville,
Florida, territory and was promoted in 1994 to District Manager of the entire
Florida sales territory. At that time, in addition to his managerial
responsibilities, he continued to promote the Company products to physicians
and pharmacies until 1995. Prior to his career with the Company, Mr. Godfrey
held the position of Marketing Research Consultant with MGT Information Systems
and also worked independently as a Research Consultant in the southeastern
United States. Mr. Godfrey received an M.B.A. degree and a B.S. degree in
Marketing from Jacksonville University.
William G. Campbell has been the Company's Controller and Treasurer
since 1998. Prior to joining the Company, from 1995 to 1998, Mr. Campbell was
the Controller/CFO of DialysisAmerica, Inc. He was the Associate
Administrator/CFO of Stringfellow Memorial Hospital from 1993 to 1995; and from
1989 to 1993, he was the Director of Budgets, Costs and Reimbursement at Grady
Memorial Hospital, a large public teaching hospital. His prior professional
experience also includes a number of profit and not-for-profit consulting, big
five public accounting, governmental auditing and internal audit positions. Mr.
Campbell is a Certified Public Accountant and received a B.A. degree in
Accounting from Walsh College of Accountancy and Business Administration and an
M.B.A. degree in Accounting from Kennesaw State College.
Pierre Lapalme was elected a Director in April 2000. His term as
Director will expire in 2002. Mr. Lapalme has served as President and Chief
Executive Officer of the North American division of Ethypharm, Inc. since 1997.
Mr. Lapalme is the non-executive Chairman of the Board of DiagnoCure Inc. From
1994 to 1997, he served as President and General Manager of Lavipharm Inc. Mr.
Lapalme served as Senior Vice President and General Manager for the North
American division of Rhone-Poulenc Rorer Inc. U.S.A. from 1990 to 1993 and as
President and Chief Executive Officer of the North American division of
Rhone-Poulenc Pharmaceuticals from 1979 to 1990. From 1964 to 1979, Mr. Lapalme
held
-8-
<PAGE> 9
various executive positions at Ciba-Geigy Pharmaceuticals in Canada. Mr.
Lapalme studied Marketing and Management at the University of Western Ontario
and Insead in France.
Jon S. Saxe was elected a Director in January 2000. His term as
Director will expire in December, 2001. He also serves as a Director of Protein
Design Labs, Inc. Mr. Saxe served as President of Protein Design Labs, Inc.
from January 1995 to May 1999. In addition, he is a Director of Questcor
Pharmaceuticals Inc., Incyte Pharmaceuticals Inc., ID Biomedical Corporation,
InSite Vision, and is Chairman of Point Biomedical Corporation, Iconix
Pharmaceuticals and VistaGen, Inc. Mr. Saxe served as President of Saxe
Associates, a biotechnology consulting firm, from May 1993 to December, 1994.
He served as the President, Chief Executive Officer and a Director of Synergen,
Inc., a biopharmaceutical company, from October 1989 to April 1993. Mr. Saxe
served in various positions including Vice President of Licensing and Corporate
Development and Head of the Patent Law Department for Hoffmann-LaRoche, Inc.
from 1960 through 1989. Mr. Saxe received a B.S. Ch.E. degree from
Carnegie-Mellon University, a J.D. degree from George Washington University
School of Law, and an L.L.M. degree from New York University School of Law.
ATTENDANCE AT MEETINGS AND BOARD COMMITTEES
During the fiscal year ended December 31, 1999, the Board of Directors
held a total of 2 meetings and also took action by unanimous consent. Each
member of the Board of Directors who served on the Board during 1999 attended
more than 75% of its meetings.
The Board of Directors formed an Audit Committee in January 2000. The
Audit Committee is responsible for (i) reviewing the Company's financial
results and the scope and results of audits; (ii) evaluating the Company's
system of internal controls and meeting with independent public accountants and
appropriate Company financial personnel concerning the Company's system of
internal controls; (iii) recommending to the Board of Directors the appointment
of the independent public accountants; and (iv) evaluating the Company's
financial reporting activities and the accounting standards and principles
followed. The current members of the Audit Committee are John Kapoor, Ph.D.,
Pierre Lapalme and Jon Saxe. Although Dr. Kapoor may not be considered an
independent director based on his beneficial ownership of 50.3% of the
Company's Common Stock and his relationship with EJ Financial Enterprises Inc.,
the Board of Directors has determined that it is in the best interest of the
Company and its stockholders for Dr. Kapoor to be a member of the Audit
Committee. The Board of Directors believes that Dr. Kapoor's 's extensive
business experience, including his service on the board of directors of several
public companies and his previous service on the Company's Board of Directors,
which makes him familiar with the Company's financial statements, will enable
the Audit Committee to provide more detailed and in-depth reviews.
The Board of Directors formed a Compensation Committee in January
2000. The Compensation Committee is responsible for recommending salaries and
incentive compensation for executive officers and administering the Company's
2000 Stock Option Plan and Employee Stock Purchase Plan. The members of the
Compensation Committee are Pierre Lapalme and Jon Saxe.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of August 10, 2000 by all
persons known by the Company to own beneficially more than five percent (5%) of
the Common Stock of the Company, each Director, each of the persons named in
the Summary Compensation Table in this Proxy Statement, and all Directors and
executive officers as a group.
-9-
<PAGE> 10
Unless otherwise indicated, each person or entity named in the table
has sole voting power and investment power, or shares voting and/or investment
power with his or her spouse, with respect to all shares of Common Stock listed
as owned by that person or entity. Except as otherwise noted below, the address
of each person listed below is the Company's address.
The number of shares beneficially owned by each stockholder is
determined under rules promulgated by the Securities and Exchange Commission.
The information is not necessarily indicative of beneficial ownership for any
other purpose. Under these rules, beneficial ownership includes any shares as
to which the individual has sole or shared voting power or investment power and
any shares as to which the individual has the right to acquire beneficial
ownership within 60 days of August 10, 2000 through the exercise of any stock
option, warrant or other right. The inclusion in the following table of those
shares, however, does not constitute an admission that the named stockholder is
a direct or indirect beneficial owner of those shares.
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Beneficial Owner Beneficially Owned Percent
------------------------------------ --------------------- --------------------
<S> <C> <C>
5% Stockholder
Kapoor-Pharma Investments, L.P. (1) ................... 6,487,583 50.3%
225 East Deerpath, Suite 250
Lake Forest, IL 60045
Safeco Asset Management Company ....................... 1,050,000 8.13%
10785 Willow Road, N.E.
Redmond, WA 98052
Directors and Named Executive Officers
John N. Kapoor, Ph.D.(1) .............................. 6,487,583 50.3
R. Brent Dixon(2) ..................................... 785,000 5.9
Gregory P. Hauck(3) ................................... 782,500 5.9
Mahendra G. Shah, Ph.D.(4) ............................ 424,560 3.3
Robert D. Godfrey, Jr.(5) ............................. 55,000 *
Balaji Venkataraman(6) ................................ 20,000 *
Pierre Lapalme ........................................ -- --
Jon S. Saxe ........................................... -- --
All directors and executive officers as a group (9
persons) (7) .......................................... 8,564,643 62.5
</TABLE>
---------------
* Represents less than 1%.
(1) John N. Kapoor, Ph.D., one of our directors, is the president and sole
stockholder of the managing general partner of Kapoor-Pharma
Investments, L.P. and is therefore deemed the beneficial owner of
those shares.
(2) Includes 305,000 shares of Common Stock issuable upon exercise of
stock options exercisable within 60 days.
(3) Includes 302,500 shares of Common Stock issuable upon exercise of
stock options exercisable within 60 days.
(4) Includes 112,500 shares of Common Stock issuable upon exercise of
stock options exercisable within 60 days. Also includes 10,000 shares
that Dr. Shah owns as custodian for his daughter that he may be deemed
to beneficially own.
(5) Includes 55,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(6) Includes 20,000 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days.
(7) Includes 795,000 shares of Common Stock issuable upon exercise of
stock options exercisable within 60 days.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid by the Company to its Chief Executive Officer and the four
most highly compensated executive officers (the "Named Executive Officers") of
the Company who received an annual salary and bonus in excess of $100,000 for
the year ended December 31, 1999:
-10-
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ----------------- ALL OTHER
SHARES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (1)
--------------------------- ---------- --------- ----------------- ----------------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D.(1)
Chairman and Chief Executive Officer .......... $ -- $55,200 300,000 $ --
R. Brent Dixon
President and Director ........................ 100,000 27,600 60,000 1,567
Balaji Venkataraman
Vice President of Corporate Development
and Chief Financial
Officer ....................................... 93,400 21,250 200,000 24(3)
Gregory P. Hauck
Vice President, Developed Products ............ 89,000 20,000 50,000 624(4)
Robert D. Godfrey, Jr
Vice President, Sales ......................... 85,950 20,000 70,000 2,024(5)
</TABLE>
---------------
(1) Dr. Shah did not receive a salary in 1999.
(2) Represents $1,543 contributed under the 401(k) plan and $24 for term
life insurance premiums.
(3) Represents $24 for term life insurance premiums.
(4) Represents $600 contributed under the 401(k) plan and $24 for term
life insurance premiums.
(5) Represents $2,000 contributed under the 401(k) plan and $24 for term
life insurance premiums.
STOCK OPTION GRANTS
The following tables show for the year ended December 31, 1999,
information regarding options granted to, and held at year end by, the Named
Executive Officers. Amounts reported in the potential realizable value column
below are hypothetical values that may be realized upon exercise of the options
immediately prior to the expiration of their term, calculated by assuming that
the stock price on the date of grant as determined by the Board of Directors
appreciates at the indicated annual rate compounded annually for the entire
term of the option (10 years). The 0% annual rate of appreciation shows the
value at the grant date based upon the stated market price of the stock on the
date of grant. The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent
management's estimate or projection of the future Common Stock price.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------
Percentage Potential Realizable Value of
of Total Assumed Annual Rates of Stock Price
Number of Options Appreciation for Option Term
Securities Granted to Market -----------------------------------
Underlying Employees Exercise Price on
Options In Fiscal Price Per Date of Expiration
Granted Year (1) Share Grant Date 0% 5% 10%
----------- ----------- --------- --------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D...... 25,000(2) 3.2% $2.50 $3.08 3/17/09 $ 14,500 $ 62,925 $ 137,218
275,000(3) 35.0 2.65 4.48 10/22/09 503,250 1,278,048 2,466,741
60,000(4) 7.6 2.50 3.08 3/17/09 34,800 151,020 329,324
R. Brent Dixon.............. 40,000(5) 5.1 1.88 4.48 9/1/09 104,000 216,698 389,599
Balaji Venkataraman......... 60,000(3) 7.6 1.88 4.48 10/22/09 156,000 325,047 584,398
100,000(3) 12.7 2.65 4.48 10/22/09 183,000 464,745 896,997
Robert D. Godfrey, Jr....... 20,000(4) 2.5 2.50 3.08 3/17/09 11,600 50,340 109,775
50,000(3) 6.4 2.65 4.48 10/22/09 91,500 232,372 448,498
50,000(4) 6.4 2.50 3.08 3/17/09 29,000 125,850 274,436
Gregory P. Hauck............
</TABLE>
---------------
(1) In 1999, options to purchase a total of 785,500 shares of Common Stock
were granted.
-11-
<PAGE> 12
(2) The option holder may exercise the option to purchase 25% of these
shares of Common Stock on March 17, 1999 and an additional 25% per
year on the next three anniversaries thereof.
(3) The option holder may exercise the option to purchase 25% of these
shares of Common Stock on October 22, 2000 and an additional 25% per
year on the next three anniversaries thereof.
(4) The option holder may exercise the option to purchase 25% of these
shares of Common Stock on March 17, 2000 and an additional 25% per
year on the next three anniversaries thereof.
(5) The option holder may exercise the option to purchase 25% of these
shares of Common Stock on September 1, 1999 and an additional 25% per
year on the next three anniversaries thereof.
None of the Company's Named Executive Officers exercised stock options
in the fiscal year ended December 31, 1999. The following table sets forth
information concerning the number and value of unexercised options held by each
of the Company's Named Executive Officers on December 31, 1999. There was no
public market for the Company's Common Stock as of December 31, 1999.
Accordingly, the fair market value on December 31, 1999 is based on the initial
public offering price of $8.00 per share. This valuation at December 31, 1999
does not represent the actual value of the Company's Common Stock at December
31, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised In-The-Money
Unexercised Options at Year Options at Year Ended December 31,
Ended December 31, 1999 1999
------------------------------- -----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D.(1) ..... 106,250 293,750 $ 771,875 $1,574,375
R. Brent Dixon ................. 265,000 135,000 1,984,375 883,125
Balaji Venkataraman ............ 10,000 190,000 61,200 1,085,800
Robert D. Godfrey, Jr .......... 35,000 115,000 239,375 653,125
Gregory P. Hauck ............... 265,000 125,000 1,984,375 828,125
</TABLE>
EXECUTIVE OFFICERS EMPLOYMENT AGREEMENTS
On January 1, 2000, the Company entered into employment agreements
with Mahendra G. Shah, Ph.D., R. Brent Dixon, Balaji Venkataraman, Robert D.
Godfrey, Jr., Gregory P. Hauck and William G. Campbell. These employment
agreements may be terminated by the Company with or without cause. The officers
may terminate employment upon sixty days written notice to the Company. Upon
termination of Messrs. Shah, Dixon and Venkataraman's employment without cause,
as defined in the agreement, each will be entitled to receive his salary for
twelve months following termination, a lump sum equal to 100% of the bonus he
received the preceding calendar year, if any, continued health insurance
coverage substantially equivalent to that provided to the officer prior to
termination for twelve months following termination, a car allowance for twelve
months following termination, and all of the officer's unvested options will
immediately vest and become exercisable.
Upon termination of Messrs. Godfrey, Hauck and Campbell's employment
without cause, each will be entitled to receive his salary for six months
following termination, a lump sum equal to 50% of the bonus he received the
preceding calendar year, if any, continued health insurance coverage
substantially equivalent to that provided to the officer prior to termination
for six months following termination, a car allowance for six months following
termination and all of the officer's unvested options will immediately vest and
become exercisable.
Upon termination by the Company for cause, termination in the event of
death or termination by the officer, each officer or his estate is entitled to
receive all accrued but unpaid salary as of the date of termination. Upon any
termination of these agreements, each officer or his estate will have 120 days
from
-12-
<PAGE> 13
the date of termination to exercise any vested options. These employment
agreements provide for a base salary in 2000 of $110,000 for Dr. Shah, $102,000
for Mr. Dixon, $95,000 for Mr. Venkataraman, $90,000 for Mr. Godfrey, $85,000
for Mr. Hauck and $80,000 for Mr. Campbell. In addition, these employment
agreements entitle each executive officer to receive a bonus based on the
percentage of his salary, if the Company and/or the officer meets certain
performance goals to be established by the Board of Directors each year. The
Compensation Committee will review the performance goals and determine whether
or not the Company and/or the executive have achieved the performance goals
based on the Company's financial statements. The Board of Directors retains
the right to award additional compensation to each officer based on the
officer's contributions to the Company.
The employment agreements provide that in the event of a change of
control, as defined in the employment agreements, all options become fully
vested and immediately exercisable.
The employment agreements restrict each officer from engaging in or
having any financial interest in a business that is in competition with the
Company's business during that officer's employment with the Company and for
thirty-six months following termination of employment. A business is in
competition with the Company if it involves research and development work
involving products that the Company markets at the time of termination or that
were under study by the Company at that time and were expected to be marketed
within six months. This provision does not prevent the officers from investing
in a publicly held company, provided that the officer's beneficial ownership of
securities does not exceed 5% of the outstanding class of the publicly held
company's securities. The employment agreements also restrict each officer from
soliciting the Company's suppliers, customers or clients for thirty-six months
after employment. This provision does not prohibit an officer from soliciting
wholesale customers, managed care agencies, scientific or computer consultants,
lawyers or manufacturers as long as manufacturers have excess capacity. The
employment agreements also prohibit each officer from soliciting, employing or
engaging any of the Company's employees or affiliates for thirty-six months
following employment. The employment agreements prohibit each officer from
disclosing any of the Company's trade secrets, confidential information or
ideas that the officer may have acquired or developed relating to the Company's
business for twelve months following employment.
DIRECTOR COMPENSATION
The Company reimburses each member of its Board of Directors for
out-of-pocket expenses incurred in connection with attending Board meetings.
Each Director who is not an employee also receives a fee of $12,000 per year
and $1,000 for each Board meeting attended. Each Director who is not an
employee and not affiliated with a greater than 10% stockholder receives
options to purchase shares of the Company's Common Stock upon election to the
Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In January 2000, the Company's Board of Directors established the
Compensation Committee. Pierre Lapalme and Jon Saxe currently serve as members
of the Compensation Committee. For the year ended December 31, 1999, the entire
Board of Directors, which was comprised of Brent Dixon, Mahendra Shah, Ph.D.
and John Kapoor, Ph.D., determined executive compensation. Two members of the
Board of Directors, Dr. Shah and Mr. Dixon, are also employees. Dr. Shah has
participated in certain transactions with the Company in the past. In addition,
Dr. Kapoor beneficially owns 50.3% of the Company's outstanding Common Stock
and certain entities affiliated with Dr. Kapoor have participated in certain
transactions with the Company in the past. See "Certain Relationships and
Related Transactions."
-13-
<PAGE> 14
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors currently
administers the Company's executive compensation program. The current members
of the Compensation Committee are Pierre Lapalme and Jon Saxe. For fiscal 1999,
executive compensation was determined by and the role of the Compensation
Committee was fulfilled by the Board of Directors which in 1999 was comprised
of Brent Dixon, Mahendra Shah, Ph.D. and John Kapoor, Ph.D.
General Compensation Philosophy
The role of the Compensation Committee is to set the salaries and
other compensation of the executive officers of the Company, and to make grants
under, and to administer, the Company's stock option and employee stock
purchase plans. The Company's compensation philosophy for executive officers is
to relate compensation to corporate performance and increases in stockholder
value, while providing a total compensation package that is competitive and
enables the Company to attract, motivate, reward and retain key executives and
employees. Accordingly, each executive officer's compensation package may, in
one or more years, be comprised of the following three elements:
- base salary that is designed primarily to be competitive with
base salary levels in effect at similar companies and
companies with which the Company competes for executive
personnel;
- annual variable performance awards, such as bonuses, payable
in cash and tied to the achievement of performance goals,
financial or otherwise; and
- long-term stock-based incentive awards which strengthen the
mutuality of interests between the executive officers and the
Company's stockholders.
Executive Compensation
Base Salary. Salaries for executive officers for 1999 were generally
determined by the Board of Directors on an individual basis by evaluating the
Company's performance and each executive's scope of responsibility,
performance, prior experience and salary history, as well as the salaries for
similar positions at comparable companies.
Annual Incentive Awards. The Company had no formal management
incentive plan in 1999. The Board of Directors considered several factors in
determining bonuses in 1999 including:
- the position held by the executive to whom the bonus was
paid;
- total compensation paid by comparable companies to similarly
situated executives;
- the performance of the executive;
- the development of the Company as measured by the Company's
growth in revenues, increases in doctors prescribing the
Company's products and increases in the number of sales
representatives; and
- the perceived increase in the value of the Company's
business.
Long-Term Incentive Awards. The Board of Directors believes that
equity-based compensation in the form of stock options links the interests of
executive officers with the long-term interests of the Company's stockholders
and encourages executive officers to remain in the Company's employ.
-14-
<PAGE> 15
In 1999, the Board of Directors granted stock options in accordance
with the 1997 Non-Qualified Stock Option Plan. During 1999, stock options were
granted to 6 executive officers as incentives for them to become employees or
to aid in the retention of executive officers and to align their interests with
those of the stockholders. The number of shares subject to each stock option
granted is within the discretion of the Board of Directors and is based on
anticipated future contribution and ability to impact the Company's results,
past performance and evaluation of other compensation. In 1999, the Board of
Directors considered these factors. The stock options granted in 1999 generally
become exercisable over a four-year period and were granted at an exercise
price that was less than the fair market value of the Company's Common Stock on
the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
During 1999, Brent Dixon served as Chief Executive Officer of the
Company from January to October and Mahendra G. Shah, Ph.D. served as Chief
Executive Officer from October to December.
Mr. Dixon received a base salary of $100,000 in 1999 for his services
as Chief Executive Officer through October and as President for the entire
year. His salary was based upon his service to the Company since its inception,
on his performance during 1998 and was also based on salaries paid to chief
executive officers of comparable pharmaceutical companies. Mr. Dixon received a
bonus of $27,600 which was based on the improved financial performance of the
Company in 1999 including a 101% increase in revenues and the completion of the
Company's licensing of the Nitrolingual product. Mr. Dixon also received
options to purchase 60,000 shares of the Company's Common Stock in order to
further align his interests with those of the Company and to provide incentives
to strengthen the Company's performance and to retain Mr. Dixon's services.
These options were granted at an exercise price that was less than fair market
value on the date that it was granted. The exercise price was determined based
on the Company's internal valuation estimates. Mr. Dixon's compensation was
determined by Dr. Shah and Dr. Kapoor.
Dr. Shah did not receive a base salary in 1999 due to the fact that he
was elected as Chief Executive Officer in the fourth quarter and because he did
not provide full time services to the Company during 1999. Dr. Shah's bonus of
$55,200 was based on his previous service on the Company's Board of Directors,
the improved financial performance of the Company during 1999 including a 101%
increase in revenues and the completion of the Company's licensing of the
Nitrolingual product. Dr. Shah received options to purchase 25,000 shares of
the Company's Common Stock prior to his election as Chief Executive Officer and
he received options to purchase 275,000 shares of the Company's Common Stock
upon his election as Chief Executive Officer. The Company granted Dr. Shah
these options in order to further align his interests with those of the Company
and to provide incentives to strengthen the Company's performance and to retain
Dr. Shah's services. These options were granted at an exercise price that was
less than fair market value on the dates that they were granted. The exercise
prices were determined based on the Company's internal valuation estimates. Dr.
Shah's compensation was determined by Mr. Dixon and Dr. Kapoor.
Mahendra G. Shah, Ph.D
R. Brent Dixon
John N. Kapoor, Ph.D
STOCK PRICE PERFORMANCE GRAPH
The Company has not included a stock price performance graph in this
document since there was no public market for the Company's Common Stock
during 1999.
-15-
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mahendra G. Shah, Ph.D., the Company's Chairman and Chief Executive
Officer, is the Vice President of EJ Financial Enterprises, Inc. John N. Kapoor,
Ph.D., a member of the Board of Directors, is President and sole stockholder of
EJ Financial. EJ Financial is the Managing General Partner of Kapoor-Pharma
Investments, L.P. which beneficially owns 50.3% of the Company's Common Stock.
On April 14, 2000, the Company entered into a Reimbursement Agreement
with the Kapoor Children's 1992 Trust (the "1992 Trust"). Under this agreement,
the 1992 Trust agreed to pledge to LaSalle Bank as collateral for a bridge loan
to the Company, securities and investments in the amount of $10 million. The
bridge loan was terminated on June 5, 2000 and the Reimbursement Agreement and
the pledge were terminated on June 15, 2000. John Kapoor is the husband of
Editha Kapoor, the Trustee of the 1992 Trust, and their children are the
beneficiaries. As consideration for this pledge, the Company paid the 1992
Trust a fee of $16,848 plus all of the 1992 Trusts' expenses incurred in
connection with the Reimbursement Agreement, which totaled $4,142.
In 1998, the Company entered into a collaboration agreement with
Inpharmakon Corporation under which the Company acquired rights to the
proprietary information for its migraine product FHPC 01 currently under
development. Under the agreement, the Company must develop a workable
once-a-day formulation for the drug, conduct clinical trials, file for and
obtain regulatory approval, and begin commercial sales of the product within
prescribed times. If the Company does not reach specified milestones on a
timely basis, Inpharmakon may terminate the agreement. In the event that
Inpharmakon terminates the agreement, the rights to develop FHPC 01 will revert
back to Inpharmakon who will, under certain circumstances, be free to develop
and market the product using the once a day formulation and the data from
clinical trials and all other information acquired or developed by the Company
in connection with its development efforts.
The Company must also pay up to an aggregate of $950,000 in
non-refundable fees at various developmental milestones through and including
regulatory approval of the product, and, in the event of commercial sales of the
product, the Company must pay royalties at rates which management believes are
within industry customary ranges. If the Company elects to sell the business
opportunity to a third party, the Company must share the proceeds of the sale
with Inpharmakon. The Company paid $200,000 and $1,352 to Inpharmakon in 1998
and 1999, respectively, under this agreement. The agreement expires on October
31, 2008 with automatic five-year renewals thereafter. The terms of this
agreement were negotiated at arms' length by management, and the Company
believes that the terms were fair to it. The John N. Kapoor Trust, dated
September 30, 1989 (the "Trust"), owns 50% of the shares of Inpharmakon
Corporation. John N. Kapoor is Trustee of the Trust, and the Trust is a partner
of Kapoor-Pharma Investments, L.P. In addition, Dr. Shah is a director of
Inpharmakon Corporation and owns options to purchase 25,000 shares of
Inpharmakon.
The other owner of Inpharmakon has previously sought to renegotiate
some of the terms of this agreement based on disputes concerning the Company's
achievement of milestones. On May 3, 2000, the Company entered into an amendment
of this development agreement in which both parties released each other from any
previous claims or disputes under the agreement. This amendment deletes
provisions permitting Inpharmakon to terminate the agreement if the Company does
not initiate clinical trials within a specified time period after completing a
clinical biostudy on the Company's migraine product under development or if the
Company does not file an NDA within a specified time period after completing
clinical trials. In addition, the amendment provided for and the Company has
paid a fee of $200,000 from the proceeds of the Company's initial public
offering and an increase in the total aggregate amount of milestone payments
that the Company must pay for development of the migraine product from $700,000
to $950,000.
In 1997, the Company entered into a packaging agreement with
Diversified Healthcare Services, Inc., under which the Company agreed to
exclusively use Diversified Healthcare to package samples of its Defen-LA,
Mescolor, Protuss-DM and Zebutal products. Under this agreement, Diversified
Healthcare
-16-
<PAGE> 17
has the right to provide exclusive packaging services for these products. The
Company paid $282,493 to Diversified Healthcare in 1999 under this agreement.
The term of this agreement is three years, with automatic yearly renewals
unless terminated by either party. The terms of this agreement were negotiated
at arm's length by management, and the Company believes that the terms are fair
to it. Warren Hauck, Chief Executive Officer of Diversified Healthcare, is the
father of Gregory P. Hauck, the Company's Vice President of Developed Products.
Steven Hauck, the President of Diversified Healthcare, is the brother of
Gregory Hauck.
In 1996, the Company entered into two agreements with Crabapple
Enterprises, Inc., a prior and potential competitor, under which Crabapple
agreed not to market products that compete with the Company's Protuss,
Protuss-D and Zoto-HC products. The Company paid $162,768 to Crabapple in 1999
under these agreements. These agreements require the Company to pay royalties
on sales of these products at rates which management believes are within
industry customary standards. The term of the agreement for Protuss and
Protuss-D is seven years with an option to renew for an additional five years.
The term of the agreement for Zoto-HC is ten years with an option to renew for
an additional five years. Crabapple may cancel these agreements if minimum
royalty amounts are not paid. The terms of these agreements were negotiated at
arm's length by management, and the Company believes that the terms are fair to
it. Warren Hauck, Chief Executive Officer of Crabapple, and Mary Hauck,
Secretary of Crabapple, are the parents of Gregory Hauck.
On January 11, 1999, Kapoor-Pharma Investments L.P. loaned the Company
$1,600,000 at an interest rate of 2% over the prime rate. In December, 1999,
the Company converted principal and $144,984 of accrued interest into 558,395
shares its Common Stock pursuant to the terms of the loan agreement. The
Company used this loan to acquire its Robinul product line.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, Directors and 10%
stockholders to file reports regarding initial ownership and changes in
ownership with the Securities and Exchange Commission and the Nasdaq Stock
Market. Executive officers, Directors and 10% stockholders are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Since the Company was not a
reporting company under the Exchange Act in 1999, no forms were required to be
filed pursuant to Section 16 or the rules promulgated thereunder by any of the
foregoing persons.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors selected Arthur Andersen LLP to audit the
financial statements of the Company for the fiscal year ended December 31,
1999. It is expected that a representative of Arthur Andersen LLP will be
present at the Annual Meeting to respond to any questions and to make a
statement on behalf of his or her firm, if such representative so desires.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any matters other than those set forth herein and in the Notice of
Annual Meeting of Stockholders that will come before the meeting. Should any
other matters arise requiring the vote of stockholders, it is intended that
proxies will be voted in respect thereto in accordance with the best judgment
of the person or persons voting the proxies.
-17-
<PAGE> 18
FUTURE STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the Company's
2001 Annual Meeting of Stockholders must be received by the Company at its
Corporate Headquarters no later than April 16, 2001, in order to be included in
the Company's 2001 Proxy Statement. However, in the event that the date of the
Company's 2001 Annual Meeting is changed by more than 30 days from this year's
Annual Meeting, then proposals must be received within a reasonable time before
the Company begins to print and mail its proxy materials.
The Company's Amended and Restated Bylaws require that in order for
stockholders to nominate Directors or bring matters before an Annual Meeting,
stockholders must provide notice to the Company's Corporate Headquarters no
later than 90 calendar days and no earlier than 130 calendar days prior to the
anniversary date of this year's Annual Meeting. In the event that the date of
the Company's 2001 Annual Meeting is scheduled to be held on a date more than
30 days prior to or delayed by more than 60 days after the anniversary date of
this year's Annual Meeting, stockholders must provide such notice no later than
90 days prior to the 2001 Annual Meeting or the tenth day following the day on
which the notice of the date of the 2001 Annual Meeting was mailed or disclosed
by the Company. The Company's Amended and Restated Bylaws specify the
procedures and notice requirements for submitting proposals or nominating
Directors.
------------------------------------------------
Please return your proxy as soon as possible. Unless a quorum
consisting of a majority of the outstanding shares entitled to vote is
represented at the meeting, no business can be transacted. Therefore, please be
sure to date and sign your proxy exactly as your name appears on your stock
certificate and return it in the enclosed prepaid return envelope. Please act
promptly to ensure that you will be represented at this important meeting.
IF REQUESTED, WE WILL FURNISH YOU THE EXHIBIT INDEX TO OUR
REGISTRATION STATEMENT ON FORM S-1 RELATING TO OUR INITIAL PUBLIC OFFERING, AND
WILL FURNISH ANY EXHIBIT UPON PAYMENT OF A REASONABLE COPY FEE.
By Order of the Board of Directors
/s/ Mahendra G. Shah, Ph.D.
-------------------------------------------
Mahendra G. Shah, Ph.D.
Chairman and Chief Executive Officer
August 14, 2000
-18-
<PAGE> 19
PROXY PROXY
FIRST HORIZON PHARMACEUTICAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 8, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mahendra G. Shah, Ph.D. and R. Brent Dixon, and
each of them, as proxies with full power of substitution to represent and to
vote, as designated on the reverse side of this proxy, all shares of Common
Stock of the Company which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on September 8, 2000 at the Company's
Corporate Headquarters at 660 Hembree Parkway, Suite 106, Roswell, Georgia,
30076, and at any postponement(s) or adjournment(s) thereof and, in such
proxies' discretion, to vote upon such other business as may properly come
before the meeting, all as more fully set forth in the Proxy Statement related
to such meeting, receipt of which is hereby acknowledged.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEE FOR ELECTION NAMED ON THIS
PROXY CARD.
(Continued and to be signed on reverse side.)
--------------------------------------------------------------------------------
-19-
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1 BELOW:
1. ELECTION OF CLASS A DIRECTOR For Withhold The undersigned acknowledges receipt from the
NOMINEE: John N. Kapoor, Ph.D. [ ] [ ] Company, prior to the execution of this proxy,
of notice of the Meeting, a Proxy Statement and
a Prospectus.
Dated: _______________, 2000
Signature(s)
--------------------------------------
-----------------------------------------------
Please sign exactly as your name appears above
on this card. When signing as attorney,
executor, administrator, trustee or guardian,
please give your full title. If shares are
held jointly, each holder should sign.
</TABLE>
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
-20-
