_______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
__________
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
AQUILA BIOPHARMACEUTICALS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check Appropriate Box)
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
_______________________________________________________________________
AQUILA BIOPHARMACEUTICALS, INC.
__________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
___________________
TO THE SHAREHOLDERS OF
AQUILA BIOPHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of
Aquila Biopharmaceuticals, Inc. (the "Company") will be held on Wednesday,
May 20, 1998, at 3:00 p.m. at the offices of the Company, 365 Plantation
Street, Worcester, Massachusetts 01605, for the following purposes:
1. To elect two Class III directors to the board of directors
to hold office until the annual meeting of shareholders in 2001;
2. To transact such other business as may properly come before the
meeting or any adjournment of this meeting.
The board of directors has fixed the close of business on March 26, 1998 as the
record date for the determination of shareholders entitled to notice of and to
vote at this annual meeting and at any adjournment thereof.
All shareholders are cordially invited to attend the meeting; however, to assure
your representation at the meeting you are urged to mark, sign, date and return
the enclosed form of proxy as promptly as possible. Any shareholder attending
the meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors
Jane V. Hawkes, Secretary
April 8, 1998
AQUILA BIOPHARMACEUTICALS, INC.
365 PLANTATION STREET
WORCESTER, MASSACHUSETTS 01605
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This proxy statement is being furnished to shareholders of Aquila
Biopharmaceuticals, Inc. (the "Company") in connection with the
solicitation by the Company's board of directors (the "Board of
Directors" or "Board") of proxies for use at the annual meeting of
shareholders of the Company (the "Annual Meeting") to be held on
Wednesday, May 20, 1998 at 3:00 p.m. at the offices of the Company,
365 Plantation Street, Worcester, Massachusetts, and any adjournment
thereof. A copy of the Company's 1997 Annual Report to Shareholders
is being mailed concurrently with this proxy statement to each
shareholder entitled to vote at the meeting. This proxy statement and
accompanying proxy materials will be mailed beginning April 8, 1998
to all shareholders entitled to vote at the meeting.
Voting and Proxies
The Board of Directors has fixed the close of business on March 26,
1998 as the record date for the determination of shareholders entitled
to notice of and to vote at the Annual Meeting. Accordingly, only
holders of record of shares of the Company's common stock at the
close of business on that date will be entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof. At the close of
business on March 25, 1998, there were 5,829,171 shares of the
Company's common stock outstanding.
Each holder of record of shares of the Company's common stock on
the record date is entitled to cast one vote per share, in person or by
properly executed proxy, on any matter that may properly come before
the Annual Meeting. The presence in person or by properly executed
proxy of the holders of a majority of the shares of the Company's
common stock outstanding on the record date is necessary to constitute
a quorum at the Annual Meeting. The affirmative vote of the holders
of a plurality of the shares of the Company's common stock present at
the Annual Meeting in person or by properly executed proxy is
required to elect the nominees for directors. With respect to the
required vote on any particular matter, abstentions will be treated as
votes cast or shares present and represented; while votes withheld by
nominee record holders who did not receive specific instructions from
the beneficial owners of such shares will not be treated as votes cast or
shares present or represented. The failure of a broker to return a signed
proxy card will result in the shares held of record by such broker not
being counted towards the determination of a quorum.
Proxy Voting and Revocation
All proxies received pursuant to this solicitation will be voted except
as to matters where authority to vote is specifically withheld. Where a
choice is specified as to the proposal, the proxies will be voted in
accordance with such specification. If no choice is specified, the
persons named in the proxies solicited by the Board of Directors intend
to vote for the election of the two nominees for directors.
The Board of Directors does not know of any matters, other than the
matters described in this Proxy Statement, which are expected to be
presented for consideration at the Annual Meeting. If any other matters
are properly presented for consideration at the Annual Meeting, the
persons named in the accompanying proxy will have discretion to vote
on such matters in accordance with their best judgment.
Shareholders of the Company who execute proxies may revoke them
by giving written notice to the Secretary of the Company at any time
before such proxies are voted or by executing and delivering later-
dated proxies. Attendance at the Annual Meeting will not have the
effect of revoking a proxy unless the shareholder so attending so
notifies the Secretary of the Company in writing at any time prior to
the voting of the proxy.
Solicitations
Proxies are being solicited by and on behalf of the Board of Directors.
In addition to solicitation by mail, directors, officers, and regular
employees of the Company (who will not be specifically compensated
for such services) may solicit proxies by telephone or otherwise.
Arrangements will be made with brokerage houses and other
custodians, nominees, and fiduciaries to forward proxies and proxy
material to their principals, and the Company will reimburse them for
their expenses. In addition, the Company has retained American Stock
Transfer & Trust Company to assist in the solicitation of proxies from
its shareholders. For such service American Stock Transfer & Trust
Company will receive reimbursement of out of pocket costs and
expenses but will receive no consideration in addition to that received
as transfer agent.
PROPOSAL 1
ELECTION OF DIRECTORS
Under the Company's By-laws, the Board of Directors consists of such
number, as the Board shall determine but not less than one. The Board
has set the number of Board members at five. The Board is classified
into three classes, as nearly equal in number as possible, whose terms
of office expire at different times in annual succession. If the two
nominees are elected, there will be two directors (Messrs. Nelson and
Hillback) whose terms expire at the annual meeting of the Company's
shareholders in 1999, one director (Dr. Taunton-Rigby) whose term
expires at the annual meeting of the Company's shareholders in 2000,
and two directors (Mr. Beaver and Dr. Dorrington) whose terms expire
at the annual meeting of the Company's shareholders in 2001. The
members of each class are elected to serve a three-year term unless the
membership of a class or classes is being reapportioned. It is intended
that the persons named on the proxy card as proxies will vote shares of
the Company's common stock so authorized for the election of Mr.
Beaver and Dr. Dorrington to the Board of Directors. The Board of
Directors expects that each of the nominees will be available for
election; but in the event that either of them should become
unavailable, it is intended that the proxy would be voted for a nominee
or nominees who would be designated by the Board of Directors, unless the
Board reduces the number of directors.
Mr. Beaver and Dr. Dorrington will each serve until the annual
meeting of the shareholders in 2001 and until their successors are
elected and qualified. All the nominees are currently directors of the
Company, and all nominees have agreed to serve as directors if elected
at the meeting.
The Board of Directors recommends a vote FOR the election of the
nominees set forth below.
Biographical summaries of the nominees for directors of the Company
appear below.
Jeffrey T. Beaver
Jeffrey T. Beaver, 60, has been a Director of the Company
since March of 1996, and currently serves as the Chairman of
the Board. Mr. Beaver served as a Director of CBC since
January 1983, and as Chairman of the Board of Directors from
April 1995 to October 1996. From May 1994 to April 1995,
Mr. Beaver served as President and Chief Executive Officer of
CBC, and from May 1994 to March 1996, Mr. Beaver served
as CBC's Treasurer. Since October 1996, Mr. Beaver has been
Managing Director of CoView Capital, Inc. From January
1991 to May 1994, Mr. Beaver was an independent consultant
in the healthcare sector. From September 1986 to December
1990, Mr. Beaver was Senior Vice President and Head of the
Corporate Finance Group of IBJ Schroder Bank and Trust
Company. Prior to September 1986, Mr. Beaver was a
Managing Director of J. Henry Schroder Corporation (a
subsidiary of Schroder Venture Managers, Inc.) where he was
engaged in providing corporate financial advisory services.
Mr. Beaver is a member of the Institute of Chartered Financial
Analysts. He received his B.A. degree from Princeton
University and his M.B.A. degree from New York University.
Mr. Beaver is a member of the Nominating Committee of the
Company.
Keith. J. Dorrington
Keith J. Dorrington, Ph.D., D.Sc., 58, has been a Director of
the Company since October 1996. Since 1991 Dr. Dorrington
has been associated with MDS Health Ventures Capital Corp.,
the leading venture capital company for the healthcare sector in
Canada, serving as Senior Vice President, Science and
Technology since 1993. In this capacity Dr. Dorrington is
responsible for the scientific evaluation of all
pharmaceutical/biotechnology proposals received by MDS and
in-depth technical review of selected proposals. Prior to this
appointment Dr. Dorrington was General Manager and Director
of Wellcome Biotechnology in the U.K. (January 1989 to June
1991); Corporate Vice President of Research and Development,
Connaught Laboratories Ltd. in Toronto (January 1983 to
December 1988) and Professor and Chairman, Department of
Biochemistry, University of Toronto (July 1976 to December
1982). Dr. Dorrington earned his B.Sc., Ph.D., and D.Sc. from
the University of Sheffield, U.K. He is a member of the Audit
Committee and Chairman of the Nominating Committee.
Biographical summaries of the remaining directors of the Company
whose terms of office will continue after the Annual Meeting appear
below.
Alison Taunton-Rigby
Alison Taunton-Rigby, Ph.D., 53, has served as President,
Chief Executive Officer and Director since March of 1996. Dr.
Taunton-Rigby served as President and Chief Executive
Officer and a member of the Board of Directors of the
Company's predecessor, Cambridge Biotech Corporation from
April 1995 until October of 1996. From 1993 to 1994, she
served as President and Chief Executive Officer of Mitotix,
Inc., a biopharmaceutical company. Prior to joining Mitotix,
Dr. Taunton-Rigby was Senior Vice President, Biotherapeutics,
of Genzyme Corporation, where she had overall responsibility
for Genzyme's biotherapeutics business. Dr. Taunton-Rigby is
a member of the Board of Directors of BIO, the national trade
organization, where she is also Chair of the Emerging
Companies section. She is also a member of the Board of
Directors and a past President of the Massachusetts Biotech
Council, the trade organization representing Massachusetts
biotechnology companies. Dr. Taunton-Rigby received her
doctorate in Chemistry from the University of Bristol in
England, and is a graduate of the Advanced Management
Program of the Harvard Business School. She is a director of
the CML Group, a specialty retailer, and of Synaptic
Pharmaceutical Corporation. She is also a member of the
Bentley College Ethics Board.
Elliott D. Hillback, Jr.
Elliott D. Hillback, Jr., 53, has been a Director of the Company
since March of 1996. Since July 1990 Mr. Hillback has served
as Senior Vice President of Genzyme Corporation and since
October 1996 has held the position of Senior Vice President of
Corporate Affairs. As Senior Vice President of Genzyme, he
was responsible for the formation in October 1990 of Neozyme
Corporation, a research and development company established
to accelerate product development for Genzyme. From July
1991 to October 1996 he served as President and CEO of its
genetic diagnostics subsidiary, IG Laboratories, Inc. Prior to
joining Genzyme, Mr. Hillback held executive positions at
Baxter International and BOC Group, Inc. as well as the
positions of President and CEO of Cellcor Therapies, Inc., a
start-up biotechnology company. Mr. Hillback is a member of
the Council of Medical Genetics Organizations, is Co-chair of
the Ethics Committee of the Biotechnology Industry
Organization and serves as Director of Integramed America,
Inc., a physician practice management company specializing in
women's health care with a focus on infertility and assisted
reproductive technology services. He earned his B.A. degree at
Cornell University and an M.B.A. from Harvard Business
School. He is chairman of the Audit Committee and a member
of the Compensation Committee.
John M. Nelson
John M. Nelson, 66, has been a Director of the Company since
March of 1996. Mr. Nelson served as director of CBC from
January 1987 to October 1996. Mr. Nelson is Chairman of the
Board of The TJX Companies, Inc., a retailer of off-price
fashion goods. Mr. Nelson retired as Chairman of Wyman-
Gordon Company in October of 1997 having held that position
since May of 1994. Previously, he had been Chairman and
Chief Executive Officer since May of 1991. From 1988 until
1990 Mr. Nelson was Chairman, President and Chief Executive
Officer of Norton Company, a manufacturer of abrasives,
ceramics, plastics, and chemical process products. From 1979
to September 1990, he was a director of Norton. Prior to
becoming Chief Executive Officer of Norton, Mr. Nelson was
President and Chief Operating Officer of Norton from 1986 to
1988, and, for more than five years, was President and Chief
Executive Officer of its subsidiary, Norton Christianson, Inc.
Mr. Nelson holds a B.A. degree from Wesleyan University and
an M.B.A. from Harvard Business School. He is a director of
Brown & Sharpe Manufacturing Company, Stocker & Yale,
Inc., The TJX Companies, Inc., Commerce Holdings, Inc. and
Eaton Vance Corp. Mr. Nelson serves as Chairman of the
Company's Compensation Committee.
Security Ownership of Certain Beneficial Owners
and Management of the Company
The following table sets forth certain information as to the Company's
common stock owned by management of the Company as of
February 15, 1998 based upon information supplied by the Company's
directors and executive officers and by beneficial owners of more than
five percent (5%) of the Company's common stock based solely upon
filings made by such beneficial owners.
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class
Alison Taunton-Rigby Ph.D.(2) 151,876 2.6%
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Jeffrey T. Beaver (3) 52,922 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Keith J. Dorrington Ph.D.(4) 7,500 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Elliott D. Hillback, Jr.(5) 7,500 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
John M. Nelson(6) 11,188 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Gerald A. Beltz Ph.D.(7) 34,456 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Stephen J. DiPalma(8) 25,000 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Deborah B. Grabbe(9) 33,240 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Robert B. Kammer, M.D.(10) 38,279 *
Aquila Biopharmaceuticals, Inc.
365 Plantation Street
Worcester, MA 01605
Directors and Executive 361,961 6.2%
Officers as a Group(11)
State of Wisconsin 414,074 7.1%
Investment Board(12)
State of Wisconsin
121 E. Wilson Street
Madison, Wisconsin 53707
Marcus Schloss & Co., Inc.(13) 416,906 7.2%
One Whitehall Street
New York, NY 10004
01605
* Less than 1%
(1) Share ownership includes shares of common stock issuable on exercise
of certain outstanding options as described in the footnotes below.
(2) Includes 146,543 shares which Dr. Taunton-Rigby may acquire upon the
exercise of options.
(3) Includes 132 shares held as custodian for one daughter and 132 shares
held as custodian for another daughter. Mr. Beaver disclaims beneficial
ownership of the shares held as custodian for his daughters. Includes
42,181 shares which Mr. Beaver may acquire upon the exercise of options
(4) Includes 7,500 shares which Dr. Dorrington may acquire upon the
exercise of options.
(5) Includes 7,500 shares which Mr. Hillback may acquire upon the exercise
of options.
(6) Includes 7,500 shares which Mr. Nelson may acquire upon the exercise
of options.
(7) Includes 30,000 shares which Dr. Beltz may acquire upon the exercise
of options.
(8) Includes 25,000 shares which Mr. DiPalma may acquire upon the exercise
of options.
(9) Includes 30,000 shares which Ms. Grabbe may acquire upon the exercise
of options.
(10) Includes 30,000 shares which Dr. Kammer may acquire upon the exercise
of options.
(11) See Footnotes Numbers 1-10.
(12) Based solely upon information contained in Schedule 13G filed with the
Company.
(13) Based solely upon information contained in Schedule 13G filed with the
Company. Douglas Schloss and Richard P. Schloss may be deemed
beneficial owners of the shares.
Board of Directors
The Board of Directors meets on a regularly scheduled basis and holds special
meetings as required. The Board met five times during 1997.
The Board of Directors has assigned certain responsibilities to the Audit
Committee, the Compensation Committee and the Nominating Committee, each of
which was established by the Board of Directors in October of 1996. The
members of the Audit Committee are Mr. Hillback (chairman) and Dr. Dorrington.
The Audit Committee held two meetings during 1997. The functions of the Audit
Committee include recommending to the full Board the appointment of the
independent public accountants for the Company, reviewing the scope and results
of the audits by the independent public accountants, and reviewing internal
reports on various aspects of corporate operations.
The members of the Compensation Committee are Mr. Nelson (chairman) and Mr.
Hillback. The Compensation Committee held four informal meetings during 1997
(acting by written consent vote), and administered the compensation plan for
the Company's officers including the adoption of a severance plan for senior
management.
The members of the Nominating Committee are Dr. Dorrington (chairman) and
Mr. Beaver. The Nominating Committee held no meetings during 1997. The
functions of the Nominating Committee include reviewing possible candidates
for the Board of Directors and recommending nomination of appropriate
candidates by the Board.
Shareholders who wish to suggest qualified candidates for the Board of
Directors must do so in accordance with the provisions of the Company's
By-Laws by sending a notice to the Company's Secretary, together with certain
information with respect to such nominees, not less than 60 nor more than 150
days prior to the date of the Annual Meeting (unless less than 70 days notice
of the Annual Meeting is given in which case notice must be given not later
than the close of business on the tenth day following the earlier of such
public disclosure or notice of such meeting).
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information as to the annual and
long-term compensation for services to the Company for the last three
completed fiscal years of the Company's Chief Executive Officer, the other
three most highly compensated executive officers of the Company as of
December 31, 1997, and Stephen J. DiPalma who was an Executive
Officer of the Company through December 5, 1997 (collectively the "Named
Executive Officers"). The amounts reported for 1996 reflect
compensation paid by the Company's predecessor, Cambridge Biotech Corporation
("CBC") (prior to and including October 21, 1996) and the Company
(after October 21, 1996). The amounts reported for 1995 reflect compensation
paid by CBC to the Named Executive Officers.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation Compensation All Other
Compen-
sation
($)
Awards
Name and Principal Year Salary Bonus Other Restricted Securities
Position ($) ($) Annual Stock Underlying
Compen- Award(s) Options/
sation ($) SARS
($) (#)
<S> <C> <C> <C> <C> <C> <C> <C>
Alison Taunton-Rigby 1997 $244,650 $ 61,500 -- -- 35,000 $6,885(2)
President/CEO & 1996 225,000 103,750 -- -- 85,000 4,895
Director 1995 161,827 38,340(1) -- -- 104,043 3,076
Gerald A. Beltz 1997 160,474 32,000 -- -- 20,000 2,962(4)
Senior Vice President 1996 144,708 40,000 31,373(3) -- 60,000 762
of Research and 1995 118,885 6,017(1) -- -- -- 514
Development
Stephen J. DiPalma 1997 131,171 -- -- -- 20,000 2,331(6)
Vice President, Chief 1996 100,000 20,000 -- -- 50,000 209
Financial Officer 1995 -- -- -- -- -- --
& Treasurer(5)
Deborah B. Grabbe 1997 137,442 34,500 -- -- 20,000 2,259(8)
Vice President of 1996 132,040 33,000 25,081(7) -- 60,000 689
Manufacturing Operations 1995 118,500 5,765(1) -- -- -- 512
Robert B. Kammer 1997 158,000 30,000 -- -- 20,000 2,924(11)
Vice President of 1996 152,354 30,000 63,158(9) -- 60,000 2,073
Medical Affairs 1995 178,614 6,945(2) 55,110(10) -- -- 772
________________________
(1) Bonus for 1995 paid on consummation of Reorganization Plan in the
Company's common stock (fair market value of common stock at time of
payment).
(2) Represents payment by the Company of $4,400 for term life insurance
and $2,485 for the company's contribution to Dr. Taunton-Rigby's 401(k)
account.
(3) Represents an incentive stock award in the amount of $29,700 and
compensation deferred pursuant to a salary reduction program, both of
which were contingent upon CBC emerging from bankruptcy and were paid
in the Company's common stock on consummation of the Reorganization
Plan.
(4) Represents payment by the Company of $653 for term life insurance and
$2,309 for the Company's contribution to Dr. Beltz's 401(k) account.
(5) Mr. DiPalma resigned from his positions with the Company effective
December 5, 1997.
(6) Represents payment by the Company of $530 for term life insurance and
$1,801 for the Company's contribution to Mr. DiPalma's 401(k) account.
(7) Represents an incentive stock award in the amount of $22,770 and
compensation deferred pursuant to salary reduction program, both of
which were contingent upon CBC emerging from bankruptcy and were paid
in the Company's common stock on consummation of the Reorganization
Plan.
(8) Represents payment by the Company of $559 for term life insurance and
$1,700 for the Company's contribution to Ms. Grabbe's 401(k) account.
(9) Represents an incentive stock award in the amount of $57,920 and
compensation deferred pursuant to a salary reduction program, both
of which were contingent upon CBC emerging from bankruptcy and were
paid in the Company's common stock on consummation of the Reorgani-
zation Plan.
(10) Tax reimbursements in the amount of $19,510 and relocation allowance
in the amount of $35,600.
(11) Represents payment by the Company of $645 for term life insurance and
$2,279 for the Company's contribution to Dr. Kammer's 401(k) account.
</TABLE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term
Name Number of Percent of Total Exercise of Expiration
Securities Options/SARs Base Price Date
Underlying Granted to ($/Sh.)
Option/SARs Employees in
Granted (#) Fiscal Year
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Alison Taunton-Rigby 35,000(2) 21.29% $5.125 9/11/2007 $113,006 $285,206
Gerald A. Beltz 20,000(2) 12.17% 5.125 9/11/2007 64,575 162,975
Stephen J. DiPalma(1) 20,000(2) 12.17% 5.125 9/11/2007 64,575 162,975
Deborah B. Grabbe 20,000(2) 12.17% 5.125 9/11/2007 64,575 162,575
Robert B. Kammer 20,000(2) 12.17% 5.125 9/11/2007 64,575 162,575
________________________
(1) Mr. DiPalma resigned effective December 5, 1997.
(2) Stock option exercisable with respect to 25% of the shares on
September 11, 1998, 25% of the shares on September 11, 1999, 25%
on the shares on September 11, 2000, and 25% of the shares on
September 11, 2001.
</TABLE>
Fiscal Year End Option/SAR Value Table
The following chart shows the number and value of unexercised
options held by each of the Named Executive Officers at the end of the
Company's last fiscal year. The value shown for each option is equal to
the difference between the exercise price of the option and the fair
market value of the underlying stock at fiscal year end. The Company
has never awarded any stock appreciation rights to any of its
employees, and thus none are outstanding. None of the Named
Executive Officers exercised any options during the Company's last
fiscal year.
<TABLE>
Aggregated Option / SAR Exercises In
Last Fiscal Year And FY-End Option / SAR Values
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options/SARs
Options/SARs at Fiscal Year- at Fiscal Year-End
End ($)
(#)
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C>
Alison Taunton-Rigby 146,543/77,500 144,412*/0
Gerald A. Beltz 30,000/50,000 0/0
Stephen J. DiPalma 25,000/0 0/0
Deborah B. Grabbe 30,000/50,000 0/0
Robert B. Kammer 30,000/50,000 0/0
___________________________
* Value of 104,043 options which were in-the-money at year-end.
</TABLE>
The Company has entered into employment contracts with several of
its officers as described below.
Dr. Taunton-Rigby entered into an employment agreement with CBC
dated April 6, 1995, which has been assumed by the Company, which
provides for an annual base salary of $225,000, subject to increase
from time to time at the discretion of the Company. The term of the
contract automatically extends for an additional year on each
anniversary date unless the Company gives a notice of termination 90
days prior to the relevant anniversary date. Dr. Taunton-Rigby also
entered into an Employee Retention Agreement dated September 2,
1997, pursuant to which, if Dr. Taunton-Rigby's employment is
terminated within twenty-four (24) months of a "change of control,"
unless such termination is by the Company for "cause," by Dr.
Taunton-Rigby other than for "good reason" or due to her death or
disability, she is entitled to a payment equal to three (3) times her
annual base salary as in effect prior to the change of control plus the
average annual bonus received by her during the three preceding years.
Dr. Beltz entered into an employment agreement with CBC dated
August 21, 1995, which has been assumed by the Company, which
provides for an initial annual salary of $140,000, subject to review on
an annual basis. Dr. Beltz's employment under the agreement may be
terminated any time after August 21, 1997 by either party without
liability upon 180 days prior written notice. Dr. Beltz also entered into
an Employee Retention Agreement dated October 24, 1997, pursuant
to which, if Dr. Beltz's employment is terminated within twenty-four
(24) months of a "change of control," unless such termination is by the
Company for "cause," by Dr. Beltz other than for "good reason" or due
to his death or disability, he is entitled to a payment equal to two (2)
times his annual base salary as in effect prior to the change of control
plus the average annual bonus received by him during the three
preceding years.
Ms. Grabbe entered into an employment agreement with CBC dated
August 21, 1995, which has been assumed by the Company, which
provides for an initial annual salary of $130,000, subject to review on
an annual basis. Ms. Grabbe's employment under the agreement may
be terminated at any time after August 21, 1997 by either party without
liability upon 180 days prior written notice. Ms. Grabbe also entered
into an Employee Retention Agreement dated October 24, 1997,
pursuant to which, if Ms. Grabbe's employment is terminated within
twenty-four (24) months of a "change of control," unless such
termination is by the Company for "cause," by Ms. Grabbe other than
for "good reason" or due to her death or disability, she is entitled to a
payment equal to her annual base salary as in effect prior to the change
of control plus the average annual bonus received by her during the
three preceding years.
Dr. Kammer entered into an employment agreement with CBC dated
August 21, 1995, which has been assumed by the Company, which
provides for an initial annual salary of $150,000, subject to review on
an annual basis. Dr. Kammer's employment under the agreement may
be terminated at any time after August 21, 1997 by either party without
liability upon 180 days prior written notice. Dr. Kammer also entered
into an Employee Retention Agreement dated October 24, 1997,
pursuant to which, if Dr. Kammer's employment is terminated within
twenty-four (24) months of a "change of control," unless such
termination is by the Company for "cause," by Dr. Kammer other than
for "good reason" or due to his death or disability, he is entitled to a
payment equal to his annual base salary as in effect prior to the change
of control plus the average annual bonus received by him during the
three preceding years.
Performance Graph
The following graph shows a comparison over a five-year
period ending at the end of the Company's last fiscal year of the
cumulative total return to the Company's shareholders with the
cumulative total return of the NASDAQ Total Return Index and the
NASDAQ Pharmaceutical Index and assumes an investment of $100
on December 31, 1992.
1992 1993 1994 1995 1996 1997
NASDAQ Total Return Index 100.0 115.8 112.3 157.7 193.1 236.2
NASDAQ Pharmaceuticals Index 100.0 89.1 67.1 122.7 123.1 127.2
Cambridge Biotech 100.0 35.1 18.4 18.4 21.1 18.2
Corporation/Aquila
Biopharmaceuticals, Inc.(1)
___________________________
(1) The graph represents the history of CBC until October 1996, and the
Company thereafter.
Board Compensation Committee Report on
Executive Compensation
Overall Policy
The Company's executive compensation program is designed to be
closely linked to corporate performance and return to shareholders by
tying a significant portion of executive compensation to the
Company's success in meeting specified annual performance goals.
The overall objectives of this strategy are to provide competitive
salaries necessary to attract and retain the highest quality talent, to
reward performances that accomplish Company goals and priorities,
and to provide incentives that link the executive officers' opportunities
for financial reward with that of the shareholders.
The Compensation Committee is responsible for setting and
administering the policies that govern the compensation of the
Company's executive officers. Generally, the three principal
components of the compensation program for executive officers are
base salary, bonus and equity-based incentives (typically stock
options), although awards are not necessarily granted in all three
categories every year. In reaching decisions on compensation, the
Compensation Committee also takes into account the full
compensation package provided by the Company to the officers,
including savings plans, severance plans, insurance, and benefits
generally available to all employees of the Company.
This report addresses the Company's compensation policies as they
relate to compensation reported for 1997.
Salary Administration
The ranges of appropriate base salaries are determined by analysis of
salary data on positions of comparable responsibility within the
biotechnology industry, as reported in the annual Radford
Biotechnology Compensation Report by Radford Associates/AON
Consulting. Salaries of executive officers are reviewed annually, and
any adjustments are made by evaluating the performance of the
Company and of each executive officer and taking into account any
change in the executive's responsibilities. Exceptional performances
are generally compensated with performance-related bonuses and stock
options rather than raising base salaries, reflecting the Compensation
Committee's increasing emphasis on tying pay to performance criteria.
Bonus Program
Executives are eligible to receive bonuses based on the overall
performance of the Company and based on individual achievement. A
number of specific goals are established at the beginning of the year
for each of the executive officers. A target bonus as a percentage of
compensation is also set for each of the executive officers including
the CEO. Bonuses are awarded based upon the recommendation of the
CEO and the Compensation Committee's evaluation of the executive
officer's achievement of his or her goals. For example, if an officer
had a target bonus of up to 25% of his compensation, he might be
given a bonus of 20% if he met most but not all of his goals. The
Compensation Committee awarded bonuses to each of the executive
officers, other than Dr. Taunton-Rigby, totaling in the aggregate
$96,500.
Stock Option Program
Under the Company's 1996 Stock Award and Option Plan, the
Company may grant stock options, discounted stock options, restricted
stock, deferred stock, and stock appreciation rights to any or all of the
Company's employees, officers, and advisors and/or consultants. The
Compensation Committee believes that long-term incentive awards,
such as stock options, link the executive's opportunity for financial
reward with that of the shareholders, in that the value of an executive's
stock options increases as the value of the shareholders' shares
increases. The Committee granted options to executive officers in
order to continue to incentivize the officers towards the achievement of
the Company's long term goals.
The Committee granted options for 80,000 shares of the Company's
common stock in the aggregate to the executive officers, other than Dr.
Taunton-Rigby. The options will vest beginning in September of 1998.
Compensation of the Chief Executive Officer
Dr. Taunton-Rigby's 1997 base compensation is pursuant to an
employment contract negotiated with CBC in 1995 and assumed by
the Company. The Compensation Committee elected to increase Dr.
Taunton-Rigby's base compensation by a percentage of compensation
consistent with the percentage increase given to other executive
officers reflecting the Committee's goal to reward performance mainly
through a bonus award. The Committee's determination of the amount
of the bonus was made after a review of the achievement of Dr.
Taunton-Rigby's goals for the year and the overall success of the
Company in moving forward after emerging from bankruptcy. The
Compensation Committee granted Dr. Taunton-Rigby a bonus in the
amount of $61,500. Under the Company's 1996 Stock Award and
Option Plan, the Board granted Dr. Taunton-Rigby options for 35,000
shares of the Company's common stock, which options will vest
beginning in September of 1998.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
John M. Nelson, Chairman
Elliott D. Hillback, Jr.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors
and executive officers and persons who own more than ten percent of
the registered class of the Company's equity securities (collectively,
"Reporting Person") to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of common stock of the Company. Each
Reporting Person is required by SEC regulation to furnish the
Company with copies of such Section 16(a) reports. To the Company's
knowledge, based solely upon review of the copies of such reports
furnished to the Company and written representations that no other
reports are required during the fiscal year ended December 31, 1997,
no Reporting Person has failed to file on a timely basis any report
required by Section 16(a) of the Exchange Act.
Compensation of Directors
Each director who is not an employee of the Company receives fees of
$2,000 ($2,500 for the chairman of the Board) for each Board meeting
attended in person by such director; $1,000 for each standing
committee meeting, held on a day other than a day on which a meeting
of the Board is held, attended by such director in person; and $500 for
each Board and committee meeting attended by telephone provided
such committee meeting is not held on the same day as a Board
meeting. Under provisions of the Company's 1996 Directors Stock
Award and Option Plan, each non-employee director is awarded an
option to purchase 2,500 shares of the Company's common stock on
the first trading day of July of each year.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Coopers & Lybrand L.L.P., independent
certified public accountants, as auditors of the Company for fiscal year
ending December 31, 1997. Coopers & Lybrand L.L.P. served as
auditors during 1995 and 1996. A representative of Coopers &
Lybrand L.L.P. is expected to be present at the Annual Meeting to be
available to respond to appropriate questions and to have the
opportunity to make a statement if such representative desires to do so.
SHAREHOLDER PROPOSALS
In order for any proposal that a shareholder intends to present at the
next annual meeting of shareholders to be eligible for inclusion in the
Company's proxy material for that meeting, it must be received by the
Secretary of the Company at the Company's offices in Worcester,
Massachusetts by December 17, 1998.
Date: April 8, 1998
By order of the Board of Directors
JANE V. HAWKES, Secretary
PROXY AQUILA BIOPHARMACEUTICALS, INC. PROXY
This Proxy is solicited on behalf of the Board of Directors
for the Annual Meeting of Shareholders May 20, 1998.
The undersigned shareholder of AQUILA BIOPHARMACEUTICALS,
INC. (the "Company"), revoking all previous proxies, hereby
constitutes and appoints ALISON TAUNTON-RIGBY and JANE V. HAWKES,
or any one of them, attorneys and proxies of the undersigned, with
full power of substitution for and in the name of the undersigned
to vote all shares of stock of the Company which the undersigned
may be entitled to vote at the annual meeting of the shareholders
of the Company to be held at the offices of the Company, 365
Plantation Street, Worcester, Massachusetts 01605, on Wednesday,
May 20, 1998 at 3:00 p.m. or any adjournment thereof, with all
powers which the undersigned would possess if personally present.
The proxies appointed hereby are instructed to vote in the
manner indicated on the reverse side on the following matters, as
set forth in the notice of meeting and in the Proxy Statement
dated April 8, 1998, receipt of which is hereby acknowledged.
This proxy when properly executed will be voted in accordance
with the specifications indicated by the undersigned shareholder.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
Where no specification is made, this proxy will be voted FOR the
Election of Directors in accordance with the recommendation of the
Board of Directors.
Proposal 1
Elect Class III directors to hold office until the annual meeting
of shareholders in 2001.
Jeffrey T. Beaver Keith J. Dorrington
FOR WITHHELD ABSTAIN
all nominees from all nominees
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
MARK HERE FOR ADDRESS CHANGE
NEW ADDRESS: __________________________
__________________________
__________________________
__________________________
__________________________
MARK HERE IF YOU PLAN TO ATTEND THE MEETING
Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature ______________________ Date _________________
Signature ______________________ Date _________________
