SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
ANNUAL REPORT
PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file
December 31, 1994 number 0-8049
CIRCA PHARMACEUTICALS, INC.
Incorporated under the laws 11-1966265
of the State of New York (I.R.S. Employer Identification
Number)
33 Ralph Avenue 516-842-8383
Copiague, New York 11726 (telephone number)
(address of principal
executive offices)
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Class on Which Registered
Common Stock, $.01 par value per share American Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirement for the past 90
days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein and will not
be contained, to the best of Registrant's knowledge, in the Proxy
Statement incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock of the Registrant
held by non-affiliates was approximately $356,540,337 as of March
17, 1995 (assuming solely for purposes of this calculation that all
directors and officers of the Registrant are "affiliates").
The number of shares of Common Stock outstanding was 21,745,912 as
of March 17, 1995.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Circa Pharmaceuticals, Inc. Annual Report to
Shareholders are incorporated by reference into Parts I, II, and
IV.
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant
DIRECTORS
Year First For Term
Elected as Expiring Position
Age Director Class In With Company
Melvin Sharoky, M.D.* 44 1992 II 1995 President
and Chief
Executive Officer
Thomas P. Rice 45 1993 I 1996 Executive
Vice President and
Chief Operating
Officer
Michael Fedida* 45 1988 I 1996 None
Stanley Grey* 71 1990 I 1996 None
Bruce Hausman, Esq.* 65 1990 II 1995 None
Kenneth Siegel* 38 1993 I 1996 None
* The Board's Audit Committee is made up of Mr. Grey,
Chairperson, Mr. Fedida and Mr. Hausman. The Board's Compensation
Committee is made up of Mr. Hausman, Chairperson, Mr. Fedida, Mr.
Grey and Mr. Siegel. The Board's Nominating Committee is made up
of Mr. Fedida, Chairperson, Dr. Sharoky, Mr. Grey and Mr. Siegel.
Melvin Sharoky, M.D.: Dr. Sharoky has served as President and
Chief Executive Officer of the Company, since January 31, 1993.
From August 21, 1992 to January 31, 1993, Dr. Sharoky served as
Executive Vice President and Director of Research and Development
of the Company, and as Senior Vice President of Research and
Development of the Company from March 1991 to August 1992. From
June 1988 to March 1991, Dr. Sharoky was Medical Director of the
Company. Dr. Sharoky also serves on the Board of Directors of
Somerset Pharmaceuticals, Inc. Circa has a 50% equity interest in
Somerset Pharmaceuticals, Inc. Under the terms of the agreements
entered into between the Company and Dr. Sharoky, the Company must
use its best efforts to cause him to be reelected to the Board
during the period of his employment with Circa.
Thomas P. Rice: Mr. Rice currently serves as Circa's Executive
Vice President and Chief Operating Officer. Mr. Rice served as
Circa's Executive Vice President, Chief Operating and Financial
Officer from July 1, 1993 to January 30, 1995. In May 1990, Mr.
Rice founded Competitive Advantage in Baltimore, Maryland, a
management consulting firm which provided financial and marketing
advice to international and local businesses. Mr. Rice managed
Competitive Advantage until he joined Circa in July 1993. Prior to
1990, Mr. Rice served as Vice President and Chief Financial Officer
of PharmaKinetics Laboratories, Inc., a pharmaceutical research and
testing firm. Mr. Rice also serves on the Board of Directors of
Somerset Pharmaceuticals, Inc. Circa has a 50% equity interest in
Somerset Pharmaceuticals, Inc.
Michael Fedida: During the past five years, Mr. Fedida, a
registered pharmacist, has served as an officer and director of
several retail pharmacies wholly or partially owned by him. In
addition, Mr. Fedida has acted as a consultant, without
remuneration, to the Company in regard to certain marketing
concepts.
Stanley Grey: Mr. Grey is a Certified Public Accountant. Prior to
his retirement in September 1983, he served as the Managing Partner
of the New York office of the national accounting firm of Kenneth
Leventhal & Co. Mr. Grey currently serves as a consultant to
companies in the real estate industry. Mr. Grey is a Trustee and
the Treasurer of L.I. Jewish Medical Center.
Bruce Hausman, Esq.: Mr. Hausman served as counsel to the law firm
of Eisen, Hershcopf and Schulman from August 1991 through July
1994. He has served as Principal Executive Officer (May 1992 to
July 1993) and as Senior Vice President (February 1988 to May 1992)
of Belding Heminway Company, Inc., a company engaged in textile and
real estate businesses. He has served as a director of Plastigone
Technologies, Inc., since August 1992, and as a Director and member
of the executive committee of Daltex Medical Sciences, Inc., since
December 1992.
Kenneth Siegel: Mr. Siegel is a Managing Director of the
investment banking firm, Wertheim Schroder & Co. Incorporated. He
has held various positions at Wertheim Schroder & Co. Incorporated,
having joined the firm in 1982.
Executive Officers (Other Than Directors)
John Botek
Vice President
Operations and Administration
Mr. Botek, 38, joined Circa in April 1994. Prior to joining Circa,
Mr. Botek served as Vice President of Information Systems at Fair
Lanes, Inc., an entertainment and recreation company, from October
1991 until April 1994. Prior to 1991, Mr. Botek served as Manager
of Information Systems at RWD Technologies, Inc., a management and
systems consulting company.
Gwen Gerrick
Corporate Secretary
Director of Investor Relations
Ms. Gerrick, 29, joined the Company in 1988 and currently serves as
Corporate Secretary and Director of Investor Relations. She
previously served as Assistant to the President.
Ed Haley
Vice President
Sales and Marketing
Mr. Haley, 51, joined Circa in May 1994. Prior to joining Circa,
Mr. Haley was Vice President of Sales with Bausch & Lomb Oral Care
from September 1991 until May 1994. Prior to 1991, he held various
key management positions with Colgate-Palmolive Company over a 22
year period.
Nicholas A. LaBella, Jr.
Vice President
Director of Research and Development
Mr. LaBella, 39, joined Circa in 1989 as the Director of Regulatory
Affairs, and in 1993 he became Vice President, Director of Research
and Development. Prior to joining Circa, Mr. LaBella held various
positions in Regulatory Affairs and Project Coordination for
research based pharmaceutical organizations. He also serves on the
Board of Directors of Somerset Pharmaceuticals, Inc. Circa has a
50% equity interest in Somerset Pharmaceuticals, Inc.
Angelo C. Malahias
Vice President
and Chief Financial Officer
Mr. Malahias, 33, joined Circa in July 1994 as Controller, and in
January 1995 he became Vice President and Chief Financial Officer.
Prior to joining Circa, Mr. Malahias was employed at KPMG Peat
Marwick LLP from August 1983 through July 1994 where he served as
a senior manager from 1990 to 1994.
Steve Martinez
Vice President
and General Manager
Mr. Martinez, 45, joined Circa in December 1994 as General Manager
and Vice President. Prior to joining Circa, Mr. Martinez served as
Director of Operations at Dentsply International, a dental supply
firm, from 1992 to December 1994. Prior to joining Dentsply, he
was a plant manager at the Ortho Pharmaceutical Division of Johnson
& Johnson.
ITEM 11. Executive Compensation
The following table sets forth the remuneration paid by Circa
during each of the three years in the period ended December 31,
1994 to its Chief Executive Officer and the four most highly paid
executive officers serving in those roles at December 31, 1994,
whose remuneration is $100,000 or more (collectively, the
"Executive Officers").
SUMMARY COMPENSATION TABLE
Other
Name and Salary(1) Annual
Principal Position Year ($) Bonus($) Compensation($)
Melvin Sharoky, M.D.(5) 1994 299,725 125,000
President and 1993 292,345 50,000
Chief Executive 1992 224,243
Officer
Thomas P. Rice(6) 1994 192,850 75,000
Executive Vice 1993 101,403 12,000
President and Chief
Operating Officer
John Botek(7) 1994 99,228 30,000
Vice President
Operations and
Administration
Stuart Deitel(8) 1994 117,393
Former Vice
President of Busi-
ness Development
Nicholas A. LaBella,Jr.(9) 1994 163,866 15,147 107,500
Vice President 1993 152,423 15,000
and Director of 1992 127,412
Research and
Development
SUMMARY COMPENSATION TABLE
(Continued)
Long-Term Compensation
Securities
Restricted Underlying
Name and Stock Options/ All Other
Principal Position Year Awards($) SARs(#) Compensation($)
Melvin Sharoky, M.D.(5) 1994 3,992(2)(3)(4)
President and 1993 2,250,000 3,722(2)
Chief Executive 1992 3,722(2)
Officer
Thomas P. Rice(6) 1994 75,000 2,979(2)(3)(4)
Executive Vice 1993 612,500
President and Chief
Operating Officer
John Botek(7) 1994 30,000 270(3)(4)
Vice President
Operations and
Administration
Stuart Deitel(8) 1994 30,000 270(3)(4)
Former Vice
President of Busi-
ness Development
Nicholas A. LaBella,Jr.(9) 1994 100,000 270(3)(4)
Vice President
and Director of
Research and
Development
(1) In addition to compensation, Executive Officers receive
hospitalization and medical insurance. Such plans do not
discriminate in favor of officers or directors of the Company and
are available generally to all employees. The value of other
benefits, securities or property, in the aggregate, does not exceed
the lesser of $50,000 or 10% of total annual salary and bonus
reported in the compensation table.
(2) The Company paid the premium on term life insurance
policies for the benefit of both Dr. Sharoky and Mr. Rice. The
premium for Dr. Sharoky was $3,722 in 1994, 1993 and 1992, and the
premium for Mr. Rice was $2,709 in 1994.
(3) Commencing in June 1994, the Company started paying the
premium on group life insurance policies for the Executive
Officers. The premium paid for each Executive Officer in 1994 was
$132. Prior to June 1994, the Executive Officers received group
life insurance under a plan that did not discriminate in favor of
the officers and directors of the Company and was available
generally to all employees.
(4) Commencing in June 1994, the Company started paying the
premium on long-term disability policies for the Executive
Officers. The premium paid for each Executive Officer in 1994 was
$138. Prior to June 1994, the Executive Officers received long-
term disability benefits under a plan that did not discriminate in
favor of officers and directors of the Company and were available
generally to all employees.
(5) On December 9, 1992, Dr. Sharoky was elected President and
Chief Executive Officer of the Company, effective January 31, 1993.
On January 19, 1993, Dr. Sharoky's employment agreement, dated
April 26, 1991, was modified to extend its term from April 25, 1996
to January 31, 1997, to increase his base compensation from
$220,000 per year as Executive Vice President and Director of
Research and Development, to $300,000 per year as President and
Chief Executive Officer, and to increase the original grant of
400,000 restricted shares (which had been granted subject to the
surrender of 150,000 restricted shares granted as of June 9, 1988)
by 300,000 restricted shares totaling 700,000 restricted shares of
common stock of the Company. Such shares are subject to forfeiture
in decreasing annual increments if Dr. Sharoky voluntarily
terminates his employment, or if his employment is terminated for
cause, prior to January 31, 1997. The forfeiture restrictions
lapsed on 100,000 shares on April 25, 1993, 100,000 shares on April
25, 1994, 100,000 shares on January 31, 1995, and 100,000 shares on
April 25, 1995. The forfeiture decreases by 100,000 shares on
January 31, 1996, 100,000 shares on April 25, 1996 and 100,000
shares on January 31, 1997. The share forfeiture clause shall be
terminated under certain stated conditions. If Dr. Sharoky's
employment is terminated following a "change-in-control" of the
Company, he may be eligible to receive severance benefits including
a lump sum amount equal to approximately three times his base
annual salary. Additionally, Dr. Sharoky's employment agreement
provides that if, in connection with a "change-in-control", his
employment is terminated "without cause" or if he terminates his
employment for "good reason", his shares of restricted common stock
immediately vest. The value of the 400,000 shares at date of grant
was $2,200,000 and the value of the additional 300,000 shares at
date of grant was $2,250,000. On December 31, 1994, Dr. Sharoky
held 632,900 shares of common stock which had a value of
$11,313,078. These shares are not restricted for purposes of
receiving dividends.
(6) As of July 1, 1993, the Company and Mr. Rice entered into
an agreement pursuant to which the Company agreed to employ Mr.
Rice as Executive Vice President, Chief Operating and Financial
Officer of the Company through June 30, 1998 (Mr. Rice has since
become Executive Vice President and Chief Operating Officer). On
July 15, 1994, Mr. Rice's employment agreement, dated July 1, 1993,
was amended to increase his base compensation from $185,000 per
year to $200,000 per year. Mr. Rice was granted 100,000 shares of
common stock, which are conditional upon Mr. Rice not voluntarily
terminating his employment, or being terminated for cause, for a
five-year period commencing July 1, 1993. If such termination
should occur prior to July 1, 1995, Mr. Rice would forfeit all
100,000 shares. The number of shares subject to forfeiture
decreases by 25,000 on June 30, 1995 and by 25,000 on each June
30th thereafter. If Mr. Rice's employment is terminated following
a "change-in-control" of the Company, he may be eligible to receive
severance benefits including a lump sum amount equal to
approximately three times his base annual salary. Additionally, Mr
Rice's employment agreement provides that if, in connection with a
"change-in-control", his employment is terminated "without cause"
or if he terminates his employment for "good reason", his shares of
restricted common stock immediately vest. The value of the 100,000
shares was $612,500 at date of grant. On December 31, 1994, the
value of Mr. Rice's 100,000 shares was $1,787,500. These shares
are not restricted for purposes of receiving dividends.
(7) John Botek joined Circa on April 6, 1994 and he currently
serves as Vice President of Operations and Administration. In
connection with the Watson/Circa transaction (as described under
Item 12 herein), the Company and Mr. Botek have entered into a
severance and separation agreement pursuant to which the Company
has agreed that if, at any time during the one year period after
the effective date of the Watson/Circa transaction, Mr. Botek is
terminated "without cause", the Company would pay Mr. Botek nine
months of his base salary in one lump sum as severance and Mr.
Botek's options to purchase shares of Circa common stock would
immediately vest.
(8) Stuart Deitel was employed at the Company from December
1993 through March 31, 1995. Mr. Deitel served as Vice President
of Business Development. Upon his departure, Mr. Deitel forfeited
the right to an option to purchase 20,000 shares.
(9) As of April 26, 1991, the Company and Mr. LaBella entered
into an agreement pursuant to which the Company agreed to employ
Mr. LaBella as Director of Regulatory Affairs (Mr. LaBella has
since become Vice President, Director of Research and Development)
of the Company through April 25, 1996. The agreement provides, in
part, that Mr. LaBella's initial base annual salary is $125,000 a
year. Mr. LaBella was also granted 50,000 restricted shares of
common stock conditioned upon Mr. LaBella not voluntarily
terminating his employment, or being terminated for cause, for a
five-year period commencing April 26, 1991. If such termination had
occurred in the first two years of employment, Mr. LaBella would
have forfeited all 50,000 shares. The number of shares subject to
forfeiture decreased by 12,500 shares on April 25, 1993, 12,500
shares on April 25, 1994 and an additional 12,500 shares on April
25, 1995. The forfeiture decreases by 12,500 shares on April 25,
1996. The value of the 50,000 restricted shares was $193,750 at
date of grant. Mr. LaBella's employment agreement provides, in
part, for the immediate vesting of outstanding restricted common
stock upon a "change-in-control". Mr. LaBella was granted 10,000
shares of common stock on July 15, 1994, with a value of $107,500.
On December 31, 1994, Mr. LaBella held 47,551 shares of common
stock which had a value of $849,974. These shares are not
restricted for purposes of receiving dividends.
The following table sets forth information with respect to
options/SARS granted in fiscal year 1994 to each of the Named
Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Potential
Realizable
Value at
Number of % of Total Assumed Rates
Securities Options/SARS Exercise of Stock Price
Underlying Granted to or Base Expir- Appreciation for
Options/SARS Employees in Price ation Term
Name Granted(#)(1) Fiscal Year ($/share) Date 5% ($) 10% ($)
Melvin Sharoky, M.D.(2) 0 0.0%
Thomas P. Rice 75,000 12.2% 12.375 7/1/04 583,693 1,479,192
John Botek(3) 30,000 4.9% 12.375 4/6/04 233,477 591,677
Stuart Deitel(4) 30,000 4.9% 12.375 3/24/04 233,477 591,677
Nicholas A. LaBella, Jr.100,000 16.3% 12.375 3/24/04 778,257 1,972,256
(1) These options were granted from the 1994 Long-Term Incentive
Plan and vest 33.33% on the first, second and third anniversary of
the date of grant; however these options are subject to an
accelerated vesting schedule upon a "change-in-control" as follows:
Exercisable % of Options
to Purchase Shares of
Length of Employment Common Stock
Less than 36 months 33.33%
At least 36 months but less than 60 months 66.67%
At least 60 months 100.00%
(2) On January 30, 1995, Dr. Sharoky was granted options to
purchase 100,000 shares of common stock. These options were
granted with an exercise price of $16.125 and vest over a three
year period; however these options are subject to an accelerated
vesting schedule upon a "change-in-control".
(3) On January 30, 1995, Mr. Botek was granted an additional option
to purchase 15,000 shares of common stock. These options were
granted with an exercise price of $16.125 and vest over a three
year period; however these options are subject to an accelerated
vesting schedule upon a "change-in-control".
(4) Mr. Deitel was employed at the Company through March 31, 1995.
Upon his departure, he forfeited the right to an option to purchase
20,000 shares.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTIONS/SARS VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARS Options/SARS
Acquired at FY End(#) at FY End($)
on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
Melvin Sharoky, M.D. 0 0 0/0 0/0
Thomas P. Rice 0 0 0/75,000 0/412,500
John Botek 0 0 0/30,000 0/165,000
Stuart Deitel(1) 0 0 0/30,000 0/165,000
Nicholas A. LaBella, Jr. 0 0 100/100,000 1,400/550,000
(1) Mr. Deitel was employed at the Company through March 31, 1995.
Upon his departure, he forfeited the right to an option to purchase
20,000 shares.
Deferred Compensation Plan
The Company maintains a Deferred Compensation Plan for the
benefit of eligible key employees and officers. A total of
1,300,000 shares were reserved for issuance under the plan. The
Company awarded to certain employees 30,000 shares in 1994,
400,000 shares in 1993, and 55,000 shares in 1992. In 1994 and
1993, 7,500 and 477,500 shares, respectively, previously issued
under the Deferred Compensation Plan were canceled and added back
into the plan for future issuance. If the recipients of shares
issued under the Deferred Compensation Plan leave the Company's
employ prior to specified dates, they must return some or all of
the awarded shares to the Company. Unearned compensation has been
recorded for the fair market value of the shares issued and such
amounts are being amortized by charges to income over the related
vesting periods.
The 1994 Long-Term Incentive Plan
The 1994 Long-Term Incentive Plan ("1994 Plan") was
approved by shareholders at the 1994 Annual Meeting. A total of
1,400,000 shares of common stock were reserved for issuance under
the 1994 Plan. In 1994, options for 537,200 shares of the
Company's common stock were issued under the 1994 Plan, of which
35,000 options were forfeited and added back to the plan for future
issuance.
Directors' Fees and Stock Options
Pursuant to the Company's 1990 Directors' Stock Option
Plan, as amended in June 1992 and in March 1994 ("Directors Plan"),
each director not employed by the Company receives an option to
purchase 5,000 shares of Circa common stock on the date of initial
election to the Board and an option to purchase 5,000 shares of
Circa common stock once each year thereafter, on the date of the
Annual Meeting of Shareholders, provided such director has been
elected to serve on the Board of Directors for the year following
that Annual Meeting. Directors not employed by the Company also
receive an annual retainer fee of $15,000 and an additional $1,000
for each Audit Committee, Nominating Committee and Compensation
Committee meeting they attend as members of those committees.
The Directors Plan is "non-qualified" under the Internal
Revenue Code and was adopted by the Board and approved by the
shareholders in 1990. It is maintained by the Company for the
benefit of directors who are not eligible to receive options under
any other plan adopted by the Company. The plan provides that the
exercise price of each option will be 100% of the fair market value
of the common stock on the date of grant and is exercisable in full
on the first anniversary of the date of grant. A total of 500,000
shares of common stock were reserved for issuance under the plan.
In 1994, options for 20,000 shares of the Company's common stock
were issued under the plan. As of December 31, 1994, options to
purchase a total of 107,500 shares of the Company's common stock
were issued under the Directors Plan, of which options to purchase
2,500 shares have been exercised and options to purchase 392,500
shares were available for future issuance.
Employee Pension Plan
The Company maintains an Employee Defined Benefit Pension
Plan covering substantially all employees who have completed six
months of continuous full-time service as of the first day of the
year. Benefits are payable in the form of a ten-year certain and
life annuity, and are limited by applicable laws and regulations.
The Company makes contributions to the Employee Defined Benefit
Pension Plan on behalf of its executive officers, and makes
similar contributions on behalf of all eligible employees.
Directors who have not served as employees are not eligible to
receive retirement benefits under the Employee Defined Benefit
Pension Plan. The following table sets forth estimated annual
benefits payable at the normal retirement age of 65 to persons in
specified compensation and years of credited service
classifications:
PENSION PLAN TABLE
FINAL AVERAGE YEARS OF CREDITED SERVICE
COMPENSATION AT NORMAL RETIREMENT DATE (1)
5 10 15 20 25 30(2)
$100,000 $ 7,500 $15,000 $22,500 $30,000 $37,500 $45,000
125,000 9,375 18,750 28,125 37,500 46,875 56,250
150,000* 11,250 22,500 33,750 45,000 56,250 67,500
200,000* 11,250 22,500 33,750 45,000 56,250 67,500
250,000* 11,250 22,500 33,750 45,000 56,250 67,500
300,000* 11,250 22,500 33,750 45,000 56,250 67,500
* Compensation for benefit purposes for 1994 is limited to $150,000
by law.
(1) As of December 31, 1994, Dr. Sharoky had 7 years of credited
service, Mr. Rice had 2 years of credited service, and Mr. LaBella
had 6 years of credited service. Benefits for the Employee Defined
Benefit Pension Plan are based upon total compensation. The method
for computing the pension benefit is a "fixed benefit formula"
based on a percentage of compensation and years of service.
Employees are considered 100% vested upon 5 years of credited
service.
(2) A participant may, with the consent of the Company, continue
his employment after attaining age 65. If a participant elects to
postpone his retirement benefits until his deferred retirement
date, he will receive a pension which is the actuarial equivalent
of his normal retirement pension determined as of his deferred
retirement date.
The benefits listed in the pension plan table are not subject
to any deductions for social security or other offset amounts.
In December 1994, the Company's Board of Directors approved a
resolution to terminate the Employee Defined Benefit Pension Plan
in 1995 with all the plan assets allocated to the plan's
participants.
Employment Contracts and Termination of Employment and "Change-in-
Control" Agreements
On January 19, 1993, Dr. Sharoky's employment agreement, dated
April 26, 1991, was modified to extend its term from April 25, 1996
to January 31, 1997, to increase his base compensation from
$220,000 per year as Executive Vice President and Director of
Research and Development, to $300,000 per year as President and
Chief Executive Officer, and to increase the original grant of
400,000 restricted shares (which had been granted subject to the
surrender of 150,000 restricted shares granted as of June 9, 1988)
by 300,000 restricted shares totaling 700,000 shares of common
stock of the Company. Such shares are subject to forfeiture in
decreasing annual increments if Dr. Sharoky voluntarily terminates
his employment, or if his employment is terminated for cause, prior
to January 31, 1997. The forfeiture restrictions lapsed on 100,000
shares on April 25, 1993, 100,000 shares on April 25, 1994, 100,000
shares on January 31, 1995 and 100,000 shares on April 25, 1995.
The share forfeiture clause shall be terminated under certain
stated conditions. If Dr. Sharoky's employment is terminated
following a "change-in-control" of the Company, he may be eligible
to receive severance benefits including a lump sum amount equal to
approximately three times his base annual salary. Additionally,
Dr. Sharoky's employment agreement provides that if, in connection
with a "change-in-control", his employment is terminated "without
cause" or if he terminates his employment for "good reason", his
shares of restricted common stock immediately vest. Upon a
"change-in-control", options to purchase shares of the Company's
common stock issued under the 1994 Long-Term Incentive Plan are
subject to an accelerated vesting schedule. (See Option/SAR Grants
In Last Fiscal Year.)
As of July 1, 1993, the Company and Mr. Rice entered into an
agreement pursuant to which the Company agreed to employ Mr. Rice
as Executive Vice President, Chief Operating and Financial Officer
of the Company through June 30, 1998 (Mr. Rice has since become
Executive Vice President and Chief Operating Officer). Mr. Rice
was granted 100,000 restricted shares of common stock, which are
conditional upon Mr. Rice not voluntarily terminating his
employment, or being terminated for cause, for a five-year period
commencing July 1, 1993. If such termination should occur prior to
July 1, 1995, Mr. Rice would forfeit all 100,000 shares. The
number of shares subject to forfeiture decreases by 25,000 on June
30, 1995 and by 25,000 on each June 30th thereafter. On July 15,
1994, Mr. Rice's employment agreement, dated July 1, 1993, was
amended to increase his base compensation from $185,000 per year to
$200,000 per year. If Mr. Rice's employment is terminated following
a "change-in-control" of the Company, he may be eligible to receive
severance benefits including a lump sum amount equal to
approximately three times his base annual salary. Additionally,
Mr. Rice's employment agreement provides that if, in connection
with a "change-in-control", his employment is terminated "without
cause" or if he terminates his employment for "good reason" his
shares of restricted common stock immediately vest. Upon a
"change-in-control", options to purchase shares of the Company's
common stock issued under the 1994 Long-Term Incentive Plan are
subject to accelerated vesting.
As of April 26, 1991, the Company and Mr. LaBella entered into
an agreement pursuant to which the Company agreed to employ Mr.
LaBella as Director of Regulatory Affairs (Mr. LaBella has since
become Vice President, Director of Research and Development) of the
Company through April 25, 1996. The agreement provides, in part,
that Mr. LaBella's initial base annual salary is $125,000 a year.
Mr. LaBella was also granted 50,000 restricted shares of common
stock conditioned upon Mr. LaBella not voluntarily terminating his
employment, or being terminated for cause, for a five-year period
commencing April 26, 1991. If such termination had occurred in the
first two years of employment, Mr. LaBella would have forfeited all
50,000 shares. The number of shares subject to forfeiture
decreased by 12,500 shares on April 25, 1993, 12,500 shares on
April 25, 1994, and an additional 12,500 shares on April 25, 1995.
The forfeiture decreases by 12,500 shares on April 25, 1996. Mr.
LaBella's employment agreement provides, in part, for the immediate
vesting of outstanding restricted common stock upon a "change-in-
control". Upon a "change-in-control", options to purchase shares
of the Company's common stock issued under the 1994 Long-Term
Incentive Plan are subject to an accelerated vesting schedule.
(See Option/SAR Grants In Last Fiscal Year.)
In connection with the Watson/Circa transaction, the Company
and Mr. Botek have entered into a severance and separation
agreement pursuant to which the Company has agreed that if, at any
time during the one year period after the effective date of the
Watson/Circa transaction, Mr. Botek is terminated "without cause",
the Company would pay Mr. Botek nine months of his base salary in
one lump sum as severance and Mr. Botek's options to purchase
shares of Circa common stock would immediately vest. Upon a
"change-in-control", options to purchase shares of the Company's
common stock issued under the 1994 Long-Term Incentive Plan are
subject to an accelerated vesting schedule. (See Option/SAR Grants
In Last Fiscal Year.)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has delegated to the Compensation
Committee (the "Committee") the authority to make certain decisions
with respect to the compensation of the Company's Chief Executive
Officer, as well as various aspects of other compensation and
fringe benefit matters applicable to all of the Company's employees
including executive officers. In addition, the Committee
administers all of the Company's stock option and incentive award
plans. During the last fiscal year the Committee consisted of
Bruce Hausman, Chairman, Michael Fedida, Stanley Grey and Kenneth
Siegel; none of whom is a Company employee.
Kenneth Siegel is a Managing Director of the investment
banking firm Wertheim Schroder & Co. Incorporated. The Company
utilized the services of Wertheim Schroder & Co. Incorporated in
March of 1994 in connection with a proposed merger with Hi-Tech
Pharmacal, Inc. and in 1995 as a financial advisor in the
Watson/Circa transaction. Additionally in 1994, the Company
utilized the services of Wertheim Schroder & Co. Incorporated to
manage the assets of the Company's Employee Defined Benefit Pension
Plan and to serve as custodian for marketable securities
collaterizing installment obligations due under prior legal
settlements.
There are no interlocking relationships, as defined in the
regulations of the Securities and Exchange Commission, involving
members of the Board of Directors or its Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following information is furnished with respect to the
beneficial ownership of the common stock of (i) the Chief Executive
Officer and the Named Executive Officers, (ii) all persons known to
the Company to be the beneficial owners of more than five (5%)
percent of the common stock, (iii) each director of the Company,
and (iv) all directors, and officers as a group (based upon
information furnished by such persons). Unless indicated otherwise
below, such information is furnished as of April 25, 1995. Under
the rules of the Securities and Exchange Commission, a person is
deemed to be a beneficial owner of a security if such person has or
shares the power to vote or direct the voting of such security or
the power to dispose of or direct the disposition of such security.
Accordingly, more than one person may be deemed to be a beneficial
owner of the same securities. A person is also deemed to be a
beneficial owner of any securities as to which that person has the
right to acquire beneficial ownership within 60 days.
Amount and
Nature of
Name and Address Beneficial Percentage of
of Beneficial Owner Ownership(1) Common Stock(2)
FMR Corp. 1,442,100(3) 6.6%
Melvin Sharoky, M.D.** 632,900(4) 2.9%
Thomas P. Rice** 100,000(5) *
Michael Fedida** 30,000(6) *
Stanley Grey** 25,500(7) *
Bruce Hausman, Esq.** 30,000(8) *
Kenneth Siegel** 2,500(9) *
John Botek 10,000(10) *
Stuart Deitel - (11) -
Nicholas A. LaBella, Jr. 80,651(12) *
Directors and Executive Officers
as a Group (14 persons) 924,951(13) 4.2%
* Represents less than 1%.
** Denotes Directors of the Company.
(1) Unless otherwise noted, the beneficial owners listed have sole
voting and investment power over the shares listed.
(2) Percentage based upon 21,770,812 outstanding shares of Circa
common stock plus, for those persons who hold currently exercisable
options for Circa common stock, the number of shares of Circa
common stock issuable upon exercise of such options.
(3) Shares of Circa common stock beneficially owned by FMR Corp.
are listed according to a report on Schedule 13G dated February 13,
1995. Based upon information set forth in such report on Schedule
13G filed by FMR Corp., Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp., is the
beneficial owner of 1,442,100 shares of Circa common stock as a
result of acting as investment advisor to several investment
companies. Mr. Edward C. Johnson 3rd (Chairman of FMR Corp.), FMR
Corp., through its control of Fidelity, and the aforementioned
investment companies each has sole dispositive power over such
shares. The power to vote such shares resides with FMR's Board of
Trustees.
(4) Includes 300,000 shares of Circa common stock held by Dr.
Sharoky which are subject to forfeiture under certain circumstances
pursuant to the terms of Dr. Sharoky's employment agreement. Dr.
Sharoky has sole voting power but no dispositive power as to such
300,000 shares. Also includes an aggregate of 12,786 shares of
Circa common stock held by Dr. Sharoky, as custodian for his three
children. Excludes options for an aggregate of 100,000 shares of
Circa common stock which are not currently exercisable.
(5) Includes 100,000 shares of Circa common stock held by Mr. Rice
which are subject to forfeiture under certain circumstances
pursuant to the terms of Mr. Rice's employment agreement. Excludes
options for 75,000 shares of Circa common stock which are not
currently exercisable.
(6) Includes options for 30,000 shares of Circa common stock which
are currently exercisable. Excludes options for 5,000 shares of
Circa common stock which are not currently exercisable.
(7) Includes options for 25,000 shares of Circa common stock which
are currently exercisable. Excludes options for 5,000 shares of
Circa common stock which are not currently exercisable.
(8) Includes options for 27,500 shares of Circa common stock which
are currently exercisable. Excludes options for 5,000 shares of
Circa common stock which are not currently exercisable.
(9) Includes options for 2,500 shares of Circa common stock which
are currently exercisable. Excludes options for 5,000 shares of
Circa common stock which are not currently exercisable.
(10) Includes options for 10,000 shares of Circa common stock which
are currently exercisable. Excludes options for 35,000 shares of
Circa common stock which are not currently exercisable.
(11) Mr. Deitel ceased being an officer in March of 1995.
(12) Includes 25,000 shares of Circa common stock held by Mr.
LaBella that are subject to forfeiture under certain circumstances
pursuant to Mr. LaBella's employment agreement. Mr. LaBella has
sole voting power but no dispositive power as to such shares.
Includes options for 33,100 shares of Circa common stock which are
currently exercisable. Excludes options for 67,000 shares of Circa
common stock which are not currently exercisable.
(13) Includes 141,500 shares of Circa common stock issuable in the
aggregate upon exercise of outstanding options granted to such
persons, in each case which are currently exercisable. Excludes
options for 416,000 shares of Circa common stock which are not
currently exercisable.
The address for each of the directors and executive officers
named in the table above is c/o Circa Pharmaceuticals, Inc., 33
Ralph Avenue, P. O. Box 30, Copiague, New York 11726-0030. The
address for FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
On March 29, 1995, Circa entered into a Definitive Agreement
and Plan of Merger, by and among Watson Pharmaceuticals, Inc.
("Watson"), Gum Acquisition Corp., a wholly-owned subsidiary of
Watson ("Watson Sub"), and Circa, pursuant to which Watson Sub will
merge with and into Circa with Circa being the surviving
corporation in the merger. As a result of the merger, Circa will
become a wholly-owned subsidiary of Watson. It is intended that
the merger will qualify as a "pooling-of-interests" for accounting
purposes and that the merger will constitute a tax free
organization for federal income tax purposes.
Pursuant to the terms and conditions of the Merger Agreement,
at the effective time of the merger, each share of common stock,
par value $.01 per share, of Circa will be converted into the right
to receive 0.86 of a share of the common stock, par value $.0033
per share, of Watson. If, during a measurement period prior to the
date scheduled for Circa's shareholders' vote on the merger, the
average price of Watson common stock is less than $25.00, Circa may
terminate the Merger Agreement unless Watson agrees to a specified
upward adjustment in the 0.86 exchange ratio.
Consummation of the merger is subject to the satisfaction of
certain conditions, including approval by Circa's shareholders of
the Merger Agreement, receipt of regulatory approvals and treatment
of the merger as a "pooling-of-interests" for accounting purposes.
In the event of termination under specified conditions, one party
to the Merger Agreement may be entitled to receive a fee of up to
$15 million from the other and payment of its expenses.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Melvin Sharoky, M.D., President and Chief Executive Officer
In order to preserve the tax deductibility to the Company of the
restricted shares awarded to Dr. Sharoky, the Company was obligated
to withhold income taxes from Dr. Sharoky. On the vesting date,
Dr. Sharoky was unable to sell shares to fund his income tax
liability due to insider trading regulations. In May 1994,
February 1995, and April 1995, the Company made loans of $406,623,
$602,510 and $898,339, respectively, on an interest free basis,to
Dr. Sharoky. Once the restrictions lapse, Dr. Sharoky is obligated
to sell shares and reimburse the Company. These loans are
collateralized by the shares of Circa common stock owned by Dr.
Sharoky. In December 1994, Dr. Sharoky repaid the loan for
$406,623. The loans for $602,510 and $898,339 are currently
outstanding.
Thomas P. Rice, Executive Vice President and Chief Operating
Officer
In July 1993, the Company made a bridge loan of $90,000 on an
interest free basis to Mr. Rice. The loan was made to allow Mr.
Rice to purchase a house in New York as he was relocating from
Maryland. This bridge loan was collateralized by the house he was
selling in Maryland. In June 1994 this bridge loan was increased
by $22,000 to $112,000 and in December 1994 it was repaid.
Nicholas A. LaBella Jr., Vice President and Director of Research
and Development
In order to preserve the tax deductibility to the Company of
the restricted shares awarded to Mr. LaBella, the Company was
obligated to withhold income taxes from Mr. LaBella. On the
vesting date, Mr. LaBella was unable to sell shares to fund his
income tax liability due to insider trading regulations. In April
1995, the Company made a loan of $112,294 on an interest free
basis, to Mr. LaBella. Once the restrictions lapse, Mr. LaBella is
obligated to sell shares and reimburse the Company. This loan is
collateralized by the shares of Circa common stock owned by Mr.
LaBella. This loan is currently outstanding.
Steve Martinez, Vice President and General Manager
In January 1995, the Company made a bridge loan of $37,000 on
an interest free basis to Mr. Martinez. The loan was made to allow
Mr. Martinez to purchase a house in New York as he was relocating
from Delaware. This loan is collateralized by the house he is
selling in Delaware. This loan was increased by $148,000 to
$185,000 in February 1995, and is currently outstanding.
Lawrence Raisfeld (former officer and director)
On June 16, 1994, Mr. Lawrence Raisfeld signed a separation
agreement pursuant to which he resigned as Vice President of
Financial Affairs, and as a Director of the Company. Pursuant to
such separation agreement, Mr. Raisfeld received severance
benefits, including a lump sum severance payment in the amount of
$337,500, which included a payment for accrued and unused vacation
and sick days.
As of December 31, 1994, there was a balance due to the
Company of approximately $1,273,910 from a trust created on behalf
of Mr. Raisfeld for premiums paid by the Company for a split-dollar
life insurance policy. This sum will be repaid from the death
benefits provided under Mr. Raisfeld's policy and is secured by
approximately $1,600,000 of cash surrender value.
See also "Compensation Committee Interlocks And Insider
Participation"
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CIRCA PHARMACEUTICALS, INC.
Dated: April 27, 1995
by:/s/ Melvin Sharoky, M.D.
MELVIN SHAROKY, M.D., President
Chief Executive Officer
by:/s/ Angelo C. Malahias
ANGELO C. MALAHIAS, Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated:
/s/ Melvin Sharoky, M.D. Date: April 27, 1995
MELVIN SHAROKY, M.D., Director
/s/ Thomas P. Rice Date: April 27, 1995
THOMAS P. RICE, Director
/s/ Michael Fedida Date: April 27, 1995
MICHAEL FEDIDA, Director
/s/ Stanley B. Grey Date: April 27, 1995
STANLEY B. GREY, Director
/s/ Bruce Hausman Date: April 27, 1995
BRUCE HAUSMAN, Director
/s/ Kenneth Siegel Date: April 27, 1995
KENNETH SIEGEL, Director
