_______________________________________________________________________
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 13, 1999
___________________
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 Thursday, May 13, 1999, at 3:00 p.m. at the offices of the
Company, 175 Crossing Boulevard, Framingham, Massachusetts 01702,
for the following purposes:
1. To elect one Class I director to the board of
directors to hold office until the annual meeting of shareholders in 2002;
2. To approve an amendment to the Company's 1996
Directors' Stock Award and Option Plan (the "Plan") to increase the
aggregate number of shares of common stock authorized for issuance
under the Plan by 200,000 shares; and
3. 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, 1999
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, 1999
AQUILA BIOPHARMACEUTICALS, INC.
175 CROSSING BOULEVARD
FRAMINGHAM, MASSACHUSETTS 01702
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 Thursday, May 13,
1999 at 3:00 p.m. at the offices of the Company, 175 Crossing Boulevard,
Framingham, Massachusetts, and any adjournment thereof. A copy of the
Company's 1998 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, 1999 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, 1999
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 19, 1999,
there were 6,996,734 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 a plurality of the votes properly
cast at the Annual Meeting on the election of directors is necessary for the
election of a director. The affirmative vote of a majority of the votes
properly cast at the Annual Meeting is necessary to approve the
amendment to the Company's 1996 Directors' Stock Award and Option
Plan. With respect to the required vote on any particular matter,
abstentions and 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 although they will count toward the
presence of a quorum. 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 nominee for director and for Proposal 2.
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 DIRECTOR
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 nominee is elected,
there will be two directors (Dr. Taunton-Rigby and Mr. Carpenter) whose
terms expire at the Annual Meeting of the Company's shareholders in
2000, two directors (Mr. Beaver and Dr. Dorrington) whose terms expire
at the Annual Meeting of the Company's shareholders in 2001 and one
director (Mr. Hillback) whose term expires at the Annual Meeting of the
Company's shareholders in 2002. 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. Hillback to the Board of Directors. The
Board of Directors expects that the nominee will be available for election;
but in the event that he 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. Hillback will serve until the Annual Meeting of the shareholders in
2002 and until his successor is elected and qualified. The nominee is
currently a director of the Company, and the nominee has agreed to serve
as a director if elected at the meeting.
The Board of Directors recommends a vote FOR the election of the
nominee set forth below.
The Biographical summary of the nominee for director of the Company
appears below.
Elliott D. Hillback, Jr.
Elliott D. Hillback, Jr., 54, has been a Director of the Company
since March of 1996. Since July 1990 Mr. Hillback has served as
a Senior Vice President of Genzyme Corporation and since
October 1996 has held the position of Senior Vice President of
Corporate Affairs. 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 the 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.
Biographical summaries of the remaining directors of the Company
whose terms of office will continue after the Annual Meeting appear
below.
Jeffrey T. Beaver
Jeffrey T. Beaver, 61, 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 the Company's
predecessor, Cambridge Biotech Corporation ("CBC"), from
January 1983 to October 1996, 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. 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.
Robert J. Carpenter
Robert J. Carpenter, 53, has been a Director of the Company since
April of 1998. Mr. Carpenter served as President of VacTex, Inc.
from November 1995 to April 1998 and currently serves as a
Director. Mr. Carpenter has served as Chairman of the Board of
GelTex Pharmaceuticals, Inc. since 1991. He is President of
Boston Medical Investors, Inc., an investment firm. Mr.
Carpenter served as President and Chief Executive Officer of
GelTex from 1991 to 1993. He served as an Executive Vice
President of Genzyme Corporation, a human health care company,
from 1989 to 1991, and was Chief Executive Officer and
Chairman of the Board of IG Laboratories, Inc., a genetic testing
service company, from 1989 to 1991. Prior to that, he was
Chairman, President and Chief Executive Officer of Integrated
Genetics, Inc., a biotechnology company, which he joined as
President in 1981. He is a director of Genzyme Corporation. Mr.
Carpenter is Chairman of the Compensation Committee.
Keith J. Dorrington
Keith J. Dorrington, Ph.D., D.Sc., 59, 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. Dr. Dorrington is currently a
member of American Association of Immunologists, American
Society of Biological Chemists, Biochemical Society, British
Society for Immunology, Canadian Biochemical Society,
Canadian Society of Immunology, American Management
Association and Canadian Research Management Association and
holds directorships in six early stage companies in the MDS
portfolio. He is Advisory Editor of Immunological
Communications, a member of the Editorial Board of Critical
Review in Immunology and a director of two of the Network
Centres for Excellence. 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.
Alison Taunton-Rigby
Alison Taunton-Rigby, Ph.D., 54, 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 CBC 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 a past Chair of and a current
member 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 Synaptic Pharmaceutical Corporation. She is
also a member of the Bentley College Ethics Board.
PROPOSAL 2
Approval of the 1996 Stock Award and Option Plan,
as Amended
In October of 1996, the Board of Directors adopted, and the stockholders
subsequently ratified, the Company's 1996 Directors' Stock Award and
Option Plan (the "Plan") authorizing the issuance of 200,000 shares of the
Company's common stock under the Plan. The Plan is intended to
provide the Company's Directors with additional incentives for
performance furthering the interest and success of the Company. As of
March 25, 1999, 193,405 shares have been granted under the Plan and
only 6,595 shares remain available for future grant under the Plan. On
March 25, 1999, the Board of Directors amended the Plan to increase the
number of shares authorized for issuance thereunder by 200,000 shares.
The increase to the reserve is designed to assure that a sufficient reserve
of common stock continues to be available under the Plan to attract and
retain highly qualified individuals to serve as Board members.
The Board of Directors recommends a vote FOR the approval of the
Amendment to the Plan.
The following is a summary of the principal features of the Plan, together
with the applicable tax and accounting implications, which will be in
effect if the amendments to the Plan are approved by the stockholders;
this summary, however, does not purport to be a complete description of
all the provisions of the Plan. Any stockholder of the Company who
wishes to obtain a copy of the actual Plan document may do so by written
request to Thomas Kelly, at the Company's principal executive offices in
Framingham, Massachusetts.
Administration and Eligibility
The Plan is administered by the Compensation Committee of the Board
of Directors. Under the Plan, the Company may grant stock options,
discounted stock options, restricted stock, deferred stock and stock
appreciation rights (collectively "Award(s)"). As amended, there is an
authorization and reservation of 206,595 shares of the Company's
common stock, $.01 par value, available for Awards. All directors of the
Company are eligible to receive options under the Plan. However, only
employee directors of the Company are eligible to receive incentive stock
options and only non-employee directors are eligible to receive the so
called "formula grants" described below.
Terms
Formula Grants
Under the terms of the Plan, each director who is not an employee
of the Company was initially granted an option to purchase 10,000 shares
of the Company's common stock; one-fourth of which vested
immediately and one-fourth of which vests at each succeeding
anniversary date. In addition, on the first trading day of each July,
commencing July of 1997, each non-employee director is granted options
with respect to 2,500 shares of the Company's common stock.
General
Except as set forth above, the Compensation Committee selects
the recipient of the Award and determines the number of shares subject to
each Award and the terms of each Award.
Payment of the option exercise price may be made in cash, shares
of the Company's common stock or a combination of both.
Amendment and Termination
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, except that if at any time the approval of
the stockholders of the Company is required under Section 422 of the
Code, or any successor provision with respect to incentive stock options,
or under Rule 16b-3 under the Securities Exchange Act of 1934, the
Board of Directors may not effect such modification or amendment
without such approval. The Plan will remain in full force and effect until
terminated by the Board.
Federal Income Tax Consequences
Under the Plan, the Company may grant non-qualified options, incentive
stock options ("ISOs") and discounted options.
With respect to a non-qualified stock option awarded under the Plan: (i)
no income is realized by the participant at the time the option is granted;
(ii) generally, upon exercise of the option, the participant realizes
ordinary income in an amount equal to the difference between the option
price paid for the shares and the fair market value of the shares on the
date of exercise, and the Company will be entitled to a tax deduction in
the same amount; and (iii) at disposition, any appreciation or
depreciation, after the date of exercise, is treated either as short-term or
long-term capital gain or loss, depending upon the length of time that the
participant has held the shares.
With respect to an ISO, no taxable income is realized by the participant
upon the grant or exercise of an ISO. If common stock is issued to a
participant pursuant to the exercise of an ISO, and if no disqualifying
disposition of the shares is made by the participant within two years of
the date of grant or within one year after the transfer of the shares to the
participant, then: (i) upon the sale of the shares, any amount realized in
excess of the option price will be taxed to the participant as a long-term
capital gain, and any loss sustained will be a long-term loss; and (ii) no
deduction will be allowed to the Company for Federal income tax
purposes. The exercise of an ISO will give rise to an item of tax
preference equal in amount to the excess of the fair market value of the
stock on the date of exercise over the option price which may result in an
alternative minimum tax liability for the participant unless the participant
makes a disqualifying disposition of the shares received upon exercise.
To the extent the aggregate fair market value of stock with respect to
which ISOs held by a participant are exercisable for the first time during
any calendar year exceeds $100,000, such ISOs shall be treated as non-
qualified stock options.
If common stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of the holding periods described above, then
generally: (i) the participant will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market
value of the shares at exercise (or, if less, the amount realized on the
disposition of the shares) over the option price paid for such shares, and
(ii) the Company will be entitled to deduct any such recognized amount.
Any further gain or loss realized by the participant will be taxed as short-
term or long-term capital gain or loss, as the case may be, and will not
entitle the Company to any further deduction.
Subject to certain exceptions for disability or death, if an ISO is exercised
more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock
option.
Discounted options awarded under the Directors' Option Plan, would
generally be treated in the same manner for tax purposes as non-qualified
options.
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 1,
1999 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 Beneficial Owner Amount and Nature of
Beneficial Ownership(1) Percent of Class
Alison Taunton-Rigby, Ph.D.(2) 186,745 2.7%
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Jeffrey T. Beaver(3) 57,922 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Robert J. Carpenter(4) 114,658 1.6%
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Keith J. Dorrington, Ph.D.(5) 12,500 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Elliott D. Hillback, Jr.(6) 12,500 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Gerald A. Beltz, Ph.D.(7) 54,456 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Deborah B. Grabbe(8) 54,095 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
James L. Warren(9) 27,700 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Directors and Executive 520,576 7.4%
Officers as a Group(10)
State of Wisconsin 414,074 5.9%
Investment Board(11)
State of Wisconsin
121 E. Wilson Street
Madison, Wisconsin 53707
Marcus Schloss & Co., Inc. (12) 570,253 8.2%
One Whitehall Street
New York, NY 10004
New Enterprise Associates VI, 374,176 5.3%
Limited Partnership(13)
1119 St. Paul Street
Baltimore, MD 21202
* 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 176,543 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 47,181
shares which Mr. Beaver may acquire upon the exercise of options
(4) Includes 2,500 shares which Mr. Carpenter may acquire upon the
exercise of options.
(5) Includes 12,500 shares which Dr. Dorrington may acquire upon the
exercise of options.
(6) Includes 12,500 shares which Mr. Hillback may acquire upon the
exercise of options.
(7) Includes 50,000 shares which Dr. Beltz may acquire upon the exercise
of options.
(8) Includes 50,000 shares which Ms. Grabbe may acquire upon the exercise
of options.
(9) Includes 25,000 shares which Mr. Warren may acquire upon the exercise
of options.
(10) See Footnotes Numbers 1-10.
(11) Based solely upon information contained in Schedule 13G filed with the
Company.
(12) Based solely upon information contained in Schedule 13G filed with the
Company. Douglas Schloss and Richard Schloss may be deemed beneficial owners
of the shares.
(13) Based solely upon information contained in Schedule 13G filed with the
Company. NEA Partners VI, Limited Partnership, Peter J. Barris, Nancy
L. Dorman, Ronald Kase, C. Richard Kranlich, Arthur J. Marks, Thomas C.
McConnell, John M. Nehra and Charles W. Newhall, III 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 1998 and
acted by written consent four times. 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. No director of the Company
attended fewer than 75% of the total meetings of the Board and Committee
meetings on which such Board member served during this period.
The members of the Audit Committee are Mr. Hillback (chairman) and Dr.
Dorrington. The Audit Committee held three meetings during 1998. 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. Carpenter
(chairman) and Mr. Hillback. The Compensation Committee held five
informal meetings during 1998 (acting by written consent vote), and
administered the compensation plan for the Company's officers.
The members of the Nominating Committee are Dr. Dorrington (chairman)
and Mr. Beaver. The Nominating Committee held no meetings during
1998. 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 and the
other three most highly compensated executive officers of the Company as
of December 31, 1998 (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).
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation Compensation All Other
Awards Compen-
Name and Principal Year Salary Bonus Other Restricted Securities sation
Position ($) ($) Annual Stock Underlying ($)
Compensation Award(s) Options/
($) ($) SARS
(#)
<S> <C> <C> <C> <C> <C> <C> <C>
Alison Taunton-Rigby 1998 $255,000 $45,000 --- --- 60,000 $3,800 <F1>
President/CEO & Director 1997 244,650 61,500 --- --- 35,000 6,885
1996 225,000 103,750 --- --- 85,000 4,895
Gerald A. Beltz 1998 175,000 32,000 --- --- 40,000 3,415 <F3>
Senior Vice President of 1997 160,474 32,000 --- --- 20,000 2,962
Research & Development 1996 144,708 40,000 31,373 <F2> --- 60,000 762
Deborah B. Grabbe 1998 142,500 34,500 --- --- 30,000 3,298 <F5>
Vice President of 1997 137,442 34,500 --- --- 20,000 2,259
Manufacturing Operations 1996 132,040 33,000 25,081 <F4> --- 60,000 689
James L. Warren <F6> 1998 159,144 --- --- --- 80,000 1,877 <F7>
Vice President of 1997 --- --- --- --- --- ---
Finance, Chief Financial 1996 --- --- --- --- --- ---
Officer and Treasurer
<FN>
<F1> Represents payment by the Company of $1,010 for term life insurance and $2,790
for the Company's contribution to Dr. Taunton-Rigby's 401(k) account.
<F2> 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.
<F3> Represents payment by the Company of $696 for term life insurance and $2,719
for the Company's contribution to Dr. Beltz's 401(k) account.
<F4> 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.
<F5> Represents payment by the Company of $581 for term life insurance and $2,717
for the Company's contribution to Ms. Grabbe's 401(k) account.
<F6> Mr. Warren joined the Company on January 19, 1998.
<F7> Represents payment by the Company of $640 for term life insurance and $1,237
for the Company's contribution to Mr. Warren's 401(k) account.
</FN>
</TABLE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term
Name Number of Percent of Exercise Expiration
Securities Total Options/ of Base Date
Underlying SARs Granted to Price
Option/SARs Employees in ($/Sh.)
Granted (#) Fiscal Year
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Alison Taunton-Rigby 60,000 <F1> 19% $2.75 9/18/2008 $103,767.61 $262,967.51
Gerald A. Beltz 40,000 <F1> 12% 2.75 9/18/2008 69,178.41 175,311.67
Deborah B. Grabbe 30,000 <F1> 9% 2.75 9/18/2008 51,883.81 131,483.75
James L. Warren 30,000 <F1> 9% 2.75 9/18/2008 51,883.81 131,483.75
James L. Warren 50,000 <F2> 16% 4.25 1/19/2008 133,630.00 338,670.00
<FN>
<F1> Stock option exercisable with respect to 25% of the shares on September
18, 1999, 25% of the shares on September 18, 2000, 25% on the shares
on September 18, 2001, and 25% of the shares on September 18, 2002.
<F2> Stock option granted on the commencement of Mr. Warren's
employment with the Company and exercisable with respect to 25% of
the shares on January 19, 1998, 25% of the shares on January 19, 1999,
25% of the shares on January 19, 2000, and 25% of the shares on January
19, 2001.
</FN>
</TABLE>
Fiscal Year End Option/SAR Value Table
The following chart shows the number and value of unexercised options
held by each of the Named Executive Officers at the end of the
Company's last fiscal year. The value shown for each option is equal to
the difference between the exercise price of the option and the fair market
value of the underlying stock at fiscal year end. The Company has never
awarded any stock appreciation rights to any of its employees, and thus
none are outstanding. None of the Named Executive Officers exercised
any options during the Company's last fiscal year.
Aggregated Option / SAR Exercises In
Last Fiscal Year And FY-End Option / SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Name Options/SARs at Fiscal Year- SARs at Fiscal Year-End
End ($)
(#)
Exercisable/Unexercisable Exercisable/Unexercisable
Alison Taunton-Rigby 176,543/107,500 $11,846/$67,500
Gerald A. Beltz 50,000/70,000 $0/$45,000
Deborah B. Grabbe 50,000/60,000 $0/$33,750
James L. Warren 12,500/67,500 $0/$33,750
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.
Mr. Warren entered into an employment agreement with the Company
dated January 17, 1998, which provides for an initial annual salary of
$165,000 subject to review on an annual basis. Mr. Warren's
employment under the Agreement may be terminated by either party
without liability upon 180 days prior written notice. Mr. Warren also
entered into an Employee Retention Agreement dated January 17, 1998,
pursuant to which, if Mr. Warren's employment is terminated within
twenty-four (24) months of a "change of control," unless such
termination is by the Company for "cause," by Mr. Warren 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 preceding three
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, 1993.
1993 1994 1995 1996 1997 1998
NASDAQ Total Return Index 100.0 97.0 136.2 166.8 203.9 281.9
NASDAQ Pharmaceuticals Index 100.0 75.3 138.0 138.5 143.0 181.9
Cambridge Biotech 100.0 52.3 52.5 60.2 51.7 47.9
Corporation/Aquila
Biopharmaceuticals, Inc. 4
4 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 1998.
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 executive officers, other than Dr.
Taunton-Rigby, totaling in the aggregate $66,500.
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 100,000 shares of the Company's
common stock in the aggregate to the named Executive Officers, other
than Dr. Taunton-Rigby. The options will vest beginning in September of
1999.
Compensation of the Chief Executive Officer
Dr. Taunton-Rigby's 1998 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 approximately four percent,
consistent with the percentage increase given to a majority of the
employees of the Company, 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. The
Compensation Committee granted Dr. Taunton-Rigby a bonus in the
amount of $45,000. Under the Company's 1996 Stock Award and Option
Plan, the Board granted Dr. Taunton-Rigby options for 60,000 shares of
the Company's common stock, which options will vest beginning in
September of 1999.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Robert J. Carpenter, 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, 1998, 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 PriceWaterhouseCoopers, L.L.P., independent
certified public accountants, as auditors of the Company for fiscal year
ending December 31, 1998. Coopers & Lybrand L.L.P. (predecessor to
PriceWaterhouseCoopers, L.L.P.) served as auditors during 1995, 1996
and 1997. A representative of PriceWaterhouseCoopers, 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 Framingham,
Massachusetts by December 9, 1999. Any shareholder proposal to be
considered at the 2000 Annual Meeting of the Company's shareholders
must be received by the Company at least 60 days prior to the scheduled
date of the Annual Meeting in order to be considered timely under Rule
14a-4(c).
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance
with their best judgment.
Date: April 8, 1999 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 13,
1999.
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, 175 Crossing Boulevard,
Framingham, Massachusetts 01702, on Thursday, May 13, 1999 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, 1999, 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 and FOR Proposal 2 in accordance
with the recommendation of the Board of Directors.
Proposal 1
Elect Class I director to hold office until the annual meeting of
shareholders in 2002.
Elliott D. Hillback
FOR WITHHELD ABSTAIN
Proposal 2
To approve amendment to the Company's 1996 Directors Stock
Award and Option Plan to increase the aggregate number of shares
of common stock authorized for issuance under the Plan by
200,000.
FOR AGAINST ABSTAIN
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 _________________
